Emerging trends: COVID-19 and Workers' Compensation

When the coronavirus first hit, there was a great deal of speculation about how it would impact workers' comp - would claims be compensable, would the number of claims be overwhelming and costly, would the economic fallout be disastrous for the industry, would OSHA adopt an infectious disease standard, and so on. Since this virus behaves in unexpected ways and more governmental action is possible, nothing can be cast in stone. However, more than eight months after the COVID-19 outbreak was declared a global pandemic, there are emerging trends that can be helpful guides for employers. Here are seven of them:

1. OSHA begins to find its footing and is using existing standards, including the General Duty Clause, to cite employers during coronavirus-related inspections

   Criticized heavily for dragging its feet on inspections and offering confusing guidance, the agency has ramped up inspections and issued 255 citations for violations related to coronavirus as of November 26, with proposed penalties of $3,403,139. It recently released guidance and an accompanying one-pager to help employers understand which standards are cited most frequently during coronavirus-related inspections.

   OSHA has received over 10,000 complaints and conducts inspections based on complaints, referrals, and fatalities. To date, it has concentrated in industries such as hospitals and healthcare, nursing homes and long-term care facilities, and meat/poultry processing plants; however, food manufacturers and distributors, cleaning companies, and consumer goods companies have also been cited. Expect more citations to come.

   Common citations include failures to:

   • Implement a written respiratory protection program
   • Provide a medical evaluation, respirator fit test, training on the proper use of a respirator, and personal protective equipment
   • Report an injury, illness, or fatality
   • Record an injury or illness on OSHA recordkeeping forms; and
   • Comply with the General Duty Clause of the Occupational Safety and Health Act of 1970

   Some experts postulate that a temporary emergency standard may be adopted very early in the Biden administration, although the list of Biden-Harris COVID-19 priorities makes no mention of an OSHA standard. It's also expected that enforcement will be more vigorous and broader than under the Trump administration.

2. State OSHA agencies have flexed their muscles

   Three states, Virginia, Michigan, and Oregon have issued emergency COVID-19 regulations and one has just been adopted in California. The Department of Industrial Relations Occupational Safety & Health Standards Board adopted a general safety order that, in effect, creates an emergency temporary standard specific to potential workplace coronavirus exposures. While the requirements of the rules differ, they give the agencies power to develop more stringent COVID-19 protection measures that employers must make or face penalties.

   During the pandemic, Cal/OSHA has conducted nearly 500 inspections into work-related COVID incidents, including 187 deaths and since August, it has issued over $1.5 million in COVID-19 related citations to businesses that did not implement an effective Illness and Injury Prevention Plan or follow California's aerosol disease standard for certain health-related workplaces.

   Michigan relies heavily on the General Duty Clause and has issued 35 citations and says it will now do more inspections in response to outbreaks of COVID-19 in construction and manufacturing.

3. Early dire forecasts of pandemic-related workers' comp claims have not transpired

   Infections and the number of workers' compensation claims have turned out to be lower than initially feared and have relatively low costs, the National Council on Compensation Insurance (NCCI) said in a recent report. However, it did caution, "due to the substantial amount of uncertainty remaining for the underlying assumptions and continued course of the pandemic, the ultimate impact COVID-19 will have on WC system costs is still not reasonably determinable." The number of compensable COVID-19 claims per worker is estimated to be less than 20% through Calendar Year 2020.

   The rate of workers who need critical care, however, has been revised upward and is between 21% and 42%; the fatal rate is between 0.5% and 1.25%.

   Not surprisingly, the rate of compensability varies by state, occupation, and the application of presumptions. Compensability in three states are reported: California - 69% -71%, Tennessee - 56%, and Florida 44% - 56%.

   Other experts have said there is not a clear relationship between denial rates and whether a state has a presumption. In Minnesota, which has a presumption law, about 46% of virus claims have been denied. Florida, which does not have a statewide presumption, has seen a similar rate of denial. In Ohio, which also has no presumption rule, about 13% were denied. States such as Washington and New York have very low denial rates, including rates under 10%, while outliers like Colorado carry a 67% denial rate. Lack of uniformity in how states manage the data also makes comparisons difficult. But overall denial rates tend to be higher than non-COVID-19-related claims.

   While it varies by state, generally, the most affected industry group, as expected, is healthcare, followed closely by first responders, including police officers, firefighters, and paramedics, then retail services, meat processing plants, and food and beverage manufacturers. One insurance carrier that has handled over 45,000 COVID-19 workers' compensation claims for clients reports that 54% of the claims had no payment made and the average cost per claim was $1,050. Over 71% of the death claims were for employees 51 or older.

   Some states, including California, Florida, and Minnesota provide an ongoing record of COVID-19 workers' comp data.

4. Large and catastrophic injury claims have not decreased during the pandemic

   While most of the COVID-19 claims are minor, a small percentage, up to 5%, of people infected with COVID-19 become critically ill with severe complications. Death claims and claims with extended ICU hospital stays can have incurred costs well over $1 million and the long-term cost of prolonged medical care and extended recovery periods is unknown. Further, the types of industries where there are higher incidences of catastrophic injuries, such as construction, trucking, and public entities, are "essential" and kept working. Violent attacks against first responders have also increased with the civil unrest around the nation.

   While both complex COVID-19 claims and catastrophic injury claims are rare, they have a disproportionately high and long-lasting impact on medical expenditures and the Experience Mod.

5. Most labor and employment COVID-19-related lawsuits involve retaliation

   According to labor and employment law firm, Littler, there have been 1,235 lawsuits, including 116 class actions, filed against employers for alleged labor and employment violations related to the coronavirus as of November 20. The most common complaints have focused on retaliation (556), leaves of absence (261), workplace safety (259), and discrimination (231). The healthcare industry has been hardest hit by COVID-19-related employment litigation with 283 alleged violations, with manufacturing (119), hospitality (98), and retail (87) following.

   The online tool tracks both federal and state filings and notes that the highest number of cases were filed in October. Some examples of recent cases include the family of a Florida grocery worker who died of COVID-19 filing a negligence lawsuit alleging Publix supermarkets forbade the man from wearing a face-covering during the early days of the pandemic and a Pennsylvania wholesale and distribution employee alleging violation of the FFCRA when she allegedly was forced to resign after she had requested an accommodation to her working hours because her son's school was closed.

   Most cases are still working their way through the court system but a recent decision in New York was applauded by employers. In Derrick Palmer, et al., v. Amazon.com Inc., a district court dismissed workplace safety claims filed by a group of Amazon.com Inc. workers after holding that OSHA, not the courts, was the appropriate venue for addressing the workers' COVID-19-related safety concerns.

6. The economic fallout has put pressure on the industry

   While the workers' comp industry entered 2020 from a position of strength, the economic downturn has put pressure on the industry. Premiums are largely driven by employment and the historic unemployment and falling payrolls have led some to suggest that absent a miraculous economic recovery, premiums written may not return to pre-pandemic levels until 2023. Carriers are tightening their risk selection standards and revamping pricing models.

7. Local, state, and federal orders will continue

   New Jersey became the most recent state to adopt an Executive Order that will require all employers in the state to follow health and safety protocols designed to protect workers from exposure to COVID-19, effective November 5.

   Pennsylvania issued stricter mitigation measures on November 17.

   The CDC modified its guidance for asymptomatic critical infrastructure employers, stating that permitting them to continue to work after an exposure should be a "last resort" and only in limited circumstances.

   Other states are still considering similar orders, and more is expected at the federal level under the Biden administration.