Insurers File Challenge To OSHA Ergo Rule

The Nov. 14 release of Occupational Safety Health Administration’s (OSHA) new ergonomic rule, approved by President Clinton, has sparked one of the largest backlashes in the 30-year history of the organization. Included in the ranks of those who oppose the new ergo rules is the insurance industry.

Among the flurry of legal initiatives filed in the wake of OSHA’s announcement is one filed by 12 major insurance groups and spearheaded by the American Insurance Alliance. Parties in the suit include ACE-USA, AIG, CGU, Chubb, CNA, Fireman’s Fund, Hartford, Kemper, Liberty Mutual, PMA, Royal & SunAlliance and Travelers.

“AIA is not a party plaintiff,” said Bruce C. Wood, assistant general counsel at AIA. “Most, but not all, of the insurance groups that are party claimants are members of AIA. We are technically listed as ‘of counsel’ to the litigation, which means that we are in an organizational and in an advisory capacity to the companies and to the individual who is counsel of record. In coordinating the litigation, I have pulled together company participation and a number of the organizational elements that are necessary in bringing a lawsuit.”

The AIA-coordinated suit, which was filed in the U.S. Court of Appeals for the 4th Circuit, Richmond, Va., challenges those aspects of the standard that mandate payment of compensation. “We believe that it violates the prescription in OSHA against interference with state workers’ compensation programs,” Wood said. “The challenge is limited to that aspect of the ergo rule.”

The reported aim of OSHA’s new standard, which will go into effect in Fall 2001 and covers nearly every type of business, is to decrease the annual number of repetitive stress injuries resulting in lost work time by half in the next 10 years. OSHA stated that 1.8 million musculoskeletal disorders, such as carpal tunnel syndrome, tendinitis, sciatica and lower back pain, are reported each year. Moreover, OSHA estimates that as many as twice that number of injuries actually occur but go unreported due to employee fears of losing their jobs or pay.

According to Wood, the objective of the insurers’ suit is to invalidate the objectives of the worker restriction protections (WRP) provisions of the ergonomics rule.

“Our challenge is the only purely legal challenge to the rule…It is the only challenge which addresses OSHA’s statutory authority,” Wood explained.

“Employers are going to be faced with extensively higher costs for repetitive motion injuries,” he continued. “They will be forced to make WRP payments of 90 or 100 percent of an individual’s wages plus all fringe benefits for up to 90 days. They will be required to pay the costs for medical diagnoses of the condition as well as for a treatment plan.” He added that employers could also be subjected to a dual administrative process: one through OSHA and a second—if the worker brings a comp claim—through a workers’ comp system.

Jeff Myers, vice president-public affairs for the Independent Insurance Agents of America (IIAA), said there are plans on the part of that organization to file a separate suit.

“We’re filing with some other small business organizations,” Myers said. “We believe it’s more effective for us to represent small business interests as opposed to being just another insurance organization.”

According to Myers, two things are of concern to the IIAA about the ergo rule. The first is that it’s not clear how companies have to institute their policies; and the second is that the rule gets into areas of state oversight and state insurance regulation.

“We believe OSHA has overreached its statutory and constitutional bounds by promulgating rules that delve into the area of workers’ comp,” Myers said. “Basically it’s saying that any and all employers have a possible ergonomics exposure. Once they experience an ergonomics-related workplace injury, they have to institute steps and standards and education programs to protect and to educate their employees on what types of injuries are ergonomically related and possible remediation steps.”

OSHA’s reported estimate of the annual costs to businesses stemming from the new rule is $4.5 billion. However, OSHA also believes that changes made to workplaces in the effort to reduce injuries will save employers $9.1 billion each year in the form of improved productivity and decreased workers’ comp costs. Many business groups strongly disagree with OSHA’s calculations, estimating that the costs to make changes to the workplace, pay benefits to injured workers and establish ergonomics programs could actually range between $18 billion to about $125 billion per year.

In 1998, Congress passed a law which was signed by President Clinton authorizing a study by the National Academy of Sciences (NAS), the purpose of which was to develop a scientific relationship between workplace injuries and repetitive stress injuries.

“We’re saying, ‘let’s slow the process down a little bit and wait for the NAS to finish its study,'” Myers said. “Despite this pending study, OSHA has decided to move fast-forward in getting this thing out there and getting it on the books before the ergonomics study by NAS is put on the table.”

Although the National Association of Independent Insurers (NAII) joined other insurance trade associations in developing formal comments on the ergo standard submitted to OSHA last Spring, Arlene Ryndak, workers’ compensation specialist for the NAII, said that the organization does not currently have set plans with respect to filing any legal challenges to the rule.

Of major concern, Ryndak said, is that two years ago “Congress specifically specified that a workers’ comp system should stay with the state. It should not be a federalized program. But the standard seems to be leaning [the] way of federalizing a workers’ compensation program.”

Ryndak commented on one of the changes made from the proposed to the final rule with respect to the amount of time companies must pay workers suffering from ergonomic injuries. “What OSHA tried to do to maybe appease the insurance industry was to cut the time frame from six months to 90 days,” she said. “Really that’s pretty inconsequential.”

Topics Lawsuits Carriers Workers' Compensation