APPENDIX N

EXTRACTS FROM THE THIRTEENTH BIENNIAL REPORT OF THE BUREAU OF LABOR AND INDUSTRIAL STATISTICS (1908)

J. D. BECK, Commissioner; M. O. LORENZ, Deputy

INDUSTRIAL ACCIDENTS AND EMPLOYERS' LIABILITY IN WISCONSIN What would be the cost if we continued with the law of negligence?-Employers' liability insurance costs now in Wisconsin from 12 cents per $100 of wages in knitting mills to at least $9 in some building operations-an average of 50 or 60 cents. But it is very probable that this expense would be increased in the near future by weakening the defense of the employer in the courts. In the railroad industry, the fellow-servant doctrine has been abolished in this state and the doctrine of contributory negligence has been seriously modified. Similar modifications are practically inevitable for other hazardour industries if the present system of liability is retained. That means that the liability companies will charge more and more for a liability policy. But in addition where there is no legal liability, employers are appealed to for charity.

One absurdity of our present law is that it says: A railroad brakeman cannot wholly be barred from compensation by the defense of contributory negligence, but a structural steel worker or a worker in a sewer (both in very hazardous employments) can be debarred from compensation by that defense. The reason for this is that the accidents in the railroad industry were the first to attract attention. But that other classes of accidents are now relatively more important, is shown by the following analysis of Wisconsin Supreme Court cases involving claims by injured workmen against their employers. Before 1890, three-fourths were railway cases; since 1890, less than onefourth are railway cases.

What could be paid with his money if distributed on the insurance principle?-The cost of the present system would be sufficient to inaugurate a general system of compensation if properly administered. The following estimate, which has been explained in chap. iii, is made on the basis of Wisconsin accident statistics:

To pay regardless of negligence for each fatal industrial accident three times the annual earnings, and for non-fatal accidents one-half wages during disablement after the second week up to one year, together with an additional payment of $500, or less, according to the degree of the injury, to those permanently injured, and for all cases first medical aid, would cost at a maximum as follows for manufacturing establishments reported in the federal Census of 1905 for Wisconsin.

Fatal accidents at three years' earnings...

. $164,290.80

Non-fatal during total disability for one year after the first two

This would be approximately 68.9 cents per $100 of the wages bill or $3.25 per man per annum, employed, on an average. In some industries it would be less and in some more. If these same manufacturers had been insured at existing employers' liability rates, the cost would have been about $416,204.61, which is 58 cents per $100 of wages or $2.75 per man per annum. That this last estimate is a reasonable one, appears from the following (explained in detail in chap. iii): The Bureau received reports from 540 establishments regarding their expenses on account of industrial accidents and wages in the year 1906. This result shows an average expense of from 53 to 58 cents per $100 of wages on the wages bill, and from $2.50 to $2.80 per man employed. The difference between the two estimates of $492,730 and $416,204 is not enough to prevent the adoption of a system of workmen's compensation on the ground of expense.

Moderate compulsory liability or a voluntary co-operative insurance fund? (a) Compulsory liability.-The preceding suggestions would be substantially carried out by the English system with the scale of benefits paid under the act of 1897. This would mean

that little further governmental machinery would be necessary.

The

law would make employers in certain occupations liable for a given amount of damages in case of accidents to their employees without regard to ordinary negligence or assumption of risk, and employers would insure themselves as at present with employers" liability insurance companies. There are two objections to this plan: first, as has already been suggested, it may be unconstitutional, and second, it would retain the wasteful system of employers' liability insurance under competitive conditions.

b) A voluntary co-operative insurance fund.-Another plan for embodying the preceding suggestions would be as follows: Employers and employees would be allowed to make a contract whereby the employer would be relieved of the liability for damage suits on account of industrial accidents to his employees on condition that he paid into a fund, to be managed by the State Insurance Commissioner, or some special commission, an annual payment about equal to the present cost of employers' liability insurance in his industry. From this fund workingmen who had entered the scheme would receive a benefit (specified by law) in case of injury regardless of negligence (except in case of gross misconduct) without making any contribution themselves.

The state could probably not guarantee the fund without an amendment to the constitution. In other respects such a solution of the problem would be similar to the Illinois Commission plan, explained in the appendix. It would, however, have some advantages over that plan. The expenses of administration would probably be less because part of the administrative work could be borne by the state. Considering the public advantages of such a system, the state could very properly contribute something in this way indirectly. It would give the state more complete information regarding accidents than if it simply asked private companies for reports. Direct state supervision of this kind would inspire confidence and would guarantee fairness in the rates charged. . . .

The conduct of liability insurance by private companies has proved excessively wasteful. As explained in chap. iii, they charge about two and one-half times as much as they pay out in losses. The plan here outlined could certainly be managed for much less than that. The administrative expenses of the German accident insurance system, as already stated, are now 13.50 per cent. of total expenditure, and probably will be less in the future; and the experience of Wisconsin

local fire mutuals indicates that the administrative expenses of the fund need not be more than 15 or 20 per cent.

To promote economy and speed in settlement, use might be made of the device employed by the Ocean and Accident Guarantee Corporation, elsewhere fully explained, whereby the employer might settle all small cases immediately according to his own interpretation of the law, and be reimbursed from the insurance fund up to 80 or 90 per cent. of what he paid out.

How the workman may be encouraged to provide for himself. -It might be made a part of the conditions of the organization of the mutual insurance fund mentioned in the preceding section, that workmen who paid additional premiums (either directly or by having them deducted from their wages) into this fund, should receive additional benefits.

Or, it might be advisable to separate these two features, and organize a system of workingmen's accident insurance on the plan now being tried for life insurance and annuities in Massachusetts, through the efforts of Mr. Louis D. Brandeis.

By an Act of the Massachusetts legislature in 1907, savings banks are permitted to establish departments for the issue of life insurance. These departments (two of which having been organized at the present time) are to be conducted at a minimum expense, no solicitors being allowed. The waste in industrial insurance as now conducted by private companies is very great. It is the thought of this Massachusetts plan to supply good insurance at a low price to those who want it. It is only when such an opportunity is offered that one can reasonably adopt the principle of "let each man look out for himself."

Similarly the attitude, frequently expressed, "Let each man buy his own accident insurance in the same way that he buys his fire insurance" will only then be a reasonable one when the workingman is given an opportunity to buy this article without feeling that he is being robbed.

Conclusion. The foregoing considerations make inevitable the conclusion that the existing method of settling the claims arising out of accidents to workingmen while at work can be greatly improved. In some manner we should introduce the idea of insurance, which practically disregards the idea of negligence. Perhaps it would be best first to test the constitutionality of making all employers liable to moderate benefits, amounting on an average to about as much as they would pay under the present system, in all cases of accidents, and

then releasing them from the liability to damage suits when these benefits have been paid. But if this is inadvisable, it would be desirable to have permissive legislation, as outlined in preceding sections, combining the idea of encouraging co-operation between employers and employees, state supervision of insurance funds to guarantee fairness, and the opportunity for workingmen to provide adequately for themselves.

In fact, a number of bills might be passed, each capable of standing alone, yet supplementing the others. Such bills would be in substance as follows: (1) Extend the law regarding the railway industry given on p. 84 (chap. 254, Laws of 1907) to other employments; (2) give the workmen the option of proceeding under the law of negligence or under a law of compulsory liability that disregards negligence, but not under both; (3) provide for a voluntary co-operative insurance fund as above outlined; (4) require complete reports from employers' liability insurance companies. The combining and choosing of these plans is the work of the legislator.