Oregon workers' compensation insurers and self-insured employers paid almost $25.3 million for attorney salaries and other costs of legal services in calendar year 1996. These costs are primarily to defend the insurer against claims or benefits believed to be unwarranted, but may also include fees paid to represent the insurer in responsibility disputes (where the outcome may not directly affect the claimant) and for advising the insurer in activities outside of litigation (such as negotiating a claim disposition agreement). These costs are distinguished from fees paid to attorneys representing injured workers.

Table 1 summarizes these costs. The bottom row of this table depicts the breakdown of costs by category: 60.0 percent of all costs were for retained counsel, compared to 60.7 percent in 1995.

The graph below depicts total defense legal costs for the past seven years, the only period for which data are available. Total costs in 1996 were the lowest of this period, 7.7 percent below the total for 1995. All insurer classifications (Table 2, column 5) contributed to this decrease, as did all cost categories. Other in-house costs showed the largest decrease, 13.9 percent, while attorney salaries had the smallest decrease, 2.4 percent.

For each insurer classification, information on share of costs, number of claims, in-house attorney staff, in-house costs as a percentage of all costs, and 1995-1996 cost changes are given in Table 2. The shares of costs for all insurer classifications (column 1) were very close to the 1995 values (the largest difference was SAIF's decrease of 0.6 percentage point). The number of claims (column 2) indicates the number of claims that had litigation during the year; this number has fallen each year since 1990. The numbers of in-house attorney staff (full-time equivalent, or FTE) and the percentages of all costs that are composed of salaries to legal staff and other in-house costs are given in columns 3 and 4, respectively. SAIF continued to rely more heavily on in-house legal staff than did the other insurer classes. SAIF also had the greatest cost decrease from 1995 (column 5).

A total of $20,095,000 79.5 percent of all defense costs was paid to defense attorneys (attorney salaries + retained counsel costs), up from 79.1 percent in 1995. (We assume for this purpose that billings for retained counsel are all attorney fees, but that is not always the case.)

This report is based on data submitted by insurers and self-insured employers as required by ORS 656.388(5). More information is available from the Department of Consumer and Business Services, Research & Analysis Section.

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Russell Reed, Research Analyst, Research & Analysis Section, Information Management Division (503) 947-7343

This document was originally published in August 1997.
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