In 1997 Oregon workers’ compensation insurers and self-insured employers paid almost $24.3 million for attorney salaries, attorney fees, and other costs of legal services. 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 worker) and for services provided 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 the table depicts the breakdown of costs by category: 60.5 percent of all costs were for retained counsel, compared to 60.0 percent in 1996.

Table 1

The graph below depicts total defense legal costs for the past eight years, the only period for which data are available. Total costs in 1997 were about a million dollars less than in 1996. All insurer classifications contributed to this 3.8 percent decrease (which was half of the 1995-1996 decrease). Of the four cost categories, only non-attorney salaries showed an increase in 1997; retained counsel costs had the largest dollar change, a reduction of $457 thousand, while other in-house costs had the largest percentage change, -23.8 percent.

Figure 1

For each insurer classification, information on share of costs, numbers of litigated claims, in-house attorney staff, in-house costs as a percentage of all costs, and the 1996-1997 cost changes are given in Table 2. The shares of total costs (column 1) for all insurer classifications were within 0.6 percentage points of their 1996 values; SAIF’s share increased slightly from 25.4 to 25.5 percent. The number of claims (column 2) approximates the numbers of claims with 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 in-house costs are given in columns 3 and 4, respectively. SAIF reliance on in-house staff has always been much greater than the other insurer classifications. For 1997, 96.0 percent of SAIF’s legal costs were in-house costs, compared to 92.6 percent in 1996. Finally, private insurers had the largest cost decrease from 1996 to 1997 (column 5).

Table 2

A total of $19,480,000 — 80.2 percent of all defense costs — was paid to defense attorneys (attorney salaries, plus retained counsel), up from 79.5 percent in 1996. (We assume for this purpose that billings for retained counsel are all attorney fees, but other costs to the retained counsel firm may be included, as well.)

This report is based on data submitted by insurers and self-insured employers as required by ORS 656.388(5). Surveys were sent to almost 400 such companies that had claims in litigation during the year. About 94 percent of the companies responded to the survey; however, responding companies were responsible for 99.7 percent of the litigated claims.

More information is available from the Department of Consumer & Business Services, Research & Analysis Section.

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If you have questions about the information contained in this document please contact by e-mail or phone: Russ Reed, Research Analyst, Research & Analysis Section, Information Management Division (503) 947-7343.

This document was originally published in November 1998.
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