Articles & Updates

Overview of Senate Bill 1 and the Mesothelioma Mess

by James Kennedy and Michael Banahan

What is Senate Bill 1 (SB 1)?

➢ SB 1 contains a number of amendments to Chapter 287, RSMo.,the Chapter that collectively constitutes the Missouri Workers’ Compensation Law

➢ The Bill was passed at the very close of the 2013 legislative session and is due to become law on January 1, 2014

➢ It is not entirely clear who supported SB 1, but the OD amendments appears to be part of a bargain to amend the law to again limit the injured worker’s remedy against the employer in an occupational disease (OD) case to the filing of a workers’ compensation (WC) claim

➢ The bargain was struck to address the exclusivity protection in OD cases that was inadvertently lost as a consequence of the 2005 WC amendments

➢ It could be, for employers and insurers, an expensive bargain where certain OD’s are contracted

➢ There are non-OD amendments but we will limit our comments to OD

➢ All but one feature of SB 1 requires no action on the part of a stakeholder and those provisions will become law as would any other legislative amendment to the existing provisions of Chapter 287

➢ But one set of provisions, those relating to mesothelioma liability, requires that every Missouri employer exercise an option no later than December 31, 2013

➢ In that respect, SB 1 is a complete departure from the historical mandatory coverage of all work-related injuries where the employer and employee were operating under Chapter 287

The New OD Provisions of SB 1 (in the order they appear in C. 287)

➢ 287.020.11. This section creates a new category of OD’s to be known as “occupational diseases due to toxic exposure”. There are 10 of these, and the list includes asbestosis and mesothelioma, the latter is a type of malignant cancer that most often attacks the lining of the lungs and is uniquely associated with asbestos exposure

➢ 287.120.1 & .2 again includes OD’s along with accidental injuries for purposes of applying the exclusivity doctrine

➢ 287.150 provides that where the injury is one of the toxic exposure OD’s, the employer no longer has a right of subrogation in any associated third-party civil claim or action

➢ 287.200.4(2) grants enhanced benefits where one of the 10 toxic exposure OD’s has been contracted and results in permanent total disability or death.

➢ In the case of all of those diseases except mesothelioma, the benefit equals 200% of Missouri’s State Average Weekly Wage (SAWW) for 100 weeks. That is $162,492.00 if based upon the current SAWW

➢ 287.200.4(3) provides that where the OD is mesothelioma, the enhanced benefit equals 300% of the SAWW for 212 weeks. That is $516,724.56 if based upon the current SAWW

➢ 287.200.4(3)(a) states the an employer can accept mesothelioma liability in one of three ways, by insuring its mesothelioma liability, by self-insuring its mesothelioma liability or by joining the newly created Missouri Mesothelioma Risk Management Fund (Mesothelioma Fund)

➢ 287.200.4(3)(b) states that in the event that an employee rejects mesothelioma liability, that employer loses the (newly restored) exclusivity protection provided under 287.120

➢ 287.223 (34 subsections) creates the Mesothelioma Fund

Understanding SB 1 and OD

➢ All 10 of the toxic exposure diseases have certainly in the past been found to be compensable OD’s

➢ Why these 10 diseases were selected for enhanced benefit purposes is not clear

➢ Other diseases can be contracted that are caused by work related toxic exposure, and these remain compensable but if contracted just won’t generate enhanced benefits

➢ Note that the enhanced benefits are calculated using the full SAAW, not a rate of compensation based upon the employee’s earnings

➢ Non-enhanced WC benefits (such as medical treatment or disability that does not reach permanent total disability) will continue to be available for all 10 of the toxic exposure OD’s

➢ The enhanced benefits for the non-mesothelioma toxic exposure OD’s should be covered under an employer’s existing insurance policy or self-insurance plan although this may result in increased premiums or assessments

➢ Declining to accept liability for the non-mesothelioma toxic exposure OD’s is not an option

➢ The only option open to an employer then is the acceptance or rejection of mesothelioma liability

Considerations in Accepting or Rejecting Mesothelioma Liability

➢ The decision should not be made until the employer has become fully informed through contact with its claims professional or legal counsel

➢ Rejecting mesothelioma liability will subject the employer to the potential of a civil suit without the protection of the exclusivity doctrine, protection that will again be provided under the amendments to 287.120

➢ However, some employers’ civil liability may be limited due to sovereign immunity – you probably know who you are

➢ And some other non-workers’ compensation insurance coverage may apply but General Liability (GCL) policies customarily exclude work related injury or disease and often specifically exclude injury due to asbestos exposure

➢ And Coverage 2 (or B) of a workers’ compensation policy excludes the payment of any obligation imposed by any WC law and customarily has a (relatively) modest monetary coverage limit as well

➢ Purchasing coverage to address mesothelioma liability only it’s not likely to be an option

➢ WC primary and excess insurance policies will very likely exclude coverage for mesothelioma where mesothelioma liability has been rejected (but coverage for any associated asbestosis should continue since that is not part of the option)

➢ Due to the ramifications of Missouri’s “last exposure rule” (which implicates the employer that last employed the worker in an occupation or process in which the hazard of the OD exists), along with the lengthy latency period between the first exposure to asbestos and the development of mesothelioma, it is often very difficult to assess a given employer’s mesothelioma claim risk

➢ No single recommendation regarding accepting or rejecting mesothelioma liability then can serve for all employers

Mesothelioma Fund Considerations

➢ The Fund does not yet exist

➢ Employers must apply before it can be created since 4 of the 5 members of the Board of Directors must be members

➢ No Rules have been promulgated by the Division of Workers’ Compensation (Division) and none are currently planned

➢ Who will eventually join the Fund?

➢ Which industries will be represented?

➢ What will this option cost?

➢ Who will insure the Fund?

➢ Who will defend the Fund?

➢ Will there be joint and several liability?

➢ Will claims be accepted retroactively?

➢ When can, or when must, an employer join?

➢ Few, if any, of these questions will be answered by January 1, 2014, the effective date of SB 1

So How is This “Mess” Being Addressed?

➢ The Division sent a form to each self-insured employer or self-insurance trust that was supposed to have been filed out, signed and returned by December 2, 2013

➢ On it, the employer or self-insurance trust has to indicate that it is accepting mesothelioma liability and indicate the method of acceptance (insurance, self-insurance or Fund membership)

➢ At the latest, the form must be filed by the effective date of the new statute

➢ A self-insurance trust may be authorized by its by-laws to accept (or reject) mesothelioma liability on behalf of all trust members but that may be subject to a member’s statutory right to make a contrary choice

➢ The Division has stated that a self-insurance trust can file a single form but it should be accompanied by a spreadsheet listing its members and stating which have accepted, and which have rejected, mesothelioma liability

➢ However, for some Trusts, particularly those with a large number of members, obtaining input from all members by the deadline may not be possible so in that situation, the Trust may be compelled to submit the form with a spreadsheet of members without indicating which have responded concerning the mesothelioma option

➢ Free standing self-insurers must respond directly to the Division

➢ The Division is taking the position that any employer failing to reject mesothelioma liability has accepted it by default, but that may not be the law

➢ And the Division believes that this is a one-time decision and the Division only needs to be advised where an employer changes its decision-of-record or where new members are added to, or existing members leave, a self-insurance trust

Is There a Bottom Line to All of This?

➢ This is all a work-in-progress, and in-process

➢ SB 1 raises more questions than can be answered with any certainty

➢ The Division may eventually adopt Rules that speak to the formalities of the acceptance or rejection process and other administrative issues

➢ The decision to accept or reject mesothelioma liability is an employer-by-employer decision, but the risks that accompany rejection are high for most employers

➢ Due to the unprecedented nature of the mesothelioma liability option, every self-insurance trust should review its founding documents and see if changes need to be made

➢ Although the Division is assuming that these issues will be addressed whenever a given insured employer’s WC policy (primary or excess) next comes up for renewal, an employer should confirm the status of its mesothelioma coverage prior to January 1, 2014

Questions? Please contact: mbanahan@evans-dixon.com, 314-552- 4002 or jkennedy@evans-dixon.com