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By PETER ROUSMANIERE, an expert on the workers' compensation industry.

Those who assume the state-based workers' compensation system will weather a major natural or man-made disaster in the future would do well to heed some hard lessons from the events that took place on U.S. soil on Sept. 11, 2001.

A final accounting has yet to be done, but federal dollars used to care for injured workers may exceed total workers' comp payments from self-insured employers and their insurers to workers and for medical care, estimates show.

Now, a decade later, there's plenty to be gleaned from events we would all rather forget.

Future major disasters may well provide similarities to the World Trade Center on issues ranging from worker safety, compensability, and the federal government's role in treating injured workers, a job that has traditionally been the responsibility of the nation's 50 independent state workers' comp systems.

That future event need not be a terrorist attack. It could be a natural or other form of man-made disaster, one that invites occupational death, injury or disease to thousands of victims, hundreds of first responders and scores of cleanup workers.

Losses to workers' comp insurers from September 11 were more than of $1.3 billion, net of reinsurance, according to a 2002 estimate by the National Council on Compensation Insurance. A more recent estimate by the Insurance Information Institute estimates losses to the workers' comp insurers at $2.2 billion, a number that excludes self-insurer losses such as for New York City personnel.

The attacks on the World Trade Center and the Pentagon, and the loss of Flight 93 in rural Pennsylvania resulted in 2,976 deaths and 2,680 injuries, the vast majority of the victims coming at the World Trade Center.

Most of these victims, including 412 first responders who rushed to Ground Zero for an ultimately fruitless effort to find survivors in the rubble, likely received workers' comp benefits. Their numbers swelled into the tens of thousands as recovery and cleanup work extended into the spring of 2002.

New York State logged 13,676 World Trade Center related workers' comp claims. More claims were filed in other states, and still more claims -- administered separately --were filed by firefighters and policemen.

The attacks on the World Trade Center exposed holes in worker safety, and only future disasters will determine if these holes have been filled.

Flaws in coordination between New York City's fire and police departments proved fatal. Years after an initial bomb attack Feb. 23, 1993, in the basement garage of the World Trade Center the city had still not figured out how to link the communications systems of the two departments.

The Homeland Security Act of 2002 addressed this problem. It called for cooperation among first responders. Already, the changes have saved lives, said William Larson, a Missouri-based emergency specialist employed by Business Executives for National Security.

Homeland Security's new guidelines, he said, "absolutely, without a doubt" improved the response to the Joplin, Mo., tornado in May.

Ground Zero revealed another problem that may rattle responders to a future disaster. The site of a future disaster may, like Ground Zero, be hazardous because of asbestos and other chemicals. When work shifts from rescue to recovery, federal Occupational Safety & Health Administration (OSHA) standards for managing a hazardous site apply, but not in the case of Ground Zero.

New York City officials resisted the imposition of OSHA's emergency hazardous site standards, said Donald Elisburg, co-author of a stinging report on the safety culture at Ground Zero. What will happen next time?

Then there's the question of compensability. Which victims of disaster deserve workers' comp benefits? Say an office worker dies from a building collapse due to an explosion. Did the death arise out of and in the course of work? State workers' comp law and the pattern of court decisions define if this death is compensable.

Lex Larson, author of Larson's Workers' Compensation Law, said New York court decisions have tended to award compensation for bystanders, such as when an office worker is hit by a stray bullet shot from outside the building.

The legal theory that offers the broadest avenue to coverage is the "positional risk theory," which states that the death or injury would not have occurred had the victim not been at work, Larson said.

Courts that adhere to this theory will be generous in awarding compensation, but courts that do not, perhaps not so much.

Arising out of the World Trade Center aftermath is a phenomenon that could change the landscape of workers' comp: parallel medical care, one funded by insurers and self-insureds, the other by the federal government.

When workers are injured the insurer or self-insured pays for medical care upon acceptance of the claim. In the confusion and subsequent surge of altruism of disaster, medical care to injured victims and responders is free.

In the case of the World Trade Center, responding to the concerns of thousands of rescue and recovery workers worried about their deteriorating health, the flow of federal dollars into medical monitoring and treatment has been huge.

The federal government began in early 2002 to fund an ambitious monitoring program headquartered at Mount Sinai Medical Center in Manhattan, and the program is costing billions of dollars.

By Sept. 30, 2011, the federal government will have spent a total of $626 million in taxpayer funds on medical monitoring for more than 30,000 workers, and beginning Oct. 1, the James Zadroga 9/11 Healthcare and Compensation Act authorizes spending up to $1.52 billion until Sept. 30, 2016, for enhanced monitoring and treatment of these workers.

All told, federal spending between 2002 and 2016 on medical care to World Trade Center workers will come to $2.1 billion.

The Zadroga Act also creates a pool of $2.75 billion for additional payments to victims not previously covered by the Victims Compensation Fund set up to compensate families of people killed or injured in the immediate aftermath of the attacks.

Congress wants workers' comp insurers and self-insurers to shoulder a financial share of the medical monitoring and treatment program, and the law instructs the Zadroga Act administrator to ensure that "payment for such treatment to be reduced or recouped for work-related conditions ?" Recouped funds, in theory, would come from public coffers or private workers' comp insurers.

Worker's comp insurers, however, are resisting paying for medical monitoring, and if no claim has even been filed, then forget it.

"Medical monitoring for speculative injuries or diseases is something that is clearly not compensable as a workers' comp medical expense," wrote Lewis Palca, vice president for workers' comp claims at General Re, in an email to Risk & Insurance®. "Without any causally related medical evidence of a compensable injury or disease, that would be admissible in court, or before any designated adjudicating board or commission, there is no compensable loss."

Whatever could be achieved by coordinating the care, between the parallel medical care offered by the federal government on the one hand and workers' comp insurers on the other, did not happen.

Kenneth Ross, former CEO of the New York State Insurance Fund, New York State's workers' comp fund that processed 778 World Trade Center-related claims, said he could not recall any contact between the fund and the Mount Sinai monitoring program.

There is a danger that in the next disaster, occupational injuries will be defined as a public health issue and trigger payments from the federal government for injuries that ordinarily would be reimbursed by private sector workers' comp carriers when a claim is filed, said Gregory Krohm, executive director of the International Association of Industrial Accident Boards and Commissions. "The idea of getting workers' comp insurers to pay for monitoring is like shoving a round peg in a square hole," he said.

Michael Liebowitz, director of risk management and insurance at New York University, said one of the lessons of September 11, is that the federal government has no compunction about jumping into the workers' comp business.

"The feds are now in the insurance business," he said. "Will they cherry pick the disasters they get involved in, and leave others to the state systems? We are at the mercy of Congress."

The attacks on the World Trade Center were the first of its kind, and are not likely to be repeated. Yet, the risk of natural disasters, disasters of the scope and magnitude of the World Trade Center, remains and responders are conscious of it. In May, eight states performed an earthquake preparedness exercise along the New Madrid fault running parallel to the Mississippi River.

In the case of an earthquake along the New Madrid fault, widespread chemical exposures to citizens, responders and cleanup workers could arise out of rail, truck and factory ruptures. Should the federal government decide to step in, the challenges faced by the workers' comp industry in the wake of the September 11 attacks are likely to return.

September 1, 2011

Copyright 2011© LRP Publications