Tuesday, July 31, 2012

Cost Shifting - It's What Comp is For

Workers' compensation claims come about in interesting and unanticipated ways - and when the alternative is civil liability employers can be more than happy to accommodate.

In Pennsylvania a dental laboratory technician of 30 years was diagnosed with chronic beryllium disease, so he and his wife sued several former employers for "Intentional Conduct with a Substantial Certainty of Causing Injury" and fraudulent misrepresentation.

In Kostryckyj v. Pentron Laboratory Technologies, No. 1604 EDA 2011 (07/27/2012) Michael Kostryckyj worked as a dental technician for nearly 30 years for several different dental laboratories where he performed various procedures using dental alloys containing beryllium. These alloys were allegedly manufactured by Pentron Laboratory Technologies and sold under the brand name Rexillium III.

In 1998, Kostryckyj began experiencing shortness of breath and sought treatment with Edward Schuman, a pulmonologist at Holy Redeemer Hospital. Schuman diagnosed Kostryckyj with sarcoidosis, a chronic inflammatory disease of the lungs of unknown origin.

Dr. Jennifer Weibel at Thomas Jefferson University Hospital confirmed this diagnosis in 2002.

Kostryckyj went to see Dr. Milton Rossman in the Sarcoidosis and Interstitial Lung Disease Program at the Penn Lung Center in 2008. Rossman diagnosed him with chronic beryllium disease. Kostryckyj then sued.

The defendants countered with the argument that Kostryckyj's claim in civil court was barred by workers' compensation's exclusive remedy.

Kostryckyj argued that an exception carved out by the state's Supreme Court in 1992 where the employee demonstrates (1) fraudulent misrepresentation, which (2) leads to the aggravation of an employee's pre-existing condition permitted his case to proceed.

The Superior Court of Pennsylvania was not persuaded and allowed defendant's summary judgments to stand because it concluded that Kostryckyj and his wife could not demonstrate that his employers had in any way misrepresented the dangers of beryllium to Kostryckyj in order to induce him to continue in his employment.

Contrast that result with a report that was released by the California Workers’ Compensation Insurance Rating Bureau. (WCIRB) which concludes that claims frequency is up, primarily on the basis of claims of continuous trauma (aka cumulative injury, or CT).

Kostryckyj's case would clearly be one of a CT nature (albeit not in California).

Cumulative trauma claims increased 177.2% from 2007 to 2010 in the construction industry at the same time that employment fell 37.3%. In real estate, cumulative trauma claims increased 136.6%, while employment dropped 12.6%, according to the Rating Bureau. This has caused some to speculate about a connection between the economy and claims frequency.

Employers say they’re seeing an increase in the number of post-employment cumulative trauma claims. On the contrary, employee representatives note that CT claims fell from 7.9% of all indemnity claims in 2004 to 6.5% of indemnity claims in 2005. By 2008, cumulative trauma claims represented 7.5% of indemnity claims, and by 2010 reached 10%.

So employers suggest the CT trend is an example of cost shifting, and employees see this as just claims normalization over a period of time.

I see it as no big deal regardless.

Employee claims for injury benefit is a part of being in business. While we as an industry get alarmed when the meta data suggests some trends that are outside the normal short term projection, the truth is that such trends reflect that workers' compensation is doing its job by capturing claims that could otherwise burden employers with the old civil liability system that existed a hundred years ago.

As the employers in the Kostryckyj case showed, its much better having a CT claim made under workers' compensation than face a civil case where damages are unlimited and others with tenuous connection to an injury (Kostryckyj's wife for example) can claim a remedy too.

Cost shifting - sure it is. Workers' compensation exists for the fundamental reason to shift the unknown cost of civil liability to the contained cost of the politically bred, statutorily defined, and heavily regulated system of work injury protection with all of its benefits, complexities and burdens.


  1. This could become the 'slippery slope'. There is a time to use the 'exclusive rememdy'. That is when the injury is AOE/COE. Asserting the exclusive remedy to thwart other legitimate claims for damages is wrong and it attacks the integrity of the system.

    The same holds true for 'cost shifting'. If a CT claim arises AOE/COE, it is proper. If not, it does not belong in the work comp arena.

    Manipulating the system either way to achieve a desired outcome that doesn't fit within the narrow scope and definitions of either case is the wrong thing to do.

    We have rules for a reason. Bending the rules to achieve a 'better, more desireable' outcome is a bad thing to start and a worse thing to carry on. After all, who gets to decide when and where the 'greater good' can be served by using the system?

  2. @ bill - the decision gets made at the judicial level!