Depending on the industry, worker’s compensation insurance can be a significant expense. So, why is it mandatory? What if there was no worker’s compensation insurance at all? There was at time, just over 100 years ago when this was true. As you will discover, employers and employees are far better off with it, than without it.
Worker’s Compensation insurance is a product of the Industrial Revolution. Before its existence, there were gross disparities between the amount that an injured worker recovered and the amount that employer’s had to pay for those injuries. An example is instructive.
During the late 1800’s copper was heavily mined out of Michigan’s Upper Peninsula. Workers and their families migrated from Europe to work the mines. It was a dangerous work environment. Explosions and cave-ins were common. From 1905 through 1911, the mines in the United States killed an average of sixty-one men per year, or more than one per week. At the end of this unfortunate run, one out of every ten men killed in the United States mining industry died on the Keweenaw Peninsula.[1] Prior to the advent of worker’s compensation insurance in Michigan in 1912, an injured miner could sue his employer for injuries incurred on the job, but the employer could defend the case with the defenses of assumption of the risk, contributory negligence and the fellow servant rule.
Pursuant to the assumption of the risk doctrine, the employer did not force the miner into the mine, and the miner understood the dangers associated with the work; therefore the miner could not sue the mine owner.
On the other hand, explosions and cave-ins left widows and children without fathers. Savvy attorneys then entered the scene. Coupled with sympathetic judges and juries, the widows and children began to see significant recoveries. Recoveries so large, and unpredictable, employers were negatively affected. Some miners, or the families that were left behind, would experience significant recoveries. Others would get nothing. It became exceedingly difficult for mine owners to budget and turn a profit. The same disparities were experienced throughout all industries, especially those involving heavy manual labor or extremely dangerous activities.
The answer, of course, was the advent of mandatory workmen’s compensation insurance. (It was not until 1969 that the legislature changed the title from “workmen’s” to “worker’s”.) Next year marks Michigan’s 100th year anniversary of mandatory worker’s compensation insurance. The law is really a tradeoff between the rights and duties of the employer and employee. No longer can the employer defend on the basis that the injury was caused be the employee’s own negligence, or by a co-worker, or by an assumption of the risk. In exchange thereof, the employee receives weekly wage loss benefits that equate his weekly take home pay. Further, the employee is not entitled to pain and suffering damages. All he can recover for his injury are wage loss, medical and vocational rehabilitation (re-training) benefits. For amputations, employers are to pay a specific number of weeks for the limb that is lost. The most that a fully dependent widow(er) may recover is 500 weeks of wage loss benefits.
In 2010, 24,097 Michigan workers were injured on the job and experienced loss time of 7 days or more. In the year 2000, that number was 54,207. Last year, the average litigated case settled for $65,868.14. Michigan is presently served by 17 Worker’s Compensation Magistrates.[2] Clearly the employment environment is more predictable and reasonable with it than without it.
[1] KEWEENAW NATIONAL HISTORICAL PARK, Historic Resource Study by Larry Lankton, Department of Social Sciences, Michigan Technological University, For the National Park Service, United States Department of the Interior, 2005
[2] 2010 ANNUAL REPORT, Michigan Workers Compensation Agency.
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