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Tornadoes Devastate Midwest and Southern States

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Last week, a series of tornadoes ripped across the Midwest and Southern United States, killing dozens and crippling infrastructure in Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri, Ohio and Tennessee. While Karen Clark & Company has estimated that the insured loss from the tornado outbreak will be about $3 billion, and credit rating agency Fitch predicted that losses would total $5 billion, Dr. Joel N. Myers, AccuWeather founder and CEO, estimated that the tornadoes are expected to cost about $18 billion in total damage and economic loss. Mark Friedlander, director of corporate communications at The Insurance Information Institute, said, “Based on preliminary assessments of the extensive property damage we are seeing across multiple states, this weekend’s tornado outbreak has the potential to be the costliest on record in the U.S.”

As of Monday, 88 deaths across the region had been confirmed, but over 100 people are also missing, which means the death count may be higher. The cyclones killed more than 70 people in Kentucky, the hardest-hit state, leaving thousands homeless and knocking out power for more than 25,000 in the western region of the state. Additionally, 10,000 Kentucky homes and businesses reported being without water, and another 17,000 were under boil-water advisories, according to the Kentucky Division of Emergency Management.

Across the entire affected region, 750,000 customers were left without electricity. These outages have complicated search and rescue efforts, as rescue workers excavated destroyed buildings, searching for people who are still missing. In Mayfield, Kentucky, for example, the city’s main fire station and multiple police stations were inoperable, and the city was scrambling to find new ways to field emergency calls.

Also in Mayfield, at least eight people died at a Mayfield Consumer Products scented candle factory after workers reportedly pleaded with supervisors to let them leave the building after warning sirens sounded and an initial twister had passed with little damage, only to be threatened with firing if they did not continue working. Over 100 workers were trapped inside the building after the next tornado leveled it. Several survivors have already filed a lawsuit against the company, citing “flagrant indifference” to worker safety, and that the company “knew or should have known about the expected tornado and the danger of serious bodily injuries and death to its employees if its employees were required to remain at its place of business during the pendency of the expected tornado.”

Another tornado struck an Amazon warehouse in Edwardsville, Illinois, killing six people and injuring another. Amazon claims that it took all necessary precautions, but family members of victims have alleged that the company prioritized productivity over worker safety by not heeding tornado warnings and not adequately preparing employees for emergency weather safety responses. Amazon pledged to help workers and their families affected by the tragedy by donating $1 million to the Edwardsville Community Foundation, a charitable trust that benefits regional communities. OSHA is reportedly investigating the Amazon warehouse, and Kentucky state regulators are investigating the Mayfield Consumer Products event.

While an Amazon spokesperson noted that the company’s warehouse was up to code, Illinois governor J.B. Pritzker also promised an investigation into whether building codes needed to be updated, “given serious change in climate that we are seeing across the country.” Scientists say that climate change may have changed normal weather patterns and led to these tornadoes’ increased intensity and reach, with record warm temperatures across the region potentially exacerbating the disaster.

Businesses and risk professionals should prepare now for more frequent and intense weather events. The following recent Risk Management articles may help:

5 Best Practices for Effective Claims Reviews

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With the cost of insurance for businesses rising across many types of coverage, staying on top of trends in the claims portfolio is more important than ever. Spotting problem areas and opportunities sooner makes it easier to develop and implement steps to reduce risk pre-loss and better control costs post-loss. For this reason, many insurers and TPAs promise to conduct claims reviews with their business customers on a regular basis, but the rigor can vary greatly. Practices that have been common historically often lack the nuance and precision that can unlock the maximum benefit for each customer’s unique situation.

Here are five best practices for a wide variety of customers across a range of industries:

1. Assemble the right team

Typically, only the person overseeing claims at the business attends the claims review with key claims staff from the carrier. However, this small team limits the potential for brainstorming solutions and getting full buy-in to implement them. In addition to claims experts, it may also be helpful for the carrier’s loss control team to attend, as well as agent/broker staff.

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From the business customer side, it is helpful to include all key personnel who can facilitate immediate decisions that will impact the ultimate resolution of the claim in an efficient and timely manner or provide other insightful information. This often includes the risk manager, and may also encompass employees from legal, human resources, safety, operations and even the CFO, in some cases.

2. Develop a clear understanding of the customer to set the claims review objective

Broadly speaking, the goal is always to minimize loss costs to help manage the price and coverage of the overall insurance program. However, each business and claims portfolio is unique. One company may be most concerned with how claims reserves are affecting budgets. Another company may have an unusually high experience modification rate that they want to bring down by reducing the frequency of worker injuries. Yet another company may be changing part of their operation and want to monitor claims activity associated with it more closely than business-as-usual activities. The policyholder’s unique objectives should drive decisions about how often to conduct the claims reviews, what types of claims to include and where to dive into the greatest detail.

3. Fully understand and account for the impact of claims on the insurance program

In the initial design of the insurance program, certain coverages may have been limited due to a problematic claims record. For instance, frequent third-party claims for premises liability may have led to restrictions on Med Pay coverage or a higher deductible to give the customer a bigger stake in safety measures.

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Or perhaps the customer hoped for a loss-sensitive program but could only secure a guaranteed cost program due to lack of an internal pre- and post-loss management platform. The claims review should be designed to account for how frequency and severity may affect underwriting decisions so that the policyholder can move toward its coverage objective

4. Choose claims for review according to objectives, not simply dollar value

The default choice for what claims to review is often based on dollar value—e.g., all open claims with incurred losses of $25,000 or more. This approach may miss underlying trends that could lead to severe loss, however. For instance, perhaps a restaurant chain experiences a high frequency of slip-and-fall claims from workers in its kitchens. While these may all have been minor, but it may only be a matter of time until a severe injury occurs.

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With the objective to reduce frequency and the risk of serious injury, the claims review should examine all slip-and-fall claims using data and analytics to uncover causal factors such as food and liquid dropped on floors or seasonal workers with little safety training.

5. Track reserving on a micro level relative to all factors that can affect open claims

Typically, reserving is only tracked from a macro perspective, but this can overlook a variety of factors that could help better manage reserves and ultimate outcomes. For example, are the latest technologies being consistently used to manage costs? Advances in artificial intelligence and data and analytics now allow us to identify treatment providers associated with the best outcomes for injured workers, but how well are companies taking advantage of the recommendations? Early resolution techniques for auto and general liability claims may lower the ultimate cost of claims but cause a short-term bump in claims payments that needs to be accounted for in the customer’s budgeting process.

Potential Benefits

Claims reviews based on these best practices can yield significant benefits, especially when used as part of a holistic approach to managing risk and reducing losses. For example, an early claims review for a new manufacturing customer identified sprain and strain injuries as a problem area. The loss control team then surveyed the manufacturer’s operations and uncovered increased risk due to various manual lifting tasks, such as loading 8-foot-tall plastic silos with heavy equipment in a confined space. Based on that finding, the insurer’s team conducted onsite job hazard analysis supervisory training that included a safe lifting program, online courses and ergonomic risk assessments on a variety of tasks. As a result, within about two years, the program cut the manufacturer’s workers compensation loss ratio roughly in half.

Court Overturns Prop 22, California’s Gig Worker Classification Law

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On August 25, the Alameda County Superior Court in California declared that Proposition 22 (better known as Prop 22) violated the state’s constitution, overturning it and potentially putting a portion of the state’s gig work industry in peril. The controversial California ballot measure designated app-based gig workers like rideshare and food delivery drivers as independent contractors, meaning that the companies they ostensibly work for would not have to provide a minimum wage, health insurance, unemployment, sick leave or other benefits. Because the initiative was a ballot measure, the court found the law restricted the state legislature’s ability to regulate compensation rules, and said the measure also illegally prevented workers from collective bargaining and unionization. However, this ruling does not mean that gig workers will automatically be considered employees, as no previous law mandated that classification.

Before Prop 22’s passage in November 2020, California passed AB 5 in May 2019, which instituted a more rigorous test to determine whether workers were employees or independent contractors: if “the person is free from the control and direction of the hiring entity in connection with the performance of the work,” the work was outside the company’s usual business, and if the worker “customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.”

Rideshare companies like Uber and Lyft essentially ignored AB 5 and poured $224 million into fighting for Prop 22, making it “the most expensive ballot measure in California history,” according to the Los Angeles Times. The measure passed with around 59% of the vote.

In a small concession for workers, Prop 22 did provide for a health insurance stipend, but an August 2021 UC Berkeley Labor Center survey of 500 drivers showed that only around 10% of workers were receiving it, and 40% had not heard about it at all. Since work hours are only defined by the time spent driving with a passenger, others do not work the required 15 hours per week on one app to qualify for the stipend. These and other factors prompted drivers and the Service Employees International Union (SEIU) to sue the state seeking to overturn the law.

For now, the Superior Court ruling will likely not change much for gig workers in California, as Uber and other companies have announced their intention to challenge it in higher courts and may ignore any of its other legal implications, leaving everyone involved with a shaky status quo: an overturned law that is effectively still being followed.

As Risk Management wrote in May, one danger of the continuing ambiguity surrounding gig worker classification is misclassifying workers, which can lead to heavy fines or lawsuits. For example, in January 2020, D.C.-based contractor Power Design Inc. agreed to pay $2.5 million for misclassifying 500 workers as independent contractors rather than employees. In August, food delivery app company Postmates settled with the city of Seattle for nearly $1 million for violating the city’s Gig Worker Paid Sick and Safe Time (PSST) ordinance. The payment will go to cover city fines and compensate more than 1,600 workers for back wages. Additionally, withholding benefits, overtime, and meal and rest breaks (whether a result of misclassification, or in general) can result in workers filing class action lawsuits against the company, potentially resulting in significant costs, impacting productivity and damaging the organization’s reputation.

Another risk for gig work companies is insufficient safety measures for workers. Unlike with formal employees, companies often do not provide gig workers with safety training and may not offer formal ways to report safety concerns. This creates an environment where workers who are often under pressure to complete as many rides or tasks as quickly as possible may get into accidents or leave dangers unreported, creating liabilities for themselves and the company.

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Other states have their own gig work regulations either on the books or in the works and President Joe Biden has expressed support for gig worker classification as employees, but there is currently no national legislation on this issue. However, in March, the House of Representatives passed the Protect the Right to Organize Act (or PRO Act), which would reclassify gig workers as employees, affording them all the benefits included in that status.

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The Senate has not yet taken up the measure.

Travel Risk Management for LGBTQ+ Employees

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LGBTQ+ travelers can face unique challenges when traveling abroad—many countries do not legally recognize same-sex marriage and more than 70 countries consider consensual LGBTQ+ relationships a crime. If an employee travels on business to a country where their sexual orientation or expression of gender identity is criminalized, an extra layer of complexity is added to duty of care responsibilities. Corporate risk managers need to consider how to best protect employees in a way that doesn’t make them feel singled out, working with them to stay safe and respect local laws without compromising their own values. 

This process begins by providing up-to-date guidance on laws and cultural variations as part of an organization’s duty of care. Attitudes towards the LGBTQ+ community vary considerably around the world, and employers therefore need to shape their duty of care policies around a wide range of considerations, both legal and cultural.

Understand the Law

Risk managers need to ensure they have relevant and up-to-date information at hand to fully understand the traveler’s destination. There are nuances within each country’s legislation, and acceptance can vary dramatically even within different regions of the same country, also evolving over time. Employees need to be informed of the laws to which they will be subject at their destination before they travel. Duty of care procedures should incorporate pre-travel advice and awareness, educating employees on what to expect when on business travel as well as how to respond and whom to contact in an emergency.

Legislation may impact an employee’s behavior in a given destination and travel managers can provide advice on best practices. In the United Arab Emirates for example, transgender, gay and gender nonconforming people have been arrested for violating a law against men “disguised” as women. To the extent possible, it is best for travelers in these countries to remain in resort areas and for same-sex couples to refrain from holding hands, hugging or kissing in public.

Understand the Culture

In addition to local laws, social norms are another factor to consider for deciding whether a destination is safe. While many countries officially recognize homosexuality and allow gender confirmation measures, some communities within these “safe” countries still harbor prejudice against the LGBTQ+ community. In such environments, LGBTQ+ travelers who engage in open displays of affection with each other or appear gender nonconforming may be at risk of harassment and assault, and may also feel intimidated when reporting the incident to local police. There may be few or no local venues that provide a safe space for members of the LGBTQ+ community and the risk of hate crimes and police raids at such establishments cannot be ruled out. Travelers are advised to maintain a low profile in countries that lack full protection for the LGBTQ+ community and exercise caution about where and with whom to discuss related topics in public spaces.

Social media can also put travelers at risk. For example, while dating apps can help people connect with local members of the LGBTQ+ community when traveling or relocating for work, employees should be advised to exercise caution if they plan to use these in communities that are not LGBTQ-friendly. In Russia, where prejudice is widespread and a law against “gay propaganda” has been in effect since 2013, far-right activists and gang members have used dating apps to lure gay men to assault and extort them. Prior to travel, risk managers should advise employees to review privacy settings on social media platforms and reconsider the use of dating applications while abroad.

With some countries still refusing to accept—let alone recognize—the LGBTQ+ community, LGBTQ+ employees often feel compelled to take additional precautions that others would not have to even consider. However, corporate risk managers can help employees to stay safe while on business travel by being aware of the local laws and social norms of the destination before departure.

For other guidance on how to support LGBTQ+ employees and advance diversity, equity and inclusion programs, check out these additional pieces from Risk Management Magazine and the Risk Management Monitor:
Beyond Pride: Building Strong Diversity and Inclusion Programs
The LGBT Travel Risk Dilemma
The Benefits of Diversity & Inclusion Initiatives
Engaging Employees in Their Own Duty of Care
Developing a Strategy for Transgender Workers
The Case for Effective DE&I Training