Magazine article Risk Management

Workers' Compensation Faces New Challenges

Magazine article Risk Management

Workers' Compensation Faces New Challenges

Article excerpt

Workers' Compensation Faces New Challenges

When asked about challenges facing the American workers' compensation system during the next decade, a seminar panelist replied, "workers' compensation is so close to my heart that it's giving me heartburn." One need only consider the 1988 loss and expense ratio of workers' compensation claims to understand the reason for his answer: It was 118 last year.

According to Thomas Rittenhouse, director of risk management for Gencorp, Inc., the greatest workers' compensation challenge to be met in the 1990s will be to correct problems that exist in the system. "I would suggest that we clearly and honestly define the problems and choose the solutions that are most consistent with the original objective of workers' compensation, which is to provide wage and medical benefits to employees for injury or death occurring in the course of employment," he said.

In Mr. Rittenhouse's view, one of the biggest problems facing the system is the inequitable distribution of benefits between seriously- and not-so-seriously injured workers. "I don't like the fact that workers with truly serious injuries still receive inadequate benefits, while employers continue to bear an increasing burden due to extravagant awards from less serious injuries," Mr. Rittenhouse said. He added that permanent total disability benefits for a worker who is totally disabled at the outset of disability are inadequate, and when overtime due to inflation is computed into the equation, the benefits grow progressively more inadequate.

`Nightmare on Elm Street'

"Why can't we provide adequate benefits to employees who are totally disabled in the course of employment?" he asked. "I suspect we can't because if we did the 20 percent of a man, 30 percent of an arm and 10 percent of a hand disability claim would wreak economic havoc on all employers." In such a case, Mr. Rittenhouse believes the concept of limited liability under workers' compensation would be akin to a "Nightmare on Elm Street." However, he maintained that if partial disability benefits were limited to wage loss, medical and reasonable rehabilitation, "we could afford to provide an adequate benefit to the totally disabled."

According to Mr. Rittenhouse, a more compassionate system would favor permanent total and rehabilitation benefits before all other benefits. "In recent years, we have witnessed the tragedy of asbestos," he said. "Thousands of men and women have suffered total disability and death as a result of their jobs. Did the workers' compensation system provide them with equitable compensation? I think not. Perhaps some people would say thank God it didn't have to. Those who feel that way are ignoring the primary criterion which will ultimately decide whether workers' compensation is working or not."

An issue that goes hand in hand with the question of whether or not to provide compensation to the totally disabled is exactly how to define the term total disability. The current accepted definition strays from pure physical disability and relates, in part, to the capacity to perform a specific job.

"The definition should be structured in terms of physical incapacities, not in terms of vocational incapacities," Mr. Rittenhouse said. "The system cannot afford to pay permanent total settlements to people who are not totally disabled, and also pay adequate benefits to people who are totally disabled. In my opinion, both reason and compassion tell us that the current allocation of benefits is not right."

A `Two-Pronged' Problem

Another "two-pronged" problem cited by Mr. Rittenhouse is the difficulty case workers have in distinguishing between work-related and non-work related injuries and their subsequent inability to effectively evaluate the injury.

"The crux of both these problems is that workers' compensation is almost always a remedial statute requiring that the common law rule of liberal construction be used during interpretation. …

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