OSHA as Insurance

By David H. Glabe, P.E. / November 28, 2012

Insurance is a big deal.  There’s life insurance, medical insurance, insurance for insurance (reinsurance) and scaffold insurance, to name a few.  Generally, the purpose of insurance is to reduce financial risk for an individual entity; frankly, another way to look at it is that insurance shares the risk with other similar individual entities.  For example, life insurance works for both the insurer and the insured because we don’t all die at the same age.  Scaffold insurance works because not all scaffold companies are having accidents all the time.  Actuaries use data to determine the risks involved for the activity.  If the actuaries get it right, the insurance company makes money and the insureds are protected against disaster.

What if OSHA could be reorganized as an insurance company?  Now, don’t laugh—well not yet anyway.  Let’s see how this might work, using the insurance industry as a model.  Insurance companies evaluate the risk of the activity, determine the cost, and establish a rate to charge the client.  If general liability insurance is the product, the insurance company will look at the costs that companies incur doing business.  For scaffold companies, it will include accidents, lawsuits, injuries and deaths.  Once the risk is established, an adequate premium is determined to make sure the insurance company doesn’t lose any money.  However, taking the same model and applying it to OSHA standards and more importantly, to violations and citations, requires some manipulation and imagination.

Here’s how it would work.  Consider OSHA as the insurance company and the scaffold company as the insured.  Each year a scaffold company would invite OSHA onto any number of its projects for an inspection.  If there are no violations of the applicable OSHA standards, the company would get credit points.  We could call the credit points “OSHA bucks.”  These OSHA bucks would be insurance against future inspections that OSHA does without announcement, like they do today.  A scaffold company could bank these OSHA bucks similar to an insurance policy.  For example, assume a scaffold company has a general liability policy valued at 2 million dollars.  It could similarly bank 2 million OSHA bucks to be used in the future.  If OSHA shows up on a job and finds a violation, the scaffold company would pay the fine with OSHA bucks.

There probably would be a question about how many bucks a scaffold company could get.  Right now the way the system works is that if there is a single violation, the scaffold company wins a citation and gets to pay a hefty fine.  For example, on a scaffold that has a thousand guardrails, if only one guardrail is missing, the company fails the test and is cited.  Therefore, it is only fair that a buck should be given for each component of the scaffold.  If the suspended scaffold has 749 components there are 749 bucks in play.  Conversely, if an investigation of the scaffold reveals that only one component is missing, then OSHA is only entitled to one buck.

Actually, this system could be advantageous to the entire industry.  OSHA bucks could be traded between scaffold companies.  For example, scaffold company A, which constructs really good scaffolds, could trade OSHA bucks for some real money from company B which just can’t seem to build scaffolds correctly.  Contrary to the present system where OSHA can bargain away the monetary value of an impending fine, under this new system OSHA would not be allowed to trade bucks; in fact they wouldn’t have any bucks in their possession for trading.

To make the concept legitimate, there would have to be referees to make sure both the employer (scaffold company) and OSHA were behaving.  The referees would be independent, objective individuals who have a thorough understanding of scaffolding and the standards.  They would be paid by both the scaffold company and OSHA so that there would be no question about fairness.  Alternatively, these referees would be paid by the “loser”, that is, either the scaffold company who does have a violation, or OSHA if there are no violations.

You don’t think this is a good idea?  Here are a few advantages of such a system:

  1. Every time OSHA is invited onto a project, the individual Compliance Safety & Health Officer (CSHO) would learn about correctly constructed scaffolding.  (It’s assumed OSHA wouldn’t be invited onto a jobsite if the scaffold wasn’t correct.);
  2. Scaffold company employees would learn how to construct scaffolds correctly since an inspection is known to be occurring;
  3. CSHO’s would have to know their stuff;
  4. Scaffold companies would have to know their stuff since CSHOs would know their stuff;
  5. Informal hearings, formal hearings, and trials would be abolished;
  6. Ridiculous citations would be eradicated;
  7. Preposterous scaffold company claims would be eliminated;
  8. Resources would be spent on prevention, not enforcement and defense.

Just think how exciting this would be; instead of OSHA being the sheriff, as declared by the Department of Labor several years ago, employers, employees and OSHA would live in harmony since they all would realize that there are some big OSHA bucks at stake.  Of course, the current situation involves some very serious money too.  Unfortunately, it’s the employers that are handing out the money when the citations are unwarranted citations, brought on by inadequate understanding of the standards and scaffolding.  Unfortunately, there is no insurance for that.

Tags: OSHA Standards & Regulations Resources

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David H. Glabe, P.E.

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