View From the Bench

Workers’ Comp Docket

Significant workers' compensation legal decisions from around the country.
By: | February 6, 2017 • 12 min read

Marijuana Use Doesn’t Prevent Award of TTD Benefits

State ex rel. Cordell v. Pallet Co., Inc., et al., No. 2015-0163 (Ohio 12/29/16)

Ruling: The Ohio Supreme Court held that a worker was entitled to temporary total disability benefits.

What it means: In Ohio, when a worker is terminated after a workplace injury for conduct prior to and unrelated to the workplace injury, his termination does not amount to a voluntary abandonment of employment that will preclude temporary total disability compensation when: 1) the discovery of the dischargeable offense occurred because of the injury; and 2) at the time of the termination, the worker was medically incapable of returning to work as a result of the injury.

Summary: A worker for Pallet Co. was injured in the course and scope of his employment when he fell between a dock and a truck, fracturing his leg. At the hospital, the worker’s urine was collected and sent for a toxicology screening. The worker sought workers’ compensation benefits the day after the accident. Subsequently, the worker’s toxicology results showed that he tested positive for marijuana metabolites. He was terminated that day for violating Pallet’s drug-free workplace policy. The Ohio Supreme Court held that the worker was entitled to temporary total disability benefits.

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The court explained that the worker’s marijuana use was not the proximate cause of his injury. Also, when he was terminated, he had not returned to work, he had not been released by his doctor to return to work, he had not reached maximum medical improvement, and he was physically incapable of returning to work.

The court also concluded that the worker’s termination did not amount to a voluntary abandonment of his employment because he was medically incapable of returning to work when he was terminated. Also, the court explained that this case involved the violation of a work rule before the injury that was discovered as a result of the injury.

Dissenting judges opined that the worker voluntarily abandoned his employment when he used an illegal controlled substance in violation of Pallet’s drug-free workplace policy. A dissenting judge said that the worker’s misconduct severed the causal connection between the injury and the wage loss.

Unpaid Intern’s Benefits Based on Assumed Wage

Rehfeld v. Sedgwick Claims Management Services, No. A157406 (Or. Ct. App. 01/05/17)

Ruling: The Oregon Court of Appeals sent the case back to the Workers’ Compensation Board for a determination of an intern’s temporary disability benefits.

What it means: In Oregon, for workers who have no wages, benefits must be calculated on the “assumed wage” on which the employer’s premium is based.

Summary: An intern’s work for Wend Magazine involved graphic design, selling advertising, and modeling sports clothing for photo shoots. The intern was unpaid in part and paid in part on commission for advertising sales. After working one month for Wend, she was injured when she fell and broke her wrist while modeling skateboard clothing for a photo shoot. At the time of her injury, the intern had not finalized any advertising sales and had not earned a commission. Because of Wend’s noncomplying status, the Workers’ Compensation Board was unable to determine a weekly wage for the intern. The intern argued that her benefits should be based on the minimum wage. The board concluded that she was entitled to the statutory minimum benefit of $50. The Oregon Court of Appeals reversed and sent the case back to the board.

For workers like the intern who have no wages, benefits must be calculated on the assumed wage on which the employer’s premium is based. The intern did not have an assumed wage because Wend was a noncomplying employer. The court explained that a compensable injury to a worker employed by a noncomplying employer is compensable to the same extent as if the employer had complied with the law. Had Wend complied, the intern’s benefits would have been calculated using the assumed rate on which Wend’s premium was based.

The court sent the case back to the board to determine the intern’s temporary disability benefits based on the assumed wage on which Wend’s premium would have been had it provided insurance.

Employee Awarded Comp for Injury in Public Street in Front of His Home

Balloli v. New Haven Police Department, et al., No. SC 19584 (Conn. 12/27/16)

Ruling: The Connecticut Supreme Court held that a police officer’s back injury was compensable.

What it means: In Connecticut, a police officer’s injury in a public street while on his way to work is within the course of his employment.

Summary: A police officer for the New Haven Police Department moved his vehicle out of his driveway so that his son could move another vehicle out of the driveway. The officer parked his vehicle in the street directly in front of his house. About 30 minutes later, the office walked to his car to drive to work. While standing in the street, he dropped his keys, which landed under his vehicle. The officer squatted down and twisted to pick up his keys, injuring his lumbar spine. The officer filed a workers’ compensation claim. The Connecticut Supreme Court held that his injury was compensable.

The court explained that for a police officer, “in the course of employment” encompasses his departure from his place of abode to duty, his duty, and his return to his place of abode after duty. The legislature provided examples to help define the term “place of abode,” including areas related to where an individual resides such as walkways, breezeways, yards, and driveways. The court noted that this list did not include public areas adjacent to a person’s property such as sidewalks or streets. The court found that construing “place of abode” to include a public street would frustrate the remedial purpose of the law.

The court concluded that when the officer dropped his keys in the street and was injured, he was acting within the course of his employment. The fact that he had left his driveway and entered the public street on his way to duty was sufficient to establish that he was covered. It was not necessary to demonstrate that he entered his vehicle or started his engine.

A dissenting judge opined that the officer’s place of abode extended to the street where his vehicle was parked.

Time Limitation on Claim Doesn’t Allow Worker to Sue Employer

Hendrix v. Alcoa, Inc., No. CV-15-558 (Ark. 12/15/16)

Ruling: The Arkansas Supreme Court held that an estate’s wrongful death suit against a deceased worker’s employer should be dismissed.

What it means: In Arkansas, a worker can sue his employer when there is no remedy under the workers’ compensation law. The time limitation on filing a workers’ compensation claim does not equate to the absence of a remedy.

Summary: A former worker for Alcoa was diagnosed with mesothelioma, an asbestos-related cancer 17 years after he stopped working for the employer. He filed a claim against Alcoa for workers’ compensation benefits, alleging that he was exposed to asbestos during the course of his employment. The administrative law judge found that the claim was time-barred because it was not filed within three years of the last date of injurious exposure. Subsequently, the worker died. His estate sued Alcoa. In a case of first impression, the Arkansas Supreme Court dismissed the suit.

The estate asserted that because the statute of limitations extinguished the worker’s remedy under the workers’ compensation law before it accrued, the exclusive remedy provision did not apply. The court rejected the argument. The court explained that a worker can sue an employer only if the workers’ compensation law provides no remedy for the worker’s condition. The workers’ compensation law covers occupational diseases, including asbestos-related claims. The court found that the temporal limitation on recovery did not equate to the absence of a remedy under the workers’ compensation law.

The court also explained that it could not have been the legislature’s intent to absolve an employer of liability for workers’ compensation after a period of time only to subject the employer to liability in a suit after that period ended. The court noted that its result “smack[ed] of unfairness,” particularly when it was well-known that mesothelioma has a long latency period. However, any inequity must be addressed by the legislature.

Dissenting judges opined that the majority deprived the estate of the opportunity to pursue its only remedy. The dissent also said that the majority’s holding deprived workers whose injuries and disease do not manifest during the three-year statute of limitations of a remedy, essentially allowing employers to escape liability.

Unexplained Death Presumption Doesn’t Extend to Worker Who Survived

Turner v. SAIIA Construction, et al., No. 5458 (S.C. Ct. App. 12/07/16)

Ruling: The South Carolina Court of Appeals held that an operator was not entitled to benefits for the injuries he sustained from an unexplained fall.

What it means: In South Carolina, the unexplained death presumption does not apply in cases where the worker survives the injury but had no memory of the events leading up to the injury.

Summary: A heavy equipment operator for SAIIA Construction was found lying on his back next to his dump truck. The operator said that he had no memory of the accident or how it happened. A few weeks before the accident, the operator sought medical care for his lower back. Two days before the accident, he complained to his supervisor that he did not feel well. The operator filed a workers’ compensation claim alleging an injury to his back, head, and thoracic spine. The South Carolina Court of Appeals held that the operator was not entitled to benefits.

The operator argued that the unexplained death presumption applied. The presumption applies when one found charged with the performance of a duty and injured while performing such duty or found injuries where his duty required him to be is injured in the course of his employment. The court declined to apply the presumption in cases where the worker survived the injury but had no memory of the events leading up to the injury. Even if the court extended the presumption, SAIIA rebutted the presumption with evidence that the operator had recent nonwork-related preexisting back conditions.

The court also found that the injury was not a compensable unexplained fall. The operator failed to establish a causal connection between his unexplained fall and his employment. The court noted that it could not determine what he was doing at the time of the incident. Although he was at work when he fell, no evidence showed that his employment contributed to the cause of the fall.

Downsized Injured Worker Was Not Victim of Discrimination

Tirk v. Dubrook, Inc., No. 16-1402 (3d Cir. 12/27/16, unpublished)

Ruling: In an unpublished decision, the 3d U.S. Circuit Court of Appeals affirmed a District Court decision granting summary judgment to an employer on an employee’s claims under ADA Title I. The 3d Circuit held that the employee’s discrimination claim failed because he showed neither causation nor pretext.

What it means: Absent evidence “unduly suggestive” of discrimination, a temporal gap of one month between a protected activity and termination does not sufficiently demonstrate a causal connection.

Summary: A maintenance worker injured his left knee several times over the course of three years. Each time, he missed several weeks of work and was put on medical restrictions, which the company accommodated. After one of the injuries, he filed a workers’ compensation claim. He injured his knee again when he fell from a ladder at work. He filed an accident report but missed no work time. He was put on temporary medical restrictions, which the company honored. One month later, the worker and two other employees were terminated for “economic reasons as part of a reduction in force.” Existing employees took over his responsibilities, and the company did not replace him. The worker sued under the ADA. In an unpublished decision, the 3d Circuit held that he showed neither causation nor pretext.

The worker argued that the company discriminated against him because of a perceived disability and that its stated reasons for terminating him were pretext. The 3d Circuit concluded that the worker failed to make a prima facie showing of causation. Although only one month transpired between the filing of his accident report and his termination, “a temporal gap of one month alone [does not] sufficiently demonstrate a causal connection.” Also, there was no basis to believe that the temporal gap was “unduly suggestive” of discrimination, given the worker’s history of knee injuries, time off from work related to those injuries, and medical work restrictions. He faced no repercussions because of prior injuries or for filing a workers’ comp claim and provided no explanation for why the most recent injury — which required no time off work and minimal work restrictions — created a perception of disability resulting in termination.

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The worker also failed to show that the company’s reasons for his termination were pretextual. He did not dispute that the company faced economic problems, that other employees assumed his responsibilities, and that he was never replaced. Rather, he argued that the company’s reasons were pretextual because three months after the RIF it partially replaced one of the other two employees. The court concluded that the company’s partial replacement three months later of another employee provided no basis to disbelieve the company’s stated reasons for terminating the worker.

Trip, Fall at Holiday Party Isn’t Covered by Comp

Lennon v. N.C. Judicial Department, et al., No. COA16-476 (N.C. Ct. App. 12/06/16, unpublished)

Ruling: In an unpublished decision, the North Carolina Court of Appeals held that a clerk’s injury at a holiday party was not compensable.

What it means: In North Carolina, an injury arising out of a recreational activity will not be compensable when the employer did not require attendance at the activity.

Summary: A deputy clerk of court in the accounting division for the Harnett County Clerk of Court planned the annual office holiday party with her division. A group of attorneys sponsored the party by paying for the venue and the food. The clerk helped design the invitations and assisted with securing catering and planning the program. She also volunteered to serve as the emcee for the event, which was to be held in the evening after work. All employees were invited to attend. Regardless of whether they attended, employees were expected to contribute $13 to pay for a gift for the clerk of court and for cleaning up after the party. On the night of the party, the clerk was entering the party venue when she tripped and fell, suffering injuries. She sought workers’ compensation benefits. The North Carolina Court of Appeals held that she was not entitled to benefits.

The clerk argued that she was required to attend the party. The court disagreed, pointing out that coworkers testified that attendance was not required. The clerk volunteered to emcee the party, the only activity that necessitated her attendance.

The court concluded that the injury did not arise out of and in the course of the clerk’s employment. The court explained that the party was not sponsored by the employer, attendance was not required, no degree of encouragement existed, the employer did not finance the occasion, the employees did not regard the event as a benefit or entitlement, and the event did not provide the employer with a benefit except for improving employee morale.

Christina Lumbreras is a Legal Editor for Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Black Swan: Cloud Attack

Breaking Clouds

A combination of physical and cyber attacks on multiple data centers for cloud service providers causes economic havoc. Even the most well-prepared companies are thrown into paralyzing coverage confusion.
By: | July 27, 2017 • 10 min read

Scenario

By month 16 of the new presidential administration, the Sunshine Brigade is more than ready to act.

Stoked by their anger over rampant economic inequality, the mostly college-educated group of what might best be called upper-middle-class anarchists — many of them from California, Oregon and Washington State — put in motion the gears of a plan more than two years in the making.

Their logic, to them at least, is unimpeachable. Continued consolidation of economic power into the hands of fewer and fewer corporations is creating a world where the rich increasingly exploit and shut out the poor.

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The rise of the techno giants is accelerating this trend, according to the Sunshine Brigade’s de facto leader Emily Brookes, an All-American rugby player and a graduate of Reed College in Oregon.

With a new presidential administration seemingly bent on increasing the economic advantages of the rich with no end in sight, nothing to do then but break things up; and in so doing break the hold of this technology oligarchy.

As Emily Brookes so forcefully put in her instant messages to the other members of the brigade: Break the Cloud.

With more than 500 members, many of them with ample financial and technical resources, the Sunshine Brigade is very capable of delivering on its plan for a two-pronged attack.

It is also radicalized enough to justify the loss of some human life, even its own countrymen, to “save” — in its collective logic — the tens of millions of global citizens that are living as virtual slaves in this callous, exploitative global economy.

With websites and digitally connected services large and small down for days, irritation turns to fear.

The first wave in the attack is an attempt to infect and shut down the data centers for the top three cloud service providers. It takes months to set up this offensive.

Rather than rely on a phishing scam from outside the firewalls of the service providers, The Sunshine Brigade uses its social and business connections to place three members on each of the cloud provider’s payrolls. An infected link from someone you know, someone in the cubicle right next to you, seems like an unstoppable play.

It only partially works. Only one of the cloud service providers is harmed when an unsuspecting employee clicks on a link from their traitorous co-worker. The released malware manages to cripple a major cloud service provider for 12 hours.

With millions of users affected, the act creates substantial disruption and garners global headlines. Insured losses are around $1.5 billion. But this is just the beginning.

The morning after, the Sunshine Brigade unleashes a far more devastating and far more ruthless Round Two.

Using self-driving trucks, the Sunshine Brigade smashes into five data centers; three on the West Coast, and two in the Midwest. Fourteen employees of those cloud servers are killed and another 23 injured; some of them critically.

This time the Brigade gets what it wanted. The physical damage to the data centers is substantial enough that it significantly affects three of the top four cloud service providers for five days.

With websites and digitally connected services large and small down for days, irritation turns to fear.

Small and mid-sized banks, which host their applications on clouds, are shut down. Small business owners and consumer banking customers immediately feel the brunt. Retailers that depend on clouds to host their inventory and transaction information are also hit hard.

But really, the blow falls everywhere.

In the U.S., transportation, financial, health, government and other crucial services grind to a halt in many cases.

Not everyone is disrupted. Some of the larger corporations are sophisticated enough in their risk management, those that used back-up clouds and had steadfast business resiliency plans suffer minimal disruption.

Many small to mid-size companies, though, cannot operate. Their employees can’t get to work and when they can, they sit idly in front of blank computer screens connected to useless servers.

For the man on the street, this is hell.

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Long lines blossom at the likes of gas stations, banks and grocery stores. A population already on edge from a steady diet of social media provocation becomes even more inflamed.

By nightfall of Day Five, the three major cloud service providers are recovered, and digital “normalcy” begins to creep back. But for many small and medium-sized businesses, the recovery comes way too late.

Economic losses promise to register in the tens of billions. It’s not being too imaginative to think that losses could hit the $100 billion mark.

Two multinational insurers based in the U.S., three Lloyd’s syndicates and a Bermuda insurer signal to regulators that their aggregate cyber-related losses are so great that they will most likely become insolvent.

Emily Brookes and her cohorts were willing to kill more than a dozen people to promote their worldview. In their youthful naiveté, they could not know just how much suffering they would cause.

Observations

For some commercial insurance carriers, the aggregated losses from a prolonged disruption of cloud computing services could be catastrophic, or close to it.

“It’s on a par with any earthquake or hurricane or tornado,” said Scott Stransky, an associate vice president and principal scientist with the modeling firm AIR Worldwide.

AIR modeled the insured losses for the Fortune 1,000 were Amazon’s cloud service to go down for one day. They came up with a figure of $3 billion.

Now consider that most businesses in this country are small businesses, with not nearly the risk management sophistication of the Fortune 1000. Then consider a cloud interruption of five days or more.

Mark Greisiger, president, NetDiligence

“Almost any company you talk about today would rely to some extent on the cloud, either to host their website, to do invoicing, inventory, you name it — the cloud is being used across the board,” Stransky said.

“It’s a significant issue for insurers and one we think about a lot,” said Nick Economidis, an underwriter with specialty carrier Beazley.

“Should a cloud service provider go down, everybody who is working with that cloud service provider is impacted by that,” he said.

“Now, pretty much every software maker is on the cloud,” said Mark Greisiger, president of NetDiligence.

“In the old days, someone would come in and install software on your servers and come in annually for maintenance. That’s all gone bye-bye. Everybody who makes software is forcing you onto their private cloud,” Greisiger said.

The aggregation risk for carriers is complicated by the degree of transparency they have into which insured’s applications are hosted on which cloud provider.

Now here’s the even trickier part. Clouds outsource to other clouds.

“It’s almost becoming a spider’s web of interdependencies on who has access to what in terms of upstream and downstream providers,” Greisiger said.

Determining which of their insureds is hosted on which cloud, and in turn, where that cloud is outsourcing to other clouds can be very difficult for carriers to determine.

Even if a company is careful to diversify the risks they’re taking, they might not realize that a high percentage of insureds are even with the same cloud provider. They could be hit with devastating losses across their entire portfolio of business, said an executive with BDO consulting.

AIR’s Stransky said his company launched a product in April, ARC, which stands for Analytics of Risk from Cyber, which is designed to help carriers gain that much needed transparency.

Among insureds, surviving an event of this magnitude will depend not only on the sophistication of their risk management department, but on the company’s overall ability to negotiate contracts with vendors and suppliers that will indemnify the company in the case of a cloud outage of this duration.

It will also depend on organization’s understanding that there is no off-the-shelf solution that will prevent an event like this or make a company whole after it.

Shiraz Saeed, national practice leader, cyber, Starr Companies

Experts say contracts with cloud service providers, customers and suppliers must be structured so that a company is defended should it lose cloud access for as much as five days or more.

Best practices also include modeling just what your losses would look like in this area, and vetting your full portfolio of insurance policies to understand how each would respond.

One broker said buyers can’t be blamed if the complexities of the coverage issues at stake here are initially hard to grasp.

“It’s becoming a spider’s web of interdependencies on who has access to what.” —Mark Greisiger, president, NetDiligence

“I think it’s the broker’s job to inform the client of this exposure,” said Doug Friel, a vice president with JKJ Commercial Insurance, based in Newtown, Pa.

“You may have business interruption coverage for direct physical damage to your building. But have you ever thought about your business income if your IT structure goes down?” Friel said.

He said many buyers might not realize there is a difference.

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Large businesses should have the resources to demand from their cloud service providers that they be indemnified for the entirety of a cloud failure event. There will be a fee for that, but it will be well worth paying, Friel said.

“You have to push,” Friel said. “They are going to say, ‘Here is our standard contract, sign it.’ ”

Don’t settle for that, he said, although many do in ignorance, he added.

“Where possible, we would look for clients to negotiate their contracts. These business relationships should be mutually beneficial, even if one of these events occur,” said Shiraz Saeed, national practice leader, cyber, for the Starr Companies.

It’s a partnership, he said.

“It shouldn’t be a zero sum game on either side. I think there should be an understanding of what the potential loss might be and then designing a contract around that,” he said.

While cloud service providers are known for having high grade security systems, most average organizations don’t have the means for that. But no matter what a company’s resources, the first step is modeling where your digital assets are, and what you and your customers stand to lose if you lose access to them.

“Most insureds don’t seem to understand the amount of individual loss that you could be subject to,” said Jim Evans, leader of insurance advisory services at BDO Consulting. “Usually this stuff is measured in hours,” he said. “But what if a cloud provider is out for three or four days?” he said.

“Trying to quantify what you did lose in an event is hard enough. Trying to do a modeling exercise about what you could lose? It’s something that just doesn’t get done enough,” he said.

Once you have an understanding of what you own and what you stand to lose, the next step is prioritizing the protection of the assets you have. That means drilling into your contract with your cloud service providers to get the maximum indemnification.

It also means spreading your risk so that if at all possible, not all of your assets or your customers’ assets are housed by one cloud service provider. Cloud platforms can be public, private, or a hybrid of the two.

Understanding where your assets are in that architecture is crucial. Spending the money to insure that they are protected behind a diverse menu of firewalls is highly advisable.

Navigating the different iterations of business interruption coverage in property, cyber and kidnap and ransom policies is also important.

Make sure your broker can provide clarity on the different types of coverages and tailor them to your needs, experts said.

The concept of design thinking is really what’s in play here. Organizations have to work with vendors in every aspect of their operations to design a risk management system that can sustain this kind of hit.

“Build a better mousetrap to protect yourself,” said JKJ’s Friel.

“Depending on your service, you need to have the best and the brightest designing this stuff. Spread the risk.”

“Don’t be afraid to ask for more,” he said.

Postscript

In engineering an attack on the cloud, Emily Brookes and her cohorts accomplished the opposite of what they set out to do.

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Only the largest corporations with the most sophisticated risk management programs were able to survive the attempt to break the cloud with manageable losses.

Small businesses, the true backbone of the U.S. economy, suffered terribly. Entrepreneurs who put their life’s work into their business lost it in many cases.

Those on the lowest part of the economic scale, the working poor, lost their jobs and their ability to cover their rent and grocery bills. They joined the ranks of those subsidized by the government by the millions.  The attempt to break the cloud resulted in an even more polarized society. &

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]