By Evangelos M. Falaris
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Extra info for Causes of Litigation in Workers' Compensation Programs
Why are some contested claims dropped or settled prior to a formal administrative hearing? 3. How are the dollar amounts of compensation influenced by a decision to settle versus a decision to continue to pursue a case through the dispute resolution system? 4. What impact does the type of insurance (commercially purchased versus self-insured) have on the decision to litigate? Chapter 1 introduces the reader to the litigation problem in workers' compensation programs. The chapter discusses how litigation has escalated within a system that was originally intended to reduce the courts' involvement in the compensation process.
Cases were selected for all workers injured during 1982. In the earlier project for the State of Delaware (Staten and Link 1988), the data were collected from computer files maintained by the DIA at the end of February 1987, reflecting four to five years of experience. These files were updated to incorporate activity as of mid-1990. As of February 1987, 90 percent of the 1982 cases were closed. In other words, 90 percent of injured workers eligible for compensation benefits had received all of their benefits by this time.
Still another area of concern recognized by the National Commission involves the administrative costs required to deliver benefits to injured workers. 4 Of course, a major component of these costs (summed across all parties involved) is the "frictional costs" associated with resolving disputes. One way of evaluating the burden imposed by litigation is to consider the dollars that injured workers receive (as indemnity benefits, medical treatment, or rehabilitation) as a proportion of the total dollars paid by employers in the form of awards (indemnity, medical, rehabilitation) plus litigation costs.