Two of the most powerful warning lights are your litigation rate and your large-loss frequency.
Together, they tell you when everyday claims are starting to turn into serious financial and operational risks.
1. The Litigation Rate — A Measure of Trust
The litigation rate tracks how many claims involve attorney representation.
Litigation Rate = (Number of Litigated Claims ÷ Total Claims) × 100
This single percentage reflects one of the most important — and most overlooked — aspects of your program: employee trust.
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When employees trust their employer, supervisor, and claims process, they rarely feel the need to call an attorney. But when they feel ignored, confused, or mistreated, legal involvement often follows.
A high litigation rate doesn’t just mean higher legal fees. It’s a symptom that employees don’t believe the system will treat them fairly without outside help.
Why Litigation Spikes
Several common causes lead to rising litigation:
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Slow or unclear communication. Injured workers who don’t understand what’s happening turn to lawyers for answers.
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Delayed reporting or treatment. Frustration builds when care feels slow or disorganized.
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Lack of supervisor support. The first interaction after an injury sets the tone. A cold or skeptical response often triggers defensiveness.
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No return-to-work plan. If employees feel forgotten or financially stressed, they may seek representation to secure income or medical stability.
How to Improve It
Lowering your litigation rate requires improving communication, consistency, and care.
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Educate supervisors. Train them to respond with empathy and clarity when an injury occurs.
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Contact quickly. A same-day phone call from HR or a claims coordinator reassures employees that the process is working.
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Explain the next steps. Simple communication like, “Here’s what will happen next” can eliminate uncertainty that fuels attorney involvement.
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Monitor trends. Track litigation rate by location, department, or supervisor to identify patterns before they spread.
A consistently low litigation rate is one of the strongest signs that your culture, communication, and injury response are functioning properly.
2. Large-Loss Frequency — A Measure of Control
While the litigation rate measures trust, large-loss frequency measures control.
It tracks how often your claims exceed a defined financial threshold — for example, $50,000 or $100,000 incurred.
Large-Loss Frequency = (Number of Claims Over Threshold ÷ Total Claims) × 100
The large-loss metric tells you how effectively your team contains serious injuries before they spiral into catastrophic cases. These claims don’t just affect one policy year — they often drive your experience mod for years to come.
Why Large Losses Occur
Large losses are typically caused by a combination of:
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Severe injuries (traumatic events or complex medical conditions).
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Poor initial response. Delayed medical care or reporting allows minor injuries to worsen.
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Uncoordinated claim management. Lack of communication between the employer, adjuster, and medical provider leads to treatment gaps and extended disability.
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Reactive decision-making. When claims aren’t reviewed early and strategically, they evolve unchecked into six-figure losses.
While not all severe injuries are preventable, many large losses are manageable — if caught early.
How to Improve It
Controlling large-loss frequency comes down to early identification and proactive oversight.
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Set an internal large-loss threshold. Flag any claim that reaches half that amount for immediate review.
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Conduct claim roundtables. Bring together safety, HR, and claims professionals to analyze major cases and determine next steps.
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Track trends. Identify departments or operations that repeatedly generate high-dollar claims.
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Prioritize early medical management. Fast, coordinated treatment and return-to-work planning reduce complications that inflate costs.
Organizations that regularly analyze large-loss claims gain valuable insight into both safety failures and system weaknesses.
3. The Relationship Between the Two
The litigation rate and large-loss frequency often move together — and that’s no coincidence.
When communication breaks down, litigation increases.
When claim management becomes reactive, large losses follow.
Both trends usually signal a broader issue in your injury response system — late reporting, inconsistent follow-up, or lack of leadership oversight.
Tracking these two metrics side by side gives you a powerful early-warning system:
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Rising litigation means employees are losing trust.
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Rising large losses mean management is losing control.
Either one demands immediate attention; both rising together means your program is entering dangerous territory.
4. How to Use These Metrics Strategically
These aren’t numbers you measure for compliance — they’re numbers you measure for insight.
Here’s how to put them to work:
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Set benchmarks. Know your organization’s historic averages and compare across similar industries.
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Create monthly dashboards. Include litigation rate and large-loss frequency alongside core metrics like cost per claim, claim count, and lag time.
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Respond quickly to change. If litigation or large-loss frequency spikes, act immediately — don’t wait for year-end results.
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Train supervisors and claim handlers. The most influential touchpoints in both metrics occur in the first few days after injury.
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Celebrate progress. When these numbers improve, share the success internally — it builds commitment to your claims management practices.
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5. A Culture of Prevention and Partnership
Ultimately, both metrics point to the same truth: trust and control determine cost.
When employees trust the system, they communicate early and cooperate fully.
When managers and claims handlers stay in control, serious losses are contained before they grow.
The best workers’ compensation programs aren’t defined by luck or paperwork — they’re defined by consistent human connection, proactive management, and data-driven focus.
Measure your litigation rate. Track your large-loss frequency.
Those two numbers will tell you — clearly and honestly — whether your program is under control or quietly slipping off course.
Michael Stack, CEO of Amaxx LLC, is an expert in workers’ compensation cost containment systems and provides education, training, and consulting to help employers reduce their workers’ compensation costs by 20% to 50%. He is co-author of the #1 selling comprehensive training guide “Your Ultimate Guide to Mastering Workers’ Comp Costs: Reduce Costs 20% to 50%.” Stack is the creator of Injury Management Results (IMR) software and founder of Amaxx Workers’ Comp Training Center. WC Mastery Training teaching injury management best practices such as return to work, communication, claims best practices, medical management, and working with vendors. IMR software simplifies the implementation of these best practices for employers and ties results to a Critical Metrics Dashboard.
Contact: mstack@reduceyourworkerscomp.com.
Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/
Injury Management Results (IMR) Software: https://imrsoftware.com/
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