A Short History of Workers' Compensation

Workers' compensation insurance was first developed in Germany in the late 1800's. At the same time in the United States, industrialization with its increased use of machinery and workers led to a rise in worker injuries. Lawsuits against the employers were the only remedy that an employee had under the "common law." The employer had many defenses against those suits such as "contributory negligence" and "assumption of risk" so that the employers often received a judgment in their favor with no payment at all to the worker.

There were also delays in getting to trial, which meant that the employee suits failed to provide a prompt and adequate recovery for injured workers or their families. These problems led to many disabled workers being on "welfare" or its equivalent. As a result, the expense of providing for the worker and the worker's family was borne by society as a whole instead of the industry that caused the injury. From the employer's standpoint, the lawsuits also caused problems since, just as today, the lawsuits were very expensive.

With government having to pay more for "welfare" and both the employees and employers being unhappy with the situation, a compromise was struck that formed the basis for workers' compensation law today. The government established a mandatory system that protected the employer from lawsuits in exchange for the employer's purchase of insurance to provide payment for the worker or the worker's family. The "no fault" insurance provided coverage regardless of who caused the accident, as long as the accident arose out of and was in the course and scope of employment. As with most compromises, no one was totally happy with the result, but the system has survived in each of the 50 states, in one form or another based on the same principles, since the early 1900's.

Arizona Workers' Compensation

Workers' compensation in Arizona, as in most states, is purely statutory. That means that the rights of the parties, the employers and employees, are determined by our state Constitution and the laws passed by our legislature in Phoenix. (The "common law" that governs all other lawsuits and that can result in large dollar awards that we read about in the newspaper has little, if any, meaning in workers' compensation cases.) Every employer who has one or more employees who is "regularly employed" is required by law to have workers' compensation coverage to cover workers who are injured or killed on the job. The employer who is not large enough to self-insure obtains the insurance from a private insurance company or from a special insurance branch of the state. (If an employer fails to purchase insurance, there is a "special fund" at the Industrial Commission of Arizona (ICA) that covers injured employees of that employer.)

Parties to a Workers' Compensation Claim in Arizona

The key parties in a workers' compensation claim usually include the injured worker, the employer, and/or the insurance company for the employer, and the Industrial Commission of Arizona. The ICA generally acts as the neutral intermediary agency when the worker and the insurance company/employer do not agree. Its only functions are to approve average monthly wages recommended by the employer/carrier, set loss in earning capacity and approve certain "lump sum settlements." (The ICA may be an actual "defendant" to a case where the employer had no insurance and the "special fund" is called upon to make payments to the worker.)