AWB Asks Washington Supreme Court to Help Stop the Bleeding in State Workers' Comp System

Olympia, WA (PRWEB) October 22, 2004 -- On October 18, the Association of Washington Business (AWB), along with the Associated General Contractors of Washington and the Washington State Farm Bureau, filed an amicus curiae (friend-of-the-court) brief to the Washington State Supreme Court to request that they overturn their landmark workers comp decision from 2001, Cockle v. Dept. of Labor & Industries. In lieu of overturning Cockle, AWB asked the High Court to refuse to extend the troublesome ruling.

The Cockle decision changed the historic approach set by the Legislature in 1971 for calculating payments to injured workers while they are off work. It is called time-loss benefits. In Cockle, the court held that time-loss benefits must be calculated not only with an injured workers wages, but also any health or dental insurance benefits the employer paid on behalf of the worker. Previously, the practice of the Department of Labor & Industries was to calculate time-loss and other workers comp benefits based only on workers wages and not wages plus fringe benefits paid by the employer.

The decision increased the complexity of managing claims, increased claim costs, and created great uncertainty in our state workers comp system for employers in the private sector, government, schools, hospitals and nonprofit organizations. Cockle applies to employers regardless of whether they are self-insured or buy their workers comp coverage from the state.

Cockle added costs to the state fund and played a major role in the proposed double-digit rate increases that were announced in 2002 and 2003. If this werent bad enough, the decision also left the door open to further litigation over whether other fringe benefits such as retirement, training programs, life and disability insurance, and vacation should also be included as wages under workers comp, AWB President Don Brunell said.

In fact, thousands of claimants have rushed through that door seeking expanded time-loss benefits based on the new Cockle definition of wages. As the AWB brief observes, a tsunami of litigation has swept over the state attempting to swell the definition of wages to include any employee benefits. According to the Board of Industrial Insurance Appeals they have experienced more than 1,395 Cockle-related claims that further seek to expand the definition of wages.

Last February, the Washington Research Council issued a report showing that Washingtons workers comp benefits increased dramatically as a result of the Cockle and Avundes Supreme Court decisions in 2000 and 2001. If we compare benefits paid per $100 of covered wages, Washington grew more than 10 times faster than the national average, increasing more than two percent, while all states declined by nearly nine percent, said Dick Davis, Washington Research Council president, as reported in the Councils report. (See attached graph from the Report at the end of the press release or go to www.researchcouncil.org/Reports/2004/workerscomp/workerscomp0204.pdf.)

Davis went on to find the maximum monthly benefit contributes significantly to the increases in benefits per claim. Indexed to 120 percent of the average wage in Washington, it grew nearly 33 percent from 1997 to 2003, and this figure is tremendously affected by the stock options taken by technology workers during the 1990s and now, according to a recent study by Actuarial and Technical Solutions, Inc., Washington state ranks 3rd highest of all states in statutory wage replacement benefit provisions.

What all this means is Washington has become a high cost state for workers comp, Brunell said. The true costs of the system were masked by some unusually high investment returns for workers comp reserves invested in the booming stock markets of the 1990s and the fact that the impact of the Cockle and Avundes decisions did not come until after the markets crashed following the terrorist attacks on Sept. 11, 2001.

Now the chickens have come home to roost, Brunell said. You cant have high benefits without costs going up, and we saw that with the 2003 workers comp premium increase of 29.5 percent and this years rate hike of nearly 10 percent.

Thats the reason we are going to the states Supreme Court seeking relief, Brunell added. They caused the problem in the first place, and now it is their chance to remedy it.

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