The question in this case is whether the Special Fund for Reopened Cases must pay a claim for workers’ compensation benefits arising after the Fund was closed to new cases.
An employer is liable to pay statutory workers’ compensation benefits if an employee is injured on the job, and is required to secure this liability through insurance. A typical workers’ compensation insurance policy provides annual coverage, meaning that the insurance provider will pay benefits arising from any injury that occurred during the policy year. But a worker who is injured in one policy year may have a claim for benefits that arises well after the policy year concluded. And as a general matter, the insurer responsible for that policy year will continue to be liable for these late-arising claims, even though they come due long after the policy year concluded. This is what is meant by the “long tail” of workers’ compensation insurance.
The Special Fund for Reopened Cases was an effort to shorten the long tail of workers’ compensation insurance. In essence, the Fund permitted insurers to transfer long-dormant cases to the Fund; if an additional claim arose with respect to a transferred case, the Fund would pay that claim instead of the insurer. In this way, the Fund was intended to relieve insurers of some of the burdens of unexpected financial obligations of late-arising claims.
Although the Fund was created in 1933, the costs that the Fund was required to pay skyrocketed after 2007 and, in 2013, the Legislature decided to close the Fund to new transfers. Insurers challenged, on constitutional grounds, the closure as it related to claims from policy years that predated the closure. Applying the closure to claims from those past policy years was impermissibly retroactive, the insurers argued, because it would impose a new liability for completed transactions: now they would have to cover claims that, before, they could have transferred to the Fund. The Court rejected this challenge in American Economy Insurance Co. (“AEIC”) v. State, 30 N.Y.3d 136 (2017), cert. denied 138 S. Ct. 2601 (2018). The Court questioned whether the closure was retroactive at all and held that, in any event, any retroactive effect of closing the Fund to cases from past policy years was not unconstitutional.
In this case, claimant was awarded workers’ compensation benefits for workplace injuries that occurred in 1987 and 1991, and his employer’s insurer (the State Insurance Fund) permissibly transferred his case to the Fund in 2000. Claimant died in 2016, and his estate sought additional workers’ compensation benefits, claiming that his earlier injuries contributed to his death. An administrative law judge with the Workers’ Compensation Board, which adjudicates workers’ compensation claims, initially found that liability for the claim should lie with the employer’s insurer, the SIF. On administrative appeal, the Board agreed with that decision, citing the Court’s decision in AEIC as authority for the proposition that the Fund could not be liable for the claim post-closure.
The Third Department reversed and held, in this case and in a companion case, that the Fund could be liable for the claim. The court noted that claimant’s case had been properly transferred to the Fund before the closure became effective, and nothing in AEIC suggested that the Fund could not continue to be liable for claims in previously transferred cases.
The Court of Appeals granted the Fund and the Board leave to appeal.
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