The Oklahoma Supreme Court Monday cleared the way for the stateto implement an administrative system for resolving disputedworkers' compensation claims.

However the decision left important industry trade groups, eachwith members that underwrite workers' comp insurance, at odds overthe outcome.

The state Supreme Court decision to support a law enacted inMay, combined with action by Tennessee that clears the way for asimilar system to go into effect next July, leaves Alabama as theonly state to maintain a court-based adjudicative system forsettling workers' comp claims.

Joe Woods, vice president, state government relations for theProperty Casualty Insurers Association of America, says thedecision, coming a week after oral arguments in the case, meansthat the state can now begin to implement the law that was indispute, which is scheduled to go into effect in February.

He cautions that the decision leaves the door open for courtchallenges to specific provisions of the law. “We all know therewill be challenges to specific provisions of the law over the nextyear. But the court decided to rule on multiple-subject rule andleave specific provisions to later scrutiny,” Woods says.

He says besides accelerated handling of disputed claims, therewill be some cuts in benefits, which will also have a direct andimmediate impact. “We are glad that that uncertainty has beeneliminated. Challenges through the courts and adjustments to thenew system will take time, but at least it has been started,” saysWoods.

But, Wil Rijksen, a spokesman for the American InsuranceAssociation, raised concerns over the decision. He says thedecision held that the underlying law does not violate theconstitutional prohibition against a legislative bill addressingmultiple subjects.

But he says, “The decision creates instability in the workers'compensation system for the foreseeable future as the justicesleft open the question of whether the new law might beunconstitutional as applied, but decided thatdetermination cannot be made until after it has taken effect, and aparticular set of facts has been presented.”

Until then, Rijksen says, the court is without power to takefurther action.

Therefore, this decision “results in the worst of both worlds,”he states.

“The state and the carriers must go through the effort ofimplementing the new law as passed, with the understanding thatvarious provisions of the law could be struck down in the future,and the 'future' taking many years of additional litigation tofinally determine.”

The National Council on Compensation Insurance estimates thatthe law, combined with other changes, will reduce the cost ofworkers' compensation claims in Oklahoma by 14.2 percent, or $138million annually.

NCCI says in an analysis that other provisions not capable ofbeing quantified could also produce significant additional savingsin the long-term, although the impact in the short-term isunclear.

In its decision, the court rejected a constitutional challengeby state firefighters. The majority ruled that “the Legislature hasexercised proper authority in a matter over which it has the powerto act.”

The lawsuit had alleged, among other things, the law amounted tounconstitutional “log-rolling” because it contains multiplesubjects in violation of the state's Constitution's single-subjectrule.

“As all sections of the new law are inter-related and refer to asingle subject, workers' compensation or the manner in whichemployees may ensure protection against work-related injuries, wedisagree with the constitutional challenge to the administrativeact on grounds of log-rolling,” the Oklahoma Supreme Court wrote inits majority opinion.

“Until such time as a case or controversy or a justiciable issueis presented to this court, we are without jurisdiction to rulefurther with regard to this act,” the opinion states

Justice John Reif wrote a separate opinion that said most futurechallenges should be decided by the new Workers' CompensationCommission before they reach the courts.

“In a few cases, however, there are provisions that areunconstitutional on their face,” Reif says.

The law is S.B. 1062.

Among the law's most controversial provisions is one that allowscompanies to “opt-out” of the state WC system.

Bruce Wood, AIA associate general counsel and director ofworkers' compensation programs, says, “Opt-out is a step that AIAstrongly opposes for a number of reasons,” the chief one of whichis that, “There is not the ultimate guarantee provided by theworkers compensation plan.”

An employer who opts out under this legislative proposal wouldhave to buy an ERISA-qualified plan of benefit that wouldprovide a substitute benefit to workers.