California Governor’s Order Creates Presumption COVID-19 Contracted At Work

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Workers’ compensation carriers and liability insurers have been in a state of high anxiety regarding the inevitable insurance claims which will result from employees contracting COVID-19 once businesses begin to reopen and employees all return to life as usual. At least in California, insurers received a little clarity in the form of Governor Gavin Newson’s new Executive Order N-62-20, which was signed on May 6, 2020, but it was not the sort of clarity they were hoping for.

Covid-19 Lady at DeskOn Friday, May 1, 2020, Governor Gavin Newson announced that California would begin to enter into Stage 2 of the gradual reopening of the State of California. On May 6, the governor signed Executive Order N-62-60 as part of entering into Stage 2. It announced that employees who contract COVID-19 while on the job may be eligible to receive workers’ compensation benefits, including full hospital, surgical, medical treatment, disability indemnity, and death benefits. Insurers and employers have long been comfortable with the obvious difficulty in proving that an individual contracted the virus in the workplace as opposed to at the grocery store or other public places. Governor Newson’s Order, however, does something extraordinary. It creates a legal presumption that employees who file a workers’ compensation claim contracted COVID-19 at work and while in the course and scope of their employment. Worse, it gives a very small timeframe for employers to rebut this presumption. The rationale for issuing Order N-62-60, while noble, opened a Pandora’s box of constitutional issue. He said, “We are removing a burden for workers on the front lines, who risk their own health and safety to deliver critical services to our fellow Californians, so that they can access benefits and be able to focus on their recovery.” 

The Order states that it will be presumed that employee contracted COVID-19 on the job if they tested positive for or were diagnosed with COVID-19 within 14 days after a day that the employee performed labor or service at the employee’s place of employment at the employer’s direct. Employers then have only 30 days from the date of the claim to reject and/or rebut the claim or else it will be presumed compensable. The presumption will stay in place for 60 days after issuance of the Executive Order.

These deadlines do not give much time to the employer and insurers to review the claim. In addition, this now opens up insurers to possibly having to pay workers’ compensation benefits for a person who may not have contracted COVID-19 at the workplace, but instead contracted it elsewhere while off the clock on that particular day. According to California Department of Public Health, COVID-19 is transmitted person to person by respiratory droplets produced when an infected person coughs or sneezes. Therefore, a person could easily contract this if they went to go pick up take-out at a restaurant or if they went shopping at a grocery store and someone sneezed or coughed near them.

This presumption now places an immense burden on employers and insurers of attempting to investigate how an employee may have otherwise contracted COVID-19, making them expend extra resources on such claim. In addition, it will place a tremendous burden on the already heavily burdened Workers’ Compensation Board. Insurers should make sure their insureds are immediately providing them with any claims that involve COVID-19, so they can determine if there is a rebuttal to the presumption, as there is bound to be a flood of claims stemming from this new Executive Order.

On its face, the Order appears to raise many constitutional questions. The Order arbitrarily places the financial burden of infections on employers as opposed to health insurers. Governor Newson has issued 32 Executive Orders since March 4, when the first official death from the Coronavirus occurred in California. States are afforded broad constitutional authority, giving them “police power” in order to improve the health, safety, morals, and general welfare of the state’s resident. Under California’s Emergency Services Act, the governor’s powers are virtually unlimited — he can suspend any law or regulation during a state of emergency. Executive Orders which restrict movement or social interaction in the name of pubic health are one thing—mandating that an insurance company pay for an illness without requiring the claimant to prove that the claim falls within established workers’ compensation law or coverage provided under an insurance policy is another thing. If and when the Executive Order is challenged remains to be seen.

California governors have a history of using Executive Orders quite liberally in the face of state-wide emergencies. Former Governor Jerry Brown used a series of Executive Orders in order to streamline and facilitate cleanup and rebuilding following the wildfires of recent years. Employers are outraged at the newest Executive Order, arguing that it will dramatically increase the cost of doing business at a time when most businesses are struggling in the wake of the virus to simply stay in existence.

California’s new Order follows on the heels of a similar Order in Illinois, issued by the Workers’ Compensation Commission. Illinois’ Order came in the form of “Emergency Amendments” issues by the Commission, effective April 16, 2020, and lasting 150 days. It applied to first responders and “essential front-line workers” and justified itself by saying, “The rapid spread of COVID-19 and uncertainty created within regulated industry has necessitated the modification of evidentiary rules regarding practice before the Commission.” The Order was immediately challenged. The Illinois Manufacturers’ Association sued the Commission over the Order and obtained a temporary restraining order. The Commission repealed the Order and indicated it would form a committee to study the issue.

California and Illinois are not the lone gunmen. Many states have already issued similar evidentiary orders with regard to first responders and front-line health care workers. On April 9, 2020, Alaska Governor Mike Dunleavy signed a new law that establishes a presumption of compensability for emergency response and health care employees who contract COVID-19. Arkansas, Kentucky, Michigan, Missouri, North Dakota, Utah, Washington, and Wisconsin have had similar orders or legislation. Minnesota issued such a rule applicable to firefighters, paramedics, emergency technicians, and licensed peace officers. The majority of states have legislation pending in their legislatures which are similar in nature. California’s Order, however, goes the extra mile and applies the controversial rule to all employees. For a chart showing the details of changes made by each of the 50 states, if any, see HERE.

Other states are sure to follow suit. There is currently no way to determine exactly when or where anyone has contracted COVID-19. Placing the financial burden on small businesses hardly seems like the answer, however. It will inevitably lead to situations where employees of a small business who is diligent in cleaning, disinfecting, and preventing the contraction of COVID-19 through contact becomes responsible for less diligent essential businesses such as grocery stores, coffee shops, or simply other family members. What happens in California and in other states which follow suit with similar orders remains to be seen.

If you have any questions regarding this article or subrogation in general, please contact Katherine Sandoval at [email protected]

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Katherine A. Sandoval
Sr. Associate Attorney

Katherine A. Sandoval is an insurance litigation attorney in Matthiesen, Wickert & Lehrer’s California office. Katherine’s practice focuses on insurance litigation, subrogation, insurance coverage, civil litigation, and contract interpretation.