COMPENSATION ADMINISTRATION AND

ADJUSTMENTS

BY JAMES E. RHODES, 2D,

Claim Examiner, The Travelers Insurance Company.

The system of workmen's compensation which is now in operation in the greater number of the states of the United States is a radical departure both in principle and practice from its predecessor, the system of employer's liability, which was recognized and enforced by the common law. The difference in principle is that the compensation system is based on a recognition of the fact that industry should bear its proportional part of the financial burdens caused by the industrial accident, regardless of the fact that such an accident may have been caused in part by the negligence of the injured employe, unless that negligence is of such a degree that it can be shown that the injury was wilfully inflicted; while the common law system was based on the proposition that an injured employe must be able to show some legal fault on the part of his employer before any recovery would be allowed for an injury alleged to have been sustained by reason of the negligence of the employer. The difference in practice has its basis in the difference in the administration of the two systems. The common law system of employer's liability placed the employer and employe on a basis of theoretical legal and economic equality, as a result of which the only recourse which the employe had when the employer refused to recognize liability and compensate him for injuries alleged to have been sustained during the course of his employment was to bring the employer into court, establish his right to recover by judicial process, and then collect the judgment at the termination of the proceedings, if judgment was secured and if collection was possible. Inasmuch as the compensation system establishes the right of the employe to recover for his injuries, unless it can be shown that they are the result of his wilful negligence, it is an essential element of that system that this right of recovery should be secured and that the compensation laws should be so administered as to effect the purpose for which they were enacted. This is effected by requiring security for the payments, and by such a supervision

of the adjustments made under compensation laws that injured employes shall receive the full amount which the law allows to them with as much regularity and as little delay as possible.

THE INDICTMENT OF THE COMMON LAW SYSTEM

The particulars in the indictment against the common law system of employer's liability may be reduced to four general specifications. They consist of the uncertainty as to the basis of liability, the uncertainty as to the amount of the recovery when liability is established, the delay which is a necessary incident of legal procedure in enforcing a claim for damages, and the uncertainty as to the payment of a judgment when judgment has been recovered. These were the principal defects of the common law system which it was the object of the compensation system to obviate. All of these specifications were incidents of a system which had as its basis the element of legal fault on the part of a person against whom negligence was alleged. On this basis was imposed the theory of the equality of all litigants in the courts, which theory in its assumption that all litigants are able to stand the delays which are incident to litigation takes no notice of the economic difference in the condition of litigants, and thus practically closes the courts and denies redress to those who are unable to stand the delay and expense of legal procedure.

The compensation system substitutes for the uncertainty as to the basis of liability the requirement that the employer shall compensate for all accidental injuries which an employe may receive in the course of his employment, and which arise out of it, except in the comparatively rare cases in which it can be shown that the injuries were received by reason of the wilful or intentional negligence of the employe himself. It substitutes for the uncertainty as to the amount of recovery a specific amount which shall be paid during disability, or for a specific length of time. Any complete compensation system will substitute for the element of delay which is incident to the common law system of litigation a summary procedure for the determination and enforcement of rights under the compensation law, and it will substitute for the element of uncertainty as to the payment of a judgment a system of security for the payment of compensation which will assure that the injured will receive his indemnity just as specified by the law.

ADMINISTRATION OF THE COMMON LAW SYSTEM

In considering the administrative feature of the compensation system, and particularly that phase of compensation administration which deals with the adjustment of claims under the compensation laws, it is necessary by way of contrast to outline the procedure for the enforcement of a claim under the common law system and thus show the defects of that system, and then show how the compensation system has attempted to remedy those defects. The common law system is based, as has been noted, on the theoretical equality of employer and employe in the eye of the law, the result of which is that in legal procedure each has an equal right to contest to the limit any allegation that may be made by the other, and as employer's liability cases are simply a part of the general work of the courts and are entitled to no precedence over other litigation the injured employe who is a plaintiff must await his opportunity to be heard in turn with all other litigants.

If an employer recognizes his liability to respond in damages to an injured employe, or if for any reason an employer chooses to settle such a claim without litigation, and the parties can agree upon the amount that shall be paid, litigation is then unnecessary. Their agreement is subject to the legal requirement that it must be supported by a sufficient consideration, but wide latitude is given to the parties in determining the sufficiency of the consideration and the law will not disturb any settlement made with an injured employe unless it appears that the consideration is grossly inadequate, or that the settlement was effected by fraud or duress and so should not be permitted to stand. The common law principles as to the assessment of damages may be observed or they may be disregarded, for the law will not interfere with any settlement that is supported by a sufficient consideration and, although the consideration may seem small, still it may be regarded as sufficient in law to support the agreement.

The enforcement of an employer's liability claim under the common law by legal process necessitates recourse to the courts by means of a suit brought by the employe against the employer, alleging injuries received during the course of employment by reason of the negligence of the employer and demanding damages for those injuries. Either party is entitled to a jury to determine questions of fact, and as the allegation of negligence is usually a question of

fact it is incumbent upon the plaintiff to establish his case to the satisfaction of the jury by a preponderance of the evidence. The defendant is allowed to prove, if possible, that the injuries were received by reason of the negligence of the injured himself, or that it arose from dangers inherent in the occupation of the injured of which he was fully cognizant, or that they were received because of the negligence of a fellow-servant, unless these common law defenses have been modified or abrogated by some statutory provisions.

If the jury decides in favor of the right of the plaintiff to recover, it is their duty to assess the damages that shall be awarded, and the latitude which is given to a jury in this respect is one of the principal defects in the common law system. While it is the theory of the common law that the damages assessed shall be compensatory, as far as possible, there is in practice little to limit a jury in the exercise of their function of assessing damages but their own imagination, and the result is a great disparity in the amount of damages assessed in different cases.

Frequently there is considerable delay before an employer's liability case can be tried, and if a verdict is obtained by the plaintiff it may happen that there are some alleged errors in connection with the trial which allow the defendant to appeal. If such an appeal is taken, the delay is almost indefinite and the result uncertain, for it may result in a reversal and dismissal of the suit, or a reversal and an order for another trial. In the former event the right of action is lost, while in the latter the plaintiff is just where he started at the beginning of the litigation. If his verdict is sustained he is then at liberty to proceed to the collection of the judgment. This may be a difficult matter unless the defendant voluntarily pays the judgment, or has property which can be reached by attachment in satisfaction of it.

This brief summary shows that the element of delay is one of considerable consequence in the enforcement of a claim by legal process under the common law rules of employer's liability, for an injured employe may be practically deprived of his rights by reason of the delay which is incident to their enforcement. An incident of this element of delay is that of expense, for it seldom happens that a seriously injured workman has been able of himself to provide for such contingencies, hence the problem of sustenance during the progress of the litigation is both practical and pressing, and this

added to the expense which may be necessary to the litigation frequently causes the relinquishment of valuable rights for much less than an injured employe is legally entitled to receive.

PRINCIPLES OF COMPENSATION ADMINISTRATION

It is, therefore, an essential element of the compensation system that the payment of the benefits which the law provides shall be made as certain as possible, and that these payments shall reach the injured with promptness and regularity. The element of certainty of payment is secured in the well considered laws by a requirement of insurance of some sort, carried by the employer for the benefit of his employes for the security of the payment of the compensation obligations. The element of promptness and regularity of payment is accomplished by vesting the administration of the compensation law in a single official or an official body whose sole duty it is to see that the law is properly administered, and this supervision over the adjustment of compensation claims is one of the vital features of the general subject of compensation administration. Some of the compensation laws which have been passed in the United States cannot be considered complete, even according to present standards of compensation, because of the fact that they fail to require security for the payment of compensation, and also fail to provide any special administrative machinery to supervise their execution. Such laws are necessarily defective in principle even though they may be satisfactory in practice.

The principle of special administrative authorities for particular classes of laws had already been recognized and developed in the United States long before the adoption of the compensation system, so in applying the principle of special administration to compensation legislation, in those states in which this principle was adopted, the legislators were not establishing any new principle but were following precedents already established. The basis of this form of administration is the fact that because of the amount of detail that may be involved in the administration of some laws, and because of the specialized knowledge that their administration may require, enforcement may be ineffective if left to the general executive authorities; or to the parties who may be interested in their enforcement, with recourse to the courts a necessity in cases of disagreement as to the construction and application of the laws.