'Forced Fun' Work Comp Claims

Andrew G. Simpson
October 15, 2009

Injury awards from company outings or "forced fun" events are sure bets to garner headlines when they are decided by courts or appeal boards. But of course, not all such claims end up in dispute. In fact, they are more often routinely processed by brokers and their carriers.

Insurance agent Carolyn Rzewski knows firsthand what it's like to handle such a claim; she had to do it for her own employer, Rogers & Gray Insurance Agency, a leading agency in Massachusetts employing close to 100 people in several branches on Cape Cod. A few years ago during the company's annual picnic, an employee slipped and fell while playing volleyball and broke his leg. The middle-aged man was rushed to the hospital. "He was in a lot of pain," said Rzweski.

Rzewski, who handles all of the agency's own insurance, filed the claim with OneBeacon. "There was no question about it being a claim," she said, noting that the agency had sponsored the event, given employees time-off to attend it and, although attendance at the picnic was not mandatory, any employees who did not go had to stay at their office and work.

More than the agency's experience modification factor suffered as a result; the tradition of an annual picnic with games or physical activities also came to an end. Today, the employees go on boat cruises or railroad rides where they enjoy a special dinner, sitting down.

Rzewski says the agency learned another lesson, too. The agency started the picnics years ago when more of the employees were physically fit. "All of us are getting older," said Rzweski, who plans on retiring within the next year or so.

Before Jim Holinka joined wholesale broker AmWINS Brokerage of Illinois in Chicago, where he is an assistant vice president, he handled workers' compensation claims for Liberty Mutual. Holinka remembers a claim by a high-level executive who broke his wrist in a soccer game during a company picnic and required surgery.

The picnic wasn't exactly mandatory, but employees who did not show were not paid for the day. Thus Liberty Mutual saw it as a legitimate claim. "It was cut-and-dried," said Holinka, "There were no curveballs with this one." Neither the employer nor the insurer balked at the claim. What's more, the claimant himself was so cooperative that he refused the monetary settlement he was entitled to. "He told us to just pay the medical expenses," Holinka recalls.

Holinka said such claims, while not common, did occur often enough that Liberty Mutual's training for adjusters took note of them.

Janet Warren, claims manager for Beecher Carlson in Atlanta, has also had experience with such claims. She remembers one agency she worked for prior to Beecher Carlson wanted to sponsor a hot air balloon ride for employees. But there had been news reports of accidents involving balloons so the employer got cold feet and cancelled.

She also remembers a risk manager for a client who sprained an ankle climbing Georgia's Stone Mountain; a senior executive who sustained a severe head injury during a horseback ride gone awry; and workers boarding a cruise boat that were sent into the water and hurt when the dock collapsed.

Warren believes most employers today know what they are getting into when they hold an event involving physical or social activity. "Most of our clients understand the risk," she told Insurance Journal, and most are not surprised that an injury arising from such an event will be compensable.

One reason they are not surprised is that in many cases the broker has been brought into the event planning and has advised them on the risks and what safety steps to take, even down to knowing enough to have players stretch before a baseball game.

"So they go into the events with their eyes wide open and make an informed decision," Warren says.

According to Warren, agents and brokers should be proactive in helping clients plan their events with accident prevention in mind. "The lesson is to use the broker as a consultant," she says.

When it comes to fielding a claim from company outing, she cautions that there is no one rule fits all. "Every state literally addresses each one differently. Never assume one way or the other," she advises, stressing the importance of brokers knowing the most current workers' compensation information from each state on such injuries.

MyNewmarkets.com's Chris Boggs seconds Warren's advice and adds his own: "Make any and all social or recreational activities expressly voluntary. Any hint of requirement or employer benefit could cause a problem."

Warren says employers appear to believe such events have value in spite of the risks. "I don't see companies refraining from activities."

Four Tests for Employee Recreational Injuries
By Christopher Boggs:

Employees injured while participating in recreational activities may qualify for workers compensation coverage. Typically, four tests are applied to the facts surrounding the injury to decide compensability:

1. Did the accident occur on the employer's premises? An affirmative response does not guarantee compensability. An employee injured while engaged in a pick-up basketball game on the employer's premises may not be eligible for workers compensation because the employer is not directly benefiting from the activity and the employer is not directing the activity. Making recreational facilities available does not make the employer liable. Nor is it required that the injury occur on the employer's premises to be compensable.

2. Was the event or team organized by the employer? Company-organized softball teams competing in "industrial leagues" may qualify under this provision. However, several employees deciding to form a team is wholly different from a team organized by the employer, encouraging "good" ball players to participate.

3. Did the employer pay for the activity? It is unclear if this refers to the total cost or a subsidy on behalf of the team. For example, the league charges $50 from every player, but the company pays $40 on behalf of each player. While the activity is not fully paid for by the employer, it could be viewed as employer-paid or sponsored (and participation encouraged).

4. Did the employer benefit? Advertising in the community (team shirts), improved employee morale or better team work. An employer can "benefit" from these activities in more ways than tangible output.

From, "The Insurance Professional's Practical Guide to Workers' Compensation: From History through Audit."