Insurers, Self-Insureds Facing $9 Billion in Black Lung Liabilities

June 20, 2022

The U.S. coal industry may be shrinking rapidly as the country shifts to renewable energy, but insurers’ and self-insured companies’ liabilities for black lung occupational disease claims have ballooned – to an estimated $9 billion and perhaps more than $14 billion.

That’s according to a recent report from Milliman, the global actuarial and consulting firm. The study’s authors took a first-ever look at the cost of existing and future claims, payments for which will continue for years to come.

The report did not name the insurers that owe the most. But historically, some of the largest P&C carriers have insured against black lung claims. Most of the claims come from miners in Kentucky, West Virginia and other coal-rich states.

“We just wanted to raise awareness and help develop solutions to protect the financial solvency of the non-trust fund entities on paying federal black lung liabilities,” said Travis Grulkowski, a Milliman actuary and one of the authors of the report.

A little history of the black lung program helps explain the complexities. Since 1969, the federal government has paid a share of miners’ claims for black lung disease, or pneumoconiosis, caused by years of breathing coal dust. In the 1970s, the law was amended, making coal companies more responsible for benefits, either by purchasing commercial insurance coverage or, if approved by a federal agency, self-insuring.

If the mine operator goes bust, the federal trust fund will assume responsibility for the benefits payments. The trust is funded through a tax on each ton of coal pulled from the ground. As coal consumption plummeted in the last decade, a number of mining companies have entered bankruptcy and have shut down, and tax payments into the trust fund have fallen, the U.S. Government Accounting Office has reported.

But the claims liabilities have only climbed.

As miners have been laid off, many have filed black lung claims, which by law must be paid for a worker’s lifetime, in many cases.

Changes approved by Congress through the years also have made more workers eligible for the federal benefits. The GAO has reported that the federal trust fund’s liabilities now stand at about $5 billion and are expected to top $15 billion by the year 2050.