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COVID-19: Do I have a workers compensation claim?

Casualty|Workers Compensation
COVID 19 Coronavirus

By Eric Silverstein and Andrew Estill | February 21, 2020

Organizations should be aware of workers compensation insurance considerations in the event of a workplace outbreak of a communicable disease.

According to the Centers for Disease Control and Prevention (CDC), COVID-19 (coronavirus) is a highly contagious flu-like virus threatening the health and safety of the general population. But what does an employer do if an employee suggests that they contracted a communicable disease at work? Further, how should they respond when employees believe they are entitled to workers compensation benefits?

The risk of a workforce outbreak is considered most likely to occur to people employed as emergency responders, health care providers, hoteliers, and public transportation workers. Outbreaks within workforces in a confined area, such as a call center, are less likely but, nevertheless, have the potential to spread a virus-like illness rapidly.

So how does workers compensation typically address diseases that may cause death or disability among employee populations?

In North America, most every state has an occupational disease statute created to extend workers compensation benefits to employees who have contracted diseases associated with workplace conditions. According to Eric Silverstein, National Casualty New Business Development Leader at Willis Towers Watson, one of the most easily identifiable occupational diseases is mesothelioma. It is unique to exposure to asbestos, it is clearly causally related to the workplace through its predominance in certain industries, and its health impact is clearly identifiable as it progresses. In contrast to other cancers, mesothelioma is known to be associated with employees in certain industries and is not a common risk to the general public.

However, most workers compensation statutes covering occupational disease do not seek to be so restrictive as to causal connection or “peculiarity” of an illness to an industry. Statutory workers compensation coverage ranges from having an origin with a risk connected with employment to more narrow statutes with a specific exclusion for diseases common to the general population. It should be noted, even if the occupational disease workers compensation statute specifically excludes coverage for the incident, it is possible that a remedy could be found under the general provisions of workers compensation statutes, should the transmission of the disease be considered an “accident” and the statute not otherwise exclude common diseases.

Lessons from the Ebola outbreak of 2014

A prime example is the Ebola outbreak that occurred at a Texas hospital in October of 2014. Two health care workers became infected while treating a patient with Ebola. One of those health care workers filed a lawsuit alleging that improper safeguards caused her to become infected and that the hospital violated her right to privacy when it released a video of her treatment. The hospital responded to the lawsuit by stating that the employee was subject to exclusive remedy as provided by workers compensation.

The hospital had a legitimate argument based on the key factors identified above. However, the case was ultimately settled out of court. In general, most employers should report situations that appear to elevate the probability of workers compensation being a source of indemnity.

What happens with employees traveling abroad?

We have established that employees who contract a communicable disease may find remedy under workers compensation, or the subpart of workers compensation known as occupational disease. However, what happens if your employee contracts the disease while temporarily traveling abroad? Does workers compensation apply?

For those employees hired in the U.S. and on temporary assignment outside of the U.S., coverage may be found under a Foreign Voluntary Workers Compensation Repatriation and Endemic Disease Endorsement (FVWC). The endorsement provides an incentive to settle claims, likely not covered by workers compensation, but more likely to be covered under employers’ liability, which could be more costly. In many states, workers compensation benefits do not apply to employees injured while traveling outside of the U.S.. In that scenario, the FVWC endorsement could apply. Keep in mind, the FVWC endorsement would typically not apply if the workers compensation law in that state had a foreign exterritorial provision applicable to the injury.

For claims covered under FVWC, there is a potential advantage over the workers compensation statute — in many cases, endemic disease is specifically covered. The contraction of COVID-19 while in China, for example, could meet the definition of endemic disease under an FVWC. If so, the benefits might be payable “as if” the claim were covered under the workers compensation law applicable to the employee’s state of hire in exchange for a full release from liability.

A cautionary note about FVWC endorsements: Most are not written on NCCI standard coverage forms, so the wording varies by insurer. Some endorsements cover endemic disease and extended temporary assignment (most limit this to 30 days) and some do not.

Purchasing coverage specifically for international risks

As an organization considers its risks from outside the U.S., strong consideration should also be made for purchasing coverage designed specifically for those international risks, often not available from a U.S. casualty or workers compensation policy. Issues to consider relate both to coverage territory, employees covered and ensuring the appropriate coverage is made available. Especially for employers with more significant risks and exposures, there are important benefits to purchasing a separate FVWC policy, often purchased in connection with an international casualty policy.

Outside the U.S., employee protection is commonly provided by state-managed social security programs rather than private insurance markets. Each government’s program offers distinct elements of coverage and systems of regulation. So when employees are hired in one part of the world and employed in another, there are opportunities for gaps to exist. A FVWC policy is designed to fill those possible gaps and provide the benefits that would have been made available to the employee in their country or state of hire.

Key considerations and benefits of a separate international FVWC policy may include the following:

  • Organizations with business operations and staff working or traveling outside the U.S. will benefit from this separate policy, as the U.S. workers compensation policy will most likely limit its coverage to U.S. hires
  • Coverage from a U.S. workers compensation policy will most likely have limitations on the number of days when coverage can apply for U.S.-based staff traveling abroad
  • Endemic disease coverage will generally apply more broadly and can include staff hired outside the U.S.
  • International casualty and FVWC coverages are most commonly written with little or no deductible, applying the state/county of hire benefits
  • A common FVWC policy can sometimes also extend to provide non-statutory employers liability for an organization’s non-U.S. operations
  • Coverage often has a 24-hour scope of coverage during a business trip
  • Claims adjusters who support international policies are often more accustomed to international risks and claims
  • An international FVWC policy will often include excess repatriation coverage, which supports the cost of relocating the injured/sick employee, including staff hired outside the U.S. and working abroad
  • Staff who are based outside the U.S. and occasionally travel to the U.S. can be covered by a FVWC’s reverse trip-travel extension
  • Some carriers offer emergency travel assistance services in connection with this policy

Report incidents promptly

Regardless of what policy may ultimately apply, we recommend that you report workers compensation and employer’s liability incidents immediately when employees notify you that they are making claims. Decisions on compensability are best left to your insurance carrier and/or claim administrator. Determination of whether a claim is compensable or not is complex and the answer can vary depending on the policy and state.

Communicable diseases: Considerations for large employers

For larger employers that purchase insurance excess of a deductible or self-insured retention, a multi-claimant disease incident carries the possibility of creating catastrophic financial loss. For example, should there be an outbreak at a hospital or hotel, workers compensation claims could be compounded by loss of revenue and extra expenses.

More specifically, the difference in retained loss, if the transmission of a covered communicable disease is a series of incidents versus a single accident, could be significant. Further, most workers compensation deductible agreements include a provision stating that the deductible applies per employee for occupational disease. Some insurers will suggest the statute requires they follow the assumption that occupational disease, by its very nature, is a series of occurrences for multiple claimant losses.

To better protect the financial concerns of higher risk companies we have worked with our insurance partners to structure aggregate stop loss coverage excess of a communicable disease event. A communicable disease event generally defines:

  • Cause, i.e., by the same communicable disease
  • Number of employees infected to be deemed an “event”
  • Maximum duration of an event, i.e., 48 hours following the onset of first transmission
  • Transmission, i.e., person-to-person

Once the definition of an event is determined, we can work with our insurance partners to structure a block of aggregate stop loss coverage to limit a company’s financial exposure to a multi-claimant catastrophic loss scenario.

Most insurers have a limited appetite for providing the coverage. Extensive underwriting is typically required around clinical practices and precise employee aggregation data.

Freedom of form is also a consideration. Excess workers compensation insurers that write excess coverage for qualified self-insurers are more likely to write per event communicable disease stop loss coverage because state filing requirements are considered less rigid.

Personal injury litigation risks and coverage issues

Manufacturers of anti-viral drugs may face product liability litigation and entities that interact with the public (e.g., hospitals, schools, restaurants, airlines, cruise lines, supermarkets) may see litigation if customers believe they can link their illness with staff illnesses. Workers compensation statutes may not shield employers from suits by their contract employees and will not shield them from suits brought by their customers. As it has in the past, proof of causation will be a major hurdle for these plaintiffs. Entities with clear and enforced pandemic policies (e.g., policies that seek to limit transmissions and keep sick workers home) will have additional defenses.

Third-party claims for bodily injury against a company are often covered by commercial general liability coverage; however, there are exclusions, some added by endorsement, that may come into play. These exclusions include, without limitation:

  • Language excluding claims related to infectious disease
  • Exclusions for “organic pathogens,” which could be construed by insurers to include flu viruses, are found in many policies, especially those issued to food companies
  • Insurers may argue that bodily injury resulting, for example, from ineffective anti-viral drugs was “expected or intended” because it was known that the drugs were not entirely effective or without adverse side-effects

Footnote

Each applicable policy of insurance must be reviewed to determine the extent, if any, of coverage for COVID-19. Coverage may vary depending on the jurisdiction and circumstances. For global client programs it is critical to consider all local operations and how policies may or may not include COVID-19 coverage. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal and/or other professional advisors. Some of the information in this publication may be compiled by third party sources we consider to be reliable, however we do not guarantee and are not responsible for the accuracy of such information. We assume no duty in contract, tort, or otherwise in connection with this publication and expressly disclaim, to the fullest extent permitted by law, any liability in connection with this publication. Willis Towers Watson offers insurance-related services through its appropriately licensed entities in each jurisdiction in which it operates.

Authors

Eric Silverstein
National Casualty New Business Development Leader

Director, Global Services & Solutions
Corporate Risk and Broking

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