Brief History of Workers Compensation Insurance in the United States
Following European examples from the 19th century, states in the U.S. began to develop
workers’ compensation laws in the early 1900’s to address the increasing risks
of occupational injuries and illnesses associated with the industrial revolution. Initial
laws in several states were declared unconstitutional but, in 1911, Wisconsin became the first state
to establish a workers’ compensation system that withstood constitutional challenges in the
courts. By 1920, most states and territories3 had followed suit. Mississippi was the last state to
adopt a workers’ compensation law in 1948.4 These laws provide partial benefits to affected
workers and protect employers from tort suits for occupational injuries and illnesses in nearly all
cases. This “grand bargain” circumvents lengthy, expensive trials where the burden of proof was on the employee and removed a source of financial uncertainty for the employer.
Since the beginning of workers’ compensationprograms in the U.S., nearly all employers have been required to have insurance to cover paymentsfor: (1) medical costs resulting from occupational injuries and some occupational illnesses suffered by workers; and (2) partial replacement of injured or ill workers’ lost wages, also known as indemnity. Death benefits are paid to survivors for occupational fatalities. These benefits are paid only for claims where workers were injured or became ill due to conditions that “arise out of and in the course of employment,” with restrictions that vary substantially among the 50 states due to legislation and case law. In return for this coverage, employers are granted immunity from employee law suits (tort litigation) for nearly all occupational injuries and illnesses. Thus workers’ compensation insurance is structured to be the sole employee remedy for restitution subsequent to occupational injuries and illnesses. Some exceptions exist for willful injuries and gross negligence.