The Iowa legislature has finally acted on the call by Iowa business groups to overhaul Iowa’s workers’ compensation system. For years, they have claimed that the state’s system has tilted unfairly toward injured workers and significantly raised employers’ costs. Many have called Iowa’s workers’ compensation system an “unsustainable litigious lottery.”
In March, the changes became official. The primary purpose for these changes was to add efficiency to the system and reduce what was supposedly an overly burdensome workers’ compensation system. In short, the changes would reduce the cost of workers’ compensation insurance through various structural changes and reductions in the amounts paid per claim. Interest groups representing commerce and business have championed these changes and believe that they serve as a beneficial way to reduce costs and increase the appeal of Iowa’s business climate. In contrast, labor advocates claim that this bill will cut funding for the most at risk citizens. No matter which way you look at it, these changes have a huge effect on how Iowa workers’ compensation claims are handled.
The new law is applicable to injuries that occurred after July 1, 2017. In its first few weeks of application there were already numerous questions relating to the appropriate interpretation and application of the various provisions. This article will outline my thoughts on these rules and how I believe these changes will be later interpreted by the judiciary.
Intoxication: The Iowa legislature has shifted the burden of proof on the intoxication presumption. Previously, Iowa required that an employer must show that an employee’s intoxication was a substantial factor in causing an injury to qualify for a limitation on liability. However, under the amended law, the employer must only show that the employee tested positive for drugs or alcohol at the time of the injury. This showing will create a presumption that the intoxication was a substantial factor in causing the injury. This shifts the burden of proof and requires the injured employee to prove that there either was no intoxication or that this intoxication was not a substantial factor in the injury.
There are many ways in which this change may alter your claim handling process. Largely, this will greatly increase the efficacy and use of drug/alcohol testing after injury. Insurance companies issuing workers’ compensation policies in Iowa should be certain that their adjusters and employer representatives have knowledge of this change and encourage such testing following injury. It is unlikely that this change will have a significant effect on subrogation recoveries, however there is a possibility that this could reduce some claim values and increase the difficulties on subrogating against negligent third-parties on claims wherein the employee had used drugs/alcohol prior to injury.
Commutations: Interestingly, the Iowa legislature has changed the law to require that both the claimant and the carrier consent to the lump sum commutation. This will require the claimant to work with the insurance carrier to obtain an agreement on commutation. It is likely that this will result in an increase in leverage for the carrier in discussions relating to the negotiable elements of commutation (attorney’s fees, costs, etc.). Claims adjuster’s should understand this change and be prepared to engage in a new level of analysis relating to life expectancy, future medicals, and other such considerations.
Industrial Disability and Loss of Earning Capacity: Iowa law has changed the analysis relating to factors considered when analyzing unscheduled injuries. This changes the analysis relating to the age of the injured worker and the impact on employee earnings.
Earnings: Instead of the traditional rule whereby the injured worker could receive industrial disability benefits, even when earnings go up, the new rule requires that the employee is only entitled to the employee’s functional impairment rating from the injury when offered work where the employee would receive the same or higher earnings.
Age: The law changes the presumption that an older worker should receive a higher award on the assumption that employers like younger workers. Instead, now the analysis is based upon the number of years in the future that the employee is expected to work.
Changes to Statute of Limitations: The workers’ compensation Statute of Limitation is changed to remove the rule that notice is not realized until the injured employee actually realizes the potential impact of their injury. The recent changes now make notice required within ninety (90) days of when the employee knew or should have known that the injury was work related. The effect of this change will be to likely decrease the number of claims for less significant and not readily noticeable injuries. This will have a disproportionate effect on claims where the employee does not immediately miss work or seek medical treatment, but instead recognizes the need for such treatment at a later date.
Changes to Light Work Duty: A major issue within the transportation industry is how to save money on indemnity payments by utilizing an injured employee for light work duty when the employee resides in a location where daily commuting for work is impractical. For example, imagine an interstate truck driver who lives in Iowa and works for a Virginia-based company. How would this truck driver be placed on light work duty if the closest corporate facility is over 1,000 miles away? The recent amendment to Iowa law attempted to solve this issue by establishing that an employee that travels in excess of 50% of their time can be made to take light work (a/k/a considered geographically reasonable) at the employer’s principal place of business or an established place of operation where the employee has previously worked. This change will greatly affect the trucking industry in Iowa and has the chance to decrease the indemnity payments on such claims.
Shoulder Injuries: The legislature amended Iowa law to remove shoulder injuries as industrial disabilities and instead making them a scheduled member injury. Under this change the maximum number of weeks for the scheduled injury is set at 400. The legislative purpose for this amendment was to reduce the high cost to employers for employee shoulder injuries. This will reduce the value of such claims, thereby reducing the extent of subrogation claims relating to shoulder injuries.
Other Scheduled Injuries: Changes the law to require that all future scheduled injuries be based solely on the impairment rating according to American Medical Association guides. This change instills added consistency to a system where results and recoveries can be varied and inconsistent.
Changes to Independent Medical Examination (IME):
Refusal of Claimant to Attend IME: The employer/carrier has been provided with additional powers to refuse payment of weekly benefits when the claimant refuses to attend the defense IME. This will greatly increase the ability of the insurance carrier to conduct quick and effective IMEs.
Change to Compensability: The law was changed to make IME fees not compensable for the employee in situations where the claim goes to trial and is determined to be not compensable. This change will likely limit the number of fraudulent claims by adding to the potential costs of a failed claim. Since this cost is oftentimes absorbed by the law firm handling the claim, this will also affect the pool of attorneys willing to handle such cases.
Interest on Unpaid Benefits: The law was changed to reduce the interest paid on unpaid benefits from 10% to approximately 3%. The new interest rate calculation is based upon the annual rate for one year treasury notes plus 2%.
Permanent Partial Disability (PPD) Reform:
Payments Start Date: PPD benefits now do not need to be paid to the injured employee until the extent of worker’s impairment can be determined and they have reached maximum medical improvement. This is compared to the previous system wherein PPD benefits were paid as soon as the healing period benefits ended.
Concurrent Payments Reform:
PPD and Permanent Total Disability (PTD): Historically it was possible for a worker to receive PPD and PTD at the same time. The new rules have closed this loophole and now state that the employee can only receive one of the two.
Unemployment: Similar to the above concurrent payment amendment, the legislature has also changed the law to close the loophole wherein an injured employee could recover PTD and unemployment compensation at the same time.
Other Income Sources: The legislature further limited the potential for concurrent payments by changing the law to state that an injured worker will forfeit PTD benefits for any week where the employee receives from an employer, or any payment for current services from any source, if this payment is equal to or greater than 50% of the states average weekly wage.
Excess Payments: This law greatly simplifies the process and means by which an employer can pursue and recover excess payments to an employee.
Jurisdictional Changes: Removes Iowa jurisdiction for injuries where the employer has a place of business in the state, the worker lives in Iowa, but the employee does not work out of this place of business in the state. This has a significant effect on trucking and other transportation based injuries and claims.
Pre-Existing Injury or Disability: The statute codified and clarified case law relating to concurrent injuries. The law holds that an employer is only responsible for paying claims resulting from a current injury. This limits the situations wherein the employee has successive injuries with the same employer and claims coverage for all injuries. This will limit the situations wherein an employee will receive a windfall or double recovery by combining previous injuries with a current injury.
These changes are significant and will impact all aspects of Iowa’s workers compensation claim handling going forward. This major overhaul should be studied and understood by all insurance professionals handling worker’s compensation claims. The overhaul will influence subrogation, defense, coverage and applicant work.
If you should have any questions regarding this article or workers’ compensation in general in general, please contact Ashton Kirsch at [email protected].