Recent reports of a potential avian flu outbreak had much of the country in a panic—and employers wondering what would happen if a flu pandemic swept through their employees. When illness affects a workforce, the result can range from inconvenient to unimaginable. Protecting workers' safety is obviously every employer's chief concern. But in the event an illness strikes the workplace, companies must also know whether their workers will be entitled to benefits under state workers' compensation statutes—and whether they may be required to pay potentially crippling self-insured retentions under their workers' compensation insurance policies.
In The Event Of Outbreak: Will Afflicted Workers Be Covered Under State Workers’ Compensation Laws?
Assuming one or more of a company’s workers become ill, will those afflicted workers be entitled to workers’ compensation benefits? That depends on how the workers became ill and the nature of the illness. Virtually every state workers’ compensation statute provides that an employee will be entitled to benefits for what is known as an “occupational disease.” To constitute an “occupational disease,” two conditions must be met:
(1) the disease must be proven to be due to causes and conditions that are characteristic of and peculiar to a particular trade, occupation or employment; and (2) the disease cannot be an ordinary disease of life, to which the general public is equally exposed outside of employment. AMJUR Workers § 316 (emphasis added).
The distinction between an occupational and an infectious disease, however, is not always easy to make. According to Donna J. Popow, Principles of Workers’ Compensation Claims, American Institute for Chartered Property Casualty Underwriters/ Insurance Institute of America (Canada 2004):
Unlike traumatic injuries, the causes of diseases are not always clear. Determining that a disease is work-related can be difficult. Proof of a condition is not proof of causation. . . . Occupational disease statutes serve mainly to distinguish between diseases that are caused by and are peculiar to the industrial setting and the ordinary diseases of life. Occupational diseases are covered; ordinary diseases are not unless a direct causal connection to the workplace and the activities of the worker can be established.
How Would A Court Determine Whether A Disease Constituted An “Occupational Disease”?
In the event a business faces one or more claims for workers’ compensation coverage arising out of an alleged illness, the business will have to determine whether or not to challenge that claim. Whether or not a given illness would constitute an “occupational disease,” and thus be covered under state workers’ compensation law, is an issue of fact. Limited case law dealing with the spread of contagions in the workplace, however, provides insight into the factors a court would examine to determine whether a given outbreak would be sufficiently connected to the workplace to constitute an “occupational disease.” For example, in California, a breakout of kerato conjunctivitis —a contagious eye disorder—among employees at a steel company was found to be “proximately caused by and to have arisen out of the employment” and “constituted a special exposure in excess of that of the commonality.” Bethlehem Steel Co. v. Industrial Accident Comm., 135 P.2d 153, 157 (Sup. Ct. Cal. 1943). The court based its holding upon the fact that conjunctivitis was apparently “epidemic” in the shipyards of the defendant, and that “although there were many cases of the disease among the public, there [was] nothing in the record to show that the same proportion as in the shipyards was affected.” Id. at 154.
Washington, too, requires a direct link between the occupational injury or disease and the employee’s scope of employment. In affirming an award of workers’ compensation to an employee who contracted asthma from exposure to dust, smoke and fumes at his workplace, the court found a correlative link between the affliction and the nature of the employment. The court held that:
Under the present act no disease can be held not to be an occupational disease as a matter of law where it has been proved that the conditions of the extra-hazardous employment in which the claimant was employed naturally and proximately produced the disease and that but for the exposure to such conditions the disease would not have been contracted. Simpson Logging Co. v. Department of Labor and Industries, 202 P.2d 448, 452 (Sup. Ct. Wash. 1949).
Thus, if a worker contracted an illness in the workplace, it is conceivable that his or her illness would be covered under state workers’ compensation laws. It is clear, however, that an employee would need to demonstrate either that there was a proximate link between the disease and the employee’s employment or that he or she was subjected to some special exposure in excess of that of the commonality.
“Disease” Versus “Injury”: How Many Self-Insured Retentions Will Apply In The Event Of An Outbreak?
If workers are able to demonstrate that they have contracted an illness through their employment and are therefore entitled to workers’ compensation benefits, their employers will need to consult their worker’s compensation insurance policies to determine how these claims will be paid, and at what cost. One question that is likely to arise is the number of self-insured retentions that will apply for a given outbreak.
Many workers’ compensation insurance policies, particularly policies providing excess coverage, provide insurance coverage beyond an initial self-insured retention (essentially, a deductible) for each accident and/or each employee for disease, after which unlimited coverage is provided for workers’ compensation coverage up until the applicable statutory caps. Thus, if an illness is deemed to constitute a “disease,” most policies would apply a separate retention for each individual employee asserting a “disease claim.” This is the likely outcome if workers contract a disease such as the avian flu—pandemic outbreaks typically constitute “diseases” and not “accidents” for purposes of determining the number of applicable retentions under workers’ compensation policies. 99 C.J.S. Workers’ Compensation § 317 (2006) (emphasis added) (“In general, an occupational disease is not compensable as an injury by accident.”) Therefore, depending on the number of claims made, employers facing multiple claims could face extremely high exposure.
If, however, an illness outbreak is triggered by a causal event at the workplace and directly flows from the work being performed, it may be arguable that the resulting disease has been produced by an accident, thus reducing the number of applicable self-insured retentions:
[I]f the cause of an infectious disease is traceable to a specific incident(s) at or related to work, then contracting the disease meets the definition of accident and qualifies as a covered injury. For example, if contracting typhoid fever could be traced to polluted water in a factory, then the illness is a covered injury. See Popow, 2.2.
Whether a given outbreak infecting multiple workers would be regarded as an “accidental event” or an “occupational disease”—and, as a result, how many retentions would be implicated—depends on the specific circumstances leading to the initial exposure to the disease. If, however, a specific event led to the spread of the contagion, an outbreak could be considered an “accident” causing bodily injury as opposed to a disease. Thus, a business would only be required to pay one self-insured retention, no matter how many employees were actually exposed to contagion or contaminant.
To be covered under state workers’ compensation laws, ill employees would have to demonstrate that they contracted an “occupational disease”— that is, a disease that results directly from conditions under which work was performed, or that subjects employees to a special exposure in excess of that of the commonality.
In the event an employee could demonstrate a causal nexus between his or her illness and his or her employment, a court would then have to determine whether the avian flu constituted a “disease” or an “injury” under the terms of the policies at issue. If the avian flu were deemed to constitute a “disease,” under most insurance policies, a separate self-insured retention would apply for each individual employee asserting a “disease claim.” However, if contracting avian flu were deemed to constitute “an accident,” it is conceivable that a single retention could apply to multiple employee claims. To support this position, an employer would need to demonstrate that multiple cases of an illness arose from one single underlying cause, and that only one “accident” had occurred.