The Trust Fund made an offer for settlement that IRG deemed inadequate and out of sync with the Fund's exposure in the case. IRG instead recommended a trial of the case.

IRG, through its law firm IRLA, brought the employee back from California to testify at hearing. Although the evidence was strongly in favor of our client, the Fund still failed to make a reasonable offer of settlement. In the end, the Judge issued a well-crafted decision, finding all the elements of the statute satisfied. The appeal period for the Fund will run out on November 1, 2008.

This claim exemplifies IRG's willingness to prosecute claims on behalf of our clients and maximize our client's rights to reimbursement when Trust Funds are unwilling to offer fair value for their exposure.

Summary: In recent years, New York, South Carolina, and Georgia have enacted legislation to phase out their respective Second Injury Funds (SIFs). Over 20 SIFs have closed or "sunset," leaving about 20 states with SIFs open to claims with new dates of injury. Of these, about 10 have enabling language that creates significant opportunities for employer savings.

While many SIFs have closed to future claims, employers should not forget that there is still, by the authors' estimates, upwards of $40 billion dollars to recover from those funds. Employers and insurers need to be certain that processes are in place to recover those dollars effectively and efficiently. Furthermore, the clock is ticking on several funds, making it imperative that insurers and employers with exposure in those states act now to recoup any outstanding recoveries.

This article briefly reviews the history and intent of SIFs and provides an update of major changes with respect to SIFs that have recently closed or been changed by key laws. It also seeks to put the role of today's SIFs in a more modern context. For employers, that context is an era of significant interstate and world competition.

Insurance Recovery Legal Associates fought this battle to preserve the right to file these claims for our clients. We diligentlay pursue claims through the appellate system when necessary in order to protect our clients' rights. This decision was extremely close with the SJC split 4 to 3 on one case and 3 to 3 on the other. It is favorable news for the many clients and business partners that currently have IRG working on their Massachusetts files.

If you are not currently working with Insurance Recovery Group (IRG) on your MA files, be aware that the further we get from the 1985 - 1991 DOI claims, the more difficult it will be to obtain the documents and evidence needed for successful SIF recovery. Timing is of the essence and urgency is in order to ensure that all such cases are identified and are being aggressively pursued before the passage of time creates an insurmountable obstacle to obtaining aged documents. Otherwise, your opportunities may be lost forever.

Contact us today if you would like to learn more about how we can help you with your second injury fund recoveries.

The major Second Injury Fund changes are as follows:

1. The Fund shall not consider a claim for reimbursement for an injury that occurs on or after July 1, 2008.

Comment: The impact on employer premiums may ultimately be an increase, estimated at anywhere from 3% to 17%, to account for the cost of disability that was previously born through the second injury fund assessments. Assessments are unlikely to go down, however, for years to come.

2. An employer, self-insurer, or insurance carrier must notify the SIF of a potential claim by December 31, 2010.

Comment: The notice period for preservation of a claim is still within 78 weeks of compensation having been paid, but this is an outside date even if 78 weeks has not been paid. The Fund now requires additional information to be submitted with any notice form, including:
• Employer's name and address;
• Insurance carrier's name, address and the NCCI code; and
• Insurance carrier's claim number, policy number, and policy effective dates.

Failure to provide this documentation with notice to the Fund after 7/1/07 will bar any future recovery efforts. Furthermore, for claims where notice was filed prior to 7/1/07 without this information, the Fund is requiring the additional information be submitted prior to the Fund's final determination.

3. The new law eliminates arthritis and "catch-all" claims from the presumptive list for dates of injury on or after July 1, 2007.

Comment: While this appears to be significant, in reality it should have little effect on your rights to recovery for so-called arthritis claims since only the "presumption", not the right to recovery, has been eliminated. If the Fund continues to view the list of medical conditions in the statute an exclusive list, then many claims will need to be litigated. There is an Appellate Panel Opinion which IRG championed, ruling that the list in the statute is not exclusive. The Fund chose not to appeal this decision. Therefore, it is now the standing law and they are obligated to follow it. Yet, they may not, thus requiring unnecessary litigation.

4. The new law creates Fund liability only when the disability is substantially greater and is caused by an aggravation of the pre-existing impairment for dates of injury on or after July 1, 2007.

Comment: The new law eliminates the right to file a claim where the prior impairment and subsequent injury involve two different body parts for dates of injury after July 1, 2007. The wording, however, is very confusing and could be subject to other interpretation. We will still look closely at so called "two body part" claims. Also, it is important to note that the "but for" language remains in the statute, meaning that if the second injury would not have occurred "but for" the existence of the prior impairment, even if two different body parts are involved, you can still file the claim.

5. An employer, self-insurer, or insurance carrier must submit all required information for consideration of accepting of a claim to the SIF by June 30, 2011.

Comment: Failure to submit all required information will bar recovery from the Fund. We anticipate that there will be litigation on this issue because parties often disagree on the definition of "required information" to prove an element of a claim. It may put some pressure on the Fund administrators towards the end of the period and result in unreasonable denials that will have to be litigated.

6. After December 31, 2011 the SIF shall not accept a claim for reimbursement.

Comment: This gives the SIF only six months to accept, deny, or compromise all submitted claims. If the Fund cannot accept a claim after this date, then it will have to deny the claim even if it may have otherwise accepted the claim. This may again create some needless litigation of claims that should have otherwise been accepted.

7. SIF terminates on July 1, 2013.

Comment: This in no way affects a carrier's future rights to recovery on established claims which remain enforceable against the State. At this point in time, there has not been a definitive answer as to which department will assume reimbursement payments. However the Fund has stated that this information will become available at a later date.

Due to ambiguities in statute and its tight time restrictions, the passage of this legislation will most likely contribute to increased litigation to perfect second injury fund recovery.

• Limits recovery to greater disabilities created by aggravation of the prior injury and eliminates merger from combined effects.
• Eliminates arthritis and "catch-all" claims from the presumptive list for dates of injury on or after July 1, 2007.
• Closes the Fund to claims with dates of injury after June 30, 2008.
• SIF must receive notice of all claims by December 31, 2010.
• SIF must receive all documentation for consideration of reimbursement by June 30, 2011.
• The fund must make a final determination on all claims by December 31 2011.
• SIF terminates on July 1, 2013

The changes create fewer opportunities for SIF reimbursement on claims with dates of injury after July 1, 2007. Although the changes do not create any expedited filing issues for a few years, you should review all claims with dates of injuries prior to July 1, 2007 to ensure that notice is filed by the December 31, 2010 deadline.

It is proposed that the fund will not accept claims for reimbursement from carriers or employers after Dec. 31, 2011 and would not consider claims for reimbursement for injuries occurring on or after July 1, 2008. It is proposed that all notices on any and all claims be filed before Dec. 31, 2010.

Planned changes to the statute itself that would take effect for dates of injury on or after 7/1/07 are:

1) Limit claims where the second injury aggravated a prior condition as opposed to prior conditions that combined with second injury to created a greater indemnity exposure
2) Eliminate arthritis as one of the presumptive prior conditions
3) Eliminate the catch all presumptive paragraphs regarding prior conditions

Both houses of the NY legislature recently passed identical versions of an extensive workers' compensation reform bill that includes, as one of its major components, the phasing out of the Special Disability Fund (Second Injury Fund). The reform package is expected to be signed into law very soon.

The impact of this new legislation on the Special Disability Fund means that there is a much shortened window of opportunity to get claims accepted for Second Injury Fund reimbursement and that reimbursement requests for already accepted claims need to be brought up to date as soon as possible.

The bill includes the following provisions:

- No claims for reimbursement (i.e., C-250 notice forms) may be filed on claims with dates of injury on or after July 1, 2007. (The Fund is therefore closed to new claims with dates of injury on or after July 1, 2007)

- No new claims for reimbursement (i.e., C-250 notice forms) may be filed for any claims (regardless of the date of injury) after July 1, 2010.

- No written submissions or evidence may be submitted in support of a claim for reimbursement after July 1, 2010.
(Previously there was no time limitation on submitting evidence to the Fund once a C-250 had been filed. The bill does not provide any exceptions for claims in litigation, claims denied by the Fund and adjourned for the carrier/self-insured to provide additional evidence, or for claims where the claimant has not cooperated with the carrier's second injury fund ("Section 15-8") investigation. )

- For claims where the Special Disability Fund has been found liable (i.e., the provisions of Section 15-8 apply), reimbursement monies must be requested within 1) one year of the date of the reimbursable expense or 2) one year from the effective date of legislation, whichever is later.
(This provision precludes recovery of all accrued reimbursement value on even newly accepted claims beyond the previous one year's worth. Therefore, a review of all accepted claims is critical to ensure no old expenses are left un-requested. Equally or more important is a thorough review of all non-accepted claims with C-250s filed that have already reached the threshold for reimbursement, or are within a year of reaching it, to ensure timely acceptance from the Fund so that retroactive reimbursement may be requested before this provision bars recovery.)

- A $250 filing fee is imposed, effective immediately for filing Forms C-250, with $200 reimbursable on accepted claims.

- A Waiver Agreement Management Office will be established to negotiate settlements on behalf of the Fund directly with claimants on claims where Section 15-8 has been found to apply. These settlement agreements will not require carrier or employer approval. The Waiver Agreement Management Office and the carrier/self-insured may also enter into joint settlement agreements where liability for payments to the claimant is apportioned.

Given the deadlines established by this legislation, it is imperative that all potential claims are uncovered as soon as possible and that work begin immediately on perfecting these claims and catching up on overdue reimbursement requests for already accepted claims.

It is important to note that in order to have preserved a claim for potential reimbursement, notice did NOT have to be filed with the Fund before June 30, 2006. The "78 week rule" for notice is still in effect. However, any claim where proper notice was filed BEFORE June 30, 2006 needs to be accepted by June 30, 2009. For any claim where proper notice is filed AFTER June 30, 2006, the claim must be accepted within three years of the notice being filed.

The requirement for acceptance will make for an interesting issue when the deadline comes. Will the Fund be able to review and accept all viable claims before the deadline? What will happen if a claim is disputed?

In June, based on IRG's appeal, the Massachusetts Reviewing Board took the exceptional step of overruling a previous decision and ordering the payment of interest on second injury fund claims. The Reviewing Board's original decision that interest did not apply was based on the application of the doctrine of sovereign immunity- that is, the government is not subject to interest assessment because the sovereign can not be sued.

In IRG's appeal, we vigorously dissented to the application of this doctrine saying we were not dealing with the state acting as the state but rather as a trustee of moneys paid by employers upon the hiring an impaired worker who later becomes disabled. This time, the Reviewing Board agreed with us, and further, acknowledged that the reasoning for its previous decision was "flawed".

There were two key quotes in the decision:

"The imposition of Sec. 50 interest serves the policy of encouraging early resolution and settlement".

"It only makes sense that there should be financial motivation for the Trust Fund to promptly pay meritorious Section 37 petitions".

The court went on to note that "The benefits to employers from the Section 37 reimbursement- the appropriate downward adjustment to experience modification - can be entirely lost when petitions languish in the system for years."

We look forward to using this development on behalf of all our clients as a financial incentive to the Fund to adopt the practice of responsible and timely adjustment of Section 37 claims.

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To learn more about this article or the other articles published by IRG, please click here.

The elimination of the Second Injury Fund was one of several proposed changes that were intended to cut the costs of workers' compensation in the state. Business groups disagreed as to whether the elimination of the fund would save money or not. Last week, a House Committee stripped the bill of most of its provisions, including a decision to keep the Second Injury Fund with some restrictions.

According to a news story in the Island Packet:

"This legislation scales the Second Injury Fund back to handle only the most severe types of injuries and disabilities. If the losses- $253 million was assessed last year- don't fall to $8 million by 2012, the program would be eliminated."

According to Associated Press reports, the legislation will not be enacted unless it will generate 10 percent or higher savings over the first five years. The recommended changes will now be studied by an independent consultant.