There was never any question that Charles E. Hanna, 33, suffered a serious job-related injury the day his cleaning rag snagged in an elevator motor at Washington's exclusive Metropolitan Club.

His right hand was amputated in the machinery. Doctors replaced it with a hook. Only a thumb remains on his left hand.

Under the D.C. workers' compensation insurance program, designed to protect injured workers, the law required that the insurer for Hanna's employer pay all the medical bills plus $70 a week to support Hanna, his wife and two children.

That was 1971. Workers' comp benefits were meager by any standard.

Even so, Hanna says today, he never went out to look for a new job although his previous experience would have qualified him for a supervisory position in an elevator company. The reason? Taking a job would have cost him the $100,000 or more in nontaxable workers' comp benefits he has collected during the last nine years.

"I would have been cutting my own throat," Hanna says bluntly.

Today those same benefits range as high as $426 a week and employers say they can no longer tolerate the skyrocketing premiums that pay for the system. The D.C. City Council is considering rolling back worker's benefits, which were liberalized by Congress a year after Hanna was injured.

The story of Charles Hanna is a stroy of the contradictions and disincentives built into Washington's workers' comp system. Even though the benefits were relatively meager at the time of Hanna's injury, the incentives were not directed at returning to work, but rather toward holding out for a higher settlement from the insurance company and qualifying for maximum Social Security benefits.

With greater benefits today, the central paradox facing the injured worker is that, contrary to encouraging an injured worker to return to the labor market, the system rewards the hard work needed for rehabilitation by diminishing or canceling benefits.

"This is a classic case of the system discouraging rehabilitation," says Hanna's lawyer, Joseph H. Koonz Jr.

For Hanna, the system's disincentives convinced him to:

Drop out of Bible school three years after his injury because a ministerial degree would have fueled the insurance company's contention that Hanna was not totally disabled.

Turn down a $25,000 settlement offer in 1973, the first of many such offers, because Hanna knew that the longer he waited, the greater the offers would be.

Totally reject the idea of temporary jobs that would have paid near the minimum wage because the potential resulting loss of workers' comp and Social Security benefits would have been greater than the wages he earned.

Tuesday, Feb. 23, 1971, was Hanna's last day of work. He had gotten his job with Wellens Elevator Co. Inc., through his uncle, Sam Boone. You needed to know someone, Hanna says, because the evevator men were a close-knit group.

To get to the machine room in the basement of the Metropolitan Club, you go down a long flight of stairs near the door to the loading dock. For two weeks, Hanna has been going to the Club at 17th and H streets NW to work on the elevator motor. It was leaking oil persistently.

Hanna was standing on the metal platform where the motor was mounted -- 18 inches or so off the floor -- and was wiping excess oil off the sheave, a big wheel grooved at the edge to carry the thick steel elevator cable.

Where the cable feeds into the groove of the sheave, Hanna's cleaning rag snagged. Instead of letting go, Hanna tightened his grip to pull the rag free.

His hands were jerked into the scissors formed by the wheel and cable.

"It was really carelessness on my part. I wasn't watching what I was doing," he said.

Hanna's right hand was amputated at the wrist and four fingers were sliced off of his left hand. He remembers vividly jumping down off the platform and running up the long flight of stairs to yell for the building engineer who tied tight tourniquets on both arms until the ambulance arrived.

"If I would have fainted [in the basement] I would have bled to death," he said.

The insurance company that held the worker's comp policy for the elevator company picked up the medical bills at George Washington University Hospital.

Within a matter of weeks, Hanna's workers' comp checks began to arrive -- $70 a week, the maximum payment prior to 1972. As an elevator man, Hanna had earned about $280 a week. With a wife and two children, it clearly was not enough to live on.

He applied for Social Security benefits, but was told it would be six months before he was eligible to collect them and seven months before the first check would arrive.

"I had to use some of my own savings," said Hanna. "Then the evevator men [of Local No. 10] took up an offering for me. They raised $7,000 or $8,000 and that really helped us."

While still in the hospital, one of Hanna's friends in the union told him about a lawyer who was good at handling worker's comp cases. Hanna asked Joseph H. Koonz Jr. to visit him in the hospital.

Months passed. Hanna was fitted with the chrome-plastic appendage over his right wrist and forearm. He learned how to drive again with special controls; to pick up a hot cup of coffee between the thumb and fingerless palm of his left hand. And, he began to think of a new career.

Born in Honea Path, S.C., where the religious tendencies are fundamentalist, Hanna decided he would enter Bible school. He sold his home in New Carrollton and moved his family to Lynchburg, Va., where he began to prepare for a Baptist ministry.

Meanwhile Koonz's strategy in handling Hanna's case was to apply for permanent total disability, which pays maximum benefits for life and is allowable with the loss of both hands.

However, the insurance company was not willing to concede that both of Hanna's hands were useless.

"The counsel for the insurance company took the position that there wasn't a loss of the second member [hand] and he had the operating surgeon go along with him," Koonz said in an interview. "The bad thing was that, based on the American Academy of Orthropedic Surgery standards, this man had 50 percent use of the hand [where the thumb remained]."

"He could pick up paper, drive a car and do things like that," said Koonz.

During the long months of negotiations with the insurance company, there were offers to settle the case, offer was $25,000," said Hanna. "But I just kept holding out, because I knew that the longer I waited, the more I would get out of it."

In 1972, Congress rewrote the D.C. workers' comp law to settle an unrelated dispute between shipyard owners and longshoremen, who are also covered by the law.

Workers' benefits were adjusted for inflation. For those who were injured before 1972, Congress set up a special fund from which extra payments were made to people like Hanna to account for inflation.

Before long, Hanna workers' comp check was up to about $140 a month. But under the provisions of his Social Security disability, his total benefits could not exceed 80 percent of his wages before his injury.

In the months leading up to a hearing in May 1975 called to settle the question of whether Hanna was totally disabled, he dropped out of Bible school on his lawyer's advice.

Said Koonz: "The truth was, if he finished school and became employable [as a minister], that weakened my legal position that he was totally disabled."

Koonz won his case before administrative law judge Russell M. King Jr. of the U.S. Department of Labor. "The conclusion that an elevator mechanic of nine years retains 50 percent use of his left hand with only the thumb remaining and no right hand at all . . . is not accepatable," King concluded.

The opinon was rendered on May 27, 1975, more than four years after the accident. Koonz was paid $1,900 for the 38 hours he told the judge he had devoted to Hanna's case to that point.

And thus began four more years of negotiations with the insurance company over the lump sum settlement that would end the company's obligation to Hanna. o

On July 5, 1979, the Aetna Casualty & Surety Co., agreed to pay Hanna $95,000 supplemented by $13,555 from the federal government for a total of $108,555. Out of that, $12,500 was paid to Koonz.

"Dragging it out this long is really my own doing," said Hanna. "I could have taken that $25,000 lump sum in 1973 and gone back to work at the minimum wage, but I would have been cutting my own throat."

Hanna doesn't think my elevator company would have hired him back at the $7.28 a hour he had been making, although he thinks he could have put his experience to work supervising others.

"A handicapped person doesn't stand a chance," he said. "They're going to hire people who have all of their faculties."

Though Koonz contends that the "system" has worked against his client's rehabilitation, he adds, "Anybody who lost hands really shouldn't be expected to work. After all, losing your hands is as servere a price a person can be expected to pay in an industrial accident short of being killed."

As for Hanna's job prospects, Koonz observed: "He [Hanna] now feels that he is qualified for [permanent] Social Security benefits [about $600 a month]. The only kink is that if he does go out and earn a living he doesn't qualify. . . ."

For Hanna, the more than $14,000 in legal fees he paid Koonz was worth it.

"You need someone who knows the system. If I didn't have a lawyer, the insurance man could have come to see me and offered me $10,000 or $15,000 and I might have signed on the dotted line. I might have lost the ball game."

"Added Koonz: "I think he very well might have been lulled into some kind of agreement that would not have been to his financial benefit. He couldn't have done this [made the $108,555 settlement] without a lawyer."

Hanna's view of the future: "I'm definitely going to try and find employment." But, he said, he will first wait to see how his settlement with the insurance company affects his Social Security benefits.

"You call 12 different people down there [Social Security Administration] and you get 12 different answers," he complained.

His greatest criticism of the workers' comp system, Hanna concluded, is: "There's no helping a man injured on the job -- from Social Securtiy or workers' comp -- there's no helping a guy to make a fair and decent wage."