Nevada cities may now be on the hook for hundreds of millions of dollars more in workers compensation for lung disease claims from first responders after a surprise bill passed out of the recent special legislative session.

The bill, SB7, addresses a recent state Supreme Court ruling that first responders must prove their lung diseases were a result of being exposed to worksite hazards to receive benefits and compensation. 

Supporters including advocates for firefighters and police officers said the ruling undermined legislative intent dating to 1989, and called the legislation critical to protecting those who are putting their lives at risk in public service. They say the fiscal costs are negligible in light of what first responders face.

The city governments of Las Vegas, Reno, Henderson and North Las Vegas gave estimates ranging from tens of millions to hundreds of millions of dollars in future costs for heart and lung-related claims. Other jurisdictions also indicated raised costs.

Local governments want to take care of first responders, said Warren Hardy, a contract lobbyist for the Urban Consortium consisting of the cities of Las Vegas, Henderson, North Las Vegas, Reno and Sparks. But he noted that already cash-strapped municipalities will likely struggle to meet the new costs, and it could especially cause problems for rural regions.

“I just don’t know how they absorb that without looking at other programs,” Hardy said about the potential for cuts. “It’s a big number. It’s going to be statewide. It’s going to be in the hundreds of millions of dollars over the biennium.” 

Hardy and others note that long-term disability payouts for conditions such as COVID can run local governments up to $6,000 a month per person. He said fears surround an unknown number of people claiming long-term disability for previously denied conditions such as asthma, COVID or Chronic Obstructive Pulmonary Disease.

Some of the higher end estimated fiscal effects include all active public safety personnel designated under the law making claims, which is unlikely to play out.

Supporters of the legislation, including first responder unions and attorneys representing workers compensation claims, said municipalities should have already expected the costs in their budgets because there was precedent under existing law that lung disease-related claims do not require proof of causation.

The bill, which passed on a 33-6 vote in the Assembly and 15-5 vote in the Senate, clarifies existing law in two key ways: Service members only have to serve two years to qualify for coverage instead of five — something proponents said has been in place since 2015 — and it specifies that a lung disease is not required to be caused by exposure to gas or other inhalants while on the job in order to receive disability benefits for police officers, firefighters or arson investigators while employed or those who are retired and completed 20 years of service.

Nevada and 35 other states and jurisdictions all address lung issues in their presumptive eligibility laws for firefighters and other first responders, though laws vary on comprehensiveness and coverage. The District of Columbia, Hawaii and Iowa all address “respiratory” issues, which is similar to the coverage under SB7.

Ryan Beaman, a district vice president for the Professional Fire Fighters of Nevada, described the law as a restoration of benefits rather than an expansion. 

He and past lawmakers in legislative hearings noted that in 1989, legislators acknowledged that demonstrating causation for heart and lung disease was impossible. So they implemented a law establishing protections known in legal terms as “conclusive presumption,” meaning that for certain first responders, a heart or lung condition is automatically considered work-related without the individual having to prove a link to the job. It recognizes that an occupation can lead to health issues.

The Supreme Court decision left the heart conditions untouched, which Beaman, an active firefighter, said created an “unjust disparity” that holds hearts as worthy of protection — but not lungs.

“I try not to get emotional,” Beaman said, adding he has witnessed family members and colleagues pass away from lung disease. “It hits home personally.” 

Beaman said his father-in-law was a firefighter for 20 years before he eventually died from lung cancer. When he first developed the disease, Beaman said his claim was initially denied and had to be challenged. After winning an appeal to get coverage, Beaman said medical treatment helped. 

“I watched his health deteriorate when he couldn’t get treatment, and seen that process take place,” Beaman said. “Ultimately, he lived for about another 10 years. His grandkids got to know their grandfather.” 

Though the bill was not initially outlined as an issue to address in Gov. Joe Lombardo’s proclamation calling the special session, Legislative Counsel Bureau attorneys determined it fell within the far-reaching scope of the session’s agenda.

Lombardo signed the legislation into law Nov. 29, but in a nod to some of the contention around it, his office wrote it may need adjustments.

“This measure was passed with great expediency, and will therefore require additional collaboration … to ensure the continued stability of the affected workers’ compensation statutes,” a press release from Communications Director Elizabeth Ray read. “The Office of the Governor will take an active role in facilitating this collaboration.”

Nevada Supreme Court weighs in

In the Nov. 13 three-member panel ruling, Supreme Court Justice Elissa Cadish wrote that police officer John Holguin was not eligible for coverage from his employer, the City of Henderson, after getting COVID from a co-worker because the disease was not from direct exposure to noxious gases or other inhalants. Holguin was hospitalized for hypoxia, pneumonia and shortness of breath in 2021 for 23 days after getting COVID. His compensation claim was denied later that same year before he appealed the decision.

The City of Henderson’s legal representation declined to comment for this story. 

“It was mind-boggling,” Beaman said about the Nov. 3 decision because lung disease coverage had been enshrined in Nevada law for more than three decades. “Everybody was surprised.” 

Holguin v. The City of Henderson arrives as the number of lung-related employee compensation claims has sharply risen in the wake of the COVID pandemic.

In 2020, 2021 and 2022, state reports reviewed by The Nevada Independent show a dramatic increase in lung disease claims for firefighters, police officers and arson investigators. 

Angelica Honsberg, an assistant professor at UNLV’s medical school and a pulmonary doctor, said firefighters are more at risk for developing serious respiratory illnesses. From her personal experience, she treated several firefighters during the height of the pandemic who died after contracting COVID. 

Honsberg said the increased number of claims filed during 2022 or 2021 could be caused by COVID, but it would be impossible to tell for sure. She said it could also be because there is more awareness of the risks of lung diseases and therefore a higher diagnosis rate. 

If anything, Honsberg said casino employees, cashiers, restaurant workers or any worker that comes in contact with “a lot of people” could see COVID as an occupational hazard. 

As a pulmonologist, Honsberg said she is acutely aware of the devastating effects lung disease can have on patients and their families. If left to her, she said any person experiencing lung disease should be covered, whether they are a “firefighter, medical assistant or a Walmart employee.” 

Jason Mills, a senior partner in the Strategic Development Department at the GGRM law firm and past president of the Nevada Justice Association, said the spike in lung claims led lawyers to revisit and challenge existing law.

Mills has worked as an attorney in Nevada for more than two decades and was one of five founding board members assigned by the State Bar of Nevada to create and administer a state bar certification and testing process for attorney specialization in workers’ compensation law.

“This notion that this is some kind of change is just not true, because most of the cases that we’ve ever won on lung claims have always been on the conclusive presumption,” Mills said. “In the post COVID years … smart defense counsel said, ‘Hey, well, what about the causation section and it’s the same number of years so don’t you have to prove causation?’”

He said attorneys are bringing a petition for rehearing on the matter to the state Supreme Court, but when the special session began, it presented an opportunity to fix any confusion.

“This isn’t a maneuver by the firefighters unions, the police unions, the trial lawyers unions, to do something untoward,” Mills said. “It was, ‘Wow, we’ve just lost a right we’ve had for 36 years. … Let’s bring this and correct it before damage is done to people that had these protections until a couple of days ago.’”

The weight of the increased cases, alongside the passage of SB7, has left some municipalities reassessing budgets. Jennifer Cooper, a spokesperson for Clark County, said the bill was not brought to them before the special session, though the county worked in a “very short time period” to figure out new financial estimates. 

According to Cooper, Clark County is projecting an additional $20.1 million in costs over the next two years on top of benefits it is already administering. 

Cooper said the new costs remain unfunded and will increase their long-term liabilities, though the exact number would not be clear until the county has done a full financial analysis. To make up for the difference, Cooper said there would likely be budget cuts or other budget reconfigurations. 

“An additional challenge for Clark County is that we are self-funded and we are concerned this may impact our ability to get coverage for our employees,” Cooper said via email. “This will have a ripple effect on the private sector’s insurance options in our market as well.” 

Claim expenses have risen by 142 percent in the last eight years, per data from the Clark County Comptroller’s office — and SB7 is expected to further increase these costs. 

“The only other thing you do is cut current services and the programs that aren’t mandated, like affordable housing and these other programs that unfortunately will end up on the chopping block,” Hardy said. 

Insurance and fiscal fears

In the wake of the state Supreme Court decision and the new law, Hardy said along with the concerns about affording the compensation claims, he worries the changes may harm the reinsurance market.

Hardy noted increased costs may lead certain liability or long-term disability insurers to leave the Silver State. Reinsurance is a financial protection mechanism that covers catastrophic or multiple claim losses, he said, noting reinsurance kicks in when losses exceed what the state or county can afford.

For example, the City of Las Vegas has a self-insured retention insurance policy with a $5 million threshold. A fiscal note from the city said the amount represents what the city must pay out before the insurer takes on additional costs. If the market becomes inundated with claims from SB7, the note said, insurers “may reconsider premium rates and/or even doing business in the state.”

The note added that only 2 percent of heart/lung claims have been accepted in the past and it’s impossible to know how many additional claims would be filed under the changes to lung-related claims.

It’s a problem the state’s risk management division highlighted during the special session as well.

An unsolicited fiscal note submitted by the agency to state lawmakers detailed that since 2020, there were 24 COVID or lung-related claims that were denied, half of which would likely be reversed under the legislation and qualify for permanent total disability, or payments over a lifetime. In a two-year period, state analysts estimated that the claims would likely cost more than $2.4 million, which would repeat as time went on.

In response to the concerns, Mills said an increase in expenses is a different conversation from the need to ensure first responders are protected.

Mills said the legislation was needed because lawmakers had an opportunity to restore rights that have existed since 1989 and were inadvertently removed by the state Supreme Court. 

“We have an opportunity to fix that with legislation, rather than let a bunch of people fall through a donut hole for the next 18 months before we get back into the regular session,” Mills said. “We just don’t want people to die or miss out on these benefits while we’re waiting around for the next session to come.”