2222222222

Risk Insider: Terri Rhodes

7th Circuit’s ADA Ruling: Important, but Limited

By: | November 27, 2017 • 4 min read
Terri L. Rhodes is CEO of the Disability Management Employer Coalition. Terri was an Absence and Disability Management Consultant for Mercer, and also served as Director of Absence and Disability for Health Net and Corporate IDM Program Manager for Abbott Laboratories.

There’s been a lot of excitement about the 7th Circuit’s recent ruling on granting additional leave as an accommodation under the Americans with Disabilities Act (ADA).  Some observers have gone so far as to claim the ruling “changes everything we know about the ADA.”

Advertisement




There’s no doubt the 7th Circuit’s ruling is a significant thing.  But to avoid trouble, it’s important to keep it in perspective.

Here’s a quick recap of how we got here.

In 1997, the Equal Employment Opportunity Commission (EEOC) filed suit against Sears Roebuck & Co.  The EEOC alleged the retail company discriminated against a salesperson by refusing to provide her with additional leave as a reasonable accommodation under the ADA. The EEOC said that Sears “maintained an inflexible worker’s compensation one-year leave policy which does not provide for reasonable accommodation of employees with disabilities.”

The U.S. District Court for the Northern District of Illinois ruled in favor of Sears. The EEOC appealed. The 7th Circuit Court of Appeals decided there was enough evidence for a jury trial and sent the case back to the District Court. In 2010, the case settled for $6.2 million.

And then there is perhaps the decision’s most quoted line: “The ADA is an antidiscrimination statute, not a medical-leave entitlement.”

Several other circuit courts followed suit. However, 20 years later, along comes Severson v. Heartland Woodcraft, Inc.

The 7th Circuit seemed to reverse itself when it affirmed a district court’s ruling that an employer did not violate the ADA by failing to provide an employee with a long-term medical leave of absence because a multi-month leave of absence was beyond the scope of a reasonable accommodation under the ADA.

The ruling itself rightly caught peoples’ attention. So did some of its language. For example, the 7th Circuit stated that “a long-term leave of absence cannot be a reasonable accommodation” under the ADA.  It went on to say such a leave would transform the ADA “into a medical-leave statute — in effect, an open-ended extension of the FMLA.” And then there is perhaps the decision’s most quoted line: “The ADA is an antidiscrimination statute, not a medical-leave entitlement.”

But before employers get too excited, it’s important to note some very important caveats.

The 7th Circuit is one court. Circuit courts in other jurisdictions have reached differing conclusions on this issue. Further, the EEOC continues to take the position that leaves of absence may constitute reasonable accommodation in certain circumstances. “Inflexible” leave policies could still be in the EEOC’s sights.

Most importantly, the 7th Circuit offers no statutory citation for its conclusion about a multi-month leave — opening it up to potential challenge. Nor does the ruling offer any real guidance for employers on what length of leave is reasonable.

So what can employers do to reduce the risk of an employee or EEOC action on an “inflexible” leave law?

First, employers should focus on individual employees. The ADA requires a case-by-case assessment to determine which particular form of accommodation is reasonable for a particular employee. A blanket refusal to grant multi-month leaves is not the kind of case-by-case assessment required by the ADA. The key to reducing potential liability is an interactive, individualized, and well-documented process.

Advertisement




Next, learn what other employers are doing. Leave laws are increasingly complicated, especially the interaction among them. Risk managers, HR professionals and others can take advantage of the workshops, webinars, training videos and other resources on the ADA; many are available at low or even no cost.

Finally, employers should think about going beyond ADA requirements. The immediate and reasonable question is, “why wouldn’t you try to accommodate an individual with a qualified disability?”

That question is best answered with other questions:

  • Why would you want skilled, experienced employees to leave your organization?
  • Why would you want to increase ADA litigation risks for your organization?

Rather than seeing the ADA as a problem to mitigate, employers should see it as an opportunity to maximize and retain valuable talent. Many employers have made that shift in regard to workers’ compensation (WC) claims. WC costs can be so significant that some organizations successfully adopt an “above and beyond” attitude toward helping claimants stay at work or return to work. Doing so requires investment in proactive policies, processes and procedures to reduce claims. It requires work, but the return on investment can be substantial. The same applies to the ADA. That investment can pay big dividends in today’s tight — and litigious — labor market.

The 7th Circuit’s recent ADA ruling isn’t the last word on reasonable accommodations. Employers should continue to take steps that minimize liability and maximize the ability to attract good talent to compete and grow.

More from Risk & Insurance

More from Risk & Insurance

High Net Worth

To the High Net Worth Homeowner: Build a Disaster Resiliency Plan You Can Be Proud Of

Having a resiliency plan and practicing it can make all the difference in a disaster.
By: | September 14, 2018 • 7 min read

Packed with state-of-the-art electronics, priceless collections and high-end furnishings, and situated in scenic, often remote locations, the dwellings of high net worth individuals and families pose particular challenges when it comes to disaster resiliency. But help is on the way.

Advertisement




Armed with loss data, innovative new programs, technological advances, and a growing army of niche service-providers aimed at addressing an astonishingly diverse set of risks, insurers are increasingly determined to not just insure against their high net worth clients’ losses, but to prevent them.

Insurers have long been proactive in risk mitigation, but increasingly, after the recent surge in wildfire and storm losses, insureds are now, too.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy,” said Laura Sherman, founding partner at Baldwin Krystyn Sherman Partners.

And especially in the high net worth space, preventing that loss is vastly preferable to a payout, for insurers and insureds alike.

“If insurers can preserve even one house that’s 10 or 20 or 40 million dollars … whatever they have spent in a year is money well spent. Plus they’ve saved this important asset for the client,” said Bruce Gendelman, chairman and founder Bruce Gendelman Insurance Services.

High Net Worth Vulnerabilities

Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

As the number and size of luxury homes built in vulnerable areas has increased, so has the frequency and magnitude of extreme weather events, including hurricanes, harsh cold and winter storms, and wildfires.

“There is a growing desire to inhabit this riskier terrain,” said Jason Metzger, SVP Risk Management, PURE group of insurance companies. “In the western states alone, a little over a million homes are highly vulnerable to wildfires because of their proximity to forests that are fuller of fuel than they have been in years past.”

Such homes are often filled with expensive artwork and collections, from fine wine to rare books to couture to automobiles, each presenting unique challenges. The homes themselves present other vulnerabilities.

“Larger, more sophisticated homes are bristling with more technology than ever,” said Stephen Poux, SVP and head of Risk Management Services and Loss Prevention for AIG’s Private Client Group.

“A lightning strike can trash every electronic in the home.”

Niche Service Providers

A variety of niche service providers are stepping forward to help.

Secure facilities provide hurricane-proof, wildfire-proof off-site storage for artwork, antiques, and all manner of collectibles for seasonal or rotating storage, as well as ahead of impending disasters.

Other companies help manage such collections — a substantial challenge anytime, but especially during a crisis.

“Knowing where it is, is a huge part of mitigating the risk,” said Eric Kahan, founder of Collector Systems, a cloud-based collection management company that allows collectors to monitor their collections during loans to museums, transit between homes, or evacuation to secure storage.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy.” — Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

Insurers also employ specialists in-house. AIG employs four art curators who advise clients on how to protect and preserve their art collections.

Perhaps the best known and most striking example of this kind of direct insurer involvement are the fire teams insurers retain or employ to monitor fires and even spray retardant or water on threatened properties.

High-Level Service for High Net Worth

All high net worth carriers have programs that leverage expertise, loss data, and relationships with vendors to help clients avoid and recover from losses, employing the highest levels of customer service to accomplish this as unobtrusively as possible.

“What allows you to do your job best is when you develop that relationship with a client, where it’s the same people that are interacting with them on every front for their risk management,” said Steve Bitterman, chief risk services officer for Vault Insurance.

Site visits are an essential first step, allowing insurers to assess risks, make recommendations to reduce them, and establish plans in the event of a disaster.

“When you’re in a catastrophic situation, it’s high stress, time is of the essence, and people forget things,” said Sherman. “Having a written plan in place is paramount to success.”

Advertisement




Another important component is knowing who will execute that plan in homes that are often unoccupied.

Domestic staff may lack the knowledge or authority to protect the homeowner’s assets, and during a disaster may be distracted dealing with threats to their own homes and families. Adequate planning includes ensuring that whoever is responsible has the training and authority to execute the plan.

Evaluating New Technology

Insurers use technologies like GPS and satellite imagery to determine which homes are directly threatened by storms or wildfires. They also assess and vet technologies that can be implemented by homeowners, from impact glass to alarm and monitoring systems, to more obscure but potentially more important options.

AIG’s Poux recommends two types of vents that mitigate important, and unexpected risks.

“There’s a fantastic technology called Smart Vent, which allows water to flow in and out of the foundation,” Poux said. “… The weight of water outside a foundation can push a foundation wall in. If you equalize that water inside and out at the same level, you negate that.”

Another wildfire risk — embers getting sucked into the attic — is, according to Poux, “typically the greatest cause of the destruction of homes.” But, he said, “Special ember-resisting venting, like Brandguard Vents, can remove that exposure altogether.”

Building Smart

Many disaster resiliency technologies can be applied at any time, but often the cost is fractional if implemented during initial construction. AIG’s Smart Build is a free program for new or remodeled homes that evolved out of AIG’s construction insurance programs.

Previously available only to homes valued at $5 million and up, Smart Build recently expanded to include homes of $1 million and up. Roughly 100 homes are enrolled, with an average value of $13 million.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work.” — Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“We know what goes wrong in high net worth homes,” said Poux, citing AIG’s decades of loss data.

“We’re incenting our client and by proxy their builder, their architects and their broker, to give us a seat at the design table. … That enables us to help tweak the architectural plans in ways that are very easy to do with a pencil, as opposed to after a home is built.”

Poux cites a remote ranch property in Texas.

Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“The client was rebuilding a home but also installing new roads and grading and driveways. … The property was very far from the fire department and there wasn’t any available water on the property.”

Poux’s team was able to recommend underground water storage tanks, something that would have been prohibitively expensive after construction.

“But if the ground is open and you’ve got heavy equipment, it’s a relatively minor additional expense.”

Homes that graduate from the Smart Build program may be eligible for preferred pricing due to their added resilience, Poux said.

Recovery from Loss

A major component of disaster resiliency is still recovery from loss, and preparation is key to the prompt service expected by homeowners paying six- or seven-figure premiums.

Before Irma, PURE sent contact information for pre-assigned claim adjusters to insureds in the storm’s direct path.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work,” said Curt Goetsch, head of underwriting for Ironshore’s Private Client Group.

Advertisement




“If you’ve got custom construction or imported materials in your house, you’re not going to go down the street and just find somebody that can do that kind of work, or has those materials in stock.”

In the wake of disaster, even basic services can be scarce.

“Our claims and risk management departments have to work together in advance of the storm,” said Bitterman, “to have contractors and restoration companies and tarp and board services that are going to respond to our company’s clients, that will commit resources to us.”

And while local agents’ connections can be invaluable, Goetsch sees insurers taking more of that responsibility from the agent, to at least get the claim started.

“When there is a disaster, the agency’s staff may have to deal with personal losses,” Goetsch said. &

Jon McGoran is a novelist and magazine editor based outside of Philadelphia. He can be reached at [email protected]