In the Missouri Court of Appeals' recent decision in Stewart v. Second Injury Fund, the facts were not in dispute: Ms. Stewart worked at Subway for a few months, suffered a moderately severe injury at work and could not return to any type of employment.
Here’s where the story becomes interesting: The claimant qualified for Social Security disability in 1997 — more than 10 years before she started working at Subway.
Her Social Security disability was awarded based on confirmed medical conditions including arthritis, reflex sympathetic dystrophy, degenerative joint and bone disease and carpal tunnel syndrome. She continued to receive Social Security disability benefits even while she was working at Subway.
After her work injury in 2009, she filed for workers' compensation benefits, claiming that she was permanently and totally disabled.
Was the claimant permanently and totally disabled before her injury at Subway? Apparently not, because she was able to obtain that job and perform the duties associated with that job. In the absence of her injury, she would have presumably been able to continue working.
Why would she be entitled to Social Security disability benefits if she was able to compete in the open labor market? If she was disabled in 1997, should she be entitled to more benefits when she was injured at a job that she should not have been able to obtain?
What if Subway had told the claimant during her initial job interview that she could not be hired because of her multiple disabilities? She could have sued Subway under the Americans with Disabilities Act, arguing that Subway was discriminating against her. Subway, not wanting to be sued, could have been forced to hire the claimant only to face the prospect of being liable for permanent total disability after only a few months of work.
I’m not attempting to disparage the claimant. She obtained benefits that are legally provided. My question is this: Is it fair to place employers in no-win situations where they face litigation if the employee is not hired, yet still face litigation if the employee IS hired?
This situation arises because of the myriad of state and federal laws that regulate every facet of the workplace. Every employer must wade through an alphabet soup of overlapping laws every single day (ADA, FMLA, COBRA, EFCA, EAD, ERISA, FLSA, FCRA, INA and a host of others).
One cannot swing the proverbial dead cat without hitting five politicians giving a speech focused on creating jobs. Yet, can jobs be created by strangling the very companies that create these jobs?
When I started defending workers’ comp claims 25 years ago, I learned very quickly what carriers and employers wanted from me—because adjusters would tell me every day about what they DIDN’T like about other defense attorneys. Seeing an opportunity, I made sure I did the OPPOSITE of the complaints.
To paraphrase Rod Serling, I am submitting for your approval six things I learned during those formative years that I believe insurance carriers and self-insured employers are looking for in defense counsel.
Workers’ compensation defense attorneys often simply inform clients that the going rate for a standard-type of injury is this or that. While the client certainly needs to know the going rate, that cannot be where the analysis ends. When I represented TWA years ago, the claims manager told me: “Brad, I can hire trained monkeys to tell me to pay the going rate for standard types of injuries. I pay you to do better than that.”
I define independent thought to be analysis on not only whether a claim is compensable but also on strategies to resolve the claim more favorably than simply paying the going rate. This means laying out a game plan that includes all necessary steps. It doesn't always work, but I know clients appreciate this analysis on the front end of a claim.
When the vast majority of claims are compensable, defense attorneys (like insurance adjusters) can easily develop the “process and pay” mentality. I define this as simply looking at what it will cost to pay the claim and taking the fastest steps necessary to close the file and move on.
Even on compensable claims, I have found that clients are always happy to also receive (and even expect) a game plan for asserting possible defenses. To promote its $1 Dollar Menu a few years ago, McDonald's had a billboard that said: “$1 Legal Advice — Plead Guilty.” When I hear of a defense attorney simply saying: “Claim is compensable, pay this amount,” I always think this is the workers’ comp equivalent of “Plead Guilty.” Even if the employer should pay, the client wants zealous advocacy from the defense attorney on how to best reach the goal.
Regular, substantive communication
This may be the most important piece. It can be broken down into two parts – – regular communication and substantive communication.
I've had a plethora of adjusters over the years tell me war stories about their prior counsel, who would never….ever…do anything on claims. One adjuster told me: “All I ever heard from that attorney was the sound of crickets.” The defense attorney who does this not only violates the ethical duty to keep his or her client properly informed, but is also an attorney who is dealing with a future ex-client.
Employers and carriers also want substantive updates that demonstrate how the attorney is best representing the employer. Communications, whether by letters or through now-common emails, should always encapsulate where the parties are on a claim and where the defense attorney intends to take it. Letters or emails from the defense attorney that say nothing more than “Look at all of the creative ways I have billed your file this month” is NOT what employers and carriers want.
Understanding what constitutes a win
One common complaint about workers’ comp defense is, “The employer almost always loses.” That raises the question: Just what is a win, and what is a loss?
I try to resist watching legal shows on television because, even when such shows are deliciously complex, the outcome of almost every legal proceeding is either guilty or innocent. If a civil court is involved, almost every verdict is for millions of dollars or nothing even though, in reality, almost everything is resolved within the nebulous middle ground. I guess that’s why it’s called fiction.
In workers’ compensation claims, the vast majority are going to be found compensable by the state division of workers' compensation. But, to borrow some analysis from Monopoly, we’re not faced with a choice between Baltic Avenue or Boardwalk with hotels. Rather, we are more often than not fighting over whether we can buy Pacific Avenue for the price of St. Charles Place.
Because the vast majority of claims are settled, I often wonder if the client views the settlement as a win or a loss. Over the years, I have seen carriers and employers examine the relative value of a settlement by looking through the lens of the following criteria:
- Is the settlement fair in light of the evidence available and the applicable jurisdiction? (e.g., Illinois claims settle for far more than Missouri claims even if the injuries are identical.)
- Was the claim resolved within the established reserves?
- Were the defenses that were raised truly sufficient to obtain a non-compensable award or were they only good enough to use for settlement negotiations?
Creative attempts at problem-solving
All carriers and employers know that most claims are compensable. Rarely have I had clients who expected an award of “not compensable” on every claim or even on most claims.
But most clients expect the defense attorney to at least examine all potential defenses to evaluate how the assertion of such defenses might affect the value of the claim.
Despite the lofty views that most attorneys have of our profession, most of our jobs can often be distilled down to this concept: We help our clients avoid obstacles. While this is self-evident in criminal law (obstacle — the state wants to put client in prison), such analysis is rarely applied to workers’ comp.
For example, if a claimant states, “My injury occurred on the job,” this may or may not actually be the case. My job as a defense attorney is to identify factual, medical and legal evidence that might persuade the judge that the “work-related” component of the employee’s injury is not as clear-cut as the employee may believe.
I had one case years ago where the employee claimed he was injured on the job. In his deposition, he admitted that he liked to ride the bull in rodeos. It occurred to me that there must be some association that keeps track of who rides in professional rodeos, and I contacted the Missouri Rodeo Association. I was “shocked” (insert mock assertion of surprise here) that the claimant’s medical care ALWAYS seemed to occur exactly one day after he competed in professional rodeos. After I provided this information to opposing counsel, the claim was quickly dismissed.
My point — the employee’s assertion that he was hurt on the job would normally be sufficient to prove compensability in the absence of other evidence, but my job was to find that other evidence. Carriers and employers want their counsel to explore all possible defenses, even if the probability of success is low, because occasionally (like in my rodeo case) the defenses actually work.
Sticking to your guns
If you ask an adjuster about her greatest pet peeve when it comes to dealing with defense attorneys, one example is most often cited: “I hate it when my defense attorney tells me at the beginning of the case that the claim is only worth $500, and then, on the day of trial, he tries to convince me to pay $20,000 to settle it.”
Years ago, I had a client who pulled files from another attorney and sent them to me. As I reviewed them, I saw a theme. The attorney would often say: “This claim is a fraud, and I wouldn't pay anything more than $500 to settle.” But I didn’t see ANY evidence of fraud in many of the files. I was in the unenviable position of having to tell the client that I thought these claims were not fraudulent, and I provided exposure estimates that were far higher than $500.
I was concerned that the client would say: “Gee, Brad, I liked the advice from the prior guy a lot better.” However, this did not happen. Instead, I heard this: “I thought the prior attorney was simply telling me what I wanted to hear. That's why I pulled the files and sent them to you.”
The lesson I learned here: Clients want the attorney’s honest assessment of the claim, and they don't want the defense attorney to simply tell them what the attorney thinks the client wants to hear. If the client can't rely on my analysis, then I'm not doing my job correctly. If the case is worth $20,000, I must tell this to the client as soon as it becomes possible to arrive at such a valuation. If I wait until the day of trial to disclose the true value of the claim, the client will think that I am simply afraid to take the case to trial.
One could easily distill all these comments into a single concept: There must be a good working relationship between the defense attorney and the carrier/employer, one that is based on shared values, frequent communication and deliberative communication (meaning the attorney and the client jointly develop the goal for a particular claim and then both take the steps necessary to reach that goal). If reality matches this ideal, the defense attorney and the carrier/employer will probably be working together for a long time.
Those of us who have been workers’ comp professionals for a while like to think that there are no new issues. We’ve seen it all, done it all, and have a closet full of T-shirts to prove it. Yet technology, like the proverbial new wine in an old wineskin, can break out of the boundaries created by aged statutes and old case law.
There have been some recent examples of corporate civil liability for employees who are in motor vehicle accidents while using their cell phones for business. This also raises a slightly different and thornier question: What about employees who get into accidents while off work but while making business calls on personal cell phones. Should they, too, be entitled to workers’ compensation benefits?
This issue was addressed in Virginia a few years ago in the case of Donna Turpin v. Wythe County Community Hospital. (http://www.washingtontimes.com/news/2011/oct/9/workers-comp-case-upheld-in-cellphone-related-cras/?page=all)
Here, the claimant was a nurse who was off work, but on call, when she received a work-related phone call. While trying to answer the phone, she lost control of her vehicle and crashed, resulting in moderate injuries.
The fact that nurse Turpin was on call makes the injury arguably more compensable, and the Virginia Court of Appeals agreed. It awarded benefits even though she wasn’t technically at work.
But I have been waiting to see courts address the issue where a business professional is driving his or her car on a Saturday or Sunday, running personal errands and not on call. Then, when he receives a work-related cell phone call, he becomes distracted and is in a motor vehicle accident. Should this be compensable even though the employee is not at work and is doing personal activities?
As you may surmise, the majority of jurisdictions within the U.S. would probably find this injury to be compensable, as there is a benefit to the employer from having the employee take a business call on personal time. Under the “mutual benefit doctrine,” if the employee is conducting legitimate work then the claim is compensable even if the employee is on his way to get donuts for his family.
However, if companies have a policy that prohibits the use of cell phones while driving, how do we resolve the inherent conflict between an injury arising out of work duties and an injury that occurred as the result of a violation of company policy?
Many states (but not a majority) have provisions within their workers’ compensation statute that allow for a reduction of benefits if the claimant is injured as a result of a failure to use safety devices or a failure to follow safety rules.
If you are in a state that has such provisions, this is an added reason why the company policy manual should be updated to prohibit the use of cell phones while driving. That way, even if the claim is compensable, there would still be a reduction of benefits paid.
The response to such policies is typically negative: “Why should the worker be punished when he was injured while trying to do his job?” Valid question. Here is a valid answer: incentive.
I often tell employers that safety rules and policies are not adopted to punish employees but to try to reduce injuries. Everything we do in life has risk. But any risk manager will tell you that the trick is to maximize work efficiency while minimizing (rarely eliminating) the risk. Employees should be penalized for violating safety policies, because without the concern for punishment (like having one’s comp benefits reduced or even eliminated), there is no incentive to follow the policies designed to minimize the risks faced by workers.
I drafted the hypothetical situation because: 1) It could easily happen, and 2) It demonstrates how technology blurs the line between our personal activities and our work activities.
Safety policies should be adopted to minimize risk—like a ban on driving and using cell phones at the same time. Such a policy should not only reduce the risk of injury to your employees but should also reduce the risk of increased insurance premiums.
Now, if only I could figure out a way to craft a policy that eliminated the calories in donuts, I would really be on to something.
While industrial companies always insure their physical plants, they rarely insure their intellectual property even though it is often the most valuable thing the company owns.
Core IP, which defines and individualizes the company, is most often the company’s inventions — patented machinery, devices and technology. But it could be something as seemingly simple as the copyrighted graphics and designs on a wildly popular designer handbag or a top-selling toy. Trademarks can be invaluable IP — for instance, Coca-Cola’s trademark is recognized worldwide.
Because IP is intangible, it can be easily stolen — though the proper term, “infringement,” sounds more polite, theft is often what it is. An engineer can walk out the door with knowledge about your patented technology and trade secrets. A counterfeiter can copy your designs and trademarks as fast as a computer or photocopier works. The Web, of course, is paradise for infringers.
On the other hand, your company can stand accused of infringing someone else’s intellectual property. Let’s say it’s a series of patents on complex machinery. You’re convinced the suit is groundless, but you still have to hire an expensive law firm and bring in expert witnesses. In the end, you win. Congratulations. You’re still out a few million dollars in legal fees.
Your general liability policy gives you very limited coverage for your liability for your alleged infringements against others. (It’s generally restricted to infringing copyrighted advertising materials.) And it gives you no coverage to sue infringers. If you want significant coverage, you have to get a special policy.
Given the amount of litigation — for example, 2,830 patent cases in 2006 — IP insurance is well worth considering.
Because there are two potential money pits — someone ripping off your IP and someone accusing you of ripping off theirs — there are two distinct types of IP insurance.
Defensive IP policies take effect when someone sues you for infringing their intellectual property. Even if your company is scrupulous, inadvertent infringement can happen. These policies are also sometimes called “IP infringement defense insurance” or “IP liability insurance.” They cover both your legal costs and the cost of the judgment if you lose. Judgments can run into the millions, and, besides paying out damages, you’ll be forced to stop making the infringing product.
A defensive policy kicks in when another party demands either money from your company or non-monetary relief, such as an injunction. Only a handful of insurers offer these policies. Depending on the carriers, you can buy coverage limits of anywhere from $5 million to $15 million. Minimum deductibles vary, and some insurers also insist on coinsurance, meaning you would pay larger out-of-pocket expenses.
Offensive IP policies are effective when someone else infringes your intellectual property. That is, the policy will provide money so your company can hire a law firm to sue the company that infringed your patent, trademark or copyright or stole your trade secrets. You will have to get permission from the insurer to hire a law firm and start litigation.
Why would you need an offensive policy? Unlike personal liability lawyers, who get paid by taking a percentage of the settlement if they win, IP law firms generally demand cash on the barrelhead for their services. If your company is a startup or a small organization without a lot of money in the bank, you might not be able to afford to hire a topnotch IP litigator to go after the bad guys. If you have a trademark or copyright case, the legal fees might be manageable, but going after a patent infringer takes millions. Your IP could be stolen by a bigger company, and there’d be little you could do about it. If the infringed patents are your competitive advantage, your company might even be forced out of business eventually. There’s only one known insurer that underwrites offensive IP insurance.
Do you need IP insurance and, if so, how much of what kind? There are no cut-and-dried answers. If your company manufactures generic goods like plywood, you may not need it, unless your manufacturing process is a trade secret. But if your company’s inventions, designs and trademarks are crucial to your company’s success, you may. Start by assessing how important your company’s IP is, and how vulnerable it is to being infringed by someone else or having someone claim that you’re the infringer. Once you have a clearer idea of the risks and potential consequences, you can start to investigate IP insurance systematically and determine if it’s worth it.
Ultimately, you may decide you don’t need IP insurance. But the time to investigate is now. Once you have been sued or your IP has been infringed, it will be too late.
Global expansion into new markets represents a powerful opportunity — especially as economic performance languishes in much of the developed world. As a result, insurance executives must regularly evaluate and refresh their strategies to identify which international markets are most likely to offer the best prospects.
As regional markets around the world become more connected and complex, however, understanding how best to optimize the balance between opportunities and risks in individual countries remains a significant challenge. Even in a world linked closer together by macroeconomic trends, mobile phones and the Internet, regulatory and cultural differences persist, and even nations that share a common border may diverge markedly when it comes to future risk.
To help executives better understand the rebalancing now taking place across the insurance landscape in rapid-growth markets, we will highlight growth opportunities in specific countries around the globe.
While once-flourishing BRIC economies Brazil and India are now expanding at a slower pace, the U.S. is rebounding, and the U.K. and the Eurozone are at last rising from their doldrums. At the same time, a cluster of emerging markets, such as Malaysia, Indonesia, Mexico and Turkey, are making regulatory changes that could produce significant opportunities.
These shifts are causing insurance executives to reassess their strategies to determine which rapid-growth markets (RGMs) represent the most attractive investment options. To help navigate this rapidly evolving landscape, EY has created a matrix that analyzes the risks and opportunities for insurance firms across 21 RGMs. Our study identifies the following RGMs as particularly attractive for insurance investment:
• Turkey offers a greater level of opportunity than any other RGM in the study but also poses substantial risks. An economic downturn cannot be ruled out. While political turmoil has cooled in recent months, tensions could return. In addition, markets for some lines of coverage are relatively mature.
• Indonesia also offers an extremely strong economic growth picture — second only to China and Vietnam in our forecasts. However, it is challenging to obtain licenses, so acquisition is the main entry route.
• China, despite a recent slowdown in growth rate, continues to boast extraordinary income growth that spurs auto and home ownership. In addition, an aging population will drive the development of the life and health markets. However, market entry remains difficult for foreign firms.
• Malaysia offers an attractive mix of demographics and strong economic growth and has become a base for the development of takaful, sharia-compliant insurance.
• Hong Kong (a special administrative region of China) ranks low for opportunity but presents less risk than any other market in our study. Hong Kong can also serve as a trade route into the rest of Asia.
• The United Arab Emirates (UAE) has become the fastest-growing insurance market among the Gulf States, with a compound annual growth rate (CAGR) of 17% over the past six years. Regulatory changes may create greater opportunity for expansion of takaful products.
Our analysis does not merely focus on markets with the highest opportunity and lowest risk but provides a more nuanced picture of the shifting landscape. Depending on a firm’s appetite for risk, a second tier of RGMs also shows considerable promise:
• Brazil remains an important opportunity, though slowing growth rates have revealed festering economic risks. Following a program of liberalization, Brazil is the most accessible of the BRICs for foreign insurance companies. Brazil’s key advantage is scale: Of the markets in our study, it has the third-largest forecast growth in insurance premiums in US dollar terms, following China and India. Moreover, record new car sales are propelling robust growth for automobile lines.
• South Africa follows Brazil with the fourth-largest absolute growth in insurance premiums. In addition to scale, South Africa may be a good trade route into sub-Saharan Africa, as South African companies have been among the most successful in penetrating other African markets.
• Vietnam has become one of the most exciting RGM opportunities. Its income growth and premium growth rates (when considered in percentage terms) place it among the top two markets we assessed. But investors face significant corruption and sovereign risks when entering Vietnam.
• Mexico has undergone a program of extensive liberalization, opening its market to foreign insurers. On some measures, Mexico is the most open insurance market in our study. Yet the pace and unpredictability of regulatory change can be risky for investors.
• India’s opportunity is impossible to ignore, given that it is second only to China in terms of absolute forecast growth in insurance premiums. Yet, the regulatory environment has proved extremely challenging for investors. In addition, a large current-account deficit and reliance on portfolio capital inflows elevate liquidity risks.
Our analysis suggests that while investment in RGMs will continue to be vital for global insurance firms, outsized returns will not come easily. Companies that carefully tailor products and develop market-entry strategies suited to particular economies and their cultures will see the greatest rewards.
Key factors influencing market selection
When investing in RGMs, insurance executives will want to carefully consider four important waves of change:
1. The speed of regulatory change.
Some RGMs, such as South Africa and Mexico, are moving quickly to adopt new insurance regulations and may surpass advanced economies in the stringency of their risk-based regulation or consumer-protection requirements.
2. Customer adoption of insurance products.
The rise of social media and the growing popularity of overseas educational experiences are among the forces breaking down traditional barriers to insurance penetration. Many markets where traditional cultures tended to limit adoption of insurance products, such as Vietnam and Saudi Arabia, are now experiencing rapid premium growth.
3. Government fiscal policy.
Offering tax incentives for insurance products can significantly affect how customers choose savings and pension services. At the same time, a lack of confidence in public pension and welfare schemes can encourage adoption of private insurance alternatives.
4. Government attitude.
In most RGMs, the government considers the insurance sector strategic. This is in part because of the crucial role insurance plays in facilitating savings, investment and entrepreneurship. Understanding the government’s goals for the sector’s long-term development is therefore crucial. Some governments will focus on the potential growth benefits of insurance development and seek as much foreign expertise as possible in developing the insurance sector. Others will wish to have the insurance market dominated by domestic companies over the long term.
Download the full report here: Waves of change: the shifting insurance landscape in rapid-growth markets