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You Be the Judge

Is a Student an Employee of a Martial Arts Academy?

A injured student at a martial arts studio claims he is an employee for the purposes of workers' comp.
By: | April 21, 2014 • 2 min read
You Be the Judge

A martial arts student and member of the “black belt club” at Fred Bauer’s Martial Arts Academy was an assistant instructor for lower ranked students. Experienced academy students customarily instructed other students as part of their own development. The student was given a key to the studio, along with five other students.

The student arrived at the academy and opened the studio, having agreed to fill in for another student who had volunteered to instruct a class. A car barreled through the studio’s window that faced the parking lot, striking the student.


The student sought workers’ compensation benefits. The academy asserted that he was not covered by workers’ compensation because no employment relationship existed. The student said that he received reduced monthly tuition rates for himself and his son. The academy owner said that the student assisted with training others but did not receive complimentary or reduced-cost lessons in exchange for doing so. The student did not produce evidence at trial showing that he received compensation from the academy.

The student did not include the academy on a list of employers in documents related to his separate lawsuit against the driver of the car. He also did not mention the academy when asked on direct examination at trial about his employment at the time of the accident. The student did not report his alleged employment with the academy on his tax returns or credit card, job, and home refinancing applications.

The trial court concluded that the student did not establish that he was an employee of the academy and dismissed his claim for benefits. The student appealed, arguing that an employment contract existed and that the trial court failed to recognize that a bartering arrangement could qualify as compensation sufficient to establish an employment relationship.

Poll Question

Was the trial court correct in dismissing the student’s claim?

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The court explained that when evaluating whether an employment relationship existed the emphasis is on whether the parties entered into a contract for hire. The court explained that while forms of consideration other than a paycheck can serve to establish an employment relationship, the student did not establish that a bartering arrangement existed. Therefore, the student and academy had not entered into a contract for hire.

How the court ruled: A. The Ohio Court of Appeals held that a the student did not establish that he was an employee at the time his injuries occurred and affirmed the dismissal of his claim. Beal v. Fred Bauer a/k/a Bauer’s Martial Arts Academy, No. C-130258 (Ohio Ct. App. 02/21/14).

B is incorrect. The court found conflicting evidence as to whether an employment contract existed. The trial court properly weighed the evidence and resolved the conflicting testimony in favor of the academy.

C is incorrect. The court found that the student did not establish that a bartering arrangement existed.

Editor’s note: This feature is not intended as instructional material or to replace legal advice.

Christina Lumbreras is a Legal Editor for Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at
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Column: The Next Level

ARAWC: A New Force for Change

By: | April 21, 2014 • 5 min read
Chris Mandel is SVP, strategic solutions for Sedgwick. He is a long-term risk management leader and a former president of RIMS. He can be reached at

On February 1, 2014, the state of Oklahoma enacted new workers’ compensation legislation in SB 1062, which allows any employer to exit, or opt-out of, the state’s statutory workers’ compensation system. While not exactly like what’s known as “non-subscription” in Texas, this new statute is a significant move forward in giving employers more options in how they respond to and finance employee injuries and related benefits with a key focus on ensuring injured employees are treated respectfully and compensated fairly in the aftermath of an on-the-job injury.


Until now, only Texas allowed any private sector employer to opt-out of its statutory workers’ compensation system. Just as there are significant differences between what Oklahoma has done and what has been in place in Texas for over 100 years, the passage of SB 1062 demonstrates that there are state-specific opportunities to improve the financing of and response to employee injuries in many other states.

Enter the Association for Responsible Alternatives to Worker’s Compensation, or ARAWC (pronounced “A-ROC”). This new national organization was formed by a coalition of employers and workers’ compensation system providers after many realized the benefits achieved in Texas and those anticipated in Oklahoma. The board and ARAWC’s members have an intense interest in seeing employees better cared for by a more optimally designed and managed system. By seeking options to traditional workers’ compensation, the organization has a goal of also driving economic development through the attraction of employer savings.

ARAWC’s mission is to expand the delivery of better medical outcomes to injured workers by expanding employer choice in other states.

Where Oklahoma’s SB 1062 offers Oklahoma employers a choice to opt-out of the state system the opportunity to substantially reduce work-injury costs and avoid both the statutory system’s extensive regulation and litigation risk, similar goals for other states are being established by the leaders of ARAWC for the benefit of both employers and employees. Two key statistics reflect a clear basis for why Oklahoma changed and improved their approach to employee injuries:

  • Oklahoma employers cited that workers’ compensation cost was the No. 1 reason they were either leaving the state or adding jobs at facilities located in other states, such as Texas.
  • 2012 NCCI statistics showed Oklahoma loss costs to be 225 percent higher than neighboring states.

ARAWC is now developing strategies and plans that will identify the states where statutory change can bring the most benefit to both employers and employees. The founders expect that their efforts will enable the delivery of better medical outcomes to injured workers and give employers more choice on how employee injuries will be managed.

Currently, 48 states effectively mandate workers’ compensation insurance as the sole option for employers to cover employee injuries. ARAWC’s mission is to expand the delivery of better medical outcomes to injured workers by expanding employer choice in other states. Experience under these alternative employee injury benefit platforms has proven to dramatically reduce employee injury costs, while achieving higher employee satisfaction and substantial economic development.


Over the past two decades Texas “Non-subscribers” have achieved better medical outcomes for hundreds of thousands of injured workers, and saved billions of dollars on occupational injury costs. While ARAWC is not necessarily taking the Texas model forward into other states, it will leverage the experience from over 100 years of having options in Texas and what emerges from the changes from Oklahoma’s new statute, to drive a strategy for process improvements and lower costs in selected states where change is overdue.

Providing employers more choice in financing and responding to employee injuries can positively impact employees, employers and health care providers. Experience supports that competition to traditional workers’ compensation insurance can reduce premium rates and improve services. Enabling choice of program design increases employers’ participation into the process, which allows them to hold all service providers accountable for results and outcomes. It also enables employees to access medical providers that do not accept workers’ compensation clients because of low fee schedules and paperwork required. In the absence of statutory mandates, responsible employers create high quality benefit plans for occupational injuries, enabling improved access to better medical talent leading to higher employee satisfaction, better medical outcomes, and lower cost claims.

The member companies of ARAWC aspire to refocus state-based mandates in response to growing gaps in quality medical care, efficient risk financing, effective return to work and other gaps in many current systems. Some of the other expected benefits of ARAWC’s strategy are expected to be:

  • Improved workplace safety and training supporting injury prevention
  • Expanded access to quality medical providers providing exceptional care
  • Opportunity for expanded benefits through custom designed plans
  • Opportunity for reduced waiting periods for wage replacement with greater benefits
  • More expedient medical treatment and more immediate referral to specialized medical treatment to enhance recovery
  • Early identification of potentially complicating medical conditions and securing appropriate medical treatment to aid recovery
  • Improved communications with injured workers to address benefit questions and assist early return to work

Nationwide, the experience under alternative employee injury platforms suggests we can slash the cost of the workers’ compensation system in half with higher employee satisfaction. How? By providing employers the option of alternative mechanisms which can result in:

  • A more competitive insurance marketplace. Experience supports significant rate reductions when choice is introduced over prior pricing where limited options exist.
  • Improved incentive for existing workers’ compensation providers to improve services and pricing knowing the employer has an option to be more engaged in helping injured workers recover and return to work more quickly and efficiently.
  • Incenting medical providers to act in the best interests of the employee and improved levels of service.
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  • Expanding employee access to medical providers who do not accept workers’ compensation patients because of low fee schedules and paperwork required. As a health plan for occupational injuries, opportunity exists to access the very best medical talent leading to higher employee satisfaction and medical outcomes.
  • An injury benefit plan can more efficiently deliver care to and achieve better medical outcomes for injured workers.

ARAWC is just the latest and perhaps one of the better examples of what an often moribund, ineffective, inefficient system can motivate; change that can benefit all participants while reducing bureaucracy and many of the negative elements it brings to effective employee injury recovery.

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Sponsored: Lexington Insurance

What Is Insurance Innovation?

When it comes to E&S insurance, innovation is best defined as equal parts creativity and speed.
By: | April 7, 2014 • 4 min read

SponsoredContent_LexingtonTruly innovative insurance solutions are delivered in real time, as the needs of businesses change and the nature of risk evolves.

Lexington Insurance exemplifies this approach to innovation. Creative products driven by speed to market are at the core of the insurer’s culture, reputation and strategic direction, according to Matthew Power, executive vice president and head of strategic development at Lexington, an AIG Company and the leading U.S.-based surplus lines insurer.

“The excess and surplus lines sector is in a growth mode due, in no small part, to the speed at which our insureds’ underlying business models are changing,” Power said. “Tomorrow’s winning companies are those being built upon true breakthrough innovation, with a strong focus on agility and speed to market.”

To boost its innovation potential, for example, Lexington has launched a new crowdsourcing strategy. The company’s “Innovation Boot Camps” bring people together from the U.S., Canada, Bermuda and London in a series of engagements focused on identifying potential waves of change and market needs on the coverage horizon.

“Employees work in teams to determine how insurance can play a vital role in increasing the success odds of new markets and customers,” Power said. “That means anticipating needs and quickly delivering programs to meet them.”

An example: Working in tandem with the AIG Science team – another collaboration focused on innovation – Lexington is looking to offer an advanced high-tech seating system in the truck cabs of some of its long-haul trucking customers. The goal is to reduce driver injury and fatigue-based accidents.

SponsoredContent_Lexington“Our professionals serving the healthcare market average more than twenty years of industry experience. That includes attorneys and clinicians combining in a defense-oriented claims approach and collaborating with insureds in this fast-moving market segment. At Lexington, our relentless focus on innovation enables us to take on the risk so our clients can take on the opportunities.”
– Matthew Power, Executive Vice President and Head of Regional Development, Lexington Insurance Company

Power explained that exciting growth areas such as robotics, nanotechnology and driverless cars, among others, require highly customized commercial insurance solutions that often can be delivered only by excess and surplus lines underwriters.

“Being non-admitted, our freedom of rate and form allows us to be nimble, and that’s very important to our clients,” he said. “We have an established track record of reacting quickly to trends and market needs.”

Lexington is a leading provider of personal lines coverage for the excess and surplus lines industry and, as Power explains, the company’s suite of product offerings has continued to evolve in the wake of changing customer needs. “Our personal lines team has developed a robust product offering that considers issues like sustainable building, energy efficiency, and cyber liability.”

Most recently the company launched Evacuation Response, a specialty coverage designed to reimburse Lexington personal lines customers for costs associated with government mandated evacuations. “These evacuation scenarios have becoming increasingly commonplace in the wake of recent extreme weather events, and this coverage protects insured families against the associated costs of transportation and temporary housing.

The company also has followed the emerging cap and trade legislation in California, which has created an active carbon trading market throughout the state. “Our new Carbon ODS product provides real property protection for sequestered ozone depleting substances, while our CarbonCover Design Confirm product insures those engineering firms actively verifying and valuing active trades.” Lexington has also begun to insure new Carbon Registries as they are established in markets across the country.

Lexington has also developed a number of new product offerings within the Healthcare space. The Affordable Care Act has brought an increased focus on the continuum of care and clinical patient safety. In response, Lexington has created special programs for a wide range of entities, as the fast-changing healthcare industry includes a range of specialized services, including home healthcare, imaging centers (X-ray, MRI, PET–CT scans), EMT/ambulances, medical laboratories, outpatient primary care/urgent care centers, ambulatory surgery centers and Medical rehabilitation facilities.

“The excess and surplus lines sector is in growth mode due, in no small part, to the speed at which our insureds’ underlying business models are changing,” Power said.

Apart from its coverage flexibility, Lexington offers this segment monthly webcasts, bi-monthly conference calls and newsletters on key risk issues and educational topics. It also provides on-site risk consultation (for qualifying accounts), access to RiskTool, Lexington’s web-based healthcare risk management and patient safety resource, and a technical staff consisting of more than 60 members dedicated solely to healthcare-related claims.

“Our professionals serving the healthcare market average more than twenty years of industry experience,” Power said. “That includes attorneys and clinicians combining in a defense-oriented claims approach and collaborating with insureds in this fast-moving market segment.”

Power concluded, “At Lexington, our relentless focus on innovation enables us to take on the risk so our clients can take on the opportunities.”

This article was produced by Lexington Insurance Company and not the Risk & Insurance® editorial team.

Lexington Insurance Company, an AIG Company, is the leading U.S.-based surplus lines insurer.
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