Introducing the Newest Business Liability: Workers' Compensation

Article excerpt

In industry as a whole, workers' compensation costs have been rising each year. These increases can be attributed to three factors: more liberal state legislative awards; increased cost of medical and hospital care; and the overall general economy.

According to the Bureau of Labor Statistics (BLS) report issued November 19, 1991, work-related illnesses and injuries increased by about 177,000 to nearly 6.8 million in 1990.

The rate of occupational injuries and illnesses for 1990 also increased to 8.8 per 100 full-time workers, compared to 8.2 in both 1988 and 1989.

The number of lost work days increased to 60.4 million in 1990, compared to 56.7 million in 1989. Half of the 6.4 million work-related injuries reported in private industry were serious enough to result in lost work time or restricted work activities.

The BLS survey noted that there were nearly 332,000 new cases of occupational illnesses in 1 990, compared to 284,000 cases in 1989. Nearly 60 percent of the illness cases in 1990 were associated with repetitive motion such as vibrations, repeated pressure and carpal tunnel syndrome.

Because of the increase in injuries, workers compensation cost has skyrocketed over the past few years. Some attorneys have recognized the opportunity to make money representing injured workers. They have now geared their advertisement toward the injured, promising not to charge a fee unless they win the case. With this attitude, workers' compensation cost will continue to increase. To be effective, employers must implement a program to reduce the potential I liability and costs associated with work related injuries and illnesses.

WORKER'S COMP TRENDS

According to the U.S. Department of Health and Human Services, employers spent an estimated $42.9 billion in 1988 to insure their work force. This was $4.8 billion higher than 1987's cost and $4.6 billion over 1986. Workers' compensation per $100 of payroll in 1987 was $2.06. This increased to $2.10 in 1989 and to $2.19 in 1990. The anticipated cost for 1991 is $2.21.

According to the National Council On Compensation Insurance medical cost accounts for approximately 40 percent of total workers losses. The average medical cost was $1,741 in 1980. By the end of the decade, medical cost had jumped to $5,370. In that same time frame average wage-replacement claim increased from $4,522 to $10,735.

Today, each of the 50 states, and the district of Columbia, have a Workers' Compensation law. Three states, New Jersey, South Carolina and Texas, do not require mandatory participation. Many efforts over the past two decades to rep!ace the various state run programs with a federal program have been defeated.

The major objectives of the Workers' Compensation laws can be defined as:

* Prompt payment of benefits to employees sustaining work related injuries with out regard to fault.

* Stimulation of maximum employer interest in the work place safety and rehabilitation.

* Encouraging the collection and analysis of data on accident causes and utilization of collected information to reduce the number of work place accidents and injuries.

* Reduction of litigation by providing a single remedy for employee injury.

* Reduction of severe financial drain on public and private resources.

The employer, depending upon state law, may secure his/her obligation to pay benefits by insuring it:

* With an insurance company.

* With a state fund established for the purpose of providing such benefits.

* By buying self-insuring insurance. Proof of financial responsibility must be furnished.

Insurance coverage under a workers' compensation policy is broad in scope. The policy states that the insurance company will promptly pay all compensation and benefits required by the law, and to defend, on the employer' s behalf, any legal actions seeking damages because of work-related injuries. …