Thursday, November 14, 2013

IL Guarantee Fund must pay ongoing benefits owed by insolvent excess comp carrier

In a recent Illinois Supreme Court decision the question was who was going to keep paying a PTD  award related to a 1985 accident   with more than a million dollars in prior benefits when the excess carrier became insolvent and the Guarantee Fund refused to pay any more.  The case is Skokie Castings v Illinois Ins. Guarantee Fund, 2013 IL 113873 (October 18, 2013).

The case involved an appeal by the Fund from summary judgment by the circuit court that it had to continue to pay benefits and reimburse the employer for benefits paid after its refusal.   The Guarantee Fund asserted it had no further obligations because of a  $300,000 cap on Guarantee Fund claims and an exception did not apply for "any workers compensation claims"  (215 ILCS 5/537.2) because the case involved an excess carrier. 

The employer had an excess policy with Home Ins.  It paid the first $200,000 based on its self-retention limits.  Home became insolvent before fulfilling its contractual obligations.    The Illinois Guarantee Fund stepped in and paid the next $300,000, and claiming the cap of 215 ILCS 5/537.2 applied.    The Fund refused to pay any more claiming the cap applied and the employer then stepped in and paid the next $500,000.

The court indicated the issue was resolved as a matter of insurance law. 

"For purposes of the Fund, a covered workers’ compensation claim is therefore an unpaid claim for a loss “arising out of and within the coverage of” a workers’ compensation insurance policy to which this portion of the Insurance Code applies and which is in force at the time of the occurrence giving rise to the unpaid claim."  The court concluded that the cap did not apply and the Fund's attempt to distinguish primary and excess coverage was untenable. The Guarantee Fund's should honor the excess carrier's obligations even if  they may exceed its $300,000 cap for non-comp claims. 
A dissent found the conclusion unsupported as a matter of statutory construction and contract interpretation  but praised the explanation of comp benefits as "intellectually enriching" and "alluring in its simplicity." 



Wednesday, November 13, 2013

Supreme Court announces new standards for Fund cases

The Missouri Supreme Court has now spoken on what prior injuries "count" for purposes of accessing second injury fund benefits in Missouri worker's compensation cases in 4 new cases appealed last year by the Fund:  Witte, Salviccio, Dyson and Buhlinger, in an en banc decision issued on November 12, 2013. (No. SC 92834, 92842, 92850, 92867). 

Since 1993 the legislature required numerical thresholds for an injured worker to access the Fund. This change was to limit access to the Fund by preventing de minimus injuries to trigger fund liability.  Section 287.220.1 provided an employee must have a prior injury of at least 15% of an extremity or 12 1/2% BAW. 

The question presented in these cases to the Supreme Court was whether each separate prior condition had to meet the threshold or whether they could be combined.  The Commission awarded benefits in all four cases and the awards were enhanced by stacking prior conditions that separately did not meet the threshold.  The Court affirmed the awards  in three of the four decisions.

The Supreme Court interpreted 287.220.1 to require proof of at least one single pre-existing  condition that meets the threshold to trigger the fund's liability.  After that requirement is satisfied,   all preexisting injuries must be considered in calculating the amount of compensation for which the fund is liable. 

The Court concludes that "section 287.220.1 does not require a disability from the last injury alone to meet  a numerical  threshold to trigger liability" and over-rules multiple court of appeals decisions supporting that requirement. 

The court concluded the Commission erroneously stacked disabilities to meet the initial threshold level based on the plain and unambiguous language which refers to disability in the singular and not in the plural form.  Similarly, the court found the Commission combining major extremity injuries to BAW injuries by using a common unit of measurement was not supported by the language of the statute.

The Court notes the legislative purpose behind having thresholds in the first place is "not clear".  The court notes the general legislative purpose of the Fund  is to encourage employment of individuals who are already disabled.  The purpose of thresholds clearly facilitates that purpose when the disability is obvious to a potential employer.  This made a lot of sense in 1943 when the Fund started before ADA, GINA and other limitations in inquiries about a job candidate's medical condition. 
There is no need for a Fund for this goal when the employer cannot inquire about medical conditions or the prior condition is so de minimus that no reasonable employer would perceive it to have any potential to combine with a new injury. 

The General Assembly in 2013 limited eligibility for the Second Injury Fund which take effect on January 1, 2014, but the changes have no retroactive effect. 

 The decision is early Christmas  for anyone with a pending SIF case with at least one prior condition that meets threshold as it creates an opportunity to enhance a Fund award by adding up minor conditions that would not otherwise qualify. The Fund is already burdened with millions of dollars in unpaid obligations for cases that met the previous statutory  threshold.  This latest decision greatly expands Fund liability. It is the legal equivalent of  a free round of drinks as the Titanic clips the iceberg. 

See also

Paule v Coibion Concrete, 2013 Mo WCLR Lexis 217 (Nov. 26, 2013). The commission approved a joint motion of resolution agreeing  that a prior disability of 10% for a back condition qualified for Fund benefits.