Nonfatal Accident Compensation and the Common Law at the Turn of the Century

We investigate the de facto operation of the employer liability system around the turn of the century with evidence on Michigan workers' nonfatal accident compensation from 1896 to 1903. The results show that the impact of the common-law defenses on accident payments was filtered through a settlement bargaining process affected by legal costs and private information. The probability of receiving compensation rose when the accident was severe enough to raise the worker's expected court award higher than his legal costs. Workers in larger firms and with greater tenure were also more likely to receive compensation. The fellow servant defense may have been less effective for larger employers, while the contributory negligence defense was less effective against experienced workers. On the other hand, employers might have been using accident payments as implicit fringe benefits to lower monitoring costs and to cut employee turnover. Copyright 1995 by Oxford University Press.