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First Department Reopens 25-a for Claims With Policies Prior to Oct. 1, 2013

April 15, 2016

Yesterday, 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 April 14 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 statue 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.

Read the full decision here: American Economy Insurance Co., et. al, v. The State of New York, et. al., 2016 NY Slip Op 02924.

For more information on how this may affect your claims, contact: