Reducing Litigation: Evidence from Wisconsin

By WCRI

December 1, 1988 Related Topics: Litigation and Dispute Resolution

High levels of litigiousness in many workers’ compensation systems have troubled system observers for some time. This concern has led public officials and private parties to search for less litigious alternatives. That search often includes a trip to Wisconsin—a state that is widely reputed to be less litigious. Many observers attribute this in substantial measure to the climate of cooperation that allegedly prevails in Wisconsin—in contrast to a climate of litigiousness in many other states.

This study finds that the parties in Wisconsin can be as litigious as their counterparts in other states. However, the study identifies four features of the Wisconsin administrative and adjudicative systems that reduce litigiousness:

  • Active oversight by the state agency
  • Dispute resolution by final-offer adjudication
  • Mandatory minimum ratings for surgery cases
  • Heavy reliance on the treating physician

Interestingly, these characteristics are absent in the typical litigious system.

These features combine to encourage insurers and employers to voluntarily tender permanent partial disability (PPD) payments to workers whose treating physician has indicated that permanency exists at the time of maximum medical improvement. When they receive voluntary payments, workers appear less likely to seek help from attorneys.

Although these system features reduce resort to attorneys and litigation, reducing litigation is not an end in itself. If workers do not consult attorneys, there is a possibility that they will not receive all of the benefits to which they are entitled. They have to be informed of their rights by another source. The most likely source is the state agency.

The study concludes that the low levels of litigation in Wisconsin are due to the design of the administrative and adjudicative systems, not simply to a climate of cooperation that does not exist in more litigious states. How do we determine this? Conveniently, Wisconsin has designed two systems for providing PPD benefits. One provides benefits based on impairment; the other, on loss of earning capacity. The first contains the four features listed above; the second does not. Because claims under both are resolved by parties operating in the same climate, we attribute differences in litigiousness between the two systems to the four features.

We are unable to conclude that a favorable climate of cooperation in Wisconsin alone explains its reputation as a non-litigious system. Rather, we conclude that the design of the administrative and adjudicative system is more important than a state’s climate of litigiousness. Given a set of rules that encourage litigation, parties in Wisconsin are litigious. Given a set of rules that discourage litigation, they are more cooperative.

Is Wisconsin a model for other states? The four features of the Wisconsin system constitute a package that might reduce litigation in other states. We use the word might because every state is different in important ways. But human nature is similar across states, and the incentives created by these rules are aimed at that which is similar in all people. In considering whether this package would work in a given state, policymakers must analyze carefully the appropriateness of each of its components for the specific setting. Moreover, they should recognize that the pieces of this package are mutually reinforcing in important ways. Adopting only one element is unlikely to produce the results we found in Wisconsin.

Reducing Litigation: Evidence from Wisconsin. Dr. Leslie I. Boden. December 1988. WC–88–7.

 

Copyright: WCRI

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