WRITTEN TESTIMONY REGARDING H5264 BY THE BEACON MUTUAL INSURANCE COMPANY - State of Rhode Island ...

WRITTEN TESTIMONY REGARDING H5264 BY THE BEACON
              MUTUAL INSURANCE COMPANY

Please accept this testimony of The Beacon Mutual Insurance Company
regarding H 5264 which is presently pending in the House Labor
Committee. For the reasons outlined below, we are unable to support this
legislation. We welcome the opportunity to discuss the information we
provide herein, as well as any other matters of interest for you or any
members of the Committee with regard to the proposed legislation.

H 5264 seeks to amend the Occupational Disease chapter (RIGL Ch. 28-34)
of the Rhode Island Workers' Compensation Act (the “Act”). In addition to
significantly increasing workers’ compensation costs in the state, as
explained in the National Council on Compensation Insurance analysis dated
July 2, 2020 of last year’s proposed Rhode Island House Bill 80661, we believe
that, as written, the legislation would unintentionally create fundamental
legal and policy issues for the Rhode Island workers’ compensation system,
and as a result, negatively impact its primary stakeholders, the employers
and employees of our state.

As further described herein, such issues would include changing the nature
of workers’ compensation benefits and potentially dismantling the
established solutions offered by the workers’ compensation system. In
addition, they would create confusion between existing workers’
compensation and other types of benefits, add delays at the Workers’
Compensation Court, increase costs exponentially, conflict with the
jurisdiction and authority of other judicial and administrative bodies, and
impair rights under existing laws, contracts and collective bargaining
agreements.

1 NCCI Analysis of Rhode Island House Bill 8066, as introduced on June 18, 2020, which was not
dissimilar from the pending legislation, indicates that this legislation could potentially result in a
175% increase over the currently expected COVID-19 related costs to the RI workers’
compensation system based on an additional $376 million in potential payments to individuals
infected with the virus, as well as a 55% increase in costs, based on an additional $119 million in
potential payments to quarantined individuals. The Rhode Island workers’ compensation system
could not sustain such significant increases.

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Existing Workers’ Compensation Benefits for COVID-19 Claimants

Currently, the Act provides for the compensability of COVID-19 claims for
those employees who contract the virus during the course of their
employment. RIGL 28-34-2 provides, in pertinent part, as follows:
“the disablement of any employee resulting from an occupational disease or
condition described in the following schedule shall be treated as the happening
of a personal injury……..(d)isability arising from any cause connected with or
arising from the peculiar characteristics of the employment….”

Regardless of any presumption, under existing law, each workers’
compensation claim is potentially compensable. Every COVID-19 related
claim is evaluated on a case by case basis by the insurance carrier/employer,
and if, based on the factual circumstances of the claim, it is determined that
the injury arose out of and in the course of the claimant’s employment, then
the claimant is eligible for workers’ compensation benefits. In the event that
the claim is not accepted, the claimant may file a petition at the Workers’
Compensation Court, which will make a determination of compensability, at
a hearing held not more than 21 days after its filing. Employers, insurers,
employees and the Court are currently engaged in this process and the Court
is routinely either granting or denying these petitions based on the evidence
and the law. Throughout the state of emergency, there has been no
interruption to the Court’s responsibilities or operations in this regard.

Workers’ Compensation Benefits Address Disability due to Causes
Associated with Employment

It is important to note that the Act provides benefits to employees with an
occupational disease related disability arising from or connected with the
peculiar characteristics of their employment. In contrast, H 5264 states that
any “disability or quarantine resulting from COVID-19 or any other viral
infection…classified by an executive order issued during a declared state of
emergency” as defined in the bill, are presumed to be work-related and
entitle them to workers’ compensation benefits. This would create a
presumption of workers’ compensation compensability for various employee
classes regardless of injury or incapacity or whether such incapacity was
actually due to a cause associated with their employment.2 This undermines
2At the beginning of the pandemic, Beacon instituted a policy creating a rebuttable presumption
that disablement of any employee diagnosed with COVID-19 while acting as a health care
provider with direct COVID-19 patient care or ancillary work in COVID-19 patient units, is an

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the fundamental requirements of causation and incapacity in our workers’
compensation system.

H 5264 Amends Eligibility for Workers’ Compensation Benefits

H 5264 expands the categories of employees eligible for workers’
compensation benefits to include those which are not currently subject to the
Act. We do not believe that this was the legislation’s intent. Specifically,
the proposed presumption would apply to, among others, any “public safety
worker, including police officer, firefighter or correctional officer…”

Police and firefighters are statutorily subject to the Injured on Duty (IOD)
provisions of the law (RIGL 45-19-1 et.seq.) and are specifically excluded
from our state’s workers’ compensation system. Therefore, any changes in
benefits for these employees would also require amendment of the IOD
statute. The passage of H 5264 would cause inconsistency between the
workers’ compensation and IOD laws of our state, causing upheaval in
virtually every element of both benefit systems. It would also retroactively
impair the insurance contracts between the cities and towns that employ
these workers and their insurers because at the time that the contract was
entered, such employees were not part of the workers' compensation system.
It would create an entire new population of workers, payroll and risk not
contemplated under the insurance coverage.

In addition, the proposed presumption would apply to “an essential worker,
defined as any employee whose employment is necessary for the continued
health and safety of the community, including, but not limited to, grocery or
transportation workers, having direct or indirect contact with persons with
COVID-19 or other viral infection; or any other class of employees
designated by an executive order of the [g]overnor issued during a declared
state of emergency …” Such class of employees entitled to the presumption
under this legislation appears to be indefinite. The legislation includes no
parameters to help identify whether an employee may potentially be deemed
an essential worker.

occupational disease arising from the unique characteristics of such employment. Regardless of
any such presumption, the claims analysis for any employee diagnosed with COVID-19 involves
a factual evaluation using test results, confirmed cases, known and potential high risk exposures,
other sources of exposure, and medical opinions. None of which would be considered under the
proposed legislation.

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The uncertainty created by this legislation hinders the ability to underwrite
and reserve for anticipated losses, which will result in dramatic increases in
workers’ compensation insurance costs for all employers.

In addition, the proposed legislation awards a presumption to an undefined
class of workers who may suffer “any other viral infection”. Viral infections
include the common cold, herpes simplex, chickenpox/shingles and so on.
The occupational disease provisions of the Workers’ Compensation Act
have evolved to include those defined injuries that are causally related to
employment. There is no scientific or factual basis under which anyone can
causally relate a viral infection to employment. Likewise, it is reported that
COVID will be with us for years, circulating like other endemic diseases
such as flu, measles and HIV. Passage of this bill, as written, would
immediately turn the state’s workers’ compensation system into a health
insurance system with wage replacement. Rhode Island’s well-functioning
workers’ compensation system would be turned upside down.

H 5264’s Amendment of the Act Raises Constitutionality Issues

From a legal perspective, the universal considerations in the analysis of a
workers’ compensation claim are questions of liability and disability.
Liability ensues when an employee suffers an injury arising out of and in the
course of his/her employment. Disability occurs when there is a loss of
earning capacity, i.e. did the employee lose pay when out of work because of
the work injury. The law is very well settled that an employee's injury is
compensable under the workers’ compensation laws if the particular facts of
a case establish a causal connection or nexus between the injury and
employment. Carvalho v. Decorative Fabrics Co., 117 R.I. 231, 366 A.2d
157 (1976). The proposed legislation, as written, ignores these fundamental
considerations and makes the proposed changes very likely unconstitutional
and void under federal and state law.

More specifically, the bill deems a disability or quarantine from COVID-19
or any other viral infection compensable without an actual work-related
injury. Workers' compensation benefits are paid for disability due to work
related injuries, not unrelated injuries or quarantine to prevent injury.

Indeed, H 5264 deems COVID-19 or some unnamed “other viral infection”
compensable without a positive test (and without distinction from symptoms
from any other ordinary disease of life, including many with similar

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symptoms to COVID-19) and even for no injury, i.e. periods of quarantine
due to contact with someone infected with COVID-19 regardless of whether
exposure was connected to employment. H 5264 also makes the employer
liable for benefits regardless of injury in the case of quarantine. Further, the
law may apply to a class of employees not yet defined, and dependent upon
some unknown future executive order by a governor during a declared state
of emergency.

The workers’ compensation system was founded in a “grand bargain”
between employers and employees. Employees relinquish the right to sue
their employer for a work related injury in exchange for quick and certain
benefits. Employers relinquish the right to raise affirmative defenses in this
no fault system while avoiding uncertain and potentially extensive tort
liability. The constitutionality of the system is grounded in this bargain, i.e.
both sides forfeit rights when a workplace injury occurs. The proposed
changes offered under H 5264 would eliminate this bargain relating to
certain employees and create issues of “fundamental principles of fairness”
under the Due Process, Takings, and Contracts Clauses of the U.S.
Constitution and the Rhode Island Constitution. It would mandate the
payment of benefits by an employer regardless of whether in injury or
incapacity is work related. This proposal would gut the entire workers’
compensation system.

There are also questions of constitutionality regarding the effective period
for this legislation. The bill creates a presumption of compensability for
“COVID-19 or any other viral infection (is) classified by an executive order
issued during a declared state of emergency”. It is uncertain whether this
legislation refers to a federal or state emergency order. In addition, the
undefined effective period also raises questions of fairness and certainty and
imputes the questionable constitutionality of the proposed changes. It is also
important to recognize the fundamental constitutional and workers’
compensation law principle that statutory changes, such as those proposed,
may not be applied retrospectively. Under well-established precedent, any
statutory change to workers’ compensation benefits would be inapplicable to
any worker injured prior to the change. Thus, if passed, the benefits
afforded would only benefit those employees subsequently diagnosed or
quarantined.

Retroactively imposing liability on employers and insurers would be
unconstitutional and void under Rhode Island law. H 5264 would
retroactively impair the insurance contracts between the employers and their

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insurers because at the time the contract was entered, there was a
requirement of injury, causation, and loss of earning capacity. If passed,
none of these requirements would remain for certain types of occupational
diseases, thus requiring reconsideration of rates and premium and increasing
the cost of workers’ compensation insurance for employers in Rhode Island.

H 8066 Conflicts with Other Benefits/Legal Rights/Insurance Coverage

Workers’ compensation benefits are distinguishable from other employee
benefits. While workers' compensation provides benefits for disability due to
work-related injuries, other programs such as health insurance, TDI,
unemployment insurance and other pandemic programs provide other
benefits to address COVID-19 needs. The workers’ compensation system
was never intended to remedy the needs fulfilled by such other benefits. This
legislation would unfairly impose the financial burden of the COVID-19
pandemic on employers and workers’ compensation insurers, increase costs
to all employers, interfere with existing contractual rights and result in
extremely harsh consequences which would be subject to challenge.

H 5264 also creates confusion regarding the issue of disability by proposing
to award benefits regardless of loss of earning capacity, i.e. quarantine.
Workers' compensation benefits are paid for loss of earning capacity related
to a workplace injury, not for the injury itself. In the absence of both a loss
of earning capacity and causal relationship requirement, potentially every
COVID-19 or some “other viral infection” claim suffered by employees in
our state could be subject to litigation. This has the potential to cripple the
Workers’ Compensation Court, significantly increase employer expenses,
and add delay to other employees with non-COVID issues pending at the
Court.
These conflicts with other benefit systems raise a number of legal issues
including with regard to:

          jurisdiction of the Workers’ Compensation Court and other
           state and federal courts and commissions;

           terms of insurance coverage;

          eligibility for unemployment insurance and
           other state and federal pandemic relief programs;

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    entitlement to paid time off and other employment benefits; and

          terms of collective bargaining agreements and other employment
           contracts.

In conclusion, this legislation assumes that the workers’ compensation
system is best suited to compensate employees affected by the pandemic.
However, there are systems in place under which our state and federal
government compensate workers for time lost from work when quarantined
or diagnosed with the virus unrelated to work. If passed, this legislation will
threaten the viability of the workers’ compensation system, creating a
downstream impact for all Rhode Island employers, and hinder our state’s
economic recovery. Our workers’ compensation system is skillfully handling
this crisis right now. We ask that you not bring that same system to its knees.

We look forward to further discussion of these legal and policy issues which
form the basis for our objection to this legislation.

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