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While the modern paradigm of insurance has existed since the seventeenth century, most forms of insurance that was know of today developed as a result of the industrial revolution, which changed the very simple, laissez-faire paradigms into the more organized system we have today.
One of the changes what came about was business liability insurance, which developed as a reaction to the overwhelming challenges of the lower class factory workers in developing cities facing the newly created and very dangerous work environments. Prior to the twentieth century, an injured worker had very little recourse to take against an employer that provided an unsafe work environment. If injured, and assuming he was actually able to make it to the court room, he would have to sue the employer directly in the court of law for medical expenses and lost work, for which the system was heavily slanted in the favor of the employer. If he was unable to make it to the court room, or if he was killed in the workplace, his widow and orphans would have no recourse, as common law only allowed suits from the employee.
Worker’s compensation evolved quickly into a no-fault system, meaning that employers would pay medical expenses of injured employees regardless of fault. While the system was outrageous to employers, it was necessary to reduce the excessive payment of fees to witnesses and lawyers.
It was not until 1911 when the state of Wisconsin introduced the Workmen’s Compensation Act, which required employers to compensate employees for damages incurred in the workplace. This resulted in the creation of business liability insurance, which became a virtual mandate for all Wisconsin businesses (while it was legal to operate uninsured, they would have to expose their assets directly in the event of a lawsuit). By 1934, nearly all states had adopted some form of workman’s comp legislation, creating the modern, progressive paradigm we are now able to enjoy today.