How the Federal Family Medical Leave Act and Workers' Compensation Laws Interact

Recent DOL letter rulings have clarified the interaction between FMLA and workers' compensation laws.

The federal Family and Medical Leave Act (FMLA) and state workers’ compensation laws may both cover an employee who suffers a serious health condition while on the job. The Department of Labor (DOL) has issued revised regulations that implement the FMLA. Though the interplay between the FMLA and workers’ compensation leaves was addressed within those regulations, a number of DOL letter rulings have also clarified the interaction of these laws.

Sabal Insurance Group will answer common questions regarding employee leaves that qualify for protection under both the FMLA and workers’ compensation laws.

Does FMLA leave run concurrently with a workers’ compensation absence?
The employee’s FMLA leave entitlement may run concurrently with a workers’ compensation absence when the injury is one that meets the criteria for a “serious health condition.” Thus, an employee could receive workers’ compensation benefits to replace lost wages, while at the same time having health benefits maintained under the FMLA. However, if appropriate, the employer must be sure to designate this leave as FMLA-qualifying leave and must give notice of the same to the employee. If the employer fails to designate this leave as FMLA leave, the employee may still be entitled to FMLA leave once the workers’ compensation absence has ended.

Can an employer require an employee to substitute accrued paid leave if the employee is on workers’ compensation and FMLA leave?
Since the workers’ compensation absence is already considered paid leave, the FMLA provision for substitution of the employee’s accrued paid leave for unpaid FMLA leave does not apply. More specifically, if the employee has elected to receive workers’ compensation benefits, the employer cannot require the employee to substitute any accrued paid leave for any part of the absence that is covered by the payments under a workers’ compensation plan. However, an employee is also precluded from relying upon the FMLA’s substitution provision to insist upon receiving both workers’ compensation and accrued paid leave benefits during such an absence. However, employers and employees may agree, where state law permits, to have paid leave supplement the disability plan or workers' compensation benefits, such as in the case where a plan only provides replacement income for two-thirds of an employee's salary.

What benefits is an employee entitled to while on concurrent workers’ compensation and FMLA leave?
If the employer designates the workers’ compensation absence as FMLA leave, then the employee is entitled to all employment benefits accrued prior to the date on which the leave commenced. The FMLA does not entitle the employee to the accrual of any seniority or employment benefits during any period of FMLA leave, nor to any right, benefit or position of employment other than that to which he or she would have been entitled had the employee not taken the leave. Thus, an employee on FMLA leave does not accrue seniority or employment benefits during the absence by operation of the FMLA. Nevertheless, in addition to the group health benefits guaranteed under the FMLA, an employee on FMLA leave, whether paid or unpaid, may be entitled to additional benefits while absent, depending on the employer’s established policy for providing such benefits when employees are absent on other forms of leave.

How may an employee on concurrent workers’ compensation and FMLA leave pay for group health coverage? For other non-health benefit premiums?
An employee who is receiving payment as a result of a workers’ compensation injury must make arrangements with the employer for payment of group health plan benefits when simultaneously taking unpaid FMLA leave. It is important that the employer make such arrangements with the employee in advance of the leave or shortly after the leave begins since the FMLA provision for recovery of the employer’s share of health insurance premiums does not apply. That is, the FMLA statute only authorizes the recovery of the employer’s share of insurance premiums that are paid to maintain coverage for the employee under a group health plan during any period of unpaid leave. Leave taken pursuant to a workers’ compensation plan is not unpaid leave within the meaning of the FMLA.
Likewise, an employer will also want to make prior arrangements for employee payment of other non-health benefit premiums when an employee is receiving payment as a result of a workers’ compensation injury and is simultaneously taking unpaid FMLA leave. Again, neither the FMLA statute nor its regulations provide for the employer’s recovery of any such premiums paid during a paid leave as opposed to during an unpaid leave.

What may an employer do if it questions the adequacy of a medical certification?
If an employee is on FMLA leave running concurrently with a workers’ compensation absence, and the provisions of the workers’ compensation statute permit the employer or the employer’s representative to have direct contact with the employee’s workers’ compensation health care provider, the employer may follow the workers’ compensation provisions. That is, the employer may have direct contact with the employee’s health care provider in the manner in which the workers’ compensation statute provides. Further, the revised FMLA regulations also provide that an employer can contact an employee’s health care provide to authenticate or obtain clarification of the medical certification, so long as the employer has first given the employee a chance to cure any deficiencies.

Is an employee required to return to a “light duty” job when it is not the same job or is not equivalent to the job the employee left?
If the health care provider treating the employee for the workers’ compensation injury certifies the employee is able to return to a light duty job, the employee may decline the employer’s offer of a light duty job if it is not the same or is not an equivalent job to the job the employee left. However, as a result of turning down such light duty job, the employee may lose workers’ compensation payments, but is entitled to remain on unpaid FMLA leave until the FMLA entitlement is exhausted. Additionally, when the workers’ compensation benefits cease, the employee may elect or the employer may require the use of accrued paid leave.

If the employee accepts the light duty position in lieu of FMLA leave or returns to work before the FMLA leave entitlement ends, the employee retains the right to the original or to an equivalent position. However, the period of time employed in a light duty assignment cannot count against FMLA leave entitlement. The right to restoration is held in abeyance during the period of time the employee performs a light-duty assignment. That right is not unlimited and ceases at the end of the applicable 12-month FLMA leave year. Restoration is dependent on the employee’s ability to perform the essential functions of the same or equivalent position at the end of FMLA leave.

What happens to an employee on concurrent workers’ compensation and FMLA leave once the FMLA leave entitlement has run out?
If the employee is unable to return to work or is still in a light duty job after the FMLA leave entitlement has run out, the employee no longer has the protections of the FMLA and must look to the workers’ compensation statute or to the federal Americans with Disabilities Act (if the employee is a “qualified individual with a disability”) for any further relief or protections.

Please contact Sabal Insurance Group with any questions.

Property/Casualty Insurers Dispute Consumer Group Over Claims That It Overcapitalized

“The Insurance Industry’s Incredible Disappearing Weather Catastrophe Risk” is a new report released by the Consumer Federation of America (CFA). The consumer group claims insurers aren't paying their fair share of weather-related claims, arguing that insurers have shifted costs to consumers by increasing deductibles and capping the amounts they will pay if a home is damaged or destroyed.


But property/casualty insurers aren't seeing eye to eye with the CFA on this one. Final numbers aren't in yet, but it looks like 2011 will be one of the most expensive years on record for private P/C insurers for U.S. catastrophe losses. Private U.S. insurers’ net losses on underwriting grew to $34.9 billion in nine-months 2011 from $6.3 billion in nine-months 2010. The 2011 numbers, insurers say, clearly illustrate that they took on a record amount of risk last year.


The CFA is calling on state regulators to block insurer rate hikes.

Read the rest of this article, originally published in the Insurance Journal, here.

Insurer's 'Duty to Defend' Reexamined in 10th Circuit's Ruling on Late Night Bar Brawl

The 10th Circuit Court of Appeals' ruling in a recent case involving a late night bar brawl at the Okmulgee Inn forced one insurer to reexamine the standard for duty to defend in light of unusual extrinsic evidence.

In Mount Vernon Fire Ins. Co. v. Okmulgee Inn Venture, LLC, the Tenth Circuit Court of Appeals recently demonstrated how an "extrinsic evidence" duty to defend standard can create a duty that unquestionably did not exist based on a "four corners" standard. Not to mention that the court did not exactly search high and low to locate the extrinsic evidence that it used to create the duty to defend.

In Okmulgee Inn Venture, the court addressed coverage under the following scenario:

Okmulgee Inn Venture leased space to a nightclub-bar and was a named insured on a liquor liability insurance policy. Okmulgee was insured against injuries caused by "the selling, serving or furnishing of any alcoholic beverage." Okmulgee Inn Venture at 2.

"In 2006, three bar patrons sustained gunshot wounds during a fight at the nightclub and sued Okmulgee, alleging, among other things, that Okmulgee failed to ensure the safety of the bar's patrons, properly train the bar's staff, or investigate the bar's operator. The only specific allegations pertaining to alcohol were that two of the three victims were under-age but were admitted to the bar and served alcohol. Mt. Vernon refused to defend Okmulgee in these suits. Mt. Vernon asserted there was no coverage under the policy, and thus no duty to defend or indemnify, because the allegations did not indicate the injuries were caused by the selling, serving, or furnishing of alcoholic beverages. Mt. Vernon then initiated this declaratory judgment action to determine its obligations." Id. at 3.


In other words, Mt. Vernon refused to defend Okmulgee because there was no allegation that the shooter was drunk or that the shooter was served alcohol. Rather, it was only alleged that the victims were served alcohol. Thus, Mt. Vernon asserted that there were no indications that alcohol caused the injuries. Id. at 4. The District Court agreed that no duty to defend was owed because the "precise facts alleged against the insured did not demonstrate there was coverage under the policy." Id. at 2. The Tenth Circuit reversed: "We agree the facts fail to conclusively demonstrate coverage, but we think there is still a potential for coverage as permitted by Oklahoma law." Id.


At the heart of the Tenth Circuit's decision was Oklahoma's duty to defend standard: "[T]he insurer's duty to defend its insured arises whenever the allegations in a complaint state a cause of action that gives rise to the possibility of a recovery under the policy; there need not be a probability of recovery." Id. at 5 (citations and internal quotes omitted; emphasis in original). However, this "analysis is not restricted to the four-corners of the complaint; rather, an insurer's defense duty is determined on the basis of information gleaned from the petition (and other pleadings), from the insured and from other sources available to the insurer at the time the defense is demanded." Id. (citations and internal quotes omitted). Moreover, "[t]he insurer has a duty to look behind the third party's allegations to analyze whether coverage is possible." Id. at 6 (citations and internal quotes omitted).


Applying this standard, the Tenth Circuit concluded that a defense was owed:


The parties dispute whether the facts demonstrate that alcohol caused the injuries, but the issue is whether the facts establish a potential for coverage, that is, whether the circumstances alleged give rise to the possibility that the injuries were suffered by reason of the selling, serving, or furnishing of alcoholic beverages. And on this score, we have little difficulty concluding that they do. The victims entered the bar and were served alcohol; a bar-fight ensued and witnesses recalled beer bottles shattering; then gunshots were fired by a shooter who had been previously arrested at the same bar for being drunk in public. These known and undisputed facts establish the possibility that alcohol contributed to the injuries. We do not mean to suggest, of course, that the potential for coverage exists because "later-revealed facts" may show coverage[.] . . . But the known and undisputed facts in this case, standing alone, establish a credible possibility that the injuries sustained were caused by the selling, serving or furnishing of alcoholic beverages.

Id. at 5-6 (emphasis in original).


While there is nothing unusual about a court looking to extrinsic evidence to determine a duty to defend, Okmulgee Inn Venture seemed to take it a step further - considering extrinsic evidence that might exist. The court seemed to be saying: "Come on, look at these facts, how could alcohol not have played a part in this." The court didn't explicitly say that, but that was its clear message nonetheless.


The Okmulgee Inn Venture court was quick to add that, by its decision, Mt. Vernon's duty to indemnify was not yet ripe. But having found a duty to defend - that admittedly did not exist based on the four corners of the complaint - the underlying plaintiff is now in a position to use the insurers' exposure for defense costs as leverage to secure a settlement than may otherwise be subject to coverage or liability defenses. Read the full story here

Miami Herald's new blog shines light on south Florida's entrepreneurial spirit

Entrepreneurs are the engine of the economy, and their fundamental role is especially highlighted during tough economic times. The innovators--individuals whose fear of losing does not prevent them from acting--these are the people who put Americans back to work.

Becoming a successful entrepreneur is no small feat. But it just got a little easier for south Floridians. The Miami Herald has just launched a new blog, “The Starting Gate,” self-described as “news, views and tools for startups and small businesses.”

Workers’ Compensation Turn a Profit? Fahgettaboudit!

Workers’ compensation carriers with visions of profits over the next few years are dreaming.

It ain’t goin’ to happen, according to insurance analysts at Standard & Poors Ratings Services.

“All signs are pointing to more unprofitable years ahead for the workers’ compensation insurance industry,” the firm said in its report titled “For The U.S. Property/Casualty Industry, Making Workers’ Compensation Profitable May Be Mission Impossible.”

Why the negativity?

S&P blames continued high unemployment, a sluggish economic recovery, potential for higher inflation on future claims payments, adverse reserve developments, and a volatile investment environment with historic low investment yields.

What’s more, the workers’ compensation industry hasn’t been great at making a profit in the recent past.

All of that could add up to many years of unprofitability for the workers’ compensation industry.

S&P said that this industry has a “dismal track record” of underwriting results as illustrated by only three years of underwriting profits over the past two decades (1991-2010). Between 1991 and 2010, the industry statutory combined ratio was below 100 percent in 1995, 1996, and 2006.

A combined ratio of more than 100 percent signifies an underwriting loss. Although many property/casualty (P/C) insurers, especially those writing workers’ compensation, rely on investment incomes to offset underwriting losses, current historically low investment yields could also hinder such dependence going forward.

In light of these factors, Standard & Poor’s Ratings Services said it remains bearish on this line. Despite pockets of rate increases in a few states, S&P said it believes the negative factors point to years of unprofitability in this line.

S&P also said it believes many P/C insurers with meaningful concentration in workers’ compensation will continue to report underwriting losses in this line over the next few years, primarily arising from recent accident years (2007-2010).

Workers’ compensation pricing showed a modestly improving trend in the latter part of last year. If it persists, it could potentially lead to industrywide rate improvements for many casualty lines. However, S&P said it is unsure whether the current pace of rate increases in workers’ compensation will be sustainable over the next few years, and, if so, whether it will be sufficient to overcome increased loss costs.

The workers’ compensation industry’s reserves will remain inadequate over the next few years, in S&P’s view. Its analysts expect many insurers with meaningful concentration in workers’ compensation to strengthen their prior year reserves, especially for accident years 2007-2010.

S&P, which monitors quarterly reserve developments for all P/C insurers, said that if certain P/C insurers substantially strengthen their reserves, especially for recent accident years, such that their operating earnings fall materially below expectations, its analysts would consider lowering some ratings.