The Good, The Bad, The Ugly

As decades rolled past, those in the insurance industry in Missouri became increasingly frustrated by the continuing liberalization in the interpretation and application of the state's workers' compensation law. Many in the industry thought the law had evolved to a point where the distinction between a work-related injury and a personal injury, and an occupational disease or a disease of everyday life, had become very blurred.

In 1983, matters took a turn for the worse when the state Supreme Court decided two cases in rapid succession in which the court adopted an interpretation of the law that only required an employee to prove that the injury was “work-related,” even if the relationship was only that the employee injured his or her back while merely bending down to pick up a pencil from the floor at work.

The Goal: Restoring Balance
Industry mounted efforts on several occasions to reverse this startling trend, but those efforts were met with only limited success. However, in 2004 the general election changed the balance of power when the Republicans gained a majority in both houses of the Missouri General Assembly. During the 2005 legislative session, the industry was able to bring about sweeping changes to the workers' compensation law.

Going into the process, the industry's goals were to restore the balance between work-related and non-work-related injuries and diseases, and to build a level playing field by abrogating Missouri's so-called “rule of liberal construction” which had, in the industry's view, skewed the outcome of numerous cases in the employees' favor.

The principle behind these efforts is a belief that the industry in Missouri shares with the industry everywhere — that the creation of an environment in which business can prosper, and can thereby maintain existing jobs, and create new jobs, benefits both employers and workers alike.

The 2005 amendments contain four provisions that are significant in the ensuing discussion:

• An employee is required to prove that the work was the “prevailing factor” in causing his or her need for medical treatment and disability.
• All prior case law dealing with the interpretation of what constitutes an “accident,” “occupational disease,” “arising out of,” and “in the course of” employment is abrogated.
• The party either claiming an entitlement to compensation, or the party who seeks to establish a defense to that claim, has the burden of proof and must establish that any proposition upon which a claim or defense is based must be more likely to be true than not true.
• The administrative bodies and appellate courts which construe and apply the law must follow a new “rule of strict construction.”

This poses many questions. Have workers' compensation claims been reduced? If they have been reduced, then is this because of the statutory amendments or some other cause(s)? Has the state's experience shown that workers' compensation reform can be a two-edged sword because of the operation of the “law of unintended consequences”?

The Good
Let's begin with an explanation of terms: In Missouri, employers must report all injuries to the Missouri Division of Workers' Compensation, except those involving first aid only and no lost time. However, an injured employee—or a dependent in the case of a fatality—may also file a “Claim for Compensation,” which is the document that initiates workers' compensation litigation. Thus, the number of injuries reported is a measure of the frequency of injuries; the filing of claims tracks the frequency of litigation.

In terms of injury frequency, from 2004 to 2010, reported injuries fell from a high of 140,972 to a low of 108,596, representing a decrease of 23 percent. However, the only way that the legislative changes could have affected the reporting process would be if an employer chose not to report an injury on the belief that the injury would not fall under the jurisdiction of the worker's compensation law because of the newly adopted limitations.

During that same period, formal claims filings decreased from 21,510 to 13,932, or just over 35 percent. Virtually all of that decrease occurred between 2006 and 2010. Even more notable is that of the total claims, those that could be identified as occupational disease cases decreased through 2009, the most current year for which data is available, by 39 percent. Certainly the general economic downturn in the more recent years of this study period accounts for some decrease in both injuries and claims frequency. The actual loss of jobs, however, is also often associated with a spike in claim filings, which could, over the short-term, negate a decrease attributable to the loss of jobs.

For data related to premium reductions and case successes, refer to the sidebar, “One State's Successes,” at end of the article.

The Bad
There have been some challenges along the way. For instance, labor's first reaction to the 2005 amendments was to attack their constitutionality. Although the industry survived this challenge, the Missouri Supreme Court (in that same case) reiterated that injuries that no longer fall under workers' compensation may support a civil action against the employer since Missouri's relatively broad “doctrine of exclusivity” would no longer insulate the employer from civil liability.

Another issue is that of loss of appeal rights. Under case law, an aggrieved party could appeal a Temporary Award issued by the Division of Workers' Compensation or the Missouri Labor and Industrial Relations Commission to the Court of Appeals. In light of strict construction, however, the appellate courts have now held that such an award could not be appealed because of the lack of statutory authority.

Questions about the status of occupational disease law linger, as well. At least one circuit court judge has ruled that under strict construction, an employee who contracts an occupational disease as a result of prolonged exposure can maintain a common law action and is not limited to seeking compensation under the workers' compensation law. 

The Ugly
One must also consider the abrogation of prior case law. The new statutory provisions not only abrogated a number of cases by name, but the statute also abrogated all prior cases interpreting what constitutes an injury by accident, or occupational disease, arising out of and in the course of employment. Thus, that provision prevents the appellate courts from relying on any prior legal precedent — even those where the prior decision was favorable to the defense. In many cases then, the courts must be guided only by the exact wording of the workers' compensation statutes, for better or for worse.

An employer's immunity from civil liability, which is quite broad in Missouri, was previously extended to insulate co-employees whose negligence caused an injury to a co-worker, as long as their actions involved the discharge of the employer's non-delegable duty to provide a safe workplace. However, since the 2005 amendments, the appellate courts have held that co-employee immunity no longer exists, as it is not granted by statute and the prior cases that established the immunity can no longer be followed.

As a result, this opens the door for civil suits against co-employees, including supervisors and managers, and implicates an employer's general liability coverage and even the co-worker's personal coverage and assets (It should be noted that efforts are currently being made to make co-employee immunity statutory. In the meantime, a Pandora's Box has been opened from which many “evils” will undoubtedly emerge.).

Walking Tall
Workers' compensation claim filings have clearly decreased since the 2005 reforms were enacted. The decrease is greater than what can be explained by an overall decrease in reported injuries, which suggests that some cases that may have been filed prior to 2005 are no longer being considered viable.

Since the unfavorable case law has been slow to develop, it is too early to assess whether strict construction has significantly increased civil suits against employers. This statistic would be problematic to track under even the best of circumstances, but certainly an increase in civil filings will occur.

Workers' compensation premiums have clearly declined over the last 5 to 6 years, and insurers are viewing Missouri as a more favorable place to do business than they did previously. In fact, several lessons can be learned from the Missouri experience since 2005:

• Even the most skillful legislative drafting may not survive all attacks by the claimant's bar and the scrutiny of the appellate courts.
• The courts abhor denying an injured party (in this case an injured worker) a remedy if the injury appears to have resulted from the fault of another. If access to workers' compensation benefits is denied as a result of workers' compensation reform, then the courts may expand the availability of other remedies and forums. This can result in an employer being subjected to greater exposure than would have been the case if the matter had remained exclusively under the coverage of the workers' compensation law.

Thus, when workers' compensation laws are rewritten, the full consequences of that action must be anticipated if the overall goal of creating a proper balance between workers' compensation coverage, group health coverage, and liability exposure is to be achieved.