5 Steps to Avoiding Workers’ Compensation Claim Litigation

Author, Jeremy Hoolihan, CRIS, Janitorial Group Leader, Rancho Mesa Insurance Services, Inc.


Workers’ Compensation claims can cost a company time, money, employee productivity, and morale. Litigation is one of the most costly results of a workers’ compensation claim. Once an employee hires an attorney, the time and money it takes for the claim to close drastically increases.

There are several reasons why an employee will find the need to hire an attorney. Practicing a sound Risk Management Program can dramatically reduce the likelihood of litigation. Here are some ways you can prevent most workers’ compensation claims from ever reaching that point:

  1. Acknowledge why employees hire attorneys. The employee/employer relationship is a critical factor in determining if a workers’ compensation claim results in litigation. Employees who feel threatened in some way are more likely to hire an attorney. A few key reasons are:
       a. The employee is concerned they will be fired because of the injury and/or ownership or management doesn’t truly feel the injury was work related.
       b. The employee feels they will face retaliation for reporting the claim.
       c. There is a lack of understanding of the workers’ compensation claim process. For those employees that are faced with a workers’ compensation injury, it can be a very stressful time.
       d. There is a fear the claim will be denied or they will be treated unfairly. Attorneys can prey on vulnerable injured employees. Radio and television ads imply injured employees need their assistance in order to get proper treatment and/or a huge settlement they deserve.
  2. Keep lines of communication open with your employee. Reassure the employee that he or she will have a job when they are able to return to work. In addition, show some compassion and stay in regular contact with the individual. An employee is far more likely to hire an attorney if they are concerned about losing their job or no longer of value to the company.
  3. Consider the ramifications before firing an injured employee. Termination of an employee after they have been injured on the job can put the company at risk of a lawsuit (Section 132 claim). In addition, terminating an injured worker could cost the company more in wage loss benefits; an injured employee will continue to draw from the workers’ compensation policy if they are unable to return to work, regardless if the company continues to employ them or not. Often, employees are released to modified duty (Return To Work Program). If an employer can accommodate the work restrictions, the employee’s temporary benefits are reduced or eliminated. This can significantly reduce the total cost of the claim.
  4. Act before a problem employee becomes injured.  Once an injury has been reported, it becomes extremely risky to discipline or terminate a problem employee.  Address and deal with the employee immediately and be consistent with your documentation.
  5. Train your supervisors!!!! It is vital that supervisors are trained in reporting and handling claims. They are your first line of defense in preventing claim litigation. Businesses should have a formalized Accident Investigation Program in place. Rancho Mesa provides a Supervisor’s Report of Accident or Near Miss form and a Witness’ Accident Statement form to assist in the investigation process.  In addition to all the formal documentation, there are other key strategies a supervisor can use: 
       a. Do not accuse the injured employee of fraud, even if you know fraud is involved. Supervisors should simply document the facts.  If there is suspicion of fraud, make sure you document any supporting evidence in the report and inform the adjuster.  
       b. Do not negotiate the injured worker’s treatment or return to work schedule.  Leave that determination to the claims adjuster.
       c. Keep in touch.  Instruct the supervisor to check on the injured worker from time to time.  Show some compassion and build trust. Assure the employee that their job is secure.

While there is no surefire way to eliminate litigated claims, by following these five steps you should see results.  With the average litigated claim costing 30% more than a non-litigated claim, the savings over time could be significant.  To discuss implementing this strategy within your company’s Risk Management Program, please contact Rancho Mesa Insurance Services, Inc. at (619) 937-0164.