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 Compensation for Industrial Injuries 
 
 By ALLEN RIPLEY FOOTE 
 
 PRICE TEN CENTS 
 
COMPENSATION 
 
 FOR 
 
 INDUSTRIAL INJURIES 
 
 By ALLEN RIPLEY FOOTE 
 
 PRICE TEN CENTS' ' 
 
 FUBLISHXD BT THE 
 
 OHIO JOURNAL OF COMMERCE 
 OOLUMBUS, OHIO 
 
1^ 
 
 \^ 
 
 ^•5^1 
 
 Copyright 1913 
 
 BY 
 
 The Ohio Journal of Commerce Company, 
 Columbus. Ohio 
 
 *•■ • • « • S^* ^ . , • 
 
EXPLANATORY PREFACE:— CONCLUSIONS 
 
 My ]-5urpose in supplying you with this duscussion of the sub- 
 ject of "Compensation for Industrial Injuries'' is to enable you 
 to examine, in brief form, the vital substance of the large 
 amount of data I have read while compiling it. 
 
 Your interest in this subject is so direct, I feel it unnecessary 
 to urge you to give it your prompt and careful attention. 
 
 My investigation of this subject has led me to the following 
 conclusions : 
 
 (1) The basis of insurance should be shifted from "Employ- 
 ers' Liability" to "Workmen's Compensation." 
 
 (2) The form of insurance should be collective, covering all 
 employes working for each employer. 
 
 (3) Collective insurance should be made compulsory by law 
 imposed upon every employer and employe in the same manner 
 as laws are imposed requiring the use of appliances for acci- 
 dent prevention and the observance of sanitary conditions de- 
 signed to render employment safe and healthful. This is nec- 
 essary to prevent employers who do not insure their employes, 
 and uninsured workmen, from gaining an unfair competitive ad- 
 vantage over those who do comply with the "Workmen's com- 
 pensation insurance law," by not including the cost of com- 
 pensation uisurance in the cost of their products. 
 
 (4) The fact of collective insurance should be established by 
 an inspector's certificate in the same manner and by the same in- 
 s])ectors who certify to the fact of compliance with laws requir- 
 ing the use of appliances for accident prevention and prescrib- 
 ing sanitary conditions. 
 
 (5) The fact of compensation insurance, so certified, should 
 be a com])lete defense, for any employer who has paid the re- 
 quired premium for such insurance, against any and every claim 
 for compensation for industrial injuries however originating. 
 
 263624 
 
(6) While the fact of compensation insurance is compulsory, 
 the method of insurance should be elective, subject to the 
 choice of the employer electing to have his insurance written by 
 one of the following methods: 
 
 (a) A state liability board of awards; 
 
 (b) A stock compensation insurance company; 
 
 (c) A mutual co-operative compensation insurance com- 
 
 pany ; 
 
 (d) Self-insurance by complying with reserve fund re- 
 
 quirements. 
 
 (7) All compensations for industrial injuries and terms of 
 payment should be jfixed by statutory law, and should be iden- 
 tical for all compensation insurance by whomsoever written. 
 
 (8) The method of accounting to show all costs of writing 
 insurance and administration of the business of compensation 
 insurance, and to establish and verify tests of solvency, should 
 be prescribed by the State Insurance Department, and required 
 of all writers of compensation insurance authorized to do busi- 
 ness in the state, including the State Liability Board of Awards, 
 in identical terms and without discrimination. 
 
 (9) All costs of administration, and all expenses of every 
 kind and nature, incurred by any writer of compensation insur- 
 ance should be charged to and paid out of the fund created by 
 the collection of insurance premiums. This is necessary in or- 
 der that the accounts of the State Liability Board of Awards 
 may show the true and entire cost of insurance as shown by the 
 accounts of those writing such insurance by either of the other 
 methods. 
 
 (10) The State Insurance Department should have power to 
 prohibit the selling of insurance by the State Liability Board of 
 Awards, or by any insurance company authorized to do busi- 
 ness in the state, at less than cost, or at rates of premium that 
 are insufficient fully to pay the true and entire cost of the busi- 
 ness and to establish a reserve fund sufficient to make the pay- 
 ment of every approved claim for compensation for an industrial 
 injury prompt and certain. This is necessary to safeguard tax- 
 payers from being compelled to pay a part of the cost of com- 
 
 4 
 
pensation insurance and, in case of the insolvency of the re- 
 serve fund, from having public funds collected from taxpayers 
 used to make up deficits. It is also necessary to safeguard em- 
 ployers participating in insurance written by the State Liability 
 Board of Awards from being required to pay extra or in- 
 creased premiums for the purpose of making up a deficit in the 
 fund drawn upon by that Board for the payment of approved 
 claims for compensation. 
 
 (11) The proposition to compel taxpayers to pay a part of 
 the cost of insurance, which should be paid by the industry in- 
 sured, is a device to secure the co-operation of employers in the 
 purpose to create a state monopoly in such insurance. Unless 
 human experience is to diflfer in the future from what it has 
 been in the past, employers who are caught by this bait will find, 
 when it is too late to correct their mistake, that they have paid 
 too high a price for the privilege of having their insurance writ- 
 ten at a temporarily low premium rate through sacrificing their 
 right and power to elect by what method they shall be insured. 
 When the state monopoly is established by this method as is in- 
 tended, employers, though they may have the right, will have no 
 power to secure insurance by any other method, as there will be 
 no one engaged in writing such insurance except the state. 
 
 (12) A state monopoly in writing compensation insurance 
 for industrial injuries is an entering wedge being employed by 
 socialists to secure state control of all industries. The purpose 
 of paying the operating expenses of the State Liability Board of 
 Awards out of funds collected by taxation is to enable that 
 Board to sell such insurance at less than cost and by this means 
 to establish a State monopoly by driving all competitors out of 
 the state. This unfair method of competition, when employed 
 by industrial competitors, is denounced by courts and popular 
 opinion. Why should it not be denounced with equal indigna- 
 tion when employed by authority of the state? 
 
 (13) State monopoly established in compensation insurance 
 for industrial injuries will be one step taken on the road to 
 state ownership and operation of all industries. With the rates 
 of insurance premiums subject to the dictation of the State Lia- 
 
 6 
 
bility Board of Awards, and the schedule of statutory compen- 
 sation subject to revision at each session of the General As- 
 sembly, employers will, in the not distant future, find themselves 
 caught in a net through the meshes of which they cannot escape, 
 the cords of which they cannot break. 
 
 (14) To secure the benefits that are obtainable, and to avoid 
 the evils that are threatening, as the outcome of pending legisla- 
 tion on the subject of compensation for industrial injuries, only 
 such provisions should be enacted, or retained in the law as are 
 approved by at least seventy-five per cent, of all employers in 
 the state whose business will be subject to the law as enacted. 
 
 You are urgently requested to aid in crystalizing and formu- 
 lating opinion on this subject hy expressing yon\r ozvn opinion 
 upon each and every one of the conclusions above stated. 
 
 If you approve of any of them as written, please state which 
 ones. 
 
 If you disapprove any of them, please furnish a memorandum 
 of your reasons for disapproving, also a memorandum stating 
 your own suggestion as to how the wording of the conclusion 
 should be changed, or what other statement, if any, -should be 
 substituted for the conclusion or conclusions which you disap- 
 prove. 
 
 I hope by this means to secure an expression of opinion from 
 which it will be possible to formulate propositions which will 
 commruid the unanimous approval of all employers in the state. 
 
 Hoping you will give this duscussion of compensation insur- 
 ance for industrial injuries careful consideration at your earliest 
 convenience, I respectfully submit it to your judgment. 
 
 Allen R. Foote. 
 
 Columbus, Ohio, February 8, 1913. 
 
INDEX 
 
 PAdE 
 
 Explanatory Preface : Conclusions 3 
 
 Compensation for Industrial Injuries 9 
 
 Introductory 9 
 
 The Common Law of Compensation for Industrial Injuries 3 
 
 Liability Insurance 12 
 
 Evils of the Employers' Liability System 12 
 
 Whose Fault Was It?. 15 
 
 Ohio Constitutional Amendments Adopted September 3, 1912 18 
 
 The Industry Must Sustain the Loss 23 
 
 Industries Must Not be Overburdened with Compensation Expenses 28 
 Compensation Laws Should be Applied Uniformly to 'EJvery In- 
 dustry by Every State 28 
 
 Malingering and Carelessness Must be Guarded Against 30 
 
 Remedy Proposed : Compulsory Statutory Compensation Regardle&s 
 
 of Fault 33 
 
 Limitation on Compulsory Statutory Compensation: Fault of 
 
 Employe 40 
 
 Tendency of Employers' Liability and Workmen's Compensation 
 
 Legislation in the United States and Fpreign Countries 43 
 
 United States 43 
 
 Germany 45 
 
 England 48 
 
 Common Law 49 
 
 Employers' Liability Act of 1880 49 
 
 The Asquith Bill 50 
 
 Scope of the Bill bj? 
 
 The "Negligence Remedy'* 52 
 
 Workmen's Compensation Act of 1906 54 
 
 Similar Legal Development in United States and England 55 
 
 Other Countries 55 
 
 A Logical Development 56 
 
 The Logical Principle for the United States 56 
 
 Accident Insurance in New Zealand 57 
 
 American States and European Countries 58 
 
 Chronology of Foreign Industrial Insurance and Workmen's Com- 
 pensation Acts 59 
 
 Insurance Defined 59 
 
 Voluntary, Compulsory and State Insurance 60 
 
 Voluntary CO 
 
 Compulsory GO 
 
 Distinction Between Compulsory Insurance and State In- 
 surance 60 
 
 Forms of Insurance Contracts CI 
 
 Personal Accident '. 61 
 
 Employers' Liability 61 
 
 Workmen's Collective 62 
 
 Problems of Liability and Compensation Insurance 62 
 
 7 
 
PAGE 
 
 Compulsory Collective Insurance 64 
 
 Economic and Legal Demand 65 
 
 Purpose 65 
 
 Personal Accident Insurance 65 
 
 Employers' Liability Insurance .' 65 
 
 Workmen's Collective Insurance 66 
 
 Methods of Providing Insurance 66 
 
 Insurance in a State Fund 67 
 
 Insurance in Incorporated Companies 68 
 
 Insurance in Mutal Companies 68 
 
 Level Premium and Assessment Insurance 69 
 
 Level Premium Companies 69 
 
 Assessment Companies 70 
 
 Insurance Must be Financially Sound 70 
 
 Reserve Funa and Profits 71 
 
 Reinsurance Reserve 71 
 
 Liability Reserve 71 
 
 Contingency Reserve or Surplus 72 
 
 Reserve or Emergency Funds 72 
 
 Profits 72 
 
 Requirements of Conservative Progress: Change of Base from Em- 
 ployers' Liability to Workmen's Compensation 73 
 
 Workmen's Compensation ^ 73 
 
 Statutory Compensation for Injuries 74 
 
 Statutory Compensation in Germany 75 
 
 Proposed Schedule of Statutory Compensation in Ohio 75 
 
 Collective Insurance Releases Employers from all Liability 80 
 
 Statutory Compensation Compulsory on all Employes 81 
 
 Method of Coercing Employers and Employes Into Accepting the 
 
 Provisions of a Workmen's Compensation Law 82 
 
 No Qualification 8? 
 
 A Coercive Clause 84 
 
 Drastic Coercion in Liability for Death Claims 84 
 
 Relief from This Unlimited Liability 85 
 
 No Compensation for Injuries Caused by Fauic of Employe: By His 
 Refusal or Neglect to Obey Statutory Requirements; or by His 
 
 Intoxication 87 
 
 Employer's Liability for Injuries Caused by His Own Fault or 
 
 Neglect 88 
 
 Inspection of Machinery and Safety Devices 89 
 
 Creation of Compensation Fundb 89 
 
 Sufllciency of Compensation Funds 90 
 
 Safeguards for Compensation Funds 92 
 
 No State Monopoly in Compensation Insurance — Fair Competition. . 93 
 
 Unfair Competition: Selling Insurance at Less Than Cost 93 
 
 Uniform Accounts for All Writers of Insurance 94 
 
 Insurance Written by Authorized Companies a Compliance with the 
 
 Compulsory Requirements of the Law 95 
 
 Safeguarding Good Will 95 
 
 The Cardinal Principles of an Efficient Workmen's Compensation 
 
 Law 96 
 
 8 
 
Compensation For Industrial Injuries 
 
 By Allen Ripley Footb 
 
 COLUMBUS^ OHIO 
 
 INTRODUCTORY 
 
 Pending legislation renders this subject one of vital interest 
 to every employer and employe in Ohio and throughout this 
 country. The serious discussion of this subject proves the 
 fallacy of the conclusion reached by Dr. Alfred Russell 
 Wallace, known as the "Grand Old Man of Science," after 
 concluding a survey of man's moral and intellectual develop- 
 ment from the earliest days of the Egyptians and Syrians until 
 now, in which he declares that for seven thousand years the 
 development of morals and intellect has been stationary. 
 
 The changed view with which compensation for industrial 
 injuries is now regarded, comparing the present with only 
 sixty years ago, discloses a far-reaching evolution in the de- 
 velopment of morals and a clearer perception of the principles 
 of justice. All such changes involve the displacing of old 
 customs, methods and laws with a new revision in accord with 
 this clearer perception. 
 
 Naturally, those who have been closely identified with, and 
 who have investments involved in, the old system struggle 
 hard to save themselves. It is undoubtedly the part of wis- 
 dom on the part of society to aid them in doing this, provid- 
 ing always that the doing of it does not necessarily retard 
 the development of a better way. 
 
 The trend, strength and progress made in the development 
 of morals and intelligence is never better seen than by con- 
 trast between the methods now required for the elimination of 
 old habits, customs and laws, and those employed only sixty 
 
 9 
 
yfears agfo. This is graphically shown by the terrible war 
 which was waged in the struggle to free labor from slavery — 
 1861-1865 — and the peaceful methods now being used to free 
 laborers from the burden of loss caused by industrial injuries 
 not due to their own fault. The consequences of economical 
 changes effected by. substituting free for slave labor in the 
 South have not been more far-reaching nor more beneficial 
 than v/ill he tJie consequences of the economical changes that 
 will be effected by relieving victims of industrial injuries from 
 a part of the resulting burden of their loss in earning capacity. 
 
 No loss can occur without causing a burden to rest some- 
 where. Everyone possessing perishable values is liable to a 
 loss at some time. Life is the expression of a bringing into 
 existence the new and eliminating the old. Insurance is the 
 expression of a scientific method of providing for a loss, when 
 sustained by an individual, by causing it to rest upon the 
 whole of society, or of an industry, which lives forever, and 
 thus protecting the individual from the economic conse- 
 quences of a personal disaster. 
 
 In the days of Pharaoh custom placed the burden of in- 
 dustrial injuries upon the injured workman only. The fact 
 that the loss actually belongs to society or to the industry in 
 which the injured workman was employed, had not been dis- 
 covered. 
 
 THE COMMON LAW OF COMPENSATION FOR 
 INDUSTRIAL INJURIES 
 
 When the human factor in industrial problems began to 
 demand consideration, there appeared in the common law 
 certain provisions which gave the workman the right to re- 
 cover from his employer, not from society, nor from the in- 
 dustry, compensation for loss in earning capacity caused by 
 industrial injuries sustained under certain defined conditions. 
 But the common law did not do this without making the 
 workman responsible for the loss caused by industrial in- 
 juries sustained under certain other defined conditions. 
 
 In a discussion of the "Workmen's Compensation Act" of 
 Ohio, the "State Liability Board of Awards" states : 
 
 10 
 
The contract of employment under the common law 
 imposed the obligation upon the employer to use ordi- 
 nary care in the following particulars: 
 
 1. In furnishing his employes a safe place in which 
 to work. 
 
 2. In furnishing safe tools and machinery with 
 which to work. 
 
 3. In making reasonable rules and regulations. 
 
 4. In the selection of reasonably competent persons 
 to assist in the work to be done. 
 
 The contract of employment likewise imposed certain 
 obligations to be observed by the employe, among 
 which were: 
 
 1. That he should use ordinary care to avoid injury 
 to himself. 
 
 2. That he should obey and observe such reasonable 
 rules and regulations as might be formulated by the 
 employer for the orderly disposition of the work in 
 hand, and for the safety of employes generally. 
 
 3. That he should assume such ordinary risks as are 
 incident to the employment. 
 
 4. That he should assume the risk of injury received 
 on account of the negligence of his fellow servants. 
 
 These conditions imposed by the common law to fix re- 
 sponsibility give the employer certain defenses against claims 
 of his employes for compensation for losses sustained by reason 
 of industrial injuries. These defenses are stated by the above 
 quoted authority to be as follows : 
 
 1. That the employe was not, when injured, in the 
 exercise of due care, or was guilty of contributory 
 negligence. 
 
 2. That the injury received by the employe was one 
 of the risks incident to the contract of employment. 
 
 3. That the injury was the result of the negligence 
 of a fellow servant. 
 
 These defenses are commonly referred to as "con- 
 tributory negligence," "assumpetion of risk" and "the 
 fellow servant rule." 
 
 U 
 
It will thus be seen that by the common law rule, the 
 employe assumes all of the ordinary risks incident to 
 his employment, and that his employer is only liable 
 when he is guilty of negligence and the employe is 
 wholly free from negligence and his injury was not 
 caused by the negligence of a fellow servant. 
 
 The common law gave no right of action to the per- 
 sonal representative of a killed employe on account of 
 the death of such employe. 
 
 LIABILITY INSURANCE 
 
 The fixing of responsibility induced the development of 
 liability insurance companies to insure employers against loss 
 on account of their liability on the demands of their employes 
 for compensation for losses caused by industrial injuries. 
 These organizations had for their purpose the protection of 
 the employer, not of the employe. Naturally, all procedure 
 on this basis tended to create antagonism between the em- 
 ployer and the employe, which was destructive of efficient 
 management and thus developed through such antagonism a 
 collateral cause of loss from industrial injuries against which 
 there can be no insurance. 
 
 The insurance company, having insured the employer 
 against losses caused by demands for compensation on account 
 of industrial injuries, sought protection for itself in two ways: 
 
 First. By means of inducing the use of safety appliances 
 and working regulations designed to reduce liability to injury. 
 This was good. 
 
 Second. By resisting the payment of compensation claims. 
 This was bad. This resistance has finally produced conditions 
 which require a change of the basis of insurance from Employ- 
 ers' Liability to Workmen's Compensation. 
 
 EVILS OF THE EMPLOYERS' LIABILITY SYSTEM. 
 
 Writing on this subject in 1911, Mr. Arthur St. John New- 
 berry, of Cleveland, said: 
 
 This system works serious injury to the state, to the 
 employer, and to the employe. Courts are clogged with 
 
 12 
 
personal injury cases and justice comes very slowly 
 to all litigants. An employe, if he recovers at all, gets 
 compensation years after the accident, having lived as 
 best he could during the interval, and his lawyers take 
 half the sum paid. The employer maintains a costly 
 legal department, and just when his own business de- 
 mands his every effort and moment, may be called away 
 for days to attend the trial of a la^wsuit. Worst of all, 
 the system breeds distrust and hatred between em- 
 ployes and employer and spreads the virus of socialism 
 and anarchy. 
 
 The state and the employer risk money, but the work- 
 man risks life. 
 
 The thing most important in any business is good 
 feeling and loyal co-operation. Wages, salaries, in- 
 terest and dividends must all come from a single source, 
 the profits of the business. Distrust, disaffection and 
 disloyalty, working at cross purposes between officers 
 or between officers and employes, are the worst evils 
 an enterprise can suffer from. Any method which re- 
 moves just grounds for complaint and promotes loyal 
 working together of the whole force, is most desirable, 
 and that one should be found, which will lessen or en- 
 tirely remedy the evils of the present system of settle- 
 ment of claims of injured employes, seems especially 
 essential. 
 Mr. Newberry summarized the grave evils which exist in 
 the present method of fixing liability for industrial injuries, 
 and collecting compensation for the same, as follows : 
 
 First. Uncertainty as to whether existing safeguards 
 against accident were adequate. 
 
 Second. The cost to the state through clogging of 
 the courts by lawsuits for the recovery of damage's for 
 personal injury, and its loss in supporting men reduced 
 to pauperism by injuries. 
 
 Third. The delay in receiving compensation which 
 an injured man must endure, even if any liability 
 existed. 
 
 18 
 
Fourth. The expense incurred by the injured man in 
 recovering compensation, through the division of the 
 amount with lawyers and expenses not taxable in costs. 
 Fifth. The expense to the employer of maintaining 
 a costly legal department, and the interference with his 
 business, through the time he may be compelled to give 
 such suits. 
 
 Sixth. The bitter feeling aroused between employer 
 and employe. 
 In discussing the subject, ''Employes' Compensation for In- 
 juries," in Weber's Weekly for January 11, 1913, Mr. George 
 W. Weber points out the evils of the present system as 
 follows : 
 
 It is enough to say that conditions are confusing, 
 laws and decisions conflicting, with a premium on 
 perjury and corrupt attorneyship. In a case of which 
 I know, a jury gave a verdict of $15,000 for a certain 
 injury — a sum twice as great as expected by the defend- 
 ant employer. After the verdict, one of the jurymen 
 explained to the employer that they allowed the ex- 
 cessive amount because the jurymen understood that 
 the injured man's lawyer was to get half the amount 
 returned for the damages and that the jurymen thought 
 the injury damaged the man $7,500, and that he should 
 have that amount over and above his attorney's fees. 
 In an address before the Illinois Manufacturers' Association, 
 Mr. Charles Picz quoted the Illinois Workmen's Compensa- 
 tion Commission as saying: 
 
 Out of a total of twenty-nine cases of death decided 
 by the courts, the average recovery was $2,302, and in 
 122 cases of disability the average recovery was $1,347. 
 The investigation showed that in but few cases are the 
 damages actually received within less than three years 
 after the accident. 
 Mr. W. W. Baldwin, Vice President of the Chicago, Bur- 
 lington and Quincy Railroad Company, was a member of the 
 "Iowa Employers' Liability Commission." In a minority re- 
 port recently issued Mr. Baldwin says: 
 
 14 
 
Some form of compensation for industrial accidents, 
 regardless of fault, has existed for years in various 
 European countries, and under a sort oi common im- 
 pulse for passing laws of this nature, fifteen states in 
 this country, and the United States Senate, have acted 
 within the past four or five years. No two of these 
 plans are alike, and in no single state has the experi- 
 ment continued long enough for any definite conclu- 
 sions to be stated either regarding the ])lan or the 
 wisdom of its results. My strong inclination has been 
 to recommend postponement of action in this state, and 
 further study of the methods and experience under 
 these numerous experiments, with a view of securing 
 for Iowa the full benefit of such experience elsewhere 
 under American conditions 
 
 WHOSE FAULT WAS IT? 
 
 Ev^e.ry one will readily understand that the first question 
 asked is, "Whose fault was it?" Mr. Baldwin discusses this 
 crucial question, and the complications which it involves, as 
 follows : 
 
 Upon general principles, no man should be held 
 liable to pay for an injury to another unless he was in 
 some manner or to some degree at fault; much less 
 should he, when without fault, be liable to one who has, 
 by his own fault injured himself. But this general 
 principle is greatly affected and modified by the condi- 
 tion that, in modern industry, especially where dan- 
 gerous machinery is employed among large numbers 
 of men, the question of "fault" is almost always uncer- 
 tain and complicated. Who shall decide it? We, say 
 the court; but what does that mean? It means an un- 
 equal contest from which, if the injured man or his 
 family are successful, they emerge after long delays 
 and uncertainties with only a fraction of what the emr 
 ployer pays, while the employer himself may be ruined 
 by the size of the judgments and the costs of the trial. 
 We know, moreover, that, as necessary incidents, a 
 
considerable portion of the time of the courts is taken 
 up with trial of suits in damages for personal injuries, 
 which adds to the public expense. It is also true that 
 burdens are increased by the necessity for poor relief 
 to those who have been injured, and to their families 
 because of meager compensation long delayed, to say 
 nothing of the unusual bitterness connected with this 
 class of litigation. 
 
 To change or modify this condition, I would offer 
 as the main justification for this legislation that it is to 
 protect the employer from damage suits and give to 
 the employe for a limited period a definite part of his 
 wages. 
 Referring to these quotations from Mr. Baldwin's minority 
 report, Mr. Weber says: 
 
 It is especially worth while to call attention to the 
 fact that Mr. Baldwin takes into consideration the 
 "public welfare," and this is a point to which he does 
 well to direct attention. Hitherto, in most discussions, 
 this phase of the subject has been disregarded, the 
 problem having been treated as if it were restricted 
 to the individual injured workman and mulcted em- 
 ployer. As a matter of fact, the general public is much, 
 if not most, concerned. This is apparent from two new 
 points : 
 
 1. The public cannot afford to have injured in- 
 dustrial workers and their families made a public 
 charge to be taken care of at taxpayers' expense, nor 
 to be forced to lead a precarious existence that will 
 operate to prevent them from being desirable citizens. 
 
 2. On the other hand, in these days of railroad and 
 other rate regulations, the public cannot afford to have 
 excessive allowances for trivial injuries to workers be- 
 cause such expenses of the employer must be added to 
 the cost of the article or service supplied, enhancing the 
 cost of living. 
 
 It might properly be added that the public is, also, 
 gravely concerned when it comes to adding to the 
 
 16 
 
service required of the courts, and to maintaining 
 parasitical lawyers, who incite unnecessary semi-black- 
 mailing litigation against employers who are willing to 
 make reasonable adjustments of personal injury claims. 
 In an address before the Ohio State Board of Commerce, 
 November 17, 1910, Mr. Jas. Harrington Boyd, of Toledo, then 
 president of the Ohio Employers' Liability Commission, asked 
 the following pertinent question : 
 
 The common law knows no remedy except that based 
 on the fault of the defendant. Can the legislature dis- 
 place actions based upon the fault of the employer, 
 which compensates less than one in eight of the work- 
 men injured, and those only in one-fifth part adequately, 
 by a compensation act or plan of insurance which will 
 compensate all employes injured, reasonably, with prac- 
 tically no waste and to the great betterment of the 
 laboring forces of the nation and the social improve- 
 ment of the masses? • 
 Answering his own question, Mr. Boyd makes the follow- 
 ing quotation from 'Tolice Power," by Professor Ernest 
 Freund : 
 
 The principle that inevitable loss should be borne, 
 not by the person to whom it may happen to fall, but 
 by the person who profits by the dangerous business to 
 which the loss is incident, embodies a very intelligible 
 idea of justice. 
 From many court decisions quoted by Mr. Boyd, I select 
 only the following: 
 
 The legislature may alter or repeal the common law. 
 It may create new offenses, enlarge the scope of civil 
 remedies and foster responsibility for injuries upon per- 
 sons against whom the common law gives no remedy. 
 (Bertholf v. O'Reilly, 74 N. Y., 504.) 
 In his discussion of this subject, Mr. Arthur St. John New- 
 berry says : 
 
 The epoch-making decision of the New York court 
 of appeals unanimously held the compensation law of 
 that state unconstitutional and void, on the broad 
 f 17 
 
ground that our constitutions, state and federal, do not 
 permit any one to be held liable for an injury that is 
 not his fault. This decision has been bitterly de- 
 nounced by labor organizations, and by very many good 
 men throughout the country, as reactionary, cruel and 
 unjust. Yet it is one of the very greatest of recorded 
 judicial decisions, and no fair-minded and intelligent 
 man can read it without being struck with admiration. 
 Its clear thought, logical reasoning, complete grasp of 
 fundamental principles, precise distinctions, and par- 
 ticularly its amazingly accurate statement of the limita- 
 tion of the power of courts, and their inability to set 
 aside constitutional provisions, make it loom like a 
 mountain above the desert of loosely reasoned and 
 poorly stated opinions that make up the bulk of our re- 
 ports. It fully recognizes the evils of the existing 
 system, gives the highest praise to the admirable 
 * motives, striking ability and astonishing energy and 
 diligence of the Commission that framed the act, but 
 ends with four impregnable conclusions : 
 
 First. That the constitutions, federal and state, are 
 the supreme law of the land. 
 
 Second. That setting aside constitutional provisions 
 is not within the power of the legislature. 
 
 Third. That courts must follow the law and not 
 make it. 
 
 Fourth. That remedy for the faults of the present 
 system must be obtained from the people and not from 
 the courts. 
 
 OHIO CONSTITUTIONAL AMENDMENTS ADOPTED 
 SEPTEMBER 3, 1912 
 
 In Ohio the appeal for a remedy for the faults of the present 
 system has been made to the people, but it was not intelli- 
 gently made ; therefore the answer is not intelligent. 
 
 The constitutional convention submitted three propositions 
 to the electors of Ohio relating to the subject of compensation 
 for injuries to workmen, September 3, 1912. 
 
 18 
 
One. Proposition No. 5 — "Damage for Wrongful Death," 
 was adopted by a minority of only 31% of the total vote of 
 1908. 
 
 Two. Proposition No. 10 — ''Welfare of Employes," was 
 
 adopted by a minority of only 31% of the total vote of 1908. 
 
 Three. Proposition No. 11 — "Workmen's Compensation," 
 
 was adopted by a minority of only 28% of the total vote of 
 
 1908. 
 
 In a pamphlet under the title of "Proposed Amendments to 
 the Constitution of Ohio," discussing proposition No. 5, I 
 quoted the proposition, which is as follows: 
 
 "The amount of damages recoverable by civil action in the 
 courts for death caused by the wrongful act, neglect or fault 
 of another, shall not be limited by law," and then said : 
 
 This is a reactionary proposition of the most radical 
 type. Running through all industrial history there is a 
 clearly defined and constantly growing tendency to 
 devise means for equitably dividing industrial losses 
 falling upon workmen through accidental injuries, sick- 
 ness or death. 
 
 In every form of liability insurance, whether under- 
 taken by the state, mutual benefit associations, or cor- 
 porations, a maximum must be fixed limiting the 
 liability which can be used as a basis of the premiums 
 or fees to be charged to create a fund out of which^ 
 claims can be paid. 
 
 This amendment deprives the general assembly of all 
 power to legislate in any way that will fix a limit to or 
 regulate the amount of damages for which any person, 
 firm, partnership, corporation or association may be 
 liable in a suit for damages on account of accidental 
 death. 
 
 It will deprive the farmer and the employer of less 
 than five workmen of the protection they now enjoy in 
 the maximum rate now fixed by law. The maximum 
 for death as fixed by law for the use of the Liability 
 Board is $3,400. Sections 1460-61-65-67. 
 
 19 
 
The maximum for death as fixed by the Norris Act 
 is $12,000. Section 10772. (This is higher than that of 
 any state in the Union, Connecticut being next with a 
 maximum of $10,000.) 
 
 Under this proposition there can be no uniformity in 
 the liability to damages for identical cases throughout 
 the several counties of the state. By leaving the 
 maximum amount that may be awarded in each case to 
 the verdict of a jury, the whole subject will be thrown 
 back to the common law and create endless litigation as 
 to whether or not the amount awarded by a jury is ex- 
 cessive. 
 
 As a final result, this proposition will react against 
 the wage earner and tend to fix the amount of damages 
 recoverable on the basis of his earning capacity and not 
 the real value of his life to his family, of which earning 
 capacity is but one factor. This proposition is a back- 
 ward step and will halt the progressive tendency 
 toward wise laws, equitably compensating the family 
 for loss and disability. Its adoption will place the citi- 
 zens of Ohio at a decided disadvantage with other states 
 in dealing with this vitally important subject. 
 Proposition No. 10 is as follows: 
 "Laws may be passed fixing and regulating the hours of 
 
 labor, establishing a minimum wage, and providing for the 
 
 comfort, health, safety and general welfare of all employes ; 
 
 and no other provision of the constitution shall impair or limit 
 
 this power." 
 
 The official explanation of this proposition made by the 
 constitutional convention, is as follows : 
 
 This amendment will permit the passage of humane 
 laws in conformity with modern industrial development 
 to improve the conditions of employment of men, 
 women and children. In the absence of such a pro- 
 vision in our state constitution a number of such laws 
 have heretofore been held void. 
 
 20 
 
Please notice that no intimation is here given that this 
 amendment may be used to limit the maximum recoverable as 
 compensation for death caused by an industrial accident. 
 Proposition No. 11 is as follows: 
 
 **For the purpose of providing compensation to workmen 
 and their dependents, for death, injuries or occupational dis- 
 eases, occasioned in the course of such workmen's employ- 
 ment, laws may be passed establishing a state fund to be 
 created by compulsory contribution thereto by employers and 
 administered by the state, determining the terms and condi- 
 tions upon which payment shall be made therefrom, and tak- 
 ing away any or all rig-hts of action or defenses from employes 
 and employers ; but no right of action shall be taken away 
 from any employe when the injury, disease or death arises 
 from failure of the employer to comply with any lawful re- 
 quirement for the protection of the lives, health and safety of 
 employes. Laws may be passed establishing a board which 
 may be empowered to classify all occupations, according to 
 their degree of hazard, to fix rates of contribution to such 
 fund according to such classification, and to collect, administer 
 and distribute such fund, and to determine all rights of 
 claimants thereto." 
 
 The official explanation of this proposition, made by the 
 constitutional convention, is as follows : 
 
 This amendment will permit legislation providing 
 that workmen who have been injured or who have con- 
 tracted an occupational disease in the course of their 
 employment, and the dependents of workmen, who have 
 been killed or who may have died from injuries received, 
 or occupational diseases contracted in the course of 
 such employment, shall be compensated out of a fund 
 maintained by compulsory contributions by the indus- 
 tries of the state, which funds shall be under the control 
 and supervision of the state. 
 In discussing this proposition, I said : 
 
 This proposition covers all employes, whereas the 
 explanation states, and is intended to lead electors to 
 believe, that it will apply to industries only. The word 
 
 21 
 
''industries" where it occurs in the explanation should 
 be changed to ''employers," which includes farmers, 
 merchants, manufacturers, builders, railroads, and all 
 employers regardless of the number of their employes. 
 
 This proposition contemplates a fund to be provided 
 by employers only, for the purpose of insuring employes 
 against sickness or death from any cause. 
 
 The principle of creating a fund by compulsory laws, 
 to be provided by one class for the benefit of another 
 class, who receive all of the benefits but are not re- 
 quired to make any contribution to the fund from which 
 benefits are to be paid, is vicious in the extreme. It 
 tends to destroy the foundation of a vigorous, self- 
 respecting and self-sustained independent manhood. 
 
 The adoption of this proposition will tend to create 
 a privileged class enjoying a special privilege and will 
 lead to class legislation of the most oppressive and ob- 
 noxious character. Employers and employes should 
 both be required to contribute to a benefit fund, if such 
 a fund is to be established and administered in accord- 
 ance with the requirements of sound economics and 
 morals. 
 
 The demand that employers only shall be required to 
 make contributions necessary to establish and maintain 
 such a benefit fund comes exclusively from the legisla- 
 tive lobbyists of trade unions. Their purpose is to pro- 
 tect the funds of trade unions from diminution by 
 reason of a demand for decreased dues on account of 
 contributions to a state benefit fund. Trade Union man- 
 agers do not want the state to compete with them by 
 drawing contributions from their own source of supply. 
 Incidentally, this class of legislation enables legislative 
 lobbyists to magnify their importance and strengthen 
 their grip on their jobs by being able to show their sup- 
 porters the benefits they have secured for them at the 
 expense of some one else. 
 
 A law requiring the maintenance of this benefit fund 
 by taxation would be far more just than the measure 
 
proposed, because it would cause the burden to rest 
 upon all classes of the community who are served by all 
 classes of employes. 
 
 The requirements of justice are a safer guide for con- 
 stitutional provisions and statutory laws than the de- 
 mands of prejudice and a sordid selfishness that con- 
 tinually seeks to secure something- for nothing, a pro- 
 ceeding that partakes of the nature of stealing. 
 
 Those who favor this graft in private employment 
 can be depended upon to favor graft in public employ- 
 ment. Those who believe in honest labor, just com- 
 pensation and brotherly assistance for the unfortunate 
 will repudiate this attempt to legalize and make com- 
 pulsory a graft to be imposed upon one class for the 
 benefit of another class. 
 
 Germany safeguards the workers at all times by con- 
 tributions from both employers and employes. Modern 
 tendencies are toward the German plan, which this 
 proposition will prevent. 
 The principles of justice are immutable. Attempts to apply 
 these principles in the provisions of organic and statutory 
 laws change as human conceptions of justice change. To 
 write true principles of justice into organic and statutory laws 
 is to make true progress. To take such principles out of a 
 law, or to adopt provisions in constitutions which prevent 
 their incorporation in statutory enactments, is to be reaction- 
 ary in the most harmful manner. 
 
 To hold any one liable for an injury that is caused by no 
 fault of his own is clearly unjust. 
 
 Great care must be exercised to prevent the attempt to re- 
 vise the common law in these respects from becoming reac- 
 tionary and revolutionary by moving from, instead of toward, 
 the application of the principles of justice clearly perceived 
 and intelligently understood. 
 
 THE INDUSTRY MUST SUSTAIN THE LOSS 
 
 Every industrial injury causes an economic loss. Who shall 
 bear the burden of this loss? 
 
 23 
 
The first answer, affirmed by social custom, was — The 
 Workman. 
 
 The second answer, affirmed by the common law, was — The 
 employer, for losses caused under certain conditions; the 
 workman, for losses incurred under all other conditions. 
 
 The third answer, now being given by the application in 
 statutory law of principles discerned by a clearer perception 
 of the requirements of social and economic justice, is — The 
 Industry. 
 
 The Michigan Workmen's Compensation Commission, in 
 explaining the legislative measure it recommended for enact- 
 ment, says: 
 
 We have made no provision for contribution by em- 
 ployes to the funds necessary to pay the compensation 
 accruing under this act. While it has been said with 
 much force that such contribution, however small, by 
 employes, will tend to give them a feeling of added re- 
 sponsibility, and that as the law covers accidents arising 
 from carelessness, as well as from industrial hazards, 
 they ought morally to share the burden, yet, after full 
 consideration of this subject, we have reached the con- 
 clusion that it is not wise to recommend that they be 
 required to do so. In reaching this conclusion we have 
 had in mind that employers may, to some extent, add 
 the amount of such payments to the cost of production, 
 which of course, could not be done by employes except 
 by demanding an increase of wages to that amount. 
 Finally, we think that the physical injury and suffering 
 of the employe is quite sufficient to constitute his por- 
 tion of this industrial burden. 
 Mr. William C. Archer, Secretary of the Ohio State Liability 
 Board of Awards, says : 
 
 Wages paid employes are earned in the labor per- 
 formed, the laborer being worth his hire. The risk as- 
 sumed is assumed for others and the resultant loss and 
 distress, uncompensated, are borne by the injured and 
 his dependents. To distribute this loss among many the 
 
 24 
 
great principle of insurance is invoked. It is applied 
 
 by making industries bear the losses caused by them. 
 
 In the "Journal of Workmen's Compensation Insurance," 
 
 published by the Ohio State Liability Board of Awards, for 
 September 1, 1912, Mayor Gaynor of New York is quoted as 
 follows : 
 
 The theory is to pay for breaking or killing a man 
 the same as you pay for breaking or destroying a ma- 
 chine, and it all goes into the cost of production. That 
 means that it goes into the price which the consumer 
 pays for the article. In that way the whole community 
 stands the burden of these unfortunate accidents in 
 place of allowing those hurt to go to the poorhouse or 
 become paupers. 
 In the case of State ex rel. v. Clausen, Auditor, 117 Pac, 
 1101, in which the Workmen's Compensation and Compulsory 
 State Insurance Law of the State of Washington was held not 
 to be violative of the state nor of the federal constitution, and 
 clearly within the police power of the state, Chief Justice Fol- 
 lerton of the Supreme Court of Washington, is reported to 
 have said : 
 
 It seems that no matter how carefully laws for the 
 prevention of accidents in such industries be framed, 
 or how rigidly they may be enforced, there is an element 
 of human equation that enters into the problem which 
 cannot be eliminated and which invariably causes per- 
 sonal injuries and consequent financial losses to work- 
 men engaged therein. Heretofore these losses have 
 been borne by the injured workmen themselves, by their 
 dependents, or by the state at large. It was the belief 
 of the legislature that they should be borne by the 
 industries causing them, or, perhaps more accurately, 
 by the consumers of the products of such industries. 
 That the principle sought to be put into effect is 
 economically, sociologically and morally sound, we 
 think must be conceded. 
 I quote the following from a speech of Hon. George Suther- 
 land, United States Senator from Utah, April 16, 1912, the 
 
 25 
 
Senate having under consideration the bill (S. 5382) to pro- 
 vide an exclusive remedy and compensation for accidental in- 
 juries, resulting in disability or death, to employes of common 
 carriers by railroads engaged in interstate or foreign com- 
 merce or in the District of Columbia, and for other purposes : 
 It will be seen from the statistics (and I could quote 
 much more to the same efifect if I had the time) that 
 more than one-half, on the average, of all these accidents 
 are due to the natural hazard. So long as we leave the 
 employers' liability law in force with the element of neg- 
 ligence at the basis of it, half of those accidents must 
 go unrecompensed. The suffering of the man who 
 loses his leg as a result of the inherent risk of the in- 
 dustry, or as the result of his own negligence, is just 
 as great as that of the man who loses it as the result of 
 the negligence of his employer. The hardship upon the 
 widow and children of the man killed as the result of 
 the hazards of the industry, or as the result of his own 
 negligence, is just as great as though it was due to the 
 negligence of the employer. 
 
 We must take great care that these people do not 
 become wrecks, human driftwood in society. That is 
 one object of this legislation. The law of negligence 
 is hard; it is unjust, it is cruel in its operation. The 
 law of compensation proceeds upon broad humanitarian 
 principles. It says that when a man has been injured in 
 an industry, he is a soldier in that industry, and the 
 industry must take care of him to some extent. 
 
 Mr. Heyburn. The Senator uses the expression 
 "We must take care of these people." I assume he 
 means that the employer must be compelled to provide 
 for them. Of course there is no governmental applica- 
 tion of the term. 
 
 Mr. Sutherland. Oh, no ; society in the last analysis 
 must take care of these people, because if the injured 
 man or the family that is left is not compensated by 
 the industry directly, they become a charge upon 
 society. They must be taken care of in our charitable 
 
 26 
 
institutions and in one way and another; they must 
 support themselves very often by unaccustomed and 
 poorly paid work. 
 
 Mr. Heyburn. Has the Senator — he doubtless has — 
 taken into consideration the effect upon the expense of 
 the business itself? To what extent would the Senator 
 carry this question of compensation as compared with 
 the ability of the employer to meet the liability? 
 
 Mr. Sutherland. This bill proceeds upon the theory 
 that we pay half wages. 
 
 Mr. Crawford. May I inquire, does the Senator deal 
 with this phase of it, that these employes enter into 
 the question of efficiency; that in one sense their rela- 
 tion to industry is a relation that goes toward keeping 
 up in the highest state of efficiency the operating in- 
 dustry, as a locomotive that has been damaged must 
 be kept up in an efficient condition of repair ; that these 
 men are, in a way, devoting their lives to the work of 
 railroading; that they are unfit for anything else; that 
 all their training is blended with that operation; and 
 that they are in one sense a part of the plant itself and 
 entitled to consideration upon that theory? 
 
 Mr. Sutherland. Yes. The Senator from South Da- 
 kota very well states it. These men, in a sense, may be 
 regarded as the human part of the machinery which they 
 operate. When a piece of machinery is broken, when 
 a boiler is destroyed, the industry must replace it ; it 
 bears the expense of it. When the man who operates 
 the machine is injured, the industry must take care of 
 him and must repair that damage. 
 
 It must be so, because when capital is invested in a 
 railroad enterprise, for example, it must be permitted 
 to have a rate which will afford compensation for the 
 work it does. If you reach into the treasury of the rail- 
 road company for any expense, for making better road- 
 ways, for compensating for these injuries, or for any 
 other purpose, it becomes a part of the operating ex- 
 penses of the railroad. They charge to their operating 
 
 27 
 
expenses now the amount they pay out in personal 
 injury cases and the damages which they pay. So, in 
 the last analysis, it is, of course, shifted to the public. 
 
 INDUSTRIES MUST NOT BE OVERBURDENED WITH 
 COMPENSATION EXPENSES. 
 
 Bringing this element of the question into view, Mr. Arthur 
 St. John Newberry says: 
 
 Competition is now so keen and general, and trans- 
 portation over considerable distances so easy and so 
 cheap, that even a small handicap on an industry may 
 cause its failure. A slightly greater burden imposed on 
 manufacturers, in one state, may result in putting them 
 at a hopeless disadvantage against producers of the same 
 product in another state, where such is not imposed. 
 Uniformity in legislation between all our states, and 
 even between a few states closely contiguous, has 
 already been found practically impossible. It should 
 be clear, even to the most ardent advocate of the pro- 
 tection of the poor, that the destruction or even hamper- 
 ing of a great industry may do much greater harm to 
 the workman than a continuance of the present system, 
 cruel and harsh as it is. Those who declaim about 
 making the loss caused by accident a charge on an 
 industry should first consider whether the industry can 
 bear the load and what the result will be if it cannot. 
 
 COMPENSATION LAWS SHOULD BE APPLIED UNI- 
 FORMLY TO EVERY INDUSTRY BY 
 EVERY STATE 
 
 The commercial competition within industries of employers 
 with employers, employes with employes ; of industry with in- 
 dustry ; of municipality with municipality ; of state with state, 
 of nation with nation, is an economic fact that can be ignored 
 by legislators only at the peril of the communities they tem- 
 porarily represent. The most accurate information obtainable, 
 the most intelligent conception of moral and economic princi- 
 ple that can be evolved from the brains of man; the most 
 
 28 
 
thorough and capable experience in the practical management 
 of industrial business, must be utilized to secure a right solu- 
 tion of the many problems involved in the proposition to give 
 every workman a legal right to statutory compensation for 
 loss of earning capacity caused by industrial injuries regard- 
 less of fault. When such a solution is found, to make it most 
 helpful and effective, it should be applied uniformly to every 
 industry and by every state. In no class of legislation is there 
 a greater demand for uniformity than in laws affecting the 
 regulation of business and the welfare of workingmen. State 
 boundaries have no power to place a limitation upon the 
 operation of moral and economic principles. . 
 
 In a "Review of Labor Legislation in the United States 
 for the Year 1909," Irene Osgood, Assistant Secretary, Ameri- 
 can Association for Labor Legislation,. New York City, says : 
 The greatest need in the field of labor legislation is 
 the establishment of scientific standards. The chaotic 
 condition of such legislation in this country is every- 
 where recognized. This lack of uniformity is due 
 partly to the fact that, where England, for instance, 
 has one body enacting legislation, we have fifty bodies 
 politic, each with different industrial conditions and 
 with different ideas as to what is constitutional. It is 
 significant that this lack of uniformity has led to the 
 organization of a special national association to promote 
 scientific study of labor legislation. Forty-two states 
 held legislative sessions during 1909. A flood of labor 
 bills were introduced and nearly four hundred were 
 enacted into law. 
 
 * * * From all directions comes the recognition of 
 the need of more careful study of the underlying condi- 
 tions which require remedy by legislation. * * * 
 
 Beyond question labor legislation, in order to be effec- 
 tive, must be based upon the ascertained facts of the 
 conditions pervading each particular industry. * * * 
 The most obvious defect in the literature issued by the 
 Workmen's Compensation Commissions of the several states, 
 and by the various State Boards created to administer the 
 
 29 
 
laws thus far enacted, is seen in their disposition to become 
 partisan advocates of new and really untried methods as 
 against established methods with which society has had ex- 
 perience. All of this literature is biased by a keen appreciation 
 of political advantage and an inadequate deference to moral 
 and economic requirements. Having no personal liability for 
 losses that their mistakes may cost employers or taxpayers, 
 the disposition is to take unwise chances by basing judgment 
 and procedure on conclusions drawn from insufficient experi- 
 ence. They do not realize that sympathy is really helpful 
 only when guided by justice. 
 
 These defects cannot be wondered at when consideration 
 is given to the astute cunning with which trade union leaders 
 play on the sympathies of the public to secure support for 
 labor legislation of their devising. The popular mind is ever 
 ready to respond to appeals from those who claim they are 
 the victims of oppression. Impressed by this fact, Mr. New- 
 berry well says : 
 
 Workmen's compensation acts are produced by 
 sympathy with the hard lot of the laborer, and a widely 
 spread feeling that he should receive much greater con- 
 sideration and protection than is now afforded him. This 
 feeling is natural and justifiable, but hasty yielding to 
 humanitarian impulses may produce evils greater than 
 those which they seek to remedy. 
 Under such conditions it causes no surprise to find that the 
 workmen's compensation laws that have been proposed or 
 enacted are not supplementary to the common law, but directly 
 opposed to it; not reformatory, but revolutionary. 
 
 MALINGERING AND CARELESSNESS MUST BE 
 GUARDED AGAINST 
 
 Here the human element becomes a dominating factor. 
 Through all the aeons of human life men have been eager to 
 secure personal benefits by cunning craft, regardless of the 
 injustice to others of their conduct. This is the initial cause 
 of time-serving and graft in public employment. Evidently 
 this evil element in human character is developed by oppor- 
 
 30 
 
tunity. Such opportunity is offered by the adoption of a 
 schedule of statutory compensations for all industrial injuries 
 however caused, regardless of fault. 
 
 The Ohio State Liability Board of Awards, discussing this 
 subject in the "J^^^^^l o^ Workmen's Compensation Insur- 
 ance" for July 1, 1912, says: 
 
 Malingering, or feigning of disability from injury or 
 disease has occurred in every age, every country and 
 every class of society. Perhaps it is traceable to a 
 primitive instinct, that instinct which from fright will 
 cause the opossum to assume the appearance of death, 
 the robin to be badly wounded when leading you away 
 from her young. 
 
 The Bible tells us how David "feigned himself mad." 
 In Greek mythology, we learn how Ulysses plowed the 
 sand to escape military service, how his malingering 
 was detected by placing his infant son in the furrow. 
 
 In the administration of workmen's compensation 
 laws it has been the experience to find a great many 
 attempts at malingering or feigning of disability follow- 
 ing an accident, due principally to the compensation 
 feature. 
 
 Who among us has not heard the blood surging to 
 the head when awake or worried? When in health, if 
 not worried, we would not give the matter a thought. 
 We have all carried on our ordinary vocations at times 
 having small disabilities but not allowing them to get 
 the mastery over us. Thus in sickness even normal 
 conditions become to the perturbed mind of the patient 
 symptoms of ailment. 
 
 Twenty years ago a nervous breakdown as the result 
 of an accident was not admitted, but now some actually 
 believe, when suffering from a minor accident but nar- 
 rowly escaping a serious accident, that they should be 
 compensated, not for the injury actually received, but 
 for the danger which is threatened. When a workman 
 receives a trifling injury, his idea sometimes is that he 
 mu3t receive substantial damages, then when he is well 
 
 31 
 
he persuades himself that he is still ill. Most employers 
 have seen such cases. They are decidedly difficult to 
 detect. 
 During the Civil War it was not an uncommon occurrence 
 for soldiers to seek discharge from military service by means 
 of a self-inflicted wound. Afterward they were not ashamed 
 to exhibit the depravity of their natures by making application 
 for a pension on account of such wound. If the pension roll 
 could be relieved from all payments claimed by malingering 
 soldiers, ''their sisters, their cousins and their aunts," an in- 
 definite number of millions of dollars would be saved annually 
 for the taxpayers of the United States. This condition has 
 been the outgrowth of "bids for votes" by demagogues. How 
 long will it be before similar conditions will prevail in state 
 politics when the army of industrial workers is offered a fixed 
 compensation for every industrial injury, however caused, re- 
 gardless of fault? No person who will think of this proposi- 
 tion with unprejudiced intelligence can fail to see the danger 
 of a repetition of the evils and scandals of pension legislation 
 that is involved in laws providing statutory compensation for 
 industrial injuries, administered by the appointees of politicians 
 in office. 
 
 Certainty of compensation for loss of earning capacity 
 caused by an industrial injury will inevitably tend to induce 
 carelessness. This fact is clearly pointed out by Mr. New- 
 berry when he says: 
 
 It is at least doubtful whether lessening the penalties 
 for heedlessness will not have a positively deteriorating 
 effect on those it is sought to benefit, and whether a law, 
 granting greater protection in case of accident, may not 
 haVe the disastrous effect of increasing accidents. Most 
 of the injuries occurring in any business come from the 
 carelessness of the injured men themseves, and the 
 multiplication of safety appliances and the most urgent 
 warnings and cautions will not prevent them from 
 taking risks that no reasonable person would venture 
 on. Familiarity with dangers breeds contempt of them, 
 contempt breeds lack of care, until, at last, frail flesh 
 
 32 
 
and blood is crushed against stone and steel. Though 
 they know the dreadful consequences of injury, men are 
 still constantly injured solely from their own reckless- 
 ness. It is possible that decreasing the penalties of care- 
 lessness may lessen care, that sure compensation for 
 accidents may increase accidents, that a system put in 
 force with the most earnest desire to do good, may in 
 fact do the greatest harm. 
 To be helpful without impairing a manly desire to be self- 
 supporting and without belittling a noble self-respegt, is the 
 most difficult problem in human relationship. This problem 
 is present in every remedy proposed for the cure of the evils 
 which all acknowledge are to be found in the existing system 
 of employers' liability. "Every law not based on wisdom is a 
 menace to the State." 
 
 REMEDY PROPOSED: COMPULSORY STATUTORY 
 COMPENSATION REGARDLESS OF FAULT 
 
 This remedy will be found in nearly every recommendation, 
 proposed measure, and enacted law. 
 
 In its "Immediate Legislative Program," December, 1912, 
 the American Association for Labor Legislation says: 
 
 "The adoption of some uniform compensation measure, and 
 its extension to all states, including those which have so far 
 taken no action, is urgently needed." 
 
 In support of this statement, it quotes from the report of 
 
 the "Committee on Compensation for Industrial Accidents and 
 
 Their Prevention" of the American Bar Association, submitted 
 
 at its annual meeting at Milwaukee, August, 1912, as follows: 
 
 The consensus of opinion is that uniform laws for 
 
 compensation for industrial accidents should be enacted 
 
 by all the states and by the United States within its 
 
 jurisdiction. Such a law should, in the opinion of your 
 
 committee, be based on the following principles: 
 
 1. It should be compulsory and exclusive of other 
 remedies for injuries sustained in course of industrial 
 employment. 
 
 88 
 
2. It should apply to all industrial operations or at 
 kast to all industrial organizations above a certain limit 
 of size. 
 
 3. It should apply to all accidents occurring in the 
 course of industrial operations regardless of the fault 
 of anyone, self-inflicted injuries not being counted as 
 accidents. 
 
 4. The compensation should be adjudicated by a 
 prompt, simple and inexpensive procedure. 
 
 ^5. The compensation should be paid in regular in- 
 stallments continuing during the disability or in case 
 of death during dependent period of beneficiaries. 
 
 6. The compensation should be properly propor- 
 tioned to the wages received before injury. 
 
 7. The compensation should be paid with as near 
 absolute certainty as possible, in the most convenient 
 manner, and there should be adequate security for de- 
 ferred payments. 
 
 Your committee, however, is of the opinion that a 
 very important branch of the subject referred to is the 
 prevention of industrial accidents and that every effort 
 should be made to procure the adoption of uniform laws 
 for proper safeguarding of industrial employes from 
 accident, and that this element should always be con- 
 sidered in connection with any scheme for compensa- 
 tion for industrial accidents. 
 As pointed out by this committee, the prevention of indus- 
 trial accidents is an important branch of this subject, but it 
 cannot be discussed at this time. If the old adage that "an 
 ounce of prevention is worth a pound of cure" is true, the sub- 
 ject of prevention of industrial accidents is sixteen times as 
 important as the subject of compensation for industrial acci- 
 dents. 
 
 The trend of legislation on this subject, proposed and en- 
 acted, is clearly shown by the following concise statement 
 quoted from a pamphlet issued by the ''Ohio State Liability 
 Board" under the title of "Workmen's Compensation Act of 
 the State of Ohio, with Appendix and Notes to Sections": 
 
 84 
 
Under the law as it formerly existed, compensation 
 for injuries was uncertain, both as to the right to recover 
 and the amount to be recovered in case of legal liability. 
 The law placed no limit upon the amount to be re- 
 covered for an injury, and any amount not exceeding 
 $12^000.00 could be recovered in case of wrongful death. 
 Under the new law, the right to receive compensation 
 for all injuries, as well as the amount of the compensa- 
 tion, is definite and certain, as determined by the 
 rule fixed by the terms of the act. In other words, the 
 new law substitutes certainty of liability and amount of 
 award for uncertainty. 
 
 To summarize : 
 
 1. (a) At common law: Established fault or negli- 
 gence of the employer is the sole basis of recovery in 
 an action by an employe for injury received in the 
 course of his employment. 
 
 (b) In all such actions the employer may plead either 
 the "contributory negligence," ''assumed risk," or "fel- 
 low-servant" defense, as may be appropriate. 
 
 (c) No right of recovery exists for wrongfully caus- 
 ing death. 
 
 2. The common law, prior to the enactment of the 
 Workmen's Compensation Law, was modified by 
 statute in Ohio : 
 
 (a) By authorizing recovery for wrongful death not 
 exceeding $12,000.00 in amount. 
 
 (b) By requiring certain safety devices and appli- 
 ances to be used in certain hazardous occupations and 
 denying the employer the right- to assert the so-called 
 common law defenses where such required safety de- 
 vices or appliances are not provided and injury or death 
 results from such failure ; and by making the employer 
 prima facie guilty of negligence where an injury is 
 occasioned by defective machinery. 
 
 (c) By the "Norris Law" of 1910, which applies to 
 all occupations, and which, while it does not specifically 
 abolish the defenses of "assumed risk" and "fellow ser- 
 
 36 
 
vant," and still adheres to the doctrine that fault or 
 negligence is the only basis of recovery, so modifies the 
 above named defenses as to allow a recovery for prac- 
 tically all injuries received by an employe in the course 
 of his employment, except such as result from the use 
 of simple tools or solely from the negligence of the 
 injured employe. 
 
 3. The Workmen's Compensation Law advances a 
 step beyond the "Norris Law" and establishes a new 
 method of compensation, and a rule of liability unknown 
 to the common law, by which it is sought to provide a 
 limited compensation for every injury received by an 
 employe in the course of his employment, which has not 
 been intentionally self-inflicted. 
 
 (a) By creating an insurance fund from which a 
 limited compensation will be made for injuries received 
 by employes of such employers as come within the 
 purview of the act, and who elect to pay the premiums 
 fixed for such insurance fund, and otherwise observe 
 the laws. The injured employe, in such cases, must 
 report to the insurance fund for compensation and can- 
 not maintain a civil action against his employer. The 
 dependents of a killed employe are provided for in the 
 same way. 
 
 (b) By specifically abolishing the "assumed risk," 
 "fellow servant" and "contributory negligence" de- 
 fenses as to such employers as come within the purview 
 of the act, and who do not elect to pay the premiums 
 fixed for the state insurance fund. In actions against 
 such employers not more than $12,000.00 can be re- 
 covered for wrongful death, and there is no limitation 
 on the amount of damages for injury, that being left to 
 the sound discretion of the jury in each particular case. 
 
 In a bulletin issued by the Michigan Industrial Accident 
 Board, under the title of "Workmen's Compensation Law," 
 the following explanation is made by the Michigan Industrial 
 Commission : 
 
 86 
 
The distinguishing feature of the compensation law 
 is that it provides benefits for every injury regardless 
 of fault or negligence. The Michigan law pays the in- 
 jured employe, beginning the third week of the disa- 
 bility, 50 per cent of his earnings during such disability. 
 The employe, therefore, in reality bears part of the cost 
 of such compensation, because under the common law, 
 if any recovery was had, his damages were assessed on 
 the basis of 100 per cent of his earnings. He also con- 
 tributes in the sense that he gets no compensation for 
 the first two weeks of his disability unless incapacity 
 should extend eight weeks, in which event payment 
 reverts to first day of injury. 
 
 The law is compulsory as to the state, and counties, 
 cities, incorporated villages, townships and school dis- 
 tricts, and all employes of the state and of such munici- 
 palities, but this does not include employes of contrac- 
 tors engaged in performing work for the state or any 
 such municipality. 
 
 It is optional as to all private employers (including 
 public service corporations) and their employes except 
 that it contains a qualifying section governing em- 
 ployers and workmen engaged in interstate commerce. 
 In his speech on "Employers' Liability and Workmen's 
 Compensation" (S. 5382) April 8, 1912, United States Senator 
 George E. Chamberlain of Oregon said : 
 
 It is pretty generally conceded by the employers in 
 almost every industry that such legislation in some form 
 or other is just, as an instrumentality to put an end to 
 uncertainty and to fix the extent of liability for all 
 classes of occupational injuries; and some employers, 
 without any legislation, have voluntarily adopted some 
 form of compensation for injured employes. It is de- 
 manded by most of the employes in hazardous employ- 
 ments, in the hope that they may feel assured, in case 
 of accident, that they will not become dependent and 
 that their families and dependents, in case death results 
 
 87 
 
from such accident, will not become the objects of 
 public or private charity. 
 
 As the subject comes to be better understood it will 
 eventually be demanded by both employers and em- 
 ployes, in order that the antagonisms which the present 
 liability laws occasion may be alleviated by a statute 
 which fixes the rights and responsibilities of both with- 
 out regard to fault upon the part of either. It is de- 
 manded by justice, as well as by a sound public policy. 
 United States Senator George Sutherland, of Utah, speak- 
 ing on the same measure, April 16, 1912, said: 
 
 The general principle in this bill upon which com- 
 pensation is based, I may illustrate in this way: A man 
 who goes to work in one of those dangerous employ- 
 ments and the employer who invests his money may 
 be regarded as joint adventurers in an industry in which 
 a certain number of accidents are inevitable. When an 
 accident occurs, we propose to compel the man who has 
 invested his capital for the sake of the profits he may 
 make to continue to pay the injured man half wages, 
 notwithstanding the fact that he gets no service from 
 the man; but the workman himself was a joint ad- 
 venturer in the enterprise; he has invested his work in 
 that dangerous enterprise for the sake of the wages. 
 So we have him lose half his wages while he is doing 
 nothing, and we compel the employer to contribute half 
 of the wages without getting anything in return. 
 Pursuant to Joint Resolution No. 41 (approved June 25, 
 1910), President William Howard Taft appointed an "Em- 
 ployers' Liability and Workmen's Compensation Commission." 
 This commission drafted a bill to give statutory effect to its 
 conclusions, now known as S. 5382, under the following title : 
 "A bill to provide an exclusive remedy and compensation 
 for accidental injuries, resulting in disability or death, to em- 
 ployes of common carriers by railroads engaged in interstate 
 or foreign commerce, or in the District of Columbia, and for 
 other purposes." 
 
 38 
 
In his message transmitting the report of this commission 
 to the Senate and House of Representatives, under date of 
 February 20, 1912, President Taft said : 
 
 One of the great objections to the old common law 
 method of settling questions of this character was the 
 lack of uniformity in the recoveries made by injured 
 employes, and by the representatives of those who suf- 
 fered death. Frequently meritorious cases that appealed 
 strongly to every sense of human justice were shut out 
 by arbitrary rules limiting the liability of the employer. 
 On the other hand, often by perjured evidence and the 
 undue emotional generosity of the jury, recoveries were 
 given far in excess of the real injury, and sometimes on 
 facts that hardly justified recovery at all. Now, under 
 this system the tendency will be to create as nearly a 
 uniform system as can be devised ; there will be re- 
 coveries in every case, and they will be limited by the 
 terms of the law so as to be reasonable. 
 
 The great injustice of the present system, by which 
 recoveries of verdicts of any size do not result in actual 
 benefit to the injured person because of the heavy ex- 
 pense of the litigation and the fees charged by the coun- 
 sel for the plaintiff, will disappear under this new law, 
 by which the fees of the counsel are limited to a very 
 reasonable amount. The cases will be disposed of most 
 expeditiously under this system, and the money will be 
 distributed for the support of the injured person over 
 a number of years, so as to make its benefit greater and 
 more secure. 
 
 Of course the great object of this act is to secure jus- 
 tice to the weaker party under existing modern condi- 
 tions, but a result hardly less important will follow 
 from this act that I cannot fail to mention. 
 
 The administration of justice today is clogged in 
 every court by the great number of suits for damages 
 for personal injury. The settlement of such cases by 
 this system will serve to reduce the burden of our 
 courts one-half by taking the cases out of court and 
 
 39 
 
disposing of them by this short cut. The remainder of 
 the business in the courts will thus have greater atten- 
 tion from the judges, and will be disposed of with much 
 greater dispatch. In every way, therefore, the act de- 
 mands your earnest consideration, and I sincerely hope 
 that it may be passed before the adjournment of this 
 session of Congress. 
 
 LIMITATION ON COMPULSORY STATUTORY COM- 
 PENSATION: FAULT OF EMPLOYE 
 
 In discussing the necessity of guarding against the evils of 
 malingering and carelessness on part of employes, in enacting 
 compulsory statutory compensation laws, the human element 
 was declared to be the dominating factor. 
 
 To offer compulsory statutory compensation for loss of 
 earning power caused by industrial injuries, regardless of the 
 fault of the injured workman, is to offer a premium for suc- 
 cessful malingering, carelessness and fraud. At this point 
 sympathy must be restrained by justice if manly independence 
 and the nobility of self-respect are to be safeguarded, and em- 
 ployers, industries and society are to be safeguarded from 
 burdens imposed by impostors. 
 
 The principles of justice require that employers shall be 
 liable for injuries caused by their wilful misconduct, and that 
 employes shall not be compensated for injuries caused by their 
 own misconduct. 
 
 The Ohio Workmen's Compensation Law provides that **no 
 compensation shall be paid for purposely self-inflicted injuries 
 and that the employer shall not be liable to respond in 
 damages if the injury or death of the employe was due to 
 the absence of any guard or other device required by law for 
 the safety of persons, if the absence of such guard or device 
 be due to the removal thereof by the injured workman him- 
 self or with his knowledge by any of his fellow workmen, 
 unless such removal be by order of the employer, his officer 
 or agent." 
 
 The Michigan law provides that: "No employe shall be 
 eligible for compensation if it is proved that the injury resulted 
 
 40 
 
from the deliberate intention of the employe to cause the 
 injury or if the injury results after the employe has left the 
 plant, or quits, or is properly discharged from the service. Em- 
 ployes whose service is of a casual or incidental character are 
 not eligible for benefits." 
 
 The elective form of the Model Workmen's Compensation 
 act proposed by the Committee for Accident Prevention and 
 Workmen's Compensation of the National Association of 
 Manufacturers of U. S. A. excludes employes from receiving 
 compensation in the following language : 
 
 Provided that no compensation shall be paid where 
 such injury or death is intentionally self-inflicted or due 
 to the intoxication of the employe or his wilful failure 
 or refusal to use a safety appliance provided by the em- 
 ployer or his refusal or neglect to perform a statutory 
 duty. 
 In the compulsory form, proposed by this committee, the 
 corresponding provision is: 
 
 Section 2. No workman shall be compensated for 
 injury wilfully self-inflicted, or due to his own intoxica- 
 tion, or his wilful failure or refusal to use a safety ap- 
 'pliance provided by the employer, or to a wilful viola- 
 tion of any statutory duty; but the burden of proving 
 such failure shall be upon the employer. 
 The tentative drsift of a compulsory uniform workmen's 
 compensation act, framed by a "Special Committee of the Con- 
 ference of Commissioners on Uniform State Laws," contains 
 the following: 
 
 Section 3. Injuries not covered. .No compensation 
 shall be allowed for an injury caused (1) by the em- 
 ploye's wilful intention to injure himself or to injure 
 another, or (2) by his intoxication. 
 
 Section 59. Definitions, (e) The words "personal 
 injury arising out of and in the course of such employ- 
 ment" shall not include an injury caused by the wilful 
 act of a third person directed against an employe for 
 reasons personal to such employe or not directed against 
 him as an employe because of his employment. They 
 
 41 
 
shall not include a disease except as it shall result from 
 the injury. 
 
 Note: This is substantially the same as the language 
 used in the Federal bill, now before Congress (S. 5382). 
 In New Hampshire, New Jersey and Kansas intoxica- 
 tion is a bar to compensation. In New Jersey, Illinois, 
 Kansas, Ohio and Washington compensation is barred 
 if the employe intended to cause the particular injury 
 in question. 
 The bill proposed by the ''United States Employers' Lia- 
 bility and Workmen's Compensation Commission," (S. 5382,) 
 introduced in the United States Senate by the Hon. George 
 Sutherland of Utah, chairman, and in the House of Repre- 
 sentatives by the Hon. W. G. Brantley of North Carolina, 
 vice-chairman of the Commission, contains the following pro- 
 vision : 
 
 Section 6. That no compensation shall be allowed 
 for the injury or death of an employe when it is proved 
 that his injury or death was occasioned by his wilful 
 intention to bring about the injury or death of himself 
 or of another, or that the same resulted from his in- 
 toxication while on duty. 
 A writer attacked this bill in the Charlotte (N. C.) News, 
 June 27, 1912. In referring to this Section 6, he said : 
 
 In no case of wilful killing or death by intoxication 
 would an employer be liable. The bill puts a drunken 
 man further out of the pale of protection than the lower 
 animals, and gives employers license to murder in the 
 name of drunkenness. 
 Representative Brantley answered this attack in the Char- 
 lotte News for August 5, 1912. After quoting the full text of 
 this Section 6, Mr. Brantley says : 
 
 Does the writer of the article contend that if it is 
 proven that a railroad employe deliberately commits 
 suicide, or attempts to do so, that the railroad company 
 should pay compensation to him? If some one else is 
 injured as the result of the employe's intoxication while 
 on duty, compensation will be paid under the bill. The 
 
 42 
 
bar is put upon the intoxicated man. Does the writer 
 of the article think that the sober man and the drunken 
 man should be treated alike? Does not he know that 
 the present liability law distinguishes between them 
 and that the compensation bill makes no change in that 
 regard? Does not he think that the public has sub- 
 stantial rights in the premises? Would he by law de- 
 clare a reward to the drunken man whose drunkenness 
 injures him while destroying the lives of others? The 
 public has rights that must be considered by the law- 
 makers. In all the many hearings before the commis- 
 sion the labor men present made no such objection to 
 Section 6 of the bill as the article in question makes. 
 The suggestion in this article that Section 6 of the bill 
 will "give employers license to murder in the name of 
 drunkenness" reflects no credit upon the intelligence or 
 fair-mindedness of the author and suggests a purpose in 
 his mind that is far and apart from any interest in rail- 
 road employes. 
 
 TENDENCY OF EMPLOYERS' LIABILITY AND 
 WORKMEN'S COMPENSATION LEGISLATION 
 IN THE UNITED STATES AND FOR- 
 EIGN COUNTRIES 
 
 Legislation on these subjects is world-wide. It has been 
 developing for nearly a century. It is being urged in many 
 states with the cumulative force of past experience and suc- 
 cessful progress. 
 
 UNITED STATES 
 
 A memorandum showing the law and conditions in the 
 United States, Germany and England, relating to employers' 
 liability and workmen's compensation, by Mr. Launcelot 
 Packer, Secretary of the "United States Employers' Liability 
 and Workmen's Compensation Commission," is published as an 
 appendix to the Report of the Commission (Senate Document 
 No. 338), February 21, 1912. In speaking of the present ten- 
 dency of negligence legislation in the United States, Mr. 
 Packer says: 
 
 4S 
 
The trend of recent legislation and attempted legis- 
 lation throughout the country, until the introduction 
 of so-called compensation laws, has been to make the 
 master liable for all accidents that arise in the business, 
 due to negligence of anyone in his service; to change 
 the burden of proof so as to require the master, where 
 defects exist, to show that there was no negligence, and 
 also to change the burden of proof so as to require the 
 master to show that the injured employe was negligent ; 
 to remove all limits whatsoever that exist upon his lia- 
 bility, leaving him open to such damages as the juries 
 may see fit to assess, without any certainty of what such 
 damages may cost him at any moment; to require all 
 questions of negligence to be left to the jury ; to prohibit 
 any contracting out of such liability; and to increase 
 the body of law aimed directly at preventing accident. 
 
 Verdicts have been growing in amount until some 
 have become greatly excessive, though others are in- 
 adequate. 
 Discussing this element of the general subject, Mr. New- 
 berry says: 
 
 At common law, liability of an employer to a work- 
 man injured in his employment rests solely upon negli- 
 gence of the former. Unless the employer has, either 
 by commission of some positive act or omission of some 
 proper safeguard, caused the injury, he is not liable for 
 its result. In recent years this rule has been so modified 
 that in many states the negligence of an employe, if 
 in a position superior to that of the man injured, is con- 
 sidered negligence of the employer, so that the one 
 whose lack of care caused the accident represents the 
 employer, and the latter suffers for the former's fault. 
 It is manifest that one who has made every effort to 
 safeguard his works, by using the best material obtain- 
 able, by erecting all safeguards and protection known 
 in that particular business, and by using reasonable 
 care in engaging workmen, should not be responsible 
 for injuries which he cannot foresee nor guard against. 
 
 44 
 
It is difficult to safeguard a large works against any 
 possible accident, and a jury is apt, through natural 
 sympathy with an injured man, to be severe on an em- 
 ployer and hold him bound to what seems an unreason- 
 able degree of care. Juries being judges of the facts, 
 courts will not overrule their decisions, on questions of 
 fact, unless manifestly against the weight of the evi- 
 dence. The employer is therefore generally compelled 
 to rely on defenses to such an action, the principal of 
 which are the following: 
 
 First. That the accident was caused by the negli- 
 gence of a fellow servant of the same grade as the in- 
 jured man. 
 
 Second. That the injury was caused by contributory 
 negligence of the injured man. That is, that though the 
 employer was negligent, the injured man was also neg- 
 ligent, that without his negligence the accident would 
 not have happened. 
 
 Third. That the injury happened through inherent 
 risk in the nature of the employment, or that the em- 
 ploye either expressly or impliedly assumed the risk. 
 
 GERMANY 
 
 Mr. Packer states that ^'Germany was the first country to 
 deal effectively with accidents." The movement began in 
 Prussia in 1838. He also says: 
 
 On the constitution of the German Empire, in 1871, 
 the Prussian law as to railroads was adopted under the 
 German Imperial Employers' Liability Act of 1871. At 
 the same time a similar need was felt for more effective 
 remedies in consequence of the development of the fac- 
 tory system and in the dangerous trades, so a step was 
 taken increasing the responsibility of the employer to 
 include the acts of his superintending agents (though 
 not of lower grade employes) in mines, quarries, pits, 
 or factories, thus adopting to this extent the French and 
 English law of agency. This changed the pre-existing 
 law, under which the master was responsible only for 
 
 45 
 
his own negligence, but left proof of negligence neces- 
 sary in those undertakings. 
 
 The next step was an endeavor to meet the problem 
 by combining the idea of extended liability with that 
 of insurance. This was done under Section 4 of the 
 Imperial Employers' Liability law of 1871 by reducing 
 the amount of the employer's damages to the extent of 
 any insurance paid to the injured man if the employer 
 contributed one-third to the premium on that insurance. 
 
 This employer's liability law still left uncovered that 
 large class of injuries caused by chance, and those 
 caused by fellow servants; it resulted in an increased 
 number of lawsuits, seriously embittering the relations 
 between employer and employed, and caused vast ex- 
 ' penditures for litigation that should have been spent 
 directly for the benefit of the injured employes. 
 
 The evidence was overwhelming that in the past indi- 
 vidual workers in the less favorable industries had 
 borne a burden of risks cruelly disproportionate to any- 
 thing that fair dealing would dictate — under the steady 
 increase of danger resulting from the change from an 
 agricultural to an industrial population — and resulting 
 from the fact that to obtain redress not only was negli- 
 gence necessary, but the burden of proof of that negli- 
 gence was upon the employe. 
 
 This resulted in it being made clear that the law 
 would have to be amended, and there is no doubt that 
 the existing employers' liability law would have been 
 made more stringent, entailing a further burden upon 
 the employer, if the views of distinguished economists 
 had not been adopted. These views pointed out that 
 waste in litigation under the law of negligence was in- 
 evitable, and advocated a law requiring indemnification 
 of all accidents without inquiry into the question of 
 cause. 
 
 Finally the views of the economists were adopted 
 that the plain practical exigencies of the safety of the 
 laborers was the vital question, and that legislation 
 
 46 
 
should be based upon statistical material rather than 
 upon doctrine. 
 
 Elaborate proof showed that a large class of work- 
 men in misfortune are reduced to pauperism, and do not 
 insure, that the classes needing insurance required com- 
 pulsion, the evidence being that if left to individual 
 iniative, or to the common labor contract, or even to 
 "local statute" insurance was not effected (written). 
 Employers (and the townships alike) urged "competi- 
 tion" as a reason for failure to insure their employes, 
 unless the Government dictated uniform conditions 
 for all. 
 
 Insurance Law Evolved. — Therefore, to revive the 
 old feeling of fellowship between employers and the 
 working population, the idea found in the old German 
 law notions, exemplified by the mining industry of 500 
 years before, was generalized, and there was evolved 
 the compulsory accident insurance law of 1884, and the 
 workmen have been entitled to fixed compensation for 
 injuries without being required to furnish proof of 
 negligence since. 
 
 The accident law was the first introduced, but failed 
 of passage until after the passage of the sickness in- 
 surance law of 1883, with which it was intimately re- 
 lated. 
 Regarding the eflfect on litigation of complsory statutory 
 
 compensation, regardless of the fault of the workman, Mr. 
 
 Packer, quotes Dr. Ludwig Lass, an imperial councilor, as 
 
 follows : 
 
 As to paying for the accidents caused by the negli- 
 gence of the injured, Dr. Ludwig Lass, an imperial 
 councilor, pionts out that the real art of legislation is to 
 prevent litigation which is an evil to society. Paying 
 for these accidents prevents the natural attempt of the 
 employer in most cases to prove disobedience to regu- 
 lations or recklessness, and thereby increase Htigation. 
 Recklessness on the part of the employes is prevented 
 by instruction, careful control, fines, and dismissal. 
 
 47 
 
ENGLAND 
 
 Writing on the employers' liability and workmen's compen- 
 sation law of England, Mr. Packer says : 
 
 In England the development of law regulating acci- 
 dents of industry is based on and is illustrated by two 
 views, one held under the early negligence basis and the 
 other under the compensation law, respectively, viz., the 
 view enunciated in 1837 (Priestley v. Fowler, 3 Mees 
 and W., 1), that "principles of justice and good sense 
 require that a workman should take on himself all the 
 ordinary risks of his employment," and the view held in 
 1897 that "sound economic doctrine requires that the 
 employer shall take all the ordinary and extraordinary 
 risks involved in the carrying on of his industry," it 
 being in 1897 that England adopted a system of com- 
 pensating accidents of industry without regard to cause 
 and discarded the negligence basis for dealing with 
 them which was then operative. In England, as in 
 this country, industrial accidents were originally dealt 
 with under the common law of negligence. The fellow- 
 servant rule had been adopted in 1837 in the case of 
 Priestley v. Fowler, supra, and the doctrine of assump- 
 tion of risk and volenti non fit injuria, together with 
 the doctrine of contributory negligence, were valid 
 defenses to claims. 
 
 The German insurance laws had therefore been in 
 force thirteen or fourteen years before England adopted 
 the principle of compensation, and when it finally did 
 so its law took a very different form from that of the 
 German law, in that it proceeded on more individualistic 
 lines. In England each individual employer was simply 
 required to pay his own workmen in case of accidents 
 a definitely ascertained and predetermined sum, irre- 
 spective of negligence, in just the same way as the law 
 had made him in certain cases liable to pay his work- 
 men before this compensation law was adopted, an in- 
 definite sum, viz., such a sum as a jury might assess 
 
 48 
 
after trial in such cases as he could be proved to have 
 been negligent. The English compensation law also 
 left it to the individual initiative of the employer in each 
 case to make his ow^n provision for the payment of this 
 definitely ascertained compensation, in the same w^ay as 
 the law had before left it to his individual initiative to 
 make provision for the payment of the indefinite dam- 
 ages that might be assessed against him by a jury under 
 the negligence law, while in Germany he was compelled 
 to join an insurance association. 
 
 The English system was advocated by Mr. Chamber- 
 lain, the author of the workmen's ^compensation legisla- 
 tion and a man who had had a long practical experience 
 as a manufacturer himself, as being far better adapted 
 to English institutions than the German system which 
 was too elaborate and bureaucratic for English people; 
 the expediency of this view was acknowledged when 
 the law adopting the same principle was extended in 
 1906 to practically every employment. 
 Continuing his explanation of the English law, Mr. Packer 
 says: 
 
 The Common Law. — In England the common law de- 
 fenses were pressed even more strongly against the 
 workman than in the United States; the common law 
 in England, according to the statement of Mr. Dobson 
 on the introduction of the employers' liability act of 
 1880, "had ended in giving the workmen no compensa- 
 tion at all unless they could trace the accident to per- 
 sonal' negligence on the part of the employer." 
 
 Employers' Liability Act of 1880. — It was claimed by 
 the opponents of the bill which became the employers' 
 liability act of 1880 that if passed it would result in the 
 ruin of industries. 
 
 The employers' liability act of 1880 having produced a 
 large crop of litigation and failing to reach a great num- 
 ber of accidents, a bill was introduced, in 1893, known 
 as the Asquith bill, by Mr. Asquith, now Prime Minis- 
 ter of England. 
 
 49 
 
The Asquith Bill. — The principle of the Asquith bill 
 was that ''if a man for his own profit sets on foot in- 
 dustrial operations, he ought to be made responsible for 
 the selection of his servants and the supervision of his 
 business." 
 
 This bill went almost to the limit of the neghgence 
 basis for dealing with accidents in that it abolished en- 
 tirely the doctrine of fellow service and the limit of 
 damages, and it prohibited contracting out, leaving, 
 however, contributory negligence and assumption of 
 risk defenses operative. 
 
 Mr. Chamberlain, then a member of the opposition 
 (the Conservative party), proposed an amendment to 
 the bill embodying the principle — 
 
 "That no change in the law will be final or satisfac- 
 tory which does not. provide compensation for all in- 
 juries in the ordinary course of employment not caused 
 by the injured's own act or default." 
 
 This was only tentative, however, and was withdrawn. 
 Continuing the development of the English law Mr. Packer 
 writes, regarding the "Workmen's Compensation Act of 1897" 
 as follows : 
 
 In 1897 the conservative government introduced the 
 workmen's compensation act, saying: 
 
 "The present law is notoriously inadequate; it fails 
 to compensate for accidents if caused by fellow servants, 
 if contributed to by the injured, and if resulting from 
 the risks of occupation ; it causes costly litigation, 35 
 per cent of the amount recovered being legal expense ; 
 it leaves the employer ignorant of what his liability is." 
 
 The government criticised the Asquith bill, saying 
 that such negligence legislation rendered proof of 
 negligence necessary, which meant increased litigation, 
 and such a law would still reach only 50 per cent of the 
 accidents that happen. 
 
 The government admitted the principle was new, 
 based on the doctrine that — 
 
 50 
 
**when a person on his own responsibility and for his 
 own profit sets in motion agencies which create risks for 
 others, he ought to be civilly responsible for the conse- 
 quences." 
 
 But in applying this and granting compensation it 
 was the general opinion that a limit of liability should 
 be adopted with it. 
 
 Mr. Asquith, who was then in the opposition, ad- 
 mitted the principle of universal compensation and of 
 giving some solatium for a pure accident, the result of 
 no negligence, to soldiers in the army of industry, and 
 that it was revolting to sentiment and judgment alike 
 that men who met with accident through the necessary 
 exigencies of daily occupation should be a charge upon 
 their families. 
 
 Mr. Chamberlain, in admitting that the principle was 
 new and only applicable if "a great human interest is 
 involved," said that the bill dealt with a great scandal, 
 not with absolute rights, but with questions of humanity 
 and expediency. He said it contained two principles: 
 
 (1) That a workman was entitled for all accidents 
 of occupation to a moderate and reasonable compensa- 
 tion. 
 
 (2) That the compensation should be a charge on 
 the trade, like repair of machinery. 
 
 Lord Salisbury said there was a proper distinction 
 between state interference when saving life, as against 
 saving property, and that the bill was a part of a series 
 of old factory legislation preventing disease and death. 
 He said that the history of the law of compensation was 
 the history of a great machinery for saving life. 
 
 Mr. Ruegg, a leading English lawyer and writer on 
 this subject, states that fhe principle of the bill is that 
 "the pecuniary results from loss of life incident to the 
 carrying on of industrial enterprises" should be re- 
 garded as a ''part of the expense of production"; that 
 the employer who initiates it should, for conscience 
 sake, pay this expense in the first instance that "ulti- 
 
 51 
 
mately it will be paid by the community" for whose 
 use and enjoyment industry is carried on. 
 
 Scope of the Bill. — As the bill involved a new prin- 
 ciple and was a tentative measure, it was limited to the 
 more dangerous industries, viz., to employment on, or 
 in or about a railway, mine, quarry, or engineering work, 
 and building which exceeds 30 feet in height (an arbi- 
 trary line based on the factory act). 
 
 It made the employer responsible to his employes for 
 all accidents with two exceptions: 
 
 (1) Those due to ''the serious and wilful misconduct 
 on the part of the injured employe." 
 
 (2) Except for "the first two weeks' disablement 
 after any accident." 
 
 There were three tests of the scope of this bill, viz., 
 (1) risk, (2) capital in industry, (3) insurance feasi- 
 bility. 
 
 It was admitted that when experience had proved 
 that there was no injury to the trades covered, such ex- 
 perience would be an unanswerable argument in favor 
 of the extension of the scope of the bill. 
 The "Negligence Remedy" as defined and limited in this 
 bill, is summarized by Mr. Packer as follows : 
 
 It was intended to restrict tjie use of the negligence' 
 remedy in the trades to which the compensation act ap- 
 plied, and words were inserted in that act to limit the 
 right of suit under the negligence law to cases in which 
 there was moral blame on the part of the employer, 
 namely, to cases where there was deliberate and pe- 
 culiar negligence attributable to him, such as would 
 correspond to the serious and wilful misconduct which 
 deprived the employe of compensation under the act. 
 There was very little incentive to use the negligence 
 remedy, however, as the common law in England gave 
 practically no rights, and the employers' liability act 
 limited the amount of compensation to three years' 
 wages, while under the compensation act the disable- 
 ment benefits continued as long as the disablement In 
 
 52 
 
addition to that the defenses of assumption of risk, con- 
 tributory negligence, and fellow service might defeat 
 the negligence claim. 
 
 Serious and Wilful Misconduct. — Having left the 
 negligence remedies in order to penalize the employer 
 where grossly negligent, the employe was similarly pen- 
 alized, by losing his compensation if the accident was 
 due to his serious and wilful misconduct; although it 
 was admitted that going into the question of cause 
 of accident was contrary to the principle of the bill. 
 
 Speaking of the effect of the enactment of this measure by 
 the English Parliament on similar legislation in English col- 
 onies, Mr. Packer says: 
 
 The passage by England of this effective but conser- 
 vative measure was a declaration, after exhaustive de- 
 bate, of her legislature's view of the requirements of the 
 existing public policy in the treatment of industrial ac- 
 cidents. It was shortly afterwards followed by similar 
 enactments in her colonies, and was followed in 1900 
 by an act extending the principle to agriculture. 
 Building on the safe foundation of experience, the scope of 
 the English act of 1897 was extended in 1906. Continuing his 
 explanation of the English law to a conclusion, Mr. Packer 
 reports that: 
 
 In accordance with the admission on the passage of 
 the bill that when experience had proved that there was 
 no injury to the trades covered under it, such experience 
 would be an unanswerable argument in favor of the 
 extension of the scope of the 1897 bill, a committee 
 was appointed in November, 1903, by the Home Secre- 
 tary to inquire and report to the Home Office — 
 
 (1) What amendments in the law relating to com- 
 pensation for injuries to workmen are necessary or de- 
 sirable ; and 
 
 (2) To what classes of employment not now in- 
 cluded in the workmen's compensation acts can be 
 properly extended with or without modification. 
 
 6S 
 
The committee was composed of able men, represent- 
 ing all interests, and took exhaustive evidence, making 
 a report in August, 1904, which has been accepted as a 
 basis for future legislation. 
 
 As to exclusion from payment of accidents caused by 
 the "serious and wilful misconduct of injured," and of 
 payment for the "first two weeks after an accident," the 
 committee recommended that no change be made. 
 
 With a view to stimulating the prevention of acci- 
 dents they recommended that a workman should be 
 allowed to receive part of a penalty recovered under any 
 criminal enactment. 
 
 The evidence as to the burden on industry of the 
 act showed that as moral obligations to the injured 
 were met by some employers and not by others, some 
 advantage resulted from the legal obligation of the act, 
 but that employers desired greater certainty, especially 
 of the weekly payments for permanent injury, which 
 necessarily accumulated year by year until new pen- 
 sioners were balanced by the old dropping off. 
 
 The committee concluded that the evidence showed 
 that the burden on employers had not been excessive, 
 but that it tended to increase. This suggested caution 
 in legislation and especially in adding to its indefinite- 
 ness or uncertainty. 
 
 Workmen's Compensation Act of 1906. — In the 
 amending act, known as the workmen's compensation 
 act of 1906, in effect July 1, 1907, the chief extensions 
 of the scope of the old act made were : Covering all 
 manual workers and all other employes who earn 
 $1,216.63 per annum or less (policemen and home work- 
 ers alone excepted) ; covering certain trade diseases ; 
 excluding from ^compensation only the first seven days 
 where the disability was less than fourteen days ; re- 
 stricting the defense of serious and wilful misconduct to 
 cases in which the injury does not result in death or 
 serious and permanent disablement; adding to the 
 number of dependent relatives entitled; raising the 
 
 54 
 
maximum allowance of minors to full wages, and sub- 
 sequently to half what they would have been earning 
 as their wages advanced ; removing the restriction that 
 the accident must happen "on, in, or about" the em- 
 ployer's premises ; provisions controlling the commuta- 
 tions made. 
 
 There were other minor changes made, but the prin- 
 ciple of the act of 1897 was adhered to. 
 
 SIMILAR LEGAL DEVELOPMENT IN UNITED 
 STATES AND ENGLAND 
 
 An examination of the English law of negligence, 
 passing through which there was evolved the law of 
 compensation, shows an almost exact parallel to the 
 development of the law of negligence in this country ; 
 the amendments that have been adopted here follow- 
 ing the same course of development as the amendments 
 made or attempted to be made in England, and thus it 
 is clear from the English experience that their com- 
 pensation principle is adapted to our system of laws, and 
 will fit the conditions under which industry is carried on 
 in the United States. 
 
 OTHER COUNTRIES 
 
 Mr. Packer says : 
 
 That England and Germany do not stand alone in 
 
 recognizing and dealing with the present needs of in- 
 dustrial production can" be seen by a reference to the 
 
 compensation laws passed in the following countries: 
 
 Austria Alberta 
 
 Belgium British Columbia 
 
 Denmark Quebec 
 
 Finland Cape of Good Hope 
 
 France Transvaal 
 
 Germany New Zealand 
 
 Greece New South Wales 
 
 Hungary Queensland 
 
 Great Britain South Australia 
 55 
 
Western Australia 
 
 Norway 
 
 Italy 
 
 
 Russia 
 
 Luxemburg 
 
 
 Spain 
 
 Netherlands 
 
 
 Sweden 
 
 as well as in a 
 
 few c 
 
 )f the states of the United States, 
 
 A LOGICAL DEVELOPMENT 
 
 In concluding his memorandum, Mr. Packer points out that 
 each foreign country has followed its own logical develop- 
 ment. He says : 
 
 Germany followed the logical development from her 
 existing institutions, utilizing, as she did, the existing 
 organizations for sickness insurance and accident insur- 
 ance in the various trades and adopting elaborate sys- 
 tems of regulation to which her people are so thorough- 
 ly accustomed. England's compensation law is the 
 logical development from her institutions and her 
 system of law. Her empoyers' liability system looked 
 to the employer alone to make the payments required 
 under it, leaving his insurance to individual initiative. 
 Each foreign country has followed its own most 
 logical development, but practically every industrial 
 country of the world has discarded the negligence 
 system and has adopted the principle that every acci- 
 dent the result of occupation should be compensated 
 without inquiry into the question of negligence. 
 
 THE LOGICAL PRINCIPLE FOR THE UNITED 
 STATES 
 
 Applying his conclusions to federal and state legislation on 
 the subject of employers' liability and workmen's compensa- 
 tion in our own country, Mr. Packer says : 
 
 Various forms of insurance in which the state plays 
 a more or less important part have been urged for 
 federal legislation, but they are not adapted to our sys- 
 tem of law or the temper of our people, nor should the 
 state assume a burden which is the result of action of 
 individuals who have it in their power to increase or 
 
 56 
 
reduce that burden in accordance with their own in- 
 genuity, as that same ingenuity devises new processes 
 of manufacture, etc. 
 
 The logical principle which should be applied in the 
 development of our law in order to meet the changed 
 conditions incident to the use of dangerous appliances 
 and forces is expressed in the language used by Mr. 
 Justice Brewer in Atchison, Topeka & Santa Fe Rail- 
 road Co. V. Matthews (174 U. S., 96), in relation to a 
 statute imposing absolute liability upon railroad com- 
 panies in case of fire (p. 98) ; 
 
 "Its monition to the railroads is * =»= * see to it 
 that no fire escapes from your locomotive, for if it does 
 you will be liable * * * for the damage it causes. 
 
 The monition of a compensation law should be: 
 "See to it that no accident results to any of your em- 
 ployes by your use of these dangerous appliances and 
 forces, for if it does you shall be liable to make com- 
 pensation for any injury which follows." 
 
 ACCIDENT INSURANCE IN NEW ZEALAND 
 
 Comparative Legislation Bulletin No. 20, on "Accidental 
 Insurance for Workmen," by Reuben McKitrick, published by 
 the Wisconsin Library Commission, Legislative Reference De- 
 partment, July, 1909, contains the following statement regard- 
 ing "Accident Insurance in New Zealand: 
 
 State Insurance. — The accident insurance law of New 
 Zealand is of interest in an analysis of this kind be- 
 . cause it illustrates a method by which state insurance 
 is conducted. In New Zealand the political organiza- 
 tion of the state conducts an insurance office and state 
 officials administer the funds of the office. The insur- 
 ance is conducted according to actuarial principles in 
 competition with private corporations. Insurance in 
 the state fund is purely voluntary on the part of all poli- 
 cy holders. The point of particular interest in connec- 
 tion with the New Zealand insurance department is the 
 
 57 
 
fact that the original capital for the department is raised 
 on the credit of the government, that a sinking fund is 
 created out of the proceeds of the accident branch for 
 the redemption of the government securities when they 
 mature, and that a deficiency in the cash funds of the 
 insurance department shall be made up out of the 
 public treasury. Any money advanced to the insurance 
 department in this way is considered as a loan which is 
 to be returned to the public treasury as soon as prac- 
 ticable out of the proceeds of the insurance office. 
 
 Taxation. — The Commissioner of Insurance is liable 
 to assessment and taxation in the same manner and to 
 the same extent as in the case of an accident insurance 
 company. 
 
 AMERICAN STATES AND EUROPEAN COUNTRIES 
 
 The following statement is quoted from the "Conclusion" 
 of this Wisconsin Bulletin : 
 
 A comparison of the laws of American states with 
 those of European countries, especially Austria and 
 Germany, shows that a great deal more has been done 
 there than here toward working out a minute classifica- 
 tion of occupations and industries according to the 
 hazard involved and toward encouraging the preven- 
 tion of accidents through the activity of the insurance 
 corporations whereby the cost of insurance is greatly 
 reduced and the burden of industrial accidents more 
 equitably distributed. It is evident that these countries 
 are attempting to do a great deal in the way of modify- 
 ing their law relating to the legal liability of employers 
 for accidents to their workmen by encouraging the or- 
 ganization of insurance corporations along trade lines, 
 in which workmen will be collectively insured against 
 accidents in the course of their employment, and still all 
 the essential requirements of a solvent institution be 
 carefully observed. 
 
 68 
 
CHRONOLOGY OF FOREIGN INDUSTRIAL INSUR- 
 ANCE AND WORKMEN'S COMPENSATION 
 ACTS 
 
 1875 — Finland, December 5. 
 
 1884 — Germany, July 6; supplemented by acts. May 28, 
 1885; codification of all acts, June 30, 1900. 
 
 1887— Austria, December 28. 
 
 1894— Norway, July 23. 
 
 1897_Great Britain, August 6; July 30, 1900; and Decem- 
 ber 21, 1906. 
 
 1898 — Denmark, January 7. 
 
 1898 — Italy, March 17. This and subsequent acts codified 
 January 31, 1904. 
 
 1898— France, April 9. 
 
 1900 — Spain, January 30. 
 
 1900— New Zealand, October 18. 
 
 1900— New South Wales, November 5. 
 
 1900 — Queensland, December 5. 
 
 1901 — Netherlands, January 2. 
 
 1901— Sweden, July 5. 
 
 1902— West Australia, February 19. 
 
 1902 — Greece, February 21. 
 
 1902 — Luxemburg, April 5. 
 
 1902 — British Columbia, June 21. 
 
 1903 — Belgium, December 24. 
 
 1905 — Cape of Good Hope, June 6. 
 
 1907— Hungary, April 9. 
 
 1907— Transvaal, August 20. 
 
 1908— Alberta, March 5. 
 
 1909— Quebec, May 29. - 
 
 INSURANCE DEFINED 
 
 The following definitions of Insurance are quoted from the 
 Wisconsin bulletin : 
 
 Insurance has been defined in general terms in com- 
 mon law as a contract by which one party undertakes 
 to indemnify another against a loss, damage or liability 
 arising from an unknown or contingent event. 
 
 69 
 
From an economic point of view insurance may be 
 defined as a scientific method whereby the burden of a 
 particular loss or damage is distributed throughout a 
 group of persons exposed to similar loss or damage, and 
 associated for the purpose of assuming that burden. 
 
 VOLUNTARY, COMPULSORY AND STATE 
 INSURANCE 
 
 That there may be no confusion in the use of terms, the 
 following description of the various forms of liability or com- 
 pensation insurance is taken from the Wisconsin bulletin re- 
 ferred to above: 
 
 From the standpoint of legal responsibility for pro- 
 tection against accidents, there are two general kinds 
 of insurance, viz., voluntary and compulsory. 
 
 Voluntary. When insurance against accident is pro- 
 vided in the absence of legal obligation to do so, it is 
 said to be voluntary insurance. If such insurance is 
 provided by the workman himself, it takes the form of 
 personal accident insurance; but if it is provided by the 
 employer for himself it is liability insurance, or if, for 
 his workmen, then it is collective insurance. Through- 
 out all of the United States and in Denmark, France, 
 Great Britain, Greece, Russia, Spain and Sweden, in- 
 surance is voluntary. 
 
 Compulsory. Compulsory insurance is such insur- 
 ance against accidents as is required by law. It is col- 
 lective in form and is usually provided from funds to 
 which both employers and employes contribute. In- 
 surance against accident is compulsory in Austria, 
 Belgium, Finland, Germany, Italy, Netherlands and 
 Norway. 
 
 Distinction Between Compulsory Insurance and State 
 Insurance. State insurance is insurance which is pro- 
 vided in a fund created by the state and managed by 
 state officials, but compulsory insurance is that insur- 
 ance which is provided as the result of legal require- 
 ment and may be secured in either a state fund or in 
 
 60 
 
the funds of incorporated companies. Compulsory in- 
 surance, therefore, is not state insurance, but may be in- 
 surance required by law in incorporated companies. 
 The accident insurance of Germany and Austria is com- 
 pulsory insurance, but not state insurance. All accident 
 insurance carried in the Insurance Department of New 
 Zealand is state insurance, but not compulsory insur- 
 ance. A quotation from the explanation of the German 
 Workmen's Insurance at the Louisiana Purchase Ex- 
 position in 1904 by Dr. Ludwig Lass will illustrate this 
 principle : "According to the German system the pro- 
 ductive classes, employers and employes, are, by means 
 of corporate self-administration, exercising social self- 
 help organized on the basis of regulations bearing the 
 character of public law. Consequently we have not in 
 Germany as is often erroneously thought abroad, an in- 
 surance by the state, but an insurance by the interested 
 parties themselves, through the medium of vital cor- 
 porations, which are standing between the state and the 
 individual and which are charged with the execution 
 of the insurance." 
 
 FORMS OF INSURANCE CONTRACTS 
 
 The Wisconsin bulletin also gives the following description 
 of the forms of insurance contracts : 
 
 An insurance policy is a contract in which it is agreed 
 that the occurrence of particular circumstances or 
 events shall make a benefit payable. Policies may be 
 classified according to the nature of the agreement made 
 as personal accident, employers' liability, or workmen's 
 collective policies. 
 
 Personal Accident. A personal accident policy is one 
 which covers the individual against accidents happen- 
 ing to himself. 
 
 Employers' Liability. An employer's liability policy 
 is one which insures an employer against claims that 
 may be made upon him because of injuries suffered by 
 his employes and for which he may be liable by reason 
 
 61 
 
of some act or default. It relates to a class of personal 
 injuries for which some one other than the injured 
 person is responsible, and who is legally bound to make 
 compensation for the loss sustained. 
 
 Workmen's Collective. A workmen's collective policy 
 is one which includes all the employes of a firm or cor- 
 poration in a single contract and insures them against 
 loss by reason of accident or accident and sickness. 
 "Workmen's callective insurance is wholesale insurance, 
 the policy running to the employer, and the protection 
 thereunder to the workmen whether the employer be 
 legally liable or not." The premium for this class of 
 policies is based on the number of employes, the hazard 
 of the occupation and the amount of wages, and is 
 usually paid by the employer, though he may share it 
 with his workmen by deductions from their wages. 
 
 PROBLEMS OF LIABILITY AND COMPENSATION 
 INSURANCE 
 
 A historical study of the development of the problems of 
 insurance in all of its ramifications is intensely interesting and 
 instructive. It becomes especially so when the problems of 
 liability and compensation insurance are being considered on 
 account of its intense human interest. Here, as nowhere else, 
 there is great danger of accentuating sympathy at the expense 
 of justice and thus unsettling the very foundation of individual 
 manhood, self-reliance on self-support and a noble self-respect, 
 which is the basis of all moral, social and economic welfare, 
 the sure foundation of nobility among men. 
 
 Ability to labor is the foundation of independence for work- 
 ingmen. Opportunity to labor is the open road to the realiza- 
 tion of their independence. Earnings in excess of necessary 
 expenses is independence realized. 
 
 Loss of earning power is a calamity to a workingman, as 
 tragic and crushing as the loss of his entire fortune is to a 
 man who has always been accustomed to the emoluments of 
 wealth. 
 
The true welfare of workmen is not best promoted by those 
 who appeal to sympathy or force. Every man possessing true 
 instincts of nobility resents being patronized. He does not 
 want the conditions under which he must live and work regu- 
 lated on a scheme of sympathy which makes him the bene- 
 ficiary of a charity. He wants the conditions under which he 
 works and lives to be so regulated that what he receives, under 
 all circumstances and conditions, shall be his by right of his 
 earning capacity honestly applied in honest labor. 
 
 Human ingenuity is not capable of dividing the products of 
 associated labor and capital in a way that will be certain to 
 give to each precisely his just share. 
 
 An equitable working basis can be devised that will carry 
 through the operations of a year and then apportion the sur- 
 plus increment or loss. In the past, the wage of the workman 
 has been regarded as the full measure of his share. There are 
 now indications that many believe that this adjustment has 
 not given him his just share. One of these indications is 
 found in the growing belief that loss of earning power caused 
 by industrial injuries is a part of the cost of production and 
 must be paid by the purchaser of the product or service. The 
 employer can only pay such items of cost, as he must pay 
 any other items of cost, out of profits. If he cannot do this 
 he will be impoverished by the amount of every such pay- 
 ment. An employer whose business fails to produce a profit 
 cannot continue to give employment to workmen. This de- 
 prives them of their opportunity to labor. It closes the open 
 road to the realization of their independence. When oppor- 
 tunity to labor is lost through the failure of a business to earn 
 a profit, there is a complete loss of earning power for which 
 no compensation can be provided, as compensation for loss 
 and earning power is absolutely contingent upon the profit of 
 the business. 
 
 It is clear that any employer can well afford to be governed 
 by any regulations that will make it certain that his business 
 shall be profitable. It is equally clear that any demand made 
 in the interest of labor, whether by trade unions or politicians 
 seeking workingmen's votes, that renders the making of a 
 
 63 
 
profit impossible, or even doubtful, is as unwise and self- 
 destructive as the proverbial "killing of the goose that laid the 
 golden egg." 
 
 COMPULSORY COLLECTIVE INSURANCE 
 
 Like all other business contingencies, if the burden of loss 
 caused by industrial injuries is spread over the operations of a 
 sufficiently large number of employers and employes, it will 
 have no power to change a profit into a loss, because it will be 
 included in the cost of all products by all employers and will 
 be paid by the purchaser of the product or service, the same 
 as are all other costs which must be paid if the product is to 
 be supplied or the service is to be rendered. 
 
 It is clear that these conditions will not permit any employer 
 to be allowed to enter into unfair competition with others by 
 reason of his ability to under sell them because he makes no 
 contribution to a fund provided for the payment of compensa- 
 tion for losses caused by industrial injuries and therefore does 
 not include the amount of such contribution, required from 
 others, as a part of the cost of his product which he must re- 
 cover through his selling price. 
 
 It is equally clear that workmen shall not be permitted to 
 enter into unfair competition with each other to secure em- 
 ployment by means of waiving their right to compensation for 
 industrial injuries. 
 
 These conditions, like governments instituted by society, to 
 be beneficial and effective, must be all-inclusive and apply with 
 equal authority to all employers and to all employes engaged 
 in the same or kindred industries. The development of the 
 problems of liability and compensation insurance leads directly 
 to compulsory collective insurance imposed on all employers 
 and on all employes. 
 
 It has been demonstrated through German experience that 
 the classes needing insurance required compulsion, the evi- 
 dence showing that if left to individual initiative insurance was 
 not written. Employers and public authorities urged com- 
 petition as a reason for failure to insure their injured em- 
 
 64 
 
ployes, unless the government dictated uniform conditions 
 for all. 
 
 English experience demonstrates that the burden of com- 
 pensation for industrial injuries persistently tends to increase, 
 hence there is urgent need for great caution in formulating 
 all legislation of this class. 
 
 ECONOMIC AND LEGAL DEMAND 
 
 In support of this conclusion, the following brief review of 
 the economic and legal demand is quoted from the Wisconsin 
 bulletin on "Accident Insurance for Vv^orkingmen," to which 
 reference has previously been made: 
 Purpose : 
 
 The primary purpose of accident insurance for work- 
 ingmen is to provide a certain and adequate return ^or 
 the economic loss of wages due to personal injury in 
 the course of employment. 
 Personal Accident Insurance: 
 
 The common law doctrine provides no legal protec- 
 tion for workmen except in cases of negligence on the 
 part of employers. To a limited extent this rule is being 
 modified in certain states by statutory provisions which 
 increase the responsibility of the employer for accidents, 
 especially in so far as they may be due to the negligence 
 of a fellow servant. The lack of legal protection and 
 the personal care for themselves and those dependent 
 upon them prompt many individual workmen to insure 
 themselves against accidents. This gives rise to a de- 
 mand for personal accident insurance which is supplied 
 by legal reserve companies, assessment and fraternal 
 companies or trade unions which conduct a benefit de- 
 partment on the assessment plan. 
 Employers' Liability Insurance : 
 
 All employers are liable under the common law for 
 injuries to their workmen which are due to their own 
 negligence. In some states the legal responsibility of 
 employers in certain industries is considerably increased 
 by statutory abrogation of the fellow servant rule, and 
 
 65 
 
modification of the laws of comparative negligence and 
 assumption of risk. In some foreign countries particu- 
 larly England and New Zealand employers are made 
 legally liable for all accidents regardless of negligence. 
 The payment of a damage suit or the payment of a per- 
 sonal injury claim in lieu of a suit may and frequently 
 does place the finances of an employer in a critical con- 
 dition. In order to avoid such a contingency many em- 
 ployers insure themselves against their legal liability 
 for injury to their employes. This gives rise to a de- 
 mand for v^hat is know^n as "Employers' Liability" in- 
 surance which is supplied by legal reserve insurance 
 companies organized on either the stock or mutual plan. 
 Workmen's Collective Insurance: 
 
 Some employers out of motives purely personal prefer 
 to insure their employes against accident rather than 
 to insure themselves against legal liability for the acci- 
 dent should it occur. In that event the employers 
 usually obtain a policy which covers all the workmen 
 in the plant and pay the premium for it but they fre- 
 quently share the cost of such insurance with their 
 workmen by deductions from the pay roll. In some 
 foreign countries, notably Germany and Austria, em- 
 ployers in certain industries are required by law to in- 
 sure their employes against accident rather than to 
 insure themselves against legal liability for the accident. 
 This situation gives rise to a demand for what is known 
 as "Workmen's Collective" insurance which is furnished 
 both in the United States and in foreign countries by 
 legal reserve companies organized on the stock or 
 mutual plan. 
 
 METHODS OF PROVIDING INSURANCE 
 
 Many methods of providing insurance have been devised. 
 Some are socialistic, some sympathetic, some unsafe, and some 
 safe. 
 
 The use of public funds collected from taxpayers by the 
 arbitrary power of government for any purpose that can be 
 
served with equal economic advantage by private enterprise is 
 socialistic. 
 
 The active principle in socialistic methods of insurance is to 
 increase the scope of governmental activities at the expense 
 of private enterprise under the plea of furnishing insurance at 
 cost, thus destroying profit which is the source from which 
 capital is created, the inducement to private enterprise. 
 
 Mutual benefit associations are held together by the active 
 principle of sympathy for the relief of a brother in distress, 
 through a desire to obtain benefits for the least possible outlay. 
 The diflference between safe and unsafe methods of insur- 
 ance is caused by lack of responsibility for premium rates, for 
 the management of reserve funds and liability of loss of capital 
 invested when premium receipts are insufficient. 
 
 In his study of "Accident Insurance for Workingmen," Mr. 
 Reuben McKitrick says : 
 
 The business of insurance is usually conducted 
 through one of two general plans of organization, viz., a 
 state insurance fund, or an incorporated company. 
 The state insurance fund" which he describes is the 
 socialistic method whereby the taxpayer is made the under- 
 writer of last resort. As all property within the jurisdiction 
 of a government, however owned, may be seized by means 
 of taxation for the payment of any and every government ob- 
 ligation, however and for whatever purpose incurred, this 
 method is safe in the sense of making certain the payment of 
 the compensation covered by the insurance. This, however, 
 is not true of the so-called state insurance fund of Ohio as the 
 state does not underwrite the obligation to pay the compensa- 
 tion required by the terms of the payment of the insurance 
 premium. 
 
 Mr. McKitrick describes the ''State Fund," ''Stock Com- 
 pany," "Mutual Company," and "Assessment Company" 
 methods of insurance as follows: 
 
 Insurance in a State Fund. Some foreign countries 
 have organized a state insurance department in which a 
 person or firm may become insured just as in an incor- 
 porated company. State officials collect and administer 
 
 67 
 
the funds and the state guarantees the payment of 
 policy claims in case of a deficit in the cash funds 
 of the insurance department. A good illustration of 
 state insurance is found in New Zealand, where the 
 State Insurance Department is organized into three 
 branches, viz., fire, accident and life; and furnishes 
 insurance on strictly business principles in competition 
 with incorporated companies. 
 
 Insurance in Incorporated Companies. The more 
 usual method of conducting insurance is through the 
 medium of incorporated companies. Under this system 
 the state supervises and regulates the insurance busi- 
 ness but does not conduct it. Insurance corporations 
 are formed under general laws. They collect, adminis- 
 ter and disburse all the funds and assume all liability 
 for the payment of policy claims and expenses in case 
 of a deficit in the cash funds. 
 
 The state fixes a standard of solvency by requiring 
 companies to have certain amounts of capital, to main- 
 tain reserve funds, to invest their assets in legally au- 
 thorized securities, to render annual statements and to 
 comply with certain other legal regulations. It thereby 
 protects the policy holders from an improper conduct 
 of the business through its lawful agents, the insurance 
 corporations. This is the method adopted by all of 
 the United States, by England except in case of life 
 insurance through the post ofiice, and by Austria and 
 Germany. 
 
 Insurance in Mutual Companies. 'A corporation doing 
 an insurance business, which has no capital stock and in 
 the management and profits of which the policy holders 
 alone participate, is a mutual company.' The essential 
 features of a mutual company are that all policy holders 
 are members of the company, that the companies are 
 required by law fo have a minimum membership, that 
 the funds are made up from cash premiums and assess- 
 able premium notes, and that the policy holders partici- 
 pate in the profits. Certain funds of a mutual company 
 
 68 
 
in Illinois have been defined by statute as the capital 
 of the company, and in a few other states mutual com- 
 panies have what is known as a guarantee capital, but 
 a guarantee fund or the payment of cash premiums does 
 not change the character of a mutual company to that 
 of a stock company. 
 
 LEVEL PREMIUM AND ASSESSMENT INSURANCE 
 
 The difference between "Level Premium" and "Assessment 
 Insurance" is described by Mr. McKitrick, as follows: 
 
 Level Premium Companies. Level premium insur- 
 ance may be defined as that insurance which is fur- 
 nished in return for a periodical fixed premium pay- 
 able in advance and based on experience tables without 
 reference to the losses or expenses which may be 
 actually experienced in any particular year, as a price 
 paid for the assumption of risk, and for which the in- 
 sured is relieved of liability for any assessment to cover 
 unexpected losses or expenses. Level premium com- 
 panies charge a premium sufficient to maintain such 
 reverses as will enable the company to carry out its 
 own obligations on the basis originally agreed upon 
 and to protect it against unexpected losses and ex- 
 penses. Mr. Miles M. Dawson, an eminent New York 
 actuary, explains the necessity for these reserves in 
 the following terms: *A level premium to cover an 
 increasing hazard, converging into certainty of loss, as 
 does a whole life premium, calls for an accumulation 
 of the excess of the premium over the current cost 
 during the earlier years, the drawing back from this 
 accumulation and its interest during the latter years 
 and the final application of the entire fund toward pay- 
 ing the insured's own claim whenever his death takes 
 place.' Reserves thus set aside constitute the distin- 
 guishing characteristic of level premium insurance. 
 Practically all stock companies, and such mutual com- 
 panies, as provide in their policies for the payment of 
 fixed premiums, contract insurance on the level premium 
 
plan and are designated as 'ievel premium" or ''old line" 
 companies. 
 
 Assessment Companies. Assessment insurance is that 
 insurance which is provided from funds derived from 
 assessments or periodical calls levied to cover a par- 
 ticular loss or the losses and expenses of a particular 
 term. 'The predominant and distinguishing feature of 
 all mutual benefit associations is that the payment of 
 losses by death or injury is not by a fixed premium 
 payable in advance, as in the case of ordinary insurance 
 companies, nor by deposit notes, as in the case of mu- 
 tual companies, but by post mortem assessments, in- 
 tended to liquidate specific losses and levied only on 
 surviving members.' It is customary, however, among 
 most assessment companies to charge an anticipated 
 assessment in the nature of a more or less regular 
 premium, but on the condition that an additional as- 
 sessment may be charged in case of a deficit. The 
 character of an assessment or co-operative company is 
 not affected by the fact that it may have established 
 and maintains an emergency or guaranty fund to insure 
 the prompt payment of its losses. 
 
 INSURANCE MUST BE FINANCIALLY SOUND 
 
 Insurance, to be insurance, must be financially sound. When 
 it is not financially sound it is a delusion. Mr. McKitrick well 
 says: 
 
 The one quality of supreme importance in all plans 
 and methods of insurance is solvency, the ability to 
 pay the benefits agreed upon. 
 
 The problem in all efforts to insure workingmen 
 against accidents is to devise a method which will so 
 fit into the economic situation as not to be too burden- 
 some to either the employer or the employe and still be 
 financially sound. 
 Based on experience, requirements as to the management 
 of insurance funds, designed to make and keep the insurance 
 written financially sound, have gradually been formulated 
 
 70 
 
into law. These requirements must be observed by all writers 
 of insurance, by whatever method, if the insurance they write 
 is to be safeguarded from being a delusion when the inevitable 
 crucial test comes. 
 
 RESERVE FUND AND PROFITS 
 
 The use of insurance funds and the requirements for hand- 
 ling them in a way to safeguard the insurance written are de- 
 scribed by Mr. McKitrick as follows : 
 
 In general all that part of the income of an insurance 
 company which is not used to meet current losses and 
 expenses is credited, according to well established 
 principles of business, to one or more of the reserve 
 funds whence it becomes a liability of the company 
 and is invested according to law for the security of poli- 
 cy holders. The reserve funds to which it may be 
 credited, have been named according to the purpose 
 which they serve. The remainder of the income after 
 those reserves have been set aside constitutes profits. 
 
 Reinsurance Reserve. Theoretically a reinsurance 
 reserve is a fund set aside from premiums collected 
 sufficient in amount to enable a company to transfer 
 or reinsure all its outstanding, unexpired risks in some 
 other solvent company or to settle the claims that be- 
 come payable thereon as they arise. Such a reserve 
 can be computed according to scientific principles and 
 is required by law to be maintained by all legal reserve 
 or level premium companies. It has been judicially de- 
 scribed as a fund which must be equal in amount at all 
 times to the aggregate policy liabilities at their then 
 present value. It is created to secure these liabilities, 
 and is from that circumstance impressed in a certain 
 sense with an equity in favor of the holders of policies. 
 This fund is also known as the "premium reserve." 
 
 Liability Reserve. The liability reserve is a special 
 fund which employers' liability companies are required 
 by law in some states to set aside as security for obli- 
 gations accrued but unpaid. These claims accumulate 
 
 71 
 
because of the time required for adjustment and set- 
 tlement, or for litigation, and they are no longer pro- 
 tected by premium reserve because the insurance is 
 not in force, since the policy becomes a claim against 
 the company as soon as the injury occurs. 
 
 Contingency Reserve or Surplus. A contingency re- 
 serve or surplus is a fund which is set aside after the 
 reinsurance reserve has been provided for to meet un- 
 expected losses and expenses. The reinsurance reserve 
 is computed on the basis of experience for a period of 
 years. It is, therefore, based on averages, and in 
 normal conditions a company would be financially 
 sound with no other reserve than its reinsurance re- 
 serve. But in order to guard against exceptional losses, 
 some companies set aside a special fund before distrib- 
 uting profits, which is known as the contingency reserve 
 or surplus. This reserve is not required -by law, but it 
 is maintained by every conservative company as a safe- 
 guard against emergency. 
 
 Reserve or Emergency Funds. Reserve or emergency 
 funds is the term applied to funds set aside by mutual 
 benefit societies in order to enable prompt payment of 
 policy claims in lieu of an assessment. They are re- 
 quired by law in some states to be maintained by this 
 class of companies ; in other states their maintenance 
 is permissible but not obligatory. 
 
 Profits. "Profits" is a term applied in the statutes of 
 a number of states to that portion of the funds of an 
 insurance company not required for the payment of 
 losses and expenses, nor set apart for any other pur- 
 poses required or allowed by law. The term ''profits" 
 represents a definite concept in insurance law, for a 
 large number of states specify that dividends may be 
 declared only from profits, and that these profits must 
 be estimated according to statutory rule. 
 
 72 
 
REQUIREMENTS OF CONSERVATIVE PROGRESS: 
 CHANGE OF BASE FROM EMPLOYERS' LIA- 
 BILITY TO WORKMEN'S COMPENSATION 
 
 Experience clearly shows that using employers' liability as 
 the insurable basis for industrial injuries, instead of compensa- 
 tion for the injured workman, is the fundamental cause of dis- 
 satisfaction with old methods. Under the liability method the 
 employer is insured against the payment of damage claims 
 for industrial injuries required by law. This makes it neces- 
 sary for the injured workman to demand payment from his 
 employer and, in case his claim is not settled by the insurance 
 company, to sue his employer for its amount. There being no 
 statutory schedule fixing the amount of damages for specified 
 injuries, the amount of the workman's claim under this method 
 is usually fixed by a class of lawyers known as "ambulance 
 chasers" who take good care to make it large enough to cover 
 an exorbitant fee for themselves. 
 
 The legal action is against the employer, but the judgment 
 is paid by the insurance company. Thus the employer and 
 the insurance company are both arrayed against a compar- 
 atively defenseless employe to reduce the amount of the com- 
 pensation to be paid to him on account of an industrial injury, 
 or to avoid payment altogether. 
 
 A necessary result of this method is the generation of bitter 
 feelings in workmen against employers; a strong popular 
 prejudice against employers, induced by sympathy with ill- 
 treated employes, which renders it almost impossible for an 
 employer to secure a just verdict from a jury on a claim for 
 compensation for an industrial injury, and a popular demand 
 for drastic regulation, if not the actual wiping out, of the 
 business of industrial insurance by privately owned and man- 
 aged insurance companies. 
 
 All of these evils can be eliminated from the problem by 
 changing the insurable base from "employer's liability" to 
 "workmen's compensation." 
 
 WORKMEN'S COMPENSATION 
 
 Under this new method the employer, on the payment of 
 the required premium, is relieved from all liability. The work- 
 
 73 
 
man being the one insured, his claim is against the insurance 
 company, not against his employer. The employer, having 
 paid the premium, is joined in interest with his employes to 
 secure the prompt payment of the just claim of his injured 
 employes, thus giving tangible evidence of his interest in their 
 welfare. Under such circumstances, excepting in rare in- 
 stances, the full compensation rightfully claimed will be 
 promptly paid, and without any expense for collection on the 
 part of the employe. This method should generate a feeling 
 of mutual respect and good-will between employers and em- 
 ployes and substitute popular appreciation for the popular 
 prejudice that has resulted from the old method of arraying 
 the employer against an injured employe in his effort to se- 
 cure compensation for his injury. 
 
 STATUTORY COMPENSATION FOR INJURIES. 
 
 Another cause of grievous dissatisfaction with the old 
 method is in the uncertainty as to the amount of compensation 
 an employe can collect, the amount being left to the ad- 
 juster of the insurance company or the verdict of a jury. 
 As a result, compensations for an identical injury varied from 
 very little to an amount so large it was virtually blackmail. 
 
 Scientific study of the statistics of experience demonstrates 
 the practicability of fixing statutory compensation for specific 
 injuries by the enactment of a law containing a compensa- 
 tion schedule. In this way the question of the amount of 
 compensation is definitely fixed by law. This leaves the fact 
 of the injury, and the conditions under which it was sus- 
 tained, the only questions at issue between an injured em- 
 ploye and the insurance company. In the settlement of these 
 questions the physical evidence of the injury, the testimony 
 of fellow workmen and of the employer will be conclusive. 
 The taking of this testimony need not involve serious loss of 
 time, nor the incurring of expense on the part of the injured 
 employe. This will enable him promptly to receive the full 
 benefit of the compensation to which he is entitled by law. 
 
 74 
 
STATUTORY COMPENSATION IN GERMANY 
 
 Scope of the Law. Since 1884 the German govern- 
 ment has required that all workmen and administra- 
 tive officers employed in mines, salt works, establish- 
 ments in which ores are treated, quarries, pits, on 
 wharves, and in building establishments, factories and 
 smelting works must be insured against accidents oc- 
 curring in the course of their occupations. In general- 
 the compensation consists of medical treatment and 
 66 2-3 per cent, of wages for disability after the thir- 
 teenth week. Prior to that time compensation for acci- 
 dent comes out of sickness insurance funds. Compensa- 
 tion up to the maximum limit of 60 per cent, of 'the annu- 
 al wage may be paid the widow, children and other de- 
 pendents in case of fatal accident's in addition to funeral 
 benefits and whatever may have been paid previous to 
 death. In its nature this is workmen's collective in- 
 surance in that it is furnished by employers and covers 
 all the workmen in the factory or establishment. 
 
 PROPOSED SCHEDULE OF STATUTORY COMPEN- 
 SATION IN OHIO 
 
 The schedule of compensation for specified injuries pro- 
 posed in a bill now pending in the Ohio Legislature (Febru- 
 ary, 1913), S. B. No. 48, Mr. Green, is as follows: 
 
 Section 31. No compensation shall be allowed for 
 the first week after the injury is received, except the 
 disbursement hereinafter authorized for medical, nurse 
 and hospital services and medicines, and for funeral 
 expenses. 
 
 Section 32. In case of temporary disability, the em- 
 ploye shall receive sixty-six and two-thirds per cent, 
 of his average weekly wages so long as such disability is 
 total, not to exceed a maximum of twelve dollars per 
 week, and not less than a minimum of five dollars per 
 week, unless the employe's wages shall be less than 
 five dollars per week, in which event he shall receive 
 compensation equal to his full wages; but in no case 
 
 7^ 
 
to continue for more than six years from the date of the 
 injury, or to exceed three thousand, four hundred dol- 
 lars. 
 
 Section 33. In case of injury resulting in partial 
 disability, the employe shall receive sixty-six and two- 
 thirds per cent, of the impairment of his earning capa- 
 city during the continuance thereof, not to exceed a 
 maximum of twelve dollars per week, or a greater 
 sum in the aggregate than thirty-four hundred dollars. 
 In cases included in the following schedule, the dis- 
 ability in each case shall be deemed to continue for 
 the period specified and the compensation so paid for 
 such injury shall be as specified herein, to-wit: 
 
 For the loss of a thumb, 66 2-3 per cent, of the average 
 wages during sixty weeks. 
 
 For the loss of a first finger, commonly called index 
 finger, 66 2-3 per cent, of the average weekly wages 
 during thirty-five weeks. 
 
 For the loss of a second finger, 66 2-3 per cent, of 
 the average weekly wages during thirty weeks. 
 
 For the loss of a third finger, 66 2-3 per cent, of the 
 average weekly wages during twenty weeks. 
 
 For the loss of a fourth finger, commonly known as 
 the little finger, 66 2-3 per cent, of the average weekly 
 wages during fifteen weeks. 
 
 The loss of the second, or distal phalange of the 
 thumb, shall be considered equal to the loss of one-half 
 of such thumb ; the loss of more than one-half of such 
 thumb shall be considered to be equal to the loss of 
 the whole thumb. 
 
 The loss of the third, or distal phalange, of any finger 
 shall be considered to be equal to the loss of one-third 
 of such finger. 
 
 The loss of the middle or second phalange, of any 
 finger shall be considered to be equal to the loss of two- 
 thirds of such finger. 
 
 The loss of more than the middle and distal phalanges 
 of any finger shall be considered to be equal to the loss 
 
 76 
 
of the whole finger; provided, however, that in no case 
 will the amount received for more than one finger ex- 
 ceed the amount provided in this schedule for the loss 
 of a hand. 
 
 For the loss of the metacarpal bone (bones of the 
 palm) for the corresponding thumb, finger, or fingers 
 as above, add ten weeks to the number of weeks as 
 above. 
 
 For ankylosis (total stiffness of) or contractures 
 (due to scars or injuries) which makes the fingers more 
 than useless, the same number of weeks apply to such 
 finger or fingers (not thumb) as given above. 
 
 For the loss of a hand, 66 2-3 per cent, of the average 
 weekly wages during one hundred and fifty weeks. 
 For the loss of an arm, 66 2-3 per cent, of the average 
 weekly wages during two hundred weeks. 
 
 The above schedule of injuries shall be considered 
 to apply to the right hand and arm. Compensation 
 shall be reduced 20 per cent, in cases of similar injury 
 to the left hand or arm. 
 
 i or the loss of :i g'eat toe, 66 2-3 per cent, of the 
 average weekly wages during thirty weeks. 
 
 For the loss of one of the toes other than the great 
 toe, 66 2-3 per cent of the average weekly wages during 
 ten weeks. 
 
 The loss of more than two-thirds of any toe shall be 
 considered to be equal to the loss of the whole toe. 
 
 The loss of less than two-thirds of any toe shall be 
 considered to be no loss. 
 
 For the loss of a foot, 66 2-3 per cent, of the average 
 weekly wages during one hundred and twenty-five 
 weeks. 
 
 For the loss of a leg, 66 2-3 per cent, of the average 
 weekly wages during one hundred and seventy-five 
 weeks. 
 
 For the loss on an eye, 66 2-3 per cent, of the average 
 weekly wages during one hundred weeks. 
 
 77 
 
The amounts specified in this clause are all subject 
 to the limitation as to the maximum weekly amount 
 payable as hereinbefore specified in this section. 
 
 Section 34. In cases of permanent total disability, 
 the award shall be sixty-six and two-thirds per cent, 
 of the average weekly wages, and shall continue until 
 the death of such person so totally disabled, but not to 
 exceed a maximum of twelve dollars per week, and not 
 less than a minimum of five dollars per week, unless 
 the employe's average weekly wages are less than five 
 dollars per week at the time of the injury, in which 
 event he shall receive compensation in an amount equal 
 to his average weekly wages. 
 
 The loss of both hands or both arms, or both feet or 
 both legs, or both eyes, or of any two thereof, shall 
 prima facie constitute total and permanent disability, 
 to be compensated according to the provisions of this 
 section. 
 
 Section 35. In the case the injury causes death with- 
 in the period of two years, the benefits shall be in the 
 amounts and to the persons following: 
 
 1. If there be no dependents, the disbursements 
 from the state insurance fund shall be limited to the 
 expenses provided for in section forty-two hereof. 
 
 2. If there are wholly dependent persons at the time 
 of the death, the payment shall be sixty-six and two- 
 thirds per cent, of the average weekly wages, and to 
 continue for the remainder of the period between the 
 date of the death, and six years after the date of the 
 injury, and not to amount to more than a maximum 
 of thirty-four hundred dollars, nor less than a mini- 
 mum of one thousand, five hundred dollars. 
 
 3. If there are partly dependent persons at the time 
 of the death, the payment shall be sixty-six and two- 
 thirds per cent, of the average weekly wages, and to 
 continue for all of such portion of the period of six years 
 after the date of the injury, as the board in each case 
 
 78 
 
fnay determine, and riot to amount to more than a max:- 
 imum of thirty-four hundred dollars. 
 
 4. The following persons shall be conclusively pre- 
 sumed to be wholly dependent for support upon a de- 
 ceased employe : 
 
 (a) A wife upon a husband with whom she lives at 
 the time of his death. 
 
 (b) A child or children under the age of sixteen 
 years (or over said age if physically or mentally in- 
 capacitated from earning) dependent upon the parent 
 with whom he is living at the time of the death of such 
 parent. 
 
 In all other cases, questions of dependency, in whole 
 or in part, shall be determined in accordance with the 
 facts in each particular case existing at the time of the 
 injury resulting in the death of such employe, but no 
 person shall be considered as dependent unless a mem- 
 ber of the family of the deceased employe, or bears to 
 him the relation of husband or widow, lineal descendant, 
 ancestor or brother or sister. The word "child" as 
 used in this act, shall include a posthumous child, and 
 a child legally adopted prior to the injury. 
 
 Section 36. The benefits in case of death shall be 
 paid to such one or more of the dependents of the de- 
 cedent, for the benefit of all the dependents as may 
 be determined by the board, which may apportion the 
 benefits among the dependents in such manner as it may 
 deem just and equitable. Payment to a dependent sub- 
 sequent in right may be made, if the board deem proper, 
 and shall operate to discharge all other claims there- 
 for. The dependent or person to whom benefits are 
 paid shall apply the same to the use of the several 
 beneficiaries thereof according to their respective 
 claims iipon the decedent for support, in compliance 
 with the finding and direction of the board. 
 
 In all cases of death where the dependents are a 
 widow and one or more minor children, it shall be suffi- 
 cient for the widow to make application to the board 
 
 79 
 
on behalf of herself and minor children ; and in 
 cases where all of the dependents are minors, the ap- 
 plication shall be made by the guardian or next friend 
 of such minor dependents. 
 
 Section Z7. The average weekly wage of the injured 
 person at the time of the injury shall be taken as the 
 basis upon which to compute the benefits. 
 
 Section 38. If it is established that the injured em- 
 ploye was of such age and experience when injured as 
 that under natural conditions his wages would be ex- 
 pected to increase, the fact may be considered in ar- 
 riving at his average weekly wage. 
 
 Section 42. In addition to the compensation provided 
 for herein, the board shall disburse and pay from the 
 insurance fund, such amounts for medical, nurse and 
 hospital services and medicine as it may deem proper; 
 not, however, in any instance, to exceed the sum of 
 two hundred dollars, and in case death ensues from the 
 injury, reasonable funeral expenses shall be likewise 
 disbursed and paid from the fund in an amount not to 
 exceed the sum of one hundred and fifty dollars, and 
 the board shall have full power to adopt rules and regu- 
 lations with respect to furnishing medical, nurse and 
 hospital services and medicine to injured employes 
 entitled thereto, and for the payment therefor. 
 This publication of this schedule is not an endorsement of 
 its provisions. It is quoted here only for the purpose of il- 
 lustrating the system proposed. Similar schedules are found 
 in the laws of one or two other states. 
 
 COLLECTIVE INSURANCE RELEASES EMPLOYERS 
 FROM ALL LIABILITY 
 
 Employers' liability insurance safeguards employers against 
 claims for comepnsation for industrial injuries made by 
 any employe. In shifting the- insurable base from employ- 
 ers' liability to workmen's compensation, it is necessary to 
 provide collective insurance in order that employers may be 
 relieved from all liability and workmen, employed by an em- 
 
ployer who has secured legal release from liability for com- 
 pensation claimed for industrial injuries sustained by his 
 employes, by paying the required premium for collective in- 
 surance, may have a legal right to claim compensation from 
 the insurance company to which the employer has paid the 
 insurance premium. In writing a collective policy or contract 
 the collective payroll is made the basis of the premium charged. 
 Acceptance of the theory that losses caused by industrial in- 
 juries are a part of the cost of the product or service rendered 
 and should be included in all statements of costs made for the 
 purpose of determining prices, service charges, and profits, 
 makes it necessary to enforce compulsory collective insurance 
 upon every employer engaged in an insurable industry. If 
 this is not done, the employer who is willing to, and does deal 
 justly with his employes in this respect will be placed at a 
 competitive disadvantage with the employer who does not so 
 safeguard his employes' welfare. The principles of justice 
 which this new method seeks to enforce cannot be fully ap- 
 plied unless enforced upon every employer operating under 
 similar conditions. In no other way can the losses caused by 
 industrial injuries be included in the cost of products and 
 services. 
 
 STATUTORY COMPENSATION COMPULSORY ON 
 ALL EMPLOYES 
 On the other hand, the law should be equally compulsory 
 as against employes. 
 
 In an explanation of the Ohio law, Mr. H. T. Weston, Rat- 
 ing Actuary of the Ohio State Liability Board of Awards, 
 (Journal of Workmen's Compensation Insurance, September 
 1, 1912) says: 
 
 If the employer pays the premium quoted by the 
 board, then all his employes must accept the indemni- 
 ties provided by the board, and the only way that the 
 employe can decline to accept such indemnities is to 
 leave the service of such employer, consequently, the 
 employer receives full protection so far as liability is 
 concerned. 
 And, consequently, if all employers do not furnish the guar- 
 antee required for the collective insurance of all their employes, 
 
 $1 
 
those who do will be placed at a disadvantage in competing 
 with those who do not. 
 
 The proposition is to tax the users of products or services 
 with the cost of losses caused by industrial injuries. The 
 employer, the seller of the product or service, is the tax col- 
 lector. The nature of a tax requires that it shall be compulsory 
 on all who are liable to pay. It can be uniformly assessed 
 and collected in no other way. 
 
 METHOD OF COERCING EMPLOYERS AND EM- 
 PLOYES INTO ACCEPTING THE PROVISIONS 
 OF A WORKMEN'S COMPENSATION LAW 
 The purpose of the new method being to make definite the 
 amount of compensation that may be claimed by an employe 
 for a specific injury; to make certain the procedure to be fol- 
 lowed for its collection ; to relieve courts from the necessity of 
 trying damage suits ; and to safeguard employers from liability 
 to suits for losses caused by industrial injuries, it is necessary 
 to make the law air-tight against claims made by injured 
 employes in any other way than through the insurance com- 
 pany. The accomplishment of this purpose is sought through 
 depriving the employer and employe of the legal right to 
 defend or enforce a claim in any other way. 
 
 The Michigan Accident Board explains the provisions of the 
 Michigan Workmen's Compensation law in an official bulletin 
 (1912) as follows: 
 
 Sec. 1. In an action to recover damages for personal 
 injury sustained by an employe in the course of his 
 employment, or for death resulting from personal in- 
 juries as sustained, it shall not be a defense : 
 
 That the employe was negligent, unless and except 
 it shall appear that such negligence was wilful; 
 
 That the injury was caused by the negligence of a 
 fellow employe ; 
 
 That the employe had assumed the risks inherent in, 
 or incidental to, or arising out of his employment, or 
 arising from the failure of the employer to provide and 
 maintain safe premises and suitable appliances. 
 
 The provisions of this section do not apply to those 
 employers who elect, with the approval of the Indus- 
 
 82 
 
trial Accident Board, to pay compensation in the man- 
 ner and to the extent provided by law; nor will such 
 employer be subject to any other liability whatsoever, 
 save as provided by this law for the death of, or per- 
 sonal injury to any employe. 
 The broad scope of the Ohio workmen's compensation law 
 was upheld and defined in an opinion handed down by Judge 
 Pugh of the Superior Court, January 24, 1913, in the suit of 
 John E. Schaefer vs. The Cincinnati Bickford Tool Company : 
 No Qualification. There is no qualification what- 
 ever; nothing to indicate that the "neglect or default" 
 which fixed liability must be gross neglect or slight 
 neglect or such neglect as is entailed by failure to ex- 
 ercise ordinary care and prudence. The naked words 
 "neglect or default" employed import prima facie all 
 neglects and all defaults. To limit these terms to such 
 neglect or default as is the equivalent of failure to 
 exercise ordinary care and prudence requires a resort 
 to construction; it necessitates reading into the lan- 
 guage of this statute some qualification not expressed 
 therein. 
 
 Is there any sufficient reason why such an employer 
 should not be held to the plain, unqualified language of 
 the law? He has been invited to avail himself of the 
 protection against liability of this kind afforded him by 
 the preceding sections of the workmen's compensation 
 act, and has refused to accept it. If anything, this fur- 
 nishes a reason why his liability should be extended, 
 not limited, by construction. 
 
 The imposition on employers who refuse to accept 
 the protection afforded by the preceding sections of 
 the workmen's compensation act, of a liability greater 
 than has ever before existed in this state, seems to 
 have been deliberately intended by the language of the 
 General Code, Section 1465-60. It was known when the 
 act was being considered that it would incur much op- 
 position, and that vigorous efforts would be made to 
 prevent employers of labor from accepting its provis- 
 ions. The possibility that the law, when enacted, would 
 
 83 
 
become a dead-letter was very great, and it was de- 
 sirable to adopt every legitimate means of preventing 
 this. While the statute was intended for the benefit of 
 the employer and employe alike, it was known that 
 many persons interested in business thought it would 
 work a hardship on the former. 
 
 A Coercive Clause. To make the statute effective 
 it was deemed necessary to insert a coercive clause. In 
 view of the decision in Ives vs. Railway Company, 201 
 N. Y. 276, it was obviously not expedient to risk the 
 validity of the law by absolutely compelling employers 
 to adopt its provisions, but it was apparent that every 
 means short of this would be necessary. The history of 
 the bill and its progress through the two branches of 
 the General Assembly, and the arguments reported in 
 the case of State ex rel. vs. Creamer, 85 O. S. 349, 
 wherein the constitutionality of the act was upheld, 
 indicate clearly the necessity of some degree of coercion. 
 Possibly General Code, Section 1465 — 60, as herein con- 
 strued, goes to the limits of constitutionality. 
 
 To the court it seems clear that every means of mak- 
 ing the statute effective should be employed, if it can 
 be done without violence to the language used — and the 
 more effective it can be made, with regard to the ends 
 contemplated by the Legislature, the better. It fol- 
 lows that the greater the liability imposed on employers 
 by General Code, Section 1465-60, the more likely are 
 they to accept these provisions of the act which relieve 
 them from such liability. The opinion of the Court, 
 therefore, is that to relieve an employer from liability 
 under General Code, Section 1465-60, a higher degree of 
 care and prudence than ordinary must be exercised by 
 them. The degree of care required is such that it ex- 
 cludes the existence of any "wrongful act," neglect or 
 default whatever." 
 
 DRASTIC COERCION IN LIABILITY FOR DEATH 
 
 CLAIMS 
 The new amendments to the Ohio Constitution create an 
 
 exceedingly interesting condition regarding the amount an 
 
 84 
 
employer may be compelled to pay on account of the death 
 of an employe. 
 
 Article I, Section 19a provides that, *'The amount of dam- 
 ages recoverable by civil action in the courts for death caused 
 by the wrongful act, neglect, or default of another, shall not 
 be limited by law." 
 
 This establishes an unlimited liability for the amount of 
 a death claim. It may be as high as a greedy "ambulance 
 chaser" may claim and a sympathetic three quarters of a jury 
 may be induced to award. Naturally, the wealthier the em- 
 ployer, the higher the award will be, because he can stand it. 
 This is a prejudiced conception of justice to which this con- 
 stitutional amendment is designed to give the authority of 
 law. , 
 
 Relief from this unlimited liability is promised all employers 
 who participate in the workmen's compensation insurance 
 written by the Ohio State Liabiliity Board of Awards. In the 
 existing law, and in Sections 32 and 35-2 and 3, of the pro- 
 posed law, the statutory compensation for a death loss is 
 $3,400. 
 
 The constitutionality of this law and the proposed amend- 
 ments thereto rests upon the Constitution, Article II, Section 
 35, which provides that : 
 
 "For the purpose of providing compensation to work- 
 men and their dependents, for death, injuries or occu- 
 pational diseases, occasioned in the course of such 
 workmen's employment, laws may be passed establish- 
 ing a state fund to be created by compulsory contribu- 
 tions thereto by employers and administered by the 
 state, determining the terms and conditions upon which 
 payments shall be made therefrom, and taking away 
 any and all rights of action or defenses from employers 
 and employes; but no right of action shall be taken 
 away from any employe when the injury, disease or 
 death arises from failure of the employer to comply 
 with any lawful requirement for the protection of the 
 lives, health and safety of employes. Laws may be 
 passed establishing a board which may be empowered 
 to classify all occupations, according to their degree of 
 
 8i 
 
hazard, to fix rates of contribution to such fund accord- 
 ing to such classification, and to collect, administer and 
 distribute such fund, and to determine all rights of 
 claimants thereto." 
 Of course an employe's claim for compensation for an in- 
 dustrial injury is a lien upon the property of his employer, 
 therefore the following constitutional provision. Article II, 
 Section 33, has a significant bearing on statutory compensa- 
 tions : 
 
 "Laws may be passed to secure to mechanics, ar- 
 tisans, laborers, sub-contractors and material men their 
 just dues by direct lien upon the property, upon which 
 they have bestowed labor or for which they have fur- 
 » nished material. No other provision of the Constitu- 
 
 tion shall impair or limit this power." 
 Average wages is the basis of computation for compensa- 
 tion for industrial injuries, therefore the rate of wages is an 
 important factor in a workmen's compensation law. Not only 
 this, such a law is demanded as a measure to promote the 
 welfare of employes. For these reasons the following consti- 
 tutional provision, Article II, Section 34, should be carefully 
 considered in connection with the existing compensation law 
 and the proposed amendments thereto: 
 
 "Laws may be passed fixing and regulating the hours 
 of labor, establishing a minimum wage, and providing 
 for the comfort, health, safety and general welfare of 
 all employes ; and no other provision of the Constitu- 
 tion shall impair or limit this power." 
 Question : Do the three constitutional provisions just 
 quoted give authority for limiting the compensation for a 
 death claim to $3,400 for employers who participate in the 
 state compensation fund when Article I, Section 19a, of the 
 Constitution specifically provides: 
 
 "The amount of damages recoverable by civil action 
 
 in the courts for death caused by the wrongful act, 
 
 neglect or default of another, shall not be limited by 
 
 law." 
 
 These four constitutional provisions show with what deft 
 
 and astute cunning and intelligence the trade union members 
 
 86 
 
of the Constitutional Convention enmeshed the employer in 
 a way to render him powerless to resist the demands of trade 
 union labor. Having this example before them the trade 
 union members of the General Assembly, there are twenty of 
 them, are seeking to realize through statutory law the ad- 
 vantages made permissible by the Constitution as amended 
 by their compatriots in the Constitutional Convention. 
 
 If they succeed, the liability to an unlimited claim for a loss 
 caused by accidental death will be a drastic coercive persuader 
 to induce all employers to participate in creating a state 
 monopoly in compensation insurance. 
 
 Can you see any limit to the pressure that can be put on 
 employers by increasing the schedule of statutory compensa- 
 tions by act of the General Assembly and then increasing the 
 premium rates by order of the State Liability Board of 
 Awards to provide the funds necessary to take care of such 
 increase? 
 
 At a hearing on this Workmen's Compensation bill, — S. B. 
 No. 48, Mr. Green, — before the Senate Committee on Labor, 
 February 11, 1913, one of the members of the labor lobby pre- 
 sented to the Committee a complete upward revision of the 
 schedule of awards fixed in the act, providing a uniform in- 
 crease of 33^ per cent and greatly augmenting the number 
 of weeks an injured employe would be able to draw compen- 
 sation, thus making a double raise. This gives notice to all 
 employers to be on their guard. 
 
 NO COMPENSATION FOR INJURIES CAUSED BY 
 FAULT OF EMPLOYE; BY HIS REFUSAL OR 
 NEGLECT TO OBEY STATUTORY REQUIRE- 
 MENTS; OR BY HIS INTOXICATION 
 
 It is as unjust to compensate an injured workman for in- 
 juries caused by his own fault, negligence or carelessness ; by 
 his refusal or neglect to obey statutory requirements, or by 
 his intoxication as it is to refuse to compensate him for in- 
 juries not so caused. For this- reason it is necessary, in the 
 interests of all employers, of all employes, and of the users 
 of products and services, to safeguard the fund out of which all 
 compensations must be paid, if paid at all, by making illegal 
 
 87 
 
any claim made fraudulent by any of the faults herein named 
 or by deception known as "malingering." 
 
 Laws requiring the use of safety appliances, statutes and 
 rules designed to establish safe conditions of employment, 
 cannot be enforced except through the service of employes. 
 If they tamper with, remove or fail to use safety appliances ; 
 if they fail to give notice when some part of a machine gets 
 out of order; if they neglect or refuse to obey statutory re- 
 quirements or shop regulations designed to make working 
 conditions safe and healthful, it is not possible for an em- 
 ployer to comply with such lawful requirements. Above all, 
 the presence of an intoxicated man in a shop where other men 
 are at work is destructive of effective discipline, a menace to 
 his fellow workmen, and an invitation to injury for himself. 
 
 The rules of justice require that compensation shall be de- 
 nied for all injuries so caused, and further, that any employe 
 found guilty of any such misconduct shall be fined or denied 
 further employment. 
 
 The law should make it the duty of designated state officials 
 to ferret out all fraudulent claims and to punish all fraudulent 
 claimants. 
 
 EMPLOYER'S LIABILITY FOR INJURIES CAUSED 
 BY HIS OWN FAULT OR NEGLECT 
 
 Compensation for the injured workman is provided in the 
 policy or contract of collective insurance. No question as to 
 the validity of the workman's claim for compensation can be 
 raised by the insurance company on account of any fault or 
 neglect on the part of his employer. 
 
 A workmen's compensation law should not be made 
 the vehicle for securing compliance with statutory regula- 
 tions designed to render working conditions safe and health- 
 ful, the fact of non-compliance, established by a state inspector, 
 must be made a cause of penal action against an employer. 
 The penalty should not be less than twice the compensation 
 paid on account of the loss caused by failing to comply with 
 the law. It should be collected by the State for the support 
 of its inspection service. 
 
 88 
 
INSPECTION OF MACHINERY AND SAFETY 
 DEVICES 
 
 Inspection to determine compliance with statutory regula- 
 tions designed to render working conditions safe and health- 
 ful, conserves the safety of property as well as of life. Such 
 inspection should be required by the state, regardless of the 
 question of compensation for industrial injuries. The penalty 
 of neglect should be an order to stop the operation of a boiler, 
 flywheel, transmission machinery, elevator, planer, lathe, or 
 whatever device or machinery may be found faulty, until the 
 same is made safe. Compensation to workmen injured by 
 continuing the use of machinery known to be unsafe cannot 
 cover the whole requirement. Safety laws should be obeyed. 
 
 The state can protect the common good against inefficient 
 inspection by discharging the inefficient inspector. 
 
 CREATION OF COMPENSATION FUNDS 
 
 All compensation funds are accumulated by the collection 
 of premium payments made by employers. Laws that require 
 a part of the fund to be paid by employes make the employer 
 the collector of the fund. This brings the cost of insurance 
 to the direct knowledge of the employe in the form of a re- 
 duction of the amount of wages received by him. Ill feeling 
 is certain to result and also a constant pressure to recover the 
 loss by demands for a corresponding increase in wages. 
 These considerations make the saving of expense in this way 
 an expedient of doubtful economic value to the employer. 
 
 Restraint upon employes is made effective in all compensa- 
 tion laws by provisions placing a limit on the maximum 
 amount that can be recovered under all specified contin- 
 gencies, and also providing that the injured employe must 
 suffer the loss of from one to three weeks' time before 
 his compensation will begin, and then, that the compensation 
 shall not exceed from fifty to sixty-six and two-thirds per 
 cent of his regular wages. 
 
 These restrictions plainly show that, in any event, a heavy 
 percentage of the industrial loss is a burden upon employes 
 and that far less than the total loss is placed upon the in- 
 dustry. To impress this fact upon the minds of those em- 
 ployes who do not think accurately or far, it would be well 
 
 89 
 
for insurance companies to prepare a brief statement to be 
 furnished to employers, to be placed in the pay envelope of 
 each employe each pay day, showing precisely how and to 
 what extent he must bear the burden of a loss caused by an 
 industrial injury. 
 
 SUFFICIENCY OF COMPENSATION FUNDS 
 
 It is clear that premiums charged for the purpose of creat- 
 ing funds out of which compensation for industrial injuries 
 are to be paid must be high enough to create a fund adequate 
 to provide fully for all losses, the cost of securing business 
 and of administration, or the day will come when claims for 
 compensation cannot be paid in full. In such a contingency 
 the deficiency must be made good in one of three ways : 
 
 1. When the insurance is written by, an insurance com- 
 pany: By payments drawn from its surplus or by an assess- 
 ment on its stockholders. In no case can an insurance com- 
 pany make a special assessment on employers in the form of a 
 charge for an additional or extra premium; or obtain relief 
 from public funds collected by taxation. 
 
 2., When the insurance is written by a mutual company: 
 By a special assessment on employers in the form of a charge 
 for an additional or extra premium. All mutual companies, 
 to be sound, must have power to make such assessments 
 whenever necessary or the insurance written by them will 
 some day prove to be a delusion ; 
 
 3. When the insurance is written by a state board: By 
 a special assessment on employers in the form of a charge for 
 an additional or extra premium, or by placing the burden on 
 taxpayers by an appropriation of public funds. 
 
 Any fund created by a state board that is not guaranteed 
 by authority to levy additional or extra premium assessments, 
 or by a pledge that the state will make good any deficiency 
 from funds secured by taxation, does not offer sufficient se- 
 curity for the prompt payment of all claims for industrial in- 
 juries. 
 
 Insurance written under such conditions is certain to prove 
 to be a delusion some day when a crucial test comes. 
 
 Insurance sold for premium payments that are too low to 
 create an adequate fund for the prompt payment of all claims 
 
 90 
 
for compensation for industrial injuries, plus all costs of 
 securing business and of administration, is sold at less than 
 cost. The sale of any product or service at less than its true 
 and entire cost inevitably places a burden of loss on some one. 
 
 In the case of an insurance service for the compensation of 
 injured workmen, this loss must fall: 
 
 First. Upon injured employes, if the deficiency in the com- 
 pensation fund is not made good, because there will be no 
 funds with which their claims for compensation can be paid ; 
 
 Second. Upon stockholders in compensation insurance 
 stock companies; 
 
 Third. Upon employers who are members of a mutual com- 
 pensation insurance company; 
 
 Fourth. Upon employers who participate in a state 
 fund; or 
 
 Fifth. Upon taxpayers whose property is assessed for the 
 purpose of raising funds by taxation for public purposes. 
 
 The taxpayers of Ohio are now paying for such a loss 
 through appropriation of public funds for the payment of cost 
 of securing business and for the administration of the Ohio 
 Workmen's Compensation Law, by the Ohio State Board of 
 Liability Awards. 
 
 In the ''Journal of Workmen's Compensation Insurance" for 
 September 1, 1912, issued by the Ohio State Liability Board 
 of Awards, the following statement is made by the Board: 
 
 The protection given to employer and employe alike 
 is given without the cost of one dollar to the Insurance 
 Fund, the expense of the administration of the Board 
 being borne by the state, and every dollar paid into the 
 insurance fund can only be used to pay compensation. 
 
 This statement would have been more accurate if it had 
 said : The expense of the administration of the Board is being 
 borne by the taxpayers of the state. 
 
 The appropriation for the expenses.of this board for the year 
 1912 was $115,000.00; the same amount is now asked for the 
 years 1913 and 1914. Three hundred and forty-five thousand 
 dollars of taxpayers' money taken in the first three years. Who 
 can tell how much will be required in ten years? 
 
 91 
 
SAFEGUARDS FOR COMPENSATION FUNDS 
 
 Experience has demonstrated the necessity for providing 
 legally required safeguards for all funds created for the pur- 
 pose of paying on demand all claims for compensation for in- 
 dustrial injuries. 
 
 Such laws should be identical for all funds not underwritten 
 by specific authority to make up deficits by special asses- 
 ments on employers, or by a pledge of public funds raised by 
 taxation. 
 
 The workmen's compensation fund created by the Ohio law 
 is not safeguarded in any of these ways. Section 17 of the 
 Ohio workmen's compensation law provides: 
 
 The state liability board of awards shall classify em- 
 ployments with respect to their degree of hazard, and 
 determine the risks of the different classes and fix the 
 rates of premium on the risks of the same, based upon 
 the total payroll and number of employes in each of 
 said classes of employment, sufficiently large to provide 
 an adequate fund for the compensation provided for in 
 • this act, and to create a surplus sufficiently large to 
 guarantee a state fund from year to year. 
 No power is given to the board to correct its actuarial mis- 
 takes by reassessing those who have paid premiums demon- 
 strated by experience to have been too low to satisfy all re- 
 quirements of the law. Who shall pay for the mistakes of this 
 board? is a question that has been blindly left for the future 
 to answer. This is dangerous. 
 
 The Michigan workmen's compensation law provides that 
 an employer may "carry his own risks if he can satisfy the 
 board of his financial ability to do so." 
 
 This provision is defective in not requiring such employer 
 regularly to set apart in a special fund the amount of the 
 premiums they otherwise would be required to pay, and to 
 invest such funds under precisely the same conditions as re- 
 quired for the investment of the compensation funds secured 
 by the collection of premiums by stock insurance companies ; 
 mutual compensation insurance companies, and the State 
 Board. The law should also provide that such fund shall not 
 be used or be liable for the payment of any debt of the 
 
 92 
 
employer, excepting claims for compensation for industrial 
 injuries sustained by employes rendering services to such em- 
 ployer. 
 
 NO STATE MONOPOLY IN COMPENSATION INSUR- 
 ANCE—FAIR COMPETITION 
 
 In its Journal of Workmen's Compensation Insurance, for 
 July 1, 1912, the Ohio State Liability Board of Awards says: 
 It is not the belief of the members of the State Lia- 
 bility Board of Awards that governmental authority 
 should take charge of and conduct any business enter- 
 prise which private enterprise may conduct in a satis- 
 factory manner. In other words, that the* government 
 should undertake to do no act which the people can do 
 as well for themselves. 
 In his message to the General Assembly, January 14, 1913, 
 Governor James M. Cox says : 
 
 Plain fairness suggests that in the operation of utili- 
 ties both private and public ownership must be subject 
 to the same standards of ethics and government. 
 
 If the State Board (the State Liability Board of 
 Awards) gives better service and lower rates it will be 
 perfectly apparent that liability companies are operat- 
 ing on a wrong base. If on the other hand, insurance 
 concerns yield an advantage in both service and rates, 
 then it would be safe to assume that efficiency and 
 economy of administration are lacking with the State 
 Board. The competitive feature may be wholesome. 
 The objective to be sought is the fullest measure of 
 protection to those engaged in dangerous occupations 
 with the least burden of cost to society, because after 
 all the social organization must pay it. 
 How can a just measure of relative efficiency be established 
 when all of the operating expenses of the State Board are 
 paid by taxpayers — not covered by its premium rates, while 
 all of the operating expenses of insurance companies are cov- 
 ered by their premium rates? 
 
 UNFAIR COMPETITION: SELLING INSURANCE AT 
 LESS THAN COST 
 
 The Ohio State Liability Board of Awards, in its Journal 
 for July 1, 1912, makes the following statement: 
 
 93 
 
The Ohio state coni])ensation rates are the lowest 
 rates in existence covering the protection affc^rded by 
 law. 
 
 Thie reason is that Ohio handles her own insurance 
 
 fund and provides insurance at cost. 
 
 From the foreging it is clear that the reason is that Ohio 
 
 taxpayers are paying all expenses of administration. On this 
 
 account the State Board is selling workmen's compensation 
 
 insurance at less than cost. 
 
 This is the kind of unfair competition always engaged in 
 by those who desire to establish a monopoly. 
 
 When the State Board, after the brief experience of a few 
 months, states that it can sell insurance at about one-half the 
 rates figured out by all experienced actuaries, it seems only 
 too probable that it is heading straight toward a deficiency — 
 toward trouble for the State of Ohio. 
 
 These rates are merely initial or trial rates, which, if foreign 
 experience is any guide, not only cannot be maintained, but 
 will result in deficiencies which will lead to unduly high rates 
 or call for state subsidies later on. 
 
 This attempt to sell insurance at less than cost, like every 
 attempt to get something for nothing, will take the shirt off 
 the tax-payer's back when he comes to pay. 
 
 The state has no moral or economic right, it should have 
 no legal right, to drive private compensation insurance com- 
 panies out of business by unfair competition. 
 
 When competition between state boards and privately 
 owned and managed compensation insurance companies is 
 openly conducted under an identical code of regulations, the 
 economic value of intelligent self-interest will be fairly 
 - matched against the economic value of patriotic devotion to 
 the common good. From such a competition that which is 
 best for the general welfare ; best for each industry involved ; 
 best for every employer; best for every employe, surely will 
 be evolved. 
 
 UNIFORM ACCOUNTS FOR ALL WRITERS OF 
 INSURANCE 
 That this question may be tested by the records of impar- 
 tial experience, the Legislature should appl}^ to the problem 
 
 94 
 
of workmen's compensation insurance the recommendation 
 made by Governor Cox to the General Assembly, January 
 14, 1913, when he said, speaking of the municipal ownership 
 (jf public service utilities : 
 
 The utilities commission should have the right to 
 enforce the same system of uniform accounting on 
 municipalities operating utilities as are now imposed 
 upon private enterprises, otherwise the public would 
 have no means of knowing whether municipal plants 
 were conducted along the lines of efficiency and 
 economy. 
 The law should provide that the State Commissioner of 
 Insurance shall require the State Liability Board of Awards 
 to keep its accounts in the same manner as the accounts of 
 ])rivate insurance companies are kept, and shall declare it in- 
 solvent when its income from premiums and interest on its 
 invested funds do not fully cover all of its operating expenses, 
 its liabilities for insurance written, with a necessary margin 
 to provide a required reserve, as it would do in the case of a 
 private insurance company under similar circumstances. 
 INSURANCE WRITTEN BY AUTHORIZED COM- 
 PANIES A COMPLIANCE WITH THE COMPUL- 
 SORY REQUIREMENTS OF THE LAW. 
 In making the collective insurance of all employes compul- 
 sory, and relieving employers from all liability for the pay- 
 ment of claims for compensation for injuries sustained by 
 their employes, the law should provide that the payment of 
 the premium required to the State Liability Board of Awards, 
 or to any private compensation insurance company, stock or 
 mutual, authorized to write insurance in the state, shall be 
 construed as being a full compliance with statutory require- 
 ments in this behalf. 
 
 SAFEGUARDING GOOD WILL. 
 Mr. Emile E. Watson, Actuary of the Ohio State Liability 
 Board of Awards, does not claim too much for the new 
 methods to be used in writing compensation insurance when 
 he says: 
 
 The plan should destroy the hostility and antagonism 
 that the employers' liability system has engendered and 
 
 95 
 
should substitute for same the sympathetic co-operation 
 of the employe with his employer. 
 
 That this may be most effectually done, the law should 
 provide that every check, by whomever drawn, given in pay- 
 ment of a compensation claimed for an industrial injury, 
 should be transmitted to and countersigned by the employer 
 as an evidence to him of the payment of the compensation 
 for which he has paid, and as an evidence to the employe 
 that his employer did provide for his welfare as required by 
 the principles of justice and statutory law. 
 THE CARDINAL PRINCIPLES OF AN EFFICIENT 
 WORKMEN'S COMPENSATION LAW. 
 
 The Michigan Industrial Accident Board states the cardinal 
 principles of an efficient workmen's compensation law in the 
 following concise terms: 
 
 1. Reasonable compensation at minimum cost for all acci- 
 dents except the result of wilful fault; 
 
 2. Certainty of amount; 
 
 3. Certainty of payment ; 
 
 4. Payment without litigation; 
 
 5. Prevention of accidents. 
 
 It states the purposes of such a law to be: 
 
 That injured workmen may receive justice ; 
 That employers may have fixed liabilities and escape 
 the embarrassment and expense of damage suits; 
 
 That courts be relieved of the time of trying damage 
 suits ; 
 
 That the public treasury be relieved of the expense of 
 these damage suits; 
 
 That the public be relieved of the expense of caring for 
 the victims of industrial accidents; and 
 
 That more harmonious relations be promoted between 
 
 employers and employes. 
 
 To this statement of purposes, one other should be added: 
 
 That each industry be required to carry the loss involved in 
 
 the payment of compensation for industrial injuries incurred 
 
 by the workmen employed by it. 
 
 This cannot be done if any part of the cost of insurance is 
 paid by taxpayers, or any employer fails to collectively insure 
 all of his employes. 98 
 
UNIVERSITY OF CALIFORNIA LIBRARY 
 BERKELEY 
 
 Return to desk from which borrowed. 
 This book is DUE on the last date stamped below. 
 
 28Apr'50C£ 
 
 2.7 1983 
 
 fecu cifC. ju.i u i 1983 
 
 ,D 21-100m-ll,'49(B7146Bl6)476 
 
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 UNIVERSITY OF CAIvIFORNIA lylBRARY 
 
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