Injury Reporting

U.S. Steel Lawsuit Could Impact Reporting Policies

If the Department of Labor wins the case, all companies may have to revise rules for immediate reporting of injuries.
By: | March 23, 2016 • 4 min read

It’s commonly known that the earlier a work injury is reported, chances are better that claim costs will be controlled and the worker’s absence will be limited.

Advertisement




But strictly enforced policies that require workers to report an injury in 24 hours or face disciplinary action are being deemed too rigid.

In February, the U.S. Department of Labor filed suit against U.S. Steel for disciplinary action the company took against two employees.

The Pennsylvania-based workers reported injuries several days after they occurred and were suspended without pay for violating U.S. Steel’s policy that required reporting of an injury within 24 hours.

The employees filed complaints with the Occupational Safety and Health Administration (OSHA), alleging the suspensions were retaliatory.

“The reliability of witness statements can degrade significantly over time.” — Joseph Freeman, managing director, risk control, Beecher Carlson

DOL’s lawsuit charges that U.S. Steel’s action violates the anti-discrimination provision of the Occupational Safety and Health Act.

In announcing the lawsuit, Richard Mendelson, OSHA regional administrator in Philadelphia, said the company’s policy “discourages employees from reporting injuries for fear of retaliation.”

“Because workers don’t always recognize injuries at the time they occur, the policy provides an incentive for employees to not report injuries once they realize they should, since they are concerned that the timing of their report would violate the company’s policy and result in some kind of reprimand.”

Joseph Freeman, managing director, risk control, Beecher Carlson.

Joseph Freeman, managing director, risk control, Beecher Carlson.

The suit demands that U.S. Steel rescind the disciplinary actions, and pay the workers lost wages and damages. It also wants the company’s policy to be changed so that employees can report workplace injuries or illnesses up to seven days after becoming  aware of them.

Workers’ compensation experts say that there is nothing wrong with asking employees to report an injury immediately, in theory anyway.

“Many companies have a rule that you must report workplace injuries immediately, and it is not designed to be a ‘gotcha’ opportunity,” said Joseph Freeman, managing director, risk control at Beecher Carlson.

Prompt reporting of workplace injuries lowers costs and improves outcomes, experts said.

Advertisement




“The insurance companies have statistics on the amount of money paid depending on how late the claim is reported,” said Robert Phelan, president and CEO of TriPoint.

“If you miss a week in reporting, you get killed. And it goes downhill from there.

“What’s really critical in workers’ comp today is to get the injured employee the right medical treatment from the beginning. Conditions worsen when treatment is delayed, which can happen if the wrong treatment is sought from the start.”

Phelan said that delays can cause medical-only claims to become lost-time claims.

Delays also impede efforts to investigate — and remediate — the causes of injury or illness.

“Conditions at a workplace can change very rapidly,” Freeman said. “If the employer isn’t given the opportunity to investigate immediately, when they do conduct their investigation, the environment could be completely different from when the incident actually occurred.”

“Workplace safety is all about communication, and communication is what creates the culture.” — Robert Phelan, president and CEO, TriPoint

He added that injured workers often don’t see the injury occur, making co-workers’ accounts important.

“The reliability of witness statements can degrade significantly over time,” Freeman said.

Immediate reporting policies help companies gather statements while they are as accurate as possible, he said.

Fraudulent claims, while rare, do occur, and delays, particularly over a weekend, not only make it harder to determine a claim’s validity, but can also spark employer suspicions, harming workplace culture, experts said.

Longer delays can also trigger exclusions to coverage.

“In every insurance policy there is an obligation to report a claim in a timely manner,” Phelan said.

“If you get outside of 30 days, an insurance company could say … ‘We’re not going to pay for it.’ … because your ability to understand what really happened is compromised.

“The [insurance] premium is going to increase on its own, because if you have this late reporting, the statistics prove it will make your claims values higher, and if the claims are higher … your premium goes up,” Phelan says.

Implications of Lawsuit

The suit could have implications beyond U.S. Steel’s policy and procedures.

“If OSHA wins the case, I think many companies will have to revise their policies and retrain people to say, ‘We would appreciate you reporting these immediately so we can investigate in a timely manner, but you have seven days, per OSHA,’ ” Freeman said.

Robert Phelan, president and CEO, TriPoint

Robert Phelan, president and CEO, TriPoint

While Phelan doubts U.S. Steel intended to discourage reporting, he said punitive policies are a bad idea.

Strict disciplinary action, he said, could make workers wary of filing safety reports and damage the collaborative workplace culture that is the most powerful tool in reducing reporting times.

“Workplace safety is all about communication, and communication is what creates the culture. You can’t just send out an email or put something in their pay envelope — it’s got to be continuously communicated. We tell our employees to get everyone to report everything, because if it doesn’t amount to anything, you just throw the paperwork in the trash.’”

Freeman agreed.

Advertisement




“Careful communication between employers and employees is absolutely critical,” he said; the wrong tone can put employees on the defensive.

“When those policies are communicated with greater care, the employees will adhere to them more frequently and you end up having a better culture because of it, which sets all parties up for success.”

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

More from Risk & Insurance

More from Risk & Insurance

Alternative Energy

A Shift in the Wind

As warranties run out on wind turbines, underwriters gain insight into their long-term costs.
By: | September 12, 2017 • 6 min read

Wind energy is all grown up. It is no longer an alternative, but in some wholesale markets has set the incremental cost of generation.

As the industry has grown, turbine towers have as well. And as the older ones roll out of their warranty periods, there are more claims.

This is a bit of a pinch in a soft market, but it gives underwriters new insight into performance over time — insight not available while manufacturers were repairing or replacing components.

Charles Long, area SVP, renewable energy, Arthur J. Gallagher

“There is a lot of capacity in the wind market,” said Charles Long, area senior vice president for renewable energy at broker Arthur J. Gallagher.

“The segment is still very soft. What we are not seeing is any major change in forms from the major underwriters. They still have 280-page forms. The specialty underwriters have a 48-page form. The larger carriers need to get away from a standard form with multiple endorsements and move to a form designed for wind, or solar, or storage. It is starting to become apparent to the clients that the firms have not kept up with construction or operations,” at renewable energy facilities, he said.

Third-party liability also remains competitive, Long noted.

“The traditional markets are doing liability very well. There are opportunities for us to market to multiple carriers. There is a lot of generation out there, but the bulk of the writing is by a handful of insurers.”

Broadly the market is “still softish,” said Jatin Sharma, head of business development for specialty underwriter G-Cube.

“There has been an increase in some distressed areas, but there has also been some regional firming. Our focus is very much on the technical underwriting. We are also emphasizing standardization, clean contracts. That extends to business interruption, marine transit, and other covers.”

The Blade Problem

“Gear-box maintenance has been a significant issue for a long time, and now with bigger and bigger blades, leading-edge erosion has become a big topic,” said Sharma. “Others include cracking and lightning and even catastrophic blade loss.”

Long, at Gallagher, noted that operationally, gear boxes have been getting significantly better. “Now it is blades that have become a concern,” he said. “Problems include cracking, fraying, splitting.

Advertisement




“In response, operators are using more sophisticated inspection techniques, including flying drones. Those reduce the amount of climbing necessary, reducing risk to personnel as well.”

Underwriters certainly like that, and it is a huge cost saver to the owners, however, “we are not yet seeing that credited in the underwriting,” said Long.

He added that insurance is playing an important role in the development of renewable energy beyond the traditional property, casualty, and liability coverages.

“Most projects operate at lower capacity than anticipated. But they can purchase coverage for when the wind won’t blow or the sun won’t shine. Weather risk coverage can be done in multiple ways, or there can be an actual put, up to a fixed portion of capacity, plus or minus 20 percent, like a collar; a straight over/under.”

As useful as those financial instruments are, the first priority is to get power into the grid. And for that, Long anticipates “aggressive forward moves around storage. Spikes into the system are not good. Grid storage is not just a way of providing power when the wind is not blowing; it also acts as a shock absorber for times when the wind blows too hard. There are ebbs and flows in wind and solar so we really need that surge capacity.”

Long noted that there are some companies that are storage only.

“That is really what the utilities are seeking. The storage company becomes, in effect, just another generator. It has its own [power purchase agreement] and its own interconnect.”

“Most projects operate at lower capacity than anticipated. But they can purchase coverage for when the wind won’t blow or the sun won’t shine.”  —Charles Long, area senior vice president for renewable energy, Arthur J. Gallagher

Another trend is co-location, with wind and solar, as well as grid-storage or auxiliary generation, on the same site.

“Investors like it because it boosts internal rates of return on the equity side,” said Sharma. “But while it increases revenue, it also increases exposure. … You may have a $400 million wind farm, plus a $150 million solar array on the same substation.”

In the beginning, wind turbines did not generate much power, explained Rob Battenfield, senior vice president and head of downstream at JLT Specialty USA.

“As turbines developed, they got higher and higher, with bigger blades. They became more economically viable. There are still subsidies, and at present those subsidies drive the investment decisions.”

For example, some non-tax paying utilities are not eligible for the tax credits, so they don’t invest in new wind power. But once smaller companies or private investors have made use of the credits, the big utilities are likely to provide a ready secondary market for the builders to recoup their capital.

That structure also affects insurance. More PPAs mandate grid storage for intermittent generators such as wind and solar. State of the art for such storage is lithium-ion batteries, which have been prone to fires if damaged or if they malfunction.

“Grid storage is getting larger,” said Battenfield. “If you have variable generation you need to balance that. Most underwriters insure generation and storage together. Project leaders may need to have that because of non-recourse debt financing. On the other side, insurers may be syndicating the battery risk, but to the insured it is all together.”

“Grid storage is getting larger. If you have variable generation you need to balance that.” — Rob Battenfield, senior vice president, head of downstream, JLT Specialty USA

There has also been a mechanical and maintenance evolution along the way. “The early-generation short turbines were throwing gears all the time,” said Battenfield.

But now, he said, with fewer manufacturers in play, “the blades, gears, nacelles, and generators are much more mechanically sound and much more standardized. Carriers are more willing to write that risk.”

There is also more operational and maintenance data now as warranties roll off. Battenfield suggested that the door started to open on that data three or four years ago, but it won’t stay open forever.

“When the equipment was under warranty, it would just be repaired or replaced by the manufacturer,” he said.

“Now there’s more equipment out of warranty, there are more claims. However, if the big utilities start to aggregate wind farms, claims are likely to drop again. That is because the utilities have large retentions, often about $5 million. Claims and premiums are likely to go down for wind equipment.”

Advertisement




Repair costs are also dropping, said Battenfield.

“An out-of-warranty blade set replacement can cost $300,000. But if it is repairable by a third party, it could cost as little as $30,000 to have a specialist in fiberglass do it in a few days.”

As that approach becomes more prevalent, business interruption (BI) coverage comes to the fore. Battenfield stressed that it is important for owners to understand their PPA obligations, as well as BI triggers and waiting periods.

“The BI challenge can be bigger than the property loss,” said Battenfield. “It is important that coverage dovetails into the operator’s contractual obligations.” &

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]