Solid Substance Abuse Program Can Combat Legal, Safety Issues

Organizations need to develop and implement clear and defensible substance abuse programs to keep abusers from putting themselves and others at risk.

By: Nancy Grover | March 23, 2015

More than one-third of workers’ comp claims involve issues surrounding substance abuse, says a risk manager who specializes in workplace substance abuse prevention. Alcohol and drugs are also major contributors to work-related motor vehicle accidents.

Employers spend an estimated $7,000 per year per substance abuser in direct operational costs. With some estimates suggesting up to 20 percent of workers are substance abusers, organizations need to develop and implement clear and defensible programs.

“It’s not a moral or ethical issue, it’s a business decision,” said Christine Clearwater, president of Drug-Free Solutions Group, “and a very important one to decide where you want to position your company and communicate that to your organization.”

Failing to address the issue can not only land an organization in a legal quagmire but also puts the safety of the entire company at risk. In a recent webinar produced by the National Safety Council, Clearwater outlined the risks employers face and provided solutions.

Marijuana

In addition to states that allow recreational use of marijuana, 23 allow the drug for medicinal purposes. Clearwater said the effects of the drug can create safety risks in the workplace even two days after use.

While the person may feel “high” for several hours after smoking marijuana, THC, the active ingredient in marijuana, reduces pressure on the optic nerve and can alter depth perception for up to 48 hours.

“So a person works with machines and doesn’t know if something is 5 or 7 inches away,” she said. “If you drive a forklift you don’t know if something is 5 or 10 feet away. … Hundreds of studies show this.”

The fact that federal law still bans the use of marijuana is good news for employers. “In workers’ comp, most states don’t require payment for the injured worker if he is under the influence at the time of an accident,” Clearwater said. “At this point in time, the system is supporting the employer.”

Other Drugs

“Herbs coated with chemicals not designed for human consumption” is how Clearwater defines synthetic drugs. They are one of the fastest growing and readily accessible drugs and are designed to simulate the effects of specific illegal drugs.

“They are fundamentally poisonous with plant fertilizer, etc.,” Clearwater said. “They are 500 times stronger than the actual drug it is simulating.”

Synthetic drugs are illegal in all 50 states, she said. The challenge is that labs making them develop new ones constantly.

“The majority of these simulate marijuana,” Clearwater said, “so you want to be talking to whoever is doing your testing to expand your testing profile.”

Methamphetamine, a synthetic version of cocaine, has grown to epidemic proportions, Clearwater said. It is highly addictive and may be associated with side effects such as paranoia and violent behavior.

Drugs such as Ecstasy and LSD are also prevalent. Clearwater said the LSD on the market today is simply chemicals.

Employer Solutions

Substance abuse issues can be “a hotbed for litigation,” Clearwater said. “The key factor is to have a very comprehensive sound policy that takes into consideration federal law, state law, and case law.”

A company’s substance abuse program should include several defensible elements, said Clearwater. The following five elements are program objectives to reach:

Policy and procedures.
Education for employees, which is mandatory in some states. “Educated employees are three times less likely to produce a positive test result,” Clearwater said. “They understand what you are trying to accomplish, and they don’t want to lose their jobs.”
Training for managers, which may also be mandatory. Trained managers are much more likely to use the policy.
Drug and alcohol testing. “Look at how you communicate your program,” she said. “Many companies say they have a program. But look at it as a substance abuse prevention program rather than a testing program.”
Access to support. This may range from a formal employee assistance program to just a listing of local resources.

The substance abuse policy needs to be clear as to when and how much alcohol can be consumed, she added. Retirement or holiday parties, or when employees are traveling and entertaining may be occasions when alcohol is allowed.

“If it’s not written down, it is not a rule and is difficult to take action on,” Clearwater said. “Alcohol is a big hotbed for being exposed to litigation.”

Clearwater also suggests workplace substance abuse policies define the level of “under the influence.”

For prescription medications, employers are advised to clarify employees who must report a specific prescription. “Often I see companies say, ‘all employees need to report prescriptions.’ We can’t do that today,” she said. “We can ask employees in safety-sensitive positions to report a prescription drug that may affect their ability to do their jobs.”

The policy should specify what should be reported and in what form, whom to report it to, and who decides whether reasonable accommodation is warranted.

If drug and alcohol screening is included in the program, employers need to determine which drugs they are including in the drug panel. Many test for five drugs following the Department of Transportation’s drug testing protocol.

“I’d highly recommend moving that to nine or 10,” Clearwater said. “The additional four or five are generally your prescription drugs. Otherwise, you are not capturing potential problems of prescription drugs.”

Nancy Grover is the president of NMG Consulting and the Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at [email protected].

How a Carrier Partner Can Help Navigate a Challenging Management and Professional Liability Market

A combination of a choppy economy with increased claims frequency and severity could lead to rate increases in the Management & Professional Liability market.

By: Risk & Insurance | April 3, 2024

Rates in the management & professional liability (M&PL) markets were on the rise from 2020 to early 2023 and are now falling rapidly.

M&PL divisions manage a number of different insurance products including management liability (D&O), professional liability (E&O), employment practices liability (EPL), fiduciary liability policies, cyber, etc. In 2023 and into 2024, a big influence on the marketplace has been the extremely aggressive and softening public company D&O market.

Though these rates have been softening for management liability, that may change over the next few years as companies continue to adjust their business models motivated by economic uncertainty. Layoffs were up nearly 200% last year, Forbes reported, even as other recession indicators, like the inflation rate, improved. A recession could lead to an increased claim activity and force carriers to raise rates.

“Whenever there is a meaningful downturn in the economy, we tend to see claim frequency pop up,” said George Schalick, Jr., senior vice president of the Management and Professional Liability Division at Philadelphia Insurance Companies (PHLY).

With continued fiscal uncertainty, businesses potentially already burdened with pandemic-related claims should seek a carrier with a long history in M&PL products. They will provide much-needed risk management guidance and be better positioned to support their insureds during market fluctuations.

Why Insureds Might See an Uptick in M&PL Claims

George Schalick, Jr., Senior Vice President of the Management and Professional Liability Division, Philadelphia Insurance Companies

The current soft market might come as a bit of a surprise as it does not track with previous underwriting cycles and economic conditions. Afterall, many privately held and non-profit organizations struggled during the early days of the pandemic with shutdowns and rapidly declining revenues. But the Government assistance programs, like the Paycheck Protection Program loans, helped keep many afloat during the tough times.

“During COVID many organizations stopped doing business until they were able to sort out all of the health and safety challenges,” Schalick said. “They were forced to lock down, but then all the government assistance programs allowed them to keep people employed. The increased volume of claims we anticipated we would see coming from the lockdowns and restrictions that were imposed upon businesses in the U.S. didn’t manifest at first.”

“Just because there wasn’t an onslaught of reported claims at the beginning of the pandemic, doesn’t mean the circumstances that would give rise to a claim being reported didn’t occur. Courts and the judicial system were closed or slowed and now that they are back open, we’re starting to see the circumstances that occurred during the COVID lockdowns becoming claims today,” Schalick said. “Litigation is progressing.”

Added to the delayed pandemic litigation is a concern over newer claims that might be filed as the country inches toward an economic downturn. Though a recession was avoided in 2023, experts think a soft dip could occur in 2024, with 76% of economists saying there’s a 50% or less chance of an economic downturn this year — that almost always results in more management liability claims.

“During the Great Recession in 2008, we saw an almost immediate spike in claims because of the economic conditions and the pressure it placed on organizations. They were making personnel changes with significant belt tightening almost immediately.” Schalick said.

What’s in Store for M&PL Policy Rates in 2024?

Despite an uptick in claims and increased economic uncertainty, management liability rates haven’t increased, resulting in market-wide pricing levels that may not meet the increased pressure of rising settlements and jury verdicts.

“Rates are going the other direction and settlement values are not falling,” Schalick said.

The mismatch between rates, claim frequency and severity is, in part, because carriers experiencing the dramatic soft market in the public D&O market are seeking premium gain in the private and non-profit market.

“In the public company market, the rates have been decreasing significantly. The rates were increasing in the private, not-for-profit market, and rightfully so, but there’s a desire to supplement overall mid-size D&O for carriers who also write private not-for-profit, and they see that as an opportunity to aggregate premium,” Schalick said. “So the always competitive landscape in the private, not-for-profit market has dramatically increased in the last 18 to 24 months.”

Still, companies of all sizes and types should be concerned about management liability rates in the future. Legal system abuse is resulting in increases in both the amount of litigation and the size of verdicts plaintiffs are receiving.

Certain areas of the country are particularly vulnerable to this type of legal system abuse. As a result, insureds in these localities are likely to be vulnerable to rate increases.

“The environment is so positive for the plaintiff that forces premium increases so carriers are able to stay in that market long term,” Schalick said.

Why a Tenured Carrier Partner Can Help Insureds Navigate An Uncertain Market

It’s clear that insureds are facing an uncertain M&PL market over the next few years. Fortunately, carriers with a long history in the M&PL space will be there to offer stability.

Philadelphia Insurance Companies has been supporting this market for 35 years. PHLY is committed to offering long-term rate stability, even as economic and claims trends start to push premiums upwards. They have an appetite for all sorts of companies, large and small, for-profit and nonprofit alike.

“We’ve been at this game for a long time and are one of the most tenured underwriters in this space,” Schalick said. “We like to stay very consistent.”

PHLY has worked with both for-profit and non-profit on management liability policies. With dedicated M&PL teams throughout the company’s 13 regions, PHLY provides the support agents and brokers are looking for on behalf of their clients. The teams know their regions well and can respond to local trends. They’re also dedicated to making the renewal process as easy as possible for their partners and policyholders.

“We have real confidence in our results, so we focus a lot on making the renewal experience as painless as possible for all agents and insureds,” Schalick said.

The company is also investing in tools to help insureds avoid losses. Earlier this year, they launched a new online risk management platform, PHLYGateway, which offers resources for insureds on how to create an employee handbook and trainings on issues such as recognizing workplace sexual harassment and discrimination.

If insureds have questions, they can consult a Best Practices Help Line, provided via the platform. That way, they can get on the spot risk management guidance to help them prevent claims.

To learn more, visit: https://www.phly.com/mplDivision/managementLiability/default.aspx.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Philadelphia Insurance Companies. The editorial staff of Risk & Insurance had no role in its preparation.

Drug-Free Workplace