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August 29, 2013

Workers' Compensation No Longer The Exclusive Remedy: RICO On The Radar

Summary:

It appears that the exclusive remedy provision for workers' compensation will no longer serve to prevent costly civil litigation.

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Workers' Compensation origins can be traced to the late Middle Ages and Renaissance times in the Unholy Trinity of Defenses, the doctrine that first outlined that work-related injuries were compensable.  This doctrine began in Europe and made its way to America with the Industrial Revolution.  There were so many restrictions with it that changes occurred and led to the doctrine of Contributory Negligence which outlines that employers are not at fault for work-related injuries. This principle was established in the United States with the case Martin vs. The U.S. Railroad. In this case, faulty equipment caused the injuries, but the employee did not receive compensation, as it was deemed that inspection of equipment was part of his job duties. Additionally, the case Farnwell vs. The Boston Worchester Railroad Company led to the “Fellow Servant Rule” where employees did not receive compensation if their injuries were in any way related to negligence from a co-worker.

For awhile, in the United States, we had the Assumption of Risk Doctrine that held employers were not liable for injuries because employees knew of job hazards when they signed their work contracts. By agreeing to work, they assumed all risks. These contracts were often nicknamed Death Contracts. The only recourse an employee had was civil litigation or tort claims. As the nineteenth century continued, employers were faced with increasing civil litigation and employee verdicts.

The basis of our exclusive remedy workers' compensation system had its roots in Prussia with Chancellor Otto Von Bismarck, who, in 1884, pushed through Workers' Accident Insurance which contained the exclusive remedy provisions for employers.  The first Federal Workers' Compensation law was signed in 1908 by President Taft, protecting workers involved in interstate commerce.

Work Reform was slower to progress to America. Early workers' compensation acts were attempted in New York (1898), Maryland (1902), Massachusetts (1908), and Montana (1909) without success.  Finally, in 1911, Wisconsin passed the first comprehensive workers' compensation law, followed by nine other states that same year. Before the end of the decade, thirty other states passed workers' compensation laws. The last state to pass workers' compensation laws was Mississippi in 1948.  The main issue in all the states workers' compensation acts is the no fault system, i.e. employers who participate in the states workers' compensation system are exempt from civil tort litigation, hence the exclusive remedy. In the United States this exclusive remedy for work related injuries has stood, for the most part, until recently.

Racketeer Influenced and Corrupt Organizations, more commonly known as RICO, is a federal law that provides for criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. This act focuses specifically on racketeering, and it allows the leaders of a syndicate to be tried for the crimes which they ordered others to do or with which they assisted. It was enacted October 15, 1970 and was in widespread use to prosecute the Mafia. It has become more widespread and now plays a significant role in work-related injuries.

RICO on the Radar

One of the most recent significant cases is Brown, et al v. Cassens Transport, et al No. 08a0385. In summary, The United States Court of Appeals, Sixth District (Michigan), acting on a remand from the United States Supreme Court, has held that employees may have an action based on the civil provisions of the RICO Act against not only employers but their agents (carriers and doctors).  This is an important decision which could affect employers in the 6th district, Michigan and Illinois, because it involves a Federal statute where the United States Supreme Court has held that the plaintiffs need not prove reliance that the defendants’ actions resulted in detrimental consequences to the plaintiff.

In the instant case, Brown v. Cassens, decided October 23, 2008, the Supreme Court had merely restated its opinion in Bridge v. Phoenix, decided June 9, 2008, where it originally held that the plaintiff need not prove that it relied on the alleged RICO violation. This case allows the Plaintiffs to sue the Employer (Cassens Transport Company), the TPA (Crawford and Company) and the doctor (Dr. Margules).

The Plaintiffs allege that the defendants engaged in a civil conspiracy and racketeering to deny them workers' compensation benefits. Specifically, the Plaintiffs allege that the employer and TPA hired unqualified doctors to issue fraudulent medical findings to deny them workers' compensation benefits.  The case alleges at least 13 predicate acts of fraud by mail and wire all relating to the fraudulent denial of the workers' compensation benefits under the Michigan Workers' Disability Compensation Act. For more specifics, please refer to the case citations. Suffice it to say here that the Court has allowed this case to proceed forward, taking away the employers exclusive remedy. Furthermore, RICO cases are not covered by insurance, making this very costly for the employer, carrier and physician.

Many say that the this case has a long way to go before employers have to be concerned about  the exclusive remedy position being taken away, but that may no longer be true. In November 2012, a landmark settlement was reached in Josephine et al v.Walmart Stores, Inc., Claims Management, Inc., American Home Assurance Co., Concentra Health Services, Inc.; Defendants. Civil Action No. 1:09-cv-00656-REB-BNB (USDCT Colorado). This RICO case was allowed to proceed against defendants under a state RICO statute in Colorado in March, 2011. In November, 2012, a settlement was reached between the parties for $8 million.

And most recently, June, 2013, the Sixth Circuit heard arguments in Jackson v. Sedgwick Claims Management Serv. This RICO case will determine if Michigan’s workers’ compensation laws provide the exclusive remedy for injured workers, or whether injured workers can sue under RICO for an alleged conspiracy to file false medical reports to cut off workers’ compensation benefits. 

These cases are just the beginning and it appears that the exclusive remedy provision for workers' compensation will no longer serve to prevent costly civil litigation. An employer, insurance carrier/TPA and physician can take several steps to protect themselves. First, evidence-based medicine should always prevail. Objective medical evidence can help protect against claims for fraudulent denials of work-related injuries. Also, employers should accept only claims that arise out of the course and scope of employment (AOECOE). If an employer can objectively document AOECOE issues, then no claim exists, hence no fraudulent denials.

A good approach to determining AOECOE claims is baseline testing, as it can identify injuries that arise out of the course and scope of employment. If a work-related claim is not AOECOE, as proven by objective medical evidence such as a pre- and post-assessment where there is no change from the baseline, then, not only is there no workers’ compensation claim, there is no OSHA-recordable claim, and no mandatory reporting issue. If the baseline testing is evidenced-based medicine and objective, this can further protect employers against RICO claims.

A proven example of a baseline test for musculoskeletal disorders (MSD) cases is the EFA-STM program. EFA-STM Program begins by providing baseline injury testing for existing employees and new hires. The data is interpreted only when and if there is a soft tissue claim.  After a claim, the injured worker is required to undergo the post-loss testing. The subsequent comparison objectively demonstrates whether or not an acute injury exists. If there is a change from the baseline, site-specific treatment recommendations are made for the AOECOE condition, ensuring that the injured worker receives the best care possible.

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