CONSTRUCTION + ENGLISH MAJOR
= THIS ARTICLE
This article chronicles the plight of America's hardest workers while sharing the story behind the insurance meant to protect them. I wrote this article while pursing my B.A. in English at Davidson College after having worked construction during two summers in rural Appalachia.
Upon graduating from Davidson and before matriculating to Brandcenter, I spent 3 years as a Workers' Compensation Insurance Underwriter studying the dangers America's workers face every day in their jobs. I observed employee behaviors at job sites, reviewed client loss reports, and developed strategies and recommendations to reduce workers' chance for injury.
hURT AT WORK
At six feet, four inches and between two and three hundred pounds, or however large is as large as a man can be without being considered fat, Randy Johnson, or "Banjo" as he is known familiarly, is a real life Paul Bunyan. I’ve seen him pick up twenty-foot-long PVC pipes with a ten inch circumference and handle them as though they were twigs in a game of pick-up-sticks. I’ve seen him ram one PVC pipe into the next with his bare hands, never waiting for the hydraulic force of the backhoe bucket to assist him. I’ve seen him string ten of these twenty-foot pipes together and then toss them into a five foot trench with the flick of his hand. And I’ve seen him do this continuously for the entire twelve-hour workday, in eighty-degree heat, sweat dripping down the Grimm Reaper tattoo that covers the entire area—elbow to shoulder—of his left arm.
Banjo is a pipe layer by profession, though “professional pipe layer” may be a more adequate description, as he is known to have strung together over a thousand feet of pipe all by himself on multiple occasions. That’s not to say he doesn’t have assistance, but the fact remains that he can do the work, and if faced with the option of waiting for help or doing it by himself, Banjo never waits. He does and does and does and will continue to do until he can’t. In his late forties, Banjo is a career laborer, and his job is grueling. Forty hours a week he lifts, bends, digs, squats, cuts, breaks, fixes, replaces. And forty hours a week, he risks injury to the one tool he cannot replace: his body.
This, for Banjo, is a constant concern. Not just a construction worker, Banjo is also a husband and a dad, a father of two boys. He must provide for his family and can’t risk an injury that would inhibit him from working. As a pipe layer, however, he constantly faces very dangerous conditions. In addition to all the soft-tissue injuries he risks while lifting and digging, he also faces environmental hazards such as cave-ins, which, according to the Department of Labor website are “the leading cause of worker fatalities during excavations,” conditions in which Banjo works every day.
Despite Banjo’s commanding presence and brute force, he is no match for the weight of collapsing earth, which could quite literally bury him alive, or crush any part of his body, causing serious injury. For this, there are not only safety measures in place, but also Workers’ Compensation, which protects workers injured in the course of employment by serving as a form of health insurance, loss of wages insurance, and in some cases, life insurance.
Ross Johnson, President of Mountain State Insurance Agency in Charleston, West Virginia, comes from a very typical southern West Virginia family: His father was a coal miner and his grandfather, a coal miner before him. He grew up in a small house with a big family. No one had ever gone to college. Johnson did. After a brief stint in the mines, Johnson enrolled in Marshall University and graduated in 1985 with a degree in Finance and Business Law, concentrating in insurance.
Even as a boy, Johnson knew that he wanted to be an “insurance man” when he grew up. A son and grandson of coal miners, Johnson experienced first-hand the frustration and hardship that accompany injury, learning at an early age the importance of workers’ compensation insurance benefits. In a recent phone conversation he described the uncertainty his father’s profession cast on his childhood: “When I was a kid,” Johnson recalled, “my dad would inevitably get hurt every two or three years. It was always a family hardship.”
One injury he remembered distinctly: “my dad tore his thumb off once.” The others he simply lumped together adding casually, “my dad tore his thumb off once, and just different things.” And while his father did receive compensation for his injuries, the compensation system, despite being designed to aid injured workers and their families, was little help in easing this young boy’s mind: “I hated it when I was a kid and my dad got hurt, because there were going to be problems.” Johnson described his frustration saying, “He would be off on comp, and it would be an extended period of time because it was out of his control, and the paychecks would be irregular—it made life difficult.” That’s why in his own practice, Johnson explained, “one of the things we try to do in my business is try to help little kids’ dads from having bad experiences with work comp. We inevitably have those situations, but we try to minimize them.”
Though even today Workers’ Compensation isn’t a perfect system, it has come a long way since its inception. Prior to the introduction of workers’ compensation, workers injured on the job were compensated under a system of negligence liability. Workers were entitled to full compensation for the damage he or she experienced, but the worker had to first prove that the accident was caused by the employer’s negligence. If the worker could do this, he or she would receive full compensation. If not, he or she would receive none.
There are some obvious problems with this system, not the least of which is the requirement of having to prove one’s employer’s negligence. A negligent employer was considered to be one who “failed to exercise due care," but under a system which also mandated that a worker might not receive any compensation if the employer could argue one of three defenses—assumption of risk, fellow-servant defense, and contributory negligence—one can see just how narrow the scope for granting benefits actually was. The employer was no longer liable, this system argued, if the worker “knew of the danger and assumed the risk of the danger when accepting the job, if a fellow worker caused the accident, or if the worker’s own negligence contributed to the accident."
Take the case of Jim Hurd for example. Jim Hurd, a Stonega Coke and Coal Co. employee, died in 1916 while helping a coworker move a tie for a coal car. As he stooped down, a piece of slate “fell out of the roof” striking Hurd and inflicting fatal injuries. He was survived by a widow and “infant children.”
Given the three defenses mentioned earlier, Stonega might have tried to argue the “assumption of risk” defense. If the company could convince the jury that Hurd knew the risks of a slate fall when he took the job and was “already receiving extra compensation in his wages from Stonega to accept these risks,” Stonega would be freed of liability. Likewise, had the cause of the accident been different, Stonega’s lawyers might have argued the “fellow-servant defense,” and/or “contributory negligence.” Say Hurd had not gone to help his co-worker, but had remained in his own workplace that day and been killed by a similar slate-fall accident there, “If Stonega’s lawyers could have shown that Hurd’s coworker had failed to prop the roof in a timely fashion,” Stonega could have argued it was the coworker’s negligence that caused the accident, not Stonega’s, and Hurd’s family would have been left to sue the coworker for the damages. Finally, had the accident been caused by Hurd’s own failure to prop the roof effectively, the lawyers could have argued that Hurd’s own negligence contributed to the accident. Once again, the employer, Stonega, would not be required to pay.
The result of this case—a payout in the value of twenty-five hundred dollars to Hurd’s family (half to his spouse and half to his children)—demonstrates not only the three defenses at play, but also the settling (often unfair) that occurred under this system of negligence liability. In this case, “because the fall of slate had occurred in an entryway, where the company had responsibility to keep the roof safe, Stonega’s lawyers felt that it was likely that the court would consider the company negligent.” As a result, the company would try to settle quickly and out of court.
Accepting a quick settlement, however convenient, was not necessarily the best option for the family. While immediately benefitting both the employer and the family—the employer or the insurance company could avoid costly legal defense fees and families like Hurd's could receive immediate financial assistance to help cover their needs rather than endure months, even years, of legal battle—was not necessarily the best option. Settlement payouts were typically “well below the potential damages that might be awarded in court.” Thus, while a quick settlement filled the family’s immediate needs and guaranteed that they received some aid (remember, the court could rule against them), accepting a settlement, in many cases, meant leaving money on the table.
In short, the system was a gamble, something needed to be done.
The progressive era (1900-1917) brought about change. According to the Department of Labor website, investigating and ameliorating hazardous working conditions became an area of great interest. Partly due to presidential leadership by Theordore Roosevelt who “championed the conservation movement and broadened its scope to include the saving of human life,” and partly due to muckraking journalism, which exposed the deplorable working conditions behind the production of the nation’s goods, workers’ compensation became a topic of serious, however divisive, discussion.
In 1908, President Theordore Roosevelt explained to congress: “the burden of an accident falls upon the helpless man, his wife, and children.” He urged, the passage of an act to provide “a certain definite and limited compensation for all accidents,” emerging, “as an incident of the performance of their duties,” and succeeded at the federal level with the passage of the Federal Employers Liability Act (1908). Though not comprehensive, this act provided a compensation model the states could follow.
In 1910, Muckraking journalists William B. Hard and Crystal Eastman gave nation-wide publicity to workplace accidents with two cornerstone publications: Hard’s “Making Steel and Killing Men,” and Eastman’s “Work Accidents and the Law.” In “Making Steel and Killing Men,” Hard estimates that every year, twelve hundred men out of ten thousand workers are killed or seriously injured. He describes one man, Ora Allen, as having been “roasted alive” by molten slag, when a hook from an overhead crane slipped, spilling its liquid fire over Ora down below. The ladle “lacked proper lugs and the hook had been attached precariously to the rim,” but the crane’s operator didn’t know this.
When Newton Allen descended his crane, hurrying back to the scene of the accident, he was surprised by what he saw: “I did not know it was my brother. It was not till I turned him over that I recognized him. Then I saw it was my brother Ora. I asked him if he was burned bad. He said no, not to be afraid…” Ora died in the hospital three days later. His doctor, Ira Miltimore, testified “his death was due to a ‘third-degree burn of the face, neck, arms, forearms, hands, back, right leg, right thigh, and left foot.’” He was “burned bad.” Hard concludes, “A third-degree burn is the last degree there is. There is no fourth degree.”
Crystal Eastman, in her book, Work Accidents and the Law, chronicled the findings of the Russell Sage Foundation’s, “Pittsburgh Survey,” a year-long (1907-1908) survey of the living and working conditions of steel workers in Pittsburgh, Pennsylvania. Eastman reviewed information on “the nature of each accident—the cause, who was at fault, economic effects on families, and so on” for “all industrial deaths in the Pittsburgh area for one year,” and on all accidents (even those not resulting in death) for three months. Reviewing over a thousand cases in all, her resulting book sought to find the answers to two questions:” what was the distribution of blame for accidents between workers and employers; and, who bore the brunt of the economic burden of work accidents.” Her conclusions proved formative in changing the opinions of both employers and laborers with regards to workers’ compensation.
As workers’ compensation provides wage replacement benefits, medical treatment, and vocational rehabilitation for workers injured on the job, it may seem peculiar that labor did not immediately embrace the proposed legislation. The switch to workers’ compensation, however, involved a great deal of compromise, and despite the clear flaws of the common law negligence liability system, both employers and laborers alike hesitated in adopting workers’ compensation legislation.
Workers’ compensation is what is known as a “no-fault” insurance, and it is precisely this “no-fault” component that makes it so praised and so contested. What “no-fault” means is that the insureds (the workers) are compensated for losses regardless of fault in any incident arising out of the “course” and “scope” of their employment. Sounds great, right?
Under this system, Jim Hurds throughout the entire American workforce and their families would have no problem receiving compensation for their or their loved one’s workplace accident(s). Under this system, the three defenses—“assumption of risk,” “fellow-servant defense,” and “contributory negligence”—would hold no bearing, and families, rather than have to prove some other party’s negligence (their employer’s, coworker’s, etc.) in order to receive compensation, would receive aid regardless of fault, even the employee’s own.
Perhaps of even greater significance for workers and their families, workers’ compensation legislation essentially guaranteed compensation if the injury or damage sustained arose out of the “course” and “scope” of their employment. No longer would families, fearing of lengthy litigation and the threat of losing the lawsuit (and receiving no aid) feel pressured into accepting settlements far lower than the value of their injury entitlement.
Workers, and particularly the labor unions, however, resisted workers’ compensation. In exchange for the guarantee of compensation, workers had to give up their right to sue their employers for damages arising from the tort of negligence. Labor leaders were particularly uncomfortable with this idea as the power to sue (or even threaten to sue) their employers was one of their only protections against exploitation. Also, while courtroom success under the negligence liability system was not guaranteed, awards, when given, were sometimes very large. Labor feared a standardized, guaranteed compensation system would reduce payout amounts.
Beyond mere economic concerns, labor representatives also worried the new legislation focused too much on compensation for injuries and not enough on prevention of those injuries in the first place. John Mitchell, president of the United Mine Workers (1898-1908), shared this concern. The Department of Labor’s website explains: “Labor’s efforts had for some years been concentrated heavily on obtaining factory inspection legislation, and compensation was seen as a diversion from this effort.” Plus, with the seeming concessions business was going to have to make in order for workers’ compensation to work, labor leaders like Mitchell wondered whether employers would follow through, eliminating hazardous workplace conditions in order to pay a reduced premium, the proposed incentive for business.
Indeed, until Eastman’s groundbreaking work, Work Accidents and the Law (1910), employers “commonly believed that around 95 percent of all accidents were due to workers’ carelessness,” and not actual unsafe conditions in the workplace.
Eastman’s book challenged this conviction, “showing that, of the 377 accidents covered in the Survey for which fault could be determined, 113, or 20 percent, of them were solely the employers’ fault. Further, at most, only 44 percent could be even partially blamed on the victim of fellow workmen.” She continued, explaining, “of the 132 deaths which were found to be the victim’s fault, 47 involved very young or inexperienced workers, or those with physical conditions that made them vulnerable. That left 85 experienced, able-bodied victims of ‘carelessness’”—hardly the majority.
Her work also helped put workers’ (“workmens’” at the time) compensation in a different light—as a preventive program. Upon exposing that employers and not employees shared the largest blame in workplace accidents, Eastman developed the argument that “if employers had an economic incentive to eliminate workplace hazards, they would do so,” thus resulting in a safer workplace. Her insight became one of the fundamental reasons for labor’s shift in favor of adopting workers’ compensation.
As mentioned above, workers’ compensation sought to reduce workplace accidents by incentivizing employers to maintain a safe workplace. This economic incentive was bound to the premiums they would pay to the state or to the insurance company that underwrote compensation payments. Premiums would vary depending on “safety record, extent of hazards, and the efforts companies made in accident prevention.” Already a step up from the expensive liability insurance employers had been buying, workers’ compensation allowed for continued reduction of premiums as “safety efforts and the accident record improved.” These potential savings, asserted supporters of workers’ compensation, “would more than cover the costs of necessary safety improvements, making it in the employers’ own best economic interest to reduce accident rates.”
Further economic advantage to employers arose in the form of tort relief. Since employees exchanged their right to sue for more reliable, albeit smaller payouts, employers no longer had to worry about expensive court costs.
Like the workers’ mandatory relinquishing of their right to sue their employers however, these economic incentives did not come without sacrifice. Employers, while they could no longer be sued, also could not avoid payouts as they had in the past by employing one of the three defenses—“assumption of risk,” “fellow-servant defense,” “contributory negligence.”
Under workers’ compensation, employers had to pay premiums, which covered the compensation for all workplace accidents regardless of fault, and as improving workplace conditions and safety records was the only way to reduce premiums, employers also had to continually seek health and safety improvements, which were often costly, for their workplace.
With both business and labor in support, the United States began to adopt workers’ compensation laws at a rapid pace. In 1908, the federal government paved the way for workers’ compensation with the passage of the Federal Employers Liability Act of 1908, and in 1909, New York, Wisconsin, and Minnesota set up commissions to “investigate the question of employers’ liability for accidents.” More states joined in the next year.
The reports of these commissions showed that most employers were in favor of workmen’s compensation,” and in May of 1911, Wisconsin became the first state to establish a workmens’ compensation system. Before the end of that same year, nine other states passed compensation laws. Three passed in 1912, and eight more in 1913, so that “by 1921, 46 jurisdictions had workmen’s compensation laws in force.
Relatively late in adopting workers’ compensation, (Germany, in 1884, became “the first country to provide compensation to workers injured in accidents”), the United States faced different challenges in the passing of workers’ compensation laws than its European, industrialized counterparts. Namely, the federal government considered social insurance and welfare the responsibility of the states, and while the federal government did pave the way in covering its own federal workforce, workers’ compensation did not pick up support on a large scale until the second decade of the twentieth century.
Even then, debate over the socialization of insurance continued. As economists Price Fishback and Shawn Everett Kantor note in A Prelude to the Welfare State: The Origins of Workers’ Compensation, “the greatest political turmoil [in adopting state workers’ compensation], developed over the issue of private versus state insurance of workers’ compensation risk." Union leaders and private insurers fought over the states’ business, with union leaders pushing strongly for state insurance “on the grounds that private insurers were profiting from denying benefits to many deserving injured workers,” and insurers fighting to save their business and charging that “state insurance was a sign of creeping socialism.” The eventual choice carried lasting repercussions, “set[ing] the stage for later debates over the government’s underwriting of unemployment, health, and disability risks.”
Most states allowed their employers to contract with private insurance providers, but some chose to implement competitive state-run systems. Still fewer, seven in all, established monopoly state-run insurance systems, which Fishback and Kantor speculate occurred either because “strong labor unions were able to enact state insurance in the face of relatively weak insurance interests and agricultural interests, or monopoly state insurance was swept into place when a strong political reform movement—for example, progressives in the early 1910s and nonpartisans in the late 1910s—incorporated unions’ demands for state insurance into a broader program of socioeconomic changes.”
“Actually, West Virginia provides an interesting case study,” offered Johnson in our phone interview. Though enacted in 1913 as a monopoly state fund, the state in recent years has passed from one end of the spectrum to the next, phasing from a monopolized state fund system to a competitive state fund system and finally a privatized system. Now, workers’ compensation in West Virginia “looks like the systems in thirty-five or so other states,” a fact that Johnson proudly shared.
It’s no wonder. Just under a decade ago, West Virginia’s workers’ compensation reached a crisis point. “The system was broken,” Johnson declared, “it was so archaic, it couldn’t even be compared with other states.’” In fact, of the seven original monopoly states, only three remain—Washington, Ohio, and North Dakota.
Having reached a breaking point, journalists from The State Journal spent two-months reporting on the current and past state of workers’ compensation in West Virginia. The resultant title of the series was “Broke and Broken.” In a piece for the series titled, “Putting it All Together,” which broke June 04, 2003, The State Journal reported:
Picture a system where injured workers are made whole. Where health care is prompt and reasonably priced. Where benefits are paid only to those who need them, and it doesn't take a lawyer to get them. Where businesses pay affordable premiums that cover the system's costs. In West Virginia, that picture has been shattered. A catastrophic mishmash of policy and politics has left the state's Workers' Compensation Division with an unfunded liability of $3.6 billion.
In a second installment to the “Broke and Broken” series, The State Journal reported:
Workers' compensation in West Virginia started in 1913, but the writing was on the wall from the beginning. The first financial statement for the West Virginia Workers' Compensation Fund showed a $290,000 deficit; even then, cash flow was a problem. It took the state until 1917 to climb out of the red. Nearly 90 years later, the system is drowning in billions of debt.
To remedy this situation, West Virginia underwent a phased transition managed by Brickstreet Insurance, based in the state’s capital, Charleston, West Virginia. Given the state’s huge unfunded liability for compensation claims (just under $3 billion dollars) and years of operation under an inefficient state bureaucracy, the transition would not be easy. West Virginia, claimed the reporters, had developed a “culture of disability” where “one in seventy lost time claims turns into permanent and total disability (the next closest state comes in at a rate of one in 220).” Thus, part of West Virginia’s challenge in transitioning would involve transforming the culture from “disability entitlement to a priority on return-to-work.”