COMPACT

The Newsletter for Workers’ Compensation Professionals May 2001

Minnesota Department of Labor and Industry 443 Lafayette Road N. St. Paul, MN 55155

Inside ...
Articles
DLI Web site medical fee schedule updates .............................................. 4 Assigned Risk Plan surplus; settlement opportunities for SCF cases .................... 5 More than $3 million of reimbursements unclaimed ............................................ 5 Assault-injury indemnity claim numbers level since 1997 ................................... 6 Musculoskeletal-disorder claims in Minnesota ........................................ 8 New work comp poster available ............. 10 Payment of permanent partial disability in lump sum ......................................... 11 Voc Rehab unit statistics, 1997-1999 ....... 12 Attorney costs in the workers’ compensation system ............................ 15 Rehabilitation provider professional conduct and accountability outcomes ...... 21 Roy v. Gas Supply, Inc. – summary to date ............................................... 24 Notices of request for comment .............. 43

Tables
Number of injuries due to assaults ........... 6 Number of assault indemnity claims for selected industry groups ........................ 7 MSD indemnity claims ............................ 8 Types of MSDs, 1999 indemnity claims ..... 9 Industry of MSD claimants among 1999 indemnity claims ................................... 9 Occupation of MSD claimants among 1999 indemnity claims ........................... 10 Voc rehab plans closed 1997-1999 [1] ..... 13 Voc rehab plans closed 1997-1999 [2] ..... 14 Defense attorney costs by six-month interval ................................. 16 Fees to attorneys compared with associated service fees by six-month interval ........... 17 Insurer/defense attorney fees ................ 18 SCF reimbursements and assessments ..... 25

Forms
Annual Statement of Defense Attorney Fees ................................................... 19

COMPACT is a publication of the Minnesota Department of Labor and Industry. Its purpose is to provide department news and workers’ compensation case information to professionals who work within Minnesota’s workers’ compensation system. Correspondence should be sent to: COMPACT editor, Minnesota Department of Labor and Industry, 443 Lafayette Road N., St. Paul, MN 55155; by e-mail at DLI.Communications@state.mn.us. Subscription requests should be sent to Customer Assistance Publications, Workers’ Compensation Division, 443 Lafayette Road N., St. Paul, MN 55155; by e-mail at DLI.brochure@state.mn.us. Visit www.doli.state.mn.us/compact.html to view this publication on the Web. Upon request to the editor, COMPACT will be made available in alternative formats such as Braille, large print or audiotape.

Level 1 Adjuster Training, Day 1 .............. 35 Level 1 Adjuster Training, Day 2 .............. 37 Publications order form .......................... 39 ‘Rule 101’ order form ............................. 41

Summaries of decisions
Workers’ Compensation Court of Appeals ........................................... D-1 Minn. Supreme Court decisions................ D-23

Attorney costs in the workers’ compensation system
By Carolyn MacDonald, Research Analyst Research and Statistics

In the decades since the inception of the workers’ compensation program, formal resolution of disputes among parties has resulted in a body of case law that affects outcomes of current disputes about workers’ compensation matters. Although recent reforms to workers’ compensation laws have aimed at increasing the proportion of disputes that can be resolved informally, many disputes continue to be heard by judges at proceedings where attorneys represent disputing parties. Important reasons for this include:

1992 through 1997, the most recent year for which this data is available.

The balance of this article presents information about attorney fees and related legal defense costs2 reported by insurers and self-insured employers, referred to in total as “defense attorney fees.” Concern about rapidly increasing workers’ compensation costs in the early 1990s resulted in reforms that included the reporting of defense attorney fees for the first time. This was in order to measure the extent to which defense attorney fees 1) responsibilities under current law may be unclear while contribute to overall system costs. Defense attorney fee consequences of the injury or illness may be serious; data for both insurers and self-insured employers first became available beginning with the second half3 of 1994. 2) some types of injuries, such as injuries with a lengthy period of onset, can involve interpretations of Defense attorney costs complicated combinations of legal precedents; Total annual defense attorney fees ranged from $46 million to $52 million between 1995 and 1999, the most 3) one or more parties to a dispute may be reluctant to recent year for which data is available. Trend data is participate in informal dispute resolution, preferring the presented in Figure 1 (see page 16). Defense attorney finality of a judge’s ruling. fees decreased between 1994 and the first half of 1996, returned to their 1994 levels by the first half of 1998, Under Minnesota statute, claimant attorney fees are and then decreased again. Reported estimated fees per calculated as a percentage of the benefits awarded and injury generally decreased during the entire period. may be a lien against these benefits. Claimant attorney fees are regulated and have historically been reported to Fees to attorneys, associated service costs the department on required claims forms. Trend data Defense attorney fees reported for the second half of about claimant attorney fees, beginning in 1984, is 1994, were $27.1 million. Of this, $7.6 million, or 28 reported annually in the Workers’ Compensation percent, represents legal defense costs other than attorney System Report. The most recent (1999) system report fees. The most substantial among these costs is indicates the percentage of indemnity claims with claimant independent medical examinations. By the first half of attorney fees was 10 percent in 1984, rose to a high of 2000, the proportion of total defense attorney fees paid 17 percent in 1991, and declined to 15 percent in 19971. for other legal defense costs increased to 51 percent. Average claimant attorney fees as a percentage of The relationship between attorney fees and other legal average associated indemnity benefits has increased defense costs is shown in Figure 2 (see page 17). Fees gradually from nine percent in 1984 to 12 percent in to attorneys have generally decreased over time, while 1997. Total claimant attorney fees as a percentage of other costs have fluctuated in the range of $6 million to total indemnity benefits for all claims, at five percent in $10 million. 1984, remained at slightly more than seven percent from
Attorney costs, continued on page 16
Data is “developed,” meaning the numbers are projected to what is expected to be full claim maturity. Most current data available is 1997. Related legal defense costs includes deposition and other expert-witness fees, investigative costs related to litigated cases, medical report fees, file and chart copy fees, court filing fees, transcript costs, and travel and mileage costs paid in connection with litigated cases. 3 Defense attorney fee data is reported by the attorney’s fiscal year, in half-year segments. Fees paid to attorneys and associated service costs are itemized separately.
1 2

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Attorney costs, continued from page 15

which means they are associated with injuries that may Information about claimant attorney fees and defense have occurred in any year. Nevertheless, general attorney fees is collected differently. Claimant attorney comparisons can be made. fees are reported to the Department of Labor and Industry (DLI) on a per-claimant basis and are reported Generally, defense attorney fees were more than twice in the Workers’ Compensation System Report as as much as claimant attorney fees from 1995 through developed costs for claims by year of injury. Defense 1997, the years for which both data series are available. attorney fees are reported according to the year paid, This relationship is illustrated in Figure 3 (see page 18).
Comparison of defense, claimant attorney fees

Figure 1 Defense attorney cost
by six-month interval July 1, 1994 - June 30, 2000
Millions $40 $30 $20 $10 $0 II-94 I-95 II-95 I-96 II-96 I-97 II-97 I-98 II-98 I-99 II-99 I-00 Defense attorney fees Estimated fees per injury 4,000 3,000 2,000 1,000 0

Half-year II-94 I-95 II-95 I-96 II-96 I-97 II-97 I-98 II-98 I-99 II-99 I-00

Defense attorney Estimated fees number of (millions) injuries $27.1 16,603 26.2 16,426 23.0 21,502 22.3 23,464 24.1 29,297 22.9 29,298 24.2 25,051 27.3 32,577 24.8 39,236 24.9 39,227 23.1 35,503 23.2 36,286

Estimated fees per injury $1,635 1,595 1,068 949 823 780 965 839 635 635 651 639

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Figure 2 Fees to attorneys compared with other legal defense costs
by six-month interval July 1, 1994 - June 30, 2000
Millions
$25 $20 $15 $10 $5 $0 II-94 I-95 II-95 I-96 II-96 I-97 II-97 I-98 II-98 I-99 II-99 I-00 Fees to attorneys Other legal defense costs

Other legal Fees to defense attorneys costs Half-year (millions) (millions) II-94 $19.5 $7.6 I-95 18.0 8.2 II-95 16.6 6.3 I-96 16.4 5.9 II-96 16.4 7.7 I-97 15.4 7.5 II-97 16.3 7.9 I-98 16.9 10.4 II-98 15.7 9.1 I-99 16.3 8.6 II-99 15.2 7.9 I-00 15.3 7.9

Attorney costs, continued on page 18

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Attorney costs, continued from page 17

Figure 3 Defense attorney fees, 1995-1999,
compared with claimant attorney fees, 1995-1997
Millions
$60 $40 $20 $0 1995 1996 1997 1998 1999 Claimant attorney fees Defense attorney fees

Year 1995 1996 1997 1998 1999
database.

Defense Claimant attorney attorney fees fees ($millions) ($millions) $49.2 $19.6 46.4 21.8 47.1 20.6 52.1 48.6

Source: DLI Statement of Attorney Fees database and DLI claims

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