Questions about company's testing of workers for legal drugs head to trial

According to the U.S. District Court, Middle District of Tennessee, urinalysis and similar testing -- outside of testing for illegal drugs -- may constitute a medical examination under the ADA.

Case name: Bates v. Dura Automotive Systems, Inc., No. 1:08-0029 (M.D. Tenn. 03/30/11).

Ruling: The U.S. District Court, Middle District of Tennessee denied summary judgment to an automotive manufacturing company and several workers on the workers' claims under the Americans with Disabilities Act of 1990 related to the company's drug testing for legal prescription drugs.

What it means: Under the ADA of 1990, an employer may not require a medical examination unless it is job-related and consistent with business necessity. According to this court, urinalysis and similar testing -- outside of testing for illegal drugs -- may constitute a medical examination under the ADA.

Summary: An automotive manufacturing company became concerned that legal and illegal drug use by workers was leading to workplace accidents. Because of this, the company began a drug testing program for certain substances, including some found in legal prescription drugs. Workers who failed the test had to provide a list of all prescription medications they were taking. If any of the medications carried warnings about impaired mental alertness or the operation of equipment or machinery, the worker was placed on a leave of absence to transition to different medication. Several workers who failed the test due to legal prescription drugs sued under the ADA of 1990. The District Court ruled that the workers' claims could go forward even though only one had a viable claim that she had a disability under the ADA. The court denied summary judgment to the company and the workers, sending the case to trial.

The company argued that even if the workers were subjected to an impermissible medical examination, the test was not the proximate cause of harm to the workers. The court found this argument "without merit," explaining that the workers were placed on unpaid leave of absence, which a reasonable jury could consider an "injury." Additionally, the court explained that federal law suggests that testing for drugs other than illegal drugs constitutes a medical examination under the ADA. Whether the test was job-related and consistent with business necessity was a question for jury consideration in the court's view. The existence of these triable issues defeated the employees' motion for summary judgment.

Read more at the WorkersComp Forum homepage.

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New report shows growing off-label narcotic use in California's comp system

Buccal Fentanyl is not approved by the U.S. Food and Drug Administration for musculoskeletal injuries. Yet, a new study shows it's being prescribed for dozens of injured workers with minor back pain in California.

Part 2 of the California Workers' Compensation Institute's study on Prescribing Patterns of Schedule II Opioids focuses on the use of fentanyl in the California workers' comp system. The data sample was obtained from pharmacy bills contributed by pharmacy benefit management organizations with injury dates between January 1993 and December 2009.

Fentanyl can be administered intravenously as a skin patch or as a lozenge or effervescent tablet. The prescriptions in the study included those prescribed as a skin patch or orally.

While the FDA has issued various warnings about the drug over the past years, there was a particular warning in 2007 about Buccal Fentanyl, also called Actiq lozenges or Fentora effervescent tablets.

"Buccal Fentanyl should be used only to treat breakthrough cancer pain . . . in cancer patients who are taking regularly scheduled doses of another narcotic (opioid) pain medication and who are tolerant (used to the effects of the medication) to narcotic pain medications," the FDA said. "This medication should not be used to treat pain other than chronic cancer pain."

Despite that warning, CWCI reports more than 14 percent of claims with minor back injury had at least one prescription for Actiq or Fentora. "There was no evidence of cancer-related illness or injury among any of the injured workers in the study sample, indicating that off-label use of fentanyl lozenges or tablets, which are only FDA approved for breakthrough, chronic cancer pain, has become an issue in the California system," the report states.

The use of off-label narcotics is not restricted to California. Nor is it a small problem in the workers' comp system.

"I'd argue from a medical management standpoint it's the most significant problem we have," said Joe Paduda, principal of Health Strategy Associates and author of the blog, Managed Care Matters. "It's not just that they cost a lot of money -- they do; but there's ample evidence to suggest the use of narcotic opioids for an extended period of time to treat musculoskeletal injuries is contraindicated."

In addition to the cost -- about $3,000 to $4,000 a month -- Paduda says the off-label use of these drugs to treat minor injuries creates a plethora of other problems. "There are side effects, such as sexual dysfunction, constipation, and sleeplessness," he said. "So people need other medications to deal with the side effects."

Additionally, there are risks of addiction as well as abuse or diversion of the drugs. Finally, there's the risk of death.

"Opioids slow down the respiration rate," Paduda explained. "You build up a tolerance for a certain dose, but your body doesn't build up the pulmonary tolerance. People go to sleep and die."

The question of how to address the growing issue of narcotics -- especially off-label use -- in the workers' comp system is starting to be addressed by several states. Washington, for example, has established policies and practice guidelines for physicians who prescribe Schedule II narcotics.

"I think there's a growing recognition on the part of state regulators and legislators that they've got to solve this problem," Paduda said.

Read more at the WorkersComp Forum homepage.

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Carpenter wins benefits despite termination for heated argument

In Florida, a verbal argument between a worker and employer is not willful misconduct preventing entitlement to temporary total disability benefits.

Case name: Wagner v. Southeast Personnel Leasing, 18 FLWCLB 36 (Fla. JCC, Jacksonville 2011).

Ruling: A Florida judge of compensation claims awarded temporary total disability benefits to a carpenter.

What it means: In Florida, a verbal argument between a worker and employer, where both parties yell at each other, is not willful misconduct preventing entitlement to temporary total disability benefits, especially where the parties have a history of conflicts.

Summary: A carpenter was working for a framing company when he injured his neck. Two weeks later, the carpenter and the company's owner had a heated argument. The owner stated that the carpenter verbally attacked him on a personal level. The carpenter denied that he made a threat. At the end of the argument, the owner terminated the carpenter. The carpenter later called the owner using profanity and threatening to publicly wreck the owner's reputation at the church he attended. The carpenter also left voice messages repeating this threat. Evidence indicated that the owner and the carpenter had a history of conflicts. In awarding temporary total disability benefits, the JCC rejected the employer's argument that no indemnity benefits were owed because the carpenter was terminated for misconduct.

Based on the history and interaction of these two individuals before and after the incident, the JCC determined that this isolated verbal argument was not sufficiently egregious to rise to the level of willful misconduct. Although the threats made by the carpenter to the owner were disturbing, the threats did not factor into the misconduct analysis as the carpenter had already been terminated.

Read more at the WorkersComp Forum homepage.

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Crunch Time for Reinsurers

A string of costly natural disasters in the first months of 2011 has rung down the curtain on the prolonged soft market. Expect the cost-of-capital trickle-down to commence.

By GRAHAM BUCK, who covers European risk management issues

LONDON---Industry analysts have been saying for several years that it would take a major natural catastrophe of Hurricane Katrina proportions to reverse the trend of steadily softening rates in the reinsurance market. Nature has duly delivered a string of calamities in the early months of 2011, with Japan's tsunami and earthquake in March currently estimated to cost the insurance industry $24 billion and last month's tornadoes in Alabama and neighboring states leading to upward of $6 billion in losses.

Add to these the earlier extensive floods in Australia and a damaging earthquake in the New Zealand city of Christchurch, and the year is already challenging 2005 as the costliest on record for the industry, with the combined first-quarter tally of $50 billion.

More than $6 billion of this figure has fallen on Bermuda's insurance and reinsurance community, with PartnerRe Ltd. hardest hit at $1.07 billion.

Across the Atlantic, the bill for Lloyd's of London comes to $3.8 billion--which already exceeds the figure for the whole of 2010.

The reinsurance industry's two main players, Munich Re and Swiss Re, have reported first-quarter net-income losses of $1.4 billion and $665 million, respectively. Munich Re said that natural catastrophes in the first three months would cost $3.9 billion (2.7 billion euros) and warned that rates for June 1 and July 1 renewals are set to rise.

There are already signs of hardening, with an average rise of 3 percent for reinsurance contracts renewed in April, rising up to 50 percent for Japan business

London companies such as Hiscox and Amlin forecast that U.S. catastrophe cover will bear a 10 percent increase.

"In the United States, with the Atlantic hurricane season approaching, the combination of international loss events and loss-modeling changes made by a major catastrophe firm (RMS) is resulting in increasing rates," said Amlin's chief executive, Charles Philipps.

RATINGS AGENCIES SOUND OFF

However, the parallels between 2005 and 2011 only go so far. Oldham, N.J.-based ratings agency A.M. Best reported earlier this month that it does not expect a similar post-loss influx of new companies to create a "Class of 2011," as it doesn't believe the necessary long-term capital and new management can be secured.

Instead, it expects the special-purpose vehicles for defined risk periods, the so-called "sidecars" that emerged in the wake of Katrina, to be the preferred capacity provider.

The ratings agency's latest market analysis, which maintained a "stable" ratings outlook for the global nonlife reinsurance market, referred to "growing pressure" to support increased rates in the property/casualty insurance and reinsurance markets.

Yvette Essen, an analyst for A.M. Best, said that the catastrophic first quarter means that many reinsurers will struggle to record any full-year underwriting profit for 2011.

"The industry faces further challenges in achieving profitability as the hurricane season approaches and investment yields remain low," she commented.

"While reinsurers continue to maintain sound capital positions, the excess capacity that existed at the prior year-end has clearly been diminished," he said.

RATE HIKE OR BUST

In London this week, Lloyd's chief executive, Richard Ward, bluntly warned that insurers faced the options of either hiking their rates or going out of business. The market's "lucky streak" of fairly benign hurricane seasons, most notably in the past two years, could be about to end.

"Prices are dangerously low at present," Ward told an industry conference. "Clients may think they are getting a bargain. But the fact is that they are buying security. The insurers who write unprofitable business are inevitably the first to collapse when disaster strikes."

A report issued by the venerable insurance market draws parallels between 2011 and 2001, when, as it notes, "the tragic events of 9/11 occurred during a soft market and Lloyd's recorded a combined ratio of 140%."

The Lloyd's chief added that the most recent spate of natural disasters, and their effect on industry and travel, reflected an increasingly systemic nature to catastrophes.

"Risk travels further and faster," he observed.

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Award Nominations

RISK INNOVATORTM

The Risk InnovatorTM Award recognizes winners across different industries who have demonstrated innovation and excellence in risk management. These key individuals see risk differently and have resolved risk-related problems in a unique or innovative way. They view risk not only as a threat, but also as an opportunity for their organizations.

The 2011 Risk InnovatorTM application is now available. Deadline to apply is June 30.

The winners of the 2010 Risk InnovatorTM Award were announced in our Sept. 15, 2010, issue. Read the profiles of all of this year's winners here.

TEDDY AWARD

The Theodore Roosevelt Workers' Compensation and Disability Management Award again this year recognizes the top programs for their efforts to reduce the number and cost of injuries to workers on the job.

This year's application process is now open. Download the 2011 Teddy Awards application here.

Please click here to learn more about the 2010 Teddy Award winners.

You can find the listing of all other previous winners at our WORKERSCOMP ForumTM site.

Additional information on the judges and judging process and past winners can be found here.

PREVENT AWARD

"The PreVent" National Employee Injury Prevention Award, sponsored by PreCare Inc., honors an organization that has devoted significant time and resources to developing and implementing proactive strategies and programs for preventing workplace injuries and providing a safer work environment for an employer's greatest asset: its people.

We seek to recognize a truly innovative organization that has evolved beyond "reactive" accident reduction tactics, and embodies a proactive injury prevention philosophy and culture, extending far beyond traditional safety and loss control programs.

The award is presented in conjunction with the Risk & Insurance? Theodore Roosevelt Workers' Compensation and Disability Management Awards (Teddy Awards), and will be open to any company, nonprofit or government entity.

To apply, please download and complete the PreVent Award application. The application is for both the Teddy Award and the PreVent Award. If you only want to apply for the PreVent, please complete just questions 11 through 13 in addition to your contact information.

TOP EMPLOYEE BENEFITS CONSULTANT

The Risk & Insurance? and Human Resource Executive? Top Employee Benefits Consultant Award identifies outstanding benefits brokers and consultants: those individuals who have done extraordinary work for their clients during the past year. We look at client service, creativity and innovation in problem-solving, cost-savings and quality improvements, along with insurance and benefits expertise.

We will profile what each Top Employee Benefits Consultant has accomplished during the past year in the June issue of Risk & Insurance? and the June 16 issue of Human Resource Executive?.

The deadline to submit for 2011 has passed. Please contact Senior Editor Dan Reynolds with any questions or requests for a deadline extension.

POWER BROKER?

This year's winners are out. Browse all 24 categories of winners for the 2011 Power Broker? awards here.

Also be sure to see brokers recognized as our Power Broker? Under 40s and Responsibility Leader? winners.

Feel free to check out all of our past winners.

The 2012 Power Broker? Application is now available. Deadline to apply is October 3, 2011.

REINSURANCE POWER BROKER?

The deadline to apply for the 2011 Reinsurance Power Broker? has passed. For questions about the application and awards process, please contact Senior Editor Dan Reynolds.

This year's winners will be announced in the July/August 2011 issue, both in print and online.

Please view all five categories of the 2010 Reinsurance Power Broker? winners.

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Colorado: Surcharge to stay the same

The Division of Workers' Compensation announces the surcharge on premiums will not change.

The rate of surcharge on premiums and premium equivalents for the period July 1 though June 30, 2012, will not be increased and will remain constant. The surcharge will remain at a rate of 1.630 percent for insurance carriers and 1.600 percent for self-insured employers.

Read more at the WorkersComp Forum homepage.

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Measuring the Damage From the Mighty Mississippi (updated)

It's been a long couple of weeks for business and residents along the Mississippi River. As the flood inundates the Delta, we gauge the insured and economic losses.

By MATTHEW BRODSKY, senior editor/Web editor of Risk & Insurance?

The national media has the attention of a 1-year-old, chasing the story of whatever disaster is in front of it at the moment. Lately, the zig-zag's been tornado, flood, tornado. The way events along the Mississippi River have yet to unfold, perhaps the headlines will veer back toward flood.

So far, the flooding in the South along the Mighty Mississippi has impacted nine states: Arkansas, Illinois, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Ohio and Tennessee.

According to catastrophe modeling firm Risk Management Solutions, citing the May 23 update from the National Weather Service, at least four cities in the region are reporting major flooding still: Arkansas City, Ark.; Greenville, Miss.; Natchez, Miss.; and Baton Rouge, La. These towns can expect to remain at major flood levels until at least May 30. In Vicksburg, forecasters are calling for the Mississippi River to remain above flood levels through June 14.

Mother Nature is not relenting. Severe storms struck the Lower Mississippi River region over the weekend, and the NWS is calling for a secondary cresting in Missouri through Tennessee, with Memphis, Tenn., possibly getting hit again on May 29.

Damage in Memphis from the first cresting was estimated at $753 million in crop, residential, business and infrastructure losses, according to a Ball State University study, cited in a New York Times article.

"I am going to estimate in the $6 billion to $9 billion range for total damages from Memphis southward to the gulf," the author of that research paper, Michael J. Hicks, director of the Center for Business and Economic Research at Ball State, told the Times.

Perhaps the industry most impacted from the flood waters has been agriculture. The American Farm Bureau Federation estimated on May 23 that 3.6 million acres of farmland had been hit by the floods. That includes 40 percent of this year's domestic rice crop.

"There is no doubt about it, the effect of the flooding on farmers and ranchers is being felt deeply across the South," said AFBF Chief Economist Bob Young, in a statement.

"In many of these areas, agriculture is the major economic driver for the region," he said.

The AFBF estimates that Arkansas farms have been hit the hardest, with 1 million acres affected, including 300,000 acres of rice and 120,000 acres of wheat. Mississippi and Missouri experienced 600,000 and 570,000 acres of impacted farmland, respectively. Tennessee reported 650,000 acres. About 500,000 acres of Illinois farmland could be under water and Louisiana currently is seeing 280,000 submerged acres.

To put a dollar figure on these massive numbers, the Arkansas Farm Bureau is estimating more than $500 million in damages, according to economist John Michael Riley, cited in USA Today. Overall, agricultural losses in Mississippi could top $800 million.

GAMING ON THE RIVER

Also impacted is the gaming industry. John Bullock, president of Willis of Mississippi Inc., declined to give an estimate for possible insurance losses for the industry for this "flood of epic proportions," given that events are still playing out.

"Both owners and insurers are actively involved in measuring those losses," Bullock said, adding that losses could come from direct damage, as well as from business interruption, denial of access, ingress/egress, and civil authority coverages. Bullock works with gaming clients up and down the Mississippi from southern Indiana down.

COMMERCIAL INSURANCE LOSSES

According to Boston-based modeling firm AIR Worldwide, given the magnitude of this event, it is clear that there will be significant commercial losses when this event is compared to the last great flood on the Mississippi, in 1993.

"According to Munich Re, the insured losses (presumably mostly commercial) in 1993 were $1.27 billion, which AIR estimates would amount to $2.6 billion after accounting for exposure growth and inflation. Meanwhile, the FEMA (NFIP) losses in 1993 were $273 million, which AIR estimates would amount to $559 million after accounting for exposure growth and inflation," Kevin Long, AIR spokesman, told Risk & Insurance? in an e-mail.

That 1993 event was the most expensive flood for the economy during the period between 1980 and 2010 with total economic losses reaching $21 billion, as estimated by the Munich Re NatCat Service.

View the original article here

Ohio: Bureau working on outpatient medication formulary

The Bureau of Workers' Compensation proposed changes to a rule adopting an outpatient medication formulary indicated in an appendix.

The formulary in the appendix will constitute the complete list of medications that are approved for reimbursement by the bureau for treatment of a work-related injury or disease in an allowed claim. Drugs not listed in the formulary are not eligible for reimbursement by the bureau. The formulary indicated in the appendix also contains specific reimbursement, prescribing or dispensing restrictions that have been placed on the use of listed drugs. The formulary will be reviewed annually and updated as necessary. The most current version will be electronically published by the bureau. The bureau's pharmacy and therapeutics committee will evaluate and make recommendations to the administrator regarding the addition, deletion or modification of coverage of medications listed in the formulary.

Requests for pharmacy and therapeutics committee action on a specific drug may be initiated by the bureau's administrator, chief of medical services, chief medical officer, or pharmacy director. According to the rule, the bureau will develop policies to perform an expedited review process for clinically or therapeutically unique medications. The bureau will also develop policies to address the timely review of new drug products. The rule is effective Sept. 1.

Read more at the WorkersComp Forum homepage.

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Surgery Stories Online: Hysterical Laughs or a Bad Risk?

Either way, the website is HIPAA-compliant and insured with media liability coverage.

By STEVE YAHN, who has written for and edited national publications for more than 30 years

If you name a website FunnySurgeryStories.com, you better be ready for controversy.

But your odds of success are considerably improved if you have 30 years of medical experience behind you.

So on St. Patrick's Day, into the Internet arena stepped 52-year-old Julie Ryan of Birmingham, Ala., with her website about funny operating room stories. All of them real, HIPAA-vetted stories, she claimed.

"People in surgery are really the unsung heroes in the medical world," said Ryan, a veteran of the hospital supply industry. "The amount of stress they work under is just phenomenal. And they relieve that stress with humor. Some of the funniest people I know are in surgery.

"With all the HIPAA regulations and the concerns about the social media stuff out there, they really can't talk about work and share their funny stories because they're afraid they're going to get fired."

Every operating-room employee tweet and Facebook posting is a potential lawsuit in the eyes of hospital legal departments.

So, Ryan created Funny Surgery Stories as a place where surgeons and other operating-room personnel can anonymously post their humorous stories.

"I take great pains to be sure we have HIPAA-compliant videos and stories up on the site," Ryan said. "I'm more well versed than most people on the subject, given my regular lecturing around the country on privacy and federal security and identity theft laws and HIPAA regulations. And we have two folks who work with us who help review for HIPAA compliance."

NOT SO FUNNY?

But Funny Surgery Stories has more than a few critics.

"Whether there's a name attached to it or not, you're putting out what is going to be perceived as a factual story, and whether or not they hide the surgeon's name or they hide the facility's name, you're putting up things which you don't have any accountability for," said a top executive at one of the largest hospital groups in the country.

"There are enough people who are afraid to go to doctors now," this executive added. "They're going to be even more scared when they start hearing stories like these that may or may not be true."

Another critic, an official at a major manufacturer and marketer of surgical equipment, weighed in with, "The videos appear to be staged and the general consensus here is that the site is in very poor taste. We felt the videos were childish and belittled the patient and that the stories, while presumably legal, violated a trust."

"The site seems to be intended for humor and levity," said a representative for a top patient safety and medical risk management organization. "But it does not give the appearance or hold itself out to be peer reviewed. So I would say it is much like the rest of the Internet: consumer beware."

SUPPORT ELSEWHERE, LIKE INSURANCE

Ryan, a lifelong entrepreneur who has launched 10 successful companies in various industries, has supporters in some important places.

Jerry Ippolito, owner and CEO of Naples, Fla.-based OR Efficiencies LLC, which offers healthcare consulting services, including surgery center consulting and operating room management, said, "You can only truly appreciate this humor if you've been in this business for 32 years like I have. You have to respect freedom of speech. I was with the chief of staff of a very major medical center not long ago, and we were looking at one of these cartoons. As a skilled physician and a highly accomplished business person, this doctor was laughing hysterically. You have to find amusement in this. It's funny."

And just in case, Ryan, who has patents on several surgical devices, said she has "a bunch of insurance" through a policy created for her by Jeff McCart of The McCart Group, in Duluth, Ga., a suburb of Atlanta. She has media errors-and-omissions coverage through OneBeacon Insurance Co.

Those wanting to participate in FunnySurgeryStories.com can submit videos (for "OR Funnies") of themselves telling their funny operating room stories, placing them first on YouTube, from which they are then transferred to Ryan's company for HIPAA-compliance review.

Titles of some "OR Funnies" include "Emergency Room Rap," "Waking Up is Hard to Do," and "Monty Python--Gumby Goes to Surgery."

The most popular part of the site to date is "The Witless Protection Program," in which people can upload written stories for prizes. This feature currently is bringing in between four and five entries a day.

The third feature of the site, and one Ryan clearly relishes, is "As the Scalpel Slices," a weekly three-minute podcast that's like an old-fashioned radio soap opera based in an operating room.

To create a cast of characters for this feature, Ryan has hired two comedy writers, one who has written TV shows and movies, and the other who is a former writer for "Saturday Night Live."

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Blame the Casserole

Did a hospital and its adjuster mislead a nurse about her rights to temporary total disability benefits?

A registered nurse for a hospital regularly worked in an operating room. She was asked to assist in postsurgery recovery and transport in a different department. As she was reaching out her hand to help a 300-pound patient transfer from a gurney to a bed, she felt pain in her back. The nurse returned to her usual workstation and sat at a desk for the last hour of her shift and her pain gradually increased. She reported the injury to her supervisor the next morning.

She completed an injury report, and risk management staff reported that her claim fell under the hospital's workers' compensation policy. She saw a physician assistant, who diagnosed her with a low back and joint strain.

While the nurse was on restricted duty, she reinjured her back on three occasions while performing lifting duties. A workers' compensation claims adjuster interviewed the nurse and told her that, because neither she nor the patient she was assisting slipped, tripped or fell, the first incident was not covered under workers' compensation. The hospital denied her claim.

The nurse saw a doctor after continuing to have pain. Her diagnosis was pre-existing spondylolisthesis, and her restrictions remained unchanged. The doctor noted that the nurse reported back pain and spasms from lifting a casserole out of the oven at her home that were so severe she had to lie on the floor. Later, a neurosurgeon performed a surgical fusion. The nurse's doctor stated that it would take months for the nurse to reach maximum medical improvement.

The Workers' Compensation Commission found the nurse suffered a work-related injury and ordered the hospital to pay temporary total disability benefits, as well as incurred and future medical expenses relating to the injury. The hospital appealed.

Was the commission correct in finding the nurse's back injury was compensable?

A. No. The nurse's back condition, need for surgery, and resulting disability were due to the nonwork-related casserole-lifting event.

B. Yes. The nurse's medical condition was causally related to her compensable injuries.

C. No. The aggravation of a preexisting condition that results in a loss of wage earning capacity is not compensable.

How the court ruled: B.

The North Carolina Court of Appeals held that the nurse was entitled to benefits. Cawthorn v. Mission Hospital, Inc., No. COA10-748 (N.C. Ct. App. 04/19/11).

The court explained that the nurse's statements to her doctor were reliable despite the hospital's argument that the nurse provided incorrect information to her doctor. The court said the doctor had all of the pertinent information in forming his opinion that the nurse's disability was due to her work injury.

The court also concluded that the hospital's denial of the nurse's claim and defense at the hearing were not reasonable. The court found the hospital engaged in a conscious attempt to mislead the nurse regarding her entitlement to workers' compensation benefits. The court sent the case back to determine the amount of attorney's fees the nurse should be awarded.

A is incorrect. The court explained that the nurse's diagnosis went unchanged before and after the casserole-lifting incident.

C is incorrect. The aggravation of a pre-existing condition that results in a loss of wage earning capacity is compensable.

CHRISTINA DIFONTE is the legal editor of the WorkersComp Forum.

This feature is not intended as instructional material or to replace legal advice.

Read more at the WorkersComp Forum homepage.

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Saving Stanford From D&O Insurance

Can you find greater perversion of insurance coverage obligations than what Lloyd's did to Allen Stanford?

In the least surprising development since Charlie Sheen was fired by CBS, Allen Stanford's lawyers asked to withdraw and have been relieved as counsel. To catch you up, Allen Stanford is accused of a massive investment fraud. He, along with several other Stanford executives, is facing a multitude of criminal and civil charges, none of which have been adjudicated against them--with the notable exception of the claims of his own insurance company, Lloyd's of London.

In its headlong quest to avoid its coverage obligations, Lloyd's, with the imprimatur of the Fifth Circuit, was able to hold a trial to prove the very charges pending against its insureds in order to avoid its obligations to fund the defense of those executives.

To find a greater perversion of insurance-company coverage obligations would be hard.

To begin with, the Stanford Financial Group (which consisted of some 100 different companies) bought a truly lousy directors' and officers' liability (D&O) insurance policy. The policy did not have basic terms that would commonly be found in any decent D&O policy.

The key deviation was one of the so-called "bad acts" exclusions. These types of exclusions are found in every D&O policy, so how they are phrased is critically important. The Stanford fraud exclusion was pretty standard:

"Resulting from any claim ... brought about or contributed to in fact by ... any dishonest, fraudulent, or criminal act or omission by the directors or officers or the company ... as determined by a final adjudication."

As is typical, it required a "final adjudication" to bar coverage.

The "money laundering" exclusion in Stanford's D&O policy was another story. It barred both coverage resulting from any claim "arising directly or indirectly as a result of or in connection with any act or acts (or alleged act or acts) of money laundering."

"Money laundering" was defined to include pretty much any financial misdeed imaginable. While only one count of the 21 asserted against the Stanford insureds alleged money laundering as defined in criminal statutes, every one of the 21 counts constituted money laundering as defined by the insurance policy.

But the real problem was that Lloyd's could withdraw coverage, including defense coverage, once "it is determined that the alleged act or alleged acts did in fact occur," according to the policy wording.

So Lloyd's made that determination itself, arguing that its decision was supported by the following:

1. The SEC action's preliminary finding of "good cause to believe that (the executives) used improper means to obtain investor funds and assets."

2. A temporary restraining order and preliminary injunction in the SEC action, which froze personal and corporate assets and appointed a receiver.

3. The SEC action's preliminary injunction finding that "Stanford engaged in fraudulent conduct, including misappropriating investor funds."

4. The examination report and testimony of the receiver's accounting expert, Van Tassel, that investment proceeds were used to pay interest on existing investment products, commissions, and bonuses, and to make loans to employees.

5. The statements of an alleged co-conspirator that the executives were behind a "massive Ponzi scheme."

STANFORD'S SIDE DEFEATED

Various Stanford executives insured under the D&O policy took issue with Lloyd's right to make that determination on its own. They sued, arguing that the duty to defend is broader than the duty to indemnify and that Lloyd's could not look outside the complaint and the policy in determining its defense obligation.

The federal court in Houston agreed with the insureds and ordered Lloyd's to continue to pay their defense costs. Lloyd's appealed to the Fifth Circuit Court of Appeals.

While the Fifth Circuit rejected Lloyd's argument that it had the unilateral right to make the "in fact" determination, it would have agreed with Lloyd's had the policy explicitly given that authority to Lloyd's. Note to policyholders: Read your policies!

Nevertheless, the Fifth Circuit decided that Lloyd's could force a public trial against its insureds on the very issues they were facing--before the civil and criminal claims against them were tried.

This, of course, put the insureds in a completely untenable position. They would have to assert their rights against self-incrimination under the Fifth Amendment, forcing them to defend against the Lloyd's action with both hands tied behind their backs.

A four-day trial was held in August 2010. Unsurprisingly, given the extraordinary breadth of the "money laundering" exclusion in the D&O policy and the restrictions that the insureds were operating under, the court found for Lloyd's.

"To the extent necessary, the court would hold that the evidence of record supports a conclusion that the underwriters have shown by a preponderance of the evidence that the money laundering exclusion in fact applies, not merely that there is a substantial likelihood this burden has been met," the trial judge wrote.

To soften the obvious injustice of the procedure inflicted on the Stanford insureds, the trial judge wrote: "The court's ruling here is narrow. The court does not reach the issue of whether the evidence supports a finding that Stanford personally engaged in criminal conduct. The ruling is limited to analysis of conduct found by a preponderance of the evidence on a necessarily restricted record and without reliance on inferences that could be drawn from Stanford's invocation of his Fifth Amendment privilege against self-incrimination. These findings and conclusions are not intended for use in the criminal or SEC actions."

Little consolation. The court had just conducted a trial that determined whether these insureds would be afforded the money to defend themselves in the criminal and civil cases pending against them--a trial which they could not defend.

So they lost the trial and their defense coverage, and then they lost their lawyers because the insurance company was allowed to place its interests above those of its insureds with impunity. It's a complete perversion of the insurance company's duty of good faith and fair dealing that I learned about when I started in this business.

DOUGLAS CAMERON is a partner and practice group leader of the firmwide Insurance Recovery Group at Reed Smith.

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Industry Events

(EVENT ORGANIZERS AND MEDIA CONTACTS: Please send announcements for future events to the editors of Risk & Insurance? to have them posted here and/or in the print edition of the magazine.)

MAY

May 31 - June 1

Oregon RIMS Chapter Annual Golf Tournament and Education Day

The Oregon Chapter of the Risk and Insurance Management Society is holding its annual Golf Tournament and Education Day. The tournament is set for May 31 at Langdon Farms Golf Club in Aurora, and E-Day is titled "Managing Risk Amidst Economic Chaos" and will be held on June 1 at the Wilsonville Holiday Inn.

More information: Oregon RIMS, oregon.rims.org

JUNE

June 1-2

World Bank Global Insurance Conference

The World Bank and IFC will be holding their inaugural Global Insurance Conference in Washington, D.C., at the Work Bank Headquarters, to establish a platform for World Bank Group staff, clients and key players in the insurance industry to discuss and debate new developments, including: Solvency II, climate change and innovation.

More information: World Bank, http://web.worldbank.org/

June 1-2

7th Annual Canadian Captives and Corporate Insurance Strategies Summit

This event is specifically designed for risk and insurance executives who are seeking to better manage risks, reduce costs and improve stability. The event will be held at the Metropolitan Hotel in Toronto.

More information: Strategy Institute, http://www.captivesinsurance.com

June 5-8

PRIMA 2011 Annual Conference

The Public Risk Management Association's annual meeting will feature education sessions on such topics as ERM, legal and regulatory issues, risk control, and safety and loss control. The event will take place at the Oregon Convention Center in Portland, Ore.

More information: PRIMA, http://www.primacentral.org

June 5-8

IASA 2011 Education Conference & Business Show

The Insurance Accounting Systems Association meeting will focus on the IT challenges facing the industry and is designed to give attendees strategies for shaping the future of their company. The event will take place at the Gaylord Opryland in Nashville.

More information: IASA, http://www.iasa.org

June 5-8

Bermuda Captive Conference

The premier captive event in the world's No. 1 domicile, the Bermuda Captive Conference will provide opportunities to learn from veteran captive owners and network with industry insiders. The event will take place at the Fairmont Southampton Resort in Bermuda.

More information: Bermuda Captive Conference, http://www.bermudacaptive.bm/index2011.html

June 5-8

NAIW Annual Convention

The National Association of Insurance Women will hold its 70th annual event at the Flamingo in Las Vegas,

More information: NAIW, http://www.naiw.org

June 6-8

AIRMIC Conference

The Association of Insurance Risk Managers in the U.K. will be held this year at Bournemouth. The conference is an opportunity to network, update knowledge on competitors, attend workshops, and showcase your brand and services.

More information: AIRMIC, http://www.airmicconference2011.com/

June 7-9

SIIA International Conference

This year's international conference of the Self-Insurance Institute of America Inc. will take place at the Marriott Toronto north of the border. The event is for international organizations involved in the self-insurance industry and those employers participating in alternative risk transfer programs.

More information: SIIA, http://www.siia.org

June 8-9

S&P Insurance Conference

Standard & Poor's will hold its 27th annual Insurance Conference at the New York Marriott Marquis near Times Square. The event will cover a diverse spectrum of topics that are front-of-mind for the property/casualty (P/C) and life insurance and reinsurance industries.

More information: S&P, www.events.standardandpoors.com/insurance

June 8-9

DAIAB Annual Convention

The Delaware Association of Insurance Agents & Brokers will hold its 54th annual convention at the Atlantic Sands Hotel in Rehoboth Beach, Del. The event will feature CE-approved courses, leadership training, social outings, recognition events and a trade show.

More information: DAIAB, http://www.iabgroup.com/

June 12-14

RIMS on the Hill Legislative Conference

Attendees will have the opportunity to hear from leading risk professionals about a number of critical issues, including the strengthening the Medicare and Repaying Taxpayers Act of 2011 (SMART Act), the expansion of the Risk Retention Act to include property insurance, and limits on deductibility of reinsurance premiums ceded by domestic insurers to offshore affiliates. The event will take place at The Madison, a Loews Hotel in Washington, D.C.

More information: RIMS, www.rims.org

June 20-21

Reinsurance and Risk Management Executive Forum

IQPC's Reinsurance and Risk Management Executive Forum will bring together experts to share insights on how to effectively manage risk and on new compliance laws in the reinsurance industry. The event will be held in New York City.

More information: IQPC, http://www.reinsuranceforum.com

JULY

July 12-14

Sixth Annual Montana Captive Insurance Association Meeting

The annual meeting of the MCIA will be held at The Lodge at Whitefish Lake, Mont. The event is the key education and networking event for captive owners and vendors involved in the Montana domicile, as well as those interested in getting involved.

More information: MCIA, www.mtcaptives.org

July 13-15

7th Annual Midwest Product Recall & Liability Insurance Conference

This two-day conference will feature leading product liability defense attorneys, engineering experts, a best-selling author and more. Sponsored by the IPSLP Association and Randall Goodden International, the event will take place in Chicago.

More information: Randall Goodden International, RandallGoodden.com

July 13-15

LAAIA Convention

The 41st annual convention of the Latin American Association of Insurance Agents will take place at the Westin Diplomat in Hollywood, Fla.

More information: LAAIA, http://www.laaia.com/

July 27-29

IWCP Workers' Comp Symposium

Sponsored by the Institute of WorkComp Professionals (IWCP), this three-day event promises to be a place for insurance professionals to learn new skills and approaches that will help them expand markets, better serve client needs, save money and strengthen business relationships. The event will be held at the Pfister Hotel in Milwaukee.

More information: IWCP, http://www.iwcpro.com/symp2011

July 31-Aug. 3

16th Annual DMEC International Conference

The annual event of the Disability Management Employer Coalition will focus on absence and disability management strategies for today's workforce. This year's event will take place at The Fairmont in Dallas.

More information: DMEC, http://www.dmec.org

AUGUST

August 9-11

26th Annual VCIA Conference

The Vermont Captive Insurance Association will hold its annual meeting in Burlington, Vt. This year's theme is the "DNA of Captives."

More information: VCIA, http://www.vcia.com/

August 21-24

Third Annual NAWCJ Judiciary College

The National Association of Workers' Compensation Judiciary is a nonprofit dedicated to development of collegiality among those that adjudicate workers' compensation disputes nationwide. Each year, it holds a judiciary college in Orlando, this year at the Marriott World Center. This meeting affords adjudicators with significant education focused on specifically on judicial topics and is held in conjunction with the Workers' Compensation Educational Conference sponsored by Florida Workers' Compensation Institute

More information: NAWCJ, www.nawcj.org

August 22-25

2011 IAIABC 97th Annual Convention

Attend a workers' compensation event for regulators, administrators and private-sector professionals for sessions on general workers' compensation issues, regulation and medical issues. The event will take place in Madison, Wisc.

More information: IAIABC, http://www.iaiabc.org/convention2011

August 29-September 1

NAIC Summer Meeting

The National Association of Insurance Commissioners will visit Philadelphia for its annual summer meeting.

More information: NAIC, http://naic.org/meetings_home.htm

SEPTEMBER

September 10-15

Les Rendez-Vous de Septembre

The big-wigs of the reinsurance world will get together in Monte Carlo to catch up, eat, drink, gamble and start negotiating their next treaty renewals.

More information: Les Rendez-Vous, http://www.rvs-monte-carlo.com/main.php

September 18

NAMIC Annual Convention

The National Association of Mutual Insurance Companies will travel to the JW Marriott in Indianapolis for its annual meeting. Expect sessions on M&As, IT, corporate governance, predictive modeling and more.

More information: NAMIC, http://www.namic.org

OCTOBER

October 9-11

31st Annual SIIA National Education Conference & Expo

The annual meeting of the Self-Insurance Institute of America is focused exclusively on the self-insurance/alternative risk transfer marketplace. This year's event will take place at the JW Marriott Desert Ridge Resort & Spa in Phoenix.

More information: SIIA, http://www.siia.org

October 10-13

NAPSLO Annual Convention

Want to know what's going on in the excess-and-surplus lines marketplace? Attend the annual National Association of Professional Surplus Lines Offices Ltd. This year's event will take place at the Manchester Grand Hyatt in San Diego.

More information: NAPSLO, http://www.napslo.org

October 22-25

CPCU Society Annual Meeting & Seminars

The CPCU Society serves more than 25,000 credentialed insurance professionals and continues to be the premier professional organization in the property/casualty industry. Its annual event provides educational sessions and networking opportunities. The event will be held in Las Vegas.

More information: CPCU Society, www.cpcusociety.org

October 23-26

PCIAA Annual Meeting

The top-brass of leading property/casualty insurance companies will attend this annual meeting of one of the industry's leading trade and lobbying groups. The event will take place at the Sheraton New Orleans Hotel in New Orleans.

More information: PCIAA, http://www.registration123.com/pci/11Annual/Home.cfm

October 24-26

11th Annual TMPAA Summit

The Target Markets Program Administrators Association will hold its annual summit in the desert at the Hyatt Regency Scottsdale.

More information: TMPAA, http://www.targetmkts.com

October 25-28

HCIC Annual Forum 2011

The Hawaii Captive Insurance Council will holds its annual meeting for the captive domicile, its captive owners and managers, and vendors at the Ritz Carlton at Kapalua, Maui.

More information: HCIC, http://www.hawaiicaptives.com

(EVENT ORGANIZERS AND MEDIA CONTACTS: Please send announcements for future events to the editors of Risk & Insurance? to have them posted here and/or in the print edition of the magazine.)

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Witness's statement provides insurer with plausible defense

In Massachusetts, if an insurer has adequate grounds for presenting an alternate version of events, the insurer will not be liable for penalties.

Case name: DiFronzo's Case, No. SJC-10785 (Mass. 04/12/11).

Ruling: The Massachusetts Supreme Judicial Court held that an insurer was not liable for a penalty of double back benefits and costs.

What it means: In Massachusetts, if an insurer has adequate grounds for presenting an alternate version of events, the insurer will not be liable for penalties.

Summary: A laborer on a construction project was injured when he was struck by a car while crossing the street soon after completing his shift. A witness said that the laborer told him he was crossing the street to catch his bus home while the laborer claimed he was crossing the street to use a two-way radio in one of the employer's trucks to contact his supervisor. The employer's insurer denied benefits, arguing that the laborer was on his commute home when he was injured. A workers' compensation judge ruled for the worker. The Massachusetts Supreme Judicial Court held that the insurer was not liable for penalties of double back benefits and costs.

In Massachusetts, penalties can be assessed on an insurer that brings a defense without reasonable grounds. The court concluded that the insurer had a plausible defense based on the witness's statement, which provided the insurer with an alternate version of events. The law regarding the compensability of a person injured while crossing a street from a work site to catch a bus home was unclear.

The court noted that penalties would have been appropriate if the laborer was entitled to benefits even if he had crossed the street to catch his bus.

The project was divided into "work zones" closed to the public. Workers regularly crossed public streets to move between work zones. At the time of the accident, the laborer had just finished putting away his tools and was proceeding in the direction of another work zone across the street where his employer's trucks were located.

Read more at the WorkersComp Forum homepage.

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Nebraska: Compensation court schedules hearing on office location

The Workers' Compensation Court proposed a rule indicating the location of the court's office.

Until June 30, the court's office is in the state capitol building in Lincoln. On and after July 1, the court's office will be at 1010 Lincoln Mall in Lincoln. A public meeting on the rule is scheduled for June 3 at 1:30 p.m. in Room 1524, first floor, State Capitol Building in Lincoln. Written comments may be e-mailed to Su Davis at su.davis@nebraska.gov. For a copy of the proposed rule, visit www.wcc.ne.gov/news/public_hearings_meetings.aspx.

Read more at the WorkersComp Forum homepage.

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Phoning the Injured Worker for the First Time

It's well recognized in workers' comp claims that injured workers should be called as soon as possible after the incident. But who should make that call, and what should they say?

By PETER ROUSMANIERE, an expert on the workers' compensation industry

Place an early call to the injured worker. That's a claims commandment that is Mt. Sinai high. It is virtually impossible to find anyone today in workers' compensation who says that claims personnel should not call the injured workers at the earliest chance. Fine, but what is that call meant to achieve?

Three seasoned professionals--a claims executive, a managed-care advisor and the director of a claims unit within a large self-insured employer--weigh in on their preferred scenario for the all-important first call.

According to John Marr, senior vice president of the Portland, Maine-headquartered Maine Employers Mutual Insurance Co., the first call should happen quickly. It should not be held up to collect the initial report from the doctor or an in-depth accident report from the employer.

"An injured worker, more often than not, is lost when a loss occurs and is looking for the helping hand. If you are not the one offering the helping hand, you've lost the chance to establish the pivotal relationship," he said.

For Patrick Venditti, director of corporate health services for BJC HealthCare, a large St. Louis-based hospital system, nurses tend not to be as proactive enough. He has his adjusters (called senior case coordinators) place the call as soon as possible.

Marr is not concerned about who places the call. It's more important to show concern for the injured worker.

"I start by asking how they are now, if they are getting the care that they need and what they need from me. After I find out about them, I can develop the facts of the claim," Marr explained.

Venditti agrees that building rapport with the worker is the single most important goal. Then the caller should ask questions to help complete "the total picture of the incident" and help establish compensability.

"The caller should guide and answer the employee's questions to make them feel more at ease with the process and the expectations," Venditti said.

THE DUAL MESSAGE

Jennifer Christian, an occupational medicine physician and president of the Wayland, Mass.-based consultancy Webility Corp., suggests a nuanced approach after having studied and listened in on some actual first calls.

She says the caller must convey from the outset a dual message. One message is that the claims staff intends to help the worker.

"We (the claims staff) have expertise in these matters and want to be a resource for her, that she is not being left alone to fend for herself, and we will do our best to help this all turn out all right," Christian explained.

The second message is: "We are going to keep track of this episode."

"It is going to be actively observed and managed because we are not suckers, and she will not be left alone in the shadows to take advantage of us," Christian said.

By the time the initial call happens, a lot of missteps could have occurred between an ignorant and na?ve worker and her supervisor, Christian noted. Most people have no or little experience with what to do following an injury, how to obtain expeditious healthcare and how workers' compensation works.

In Christian's experience, the claims staffers making calls are "usually primarily focused on themselves and their issue, which is managing the claim." In the phone calls that she's listened in on, Christian found that the caller "really hadn't thought much about the practical issues and weren't really prepared to help."

For instance, what if the worker needs assistance deciding how best to get medical care?

Some claims are doubtful, sure, and the worker may not be entirely truthful, but the first message should still always resonate from the caller.

"Even if a claim is suspicious, you should treat the person with dignity and respect, and let the facts develop as they may. There are many sides to the story but there is only one injured worker, and by concentrating on getting them focused on recovery, you will be best served," Marr said.

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Sorting out a Touchy State of Affairs

The Dominique Strauss-Kahn affair underscores the legal and employment liability risks to foreign employers doing business stateside.

By ANDREW R. MCILVAINE, senior editor of Human Resource Executive?, sister publication of Risk & Insurance? and where this article first appeared

The recent arrest of former International Monetary Fund chief Dominique Strauss-Kahn may have highlighted an ongoing issue with foreign executives who come to work on U.S. shores: We do things differently here than in other cultures.

Strauss-Kahn was arrested for allegedly attacking and attempting to rape a hotel maid in his $3,000-per night suite at the New York Sofitel. The altercation appears to be one of a number of incidents between Strauss-Kahn and members of the opposite sex.

A French journalist came forward after the arrest and said Strauss-Kahn had attacked her during an interview in his Paris apartment several years ago. The married Strauss-Kahn also admitted to an affair with a subordinate, Hungarian economist Piroska M. Nagy, in 2008, although an IMF investigation concluded that he broke no rules. (U.S. law does not apply inside the IMF because it is an international institution.)

A story published in the New York Times following his arrest described complaints from female IMF employees about bosses who routinely harassed women subordinates, to the point that some of them decided not to wear dresses to work in order to avoid unwanted attention.

Within days of Strauss-Kahn's arrest, details also came to light about a party that a subsidiary of German insurer Munich Re held for its top-performing sales agents in 2007, complete with 20 prostitutes hired for the occasion, at a resort in Budapest, Hungary. According to CNN, the agents and their guests allegedly transformed the resort into "an open-air brothel."

ABSOLUTELY

The cultural norms in workplaces in Europe, Asia, Latin America and Africa tend to differ--sometimes markedly--from those found in U.S. workplaces, attorneys and consultants said.

Behavior that would warrant sexual-harassment charges here may result in a slap on the wrist in other countries. So, should U.S. employers be on the lookout for potential trouble regarding managers coming from overseas to work at their American locations?

Absolutely, said Suzanne Arpin, an attorney at Schiff Hardin in Atlanta. Arpin, who's worked in Europe, South America and Africa, said sexual harassment of female employees is often a fact of life in other parts of the world.

"It's a real issue," she said.

While France may have laws on the books that are similar to American laws regarding workplace harassment, these laws tend to be enforced far less stringently than in the United States, said Jerome Ternynck, a French native who's CEO of SmartRecruiters in San Francisco.

"The cultural norms in France, for example, are very different, not only in terms of the sensitivity toward what might constitute sexual harassment, but also to sexual discrimination," he said. "French businesses, in general, are fairly OK with sexual discrimination--it's OK that a female makes less money than a male, it's OK to make jokes about female colleagues--it's a Latin country."

Nor is it just limited to sexual harassment, said Arpin.

"U.S. employers also need to ensure that (these managers) understand the appropriate way to handle differences in age, race, ethnicity and, in locations that have laws addressing this, sexual orientation," she said.

Many European countries have mandatory retirement ages for employees, she said, which means that European managers may be startled to find themselves working with American employees who are still going strong at the ages of 68, 70 or older.

Managers from India may have similar attitudes about older workers, said Jeffrey Pa, past chairman of the labor and employment practice at Philadelphia-based Cozen O'Connor.

"The norm in India is that you retire at 60 or 62, even if it's unlawful to force employees to do so," he said. "We've seen the American employees of India-based companies bring age-discrimination claims because the Indian managers essentially carried their cultural norms over here with them and decided that these workers were too old for the job, too old to be promoted."

The workplace structure at foreign companies tends to be more hierarchical than in the United States, said Michael Schell, CEO of RW3 CultureWizard, a consulting firm in New York. This can result in foreign managers feeling entitled to treat subordinates how they wish, he said.

"When foreign managers come to the United States, they need to learn what the culture of the U.S. workplace is and the rules here, otherwise people will get sued," said Schell.

MITIGATION STEPS

To begin with, employers need to ensure their organization has a well-written sexual-harassment policy "that goes into detail on what constitutes sexual harassment," Arpin said.

"There's still a lot of misunderstanding even in this country about what that is," he said.

The policy should instruct employees on who they should alert when they suspect they've been the victim of, or have observed, sexual harassment.

All employees, including foreign nationals, should sign a written confirmation that they've received the employee handbook and will comply with it, she said.

Employers must ensure that foreign nationals receive training on U.S. workplace laws before they begin supervising employees, said Celia Joseph, a management attorney at Fisher & Phillips in Philadelphia.

"They don't necessarily need to memorize every law, but they should have a clear understanding of when to recognize a potential issue, when they should seek guidance and who they should turn to," she said.

Foreign managers, especially executives, should also sign an employment agreement in which they acknowledge that harassment is illegal in the United States and that they will comply with the law, said Arpin.

Executives sent to the United States from abroad are often asked to sign an employment agreement, she said.

"You can include a provision in which the executives agree to read all the materials passed on to them regarding the treatment of people in the workplace and to indemnify the company for any legal costs associated with a dispute," Arpin said. "That's extreme, but what we're often dealing with here is the need to change behaviors, and if you hit them in the pocketbook, they're likely to pay attention."

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OSHA, NOAA launch outreach campaign to prevent heat-related illnesses

With the summer months approaching, two federal agencies are teaming up to educate employers and workers on the dangers of working in the heat.

OSHA and the National Oceanic and Atmospheric Administration encourage businesses to keep employees safe in extreme heat.

Drinking water often, taking breaks, and limiting time in the heat are the main recommendations to prevent heat illness. The two agencies have a variety of materials available in English and Spanish.

Officials say thousands of workers suffer needlessly from heat illnesses each year. Additionally, more than 30 workers died from effects of the heat last year.

During hot, humid weather, body temperature can rise to dangerous levels if precautions are not taken, according to OSHA. Heat illnesses range from heat rash and heat cramps to heat exhaustion and heat stroke.

Workers exposed to hot and humid conditions are especially at risk of heat illness, particularly if they do heavy work tasks or use bulky protective clothing and equipment. The agencies suggest employees be made aware of the symptoms of heat illness and what to do.

Heat illness often manifests as heat exhaustion. Symptoms include headache, weakness and wet skin, irritability or confusion, and thirst, nausea, or vomiting.

To prevent heat exhaustion from becoming heat stroke, which can be fatal, employers and coworkers should have someone stay with the worker until help arrives, move the worker to a cooler area, remove outer clothing, and fan and mist the worker with water.

Heat stroke is denoted by confusion or the inability to think clearly. Also, the person may stop sweating.

If someone is not alert or seems confused, OSHA suggests calling 911 immediately and applying ice.

To prevent heat illnesses, OSHA recommends employers take the following precautions:

Provide training about the hazards leading to heat stress and how to prevent them.Provide a lot of cool water to workers close to the work area. At least one pint of water per hour is needed. Schedule frequent rest periods with water breaks in shaded or air-conditioned areas.Routinely check workers who are at risk of heat stress due to protective clothing and high temperature.Consider protective clothing that provides cooling.

Read more at the WorkersComp Forum homepage.

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Rhode Island: Division announces cost-of-living increase

The Division of Workers' Compensation issued an informational letter announcing a cost-of-living increase.

The 2.3 percent increase applies to weekly compensation for total incapacity and continuation of benefits for partial incapacity to certain classes of workers. The cost-of-living increase went into effect on May 10. A late payment of the increase may result in a 20 percent penalty on the unpaid amount. Those with questions should contact a workers' compensation education unit representative at (401) 462-8100 or send an e-mail to wcedcunit@dlt.ri.gov.

Read more at the WorkersComp Forum homepage.

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Top RRGs Prove That All Captives Aren't Evil?

Analysts at SNL Financial ranked the top midsize commercial P/C carriers, and four risk-retention groups made the list. Why?

By MATTHEW BRODSKY, senior editor/Web editor of Risk & Insurance?

It's not the structure of the insurance company that we should credit. It's the line of business it's writing. At least that's the message coming out of the ranking of 2010's top-performing midsize property/casualty carriers, released by Charlottesville, Va.-based market intelligence firm SNL Financial.

So the captive insurance industry--much maligned as of late due to supposedly loosening regulations at onshore domiciles and the group captive meltdown in New York state--shouldn't puff out its chest when it realizes that four risk retention groups (RRGs) were named to SNL's top 20 list.

Those four, and their rankings, are: No. 1, First Medical Insurance Co.; No. 7, American Excess Insurance Exchange (AEIX); No. 10, Ophthalmic Mutual Insurance Co. (OMIC); and, No. 11, Preferred Physicians Medical Risk Retention Group.

The important common denominator among them isn't that they're captives, said Jon Wright, director of the insurance group at SNL Financial.

"When you look at the captives and essentially what kind of business that they write, they're really big writers of commercial medical malpractice," he said.

Commercial med-mal writers in general, Wright explained, have been performing well lately because they've been able to release significant amounts of reserves, with tort reform impacting the line in a positive way. No wonder that, in total, eight of the top 20 performing midsize P/C carriers were focused on writing medical professional liability.

In a quick glance at the OMIC website, a visitor learns that the RRG, which writes professional liability for eye doctors, declared a 10 percent dividend for owner-policyholders renewing in 2011 and a 7.5 percent rate reduction.

AEIX, which provides excess professional and general liability to nonprofit health systems, announced on May 25 that it's distributing $29 million to 16 of its owner-policyholders.

Part of the RRG's success goes beyond just the med-mal lines that it writes, according to president Robert Dowdy, who also serves as president of AEIX's management firm, Premier Insurance Management Services Inc.

"I think it boils down to a commitment by the owners," Dowdy said, which translates to the policyholders being willing to fund risk management initiatives--for obstetrics and emergency rooms, for instance--and benchmarking.

"It's a whole lot easier when you have a committed group of members sitting around the table and nobody wants to get left behind," he told Risk & Insurance?.

The executives at Preferred Physicians Medical, a provider of professional liability insurance for anesthesia practices, pointed to other explanations for its success. In a January 2011 statement commending themselves for a ratings upgrade from A.M. Best, executives pointed to "stringent underwriting standards," a capital management plan geared toward long-term stability and the quality of care of their insured clinicians.

Conceding that some of these RRGs' successes could be attributable to the fact that they're RRGs, Wright noted that these types of captives tend to be monoline writers. As a midsized, monoline, med-mal carrier releasing significant reserves, he reasoned, you could enjoy "outsized" performance relative to peers.

The converse is true too. If you're a monoline offering the "wrong" coverage, you could expect undersized gains. Take workers' comp. You could be a multiline carrier and still get whacked by workers' comp troubles. Only one workers' comp writer made SNL's top 20.

SNL's rankings looked at 255 commercial-focused carriers with statutory surpluses between $50 million and $1 billion. Out of 13 metrics used to determine the rankings, the two most important were return on equity and assets and profitability, according to Wright.

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May 26, 2011

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Filling Very Many Little Blue Chairs (updated)

The Hartford sends out a mass-mailing to make an important point, delivering a strong visual of a serious work issue, absence and disability management.

By DAN REYNOLDS, senior editor of Risk & Insurance?

What is it about 7,000 little blue chairs?

There's actually a lot to it if you think about it, and that is exactly the point.

In the case of the Simsbury, Conn- based The Hartford, the thousands of little chairs that they mailed to benefits decision-makers in early May were a reminder to risk managers and human resources executives of all those empty chairs in their own offices. They may be adding up to something. That is, big productivity losses for employees who are out either on long-term disability, a workers' compensation injury, or a federal or state mandated leave of absence.

The Hartford came up with the idea of mailing the miniature blue chairs to remind executives who are looking at their July 1 or year-end program renewals that the empty chairs cost something not just in the area of lost productivity. There is also the rhyming word of liability, which is what employers face if they don't educate themselves on the increasingly complex fabric of state, municipal and federal laws regarding leaves of absence.

Patricia Purdy, an assistant vice president of product development and the absence and disability lead for the company, said The Hartford is currently managing more than 135 different types of leaves for clients. It's a growth area for lots of companies, what with increases in the types of protected leaves offered by state and federal governments and the ever-increasing responsibility to military veterans and their families, given the hundreds of thousands of workers that have served their country in the extended conflicts in Iraq and Afghanistan.

With its status as a leading workers' compensation carrier, The Hartford thinks it can help drive the market toward a more integrated approach to looking at absence or leave management. The idea is that a combination of risk-transfer products, plus consulting services on the legal patchwork governing leaves of absence, will provide value for employers, particularly those who manage workers in a number of states with their wide variety of local statutes.

"If an employer is not well-versed in what that law is or how much time that employee is eligible to take, they can find themselves in some hot water if they don't do the right thing," Purdy said.

And there are plenty of companies looking for help integrating compliance with the Family Medical Leave Act with short-term disability and other employee absence entitlements, according to another professional.

"What we hear from them repeatedly is they have a distinct feeling they are out of compliance with FMLA. They feel like they are overapproving leaves because they don't know how to administer properly, so they tend to overapprove everybody that wants to take a leave," said Julie Norville, an Atlanta-based national absence management practice leader for Aon Hewitt.

She said that employers who aren't analyzing all of their management programs and integrating them are probably wasting precious energy.

"If you take action on Family Medical Leave Act administration and you don't take in the concurrency of time off, short-term disability and workers' comp or return to work, you may inadvertently be pushing one lever and pulling on another one that you didn't mean to influence," she said.

Purdy added that executives at The Hartford are pleased with the online traffic they got as a result of the massive chair mailing, but it wasn't just a stunt to create clicks.

"One of the great challenges in any insurance product or the product that we sell is that it is really hard sometimes for people to connect conceptually with it because it is in many ways a promise, a service or something that in many ways you can't really put your arms around or touch or take for a test drive," Purdy said.

"So I think the whole concept of an empty chair to illustrate lack of productivity if an employee is not at work and the whole issue of absence management services really brings it to light, and certainly that chair is a strong visual of a serious work issue," Purdy said.

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A Memorial to History

History is more than mere facts and names to be memorized in grade school. It is the beginning of understanding where we are and how to best get us where we need to be.

By David M. Wong

Growing up, I always remembered Memorial Day as the weekend before the last few days of school. The end was in sight, and the excitement built for spending summer hanging out with my friends around the neighborhood, swimming at the pool and playing kick-the-can in the middle of the street at night. There was no question that I was much more interested in what was to come (the future) versus the last few days of my history class.

History was arguably one of my least favorite subjects in school growing up. My core view on the topic was that history was just that ... history. So why bother?

As I have matured (albeit, slowly), I have increasingly recognized the importance of understanding history, both professionally and personally.

Personally, I recently had the privilege of reading my grandfather's memoir. My grandfather's original plan was to lock his memoirs in a safety deposit box and then have them shared with the family once he had passed away. Fortunately, my family somehow convinced him to go ahead and share them while he was alive.

My grandfather wrote about the history of his parents and grandparents, beginning in 1922 on a small farm outside of Hillsboro, Tenn., and then growing up in Birmingham, Ala., where my great-grandfather worked in the Tennessee Coal & Iron Co. factories. He also wrote about spending summer at my great-grandparent's farm back in Tennessee doing chores, picking cotton and of course hunting for rabbits, which my great-grandmother would then cook him for breakfast.

He lived through the Great Depression as a young boy, dropped out of the University of Tennessee after Pearl Harbor and enlisted in the U.S. Navy. He eventually piloted airships (blimps) hunting for submarines off the Atlantic coast and navigated transport planes in the Pacific.

Then he returned to the University of Tennessee after the war on the G.I. Bill, met my grandmother, had five kids, got his Ph.D. at the University of Illinois, and researched and taught Agronomy at Illinois, the University of Wisconsin, and in developing areas of the world such as the Philippines and Nigeria.

After reading my grandfather's history, I felt both a greater appreciation for my grandfather's successes in life, as well as a heightened meaning and motivation to continue in his footsteps and build on his successes in my own life. In addition, I have an even greater understanding and respect for an entire generation of men and women who, like my grandfather, have achieved and given our generations so much over their lifetimes. As such, this Memorial Day will have new meaning to me, commemorating and thanking the thousands of U.S. soldiers who served before, with and after my grandfather, who collectively have made our lives and freedoms possible.

Professionally, I used to think that the key to improving a process or situation was simply understanding the current state ("as is") of the situation, getting agreement on the desired future state ("to be"), and then clearly defining and executing a plan to get from here to there. Although the core of this logic is sound, I have more recently added "understanding the history" of the process or situation to the front-end of this approach. I also try to understand the history of different types of strategies or planning approaches, especially if they are untested in the specific environment or organization.

An article I recently read struck a chord with regards to the importance of understanding history. By Richard Rumelt, a professor at UCLA's Anderson School of Management, and titled "The Perils of Bad Strategy," the article was a great example of what one can learn from the outcomes of past decisions and approaches to strategy formation. It evaluated some historically common strategy-development practices and took a shot a distinguishing between those that resulted in bad strategy versus those that led to good strategy. (The article was a summary published in McKinsey Quarterly of Professor Rumelt's upcoming book, "Good Strategy Bad Strategy, The Difference and Why It Matters.")

Rumelt's key hallmarks of bad strategy are:

-- Failure to face the problem. If one fails to identify and analyze the obstacles, they don't have a strategy. Instead, they have a stretch goal or a budget or a list of things they wish would happen.

-- Mistaking goals for strategy. Goals that are not grounded in analysis and in established or establishing competitive advantage(s) are just aspirations.

-- Bad strategic objectives. Along list of things to do, often mislabeled as strategies or objectives, is not a strategy. It is just a list of things to do. Similarly, strategic objectives that are just simple restatements of the desired state of affairs or of the challenge conveniently skip over the annoying fact that no one has a clue as to how to get there.

-- Fluff. Fluff is a restatement of the obvious, combined with a generous sprinkling of buzzwords that masquerade as expertise.

On the other hand, Rumelt's kernels of "good strategy" are:

-- A diagnosis. An explanation of the nature of the challenge, a good diagnosis simplifies the often overwhelming complexity of reality by identifying certain aspects of the situation as being the critical ones.

-- A guiding policy. An overall approach chosen to cope with or overcome the obstacles identified in the diagnosis

-- Coherent actions. Steps that are coordinated with one another to support the accomplishment of the guiding policy.

I find that understanding the history of a process or situation materially improves both my ability to design the desired future-state solution and to develop a plan with better odds of getting from here to there.

A quote from Winston Churchill's timeless wisdom probably sums it up best: "The farther back you can look, the farther forward you are likely to see."

DAVID M. WONG is director of cross-asset strategy and planning at CME Group, the world's largest and most diverse derivatives exchange.

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Get the Full Picture of the Top 10 Emerging Risks

As the world becomes more interconnected and developed, new risks emerge, while existing risks morph into more dangerous ones because of miscalculated frequency rates and/or severity potentials.

This is the first of what will become an annual report identifying those emerging risks that are not on everyone's radar screen ... though they certainly should be.

Access the new 2011 Emerging Risks summary page here and all of our 10 most dangerous emerging risks.

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Effects From Intense Space Weather Strike

Power: Numerous systems are reliant on electricity. Alternatives, such as natural gas, would also be affected because they depend on electricity to control distribution.

Fuel: Pumping systems depend on electricity to work and would shut down in the event of grid damage from a solar storm.

Food: Refrigeration systems that ensure product safety in storage and transportation run on electricity and would be without power.

Sanitation: Sewage systems depend on electricity to operate their pumps. A loss of electricity could lead to health problems as untreated sewage could build up.

Communications: Mobile devices would eventually lose their power because they couldn't be charged if the electrical grid was interrupted for extended periods.

Finance: The global financial system operates through electronic trading. And the retail sector for that matter depends on electricity to complete transactions.

Transportation: Electrical trains would stop running. And transportation such as cars and trucks would be unable to run because of the failure of pumps that move petroleum-based products.

Source: Lloyd's and RAL Space

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Study points to focus areas for preventing low back, upper extremity injuries

Strategies to prevent musculoskeletal disorders should focus on reducing work stress, heavy lifting, and hand movement. That's the gist of a new study on workplace risk factors for low back and upper extremity injuries.

Researchers studied and compared trends from 2002 and 2006 to see what risk factors are consistently related to self-reports of back and upper extremity, or arm, pain. Their findings are being published in the Journal of Occupational and Environmental Medicine.

The most recent research was based on 90-minute, face-to-face interviews with more than 1,500 U.S. workers. It showed several physical and psychosocial risk factors for MSDs.

Both the 2002 and 2006 studies identified the physical risks of heavy lifting and repetitive hand movement as being significantly related to self-reported back pain and arm pain. The researchers were not sure why jobs with exposure to repetitive or stressful hand movements or awkward hand postures would be related to an increased risk of back pain.

Several psychosocial factors were associated with back pain, especially hurt at work and work stress. In fact, the authors said the latest results indicate work stress might be a more significant predictor of risk than previously thought and warrants further research.

The psychosocial factor of job satisfaction was not as strong a predictor of back pain but still a significant predictor for some categories. The factor, work time -- having enough time to finish the work, was cited as a significant risk for both back pain and pain in arms.

The combined effects of hand movements and work stress seemed to result in back pain, the researchers said.

The interaction between heavy lifting and work stress on arm pain was statistically significant in the 2006 study, although it was negative in 2002. Also, three risk factors -- supervisor support, safety climate, and work time -- showed a stronger relationship to arm pain in the most recent analysis.

Finally, the researchers said that workers are less at risk of upper extremity MSDs if they feel they have freedom to control their work by deciding how to do the work.

The authors said the findings can be used by work designers to target ergonomic and workplace interventions at the factors that consistently are shown to be associated with increased risk of developing work-related MSDs.

Read more at the WorkersComp Forum homepage.

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Banking on Synchronicity

As a brokerage owned by a bank, Wells Fargo Insurance Services has in its nature an appreciation for shared resources, says CEO and President Neal Aton.

By DAN REYNOLDS, senior editor of Risk & Insurance?

It's one thing to create synchronicity among your various business units. It's quite another to have been gifted with some of that synchronicity in the genesis of your business.

Such is the happy circumstance that Wells Fargo Insurance Services USA Inc.'s CEO and President Neal R. Aton finds himself in.

Sure, there is always work to do to marry company cultures in the cases of mergers and acquisitions. Or to make business units work together better once you've formed them. But as the CEO of an insurance brokerage that is celebrating 10 years of being owned by a bank, Aton already finds himself in a corporate culture that is predicated on sharing resources.

"I like to quote our leader John Stumpf (president and CEO of Wells Fargo), who says our culture is: We share our toys," Aton told Risk & Insurance? during a sit-down interview on the clamoring conference exhibition floor at the annual meeting of the Risk and Insurance Management Society Inc. (RIMS) in Vancouver this week.

Being the largest insurance broker that is owned by a bank also means that Wells Fargo's business growth goals are defined by the universe of the parent company, to a degree.

"We have a stated aim of becoming the insurance distributor for one in five of Wells Fargo's customers from the retail customer to the Fortune 500 customer to everyone in between," Aton said.

Currently, he estimates that ratio at about one in 13 or 14. Among domestic brokerages, Wells Fargo is either the fourth largest or fifth largest, depending on how you look at the numbers. But in keeping with that focus on being a brokerage owned by a bank, Aton said, he doesn't want to measure himself against the Aons and Marshes of the world--rather on how the insurance brokerage he runs functions within the organism that is the bank and the brokerage.

"My aspiration for growth is tied to how well we can penetrate and serve the Wells Fargo base of customers across all of our businesses and how well I can bring those businesses into serving them," Aton said.

Spoken like a company man, or someone who knows from whence his strength derives?

Probably a little of both. Aton pointed to a Wells Fargo culture that celebrates talent, is decentralized (with around 1 percent of its workforce in its Chicago headquarters), and which works very hard at breaking down silos and getting people to work together.

The company won a top ranking from industry research firm Greenwich Associates for work in the middle market in 2010, so all of that must be paying off.

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Employer Contribution Obligations

Considerations for employers participating in multiemployer pension plans.

By LONIE A. HASSEL, a principal and co-chair of Groom Law Group's Plan Funding and Restructuring Group; and LARS C. GOLUMBIC, a principal with Groom focusing on ERISA-related matters

The sharp economic downturn has put multiemployer pension plans--sometimes referred to as Taft-Hartley pension plans--at greater financial risk than ever before. While the economy is expected to improve, large portions of the country's manufacturing base may never fully recover.

Employers that contribute to multiemployer pension plans on behalf of their unionized workers would be well-advised to understand and appreciate the requirements they face in connection with their participation in these plans.

A multiemployer pension plan is a collectively-bargained plan to which two or more unrelated employers contribute. Generally, employers contribute to multiemployer plans pursuant to a collective bargaining agreement for their employees covered by the collective bargaining agreement.

Multiemployer pension plans permit employers in industries in which employees move among employers to provide a portable benefit for their employees. Multiemployer pension plans also may be an administratively convenient method, especially for small employers, to provide a defined benefit pension to their employees.

Multiemployer pension plans are subject to minimum funding requirements and special funding rules under the Employee Retirement Income Security Act of 1974, and the Internal Revenue Code of 1986. ERISA also imposes withdrawal liability for contributing employers that withdraw from multiemployer pension plans.

The statutory funding requirement and withdrawal liability generally are a joint obligation of the company with employees in the plan and each member of that company's controlled group. A controlled group, generally, is a group of trades or businesses linked by at least an 80 percent ownership interest, by vote or value.

If an employer contributes to a multiemployer pension plan, the employer and its controlled group members face obligations related to contributions, withdrawal liability, and disclosure.

Generally, an employer's contribution obligation to a multiemployer pension plan is fixed in collective bargaining. Certain statutory provisions can require more than the collective bargaining agreement requires, however.

Under both ERISA and the IRS, meeting the minimum funding requirements for the plan is an obligation not only of the company that is a party to the collective bargaining agreement, but also that company's controlled group.

Based on these provisions, a parent or subsidiary, for example, of the company that signed a collective bargaining agreement also could be liable by statute for contributions due the multiemployer pension plan.

It is not clear, however, whether this statutory contribution obligation is enforceable through the usual mechanism of an action under section 502(g) of ERISA for unpaid contributions.

Excise Taxes. If contributions do not satisfy the plan's minimum funding standard for a plan year, an excise tax of 5 percent of the shortfall automatically is imposed pro rata on the contributing employers. The IRS may assess an additional tax of 100 percent of the funding deficiency if the initial excise tax is not paid. Assessment of the additional 100 percent tax is rare. Both the 5 percent and 100 percent excise taxes are joint and several obligations of the contributing employer and the members of its controlled group.

Critical and Endangered Plan Schedules. If a multiemployer pension plan is in critical (so-called "red zone") status or endangered (so-called "yellow zone") status based on the level of plan assets, benefit liabilities, and employer contributions, the plan trustees are required to take steps to improve the plan's funded status through reduced benefits or increased contributions or both. These changes are described in schedules that the plan trustees propose to the bargaining parties.

The plan trustees do not have the authority immediately to require the bargaining parties to agree to a schedule. But if the bargaining parties do not voluntarily adopt one of the schedules of rates and benefits offered by the plan trustees within 180 days after the collective bargaining agreement expires, the plan trustees are required to impose a so-called default schedule on the bargaining parties.

The default schedule likely will provide for reduced future benefit accruals for the employer's current employees and/or the reduction in benefits already accrued by former employees who are not yet receiving benefits under the plan. The default schedule also may require the employer to increase its contributions to the plan.

Contribution Surcharge. For plans in critical status, trustees are required to impose a surcharge of 5 percent of current contributions on employers. After the first year in critical status, the surcharge increases to 10 percent of contributions. The surcharge continues until the bargaining parties adopt a schedule consistent with a schedule proposed by the plan trustees.

An employer that no longer has an obligation to contribute to a multiemployer pension plan or that no longer has operations covered by the plan, because, for example, it agrees with the union to provide pension benefits through another plan or goes out of business, may be found to have withdrawn from the plan and therefore to be subject to withdrawal liability. Liability for a complete withdrawal is triggered when an employer permanently ceases to have an obligation to contribute to the multiemployer plan or permanently ceases operations covered by the multiemployer plan.

Liability for a partial withdrawal is triggered by a substantial decline in covered operations (to 30 percent of their previous level for three consecutive years) or by bargaining out of fewer than all of the employer's bargaining units or facilities formerly covered by the plan.

Withdrawal liability is a share of the plan's unfunded vested benefits, if any, usually based on the employer's share of total contributions to the plan. The contributing employer and all members of its controlled group are liable for withdrawal liability and partial withdrawal liability.

Pay First, Litigate Later. The rules for assessing and paying multiemployer withdrawal liability are written to require employers to pay first and litigate later. Thus, once a multiemployer plan assesses withdrawal liability against an employer, the employer generally is required to begin payment of the withdrawal liability, usually in quarterly installments.

While the employer is making the payments, it may challenge the assessment through arbitration. An arbitration award may then be enforced or challenged in federal court. If, at the end of the litigation, the employer prevails, the plan must reimburse the withdrawal liability payments with interest.

Last Employer Standing. The rules for computing an employer's withdrawal liability are complex, and can differ from plan to plan. In general, the rules are designed to allocate all of a plan's unfunded vested benefits among the employers responsible for contributing to the plan based on each employer's share of the plan's contributions. All allocation formulas must allocate to an employer a share of unfunded vested benefits that cannot be collected from other withdrawn employers. Thus, if an employer is unable to pay its withdrawal liability--for example, if it files for bankruptcy and satisfies a plan's withdrawal liability claim for cents on the dollar--significant liabilities could be added to other contributing employers' potential withdrawal liability.

Mass Withdrawal. When all employers withdraw from a multiemployer plan or when substantially all employers withdraw from the plan pursuant to an agreement or arrangement to withdraw, the plan experiences a mass withdrawal. In a mass withdrawal, each employer's withdrawal liability is calculated using more conservative assumptions than generally are used for calculating regular withdrawal liability. This results in higher liability amounts for employers.

Further, employers that withdrew during the two years preceding the year in which the mass withdrawal occurred are presumed to have withdrawn pursuant to an agreement or arrangement to withdraw. Employers therefore must rebut the presumption to avoid increased mass withdrawal liability.

The International Accounting Standards Board and the U.S. Financial Accounting Standards Board are both considering new rules that would require auditors to provide a substantial amount of additional information on the audited financial statements of employers that contribute to multiemployer plans.

In particular, the proposed rules could require multiemployer plans to provide footnote information on the possibility and amount of withdrawal liability in the event of a withdrawal from a multiemployer plan.

An obligation to identify an amount of withdrawal liability that in many cases is merely hypothetical could have an effect on a public company's ability to obtain credit and undertake day-to-day transactions.

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