Workers' Compensation Litigation

Risk Management, June 1995 | Go to article overview

Workers' Compensation Litigation


In an ideal world, workers' compensation claimants would not sue their employers. After all, in the United States, workers' compensation is a nofault system. Ostensibly, employees surrender their rights to sue in exchange for employer-provided coverage for medical care, disability, rehabilitation and death.

The reality, however, is that injured workers do litigate claims against their employers. Potential lawsuits arise from an employer's delay or denial of benefits; benefit disputes between the employer and the injured worker; case or injury complexity and fraud, explained James E. Graves, senior consultant at Johnson & Higgins of California in a session titled Workers' Compensation Litigation: How to Fight and Win.

Employers must realize that ultimately they control the outcome of their workers' compensation cases. They can ensure the accurate and timely delivery of benefits to employees. In disputes concerning benefits provisions, the employer should discuss the case with the employee; sometimes, the employer may find there are other available benefits that can replace workers' compensation.

Certain situations will prove more problematic. "If you believe fraud is involved in a claim, you might want to pursue litigation," said Mr. Graves.

Before proceeding with litigation, companies must first develop a litigation philosophy. The cornerstone of the philosophy will be a litigation plan that outlines the firm's goals. "Make the goals simple and quantifiable," said Mr. Graves. "For example, you could try to reduce your total litigation costs by, say, 25 percent by deciding only to litigate target cases, but striving to litigate these cases 100 percent of the time."

The litigation plan must be communicated and coordinated with attorneys, the claims administrator and everyone else on the litigation team, said Mr. Graves. Risk managers also should ensure the buy-in of senior management and formalize the plan for compliance.

The company then must decide who will conduct the litigation. First, review in-house counsel to determine if they can handle the litigation. If not, the company will have to retain an outside firm. As with any other purchases, caveat emptor.

Risk managers should help their organizations select the best attorneys for the case. "You can start by asking your brokers, claims people or trade groups for recommendations," said Steven H. Wax, attorney for Pearlman, Borska & Wax in Encino, California. "You want someone whose philosophy and attitudes are compatible with yours. …

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