Liability threat could prompt self-insured to OK COVID-19 comp claims

Self-insured employers facing the threat of COVID-19 workplace safety litigation could opt to accept infection workers compensation claims, as exclusive remedy clauses could provide better protection from expensive lawsuits later on, according to legal experts.

“Liability is scary because there are no caps,” said Mike Fish, Birmingham, Alabama-based founding member of the comp defense firm Fish Nelson & Holden LLC and past president of the National Workers Compensation Defense Network, an alliance of comp defense attorneys that monitor legislation.

“Employers weighing the risk may choose to have the exclusivity doctrine,” he said. “Liability lawsuits are getting filed everywhere.”

Generally, infectious diseases are not considered compensable in most states, although some accept such claims if there’s a clear connection between work and a virus — such as the risks posed to health care workers. And states are seeing an uptick in COVID-19 compensability due to executive orders or new laws clearing the red tape for certain workers. Many of the new laws are “rebuttable,” meaning an employer can challenge whether an employee contracted a virus through work.

Paralleling the drive to accept COVID-19 comp claims is the threat of related litigation as businesses increasingly bring workers back on the job, said Jeffrey Vita, partner with Trumbull, Connecticut-based Saxe Doernberger & Vita P.C.

“One of the hurdles (for workers comp) is the connection between their work and the virus,” he said. “The other option for employees is a lawsuit if they felt like the employer intentionally put them in an environment that caused harm.”

Rather than brace for years of expensive litigation, accepting claims at the onset may be “possible” for self-insured employers that don’t have to get clearance from insurance companies, said Adam Brackemyre, Alexandria, Virginia-based vice president of state government relations for the Self-Insurance Institute of America Inc., an association that promotes self-insurance and the captive insurance industry.

Employers “are not seeing as many COVID claims as they might have expected,” he said. “All of these people are testing positive, but there wasn’t much in terms of disability. It’s a severe flu at worst” for some employees.

The Boca Raton-based National Council for Compensation Insurance wrote of widespread uncertainty with regards to COVID-19 comp losses in its most recent update in July, saying the “combined impact and direction of all direct and indirect COVID-19-related forces is unknown — no explicit adjustment for the pandemic has been made in this year’s analysis at an overall or individual classification level.” And few insurers or third-party administrators have released data related to claims, although available estimates show the virus isn’t an expensive claim for most.

Corvel Corp., an Irvine, California-based third-party administrator, reported in July that COVID-19 claims resulting in hospitalization make up less than 5% of claims. That same month, Concord, California-based third-party administrator Athens Insurance Service Inc. released a report that found that among all COVID-19 claims — most of which came from health care workers in California — 2.7% of the cases involved hospitalization.

“Some (employers) are definitely crunching the numbers, and some may choose to process claims as workers comp because it may be cheaper to pay the benefit than to contest it,” Mr. Brackemyre said.

Under a comp scheme, an employer would pay wages — typically about two-thirds of salary — and medical costs.

Trent Oubre, Baton Rouge-based legislative committee chair for the Louisiana Association of Self Insured Employers and partner at the firm Breazeale, Sachse & Wilson LLP, agrees that comp could be the way to go for some employers facing smaller, less complicated COVID-19-related claims. “If they do, they need to proceed with caution,” he said. However, the alternative — litigation – could be more risky.

“It behooves (employers) to evaluate their position now on how they are going to respond to these claims,” Mr. Oubre said. “The safest route may be to keep them in the comp arena.”

Wayne J. Fontana, New Orleans-based managing partner at Roedel Parsons Koch Blache Balhoff & McCollister LLC, said some states — Louisiana, for example — are tackling the litigation risk by passing immunity laws that prevent employees from suing over COVID-19 exposure at work. Employers in other states with no such protection could face a “wild west of litigation” related to possible virus transmission in the workplace, he said.

His advice is to take matters “case by case.” This “gets you out of a tort case, paying someone for several weeks of COVID absence and getting them to sign a (liability) release,” he said.

This article was first published in Business Insurance.

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