As the ABC self-insured workers' compensation fund prepares to enter its 17^th year of operation in the year 2011, it's worth reflecting on the history of the fund and the foundation on which it was built.  To do that take a step back in time to review the origins of insurance and to provide a reminder of why the fund was established and how it serves the members of ABC. 

The Americans.  The first American insurance corporation was sponsored by a church - the Presbyterian Synod of Philadelphia - for their ministers and their dependents. Then other needs for insurance were discovered and, in the 1830s, the practice of classifying risks was begun.  The great Chicago fire in 1871 created losses that were unexpectedly high and companies had no reserves for such a situation.  Insurance companies had to work together to find a solution to the challenge of large losses. So they got together and devised a system called reinsurance whereby losses were distributed among many companies. This system is now commonly used in all types of insurance.

Workers' Compensation in America.  New York was the first state to adopt a workers' compensation law in 1910.  By 1920, 42 states had adopted workers' compensation laws.  In the late 1960s, organized labor sought the establishment of a national workers' compensation law or at least national standards for state laws.  The Occupational Safety and Health Act (OSHA) was enacted in 1970.  The Act required the establishment of a National Commission, which issued a finding in 1972 that the benefit levels paid to injured workers were too low.  In response, many states amended their laws in the 1970s to substantially increase the level of benefits.  From 1972 to 1980 there was a clear trend to raise the level of benefits.

The Michiganders.  As a result of additional regulations and benefit requirements, employers saw their premiums rise as insurance companies began to charge more to cover their increased expenses.  The timber industry was impacted particularly hard, with a logging rate of $51 per $100 of employee payroll.  This 51% "tax" on all wages was forcing businesses to close and destroying an industry.  In 1972, the Michigan Association of Timbermen was formed to help address the issue.  Several years of meeting with the state legislature and active lobbying paid off with laws allowing for the establishment of "Self Insured Group" (SIG) Workers' Compensation Funds.  The first SIG was formed on November 1, 1974 under the name of the Michigan Association of Timbermen Self Insurers' Fund. Close to forty years later, this fund is still thriving and serving the timber industry.

The SIG concept flourishes.  Prior to 1974, only very large corporations could be self-insured.  The law change now allowed smaller businesses to combine their premiums, pay for only the necessary operational expenses and purchase reinsurance to protect against the impact of large claims.  The premium not used for operational expenses and claim costs, went back to the owners, as well as any investment income earned on the premium.  The benefit of the cost savings and control soon caught on with other industries throughout Michigan. 

The ABC Self Insured Workers' Compensation Fund.  The law regulating the creation of SIG funds required that a program be formed by businesses that operate in a specific industry.  This was to allow for more control in the areas of underwriting, safety and claim adjusting.  Once the pioneer of SIG funds, Michigan is now looked at as one of the Nation's leaders in the use and management of SIGs, with over 30 SIG funds in operation. 

Twenty-one years after the formation of the first SIG fund in Michigan, on May 1, 1995, industry leaders from Associated Builders and Contractors pooled their premiums to start the ABC Self Insured Fund.  Over the past sixteen years, the ABC fund has grown to cover over 400 ABC Association members and has returned over $17 million in member profits.  The ABC fund routinely returns over 35% of the premiums paid, back to its member/owners as a result of low expenses and outstanding loss history performance.  The high standards required to join the ABC fund help ensure solid performance.

The Michigan Workers' Disability Compensation Act (sect. 418.301) states that before a worker can be entitled to compensation, the injury must be a "personal injury or death resulting from personal injury arising out of and in the course of employment."  This includes employer-required or supplied travel to and from a remote job site; activities performed at the direction or under the control of the employer; and employer-sanctioned activities at employer-provided facilities.

The language sounds simple enough but there's a reason why many attorneys, magistrates, Doctors, claim adjusters, underwriters and numerous other occupations make a living managing the workers' compensation system.  As with many laws, the challenge comes down to how the words are interpreted.  There are two distinct parts of the law worth noting;

1. "Arising out of employment":  something about the employment must have caused the injury.  For example, tasks, equipment or surroundings. 
2. "In the course (or scope) of employment":  the injury is to have happened at the time the worker was working either by an accident in the workplace or while doing some task or duty that the worker could be reasonably expected or authorized to do.  The phrase does not mean that all injuries that occur at work are "in the course or scope of employment." 

Pre-Existing & Degenerative Health Conditions

Perhaps the greatest challenge in determining whether an injury is work related is when dealing with an employee that has either a health condition that existed prior to employment or a condition that is driven by degenerative issues.  The management of claims related to pre-existing health issues is guided by Michigan case-law found in the Rakestraw v General Dynamics Land Systems case of 2003.  The Michigan Supreme Court ruled that an employee must show by a preponderance of evidence that he or she sustained an injury that is "medically distinguishable" from the pre-existing non-work related injury.  In other words, an employee must show objective medical evidence of a significant aggravation of the underlying pathology as opposed to a mere flare-up of the symptoms. 

Degenerative health factors can be caused by lifestyle behaviors, heredity, age and other matters unrelated to work.  An employee's degenerative health factors can create confusion as to whether the pain and symptoms related to the condition are compensable, particularly in the case of a long-term employee.  For a claim to be compensable, the injury must be a direct result of a specific work related occurrence, not simply caused by a cumulative exposure to a type of work related activity.  For example, in the unfortunate case of an employee getting their hand caught in a machine at work, the accident and resulting injuries would undoubtedly "arise out of employment."  However, some incidents occur at work and may NOT arise out of employment. 

An example of this can be found in a recent (March 2011) Michigan Supreme Court decision where the court summarily rejected the plaintiff's appeal in HARRIS v GENERAL MOTORS.  In this case an employee fainted in the employer washroom, struck his head on the tiled concrete floor, and died four days later.  Benefits were denied at every level on the basis that, while the accident happened at work, it did not happen because ofwork. The employee did not trip over anything, was not overcome by fumes, etc. The precise reason why he fainted was never determined.  Other examples include strokes, heart attacks and some soft tissue injuries, which are not tied to a significant aggravation of the underlying pathology or a specific work related occurrence.  In cases where these criteria are not met, the employee is not entitled to benefits under the Act.

In both the case of pre-existing health problems and degenerative issues, a decision to award or deny benefits will hinge on the careful analysis of the clinical examinations (IMEs or Independent Medical Evaluations), diagnostic testing and opinions of treating and examining physicians.  Claim adjusters are dealing with an increasing number of pre-existing and degenerative cases due to a variety of factors, including an aging workforce and an ever increasing uninsured population.

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