The lawsuit, filed by VotersInjuredatWork.org and the California Applicants Attorneys Assn., contends that the regulations reduce permanent disability benefits by a much greater amount than lawmakers intended when they approved a sweeping overhaul of the state workers' compensation system last spring.

The complaint asks a Sacramento Superior Court judge to issue an injunction, restraining the state from enforcing the new regulations.

In addition, Sen. Richard Alarcon, a Democrat from the Los Angeles area, introduced a bill that would introduce rate regulation to the workers' compensation line.

The CAAA and groups representing injured workers claim that benefits could be cut by more than 50 percent under the new rules that took effect on Jan. 1 as part of the overall reform package hammered out last spring.

Nicole Mahrt, spokeswoman for the American Insurance Association, asserted that the "facts don't add up to the attorneys' claims."

"The reforms are making a significant difference in the California workers' compensation system," she said. "Costs are going down and employers are beginning to see real savings, decisions are being made faster, injured workers are going back to work sooner, and competition is returning to the marketplace."

The VotersInjuredatWork.org was formed last week and has been conducting demonstrations throughout the state. The largest one took place in downtown Los Angeles where 400 people rallied for about an hour in front of an office at a courthouse where administrative law judges hear workers compensation appeal cases.