OSHA Assessing State Safety Offices’ Effectiveness

Ron Shawgo – February 24, 2013

Problems in Nevada four years ago have federal officials still trying to determine whether states with their own workplace safety agencies are as good as OSHA.

So-called “state plans,” like the Nevada Occupational Safety and Health Administration and the Indiana OSHA, are supposed to be just as effective as the federal agency. If not, the federal government can revoke state approval and take control. There are 26 states with their own agencies.

A 2009 OSHA investigation prompted by newspaper coverage of construction deaths in Nevada found problems with that state’s program, after the federal agency had given the state favorable reports.

A subsequent OSHA evaluation in 2009 of all states also found problems with Hawaii’s program due to staffing. Issues with other state plans also arose.

Indiana’s 2009 evaluation contained 45 recommendations for IOSHA improvement, although most of them involved record keeping and data management: “Accurate documentation is critical in determining the correct classification of violations and defending them” if contested, the report states.

The evaluation commends IOSHA’s improvements to data management and its Voluntary Protection Program, a federal initiative that allows companies with good safety records to have sworn employees assist in safety evaluations. There are 59 company sites in the Indiana program.

The report also notes IOSHA’s “long history of funding difficulties.”

“The continuing lack of State funding support and proper infrastructure is also of concern and raises questions about the State’s ability to effectively address these issues. Increased Federal oversight and technical assistance may be needed to improve Indiana’s performance,” the 2009 evaluation says.

IOSHA concurred with more than half of the recommendations.

A 2010 OSHA news release noted that budget constraints and lax federal oversight might have contributed to problems among the states.

Federal OSHA has reasserted full or partial control of some state programs, Scott Allen, a U.S. Department of Labor spokesman in Chicago, wrote in an email. Most recently, faced with budgetary constraints and “staffing challenges,” Hawaii requested federal help, he said. In other states, improvements or corrections were made after OSHA took steps toward reasserting its authority, Allen said.

Whether Indiana and other states meet federal standards remains unclear. In a March 2011 audit, the U.S. Department of Labor Office of Inspector General reported that OSHA still had not designed a way to determine if state programs were “at least as effective” as OSHA, as federal law requires.

“State officials generally believed their programs were effective, but there was no quantifiable data to demonstrate effectiveness,” the audit states.

OSHA needs that to determine when a state program has failed “to serve as a basis for using its ultimate authority to revoke state plan approval.”

The federal agency has gone from on-site, intensive monitoring of state plan case files in the 1970s to discontinuing routine visits and case reviews in the mid-1980s, according to the inspector general’s audit.

In the mid-1990s, federal oversight was further reduced to a goal-based system with states producing a 5-year plan that included goals for reducing workplace injuries, illnesses and fatalities.

That was followed with the 2009 Nevada investigation, which prompted annual evaluations of the state programs that require more on-site monitoring.

Last year, OSHA began soliciting suggestions on how to evaluate state programs to meet the “as effective” standard.

In response, former Indiana Labor Commissioner Lori Torres sent a July 2012 letter to OSHA stating opposition to relying solely on the number of inspections and penalties issued to gauge effectiveness. Rather, injury and illness reductions over time in various industries, the number of workers trained and satisfaction surveys of management and labor are among her suggestions.

via OSHA assessing state safety offices’ effectiveness | The Journal Gazette.

Arbitration vs. Litigation – 5 Issues to Consider

J. David Arkell and Benjamin M. Petre – February 14, 2013

Our topic for the month…

Deciding whether to utilize a mandatory arbitration clause in a contract is important, especially in the construction industry. Advantages and disadvantages of litigation versus arbitration should be carefully weighed before entering into a contract or subcontract. Factors to consider:

Time. Arbitration frequently results in a quicker decision than taking the matter to trial, largely due to the absence of extensive pretrial discovery.

Cost. Arbitration tends to be less costly than litigation, most often because of the limited discovery process.

Confidentiality. Barring the entry of a protective order, litigation is a matter of public record. Arbitration is a private proceeding, and thus more likely to ensure confidentiality.

The Decision Maker. An experienced arbiter or panel with expertise in the subject area can greatly streamline the process and bring credibility to the decision.

Appeal. Litigants can appeal disputed results, while an arbitrator’s decision is generally not subject to appeal. If finality is a priority, arbitration is likely the better option. Litigation is preferable if you want to maintain the option to correct decision mistakes through appeal.

via Arbitration vs. Litigation – 5 issues to consider – Lexology.

Arbitrating Construction Defect Claims

Wally Zimolong – February 18, 2013

The headline of a recent article on Lexology grabbed my attention:  “How to Guarantee the HOA Can’t Litigate the Condo Construction Defect Claims.”  The authors’ means to preventing litigation of construction defect claims was even more intriguing: arbitration clauses.

How can arbitration clauses guarantee that no ligation over construction defect claims occurs?  It can’t.  Arbitration is litigation just decided in a different forum.  Like many, the authors appear to misunderstand what arbitration is and what the parties can expect.

The misunderstanding of the arbitration process leads to a misguided bias for and against the process.  In construction defect cases, plaintiff’s counsel, in particular, bristle at the prospect of arbitrating a construction defect claim clinging to the belief that juries render larger awards.  On the other hand, defense counsel champion arbitration as a means to chill potential claims, snuff out allegedly frivolous claims, and to avoid the unhinged damages awards of juries.  These misplaced beliefs are grounded in a lack of understanding of the arbitration process and certain myths regarding arbitration.

Myth #1:  A Jury Will Give Me A Larger Damage Award.

In the early 1990′s, Professor  Ted Eisenberg of Cornell Law School published a famous law review article that examined plaintiff success rates and damage awards in jury trials and bench (Judge) trials.  To the surprise of many, the Professor Eisenberg’s revealed that plaintiffs won more frequently and received larger average awards in bench trials.  Despite empirically data to the contrary, there remains a widespread perception that jury awards are larger.

This misconception extends to arbitration panels.  Among many plaintiff’s attorneys, arbitrators are more disfavored than judges.  However, as those regularly litigating construction disputes in arbitration already know, arbitration panels regularly award extremely large damage awards.

Myth #2:  Arbitration Is Too Expensive Up Front.

It is true that the fees to initiate an arbitration proceeding are larger compared to the fees for filing a complaint in state or federal court.  Alas, litigation expenses are not limited to the initial cost of filing suit.  The overwhelming amount of attorneys fees in litigation are spent on discovery (interrogatories, document production and review, and depositions).  In arbitration, discovery is either limited by statute or agreement of the parties.  The result is usually a cost saving for the parties.

There is also a costs savings to be appreciated at the “trial” portion of the arbitration. Because the rules of evidence and procedure are relaxed (that does not mean not followed it means relaxed) the hearings are run more efficiently.  Moreover, particularly in construction defect cases, the parties benefit from the experience of the arbitration panel when it come time to explain technical areas of the construction critical to the claims.  Obviously, it is much more efficient, and thereby costs less, to have an expert explain a technical area related to the construction of an certain portion of the structure to a panel of arbitrators, who is likely already familiar with the terminology and methods described, than it is a jury, who likely has no experience with construction.

Finally, there are very few grounds for appeal of an arbitration award (much to the chagrin of those opposed to arbitration).  These efficiencies result (usually) in a lower overall litigation cost to the parties involved.

Myth #3:  Arbitration Panels Are Defense Biased.

As someone who has been on litigated cases in front of a panel of arbitrators on behalf of both claimants (in arbitration plaintiffs are called claimants) and defendants (in arbitration defendants are called respondents), I can attest that is certainly not the case.  I am unclear where this mistaken belief comes from.  However, I suspect that it comes from the unfamiliarity with the process and litigation folklore.  The fact is a good case, a good expert, and a good presentation yield good results no matter what the forum.

All of this is not to suggest arbitration is perfect.  However, it is certainly not the judicial purgatory as some believe it is.

via Supplemental Conditions | Philadelphia Construction Lawyer I Wally Zimolong.

Appraisal in Flood Claims

Robert Trautmann – February 19, 2013

A topic of much debate after Hurricane Sandy is the appropriateness of appraisal when property owners and their carrier do not agree. Can appraisal address scope (coverage) as well as price? While this area of the law is still developing, courts are unfortunately leaning to a restricted interpretation of the Standard Flood Insurance Policy (SFIP) appraisal clause, ruling that only price is appropriate for appraisal and scope is a question of coverage under the purview of the courts.

The U.S. District Court for the Northern District of Florida held “the SFIP provides that appraisal is an option only when and if the parties fail to agree on the “actual cash value” or “replacement cost” of the damaged property — not when the parties disagree on the threshold issues of coverage and causation.”1 The U.S. District Court for the Southern District of Florida likewise stated:

This language cannot be stretched to mean that appraisal can be invoked whenever the parties dispute which items of property were damaged or whether those items were in fact damaged by flood waters. That type of dispute is a dispute over coverage, and under the terms of the SFIP such a dispute can only be resolved by a federal district court.2

The U.S. District Courts in New Jersey has not yet weighed in on this subject, but it appears likely that they will follow the trend.

While this is the current state of the law, I suggest the counterargument is the correct reading of the policy and provides a more efficient process. The appraisal clause of the SFIP reads, in pertinent part:

If you and we fail to agree on the actual cash value or, if applicable, replacement cost of your damaged property to settle upon the amount of loss, then either may demand an appraisal of the loss…. The appraisers will separately state the actual cash value, the replacement cost, and the amount of loss to each item…

Nowhere in the policy does it state appraisal will be limited to the scope agreed to by the carrier. Rather, the plain language states “The appraisers will separately state the actual cash value, the replacement cost, and the amount of loss to each item.” It seems clear the appraisers should be permitted to evaluate all claimed items of the loss, regardless of the carrier’s position on scope and coverage. The carrier should then be directed to pay the appraised value of the non-disputed portions of the claim. The sole question left to litigate would be coverage, as the price for the disputed items would be set. The carrier will argue, as they did in Museum Plaza Condominium Association, Inc. v. Fidelity National Indemnity Insurance Company, that appraisal is only appropriate where the parties are in full agreement as to scope.3 This argument, however, finds no support in the SFIP. While there will continue to be ligation over the appropriateness of appraisal, a process as I have outlined here would create a much simpler process and allow litigation to be handled in an expeditious, if not summary, fashion.

1 Flaharty v. Allstate Ins. Co., 2010 WL 148226 (N.D. Fla. Jan. 11, 2010).

2 De la Cruz v. Bankers Ins. Co., 237 F.Supp.2d 1370 (S.D.Fla.2002).

3 Fidelity National Indemnity Insurance Company’s Opposition to Motion to Compel Appraisal, 2012 WL 3812755 (S.D. Fla. July 17, 2012).

via Appraisal in Flood Claims : Property Insurance Coverage Law Blog.