2006 ANNUAL REPORT
THE INDUSTRIAL COMMISSION
OF ARIZONA

Chairman
Jean Pierre Angelchik, M.D.
Vice Chairman
Joe Gosiger
Commissioner
Brian C. Delfs
Commissioner
Louis W. Lujano, Sr.
Commissioner
Marcia Weeks
Larry Etchechury, Director

TABLE OF CONTENTS

INTRODUCTION ............................................................................................................................... 1

LABOR DEPARTMENT .................................................................................................................... 2

CLAIMS DIVISION ............................................................................................................................ 3

ADMINISTRATIVE LAW JUDGE DIVISION (ALJ) ..................................................................... 4

ARIZONA DIVISION OF OCCUPATIONAL SAFETY AND HEALTH (ADOSH) ..................... 6

SPECIAL FUND ................................................................................................................................. 8

LEGAL DIVISION.............................................................................................................................10

DIVISION OF ADMINISTRATION ............................................................................................... 11

CURRENT EVENTS ........................................................................................................................ 13

CHARTS............................................................................................................................................ 14

INTRODUCTION
compensation claims. Since that time, the role of the
Industrial Commission has been expanded to cover
other labor related issues such as occupational safety
and health, youth employment laws, resolution of
wage related disputes, vocational rehabilitation,
workers’ compensation coverage for claimants of
uninsured employers, insolvent insurance carriers and
self-insured employers.

The Industrial Commission of Arizona (ICA)
is a regulatory agency that was created in 1925 as a
result of legislation implementing the constitutional
provisions establishing a workers’ compensation
system.
From 1925 to 1969, the workers’
compensation system consisted of the State
Compensation Fund, which was then a part of the
Industrial Commission, and self-insured employers
which generally were the mining and the railroad
companies. In 1969 the workers’ compensation
system was reorganized and expanded to include
private insurance companies. The State
Compensation Fund was split off from the Industrial
Commission and established as a separate agency
responsible for providing workers’ compensation
insurance coverage. The Industrial Commission
retained its responsibility as the file of record and its
regulatory authority over the processing of workers’

The policy setting body for the ICA is a five
member Commission whose members are appointed
by the Governor and confirmed by the Senate to
staggered five year terms. The Commission oversees
an Agency with approximately 313 employees and
an operational budget of approximately $18.0 million.
As a non-general fund agency, the Industrial
Commission is funded by an annual tax on workers’
compensation premiums that cannot exceed 3%. The
tax rate for 2005 was 3% and remained the same
for 2006.

The mission statement of the Industrial
Commission is to efficiently administer
and effectively enforce all applicable
laws and regulations not specifically
delegated to others, relative to the
protection of life, health, safety and
welfare of employees within the State.
Its purpose and objectives are
accomplished through seven major
divisions which are set out separately in
this document.

1

RESOLUTION OF WAGE DISPUTES

LABOR DEPARTMENT
Orlando Macias, Director

When a wage owed to an employee is no
more than $2,500 and the accrual of those unpaid
wages do not exceed one year, then an employee
may file a wage claim with the State Labor
Department or with the Small Claims Court. Upon
receipt of a claim, the Labor Department will notify
the employer of the claim and investigate the
allegations. The Labor Department will provide a
written determination which can be appealed to
Superior Court. An employer who does not comply
with a Final Order within ten days after the Order
becomes final is liable to pay the employee treble the
amount of the unpaid wages found to be owed. While
every effort is made to resolve the dispute, in some
cases there is insufficient information to make a
determination. In those cases, a claimant has the
right to file a civil action in Justice or Small Claims
Court.

The Labor Department is a Department that
has had a dramatic change in responsibilities over
the years. For example, in the 1930’s, it was
responsible for establishing minimum wages, hours
of operations for the railroads, and later enforced
the payment of appropriate wages on public works
projects within the state. Today, the Labor
Department essentially conducts 99% of its activities
in three specific areas: youth employment law
enforcement, resolutions of disputes involving wages,
and regulating private employment agencies that
charge fees to applicants (these include placement
agencies, career counseling firms, modeling and talent
firms and sitting services).
YOUTH EMPLOYMENT LAW ENFORCEMENT

Arizona’s youth employment laws, which
establish the hours a youth can work and prohibit
occupations in which they can be employed, are very
similar to those on the federal level. The Labor
Department utilizes information gathered from the
ICA’s Claims Division to review and investigate
workers’ compensation claims involving minors,
receives and investigates information from other
governmental organizations and complaints filed by
the public.

N U MB ER OF IN JUR Y
R EPOR TS IN VOL VI N G
MIN OR S AN D
C OMPL AIN TS
R EC EIVED .

N U MB ER OF YOU TH
EMPLOYEES
VI OLATI ON S
C ON FI R MED

FY04

F Y05

F Y06

1054

1060

1200

58

58

60

NUMBER OF
WAGE CLAIMS
FILE/INVESTIG
ATED
LICENSED

FY04

FY05

FY06

3104

2904

2864

& REGULATED AGENCIES

Under Arizona law, private employment
agencies that charge a fee to an applicant are licensed
and regulated by the Labor Department.The Industrial
Commission’s Employment Advisory Council and the
Labor Department investigate the background of each
firm applying for a license. Based on their
investigation, they recommend approval or denial of
a license to the Commission. The Industrial
Commission administratively approves or denies the
license. An appeal of that administrative decision is
made before the five member Commission through
an administrative hearing. The Commission’s
decision is appealable to the Superior Court.

2

The Claims Division, in addition to answering
approximately 150,000 telephone inquiries per year,
is responsible for processing approximately 6,000
documents per day and making in excess of 31,000
determinations annually that are subject to judicial
review. Some of those determinations involve a
variety of issues such as allegations of bad faith,
awards for facial scaring and loss of teeth, approvals
or denials of requests to leave the state, approvals
or denials of requests to change physicians, etc. A
historical perspective for some of those
determinations are as follows:

Number of Liscensed Agencies
FY04

FY05

FY06

Career Counseling
Firms

28

25

24

Model & Talent
Agencies

24

27

23

General Agencies

3

3

2

Sitter Agencies

3

2

1

Domestic Help
Agencies

1

1

1

Nurses Agencies

1

1

1

Total

60

59

52

AVERAGE MONTHLY WAGE AWARDS

CLAIMS DIVISION
Noreen Thorsen, Manager

The Claims Division establishes the average
monthly wage for claimants who have been injured
in excess of seven days. The number of wage awards
for the last three fiscal years are as follows:

Unlike the other Divisions, the historical role of the
Claims Division has remained unchanged. Since
1925, the Claims Division has been the file of record
for approximately 6 million workers’ compensation
claims files. Claims are received by the Claims
Division from attending physicians and injured
workers. The Claims Division, in turn, notifies the
appropriate insurance carrier/third party processing
agent or self-insured employer so that they can
appropriately process the claim. The historical
number of claims processed in the last three years
are as follows:

Number of
Claims
Processed

FY04

FY05

FY06

135645

139121

132904

Number of
Wage Aw ards

FY04

FY05

FY06

16560

16749

14184

LOSS OF EARNING CAPACITY AWARDS

The Claims Division is responsible for
determining the “loss of earning capacity” (LEC) for
claimants who have incurred a permanent impairment
that results in an unscheduled injury. The number of
“LEC” awards for the past three fiscal years are as
follows:

In addition to being a file of record, we now
have 40 million stored documents on our optical disc
system. The Claims Division is responsible for
ensuring that the 550 insurance carriers/third party
processors and 125 self-insured employers process
workers’ compensation claims in accordance with
existing statutes and rules.

Number of
LEC Awards

3

FY04

FY05

FY06

3048

3763

2385

The Commission’s ability to effectively
monitor claims activity and process the large volume
of data has been due in large part to the Commission’s
computer system. In 1991 the Claims Division
became the first state workers’ compensation
program to utilize optical disk technology and go to
a paperless system. This technology, which is used
in conjunction with new computer software, allows
for greater productivity and instant access to claims
information. With this system, more than one person
can access a file at the same time, and telephone
inquiries can be answered immediately. Based upon
the ICA’s Claims Division’s success, a number of
other states have adopted this technology.

ADMINISTRATIVE LAW JUDGE
DIVISION (ALJ)
Harriet Turney, Chief Judge

The ALJ Division conducts administrative
hearings as authorized under the Arizona Workers’
Compensation Act and the Occupational Health and
Safety Act (OSHA). It also has jurisdiction to hear
disputes arising in youth employment cases. The mission of the division is to resolve all disputes coming
before it efficiently and equitably.
Most of the cases referred to the division are
in the area of workers’ compensation. In the most
recent year for which statistics are available (FY 2006),
6842 workers’ compensation claims were referred to
the ALJ Division for hearing. It received 70 OSHA
cases.
Workers compensation cases are referred to
the ALJ Division from the Claims Division when an
interested party (claimant, employer, insurance carrier

or Special Fund) requests a hearing on a disputed issue arising in the administration of a claim. Issues include the compensability of the claim, entitlement to
continuing or additional benefits, and loss of earning
capacity.
Since issues can arise throughout the lifetime of an injured worker, some claims are referred to the ALJ
Division more than once. For example, a claim that is
initially litigated on compensability may return to the
ALJ Division on a dispute over continuing benefits. A
claimant may seek to reopen a claim, years after it has
been closed for benefits based on a new, additional or
previously undiscovered condition related to the industrial injury.
OSHA cases are referred to the ALJ Division
from the Arizona Department of Occupational Safety
and Health (ADOSH). Disputes arise when a citation
has been issued and the employer protests the action
taken by ADOSH.
The ALJ division employs 17 ALJs in Phoenix and four in Tucson. All the ALJs have are active
members of the State Bar of Arizona, with a minimum
of five years’ experience in workers’ compensation,
labor and employment, or a related field. Each ALJ is
supported by a legal secretary, who serves as a judicial assistant with responsibility for the administration
of the judge’s docket. The legal secretaries and division clerks also provide information and assistance to
parties, attorneys and members of the public.
Once a case is referred to the division, it is
assigned to an ALJ who schedules it for hearing, usually within 60-90 days. Most of the hearings are set in
Phoenix or Tucson. The others (approximately 7%)
are scheduled elsewhere around the state in such locales as Flagstaff, Prescott, Lake Havasu, Kingman,
Yuma, Lakeside-Pinetop, Show Low, Payson, Globe,
Casa Grande, Bisbee, Sierra Vista, and Nogales.
Prior to the hearing, the parties engage in discovery, such as depositions (oral examination of individuals who have information relevant to the issues),

4

and the exchange of interrogatories (written questions).
The claimant may be sent for one or more independent medical examinations scheduled by the employer
and/or carrier and the parties file and exchange medical documents.
Workers’ compensation cases usually require
more than one hearing to obtain all necessary evidence.
The claimant and non-expert witnesses, if any, testify
at the first or “initial” hearing. Subsequent hearings,
known as “further hearings,” are scheduled for medical experts and, where the issue is loss of earning capacity, labor market consultants. The limited availability of medical experts can cause delay in scheduling further hearings. It can take several weeks to several months for further hearings to be completed.
The ALJ sits as the trier of fact in workers’
compensation cases, similar to a jury in a civil case.
Once the hearings have been completed and any posthearing memoranda filed, the presiding ALJ issues a
written decision upon hearing that contains findings,
legal analysis, and conclusions. A party disagreeing
with the ALJ’s decision may file a request for review
that is considered by the ALJ who issues the decision
upon hearing. Upon receipt of legal memoranda from
the parties, the ALJ issues a written decision upon review that may affirm, reverse, modify and/or supplement the decision upon hearing. If a party disagrees
with the decision upon hearing, the party may file a
petition for special action with the Arizona Court of
Appeals within thirty days. The parties are given an
opportunity to file briefs, and occasionally are allowed
to participate in oral argument. The Court of Appeals
issues either a memorandum decision or an opinion
affirming or setting aside the decision of the ALJ. Further review is discretionary with the Arizona Supreme
Court.
OSHA hearings follow their own procedural
rules. They are usually completed in one session. The
ALJ issues a written decision at the conclusion of the
hearing process. A dissatisfied party may request review of the ALJ’s decision, but instead of being reviewed by the ALJ who heard the case, the review is

5

conducted by a Review Board. Further review is with
the Arizona Court of Appeals, as with workers’ compensation cases.
The ALJ Division continues to offer mediation
in both workers’ compensation and OSHA cases.
Mediation affords an alternative to the formal hearing
process. The parties must agree to mediation and it is
generally available only when all parties are represented
by counsel. An ALJ, who is not assigned to hear the
case, acts as a neutral third party. The role of the
mediator is to facilitate communication between the
parties and help them work toward a negotiated resolution of their dispute.
Mediation is a confidential process. If a dispute is resolved through mediation, the parties execute
a settlement agreement that is reviewed and approved
by the presiding ALJ. If the dispute is not resolved,
the case is returned to the hearing process and nothing
revealed in the mediation process is disclosed, without permission, to the presiding ALJ. Any notes or
memoranda presented to the mediating ALJ are destroyed and the presiding ALJ renders a decision based
solely on the record and evidence presented at the
hearing.
Mediation has been shown to be effective in
crafting solutions that might not otherwise be possible
in the formal hearing process. The parties who have
utilized mediation have expressed a high level of satisfaction with the process. Mediation is offered to all
employers in OSHA cases, but OSHA cases often
settle even before mediation can be scheduled.
Workers’ compensation cases with multiple issues,
such as home health care, transportation, and housing, have been successfully and creatively resolved
through mediation.
Timely resolution of all cases continues to be
a top priority for the ALJ Division. Early prehearing
conferences are convened to advise unrepresented
parties of their rights and responsibilities or at the request of the parties. These conferences often have
the salutary effect of encouraging communication between the parties, which can result in the narrowing of

issues and earlier settlement.
The division is focused on prompt scheduling
of initial and further hearings, and closer scrutiny of
requests for continuances to avoid undue delay. The
ALJs have reduced their backlog and are issuing their
decisions within 30-60 days of submission date. Most
further hearings for experts are conducted telephonically to expedite scheduling, often cutting weeks off
the process. Waiver of live medical testimony and
greater reliance on written reports in some cases has
eliminated or reduced the need for further hearings.
TheALJ Division monitors the satisfaction level
of its customers through a survey process. The anonymous process measures the public’s general satisfaction with the administrative hearing process. The division has consistently exceeded 7 on a 10-point scale.
Cases Referred
to the Div ision
Hearings
Conducted
Av erage Length
of time to
Resolv e a Case
(Days)

FY04

FY05

FY06

8025

8080

6842

7297

6598

5542

130.5

118.5

118

ARIZONA DIVISION OF
OCCUPATIONAL SAFETY AND
HEALTH
Darin Perkins, Director
In 1974 Govenor Jack Williams asserted
Arizona’s right, under the Federal Occupational Safety
and Health Act, to retain jurisdiction over occupational
safety and health issues within our state, excluding
mining operations, Indian reservations and federal
employees.
This jurisdiction encompasses approximately
2.2 million employees working in 120,000 public and
private establishments. In accordance with the Federal
Occupational Safety and Health Act,

6

the Arizona Division of Occupational Safety and Health
(ADOSH) operates under an approved plan with the
U. S. Department of Labor. In 1985 the U. S.
Department of Labor designated (ADOSH) as being
one of only 26 states and territories that have programs
that are “as effective” as Federal OSHA. Given the
large scope of responsibility, ADOSH focuses its efforts
in four specific areas: compliance, consultation,
elevators and boilers.
COMPLIANCE

ADOSH’s compliance activities consist of
conducting unannounced inspections of workplaces
throughout Arizona to determine whether employers
are complying with the Occupational Safety and Health
Act and standards.
Inspections may be the result of (1) a work
related accident, (2) a complaint, (3) a referral, (4)
planned inspection, or (5) a follow-up to ensure that
previously cited serious, repeat or willful violations
have been corrected. Inspections involving work
related accidents are generally serious in nature
involving multiple injuries or a fatality. A complaint
inspection generally is the result of a serious safety/
health allegation or a nonresponse to a written inquiry
sent to an employer by ADOSH. A referral generally
comes from another government source such as
Department of Economic Security’s Farmworker
Outreach Program, Department of Health Services,
Police and Fire Departments. Planned or scheduled
inspections are those directed at those employers in
high-hazard industries or who have a large number
of workers’ compensation claims, or higher than
average injury and illness rates.
ADOSH is the only state or Federal OSHA
program in the country that has an independent body,
(the Commission) that is separate from the OSHA
program, that reviews the appropriateness of
ADOSH’s penalty proposals and either approves,
modifies or disapproves the issuance of penalties for
violations of Arizona’s Occupational Safety and
Health Act.

Every Thursday at a public meeting before the
Commissioners, a representative from ADOSH
presents a prima facie case to the Commissioners
as to why a penalty should be assessed. The
Commission, as a body, reviews the proposal and
either approves, modifies or disapproves the
proposed penalties based upon the facts presented.
All penalties assessed and collected go directly to
the State General Fund.

Serious Willful
and Repeat
Violations
Total Penalties
Assessed*

FY04

FY05

FY06

1182

1028

989

$2.46

$1.82

$1.3

At the request of an employer, a consultation evaluation
may involve an individual operation or an entire
workplace. No citations or penalties are issued to
employers utilizing consultation services as long as the
employer corrects the apparent hazards which are noted
as written recommendations in a letter to the employer.

Free training programs are also provided by
ADOSH to business organizations, labor organizations
and individual employers upon request. A film library is
also available to individual employers who may wish to
check-out films to supplement their own safety and
health programs.

#of H az ar d s F ou nd
D ur in g
C on su ltation s

*in millions

It is important to note that not all violations
or inspections result in penalties. In fact, the majority
of violations are other than serious and carry no
penalty. In addition, for a significant number of
inspections we find no violations and determine that
the employer is “in compliance” with the Arizona
Occupational Safety and Health Act.
FY04

FY05

#of Tr ain in g
Pr o gr ams

FY04

FY05

F Y06

2411

2492

2036

398

390

377

#of Emp loyees
Tr ain ed

5145

6034

6619

#of Emp loyers
Tr ain ed

3627

2844

1696

BOILERS AND ELEVATORS

FY06

Nonse rious
Violations

2889

2356

2792

In
compliance
% Rate

42.4%

41.1%

37.1%

CONSULTATION AND TRAINING

ADOSH’s consultation activities consist of
providing free consultative assistance to employers
who are requesting assistance in coming into
compliance with existing occupational safety and
health standards.

Unlike the Arizona Occupational Safety and
Health Act, the Boiler and Elevator program is
equipment oriented, and not based upon employee
exposure. As a result, cease and desist orders are
utilized without monetary penalties. Once violations
are corrected, certificates of operation are issued
allowing the employer to utilize the boiler, elevator or
escalator.
In the Boiler and Elevator statutes, political
subdivisions are allowed to retain jurisdiction if they
provide a comparable program. The City of Phoenix
has retained jurisdiction over elevators within its
boundaries. No other political subdivision has retained
jurisdiction for boilers or elevators.

7

FY04

FY05

FY06

Boile rs
Ins pe cte d

3037

2762

1982

De ficie ncie s
Note d

710

484

148

FY04

FY05

FY06

El evators
Inspected

4802

4580

4289

Deficiencies
Noted

1466

1494

1593

SPECIAL FUND
David Sosa, Special Fund Monitor

The financial integrity of the Special Fund is
overseen by a legislatively created Investment
Committee. This Investment Committee consists of a
representative from the insurance industry, a
representative of the investment industry, a
representative of the self insured employers, the
Chairman and Director of the Industrial Commission.
The Special Fund has $364 million in assets
which is comprised of the Industrial Commission offices
at 800 W. Washington, Phoenix and 2675 E.
Broadway, Tucson, and a mix of bonds, stocks and
cash. The Special Fund’s investment portfolio consists
of 49% bonds, 35% stocks,16% cash and short-term
investments. The Special Fund’s rate of return over
the past four years has ranged from 7.5% for FY03,
10.4% for FY04, 7.4% for FY05 and 3.5%for FY06.
The annual rate of return for the last ten years of this
investment program has been 7.61%.

The Special Fund is a “trust fund” that was
legislatively created in 1969 for the express purpose
The funding source of the Special Fund has
of providing workers’ compensation benefits in the changed dramatically over the years. Originally there
following areas:
were two funding sources: the amount unexpended
from a fixed 3% Admin Fund tax on workers’
compensation premiums and an additional discretionary
♦ providing benefits for uninsured claimants,
workers’ compensation Special Fund premium tax of
♦
continuing workers’ compensation benefits
2%. After a legislative change in 1993, the source of
for claimants of insolvent carriers and
funds is now based upon the Special Fund’s investment
bankrupt self-insured employers,
income and a Special Fund discretionary tax of 2.5%
which was 0% from calendar year 1992 through
♦
partial coverage of workers’ compensation
benefits for second injury claims,
calendar year 2003. The Commission reviews the tax
rate each year and has set the tax rate at 2.5% for
♦
vocational rehabilitation benefits,
calendar year 2007. Effective August 12, 2005 any
unexpended Admin Fund tax may be transferred to
♦
continuing medical benefits for pre 1973
the Special Fund when the Special fund is not actuarially
workers’ compensation claimants.
sound.
Functionally, the responsibilities of the
Special Fund have historically been relatively stable.
The only significant changes that have occurred dealt
with the financing of the Special Fund and the creation
of an oversight Investment Committee in 1984.

The Special Fund’s retained earnings are presently
at $109 million which is a deficit at the end of FY06.
This mean that total liabilities exceed total assets by
$109 million.

8

Some examples of operational statistics and their
financial impact are as follows:
UNINSURED CLAIMS

The Special Fund is responsible for providing
benefits to injured workers whose employers are
violating the law and not providing workers’
compensation insurance (no-insurance claims). The
historical number of no-insurance awards issued are
as follows:

No Insurance
Awards
Issued

FY04

FY05

FY06

3300

3281

2744

VOCATIONAL REHABILITATION

A workers’ compensation claimant who as
a result of the worker’s injury has incurred a
permanent impairment that prevents that worker
from returning to the worker’s date of injury
employment and who also has a loss of earning
capacity may be eligible for vocational rehabilitation
benefits.
In 1988 the Commission enhanced its
existing vocational rehabilitation efforts by establishing
a specific program for injured workers with scheduled
injuries. The historical numbers of vocational
rehabilitation awards issued are as follows:

INSOLVENT INSURANCE CARRIERS

The Special Fund is responsible for
continuing workers’ compensation benefits for those
claimants insured by insolvent insurance carriers and
bankrupt self-insured employers.
The estimated reserves for those claims excluding
servicing fees are as follows:
The ten largest carriers
FREMONT COMPANIES
128.2 million
LEGION INS CO.
19.9 million
RELIANCE INSURANCE
18.9 million
GREAT STATES INS.
15.1 million
PAULA INS. CO.
14.5 million
WESTERN EMPLOYERS INS.
9.8 million
MISSION NATIONAL INS. CO.
9.6 million
SUPERIOR NATIONAL
4.7 million
MISSION INS. CO.
3.5 million
HOME INS. CO.
2.8 million
ALL OTHER INS. CARRIERS
& SELF-INSURED CO.
23.2 million

TOTAL OF ALL CLAIMS

# of
Re habilitation
Aw ards Is s ue d

FY04

FY05

FY06

139

150

151

Our rehabilitation program is focused on
providing vocational retraining that will result in
meaningful employment. This training includes a
variety of college courses to supplement prior
education, on the job training where the special fund
will pay 50% of the salary during training as long as
there is a commitment to hire the trainee, and a variety
of vocational programs including: bilingual tractortrailer operator, equine instructor, forensics, mortuary
science, computer-aided drafting, and pharmacy
technicians. For those that are eligible for vocational
rehabilitation but are lacking skills to enter a program,
the Special Fund offers foundational training in math,
reading, and English (ESL) .

250.2 million

9

LEGAL DIVISION
Laura McGrory, Chief Counsel
The Industrial Commission has always had
its own legal representation, separate from the
Attorney General’s Office. In its early years, the
Legal Division functioned in a dual role as both hearing
officers and legal counsel.

♦

Provides legal advice to the five member
Commission and Division Managers.

♦

Represents the agency in personnel matters.

♦

Assists Division Managers in the promulgation
of rules

♦

Ensures that Arizona’s employers are providing
workers’ compensation insurance coverage for
their employees.

♦

Initiates subrogation of third party no-insurance
claims.

♦

Operates a program for processing and collection
of delinquent accounts.

A historical perspective of some of the
With the creation of the Administrative Law
Judge Division in 1969, the responsibilities changed activities of the Legal Division are as follows:
and remain the same today. The Legal Division
represents the Industrial Commission in the majority
FY04
FY05
FY06
of legal matters affecting the Agency.
The major responsibilities of the Division are as
follows:
♦

♦

♦

Represents the Special Fund in actual/
potential litigation involving most
activities of the Special Fund, i.e.
uninsured workers’compensation claims,
second injury claims, supportive care,
and, on occasion, claims involving
insolvent carriers/bankrupt self-insured
employers.

Hearings/Legal
Proceedings
Involving
Special Fund
and ADOSH

452

405

INSURANCE COVERAGE

The Legal Division is notified through a variety
of sources of those employers who are violating Arizona
law by not providing workers’ compensation coverage
for their employees. The Legal Division investigates each
referral and ensures that insurance is obtained.

Represents the Arizona Division of
Occupational Safety and Health in
actual/potential litigation regarding the
enforcement of the Arizona
Occupational Safety and Health Act.
Represents the Labor Division in the
enforcement of youth employment
matters and wage claim appeals and the
regulation of employment agents under the Labor
Department’s jurisdiction.

455

Insurance
Re fe rrals

10

FY04

FY05

FY06

1930

1708

1721

5. Facilities Management
6. Workers’ Compensation Statistical
Reporting
7. Ombudsman’s Office for Workers’
Compensation
8. Printing and Mailing Services
9. Personnel Services
10. Processing & Evaluation of
Applications for Self-Insured
Employers
11. Federal Grant Administration
12. Special Fund Asset Administration
13. Administration of Assessment on Workforce
Compensation Premiums Written.

COLLECTIONS

The Legal Division is notified when monies
owed as a result of Arizona Division of Occupational
Safety and Health citations or uninsured workers’
compensation claims are delinquent. The collection
of delinquent accounts is either addressed in-house
or with outside collection counsel.

FY04

FY05

FY06

Collection Files
Opened

477

413

347

Delinquent
Collection
Accounts to
Outside Consel

194

154

149

A more detailed explanation of some of the services
provided by the Division are as follows:

ACCOUNTING SERVICES
Gary Norem, Chief Financial Officer

The Legal Division is also involved in a variety of
miscellaneous legal matters, e.g. ADOSH
discrimination cases, Superior Court injunctive
activities, attorney fee petitions and certifications of
records to the Court of Appeals.

DIVISION OF ADMINISTRATION

The Division of Administration was created
to provide support services necessary to ensure the
efficient and effective operation of the Industrial
Commission. The Division provides the following
services:

1.
2.
3.
4.

In addition to payment of operational claims
and purchase orders, the Division is responsible for
prompt payment of monthly or semi-monthly payment
of compensation and medical benefits provided to
those injured workers receiving benefits under the
Special Fund.
The Division pays compensation within two
days and medical and other service providers are
paid within thirty days from receipt of billing. A
historical perspective of the number of warrants is
provided:

Checks
Issued

Budgeting
Accounting
Data Processing
Purchasing

11

FY04

FY05

FY06

17255

17500

19111

DATA PROCESSING
Star Heilman, Manager

The other Division services provided by
Accounting are budgeting; administration of the self
insured employers program; administration of federal
grants; Special Fund asset administration; and the
administration of the assessments on workers’
compensation premiums written. The self insurance
program has over 100 companies and organizations
participating in it annually. Accounting is responsible
for filing and reviewing the annual premium assessment
payment from all the self insured companies and
organizations and another 720 insurance companies
writing workers’ compensation policies in Arizona.

In 1991 the Industrial Commission’s Claims
Division became the first state workers’ compensation
system in the country to utilize optical disk imaging.
The system works in conjunction with a large
sophisticated data software program that has provided
the agency the mechanism for an agency wide claims
system.
The Commission’s Data Processing Section has
converted all existing systems to an agency wide PC
based UNIX system utilizing HP servers that will utilize
the optical disk imaging technology, and will begin the
process of integrating the ALJ, Special Fund and Legal
systems into the optical disk imaging system.

OMBUDSMAN
Mary Green, Manager

We are continuing to develop an employer
master file to be shared by all Divisions of the agency.
This system will contain current information on Arizona
employers including address, workers’ compensation
insurance coverage, number of employees and other
data needed to assist the agency tracking Arizona
employers. Also, we are in the process of rewriting
the Claims Data Base System for processing of claims
and the Hearing Data Base for processing of workers
compensation hearings.

In 1988 the Industrial Commission’s
Ombudsman’s Office was created by statute to
provide assistance to injured workers in resolving
difficulties encountered during the processing of their
workers’ compensation claims. The Ombudsman’s
Office intercedes on behalf of an injured worker to
ensure that the worker receives benefits to which the
worker is entitled under the law. Personnel in the
Ombudsman’s Office do not provide legal advice nor
do they participate in legal proceedings. A historical
perspective of the number of claimants that have
received assistance are listed as follows:

Number of
Claimants
Assisted

FY04

FY05

FY06

3444

3080

2852

12

Current Events

This year has been an interesting year. We continued to
focus on resolving issues that have impacted our Special
Fund, dealt with issues that have the potential of impacting
the workers compensation system, and dealt with new issues
that always seem to arise.
As to the Special Fund, over the past couple of years we
have reported the negative consequences caused by insurance company insolvencies. As a matter of background, the
Special Fund is a trust fund and a guarantee fund that is
responsible for providing a number of functions: (1) workers
compensation coverage for employees whose employers are
violating the law by not providing insurance coverage; (2)
vocational rehabilitation training for those injured workers
who are unable to return to their date of injury occupation;
(3) off-setting costs to employers and insurance carriers by
providing 50% indemnity benefits to those injured workers
who have previously had a pre-existing permanent injury
and sustained a second industrially related permanent impairment, listed in ARS §23-1065C that provides an impediment to employment; (4) providing supportive care benefits
to those injured before August 1973; (5) providing workers
compensation benefits to those claimants who are insured
by insolvent insurance carriers or insolvent self-insured employers.
Because of these insurance carrier insolvencies we have been
working diligently over the past several years not only in
reducing the impacts caused by those insolvencies but also
reducing potential future impacts on the Special Fund. This
past year we have had two successful accomplishments that
favorably impacted the Special Fund; first, the actuarial deficit of $190 million that was reported last year (because of
insolvencies) has been reduced to approximately $100 million. If the deficit continues to go down, especially at the rate
we experienced this year, we will consider reducing the statutory maximum assessments that are currently in place. Second, the mortgage associated with the Industrial Commission’s
land and buildings was paid off this year. The building, which
is an asset of the Special Fund, was the first leased purchased state building that was financed through Certificates
of Participation bonds. This allowed the Special Fund to purchase the land and build the structures without impacting
the assets of the Special Fund.
In an effort to improve our operational efficiencies, we are
continuing to work to improve our internal processes. Once
this is accomplished we are hoping to assume the control for

the processing of insolvent workers compensation claims.
Currently those claims are processed and managed by the
State Compensation Fund. The Industrial Commission’s Special Fund pays the benefits and a processing fee to the State
Fund. In an effort to reduce Special Fund costs we hope that
in the near future we will be able to assume that responsibility.
Another area of continuing responsibility and concern is
that the benefit levels within the Workers Compensation System have not been adjusted since 1999. We feel that because
of the gridlock between the parties (employer and employees
groups), the workers compensation system that has historically been successful is in jeopardy. Arizona’s workers compensation system is a system that is balanced between the
interests of the employers and the interests of the employees. Through this “no-fault system”, Arizona and its employers have benefited significantly with reduced workers compensation costs. So much so that today Arizona’s employers
enjoy one of the lowest workers compensation premiums in
the country. Unfortunately, the opposite is not true for
Arizona’s injured workers. During this same period benefit
levels have not kept pace with increases in wages and benefits have remained relatively stagnant— so much so, that
Arizona’s workers compensation benefit level is one of the
lowest in the country. Our concern is that if the legislature
doesn’t take action this year then the ballot initiative will
become the only venue employee groups will have to address these shortcomings. If this occurs the historically measured outcomes and predictability of Arizona’s workers compensation system will be lost. To avoid this the Industrial
Commission will be initiating legislation to increase the statutory maximum wage to a realistic level.
Finally, the Industrial Commission has been chosen to implement the minimum wage initiative passed by the voters in
November. In order to implement this new law, the Commission has proposed emergency rules, which as we speak are
being reviewed by the Attorney General’s Office. Additionally, for public access we have developed a minimum wage
poster, the proposed emergency rules, and frequently asked
questions and answers and put those on the Industrial
Commission’s website. Shortly after the first of the year we
will be utilizing existing Commission employees and providing training to employers statewide. Concurrently we will be
gathering public input to develop permanent rules. It is expected that a lot of the agency’s existing resources and efforts will be taken up next year in implementing this program.

13

CHARTS

14

CHART 1. TAXABLE WORKERS COMPENSATION PREMIUMS
REPORTED (IN MILLIONS)
ON A CALENDAR YEAR BASIS* (1999 - 2005)
$1000

$800

$600

$400

$200

$0
1999

2000

2001

1999
2000
2001
2002
2003
2004
2005

2002

2003

2004

2005

INSURANCE
CARRIERS

SELF-INSURED
EMPLOYERS

TOTAL

365
367
425
440
508
543
615

128
127
142
149
175
200
224

493
494
567
589
683
744
839

INSURANCE CARRIERS
SELF-INSURED EMPLOYERS
TOTAL
*PREMIUMS WRITTEN LESS RETURNED PREMIUMS, DIVIDENDS, CANCELLED
PREMIUMS

15

CHART 2.DIRECT LOSSES PAID (IN MILLIONS) ON A
CALENDAR YEAR BASIS. (1999 - 2005)

500
400
300
200
100
0
2000

2001

2002

2003

2004

2005

INSURANCE CARRIERS
SELF-INSURED EMPLOYERS
TOTAL

2000
2001
2002
2003
2004
2005

INSURANCE
CARRIERS

SELF-INSURED
EM PLOYERS

TOTAL

344
303
327
357
364
367

69
77
75
85
100
95

413
380
402
442
464
462

16

CHART 3. TOTAL COMPENSATION CLAIMS FILED WITH
THE INDUSTRIAL COMMISSION (FY2000-2006)

Thousands
180

151954153937
148326

160

137099

139121
135645

132904

140
120
100
80
60
40
20
0
2000 2001 2002 2003 2004 2005 2006
17

CHART 4. TOTAL TIME LOST CLAIMS FILED WITH THE
INDUSTRIAL COMMISSION (1998 - 2004)
(calendar year)
Thousands
25
20
15
10
5
0
1998 1999 2000 2001 2002 2003 2004 2005

YEAR
1998

20842

1999

20039

2000

19752

2001

19095

2002

17298

2003

16109

2004

15902

2005

14294

18

CHART 5. LOST WORKDAY CLAIMS 2000-2005
by MAJOR INDUSTRY DIVISION
Thousands
4

3

2000
2001
2002
2003
2004
2005

2

1

2000

2001

2002

Se
rv
ic
N
es
on
-c
la
ss
ifi
ab
le

an
uf
ac
tu
rin
Tr
g
an
sp
or
ta
tio
W
ho
n
le
sa
le
Tr
ad
e
R
et
ai
lT
Fi
ra
na
de
nc
e,
in
su
ra
nc
e

ru
ct
io
n

M

in
in
g
M

Major Industry
Division

C
on
st

A
gr
ic
ul
tu
re
,

fo
re
st
ry

0

2003

2004

2005

Agriculture, forestry

581

583

606

488

533

443

Mining

126

146

132

107

141

154

Construction

3118

2969

2767

2491

2569

2657

Manufacturing

1462

1396

1226

1142

1243

1123

Transportation

1689

1501

1483

1481

1502

1395

Wholesale Trade

936

808

695

610

687

639

Retail Trade

2736

2669

2660

2467

2608

2370

Finance, insurance

314

338

345

318

291

279

Services

3816

3722

3619

3162

3218

2928

Non-classifiable

244

251

117

83

86

81

INCLUDES ALL PRIVATE SECTOR LOST WORKDAY CLAIMS THAT WERE RECEIVED DURING
CALENDAR YEARS 2000, 2001, 2002, 2003, 2004 and 2005.

19

CHART 6. LOST WORKDAY CLAIMS 2000-2005
by NATURE

6
5

2000
2001
2002
2003
2004
2005

4
3
2
1

sy

le

er
th
O

itis
on
nd

Ca

rp

Br

al

ui

tu

M

nn

ul

el

tip

Te

nd

ro

ju
r

m

ie

e

s

ns
In

ta

ur
pu

lb
em

Ch

Am

ic a

at

tio

ns

s
bu

io
us
co

se

ts

s,

He

nt

er
ac
,l

rn

ns

ns
io
at

tu
ac
Fr
Cu

Sp

ra

in

s,

st

ra

in

re

s

s

0

N ATUR E

2000

2001

2002

2003

2004

2005

S prains , s trains

5142

4934

4795

4335

4519

4366

Fractures

1501

1398

1413

1187

1324

1346

Cuts , lac erations
B ruis es ,
c ontus ions
Heat burns

1114

1212

1072

1013

1123

1107

941

889

795

833

871

775

187

161

162

143

149

123

Chemic al burns

38

30

34

27

35

28

A mputations

169

143

110

141

128

138

Multiple Injuries

677

782

680

1055

831

708

Carpal tunnel
s yndrom e

165

157

139

80

128

83

T endonitis

101

91

46

28

29

25

Other

2795

4531

4379

3887

4094

2786

IN C L U D ES AL L PR IVATE SEC TOR L OST W OR K D AY C L AIMS TH AT W ER E R EC EIVED D U R IN G
C AL EN D AR YEAR S 2000, 2001, 2002, 2003,2004 an d 2005
.

20

CHART 7. LOST WORKDAY CLAIMS 2000-2005
by PART OF BODY

7
6

2000
2001
2002
2003
2004
2005

5
4
3
2
1

PART OF
BODY
HEAD

O
th
er

M
ul
tip
le

K
ne
e

A
nk
le

W
ris
t

B
ac
k

N
ec
k

H
ea
d

0

2000

2001

2002

2003

2004

2005

634

597

617

439

533

564

NECK

178

196

197

168

172

143

BACK

2950

2825

2603

2388

2280

2004

WRIST

770

756

681

607

611

530

ANKLE

617

574

598

560

523

547

KNEE

1540

1552

1575

1319

1453

1334

MULTIPLE

1794

1482

1232

1165

1423

1211

OTHER

6569

6405

6150

5705

6187

5752

INCLUDES ALL PRIVATE SECTOR LOST WORKDAY CLAIMS THAT WERE RECEIVED DURING
CALENDAR YEARS 2000, 2001, 2003, 2004 and 2005.

21

CH AR T 8. LOST WORKD AY CLAIMS 2000-2005
by EVEN T OR EXPOSUR E
5

2000
2001
2002
2003
2004
2005

4
3

2

C ontact with
object
Fall to lower
level
Fall to same
level
Slips, trips
Overexertion
R epetitive
motion
Exposed to
harmful
substances
Transportation
accidents
Fires,
explosions
Assaults, violent
acts
Other

O
th
er

ha
rm
to

Ex
po
se
d

EVENT OR
EXPOSURE

fu
ls

m

xe
rti
on

iti
ve
R
ep
et

rip
s

O
ve
re

le
ve
l
e

sa
m
to

Fa
ll

Sl
ip
s,
t

le
ve
l
lo
w
er

to
Fa
ll

C
on
ta
ct
w
ith

ob
je
ct

0

ot
io
n
Tr
ub
an
sp
st
a
or
nc
ta
es
tio
n
ac
ci
de
Fi
nt
re
s
s,
ex
pl
As
o
si
sa
on
ul
ts
s
,v
io
le
nt
ac
ts

1

2000

2001

2002

2003

2004

2005

3691

3395

3368

3071

3343

3197

1340

1321

1123

1151

1308

1214

1944

1987

1928

1719

1927

1976

275
4129

285
3951

283
3939

184
3573

143
3535

52
3146

536

556

407

342

442

315

319

271

261

229

248

187

817

729

673

652

750

618

52

50

56

49

56

43

247

226

253

238

218

246

1702

1616

1362

1143

1212

1081

IN C L U D ES AL L PR IVATE SEC TO R L O ST W OR K D AY C L AIMS TH AT W ER E R EC EIVED D U R IN G
C AL EN D AR YEAR S 2000, 2001, 2002, 2003, 2004 an d 2005.

22

CHART 9. LOST WORKDAY CLAIMS 2000-2005
BY SOURCE
Thousands

4

2000
2001
2002
2003
2004
2005

3

2

1

ER

A

LL

H

O

TH

IC
LE

S

O
LS

R
,G

R

O

HA

VE

N
D

TO

A

M
U
ND

SU
RF

A
NI
&

TS
A
N
PL

C
ES

LS
A

LS
IA

ER
Y
M
&

O
O
FL

PE
R

SO
N

S,

PA

RT
S

R
TU
NI
R

IC
C
HE

M

AT
ER

IN

RE
S

CH

FI
E,

M
A

XT
U

A
O
NT
C
FU

A
LS

,C

H

EM

IC

A

L

PR

O

D

UC

IN
ER

S

TS

0

SOU R C E

2000

2001

2002

2003

2004

2005

125

94

86

72

100

69

1927

1739

1807

1635

1599

1419

475

459

452

412

400

380

992

977

912

807

840

845

1731

1653

1491

1399

1549

1413

3107

2991

2718

2366

2430

2068

FLOOR, GROUND
S URFA CE S

3571

3597

3327

3097

3505

3454

HANDT OOLS

939

876

867

766

854

772

V EHICLE S

1285

1207

1204

1135

1247

1053

A LL OT HER

906

795

789

662

658

602

CHE MICALS ,
CHE MICAL
P RODUCT S
CONT A INE RS
FURNIT URE ,
FIX T URE S
MACHINERY
P ART S &
MAT ERIALS
P ERSONS,
P LA NT S &
A NIMALS

IN C L U D ES AL L PR IVATE SEC TOR L OST W OR K D AY C L AIMS TH AT W ER E R EC EIVED D U R IN G
C AL EN D AR YEAR S, 2000, 2001, 2002, 2003, 2004 an d 2005.

23

CHART 10. LOST WORKDAY CLAIMS 2000-2005
by OCCUPATION
6

2000
2001
2002
2003
2004
2005

5
4
3
2
1

s
O

th

er

rs

rs

od

,f

uc

ab

tio

r ic

n,

at

cr

or

af

s,

t,

la

re

bo

pa

re

ir s

in
is h
,f
ry
st

ra

to

pr

pe
O

Pr

ec

Te

is i

ch

on

ni

ca

Fa

l,

rm

sa

in

le

g,

s,

fo

re

ad

l,
ia
er
ag
an
M

g

ic e
rv
Se

m

pr

in

of

es

su

s io

pp

or

na

t

l

0

OC C U PATI
ON
M anagerial,
professional
Technical,
sales,
Service
Farming ,
forestry,
fishing
Precision
production,
craft
Operators,
fabricators
Others

2000

2001

2002

2003

2004

2005

838

935

896

786

792

739

2124

2090

1924

1772

1688

1566

2234

2053

2066

1863

1815

1713

591

609

629

504

552

482

3371

3504

3503

3110

3514

3196

5599

5011

4535

4158

4583

4122

295

185

100

158

238

257

I NC L U D ES AL L PR IVATE SEC TOR L OST W OR K D AY C L AIMS TH AT W ER E R EC EIVED D U R IN G
C AL EN D AR YEAR S 2000, 2001, 2002, 2003 2004 an d 2005.

24

CHART 11. LOST WORKDAY CLAIMS 2000-2005
by AGE

5

4

2000
2001
2002
2003
2004
2005

3

2

1

er
ov
d

65

15
AGE

an

55

to

to

64

54

44
to

45

25

35

to

24
20

to

19
to

r
16

de
un
an

d

34

0

2000

2001

2002

2003

2004

2005

15 and under

8

7

9

1

3

4

16 to 19

512

433

384

315

360

342

20 to 24

1658

1419

1357

1189

1255

1216

25 to 34

3820

3603

3220

2918

3053

2706

35 to 44

4403

4056

3925

3464

3534

3142

45 to 54

2972

3062

2987

2799

3023

2855

55 to 64

1327

1421

1380

1331

1577

1441

65 and ov er

277

317

341

281

323

313

IN C LU D ES AL L PR I VATE SEC TOR LOST W OR K D AY C LAIMS TH AT W ER E R EC EIVED D U R IN G
C ALEN D AR YEAR S 2000, 2001, 2002, 2003, 2004 and 2005.

25

CHART 12. DISTRIBUTION OF FATAL OCCUPATIONAL
INJURIES BY EVENT OR EXPOSURE
ARIZONA, 2000-2005
35
30
25

2000
2001
2002
2003
2004
2005

20
15
10
5

EVENT

TH

AI

ST

RC

RU

RA

CK

FT

BY

IN

O

CI

DE

FA

O

ER

S
NT

S
LL

T
EC
BJ

IC
M
HO

HI

G

HW

AY

IN

CI

DE

ID

NT

S

ES

0

2000

2001

2002

2003

2004

HIGHW AY INCIDE NT S

25

20

26

24

25

HOMICIDE S

10

19

18

6

11

ST RUCK BY OBJ E CT

11

11

6

7

5

FALLS

14

9

10

10

9

AIRCRA FT
INCIDE NT S

31

4

9

5

13

OT HE R

22

25

21

28

21

S OURCE : CE NSUS OF FATAL OCCUP ATIONAL INJURIE S, INDUS TRIAL COMMISS ION OF ARIZONA

26

CHART 13. DISTRIBUTION OF FATAL OCCUPATIONAL
INJURIES BY AGE
ARIZONA, 2000-2005
35
30

2000
2001
2002
2003
2004
2005

25
20
15
10
5

ER

4

2001

2002

2003

2004

2005

24 AN D U N D ER

19

10

5

6

5

9

25-34

22

22

26

17

24

18

35-44

29

22

27

27

17

25

45-54

21

16

31

14

16

27

55-64

18

11

8

12

15

13

65 AN D OVER

9

6

4

3

5

4

24

65

AN

D

AN

D

UN

OV

45

55

-6

4
-5

4

2000

25

35

-4

4
-3

DE

R

0

AGE

SOURCE: CENSUS OF FATAL OCCUPATIONAL INJURIES, INDUSTRIAL COMMISSION OF ARIZONA

27

CHART 14. ARIZONA WC RATES

Source: Oregon Department of Consumer and Business Serv ices

28