Workers Compensation Re-engineered

by Jim Kistler

Over time, however, Missouri’s workers’ compensation system has become nationally recognized for injured employees “lawyering up” and its generosity in compensation

In 1926, the people of Missouri were asked to approve a new program to help injured workers get back on their feet sooner. On Nov. 2 of that year, the voters of Missouri approved the state’s first workers’ compensation program.

Prior to the program, an injured employee had to sue an employer in civil court—and prove the employer was negligent—before being compensated for on-the-job injuries. The old system meant lengthy delays and legal expenses before the employee was compensated for medical expenses and loss of wages.

The voter approved system was designed to be a “no fault” system which didn’t require a lawyer for an injured employee to receive compensation. An employee wouldn’t have to prove negligence on the part of the employer in civil court. Instead, the employee could file a claim and expect benefits—including medical care and wage replacement—to be immediately forthcoming. All that was required was that the place of employment be established as the cause of the injury.

Employees and employers alike hoped the employee would get better and return to work faster. In exchange for providing immediate benefits, employers agreed to a benefit scale limiting the need to defend in court against expensive lawsuits, and avoid unlimited jury awards.

Over time, however, Missouri’s workers’ compensation system has become nationally recognized for injured employees “lawyering up” and its generosity in compensation, even when the connection between the workplace and the injury is questionable at best. Missouri employers and employees have made their workplaces among the safest in the nation, reducing the number of injuries to historic lows. Despite safer workplaces, claim costs continue to climb.

The question of why fewer injuries continually become more expensive is complex. At least part of the answer is attorney involvement in a “no fault” system. As a “no fault” system, compensation for workplace injuries is guaranteed.

Court decisions since the early nineties have made it even easier to establish an employer’s liability.

Missouri is one of only a handful of states that does not limit by statute the maximum amount an attorney can make. Practice in Missouri is to pay 25 percent of the total award in attorney fees. Most states establish a maximum amount in the law, and the vast majority of states limit that amount to less than Missouri’s automatic 25 percent. A December 2003 report by the Workers Compensation Research Institute found Missouri’s system generous in its awarding of attorney fees, and cited those fees as “powerful incentives for attorney involvement.”

Between 1995 and 2001, Missouri lawyers involved themselves in workers’ injury claims more often than attorneys in every surrounding state, and 53 percent more often than the national average. A report by the National Council on Compensation Insurance (NCCI) found, in 1999, the cost of the average workers’ compensation claim doubled when an attorney is involved.

Remember, as a “no fault” system, the need to hire a lawyer is minimal. Compensation is guaranteed once the workplace has been established as the cause. When an attorney is given 25 percent of the total compensation—for handling a “no fault” case—one of two things must happen. Either the employee ends up with less compensation after paying the attorney, or the total award must be inflated to make sure an employee is fully compensated and the attorney paid.

Until we return to the original intent of workers’ compensation—compensating employees for workplace injuries—costs are going to continue to escalate. The money siphoned out of a “no fault” system by lawyers doesn’t help the employee recover, nor does it help the state compete for new and better jobs. Legal costs are one of the largest cost drivers in the system today, and must be addressed if we are to succeed in reforming workers’ compensation.

Jim Kistler is executive vice president of Associated Industries of Missouri. AIM’s website is www.aimo.com.