3 Strategies to Help Avoid Workers Compensation Claims Litigation

3 Strategies to Help Avoid Workers Compensation Claims Litigation
January 6, 2025 9 mins

3 Strategies to Help Avoid Workers Compensation Claims Litigation

3 Strategies to Help Avoid Workers Compensation Claims Litigation

When a workers compensation claim goes to litigation, expenses rise dramatically — a burden that is often shouldered by the business. To mitigate attorney-related costs, organizations should re-think their approach to engaging injured workers and use artificial intelligence to enhance outcomes.

Key Takeaways
  1. Costs, time and employee morale are often impacted when a workers compensation claim goes to litigation.
  2. Risk managers and organizations should think differently when engaging injured workers, delivering strategies that create empathy and increase employee wellbeing.
  3. The growing influence of AI on workers compensation claims has the ability to deliver improved efficiencies, decision making and claim outcomes.

Attorney-involved workers compensation claims result in a substantially higher increase in indemnity benefits paid to workers, take longer to close and result in significantly more lost-time workdays for businesses. Further, with many businesses using high-retention workers compensation policies, litigated claims directly impact their bottom line.

Breaking this workers compensation litigation cycle will require risk managers and organizations to think differently when engaging injured workers. They will also need to use artificial intelligence (AI) and a data-driven strategy to minimize risk and deliver reduced litigation costs.

The Impact of Litigated Workers Compensation Claims

The workers compensation insurance system is designed to cover the cost of medical care, rehabilitation, wage replacement and other benefits when a worker is injured in a work-related accident — generally without the uncertainty, delay and expense of litigation.

Workers typically receive benefits promptly. However, disagreements may also arise between the injured worker and insurers, giving the worker reason to seek legal representation for their claim. Studies from the Workers Compensation Research Institute and Aon’s Casualty Laser database have proven that costs significantly climb as a result:

  • Average indemnity benefits per claim increased 417 percent — $7,957 with no attorney representation and $41,148 with an attorney.
  • Nearly two-thirds (64 percent) of complex claims involving permanent partial disability and/or lump-sum benefits had attorney involvement. Those claims were 744 percent higher — $2,758 vs. $23,264 — than claims with no attorney involvement.1
  • On average, litigation leads to 284 percent more lost-time workdays.
  • Litigated claim expenses were 200 percent higher vs. non-litigated claims on average.
  • Mean claim duration with attorney involvement is 471 days more than claims without attorneys.2

With high-retention workers compensation policies frequently used, most claims costs are shouldered by the business.

“We’re beginning to understand the importance of identifying those cases with an elevated risk of attorney involvement as early as possible,” says Kevin Combes, director of U.S. casualty claims in Aon’s Global Risk Consulting practice. “This gives businesses a longer runway to deploy bespoke strategies to reduce risk and change the outcome.” That not only builds rapport, but also increases productivity, morale and gains trust. Organizations can use these three key strategies to help break the workers compensation litigation cycle:

1. Lead with Empathy and Focus on the Injured Worker

Put the needs and concerns of an injured worker at the forefront of the claim activity. Often the reason an employee will contact an attorney is fear of losing their job, being refused medical treatment or not receiving wage replacement. Many are also unfamiliar with how to navigate the process and may not even know where to send their medical bills, for instance.

Supervisors, HR managers and claim administrators must understand these fears and respond with empathy. It’s important to build trust with the worker, communicate effectively and avoid any adversarial dialogue.

Clear guidance and communication — at the onset of the event and continuing every step of the way — benefits all stakeholders, even before a claim has been reported. Adopting this approach begins the process in a positive and productive manner for all involved.

However, even with well-coordinated and empathetic communication, there are times when an employee may still retain an attorney. In those cases, it’s important to continue with consideration and clarity.

2. Address the Wellbeing of the Injured Worker

Employers should be cognizant of how an injury affects multiple dimensions of an employee’s wellbeing — physical, mental, emotional, financial and social. Navigating the claims process, addressing medical needs and returning to work can cause significant stress.

An established framework can help manage the process through the continuum of communication while supporting all stakeholders. This can be as simple as contracting a cleaning service to help with housework, using meals-on-wheels when a worker cannot cook, providing rideshare services to help an injured worker with errands or hiring a landscaping firm to do yard work.

“It works. When businesses deploy these more creative approaches, we watch their litigation go down over time and that’s how we measure our success,” adds Combes. “We lay out a plan that also involves improving communication and breaking down barriers between the employer, injured employee and third-party administrator.”

Checklists to Help Build Empathy and Wellbeing
What Businesses Can Do Additional Think-Outside-the-Box Strategies
✓ Begin with onboarding

✓ Report the loss immediately

✓ Optimize your medical treatment strategies

✓ Avoid hazard assumptions

✓ Lead with empathy and advocacy

✓ Stay in touch throughout

✓ Send get well cards, flowers, etc.

✓ Correct any unsafe work conditions

✓ Consider additional benefit systems such as EAP or other 		✓ Use collaborative settlement workshops

✓ Consider structured settlements and creative compensation structures

✓ Use inclusive decision-making platforms

✓ Consider non-statutory perks such as housekeeping services, ride share for non-medical errands (e.g., grocery store)

✓ Hold workshops for employer frontline supervisors and managers

3. Put Technology at the Forefront

As with all industries and businesses throughout the world, AI is quickly changing the insurance landscape, including claims. The influence of AI on workers compensation claims is particularly clear in its ability to deliver improved efficiencies, decision making and better outcomes.

AI is helping analyze vast amounts of data to quickly identify claims that are at greater risk of litigation. By automating routine tasks, including document review and legal research, AI enables claims professionals to focus on more complex tasks.

“Generative AI is having a fundamental impact on claims,” says Combes. “One of the most time-consuming claims management tasks is reviewing documents — medical legal reports, settlement packages and specials. This information is often highly technical. With nearly 100 percent accuracy, AI can distill all those documents down to meaningful and digestible summaries.”

He adds that AI is a game-changer, allowing claims adjusters to be more proactive rather than reactive on a case. Potential legal issues are caught earlier in the process, giving professionals additional time to develop strategies to minimize the impact of litigation.

“From a data science perspective, the modern insurance environment will be fundamentally different from what it was 10 years ago. The data will be so much more accurate and concise,” Combes explains. “That’s the sort of technology that is exciting for all of us because we see the best gains for our clients.”

How to Optimize the use of AI Applications on Workers Compensation
Pre-Loss Post-Loss
• Monitor work environments in real-time and detect unsafe conditions to alert safety personnel.

• Use fleet telematic systems to deploy AI and detect abnormalities in vehicle performance, driver behavior and structure safer routes.

• Analyze and predict where losses are most likely to occur so resources can be deployed to disrupt and prevent expected loss patterns.

• In a clinical setting, observe very early changes in chest x-rays to detect occupational disease before it becomes debilitating.

• Use strategically engineered AI-enabled exoskeletons to reduce injuries.

• Identify forces likely to cause injury and inform efforts to modify processes through wearable technology and AI systems. 		• Triage claims and route to the appropriate claims adjuster based upon several factors, such as adjusting experience, nature of loss/disability, etc.

• Predict attorney involvement and potential litigation, giving adjusters opportunities to intervene.

• Use ChatGPT-like systems to summarize legal and medical records and distill vast amounts of data into actionable steps.

• Create more accurate classifications of claims.

• Streamline fraud detection to discover potential billing fraud.

• Use AI systems to analyze vast amounts of loss data, which can help identify claim complexity and severity early in the claim cycle to ensure appropriate resources are deployed.

• Provide injured workers with easy access to information through AI-enabled chatbots.

How Aon’s LAMBDA Tool Helps Reduce Excessive Litigation

Aon’s Litigation Avoidance, Mitigation, Benchmarking of Defense Attorneys (LAMBDA) tool uses AI insights to proactively enhance workers compensation claim outcomes, ultimately reducing costs. The tool’s features can help:

  • Predict the likelihood of attorney involvement in workers compensation, commercial auto and general liability claims
  • Leverage historical outcomes data to assess performance of attorneys (both defense and plaintiff)
  • Correlate hundreds of individual data points in near-real time to provide insight into characteristics that influence the risk of litigation
  • Use natural language processing to assess unstructured data such as claim notes to detect sentiment, which can help predict attorney involvement

Five Key Workers Compensation Claim Reminders

Proactively following the strategies outlined above can help to minimize risk and reduce litigation. However, it’s important to also keep these considerations top of mind during the claims process:

  1. Don’t delay reporting employee injuries. Remember, it is mandatory to report injuries, often within 24 hours of receiving notice of injury, whether they're compensable or not.
  2. Avoid making any promises to the employee regarding workers compensation benefits.
  3. Prevent injured employees from doing work that may aggravate their injury. Make sure you provide work options that are within their restrictions and capabilities.
  4. Don’t tolerate unsafe work conditions or actions by employees. Correct unsafe conditions or actions immediately.
  5. Never discuss employees’ private medical issues.

Worker-centric and data-driven strategies help organizations mitigate litigation and take care of their workers more effectively. Even more, they allow businesses to take a proactive stance with improved management processes and sophisticated predictive-risk analytics. Adopting these strategies not only strengthen workers compensation programs, but also better serve a company’s most valuable asset — its people.

Aon’s Thought Leader
  • Kevin Combes
    Director of U.S. Casualty Claims

1 WCRI Study Shows Impact of Attorney Representation on Workers’ Comp Payments, Claims Journal
2 Aon Casualty Laser database

General Disclaimer

This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

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