What's Up With 'Loss of Trade' in Settling/Reserving WC Claims?
Tuesday, July 25, 2017 | 766 | 0 | min read
We were asked by a reader about the concept of “loss of trade” and how to reserve/settle Illinois workers’ compensation claims using it. We wanted to provide a couple of thoughts.
“Loss of trade” as a permanency concept in Illinois was first used to provide large amounts of permanent partial disability to police officers and firefighters who would receive line-of-duty disability pensions under the Pension Code. When a police officer or firefighter can no longer do his job due to life-changing injuries, he can’t simultaneously receive both the line-of-duty disability pension and a total and permanent disability award or wage loss benefits under the Illinois Workers’ Compensation Act—the Pension Code bars that double recovery. I agree with that approach.
What I feel liberal hearing officers did is cook up the concept of “loss of trade” to justify large “going away presents” to seriously injured police officers or firefighters where they suffered life-changing injuries to then receive only a line-of-duty disability pension. I remember one claim where a now-retired firefighter was seriously burned and it was felt the lifetime benefit wasn’t “enough” so the very liberal arbitrator added 80% Body as a Whole, or about $200,000 as a going-away present for the seriously injured firefighter.
The problem with this concept as it relates to police and firefighters is our silly state doesn’t require them to be catastrophically injured to be entitled to a line-of-duty disability pension. All that is required is someone confirming then can no longer work as a police officer or firefighter. For a simple example, there is an Illinois firefighter who had poor hearing and was surprised to have the siren/horn on a fire truck go off. He suffered significant hearing loss and everyone agreed he would be a danger to himself, his co-workers and others to be unable to hear commands during a live fire or medical emergency. Rather than have a law that would require the fire district to find him other work where he could have hearing augmentation and actually do something for his pay, he was pensioned off. In my view, that approach directly violates the intent and coverage of the Americans with Disabilities Act, but no one is going to bring a claim for it because the worker is getting so much money to not work.
So on top of being paid a line-of-duty disability pension, how much would you give such a worker for “loss of trade?” In my view, he hasn’t lost his trade, we are simply allowing him amazing largesse to be paid and never have to work again, unless he wants to. In fact, he can find lots of other jobs or start his own business with the money from his pension. Please note lots of firefighters and police do so—happy to provide examples on request.
Does this same “loss of trade” phenomenon apply to other Illinois workers?
Well, I am sure the term “loss of trade” doesn’t appear and isn’t defined in the Illinois Workers’ Compensation Act. When and if you start to use it, you can give it any meaning or value you like. Let’s take a construction worker who undergoes cervical fusion surgery resulting in lifetime restrictions of no lifting over 50 lbs. His employer agrees to accommodate the restrictions and he or she is successfully returned to regular work.
In my view, such a claim has a value between 15% to 30% loss of use of the body. What I feel liberals around us will start arguing is the worker is “locked” to that employer as other employers won’t hire him. Please note anyone that won’t hire him with such restrictions is almost certainly violating the federal ADA. Either way, if you start increasing reserves to 40%, 50% or up to 80% BAW, what is that supposed to be formulated on? Why would loss of trade make a claim worth triple its ordinary PPD value?
In summary, my law partners tell our entire team, we have to let you know of litigation/insurance issues like this right or wrong. You have to decide what is best in setting reserves—we only make legal recommendations.
In my view, I routinely fight “loss of trade” as a negotiating concept and trial technique. Again, in my view, to have claimant attorneys and Illinois workers’ compensation arbitrators start adding language to the Illinois Workers’ Compensation Act that isn’t there and making awards in reliance on such concepts, they are violating the due process and equal protection provisions of the Illinois constitution. As I outline above, they are also ignoring the ADA, as if you can “wish away” federal law.
Eugene Keefe is a founding partner with the Keefe, Campbell, Biery & Associates law firm in Chicago. This column was reprinted with permission from the firm's weekly client newsletter.