On April 14, a New York appellate court found unconstitutional the statute closing the Fund for Reopened Cases (Section 25-a) for purposes of workers’ compensation insurance policies issued before October 1, 2013. For qualifying cases, insurers underwriting policies in New York once again have access to this avenue for transfers of liability.
In its decision, the New York State Supreme Court, Appellate Division, First Department found that for policies issued prior to October 1, 2013, the statute was unconstitutional because qualifying reopened workers’ compensation claims were not included when the premium rates were calculated by the New York Compensation Insurance Rating Board and approved by the New York State Department of Financial Services (DFS).
The court reasoned that the statute attached new legal consequences to the prior relationships. The statute was also found to violate the Takings Clause of both the United States and New York State constitutions because it imposed retroactively liability on a limited class of parties that could not have anticipated the liability, and the extent of that liability was substantially disproportionate to the parties’ experience.
For cases with policies issued after October 1, 2013, the statute remains valid to prevent a transfer of liability to the Fund for Reopened Cases.
It should again be possible to seek a transfer of liability for qualifying cases to the Fund for Reopened Cases pursuant to Section 25-a of the Workers Compensation Law for cases covered under policies issued prior to October 1, 2013.
Insurers and self-insured employers will need to review files previously believed to be ineligible for possible transfer of liability. As a reminder, the basic requirements for transfer pursuant to Section 25-a for cases are:
It is possible that New York State will attempt an appeal of this determination. More information to follow as the circumstances surrounding this decision develop.
Read the full decision here: American Economy Insurance Co., et. al, v. The State of New York, et. al., 2016 NY Slip Op 02924.
We anticipate it is likely the State of New York will appeal this decision. As this addresses a constitutional question, the Court of Appeals will hear this case. Considering the extensive effects of this decision, the court may issue a stay of this decision, preventing applications for 25-a until the court decides the case on the merits.
Goldberg Segalla’s Workers’ Compensation Practice Group has attorneys in offices across New York State who previously worked for the Special Funds Conservation Committee, which acts as the insurance carrier for claims that are established under Section 25-a of the Workers’ Compensation Law. If you have any questions regarding whether a case potentially qualified for a transfer of liability pursuant to Section 25-a, or for more information on how this may affect your claims, contact one of our attorneys who has firsthand experience in this area: