Risk Scenario

The Scales of Justice

Two employee injuries at the same company produce two very different outcomes.
By: | August 26, 2014 • 9 min read
Risk Scenarios are created by Risk & Insurance editors along with leading industry partners. The hypothetical, yet realistic stories, showcase emerging risks that can result in significant losses if not properly addressed.

Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.

Frankie and Hector

“It’s a great day for the Irish!”

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Whether they loved him or found him annoying, workers in the seafood and meat departments in the Better Harvest grocery store in Boston’s Back Bay knew the meaning of that booming morning greeting very well.

It declared that boisterous fish cleaner and erstwhile fish-counter salesman Frankie Burns was at work, and he wanted everybody to know it.

Despite his sometimes jarring presence, most people loved Frankie. Frankie knew seafood, having worked on his family’s cod boat when he was younger. Now, at 55, he provided a knowledge of local fish and shellfish that was an asset in a store catering to the Back Bay’s educated, prosperous consumers.

Barrel-chested, with forearms, shoulders and biceps solidly built from years of manual labor, Frankie cheerfully and proudly unloaded the tubs of hake, pollock and flounder sold by the market.

This May morning, though, would prove to be a wake-up call for the hard-living Frankie. As he had thousands of times before, Frankie hoisted a heavy tub of iced pollock up onto the fish-cutting counter. This time, though, his back gave out.

“Whoa,” Frankie said as he clutched his lower back, wincing at the piercing, unfamiliar pain there.

Whoa indeed.

Testing revealed that Frankie had aggravated a chronic degenerative back condition. His claim was found to be compensable.

Scenario Partner

Scenario Partner

With 180 stores nationwide and close to $8 billion in sales, Better Harvest’s human resources department was well-versed in the amendments to the Americans with Disabilities Act that were enacted in 2008.

Following Better Harvest’s well-documented procedures, and at Frankie’s reluctant request, Back Bay store manager Gracie Walker granted Frankie an accommodation under the ADA.

For now, Frankie was done hoisting ice-filled fish tubs. The store would need to find another fish cutter as the heaviest thing Frankie would be permitted to lift would be paper-wrapped one pound cod fillets.

“Hey, a job’s a job,” Frankie said, as he hoisted a beer and a Fenway Frank with his brother Petey at a Sox game that summer.

————–

Hector Velasquez was the fish cutter in Better Harvest’s Brentwood, Calif. store.

At 53, Hector’s idea of a good time was to go Zydeco dancing with his latest and greatest girlfriend Vera at the Puma Club in nearby Venice Beach.

That’s exactly what Hector was doing on a steaming hot California night during a performance of his favorite Zydeco band, the Vallejo Oyster Crackers. But Hector made a misstep due to a slippery combination of spilled beer and crushed peanut shells on the dance floor of the Puma Club.

Vera tumbled to the ground with Hector but popped right back up, adjusting her hair and skirt in the process. Hector wasn’t so lucky.

“Honey, are you hurt?” Vera said.

Hector, whose love of beer, fried seafood and tortillas had left him with a stout belly, tried to get up but couldn’t.

Another dancer, seeing Hector in distress, stopped Hector from trying to move.

“Stay still, man,” the Zydeco dancer said. “You might have really hurt yourself.”

Hector’s fellow dancer put his hand on Hector’s belly to still his movements and pushed a chair cushion under his head.

“Be still a minute, man, and breathe — breathe against the pain,” the Zydeco dancer said.

Hector looked up at the man thankfully and started to breathe more deeply, his beer belly rising and falling with each labored breath.

Hector couldn’t make it to work the following Monday and filed for leave under the Family Medical Leave Act.

Tough Medicine

Hector rested for a few days, trying to dull the pain with Ibuprofen and light beer. Given that he wasn’t hurt at work, Hector didn’t go to a doctor, thinking he might end up bearing the cost of treatment that he couldn’t afford.

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On the Thursday after his injury, Hector got a ride from a buddy and came back to work. Hector is self-medicating, taking unhealthy doses of Ibuprofen in an attempt to perform his job.

He barely made it through Thursday and Friday, depending on co-workers to cover for him. Over the weekend, home resting but still in substantial pain, Hector faced the music.

“There’s no way, man,” he said, looking at his bent-over body in the bathroom mirror.

“I gotta talk to somebody.”

The following Monday, Dave Wagner, the general manager of the Brentwood Better Harvest store, got a knock on his office door.

Being the GM of this store, with its affluent and demanding customer base, was no joke. Dave Wagner was one busy man.

“Hector, what’s up?” Dave said.

“I need to talk to you, Mr. Wagner. It’s my back. I hurt it bad the other night and I can’t do any lifting, not much anyway,” Hector said.




Dave did some rapid-fire mental calculations as he gestured Hector to a chair.

“Sit down Hector, sit down,” he said.

Hector moved slowly to sit down, telling Dave everything he needed to know about how badly Hector was hurting.

“I’ll tell you what Hector, I’ll tell you what,” Dave said, as memories of Better Harvest HR emails concerning the ADA flashed through his formidable memory.

“Hold on a sec,” Dave said and popped down at his desk. In two clicks and a couple of scrolls, Dave scanned some emails from HR.

“Reasonable accommodation” is the phrase that stuck in Dave’s mind as he rapidly scanned the emails.

“You don’t have to lift,” Dave said, turning back to Hector. “You can work the counter. How does that sound?”

Hector, although in substantial pain, brightened some.

“That sounds good Mr. Wagner, thank you,” Hector said. But Hector’s feeble attempts to stand up sent Dave a message.

“Talk to Marcus and tell him what I said and I’ll talk to him too,” Dave said, as Hector made his way out.

As Hector went off to find Marcus, the manager of the seafood department, Dave engaged in professional, removed reflection.

“We’ll see what’s reasonable. I’ll give it three months,” he said to himself, before his vibrating cellphone distracted him.

“Cripe,” the harried Dave said to himself, looking at the number and picking up his phone.

“Dave Wagner,” he said impatiently to whoever was on the line.

Three months came and went, and Dave had to make a call. Hector just wasn’t that strong on the counter.

You had to have serious customer service skills to handle Brentwood and Beverly Hills customers and Hector was flailing. Complaints about him were coming at Dave from all sides, customers, co-workers, you name it.

“Reasonable means reasonable,” Dave said to himself as, worn down with complaints about Hector’s customer service shortcomings, he moved to terminate him.

The Wheel Turns

After his firing, it didn’t take long for the befuddled Hector to hook up with a gifted, ambitious employment rights attorney, Lucia Yamamoto, a graduate of Berkeley Law and a passionate defender of workers’ rights.

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This is how the pre-trial negotiations went between Yamamoto’s firm, The Workers’ Rights Center, and the firm that did defense work for Better Harvest’s employment liability carrier, Apex Insurance.

“Okay guys, this is an easy one,” Yamamoto said on the phone call with the Apex defense team.

“We don’t see it that way,” was the game response from Ed Kleindinst, the defense lead for Apex’s law firm, Kleindinst, Evans, Hale & Brown.

“Oh really?” Yamamoto said, her derision palpable.

“You got two guys, practically the same age. They’re both working the same job. I mean this is beautiful,” she said.

“You accommodate one guy, and he’s still got a job,” Yamamoto said.

“Your GM in the Boston store continues to accommodate him, according to widely disseminated company policy…,” she continued.

“I don’t think you’re in a position to know how widely disseminated it was,” Kleindinst responded.

“Like it matters,” Yamamoto shot back.

“The other guy, same company, you terminate after 90 days even though it’s not presenting an undue hardship to your business. Instead, he was terminated because the manager felt he had accommodated him for long enough, which runs contrary to the company policy,” Yamamoto says.

“Been there 20 years, married with four children. Never been disciplined in his working life. Hello? Are you guys still there?” she said.

“We’re here,” Kleindinst said, this time with a little less vigor, pushing the mute button and rolling his eyes at his co-counsel in one of the Kleindinst, Evans, Hale & Brown conference rooms.

One of the partners jotted a note on a sheet of paper and slid it in front of Kleindinst.

There was a pause — orchestrated on the part of both Yamamoto and Kleindinst.

“Well, you’re not saying anything,” Yamamoto said.

“Go on, please, counsel,” Kleindinst said.

“Oh I’ll go on, I could go on all day with this one,” Yamamoto said.

“Two million,” she said.

“Oh come on!” Kleindinst said.

“See you in court!” Yamamoto replied.

Kleindinst’s partner jerks his head at the sheet of paper, trying to focus Kleindinst.

“One million,” Kleindinst said.

“One and six or we go to court and no more of this,” Yamamoto said.

There is another pause.

“Gentlemen, are we done?” said Yamamoto.

Kleindinst looked at his co-counsel, who nodded and pulled back in his chair.

“Yes, we’re done,” Kleindinst said.

***

“I really, really don’t like her,” Kleindinst said to his partner after he hung up.

“Like it matters,” his partner said.

Bar-Lessons-Learned---Partner's-Content-V1b

Risk & Insurance® partnered with Sedgwick to produce this scenario. Below are Sedgwick’s recommendations on how to prevent the losses presented in the scenario. This perspective is not an editorial opinion of Risk & Insurance®.

1. Medical review: Make sure you request and document medical reviews of any request for leave or accommodation under the Family Medical Leave Act or the Americans with Disabilities Act as part of the overall interactive accommodation process.

2. Consistency: Different injured employees with debilitating chronic conditions should be treated with consistency under the Americans with Disabilities Act, regardless of whether their need for accommodation is due to a work-related injury, a non-occupational injury or illness or for another medical need.

3. Document, document, document: Companies need to make sure that standard procedures regarding leave or accommodation under the Family Medical Leave Act or the Americans with Disabilities Act are in place, up to date and triggering interactive process review – as well as clearly communicated to employees. Companies also need to document that they have communicated changes to those policies in a comprehensive and timely manner. A robust information management platform is key to supporting the process and necessary documentation.

4. The leave option: Although the goal of ADA/ADAAA is to keep people at work and every effort should be made to meet an accommodation request, supervisors need to keep in mind that there may be cases where a workplace accommodation isn’t possible or advisable due to the significant hardship it would place on their business; time off from work may be the only option. Shoe-horning an employee into a task they are unfit for may do more harm than good.

5. Disabled means disabled: Under the law, even if a condition is “controlled” by medication or some other treatment method, a disability is still a disability. Be very careful not to treat someone with a chronic condition differently just because they’re asymptomatic.

Additional Partner Resources

ADA Accommodation Services

Sedgwick Connection Blog

Webinar: ADA/ADAAA Challenges – Are You Compliant?

Watch Sedgwick delve deeper into ADA compliance with our sister publication, Human Resource Executive®.



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

More from Risk & Insurance

More from Risk & Insurance

Exclusive | Hank Greenberg on China Trade, Starr’s Rapid Growth and 100th, Spitzer, Schneiderman and More

In a robust and frank conversation, the insurance legend provides unique insights into global trade, his past battles and what the future holds for the industry and his company.
By: | October 12, 2018 • 12 min read

In 1960, Maurice “Hank” Greenberg was hired as a vice president of C.V. Starr & Co. At age 35, he had already accomplished a great deal.

He served his country as part of the Allied Forces that stormed the beaches at Normandy and liberated the Nazi death camps. He fought again during the Korean War, earning a Bronze Star. He held a law degree from New York Law School.

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Now he was ready to make his mark on the business world.

Even C.V. Starr himself — who hired Mr. Greenberg and later hand-picked him as the successor to the company he founded in Shanghai in 1919 — could not have imagined what a mark it would be.

Mr. Greenberg began to build AIG as a Starr subsidiary, then in 1969, he took it public. The company would, at its peak, achieve a market cap of some $180 billion and cement its place as the largest insurance and financial services company in history.

This month, Mr. Greenberg travels to China to celebrate the 100th anniversary of C.V. Starr & Co. That visit occurs at a prickly time in U.S.-Sino relations, as the Trump administration levies tariffs on hundreds of billions of dollars in Chinese goods and China retaliates.

In September, Risk & Insurance® sat down with Mr. Greenberg in his Park Avenue office to hear his thoughts on the centennial of C.V. Starr, the dynamics of U.S. trade relationships with China and the future of the U.S. insurance industry as it faces the challenges of technology development and talent recruitment and retention, among many others. What follows is an edited transcript of that discussion.


R&I: One hundred years is quite an impressive milestone for any company. Celebrating the anniversary in China signifies the importance and longevity of that relationship. Can you tell us more about C.V. Starr’s history with China?

Hank Greenberg: We have a long history in China. I first went there in 1975. There was little there, but I had business throughout Asia, and I stopped there all the time. I’d stop there a couple of times a year and build relationships.

When I first started visiting China, there was only one state-owned insurance company there, PICC (the People’s Insurance Company of China); it was tiny at the time. We helped them to grow.

I also received the first foreign life insurance license in China, for AIA (The American International Assurance Co.). To date, there has been no other foreign life insurance company in China. It took me 20 years of hard work to get that license.

We also introduced an agency system in China. They had none. Their life company employees would get a salary whether they sold something or not. With the agency system of course you get paid a commission if you sell something. Once that agency system was installed, it went on to create more than a million jobs.

R&I: So Starr’s success has meant success for the Chinese insurance industry as well.

Hank Greenberg: That’s partly why we’re going to be celebrating that anniversary there next month. That celebration will occur alongside that of IBLAC (International Business Leaders’ Advisory Council), an international business advisory group that was put together when Zhu Rongji was the mayor of Shanghai [Zhu is since retired from public life]. He asked me to start that to attract foreign companies to invest in Shanghai.

“It turns out that it is harder [for China] to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

Shanghai and China in general were just coming out of the doldrums then; there was a lack of foreign investment. Zhu asked me to chair IBLAC and to help get it started, which I did. I served as chairman of that group for a couple of terms. I am still a part of that board, and it will be celebrating its 30th anniversary along with our 100th anniversary.

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We have a good relationship with China, and we’re candid as you can tell from the op-ed I published in the Wall Street Journal. I’m told that my op-ed was received quite well in China, by both Chinese companies and foreign companies doing business there.

On August 29, Mr. Greenberg published an opinion piece in the WSJ reminding Chinese leaders of the productive history of U.S.-Sino relations and suggesting that Chinese leaders take pragmatic steps to ease trade tensions with the U.S.

R&I: What’s your outlook on current trade relations between the U.S. and China?

Hank Greenberg: As to the current environment, when you are in negotiations, every leader negotiates differently.

President Trump is negotiating based on his well-known approach. What’s different now is that President Xi (Jinping, General Secretary of the Communist Party of China) made himself the emperor. All the past presidents in China before the revolution had two terms. He’s there for life, which makes things much more difficult.

R&I: Sure does. You’ve got a one- or two-term president talking to somebody who can wait it out. It’s definitely unique.

Hank Greenberg: So, clearly a lot of change is going on in China. Some of it is good. But as I said in the op-ed, China needs to be treated like the second largest economy in the world, which it is. And it will be the number one economy in the world in not too many years. That means that you can’t use the same terms of trade that you did 25 or 30 years ago.

They want to have access to our market and other markets. Fine, but you have to have reciprocity, and they have not been very good at that.

R&I: What stands in the way of that happening?

Hank Greenberg: I think there are several substantial challenges. One, their structure makes it very difficult. They have a senior official, a regulator, who runs a division within the government for insurance. He keeps that job as long as he does what leadership wants him to do. He may not be sure what they want him to do.

For example, the president made a speech many months ago saying they are going to open up banking, insurance and a couple of additional sectors to foreign investment; nothing happened.

The reason was that the head of that division got changed. A new administrator came in who was not sure what the president wanted so he did nothing. Time went on and the international community said, “Wait a minute, you promised that you were going to do that and you didn’t do that.”

So the structure is such that it is very difficult. China can’t react as fast as it should. That will change, but it is going to take time.

R&I: That’s interesting, because during the financial crisis in 2008 there was talk that China, given their more centralized authority, could react more quickly, not less quickly.

Hank Greenberg: It turns out that it is harder to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.

R&I: Obviously, you have a very unique perspective and experience in China. For American companies coming to China, what are some of the current challenges?

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Hank Greenberg: Well, they very much want to do business in China. That’s due to the sheer size of the country, at 1.4 billion people. It’s a very big market and not just for insurance companies. It’s a whole range of companies that would like to have access to China as easily as Chinese companies have access to the United States. As I said previously, that has to be resolved.

It’s not going to be easy, because China has a history of not being treated well by other countries. The U.S. has been pretty good in that way. We haven’t taken advantage of China.

R&I: Your op-ed was very enlightening on that topic.

Hank Greenberg: President Xi wants to rebuild the “middle kingdom,” to what China was, a great country. Part of that was his takeover of the South China Sea rock islands during the Obama Administration; we did nothing. It’s a little late now to try and do something. They promised they would never militarize those islands. Then they did. That’s a real problem in Southern Asia. The other countries in that region are not happy about that.

R&I: One thing that has differentiated your company is that it is not a public company, and it is not a mutual company. We think you’re the only large insurance company with that structure at that scale. What advantages does that give you?

Hank Greenberg: Two things. First of all, we’re more than an insurance company. We have the traditional investment unit with the insurance company. Then we have a separate investment unit that we started, which is very successful. So we have a source of income that is diverse. We don’t have to underwrite business that is going to lose a lot of money. Not knowingly anyway.

R&I: And that’s because you are a private company?

Hank Greenberg: Yes. We attract a different type of person in a private company.

R&I: Do you think that enables you to react more quickly?

Hank Greenberg: Absolutely. When we left AIG there were three of us. Myself, Howie Smith and Ed Matthews. Howie used to run the internal financials and Ed Matthews was the investment guy coming out of Morgan Stanley when I was putting AIG together. We started with three people and now we have 3,500 and growing.

“I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

R&I:  You being forced to leave AIG in 2005 really was an injustice, by the way. AIG wouldn’t have been in the position it was in 2008 if you had still been there.

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Hank Greenberg: Absolutely not. We had all the right things in place. We met with the financial services division once a day every day to make sure they stuck to what they were supposed to do. Even Hank Paulson, the Secretary of Treasury, sat on the stand during my trial and said that if I’d been at the company, it would not have imploded the way it did.

R&I: And that fateful decision the AIG board made really affected the course of the country.

Hank Greenberg: So many people lost all of their net worth. The new management was taking on billions of dollars’ worth of risk with no collateral. They had decimated the internal risk management controls. And the government takeover of the company when the financial crisis blew up was grossly unfair.

From the time it went public, AIG’s value had increased from $300 million to $180 billion. Thanks to Eliot Spitzer, it’s now worth a fraction of that. His was a gross misuse of the Martin Act. It gives the Attorney General the power to investigate without probable cause and bring fraud charges without having to prove intent. Only in New York does the law grant the AG that much power.

R&I: It’s especially frustrating when you consider the quality of his own character, and the scandal he was involved in.

In early 2008, Spitzer was caught on a federal wiretap arranging a meeting with a prostitute at a Washington Hotel and resigned shortly thereafter.

Hank Greenberg: Yes. And it’s been successive. Look at Eric Schneiderman. He resigned earlier this year when it came out that he had abused several women. And this was after he came out so strongly against other men accused of the same thing. To me it demonstrates hypocrisy and abuse of power.

Schneiderman followed in Spitzer’s footsteps in leveraging the Martin Act against numerous corporations to generate multi-billion dollar settlements.

R&I: Starr, however, continues to thrive. You said you’re at 3,500 people and still growing. As you continue to expand, how do you deal with the challenge of attracting talent?

Hank Greenberg: We did something last week.

On September 16th, St. John’s University announced the largest gift in its 148-year history. The Starr Foundation donated $15 million to the school, establishing the Maurice R. Greenberg Leadership Initiative at St. John’s School of Risk Management, Insurance and Actuarial Science.

Hank Greenberg: We have recruited from St. John’s for many, many years. These are young people who want to be in the insurance industry. They don’t get into it by accident. They study to become proficient in this and we have recruited some very qualified individuals from that school. But we also recruit from many other universities. On the investment side, outside of the insurance industry, we also recruit from Wall Street.

R&I: We’re very interested in how you and other leaders in this industry view technology and how they’re going to use it.

Hank Greenberg: I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.

R&I: So as the pre-eminent leader of the insurance industry, what do you see in terms of where insurance is now an where it’s going?

Hank Greenberg: The country and the world will always need insurance. That doesn’t mean that what we have today is what we’re going to have 25 years from now.

How quickly the change comes and how far it will go will depend on individual companies and individual countries. Some will be more brave than others. But change will take place, there is no doubt about it.

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More will go on in space, there is no question about that. We’re involved in it right now as an insurance company, and it will get broader.

One of the things you have to worry about is it’s now a nuclear world. It’s a more dangerous world. And again, we have to find some way to deal with that.

So, change is inevitable. You need people who can deal with change.

R&I:  Is there anything else, Mr. Greenberg, you want to comment on?

Hank Greenberg: I think I’ve covered it. &

The R&I Editorial Team can be reached at [email protected]