Category Archives: Workers’ Compensation Reform

Is Insurance Still For Policyholders?

Today we have a guest post by our colleague Roger Moore of Nebraska.

Insurance began in the Middle Ages, and policies could be written for almost anything. Policies were taken out to protect risks of trade, against the death of a head of state, and for many other forms of speculation. There was almost no limit on what a policy could be written for. Additionally, there was no shared risk as these policies were taken out only by individuals.

In the early 18th century, mutual insurance was created. Instead of individuals essentially placing bets that would pay off if tragedy struck, these policies created communities of members who were concerned with offsetting risk with reward. The lack of tragedy led to the payout of dividends to the members. Gradually, governments forced the transition of insurance from legal gambling on misfortune to companies behaving more like public utilities. Mutual-insurance companies helped the betterment of society with innovations like workplace-safety measures.

Over the last four years Edmund Kelly, former CEO of Liberty Mutual, has pocketed over $200 million in compensation.

In 1911, the first workers’ compensation insurance was written in Massachusetts in the form of a state-subsidized mutual-insurance company. Like most mutual insurance, the aim was the mitigation of risk by providing incentives to reduce risk and demanding small sums from each participant that were then combined into large sums for the victims or beneficiaries of the policy.

In the mid-1990s, insurance companies began pushing for legislation to authorize them to place their assets into holding companies that could then sell stock. Critics believed the policyholders were being divested of their ownership in such an arrangement, but little true resistance was brought to bear. What has transpired as a result of this shift is that increasingly the profits from insurance companies were being captured by its executive leadership instead of being reflected as profits and returned to its policyholders as dividends.

As such, 200 years after mutual insurance was created, history reversed itself. No longer was insurance sold to people who had a stake in the assets and risks on which they bet. The community no longer bore the rewards of mutual insurance as company profits were put in the hands of the elite leadership and not distributed across policyholders. One can surmise that policyholders also lost more control over how claims were handled than was anticipated when mutual insurance was created. Policyholders also likely see little incentive to follow risk-averse practices as they receive no return benefit in the form of dividends as they used to. When profit is the only goal in business only the business itself and, more specifically, its executives truly gain. One indication of this is Edmund Kelly, former CEO of Liberty Mutual. Over the last four years he has pocketed over $200 million in compensation.

Source: The Atlantic

Development of the Worker’s Compensation Act of 1911

This is the third installment in our series on why and how workers’ compensation was established in Wisconsin.

After reaching consensus on the details of the proposed workers’ compensation system, the Industrial Insurance Committee introduced a bill in 1911 that passed both houses of the state legislature. The only significant change made was to restore to employers the assumption of risk defense and fellow servant doctrine in cases where workers elected not to proceed under the new system.

In November of the same year, the first test case was brought before the Wisconsin Supreme Court. The Court affirmed that the legislature had the right to abolish employers’ common law defenses. It also held that the preservation of common law defenses in cases where employees opted out of the new system was based on a reasonable classification which was designed to promote the objectives of the new law and which did not violate the equal protection clauses of the state or U.S. Constitution. The Borgnis case epitomized the reluctance to invoke substantive due process–characteristic of the Court throughout the Progressive Era.

After the Worker’s Compensation Law cleared its constitutional hurdle in Borgnis v. Falk Corporation, it was steadily strengthened and augmented. In 1913, spurred by slow employer acceptance of the law, the legislature provided that any employer who did not explicitly opt out of the law would be presumed to have accepted it. The contributory negligence defense was also added to the list of defenses that employers not electing under the Act were prohibited from invoking. In 1919, the law was expanded to cover all employment-related injuries whether accidental or not, including occupational exposure claims. Finally, in 1931, when workers’ compensation had become a universally accepted part of Wisconsin industrial life, the law was made compulsory for virtually all employers and employees.

Wisconsin Opts In to Worker’s Comp: Need To Change

Today we have part 2 in our series on legislative initiatives that may allow employers to “opt out” of Workers’ Compensation across the country.

Although judges and juries in the late 19th and early 20th centuries softened the impact of the three employer defenses (contributory negligence, assumption of risk and fellow servant rule), significant numbers of injured workers were denied benefits. Despite periodic efforts by the Wisconsin Supreme Court and legislature to modify the common law, an increasing number of Wisconsinites during the early Progressive years came to feel that more sweeping changes in the employer liability system were essential. The Wisconsin State Federation of Labor and the Social Democratic Party began to advocate a workers’ compensation system shortly after 1900, and they introduced the first workers’ compensation bill in the legislature in 1905.

Professor John R. Commons of the University of Wisconsin and State Commissioner of Labor Joseph Beck also endorsed workers’ compensation and vigorously promoted it to business groups around the state. Support for workers’ compensation came also from Justice Rouget Marshall of the Wisconsin Supreme Court.

Although a conservative in most areas of law, he used every opportunity on and off the bench to urge a change in what he believed was a defective and imperfect system of common law employer liability. Marshall and his colleagues grew tired of regularly having to issue defensively worded decisions for employers in cases where the court’s sympathies and those of the public were on the side of the injured worker.

Check back later this week for the third installment in this series.

“Opting In” to Worker’s Compensation: Wisconsin’s Very Good Idea

Wisconsin Capitol BuildingThis is part 1 of a 3 part series.

Oklahoma recently faced a proposal in legislative session that would have allowed employers to “opt out” of the State’s mandatory worker’s compensation system. The bill ultimately died but it was closely monitored by the business community. Similar bills may soon surface in several other states including Colorado, Kansas, Louisiana, and Tennessee.

Wisconsin’s initial efforts in workers’ compensation led the nation.

With several states proposing to “opt out” of worker’s compensation, it is important to revisit, after 100 years, why Wisconsin “opted in” leading the way for the other 50 states in worker’s compensation. The next several blog entries will tell that story.

Part I. Workers Denied Recovery

Wisconsin’s initial efforts in workers’ compensation led the nation. In 1911, Wisconsin became the first state in the nation to place a broad, constitutionally valid workers’ compensation system into operation.

Prior to 1911, Wisconsin workers who were injured on the job had to overcome three common law obstacles in order to recover from their employer. Under the contributory negligence doctrine, a worker could not recover from the employer if the worker had been negligent in any way and that negligence had contributed to the accident regardless of how negligent the employer may have been.

Under the doctrine of assumption of risk, if a worker knew or should have known of the danger inherent in the task at issue before undertaking it, the employer was not liable for an accident arising from the task even if the employee was not negligent.

Under the fellow servant rule, employers could not be held liable for accidents caused by fellow employees (i.e., co-workers) of the victim.

The combined effect of these common law defenses served to deny workers adequate remedies for their injuries.

Please visit our blog next week for part 2 of our series on states opting out of workers’ compensation.

“Open for Business” In Wisconsin Does Not Mean An Option To Provide Workers’ Comp For Workers

Companies are trying to cut costs and demand more productivity in these bad economic times. Unfortunately, one way “start up” and other employers are attempting to cut costs is by not insuring their workers under workers’ compensation. It is simply not acceptable to allow these employers to forego this fundamental protection for their employees. We field calls daily from workers whose employers do not have workers’ compensation, who tell their employees to file claims under group insurance policies (which are shrinking) or Medicare or Medicaid. This “cost shifting” to some kind of public assistance is simply not acceptable.

Failing to hold employers accountable for not having workers’ compensation coverage puts workers at risk. It also violates fundamental fairness. It would be like not holding drivers who have basic liability insurance accountable, because uninsured drivers put everyone else on the road at financial risk. Many states (North Carolina, Texas, California, Michigan, to name a few) are undergoing fundamental workers’ compensation “reform” in the name of cost saving. One of those “cost savings” should not be the failure to purchase workers’ compensation for their employees. Every employee in Wisconsin that employs even one person who is paid $500 in a quarter must have workers’ compensation insurance, and any employer who employs at least three employees( regardless of what they are paid) must have workers’ compensation insurance.

It is simply not acceptable to allow these employers to forego this fundamental protection for their employees.

Wisconsin has an “Uninsured Employer’s Fund” for those employees whose employers should have insurance but do not. Although the Fund pursues these scofflaw employers vigorously, many employees fall through the cracks, and we all pay the price through medical expense filtering down to Medicaid, Medicare, Badger Care, or some other public assistance.

Newt Wants to Replace Wisconsin’s (and every other State’s) Worker’s Compensation Systems

Newt Gingrich

Basking in the glow of his evangelical-inspired victory in South Carolina’s Republican presidential primary, Newt Gingrich is trying to unify his disparate assembly of Tea Party malcontents, religious moralists, anti-immigrant reactionaries, and most significantly, “anti-government encroachment” fanatics.

Before his candidacy gains any more momentum, we should look back and reflect on the havoc his positions would create in our current State systems. Governor Rick Perry invited Gingrich to speak to the Republican Governors Association after last November’s Republican landslide. Gingrich decried the “leftist political system that has been dominating America since 1932.” Obviously, his attack is leveled at the New Deal, Great Society systems that provide benefits (he calls them entitlements) for so many– Social Security Disability, Medicare, Equal Rights legislation, etc.

More significantly for the worker’s compensation system, he indicated in his 12 Step Program (sound familiar) that he wanted to replace State’s worker’s compensation programs. In an obvious attack on worker’s compensation attorneys, his plan was to “replace litigation-focused worker’s compensation with a rehabilitation and capabilities focused program that maximizes the speed of helping people medically, and focuses on retraining and focuses on what they can do rather than what they can’t do.”

While the medical end of this aim is laudable, Wisconsin’s system (and many others) currently does focus on retraining and what workers can do following their injury. Wisconsin’s vocational rehabilitation Continue reading

Memo To All Employees: Report Injuries Right Away Or Risk Losing Compensation

Don't miss the boat! Even a slight delay in reporting your injury can lead to zero work' comp benefits, thanks to a U.S. federal court ruling.

A U. S. Court of Appeals has ruled that an employer can require an employee to report their worker’s compensation injury even more quickly than required under Worker’s Compensation Law.

A Tennessee machinist experienced pain in her hands when she was transferred to a new position that was “like a muscle strain” when she pressed down on her machine and the pain stopped when she let go. The pain continued over the next two weeks, progressing to numbness and tingling, which forced her to see the Company Nurse. The nurse asked her why she had not reported her pain earlier and she said she wanted to “try to work through it” because she needed the job and did not want to tell her employer she could not do the job.

The next day the company fired her for failing to communicating an injury in a timely manner. She filed a claim with the Tennessee Worker’s Compensation Department and the District Court, which dismissed the claim. On appeal, the 6th Circuit noted that even though State law allowed employees 30 days in which to report a gradually occurring injury, the employer had the right to terminate based on its own policy of not reporting.

Don’t Be A “Tough Guy”

I see these claims often in my practice; claims in which the individual sustains an injury and wants to work through the pain or otherwise see if the pain will go away. Under these circumstances the worker does not report the injury. Since all injuries in worker’s compensation are based on a date of injury, this heroic “non-reporting” ends up biting the worker in the rear. For many employers, no report means no injury.

Gradual Occupational Claims

This “I’ll work through the pain” motive is especially damaging in occupational injury claims, which arise from repetitive motion and not the result of a single trauma. While it is understandable that an employee not be characterized as a “whiner” or “complainer” in the worker’s compensation setting, those who do not report do not benefit.

Wisconsin Workers Do Not Fake Injuries

I’m tired (and angry) when I read or hear news stories about alleged employee fraud in workers’ compensation cases. At cocktail parties, seminars, and social gatherings, when I say I represent injured workers, a common retort is “How many are faking their claims?” I respond, as calmly as I can, that in my experience with thousands of workers over 35 years, only a handful have not been straightforward, and that, compared to instances of employer fraud (not insuring workers, calling them “independent contractors”, telling them to file injury claims under group health insurance, etc., etc.) employee fraud is a drop in the bucket.

The Department’s six year study of such claims concluded that the public perception of workers’ compensation fraud is exaggerated. The documented level of workers’ compensation fraud is minimal.

Much fanfare (primarily fueled by insurance carrier advertisements) accompanied the mid-1990’s enactment of a fraudulent claims reporting provision in the Wisconsin Worker’s Compensation Act. Since then the statute has required insurers to report suspected fraud to the Department of Workforce Development on their own initiative and, at the request of the Department, to investigate and report on cases of alleged fraud reported to the Department by the general public.

In over 6 years, district attorneys initiated prosecution in 17 cases in Wisconsin, obtaining conviction in 14. 

Most fraud allegations are made anonymously, by telephone (608-261-8486), and from people who identify themselves as former friends or spouses, relatives, co-workers, or neighbors of the person alleged to be committing fraud. According to the Department summary report, “those allegations usually don’t pan out.” Continue reading