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MANAGING BEST PRACTICES: The $100-million wake-up call

April 1, 2004
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Did a child’s birth defects occur from its mother’s exposure to chemicals while at work? In March, IBM announced it had reached a settlement agreement in a $100-million lawsuit seeking an answer to this question. IBM faces approximately 50 more similar claims.

Lawsuits where the child sues its parent’s current or former employer (as above) for injuries suffered while in the womb are on the rise, according to USA Today. How critical is this topic and what should EHS pros do to help prevent or limit employer liability in this area?

Forrest A. Norman III, a general litigation and medical malpractice defense attorney with Gallagher Sharp Fulton & Norman; Ken Smaga, vice president, Hylant Consulting; and David Peterson, senior risk management professional at the Hylant Group, were questioned on this topic.

Are these lawsuits just a flavor of the month or is the trend real and something all employers should be concerned with?

(FN) It’s real and we see it as a serious problem. A live born child now has a cause of action for injuries sustained in utero in all 50 states. The parents of a still-borne child have a cause of action in wrongful death for injury sustained by a viable fetus in approximately 35 states. Any employer could potentially face such a claim, although proving causation, at present, is difficult.

(KS) When we consider that more than one-half of all babies are born to working mothers, and three percent to five percent of all births show severe birth defects, employer liability poses a great concern.

(DP) Claim activity is on the rise. From an insurance viewpoint, however, many underwriters are unaware of the issue.

What’s driving the growth of these claims?

(FN) The science of developmental biology has changed dramatically in the past few years. Consider the recent scientific breakthrough in cloning human embryonic cells. Public awareness of reproductive and developmental hazards is growing. Political and legal views on the rights of a fetus are changing. Most birth defects have an unknown cause. There is limited regulatory guidance for managing these types of workplace risks. For these and other reasons, disputes are heading to the courts.

(KS) There’s great sympathy for a child born with a birth defect. Parents struggle to find answers to why the birth defect occurred. Who’s to blame? Workplace hazards may be an easy target. Now we have the lure of enormous damage claims.

What are you advising your clients to do about this issue?

(FN) Awareness is important. It is easier to defend a company that was proactive, had policies in place, and tried to protect the employees’ unborn children. Workers’ compensation, compliance with safety regulations, Title VII pre-emption, and parental negligence may not be good defenses.

Depending upon the facts of the case, defenses based on theories of causation, assumption of the risk, Notice and Warnings, and State of the Art Knowledge appear to be more viable. The best of these are the causation-based defenses, which are also the most complicated and require the most scientific investigation and litigation preparation lead-time. There are no legal silver bullets to stop the case in its tracks, so it is extremely important to be proactive.

(KS) We consider this issue as part of an employer’s comprehensive risk management strategies. Minimum recommendations include knowing what hazards are present in the workplace, conducting a risk assessment, applying effective controls, if necessary, and ensuring proper communication with employees. The program must not discriminate against employees who are pregnant or may become pregnant.

(DP) Insurance may limit financial exposure. Claims would generally be covered subject to deductibles and claim specifics. This is a developing area, however. These types of claims currently are not contemplated in rate development. Employers should discuss this topic with their insurance carrier to see where they stand.

What are some of your key concerns?

(FN) This is a complex issue covering legal theories including strict liability, premises liability, intentional tort, and negligence. Strict liability is not much of a threat to the typical employer, but employers in industries such as hazardous waste or asbestos abatement may be exceptions. Negligence considers duty, breach of duty, and harm. Under duty there’s the concept of foreseeability. Did the employer have knowledge of potential harm to employees or their unborn children? There’s more access to information today, particularly with online sources, which serves to weaken a client’s foreseeability defense.

(KS) Compliance with workplace regulations alone may be insufficient to limit liability. There are no requirements under OSHA to limit fetal exposure to workplace hazards. The only standard to address a workplace exposure limit to protect a fetus is OSHA’s standard on lead. OSHA’s lead standard recommends that blood lead levels of workers who intend to have children should not exceed 30ug/100g. ACGIH TLVs® advise that women with blood lead one-third this amount may deliver a child exceeding current U.S. Centers for Disease Control guidelines for blood lead levels in children.

The burden is on employers to establish exposure limits unlikely to affect a fetus. The National Research Council’s method for establishing an unlikely effect level for developmental toxicology is one example.

(DP) Business is still reeling from asbestos litigation and from newer claims such as mold. We’ve learned that employers must perform very effective due diligence to assess exposure and limit liability. But will this be enough if employers are potentially liable for direct and punitive damages for birth defects among children of their employees? Not many employers can absorb a $100 million dollar claim against them for a single event.

Are there any concluding comments?

(FN) I’m reminded of the U.S. Supreme Court’s 1991 finding in Johnson Controls, dealing with fetal protections in the workplace. The court stated, “Without negligence, it would be difficult for a court to find liability on the part of the employer. If, under general tort principles… the employer has not acted negligently, the basis for holding an employer liable seems remote at best.” I stress that it is easier to defend an employer that has been proactive.

(KS) Those of us that grasp the potential ramifications of this emerging issue, and the effect it could have on our employers, are charged with the task of informing and educating corporate management. The cost of failing to act, the cost of not implementing a “Workplace Reproductive Health Plan,” could be catastrophic to certain companies in the near future.

SIDEBAR: For more information

Forrest A. Norman III (fnorman3@gsfn.com) is with Gallagher, Sharp, Fulton & Norman, founded in 1912, a defense litigation firm headquartered in Cleveland, Ohio. GSFN has more than 75 trial lawyers providing aggressive and cost-efficient representation to corporations, insurance carriers, municipalities and other public entities, professional service organizations, and individuals in a wide variety of civil litigation.

Ken Smaga (ken.smaga@hylant.com) and David Peterson (david.peterson@hylant.com) are with the Hylant Group, founded in 1935. Hylant is a privately held insurance agency offering complete risk management services, financial services, asset management, title insurance, healthcare management and employee benefits for businesses and individuals around the world. Hylant Group is ranked 32nd in size out of more than 12,000 insurance agencies nationwide.

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