N.Y.’s workers’ comp system’s not working

Many suits formerly brought under the employers liability section of the workers’ compensation policy are now brought under the contractual liability section of the general liability policy. This shift has exacerbated the affordability and availability of general liability insurance.

The Independent Insurance Agents & Broker of New York was a key advocate of reform legislation in 1995-1996, when we established NYCAN, the New York Compensation Action Network coalition. The 1996 reforms have had a positive impact on rates, but times have changed.

New York State ranks ninth highest in comparative workers’ compensation costs and yet our benefits are among the lowest in the nation. Our costs are approximately 30 percent above the national average. This system is not working well for business or workers.

While a hard market has gripped all lines of insurance, in all states commercial insurance has been particularly hard hit. The 1996 reforms to Workers Compensation Law Section 11 prevent the liability against employers for common law indemnification or contribution, except in instances where the employee has suffered a medically proven “grave injury,” as defined in the law.

‘Grave injury’

However, when there is “grave injury” to support a third party action against the employer, third party suits may proceed as before. When there is no “grave injury” but there is a contract providing indemnity to the employer from the third party plaintiff, suit may still be brought under the general liability policy.

‘Absolute liability’

Add to this the “absolute liability” feature of Sections 240 and 241 of the New York Labor Law and the result is that many suits formerly brought under the employers liability section of the workers’ compensation policy are now brought under the contractual liability section of the general liability policy.

This is worsened by the ever-increasing number of contractual hold harmless agreements now required of all “contractors” and “suppliers.”

Shifting liability

Many of these suits are brought under the “Safe Place to Work” laws, Sections 240 and 241 of the Labor Law, which hold the owner, contractor or subcontractor at a job site strictly liable when an employee is injured on the job in any accident involving a fall. This shift has exacerbated the affordability and availability of general liability insurance, already affected by the nationwide hard market.

Reforms needed

IIABNY supports the following reforms:

• Enactment of objective medical guidelines developed by the American Medical Association to determine permanent partial disability.

• Providing scheduled benefits for some injuries and non-scheduled benefits for others, with a reasonable cap on payments for permanent partial disability. This process will reduce costs while assuring benefits to the most seriously injured workers. (According to a 1994 study, done by the New York Workers Compensation Rating Board for NYCAN, these two changes alone would reduce premiums by 16.7 percent, probably more in today’s dollars.)

• An increase in workers’ compensation benefits for loss of wages due to disability. The maximum weekly benefit has been $400, since July 1, 1992. This benefit for workers injured on the job is among the lowest in the nation and has not kept pace with inflation.

• An increase in disability benefits for loss of wages due to disability. The maximum weekly benefit has been $170, since May 1, 1989. This benefit for workers injured off the job has not kept pace with inflation. The disparity between the loss of time benefits for workers’ compensation and disability may in effect “encourage” workers to claim any injury as occurring on the job.

We feel Gov. George Pataki’s workers’ compensation package is a step forward and we look forward to working with the Governor and the Legislature to enact meaningful reform.

Significant workers’ compensation reforms that reduce the costs in the system, while at the same time increasing the benefit levels, will improve economic development by keeping jobs here. It is imperative that any increase in benefits be tied to reforms to the system.

Mark J. Hagan, CPCU, ARM, is chair of the board, Independent Insurance Agents & Brokers of New York Inc.