Cumulative Concussions And California Workers’ Compensation

Under California’s liberal Workers’ Compensation code, NFL players from any franchise can file claims for cumulative trauma injury even if they merely played a single game or practiced in the state. Workers’ Compensation attorneys representing players from the 1960′s to present are forum shopping these claims to the tune of $150,000 to $200,000 per claim. Since 2008, 1600 claims have been filed in California at a cost of $375 million. The projected cost is expected to exceed $1 billion.

These cumulative trauma concussion claims will cost NFL teams big time on their Workers’ Compensation premiums thanks to California. Other states don’t cover cumulative trauma claims under their Workers’ Compensation codes.

Source: Risk & Insurance, Nov. 2010

Do Sports Leagues Need Workers’ Compensation Insurance?

Are sports organizations such as leagues ever required to carry Workers’ Compensation insurance in lieu of Accident insurance when workers are paid? This is a complex issue with some gray areas and some exceptions to the general rule. However, the consequences can be severe if an injured worker can successfully argue that they are entitled to Workers’ Compensation benefits and if a policy is not carried.

In this blog, I will outline the thought process to answer this question in the state of South Carolina. Other states have similar laws to South Carolina; however, there are slight variations that occur from state to state the could change the determination. In addition, several states have enacted laws that exempt sports leagues from carrying Workers’ Compensation.

Most of these sports organizations such as teams and leagues are volunteer run, but they sometimes pay individual workers or businesses for services such as umpiring, janitorial, concessions, field maintenance, etc. Whenever these sports organizations win a bid to host a large tournament, there are many more workers than normal that are hired. Of course, they consider all of these hired workers to be independent contractors and not employees for tax purposes.

Typically, these sports organizations purchase Accident and General Liability insurance but not Workers’ Compensation. The Accident policy usually covers all players, coaches, umpires, scorekeepers, and other staff and pays a medical expense benefit ranging from $25,000 to $250,000 depending on the limits selected. The coverage is on an excess or secondary basis to other collectible family health insurance. The Accident policy is meant to cover volunteers and other paid workers who don’t come under the Workers’ Compensation Act.

Under the South Carolina Workers’ Compensation Act, the following is my understanding of its application in the context of a sports league:

1. Liability For Injuries To Workers Who Are Not Paid

* Workers who are not paid are considered to be gratuitous workers and as a result their injuries are not compensable under the Workers’ Compensation Act.

* Workers whose compensation is considered to be expense reimbursement (ex: some umpires), are likely considered to be gratuitous workers.

* Injured gratuitous workers can file for Accident insurance benefits if such a policy exists.  Furthermore, they can file a lawsuit against the sports organization based on negligence theory. Such lawsuits may be covered by a General Liability policy unless a specific exclusion applies to deny coverage.

2. Liability For Injuries To Employees Who Are Paid

* Just because a sports organization classifies a paid worker as an independent contractor instead of an employee does not mean that the Workers’ Compensation commissioner will agree with such classification. This is true even if there is a contract in place that states the worker is an independent contractor. Such a contract is just one factor to be considered. In these cases, the injured worker almost always claims that they are an employee instead of an independent contractor. The commissioner will apply a test based on case law and will look at about 20 different factors. Typically the commissioners are very sympathetic to injured workers and will go to great lengths to find that they are employees and that their injuries are compensable under the Workers’ Compensation Act as a result.

*Sports organizations are exempt from carrying Workers Compensation if they regularly employ less than 4 employees within the state or had a total annual payroll during the previous year of less than three thousand dollars regardless of the numbers of persons employed during that period.

3. Liability For Injuries To Workmen Of Subcontractor

* The terms independent contractor and subcontractor are interchangeable for Workers’ Compensation purposes. 

* Sports organizations that hire subcontractors to perform or execute work that is part of the “trade, business, or occupation” of the sports organization are liable for injuries to the workmen of such subcontractors just as if they were employees of the sports organization.

 * Injures to a subcontractor worker who is a sole proprietor, partner, or LLC owner of the subcontractor business are not compensable under the Work Comp Act. However, these workers will usually claim that they are employees instead of subcontractors (independent contractors).

* If the subcontractor carries its own Workers’ Compensation policy, such policy will pay benefits to the injured workmen. That’s why its so important to require the subcontractor to provide a certificate of insurance evidencing Workers’ Compensation before they are hired.

 4. Liability And Penalties For Failure To Carry Workers’ Compensation When It Is Required

 * If an employee or workman of a subcontractor suffers an injury that is covered under the Act and they seek Workers’ Compensation benefits from a sports organization that was required to carry Workers’ Compensation but failed to do so, the consequences can be severe.

 * Penalties can be assessed against the sports organization to make up for past Workers’ Compensation premiums that should have been paid.

 * The injured worker can file for Workers’ Compensation benefits against the state Uninsured Employers Fund. The Fund will then place a lien against the sports organization in an amount that is equal to the benefits paid. This can result in insolvency for the sports organization since the total benefits can be extremely large depending on the seriousness of the injury. Workers’ Compensation benefits in SC may include past and future medical bills, lost wages based on 66 2/3% of the worker’s average weekly wage for up to 500 weeks, lump sum payment for disability, lump sum payment for disfigurement, and a death benefit.

 DISCLAIMER: THIS ANALYSIS IS NOT MEANT TO PROVIDE SPECIFIC INSURANCE OR LEGAL ADVICE TO ANY SPORTS ORGANIZATION IN SOUTH CAROLINA, MUCH LESS ANY OTHER STATE. EACH SPORTS ORGANIZATION MUST SEEK ADVICE FROM ITS OWN INSURANCE AGENT AND LEGAL COUNSEL BASED ON ITS OWN UNIQUE FACTS AND CIRCUMSTANCES.

 The contents of this opinion were reviewed and and generally agreed to by Garry Smith, Director, Compliance Division of South Carolina Workers’ Compensation Commission.  For more information, you may contact Garry Smith at 803-737-5707. 

 Sources: John Sadler and Garry Smith.

Insurance Policies Needed By Sports Organizations