Covering Contractors
The Brain Trust at CNA Tracks Commercial Insurance Trends

With all the hustle and bustle in Washington, D.C., keeping up on the legislation that affects your company can be a job in and of itself. Luckily, CNA, the seventh largest commercial insurer in the nation, tracked more than 9,000 pieces of legislation last year at the state and federal level and compiled a list of key public policy issues that may affect contractors.

Federal

Terrorism Risk Insurance Act (TRIA) — President Bush signed the Terrorism Risk Insurance Program Reauthorization Act of 2007 on Dec. 26, 2007 — extending TRIA another seven years through Dec. 31, 2014. Insurance losses resulting from the destruction of the World Trade Center and other buildings by terrorists on Sept. 11, 2001, totaled approximately $31.6 billion. The insurance industry does not have the financial resources to sustain repeated losses of this magnitude.

Consequently, TRIA was enacted in 2002 to make insurance coverage for domestic terrorism losses available in the United States. In the event of a major terrorist attack, TRIA provides a federal backstop that allows the insurance industry and federal government to share losses according to a specific formula. The availability of insurance coverage for losses related to terrorist attacks is of particular interest to contractors, as many banking institutions would not fund construction projects in high-risk areas if this coverage were not available.
As a top priority in 2007, CNA specifically met with dozens of members of the House Financial Services and Senate Banking Committees and their staffs to coordinate activities and define go-forward strategies.

Arizona

Workers’ Compensation — A business-labor compromise contained in HB 2195, which was signed into law, increased monthly benefit caps from $2,400 to $3,000 in 2008 and to $3,600 in 2009. Benefit caps thereafter would be increased annually by as much as 5 percent (indexed to the cost of living). These are the first increases in workers’ comp. benefits in nearly a decade. In exchange for the increase, organized labor agreed not to put an anti-business workers’ compensation voter initiative on the ballot and to work on a number of reforms to control system costs in the summer.

California

Tort — A class-action reform measure that would have helped to level the playing field between plaintiffs and defendants, AB 1505, was not allowed to come up for a vote in the pro-plaintiff Assembly Judiciary Committee. As a result, the bill was shelved for the year. The bill would have aligned California with federal and other state courts by giving judges clear statutory rules for handling class action cases.
However, CNA is part of a large coalition of general business interests that backed the bill. A similarly-worded ballot initiative is expected to be presented to the state’s voters next year.

Workers’ Compensation — A positive workers’ compensation bill, AB 338, was signed into law that promotes return to work by allowing 104 weeks of aggregate benefits within five years of the date of injury. This gives injured workers adequate time to obtain needed treatment, including surgery, and time for recovery before returning to work. This approach, which CNA supports, maintains the 104-week cap that has proved to be vitally important in speeding the claims process and improving return-to-work rates.

Florida

Auto — A reformed version of Florida’s auto “no-fault” personal injury protection (PIP) law was approved by the legislature and signed into law and became effective Jan. 1. It contains a number of reform provisions.

Key provisions will establish a medical fee schedule for PIP benefits, limit payments to certain types of health care providers and require that all suits on PIP claims for the same injured person that are related to a single provider be joined in a single lawsuit. CNA also believes this will prevent fraud.

Georgia

Liability — HB 136, a construction defect indemnity bill, was passed and signed by the governor. This positive bill makes construction liability contracts unenforceable if they contain language that circumvents public policy. The bill helps to further limit liability on construction defect claims.

Maine

Workers’ Compensation — LD 1107 was signed by the governor. This bill raises the penalty amount from $10,000 to $25,000 for any employer, insurer or third-party administrator that has engaged in a pattern of questionable workers’ compensation claims-handling techniques or has repeatedly and unreasonably contested claims.

Missouri

Workers’ Compensation — SB 668, legislation, which sought to overturn a recent negative Supreme Court decision pertaining to permanent partial disability benefits, failed to pass the House prior to the 2007 adjournment. CNA and others in the industry made a concerted effort to stop the bill and even the Attorney General’s office agreed that the decision was erroneous and ought to be corrected. However, the measure fell victim to disputes over how to address the growing deficit problem of the second injury fund.

New York

Workers’ Compensation — On March 13, 2007, Governor Spitzer signed SB 3322, a workers’ compensation reform and benefits increase bill. Significant provisions include a weekly benefits increase for permanent or temporary partial disability and permanent or temporary total disability from $400 to $500 for injuries occurring after July 1, 2007. Increases will be made annually until benefits reach $600 in 2010, when benefits will be indexed at two-thirds of the average weekly wage in New York. The bill also raises the cap on the maximum number of weeks that a permanent partial disability recipient may receive indemnity payments to as much as 525 weeks, depending on the injured worker’s wage-earning capacity.

The legislation addresses situations of extreme hardship and return-to-work programs and allows up to $1,000 to be spent for certain types of medical care without insurer authorization. In addition, the bill eliminates the Second Injury Fund, which currently accounts for an 11 percent assessment on workers’ compensation policies. The legislation’s promised cost savings will depend in large part on how the law is implemented.

CNA provided significant comments to the governor’s office prior to the legislation, but were excluded from the actual bill’s development. CNA plans to work with other insurer representatives and the insurance department to outline suggestions on how to maximize cost savings in 2008.

Texas

Workers’ Compensation — HB 2004 requires that all reviews of workers’ compensation medical care be performed by a doctor of a similar health care specialty as the treating doctor. The bill’s requirements would apply to all types of workers’ compensation medical cost containment, including peer review, utilization review, independent reviews, designated doctor examinations and required medical examinations.

The bill apparently prohibits medical doctors from reviewing and evaluating the need and appropriateness of chiropractic treatments. This raised a major point of contention for the entire insurance industry, and as a result, the industry sought a veto, but was not successful. The Perry Administration has indicated they will address the situation by rule to include chiropractors.

The information, examples and suggestions presented in this material have been developed from sources believed to be reliable, but they should not be construed as legal or other professional advice. CNA accepts no responsibility for the accuracy or completeness of this material and recommends the consultation with competent legal counsel and/or other professional advisors before applying this material in any particular factual situations. This material is for illustrative purposes and is not intended to constitute a contract. Please remember that only the relevant insurance policy can provide the actual terms, coverages, amounts, conditions and exclusions for an insured. All products and services may not be available in all states and may be subject to change without notice.