Public Risk November/December 2015 by Moire Marketing Partners

Published by the Public Risk Management Association

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NOVEMBER/DECEMBER 2015

APPLYING COMPOUNDED MEDICATIONS in Workers’ Compensation

PLUS

TRENDING NOW: DOMESTIC DRONES OVER-ZEALOUS ZONING Challenges for the Public Risk Manager

Going Above and Beyond “Sometimes I have to go above and beyond—literally. “Traveling the Alaskan bush to over 150 cities, boroughs and school districts is daunting, but I love what I do. Helping our members is hugely rewarding. They aren’t just risk partners, they’ve become personal friends. “To protect them from risk and losses, we rely on Genesis for reinsurance. When we encounter a little turbulence — or worse— it’s comforting to know we can trust their specialized expertise and top notch security. “With Genesis, we can always count on safe landings no matter what risks cross our path.”

Visit our website at www.GenesisInsurance.com

— Kevin Smith, Executive Director Alaska Municipal League Joint Insurance Association

Genesis Insurance Company is licensed in the District of Columbia, Puerto Rico and all states. Genesis Insurance Company has its principal business in Stamford, CT and operates under NAIC Number 0031-38962. Genesis Management and Insurance Services Corporation, 120 Long Ridge Rd, Stamford, CT 06902

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Volume 31, No. 10 | Nov/Dec 2015 | www.primacentral.org

The Public Risk Management Association promotes effective risk management in the public interest as an essential component of public administration. PRESIDENT Dean Coughenour, ARM Risk Manager City of Flagstaff Flagstaff, AZ

CONTENTS

PAST PRESIDENT Regan Rychetsky, ABCP Director, HHS Enterprise Risk Management and Safety Texas Health and Human Services Commission Austin, TX PRESIDENT-ELECT Terri Evans Risk Manager City of Kingsport Kingsport, TN

Jani J. Jennings, ARM Insurance & Safety Coordinator City of Bellevue Bellevue, NE

6 APPLYING COMPOUNDED MEDICATIONS IN WORKERS’ COMPENSATION

DIRECTORS Lori J. Gray Risk Manager County of Prince William Woodbridge, VA

Scott Kramer Risk Manager Montgomery County Commission Montgomery, AL

By Tron Emptage

Amy Larson, Esq. Risk and Litigation Manager City of Bloomington Bloomington, MN

10 TRENDING NOW: DOMESTIC DRONES

Scott Moss, MPA, CPCU, ARM-E, ALCM P/C Trust Director CIS Salem, OR

By Scott Thomason and Elizabeth Wharton

Tracy Seiler, ARM-P Director of Risk Management Services Texas Association of Counties Austin, TX

16 OVER-ZEALOUS ZONING

Challenges for the Public Risk Manager

By Joe Jarret

NON-VOTING DIRECTOR Marshall Davies, PhD Executive Director Public Risk Management Association Alexandria, VA EDITOR Jennifer Ackerman, CAE Deputy Executive Director 703.253.1267 • jackerman@primacentral.org ADVERTISING Donna Stigler 888.814.0022 • donna@ahi-services.com

Public Risk is published 10 times per year by the Public Risk Management Association, 700 S. Washington St., #218, Alexandria, VA 22314 tel: 703.528.7701 • fax: 703.739.0200 email: info@primacentral.org • Web site: www.primacentral.org Opinions and ideas expressed are not necessarily representative of the policies of PRIMA. Subscription rate: $140 per year. Back issue copies for members available for $7 each ($13 each for non-PRIMA members). All back issues are subject to availability. Apply to the editor for permission to reprint any part of the magazine.

IN EVERY ISSUE 4 News Briefs | 19 Advertiser Index | 20 Member Spotlight

NOVEMBER/DECEMBER 2015 | PUBLIC RISK

Berkley Public Entity Managers provides self-insured individual public entities and risk-sharing inter-governmental groups superior service and access to A.M. Best rated A+ (Superior) Financial Size Category XV paper. We are an integrated public sector experienced team that includes underwriting, actuarial, risk control and claims. Together we are focused on one goal – to provide the protection our clients deserve through a combination of prevention, management and coverage. Call us for flexible, collaboratively developed Risk Solutions. For more information, please contact: Berkley Public Entity Managers 30 South 17th Street, Suite 820 Philadelphia, PA 19103

Richard B. Vincelette

President T: (215) 553 7366 C: (215) 528 0410 rvincelette@wrberkley

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Sr. Vice President, Underwriting T: (215) 553 7381 C: (215) 528 0374

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Message from PRIMA President Dean Coughenour, ARM

THE CRYSTAL BALL OF RENEWAL

our Board is excited about the upcoming annual conference in Atlanta. The session planning is done, the speakers are ready and we hope that you already have June 5–8, 2016, marked on your calendar. I look forward to welcoming you to what is sure to be an educational and relationship-building success. Registration opens for the 2016 Annual Conference in January. In sharing with you this month, I think of the time of year that is upon us: budget time and the “crystal ball of renewals.” For many of us, it is a time of uncertainty, time pressure constraints, educating constituents and the stress associated with making it all come together. For some of us, this process goes into late June, well after budgets have been discussed and commitments made to our budget directors and managers. But does it need to? The time we start renewal for next year is the day we renewed this year. Seem a little early? Not at all! There are opportunities throughout the year to “sell your risk,” put in place new programs, training sessions, new policies and procedures to sell to the underwriters and senior decision makers of your carriers. Risk management is really just a whole LOT of selling. We are the risk consultants and we sell ideas to our employees, managers, vendor partners and underwriters. The more effective we sell or get folks to buy in, the more effective we will be. So for renewals, we never stop “selling.” We check in on a regular basis with our underwriters and decision makers, sometimes through intermediaries but always with the goal of and opportunity to tell our story. We do so with a passion and excitement to share our story of “what’s new,” why pricing should be more favorable, why coverage should be modified at no or minimal cost increases and perhaps why past losses are no longer the most accurate predictor of future losses. A renewal number should never come as a total surprise. Sure, the actual number is not something that can be predicted, but because we check in on a regular basis and educate our brokers, carriers and underwriters, a range of predictability becomes clearly achievable. You see, it goes back to relationships. When it comes to insurance and the markets available, it is a very small world and everyone talks. It is likely that your insurance options are limited to a pool and two or three carriers. For excess, your options expand but only after you have self-insured a substantial portion of the risk, in many

cases in excess of $500,000. The reality is that underwriters do not like to compete in an RFP every year. It simply does not build trust. When we have the ability to renew without the need to market, we go into the process with a bargaining chip. I realize that some of us are compelled to market. When that happens, we must make sure our vendor partners understand the why and assure them that our relationship/partnership is very important to us. I know that for some of you, I am singing to the choir and that there is no news here. But if you have not been as proactive in “selling” your risk, I would encourage you to reengage. Renewals do not have to be in June. But, you say, “The carrier told me that they would not consider a renewal more than two months out.” Yes, I have heard that too; last year, we started the process in January and renewed all lines except Workers’ Compensation on March 3 and that policy was renewed on April 10. Our annual renewals are July 1. You may say, “Dean, you can’t get the best deal that early!” Well depending on losses, sometimes early actually works in your favor. When I speak to underwriting, I simply educate them on the process that our entity, and many of us, must follow to deliver budget numbers and the time lines involved. You see, it is about setting the expectations, moving past “we never do that” and on to the results of what CAN be done.

The time we start renewal for next year is the day we renewed this year. Seem a little early? Not at all! There are opportunities throughout the year to “sell your risk,” put in place new programs, training sessions, new policies and

You are the best risk consultant your entity has. With renewals it is all about building trust, establishing relationships and securing the commitment that makes a difference. Remember: no one can “SELL” your risk like you, because there is no one like you.

procedures to sell

You are incredible! Thank you for everything you do each and every day to make a difference.

carriers.

to the underwriters and senior decision makers of your

Dean Coughenour, ARM 2015–2016 PRIMA President Risk Manager City of Flagstaff Flagstaff, AZ

NOVEMBER/DECEMBER 2015 | PUBLIC RISK

News Briefs

NEWS

BRIEFS UNIVERSITY OF MIAMI TESTS CONCUSSION-DETECTING GOGGLES Like millions of other Americans, Shannon McCarthy and Ronnie Johnson watched the Women’s World Cup semi-final on TV and cringed when they saw the head collision between U.S. midfielder Morgan Brian and German forward Alexandra Popp as they leaped for the ball. Both ended up on the ground, Popp with a bloody gash. Four minutes later, both were back in the game after quick sideline examinations by doctors. Brian said she was asked to touch her finger to her nose, follow a moving finger, and to repeat the words “car,’’ “apple,’’ “elbow,’’ “ball’’ and “house’’ three times. McCarthy and Johnson watched with greater concern than the average fan because they play soccer for the University of Miami. McCarthy is a defender, Johnson a forward. Neither has ever had a concussion, but they’ve had teammates forced to quit the sport as a result of head injuries, reports the Miami Herald. That is why McCarthy and Johnson were at the UM Hecht Athletic Center, testing concussion-detection goggles being developed by UM doctors and a Pittsburgh-based software company called Neuro Kinetics. The project is being largely funded by a $500,000 grant from the NFL, Under Armour and GE. The U.S. Department of Defense has also been involved, as the goggles can be used on the battlefield for soldiers with head trauma.

“Everything with technology is so much more innovative now, so to have computerized, concrete findings on the spot that seem super accurate can only make us athletes safer and better off in the long run,’’ said McCarthy. “And it can fit in a backpack, so we can take it on road games, so there would never be an excuse for putting in a player who doesn’t belong on the field. I think it’s great. Rather than just doing a manual test, to be able to go into the locker room, put on these goggles and know for sure—not 50-50, not someone’s opinion—that’s going to help a lot of athletes.’’ Johnson agreed.

Hurricane football, soccer and volleyball players were being tested. They were in an exam room where researchers were testing the goggles’ technology. This winter, men’s and women’s basketball players who volunteer to participate will join the study, and next spring, baseball players and club athletes in rugby and lacrosse will be tested. A sample of 200 athletes is the goal, according to Dr. Mikhaylo Szczupak, one of the researchers working under project leader Dr. Michael Hoffer, a UM otolaryngologist and former U.S. Navy captain who developed the technology during two tours in Iraq. The goggles feature imbedded eye tracking and stimulus display and can detect brain injury by measuring eye movement and speed and symmetry of pupil dilation. This data helps determine at the site of injury whether an athlete is clear to return to the game or whether further medical attention is needed.

PUBLIC RISK | NOVEMBER/DECEMBER 2015

When she was in high school, a club teammate suffered a concussion, was out for more than a year and eventually quit. “She was stuck in a dark room for months, and when she came back out, she had to wear sunglasses and ear plugs, so it was really bad,’’ Johnson said. “She had gotten a concussion and then she kept playing and got hit again. People weren’t really monitoring it. When something happens, you have to make sure you’re OK before you go back in, which is why these goggles are really cool.’’ UM researchers will spend the next 18 months developing the goggles, then make a production model and hope for FDA approval. Their aim is three types of devices — a simple red light-green light version under $200 that could be used in youth sports, a more sophisticated model for college and pro sports and the most complex device to be used by physicians to aid with concussion treatment and clearance.

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NHTSA CHIEF: AGENCY REVIEWING SAFETY RULES FOR AUTOMATED CARS The head of the National Highway Traffic Safety Administration said the agency is reviewing federal vehicle safety rules to determine if they could conflict with self-driving vehicle systems that Google Inc. and others want to put on the road, reports Reuters. The agency is looking at a list of rules that could affect the rollout of features such as Tesla Motors Inc’s “autopilot” hands-free driving system or General Motors Co’s proposed “super cruise” system, NHTSA administrator Mark Rosekind told reporters. “We are trying to figure out if innovation will run up against regulations,” he said. Rosekind said it is not clear where the lines are between federal and state regulation of autonomous driving technology. But he said NHTSA inevitably will have a role in overseeing the safety of selfdriving vehicles, and what standards should be applied to the technology. As an example, Rosekind asked “where’s the standardization” for the signals and alerts drivers get from robotic systems that are watching for hazards around a car, or controlling its direction. “The first time a self-driving car hits somebody, and someone gets hurt or is fatally injured, we’re going to get the phone call,” he said. Another area of uncertainty, Rosekind said, is what will happen as automated cars and humanoperated vehicles mix on the road for what could be 20 or 30 years. “We have a lot of catch-up to do,” said Rosekind, who took over the agency in December. Fully autonomous vehicles are still years from being ready for consumers to buy. But several automakers have said they intend to offer systems that will allow vehicles to navigate in traffic jams or in freeway driving even when the driver’s hands are off the steering wheel.

CHICAGO WILL SOON HAVE THE HIGHEST SALES TAX OF ANY BIG U.S. CITY Chicago next year will once again have the highest sales tax rate of any major U.S. city, according to a new analysis from a tax policy research organization and reported in the Chicago Tribune. The city rate will hit 10.25 percent on Jan. 1, when a penny-on-the-dollar sales tax increase the Cook County Board narrowly approved goes into effect. That will push Chicago above four Alabama cities, including Montgomery, where the rate is 10 percent, and Seattle, where the rate is 9.5 percent, the Tax Foundation analysis found. “Chicago, by any measure, is the city that will have the highest rate,” Jared Walczak, a Tax Foundation policy analyst, said in an interview. The foundation is a 78-year-old nonpartisan, nonprofit group based in Washington, D.C. There are other, much smaller, towns in five states that will still have higher rates, but they are in places where there is either a much greater reliance on sales taxes than Illinois to fund government or are little towns that derive the bulk of their revenue from tourists, Walczak said. “Chicago stands out because it’s a high sales tax amidst a sea of high taxes, even with the partial sunsets of the 2011 Illinois (income) tax hikes,” Walczak wrote in a blog post announcing the analysis. “Its rate as of January 1, 2016, will also stand out as the highest rate in a major city.” The county sales tax rate will rise from 0.75 percent to 1.75 percent. The balance of the sales tax comes from the state, city and mass transit portions. It’s not the first time Chicago will have the nation’s highest rate among major cities. The sales tax rate was 10.25 percent after the County Board enacted an identical 1-percentagepoint increase in 2008. But that increase was rolled back over time, first under then-County Board Chairman Todd Stroger and then current board President Toni Preckwinkle, who in 2010 pledged during her campaign to kill of what remained of the increase. The board approved the new increase this week at her request, with Preckwinkle saying the tax was needed to restore financial health to the county’s underfunded pension system, cover rising payments for debt incurred before she took office and boost spending on roads and bridges.

NOVEMBER/DECEMBER 2015 | PUBLIC RISK

Applying Compounded Medications in Workers’ Compensation By Tron Emptage

he process of compounding medications began centuries ago when pharmacists received orders from physicians to mix the elements known to have the ability to heal at that time, thereby creating personalized remedies to meet a patient’s need. Fast forward to today and prescribers have access to hundreds of medications capable of healing our ailments and restoring function. Recently, despite the variety of readily available medications, the frequency in which prescribers are selecting compounded medications as the therapy of choice for workplace injuries has grown exponentially; so too has the cost of that therapy. This has raised myriad concerns in the industry.

COMMON COMPOUNDED MEDICATIONS While sterile injectable medications, oral capsules or solutions and powders may be compounded for individual patients, the vast majority of compounded medications dispensed in the workers’ compensation system today are non-sterile topical products. Nationally-recognized medical guidelines, as well as many state guidelines and formularies, consider compounded medications—particularly those administered topically—as second or third-line therapy for many of the common industrial injuries and conditions experienced today. Primarily physicians recommend the use of compounded medications for chronic, neuropathic pain when trials of antidepressants and anticonvulsants have failed, or when an injured worker is allergic to certain inactive ingredients in oral medications. Difficulty swallowing (dysphagia) is another reason for prescribing compounded topical medications. More recently, scar creams have garnered increased utilization. These topical compounded medications claim to reduce post-surgical scaring.

COST CONSIDERATIONS The Helios 2015 Workers’ Compensation Drug Trends Report found that utilization of the bulk medications and chemicals therapeutic class, which primarily consists of ingredients used in the preparation of topical compounded medications, increased 43.9 percent in 2014. Additionally, the average wholesale price for many of the top ingredients used in compounds increased dramatically in 2014 as seen in Figure 1. FIGURE 1: TOP 10 INGREDIENTS USED IN COMPOUNDED MEDICATIONS RANKED BY SPEND 2014 RANK 1 2 3 4 5 6 7 8 9 10

2013 RANK 1 3 2 5 4 6 8 7 10 9

INGREDIENT FLUTICASONE Powder MELOXICAM Powder FLURBIPROFEN Powder GABAPENTIN Powder KETAMINE Powder BACLOFEN Powder CYCLOBENZAPRINE Powder KETOPROFEN Powder PCCA LIPODERM Powder DICLOFENAC Powder

CHANGE IN AVERAGE DAILY SPEND 18.8% 141.6% 21.2% 22.5% 3.6% 27.6% 0.1% -13.9% 20.0% -12.7%

As a result, the report also found total spend associated with compounded medications increased 36.8 percent. One of the reasons for the exorbitant costs is the number of ingredients. Commonly, compounded topical medications include four to five individual ingredients, although some contain more than 10 from a variety of therapeutic classes, including:

PUBLIC RISK | NOVEMBER/DECEMBER 2015

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• Non-Steroidal Anti-Inflammatory Drugs (NSAIDs) • Opioid Analgesics • Local Anesthetics • Antidepressants • Anticonvulsants • Skeletal Muscle Relaxants • Other Topical Analgesics Another reason for the high costs is a lack of regulatory or legislative control. Presently, most compounded medications fall outside of specific state fee schedule controls and are invoiced to payers using the National Drug Code (NDC) and its associated Average Wholesale Price (AWP) for each ingredient in the compounded medication. This sometimes leads to costs that are exponentially higher than a commercially available alternative medication that may be therapeutically equivalent. As an example (see figure 2), a typical first-line therapy for muscle sprain, strain, or inflammation (an ailment seen in workers’ compensation) is an NSAID or skeletal muscle relaxant. NSAIDs, such as ibuprofen, and skeletal muscle relaxants, like cyclobenzaprine, may be invoiced for a cost of around $85 for a 30-day supply. Compounded medications prescribed to treat the same symptoms have been noted to cost as much as $2,000 to $4,000 for a 30-day supply. Also emerging is the use of compounding kits, often at high AWPs. The kit typically contains the base and the active prescription entity in pre-measured quantities that allow for combining and subsequent dispensing to the injured worker at the point of care.

COMPOUNDED CONCERNS The lack of medical evidence supporting the use of many of the ingredients in topical compounded products is raising concerns about injured worker safety and the efficacy of the products. Topical compounds often contain numerous ingredients, many times even within the same therapeutic class. While some suggest this duplication of therapeutic class is beneficial because of the unique mechanism of action of the ingredient (the way in which the ingredient works in the body to exert its affect), others would say it increases the potential of overutilization and toxicity, even though it is applied topically. If an injured worker is also taking these same medications orally, the potential for drug-to-drug interactions increases as well, especially if the topical application leads to systemic absorption. Moreover, dosing instructions are not always clear on compounded medications. This can lead to adverse effects, such as skin irritation or even burns because of using too much product, or not receiving the therapeutic benefit from using too little. Unclear instructions may also result in more frequent refills than necessary. Misunderstandings surrounding the use of a topical medication can also lead to accidental exposure or ingestion of a product by a person

other than the patient. You may recall the case in California in June of 2014 where an infant died after accidental exposure to a topical compounded medication the mother had applied to treat her work-related injury. Further contributing to the risks of topical compounded medications is the fact that many are not dispensed by a local retail pharmacy. Without access to the injured worker’s complete medication profile—whether for the compensable workers’ compensation condition or an unrelated, but existing comorbid or group health-related condition—there may be additional medication-related complications. Concurrent use of opioid analgesics and topical compounded pain medications can not only be challenging, but seen by some as a duplication of therapy. Sterile compounded medications present some unique concerns as well. There have been a number of voluntary recalls in recent years due to particulate contamination or lack of sterility in many injectable medications. Some reading this article may recall that in 2012, 64 people died from a fungal infection brought about by contaminated injectablecompounded medications. Subsequently, the Food and Drug Administration (FDA) has released its own recalls and alert notifications because of lacking sterility. Although many such notifications address topicals, injections, or medications not generally encountered in workers’ compensation, it is still a concern for which our industry must be mindful.

REGULATORY ACTION AND UTILIZATION MANAGEMENT MITIGATES HIGH COSTS AND SAFETY RISKS One of the tools available to mitigate the aforementioned cost and safety concerns is regulatory action. Regulators and legislators around the country are exploring rules limiting the use of compounded medications, establishing price controls or fee schedules for compounded medications, or creating treatment guidelines that provide best practices surrounding the use of compounded medications. Some examples include Oklahoma’s requirement for pre-authorization for all compounded medications and Texas’ requirement for pre-authorization for any compound containing an Official Disability Guideline (ODG) nonformulary medication. Michigan requires utilization of compounded medications be authorized only if evidence of their usage meets several medical and scientific-based requirements. Georgia limits reimbursement to a maximum of three ingredients. Mississippi employs a dollar amount threshold per month. Additionally, Hawaii, Indiana, and North Carolina, are among a handful of states limiting reimbursement to the ingredients, based on AWP, using the NDC from the original manufacturer of the ingredient.

While sterile injectable medications, oral capsules or solutions and powders may be compounded for individual patients, the vast majority of compounded medications dispensed in the workers’ compensation system today are non-sterile topical products. Nationally-recognized medical guidelines, as well as many state guidelines and formularies, consider compounded medications— particularly those administered topically—as second or third-line therapy for many of the common industrial injuries and conditions experienced today.

NOVEMBER/DECEMBER 2015 | PUBLIC RISK

Applying Compounded Medications in Workers’ Compensation Utilization Review requirements, such as those in California are yet another regulatory tool. Meanwhile, workers’ compensation payers are deploying utilization management that evaluates the use of compounded medications based on the unique characteristics of the claim, medical necessity and availability of evidence-based medical guidelines. To bolster this evaluation, following is a list of questions that can help you carefully consider whether the use of compounded medications is a safe, efficacious course of therapy for the injured worker, thereby guiding the way towards a better outcome. 1. Has an adequate trial of first-line, oral medications been completed? If you’re seeing a compounded medication without first-line, oral medications, investigate why. 2. Are first-line oral medications available? There could be a shortage of commercially available first-line oral agents, or perhaps none exists.

Risk managers should be mindful of the exorbitant cost of compounded medications and potential safety risks to injured workers. By having processes in place to evaluate the ingredients in the compounded medication and the injured worker’s needs these risks can be mitigated. 3. Why is the patient unable to use oral medications? It is helpful to know why the patient cannot tolerate oral medicines, such as trouble swallowing. 4. Are there any comorbid conditions that might prevent the use of oral formulations? Underlying conditions may necessitate the use of a topical approach to pain management rather than using oral NSAIDs. 5. Does the patient have any allergies that might prevent the use of oral formulations? An oral medication that does not contain the allergen may perform as well, if not better. 6. Have other non-compounded, topical medications been tried? Many commercially available and over-the-counter topical medications may provide the same, if not better, relief. 7. Is the condition being treated compensable? Ensure the purpose of the compounded medication is related to the injury. 8. Are all the ingredients appropriate for the condition being treated? For example, a prescription for anticonvulsants wouldn’t make sense for an injury that doesn’t involve neuropathic pain.

PUBLIC RISK | NOVEMBER/DECEMBER 2015

9. Are the ingredients effective according to evidencebased guidelines? What do the ODG and American College of Occupational and Environmental Medicine (ACOEM) say about the ingredients of the compounded medication in relation to the injury? 10. Does the prescriber have any literature to support the use of the compound? Compounded medications are not subject to clinical trials; however, studies may exist on the efficacy of the individual ingredients and/or the compound itself. 11. Is there therapy class duplication with current oral medications? Therapeutic duplication increases the risk of drug-drug interactions, over-medicating, and other complications. 12. Is there ingredient duplication within the compounded medication itself? Lidocaine and Benzocaine, for example, are both local anesthetics, and not necessary in one compound. 13. Has there been an associated decrease in opioid utilization? If the opioid level has remained the same—or increased—because of the ingredients in the compounded medication, it may not be the right course of therapy. 14. Has the injured worker demonstrated improvement in function and/or quality of life? No reported improvement is a red flag that the medication therapy is in need of review. 15. How long does the physician plan on prescribing the compounded medication? The injured worker, payer, and physician should be aligned in their understanding of the treatment plan, its intended duration, and objectives. 16. Will a compounded medication cost less long-term than multiple oral medications? All things being equal look at the overall costs and determine the safest, most cost-effective approach. 17. How does the pricing of the compounded medication compare with the cost to create it? Identify the price at the ingredient level and compare it to the price paid for the compounded formulation.

THE RIGHT MEDICATION RESULTS IN BRIGHTER OUTCOMES While there is a place in therapy for compounded medications in workers’ compensation, such as when an injured worker has an allergy or condition that precludes them from taking a commercially available medication, the increase in utilization has raised a plethora of concerns in the industry. Risk managers should be mindful of the exorbitant cost of compounded medications and potential safety risks to injured workers. By having processes in place to evaluate the ingredients in the compounded medication and the injured worker’s needs these risks can be mitigated. Moreover, incorporating the 17 questions mentioned herein can further strengthen utilization management efforts, ensuring injured workers receive the right medication for their injury, resulting in brighter outcomes for everyone. Tron Emptage is the chief clinical officer for Helios.

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JUNE 5–8 , 2016 // ATL ANTA , G A REGISTR ATION OPENS IN JANUARY!

PRIMA’ S 2016 ANNUAL CO NFERENCE

RISK MANAGEMENT

ON MY MIND

TRENDING NOW

DOMESTIC DRONES By Scott Thomason and Elizabeth Wharton

PUBLIC RISK | NOVEMBER/DECEMBER 2015

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he use of drones, also referred to as unmanned aircraft systems (UAS), is becoming increasingly popular and affordable. Drones are small, unmanned, remotely operated aircraft. Drones provide inexpensive options for research, site inspections, search and rescue operations, crime scene investigations and aerial investigations. In addition to the swell in popularity, the drone industry is expected to create more than 100,000 jobs in the next 10 years, according to the Association of Unmanned Vehicle Systems International. As a result of technological advances and recent actions from the Federal Aviation Administration (FAA), more and more public agencies and higher education institutions are considering the implementation of drone flight programs. Local governments, higher education institutions and other public entities may operate drones upon receipt of a certificate of waiver or authorization (COA) from the FAA. The FAA has currently issued 79 COAs to public agencies and other organizations, including city, county and university law enforcement agencies as well as various state colleges and universities. The COA application process can be slow and cumbersome and not every COA application is approved by the FAA. A list of COA holders is available for review on the FAA website and the website also includes many resources, including guidelines for usage, frequently asked questions, regulations and policies.1 Commercial use of drones is currently barred unless the FAA issues an exemption, the most common of which is known as a “Section 333 Exemption.” As of March 5, 2015, the FAA has granted 42 Section 333 Exemptions for operations including aerial inspections for insurance purposes (State Farm Mutual Automobile Insurance Company), development of economic platforms for aerial survey, law enforcement, first responders, search and rescue (LowCountryRD, corporation), bridge inspections (Asymmetric Technologies), flare stack inspections (Total Safety U.S.), precision agriculture (Viafield), and closed-set filming (multiple companies).2 These commercial use exemptions enable local governments and law enforcement to skip the COA process and contract directly with third parties for the approved drone use.

KEY ISSUES

HOW ARE DRONES CATEGORIZED?

Access to and application of the drone technology is only one consideration. Although the advances in drone technology and application are impressive and the use is becoming more commonplace, key considerations for local government and higher education must be addressed, with the potential benefits weighed against potential threats and concerns. Those considerations must include balancing privacy rights and the protection of civil liberties against the collection and use of drone surveillance information.

The FAA currently classifies the use of drones in the national airspace system (NAS) into three categories: Civil, Public and Model Aircraft.4 Each category is subject to separate permitted operation conditions and restrictions.

Information retention and storage practices, either by the local government or its third-party contractor, also raise liability issues. The same technology used in the drone’s control, operation and surveillance is constantly collecting data (video footage, audio recordings and other bits of transmitted information). This data may constitute personal identifiable information protected by federal and state consumer privacy statutes. Under Vermont’s Security Breach Notice Act, for example, an individual’s name and driver’s license number constitutes “Personal Information.”3 Once collected, this data is then stored on servers and hard drives accessible via the entity’s computer network and systems. Unauthorized access to the information database would trigger a data breach incident. The City of Memphis police department, for example, had to spend $30,000 in monitoring fees and provide notices to thousands of individuals after hackers accessed the department’s incident report database in 2013.

Civil UAS Any private sector (non-governmental) operation of a drone for purposes other than recreation or hobby is considered a “Civil” operation.5 This category covers all commercial use of drones, including use by private universities and colleges. Pending the approval and implementation of the FAA’s proposed regulations introduced in February, 2015, there are only two methods of authorized Civil UAS flight: via a Section 333 Exemption or a Special Airworthiness Certificate (SAC).6 Generally, an SAC is granted in connection with research and development uses by private companies while Section 333 Exemptions are granted for commercial use in defined, low-risk, controlled environments.7 Exemptions under Section 333 are limited to the approved company’s specific use under the conditions outlined in the application. Use of a Section 333 Exemption also requires receipt of a COA.8 Public UAS Drones owned and operated by government agencies and organizations, such as state, county, city government agencies or public universities, are considered “Public UAS”. Commonly

NOVEMBER/DECEMBER 2015 | PUBLIC RISK

Trending Now: Domestic Drones

States have limited authority to enact and enforce drone-related legislation… States may regulate the use of unmanned aircraft by state or local law enforcement organizations and may pass legislation that addresses general

requested Public UAS operation uses include law enforcement, firefighting, disaster relief, and search and rescue.9 Public UAS may operate in civil airspace only with the issuance of a COA. Public UAS COA applications are submitted online then evaluated for operational safety.10 Approved COAs typically renew every two years and may include conditions such as limiting operations to daylight hours or other conditions.11 Normally non-emergency COA applications are reviewed within 60 days, although there are procedures in place to expedite the review of one-time time-sensitive emergency operation requests in as little as a few hours.12 Law enforcement organizations have a two-step process before it may operate its UAS.13 The organization must first receive a COA for training and performance evaluation (indicating proficiency in flying its UAS) then it may receive a jurisdictional COA.14

nuisance protections

Model Aircraft UAS used as “model aircraft” are small, unmanned aircraft (drones) operated strictly for recreational and hobby purposes. Flights in “furtherance or a business, or incidental to a person’s business” fall outside the scope of recreational or hobby flights.15

that include the

FEDERAL REGULATION

surveillance data

The current regulatory landscape for drone use is a patchwork of statutes and rules. The FAA Modernization and Reform Act of 2012, sought to address this by requiring

privacy concerns, such as voyeur or

collected by drones.

the FAA to fully integrate unmanned aircraft into the NAS by September 30, 2015, and to implement standards for drone operation. In compliance with the act, the FAA has designated six test range sites for use with both manned and unmanned flights. The Act requires a streamlined COA application process for use with Public UAS flights; requires a means of requesting commercial exemptions from the FAA for the operation of small Civil UAS (less than 55 pounds), referred to as “Section 333 Exemptions;” and bars the FAA from regulating model aircraft flights so long as they are operated in accordance with basic safety rules. Designated test sites are required, per FAA policy, to comply with state, local, and federal laws regarding privacy and civil liberties and all operators at the site must provide a written plan for the storage and use of all collected test data.16 On February 15, 2015, the FAA released the first draft of their long-awaited proposed small drone regulations, titled “Operation and Certification of Small Unmanned Aircraft Systems” (Proposed Rules).17 The Proposed Rules, as first published, provide that drone operators must be over the age of 17 and must obtain a license prior to commencing flight operations. Small drones (under 55 pounds) may only be flown under 500 feet above ground level during daylight hours at airspeeds not to exceed 100 mph. The operator or their visual observer must maintain a visual line of sight on the drones at all times during operation. Safety and privacy considerations include a prohibition against operating drones over bystanders (defined as anyone not directly involved in the drone’s operation).18 Privacy protections, with respect to surveillance data collection and its storage, are noticeably absent in large part from the Act and the Proposed Rules. To fill this gap, the White House issued a presidential memorandum on February 15, 2015, directing federal agencies to evaluate, monitor, and report their policies for protecting private information gathered via drones.19 The new rules require federal agencies to review their current policies and create additional policies as may be needed in order to ensure adequate protection of personal, private data collected via surveillance flights and ensure compliance with existing constitutional or statutory privacy and free speech protections. Agencies are directed to release an annual report disclosing locations of surveillance drone operations and to conduct follow-up policy audits every three years. Information collected by an agency’s drone surveillance operations may only be used when consistent with an authorized purpose and any data containing personal identifiable information must be destroyed after 180 days unless expressly required for an agency’s ongoing authorized mission.20 Public entities and higher education institutions should review and address their surveillance collection and retention policies in light of the February, 2015 White House privacy memorandum.

PUBLIC RISK | NOVEMBER/DECEMBER 2015

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STATE AND LOCAL OVERSIGHT States have limited authority to enact and enforce dronerelated legislation. Control over flight and safety in the NAS are under the federal government and FAA purview. Therefore federal law will preempt any state or local law regarding the operation of a drone in NAS.21 States may regulate the use of unmanned aircraft by state or local law enforcement organizations and may pass legislation that addresses general privacy concerns, such as voyeur or nuisance protections that include the surveillance data collected by drones.22 This is resulting in variations state by state. Florida, Utah, and Montana prohibit law enforcement agencies from using drones without first obtaining a probable cause warrant or in an emergency.23 Virginia lawmakers imposed a moratorium on all state and local law enforcement drone use through July, 2015, regardless of whether a warrant has been issued or an emergency exists.24 In Wisconsin, it is a misdemeanor for a private individual to use a drone to “photograph, record, or otherwise observe another individual in a place where the individual has a reasonable expectation of privacy.”25 In 2014, 35 states considered unmanned aircraft-related legislation and 2015 is shaping up to be no different.26 Privacy and the use of captured surveillance images are the main focus for a majority of the state and local government proposals. The Virginia state Senate and House of Representatives have both passed legislation to prohibit and limit law enforcement use of drones; those bills are currently pending revisions. Georgia already has three drone-related bills pending in its current legislative session; all bills include language restricting the collection and use of drone surveillance images. The Washington state House of Representatives passed two drone surveillance related bills at the beginning of March, one of which requires law enforcement agencies to obtain legislative approval prior to the purchase of drones and to obtain a warrant for any non-emergency uses (the bills are pending in the state Senate).27 In 2013, Charlottesville, Virginia was the first city to pass anti-drone legislation. Not to be outdone, the cities of Berkeley, California; Deer Trail, Colorado; Iowa City, Iowa; Pierce County, Washington and Rancho Mirage, California have all introduced proclamations to regulate the domestic use of drones.28 Public entities and higher education institutions need to be aware of local and state regulations—especially because these will continue to evolve over the coming years.

DRONE UNKNOWNS—COVERAGE, LIABILITY, ACCEPTABLE USE Operation of drones either directly or through third party contractors exposes entities to myriad risks and potential liabilities, ranging from the operation of the drones to the collection and protection of all data collected. All contracts and agreements with third parties relating to the use of drones should contain provisions outlining the proposed flight operations

and data privacy protections, ensuring compliance with all applicable federal, state and local requirements. Public entities are not automatically immune from liability in the event of a data breach. In addition to any federal requirements, 45 states each have their own data breach statutes. As a general rule under various data breach statutes, entities can be held liable when third-party business associates fail to use common data protection standards. Notification costs alone required per a state statute can strain an entity’s budget and financial resources. In addition to incorporating minimum data protection provisions in all contracts, entities should also include hold harmless and release provisions for third party actions. The National Transportation Safety Board (NTSB) confirmed in a landmark November 2014 decision that the FAA has the authority to levy fines and other penalties for unsafe drone operations.29 There, a third party operator capturing film footage of the campus on behalf of the University of Virginia was fined $10,000 for “unsafe operations” (the case later settled for a reduced fine of $1,100).30 Before utilizing drones, entities should, at a minimum, consider the following coverages when evaluating their exposures: General Liability: Some insurers will provide coverage for drones at no additional charge while other insurers are currently excluding such coverage. Before owning or operate a drone, coverage related to invasion of privacy claims should be assessed.

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Trending Now: Domestic Drones Property Liability: Coverage for the drone itself is not guaranteed if it is damaged; a property insurer may or may not cover this type of mobile equipment.

CALENDAR OF EVENTS PRIMA’s calendar of events is current at time of publication. For the most up-to-date schedule, visit www.primacentral.org.

WEBINARS 2015 • November 18 – Employment Practices Liability: Mitigating Risks

PRIMA ANNUAL CONFERENCES June 5–8, 2016 PRIMA 2016 Annual Conference Atlanta, GA Hyatt Regency Atlanta June 4–7, 2017 PRIMA 2017 Annual Conference Phoenix, AZ Phoenix Convention Center June 3–6, 2018 PRIMA 2018 Annual Conference Indianapolis, IN Indiana Convention Center

ENTERPRISE RISK MANAGEMENT: APPLYING THE ISO 31000 STANDARD Intro Workshop Dates & Locations September 29 – Savannah, GA Implementation Workshop Dates & Location November 18 & 19 – Savannah, GA

PRIMA INSTITUTE November 4–6, 2015 Albuquerque, NM PRIMA INSTITUTE 2016 October 24–28, 2016 Pittsburgh, PA

PUBLIC RISK | NOVEMBER/DECEMBER 2015

Aircraft or Aviation Liability: Drone liability coverage may be purchased from the aviation marketplace. Public entities considering use of drones directly or through third part contractors should become familiar with applicable FAA regulations and state statutes. Cyber Risk Liability: Cyber liability insurance addresses gaps in coverage for expenses that may arise in the aftermath of a data breach. Depending on the policy, covered expenses may include the legal costs and costs associated with notifying all of the impacted individuals. Scott Thomason is an area vice president for Arthur J. Gallagher Risk Management Services. Elizabeth Wharton is an attorney with Hall, Booth Smith, P.C.

FOOTNOTES 1 https://www.faa.gov/uas/public_operations/foia_responses/ (updated as of March 5, 2015) 2 https://www.faa.gov/uas/legislative_programs/section_333/333_authorizations/ (last modified March 4, 2015) 3 9 V.S.A. §2430(5) 4 FAA Fact Sheet – Unmanned Aircraft Systems (UAS), issued February 15, 2015 (http://www.faa.gov/news/fact_sheets/news_story.cfm?newsId=18297 ) 5 https://www.faa.gov/uas/civil_operations/ (last modified March 4, 2015) 6 https://www.faa.gov/uas/civil_operations/ (last modified March 4, 2015) 7 https://www.faa.gov/uas/civil_operations/ (last modified March 4, 2015) 8 https://www.faa.gov/uas/civil_operations/ (last modified March 4, 2015) 9 FAA Fact Sheet – Unmanned Aircraft Systems (UAS), issued February 15, 2015 (http://www.faa.gov/news/fact_sheets/news_story.cfm?newsId=18297 ) 10 FAA Fact Sheet – Unmanned Aircraft Systems (UAS), issued February 15, 2015 (http://www.faa.gov/news/fact_sheets/news_story.cfm?newsId=18297 ) 11 FAA Fact Sheet – Unmanned Aircraft Systems (UAS), issued February 15, 2015 (http://www.faa.gov/news/fact_sheets/news_story.cfm?newsId=18297 ) 12 FAA Fact Sheet – Unmanned Aircraft Systems (UAS), issued February 15, 2015 (http://www.faa.gov/news/fact_sheets/news_story.cfm?newsId=18297 ) 13 FAA Fact Sheet – Unmanned Aircraft Systems (UAS), issued February 15, 2015 (http://www.faa.gov/news/fact_sheets/news_story.cfm?newsId=18297 ) 14 FAA Fact Sheet – Unmanned Aircraft Systems (UAS), issued February 15, 2015 (http://www.faa.gov/news/fact_sheets/news_story.cfm?newsId=18297 ) 15 FAA Interpretation of the Special Rule for Model Aircraft, 14 CFR Part 91, June 2014 16 78 FR 68360, published November 14, 2013 17 http://www.gpo.gov/fdsys/pkg/FR-2015-02-23/pdf/2015-03544.pdf ; Operation and Certification of Small Unmanned Aircraft Systems; Proposed Rule, 14 CFR Parts 21,43, 45, et al. (published Monday, February 23, 2015) 18 http://www.gpo.gov/fdsys/pkg/FR-2015-02-23/pdf/2015-03544.pdf ; Operation and Certification of Small Unmanned Aircraft Systems; Proposed Rule, 14 CFR Parts 21,43, 45, et al. (published Monday, February 23, 2015) 19 http://www.whitehouse.gov/the-press-office/2015/02/15/presidential-memorandumpromoting-economic-competitiveness-while-safegua 20 http://www.whitehouse.gov/the-press-office/2015/02/15/presidential-memorandumpromoting-economic-competitiveness-while-safegua 21 49 U.S. Code § 40103(a)(1) 22 See, Wells C. Bennett, Civilian Drones, Privacy, and the Federal-State Balance, Brookings Institute, September 2014 23 See, Bennett, Civilian Drones, Privacy, and the Federal-State Balance, citing Fl. Stat. § 934.50; Ut. Code § 63G-18-101; Mt. Code Ann. § 46-5-109-110 24 see http://www.washingtontimes.com/news/2014/oct/10/drones-cant-be-used-va-searchwarrants-ag/#! (Virginia Attorney General confirming the moratorium through July, 2015) 25 Wisc. Stat. Ann. § 942.10 26 2014 State Unmanned Aircraft Systems (UAS) Legislation, NCSL (www.ncsl.org/ research/civil-and-criminal-justice/current-uas-state-law-landscape.aspx) 27 http://www.thenewstribune.com/2015/03/04/3670313_washington-house-passes-bill-to.html 28 Institute for National Security and Counterterrorism (INSCT) 29 Huerta v. Pirker, NTSB Docket CP-217 (November 18, 2014) 30 http://www.wsj.com/articles/u-s-federal-aviation-administration-settles-withvideographer-over-drones-1421960972

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OVER-ZEALOUS ZONING Challenges for the Public Risk Manager

By Joe Jarret

t is a scenario that replicates itself across America’s counties, towns, cities and parishes on almost a daily basis: a liquor store, sexually oriented “adult” business, or a religious-based facility is proposed to be built near an established residential or commercial area and local residents or business owners are up in arms. Locally-elected politicians hear the “not in my backyard” or NIMBY call to arms and hasten to respond. Sometimes, these officials, through their respective planning and zoning departments, respond too hastily and without the benefit of conferring with legal counsel or their entity’s risk manager. Claims are filed, lawsuits ensue and public money is often squandered. This piece will explore a potential exposure that often manifests itself long before the public risk manager is brought into the liability mix.

THE ZONING PROCESS To belabor the obvious, zoning is the way that governments control the physical development of land and the kinds of uses to which each individual property may be put. Although zoning classifications can differ somewhat from jurisdiction to jurisdiction, the most frequently used groups are commercial, industrial, residential and agricultural. Zoning review can be a very bureaucratic process. It involves handling a lot of paper—site plans, special permits, subdivisions, appeals, building permits, certificates of compliance and enforcement actions. Properly managing this paperwork and keeping it organized is often difficult, even in the best of circumstances. As such, zoning and planning officials generally don’t interact with their legal team unless there’s a move to change the regulations, or an aggrieved property owner files an appeal of a decision made by the local zoning authority. Interaction with the entity’s risk manager is even more infrequent. Although an entity’s planning and zoning department deals with myriad land use issues such as drafting and enforcing the comprehensive land use plan, determining how various parcels of land should be zoned, e.g. residential, commercial, etc., the more common issues involve nonconforming uses, conditional uses, zoning variances and spot zoning. They are explored briefly below: Nonconforming Use A nonconforming use arises when there’s a conflict between the existing property use and a new zoning law. It’s common for the existing use or qualities of a property to conflict with new zoning regulations. Two ways a use may be nonconforming are: • The nature or a characteristic of a building doesn’t meet zoning laws • The activity going on in the building doesn’t conform to the law For example, a factory located in a residential zone is a nonconforming use. A two-story building located in a one-story zone is also a nonconforming use. Although most state and local zoning laws don’t require landowners to stop or change an existing nonconforming use when a new zoning law is passed, nevertheless, the right to continue a nonconforming use may be limited in time, or eliminated outright if the property owner abandons the use. Conditional Use A conditional use is when the particular use of land is allowed by a zoning law, but is subject to certain conditions. For example, a zoning ordinance may permit professional offices in a residential zone, provided the business provides off-street parking for patrons. Variances A variance or special use permit is an exception to zoning ordinance requirements. Most state and local laws allow a government body to adopt zoning ordinances that provide the specifics for granting variances. For example, a person owns and odd-sized lot that prevents the construction of a useful structure unless a variance is granted. Where governments often run afoul of the law and a claim is filed is when such variances are meted out inconsistently.

PUBLIC RISK | NOVEMBER/DECEMBER 2015

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Spot Zoning Local land use plans and zoning ordinances usually contain restrictions on land uses in specific areas (or “zones”) outlined in the plan or ordinance. Once a local government adopts a zoning plan and ordinance, property owners may seek exceptions to the requirements and limitations, either through: • A plan or ordinance amendment, or, n application for a variance or special use permit In both cases, there may be opposition on the ground that the exception conflicts with the overall land use plan or ordinance and amounts to “spot zoning.” The most common definition of spot zoning is “the process of singling out a small parcel of land for a use classification totally different from that of the surrounding area for the benefit of the owner of such property and to the detriment of other owners.”1 Spot zoning claims are fact specific and often result in costly, protracted litigation. All of the above actions by zoning officials can lead to claims by property owners who feel that they have been deprived of the highest and best use of their land. Alternatively, claims likewise arise when neighboring citizens feel that they have been aggrieved precisely because another landowner has been permitted to use their land or site a business repugnant to their interests or beliefs. Like any challenge to an entity’s zoning ordinance, the risk manager should be involved in the beginning stages of such actions.

SPECIFIC CLAIMS & CHALLENGES: Adult-Oriented Businesses Of the claims filed against local governments relative to zoning, the most challenging and costly are those related to the regulation of what the Supreme Court refers to as “non-obscene expression,” whether in the form of sexually explicit books, magazines, movies, or dancing. Such businesses are viewed by our courts to be entitled the constitutional protections provided for by the First Amendment guarantee of free speech and expression. Consequently, when zoning regulations impinge on an adult business’s freedom of expression, they lose the presumption of constitutionality that normally applies to zoning regulations and the burden shifts to local governments to justify the restrictions. In order to avoid constitutional problems, zoning regulations pertaining to adult uses must be drafted with skill and precision and not in a vacuum. In other words, both the entity’s attorney and risk manager should be part of the drafting process. While the attorney will more likely be interested in the due process aspects of the ordinance, the risk manager will have a heightened sense of concern over the grievance and appeals processes, both of which are breeding grounds for claims. Prior to adopting such zoning regulations, a local government must generally show that it conducted or relied upon planning studies evidencing the need to protect neighborhoods from the

harmful secondary effects of adult businesses. Some studies have identified such adverse secondary effects as urban blight, decreased retail shopping activity and reduced property values. However, courts will strike down regulations that seek to exclude all adult uses through an outright ban. Therefore, adult uses may be restricted (even substantially) within a community through zoning regulations, but may not be entirely prohibited. When drafting adult use zoning legislation, many public entities typically choose between two zoning techniques, which either: 1) concentrate adult uses in a single geographic area of the locality or 2) disperse adult uses using distance requirements. By concentrating adult uses in a specific area of the community, some municipalities believe these uses will affect fewer neighborhoods and can be avoided by persons who are offended by them. Other municipalities have taken the opposite approach and require that sexually oriented uses be separated from one another or from residential areas. Constitutional scholar David A. Thomas2 suggests that a local ordinance that attempts to completely ban a sexually oriented business because it dealt in obscene materials, expression or conduct would likely be held unconstitutional. He likewise asserts that a local ordinance that regulates where the business could be located or some aspects of how it operated, in order to reduce adverse effects of the business, could pass court muster. The reason for this assertion is that such regulation could be considered “content neutral,” not seeking directly to suppress expression on account of its allegedly obscene nature, but seeking rather to regulate only the “time, place and manner” in which the expression would take place.3

Although an entity’s planning and zoning department deals with myriad land use issues such as drafting and enforcing the comprehensive land use plan, determining how various parcels of land should be zoned, e.g. residential, commercial, etc., the more common issues involve nonconforming uses,

The United States Supreme Court has provided government with a four (4) part test for determining when it is permissible to use zoning to single out adult uses without violating the First Amendment of the U.S. Constitution. In determining the constitutional validity of a zoning regulation, courts must consider whether:

conditional uses, zoning variances and spot zoning.

 The predominant purpose of zoning is to suppress the sexually explicit speech itself, or rather, to eliminate the “secondary effects” of adult uses;  The zoning regulation furthers a substantial governmental interest;  The zoning regulation is “narrowly tailored” to affect only those uses which produced the unwanted secondary effects; and  The zoning regulation leaves open reasonable alternative locations for adult uses.4 David A. Thomas suggests that drafters pose several key questions to themselves that may help determine the validity of the ordinance: • Does the ordinance serve a substantial and legitimate governmental purpose?

NOVEMBER/DECEMBER 2015 | PUBLIC RISK

Over-Zealous Zoning: Challenges for the Public Risk Manager

FOOTNOTES 1 Anderson’s American Law of Zoning, 4th Edition, § 5.12 (1995) 2 David A. Thomas, [Rex E. Lee Endowed Chair and Professor of Law, J. Reuben Clark Law School, Brigham Young University, Provo, Utah. 3 For a thorough study on the regulation of sexually oriented businesses and the 1st Amendment, see, Thomas, D. A. (2008). Tips for Successfully Regulating Sexually Oriented Businesses. Prob. & Prop., 22, 43. 4 City of Renton v Playtime Theaters, 475 US 41, 89 L Ed 2d 29, 106 S Ct 925 (1986) 5 Thomas, D. A. (2008). Tips for Successfully Regulating Sexually Oriented Businesses. Prob. & Prop., 22, 43. 6 42 United States Code § 2000cc-1 et seq (2006). 7 See Foster, K, Residential Care Facilities in the Neighborhood: Federal State & Local Government Requirements. California Research Bureau

• Does the ordinance declare a purpose that could be construed as suppressing free expression? • Does the ordinance’s particular method of regulation relate to the legitimate governmental purpose in promulgating the regulation? • Does the ordinance contain procedures that might be construed as any form of “prior restraint”? • Does the ordinance contain definitions or restrictions that might be construed as too broad? • Does the ordinance contain provisions that may be too vague on when it comes to unguided discretion in public officials or agencies? • Does the ordinance provide for reasonable review procedures? 5 By posing these questions and engaging in objective debate, the entity increases its chances of proposing legislation that minimizes exposure or the probability of challenge by affected landowners or other concerned citizens. Churches & Religious Organizations On the other end of the regulation continuum are religious organizations. Despite the fact that churches and religious organizations are regulated by the same zoning laws as other entities or institutions, some local governments have purposely enacted zoning ordinances specifically designed to prevent churches and other tax-exempt organizations from building in certain areas, either to appease constituents or increase tax-revenue. Such practices lead to Congress’ passage of the Religious Land Use and Institutionalized Persons Act (RLUIPA), a law designed to protect churches and religious organization from zoning ordinances that single out such organizations for disparate or different treatment, by placing an unnecessary or substantial burden on a person or organization’s ability to worship. Consequently, if a church or religious organization could show that a zoning ordinance imposed a substantial burden on it, then the zoning authority could only apply that ordinance to the church unless it demonstrated to the court’s satisfaction that it had a compelling government interest to do so and that it used “the least restrictive means of furthering that compelling governmental interest.”6 For example, let’s say a municipality, through its zoning regulations provided that non-religious membership organizations and community centers could locate within an industrial zone, while simultaneously excluding churches or religious organizations from that same zone. Such a double standard would probably run afoul RLUIPA. Incidentally, the United States Supreme Court upheld the constitutionality of RLUIPA in the 2005 in the case of Cutter v. Wilkinson, 544 U.S. 709 (2005). Residential Care Facilities According to mental health and rehabilitation specialists, persons with physical and mental disabilities and other

PUBLIC RISK | NOVEMBER/DECEMBER 2015

special needs, deserve to live in residential communities (in contrast to an institution)—and in fact thrive in those residential neighborhoods that allow them to participate in and become a part of, that community. However, like adult businesses and religious organizations, local governments often face concern from homeowners that these residential facilities will have a negative impact on their neighborhoods.7 The right of individuals with special needs to live in the community versus the right of neighbors to preserve the integrity of their neighborhood results in the longstanding conflict between federal, state and local government requirements that affect zoning and land use regulations and often generate claims by citizens on both sides of the argument. Two federal laws impact local land use practices with respect to residential care facilities. The Fair Housing Act, which promotes the integration of individuals with disabilities into the community and the Americans with Disabilities Amendment Act (ADAA) which prohibits discrimination against individuals with disabilities. Claims founded in violation of either act are most commonly filed in federal court and more often than not are protracted and costly. The two more common types of facilities that draw the most ire from residents and business owners are Alcoholism or Drug Abuse Recovery or Treatment Facilities and Congregate Living Health Facilities, which are small facilities that provide care to individuals who are severely physically or developmentally disabled, or terminally ill. When it comes to local governments’ approach to such matters, the overarching public policy issue is almost universally a balancing of the rights of individuals with special needs to live and participate in the community with the rights of the individuals to protect the welfare of their families and their neighborhoods. Unfortunately, many local governments tend to favor the rights of established residents through zoning regulations or the application of those regulations beyond that which they were designed. As with the proposed location of other controversial entities, the risk manager should be placed on notice whenever an application is presented to the zoning department. In today’s litigious society, the days of the risk manager being marginalized or ignored outright when it comes to zoning disputes, have come to an end. The risk manager can prove to be a valuable asset when controversial matters of this ilk challenge local government zoning laws. By including the risk manager at the outset, government entities increase the chances of reducing their liability and claims exposure exponentially. Joe Jarret is an attorney, federal & state mediator and former public risk manager who lectures for the University of Tennessee.

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Has your entity launched a successful program? An innovative solution to a common problem? A money-saving idea that kept a program under-budget? Each month, Public Risk features articles from practitioners like you. Share your successes with your colleagues by writing for Public Risk magazine! For more information, or to submit an article, contact Jennifer Ackerman at jackerman@primacentral.org or 703.253.1267.

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Member Spotlight

HOW DID A COLORADO POOL UTILIZE DR. SEUSS TO TEACH SAFETY? features a member who has gone above and beyond in a feature column titled “Member Spotlight.” Do you know someone who deserves recognition, has made a contribution or excelled in their profession? If so, we’d like to hear from you for this exciting column, as PRIMA shines the spotlight on its members. To be considered for the Member Spotlight column, contact Jennifer Ackerman at jackerman@primacentral.org or 703.253.1267.

“

This 26-minute video includes various scenarios to show how two new workers are introduced to the safety culture at a parks department. Topics reviewed include: • • • • •

Personnel policies Hazard awareness and control Environmental hazards Safe driving techniques Emergency procedures.

To help demonstrate these topics, the characters are shown performing various tasks using tools and equipment common to parks and forestry departments. This includes vehicles with trailers, lawn mowers, hedge and edge trimmers, chain saws, chippers, bucket lift trucks and ladders. Other topics included in the video are cell phone use, proper lifting techniques, sun exposure, chemical safety, and first aid.

“Our members felt that there was a need for a video tailored toward government agencies that emphasized personal safety responsibility and safety for fellow employees as part of a safety culture,” said Chris Krall, executive director. “Since new employees often sustain a higher number of injuries and accidents, the video was made to be used for training upon hire as well as a refresher for experienced staff.” The topic was selected by CIRSA’s safety committee and created by CIRSA’s staff and video task force. The filming involved 52 employees and six day of filming at multiple locations around the city. Krall says that the video’s contents could be applied to any public entity. “This information may be modified to fit any size organization based on individual exposures, specific job tasks and used as a training tool such as a toolbox topic to increase employee awareness,” Krall said. CIRSA’s video recently won an Honorable Mention in PRIMA’s 2015 Achievement Awards program. For more information on CIRSA’s Green Megs and Sam safety video program, contact Channa Chavez at channac@cirsa.org.

Our members felt that there was a need for a video tailored toward government agencies that emphasized personal safety responsibility and safety for fellow employees as part of a safety culture.

“

Each month, Public Risk

ew employees are more susceptible to injuries since they are often inexperienced and lack the knowledge and skills need to perform their jobs safely. CIRSA, a risk pool in Colorado, developed a video and handbook, Green Megs and Sam: Safety Awareness for New Employees Working Outdoors, to help public entities avoid some of the risks associated with new employees working outdoors.

Chris Krall, executive director, CIRSA

PUBLIC RISK | NOVEMBER/DECEMBER 2015

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STATES OFFERS YOU: • A BROADLY INTERPRETED EXCESS LIABILITY COVERAGE FORM THAT IS SECOND TO NONE IN THE INDUSTRY. • PREMIUM STABILITY AND SOUND FINANCIAL RESULTS FOR OUR PARTNER MEMBERS – MEMBER PREMIUMS ARE INVESTMENTS IN THEIR OWN COMPANY. • EXCELLENT CLAIMS AND LOSS CONTROL SUPPORT, INCLUDING ON-SITE. • SPECIALIZED PUBLIC ENTITY-ORIENTED SERVICES FROM EXPERIENCED, SERVICE-DRIVEN PROFESSIONALS.

FOR INFORMATION CONTACT: STATES SELF-INSURERS RISK RETENTION GROUP, INC. AT 1-800-640-0345, EXTENSION 3310, OR VISIT OUR WEBSITE AT WWW.STATESRRG.COM

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