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SJC hears dispute over whether insurers in runoff can claim workers' compensation reimbursements
Summary
The Supreme Judicial Court heard arguments over whether an insurer that stopped writing new policies and entered runoff remains eligible for second-injury reimbursement from the state Workers' Compensation Trust Fund. Counsel for Arrowood said the statute allows reimbursement; the Trust Fund argued a statutory gap and administrative concerns.
The Supreme Judicial Court heard oral argument in Arrowood Indemnity Company v. Workers' Compensation Trust Fund over whether an insurer that has stopped writing new policies and entered runoff remains eligible for second-injury reimbursement from the Commonwealth's workers' compensation trust fund.
Attorney Eric Smith, representing Arrowood Indemnity Company, told the court Arrowood "has pursued this case because we believe that the earlier decisions in Panu affirmed by Home ... were wrongly decided." Smith argued the text and structure of the workers' compensation statutes show no bar to reimbursement for insurers in runoff and that assessments continue to flow into the trust fund through successor insurers. "There's no provision in the statute that prohibits reimbursement to insurance companies run off or that requires an insurance company to deposit assessments as a condition to receiving reimbursement," Smith said.
Smith described the facts of the case: Arrowood issued a policy to employer Scully in February 2001 and paid benefits after an employee, Pena, was injured that month. Arrowood entered runoff in February 2003; Smith said Arrowood submitted reimbursement requests for second-injury benefits and received payments through roughly 2013 until the appeals-court decisions at issue altered the fund's position.
Douglas Martland, Assistant Attorney General representing the Trust Fund, countered that the case centers on deference to the agency and on a statutory gap concerning insurers that stop fulfilling certain obligations under Section 65. "The legislature left a gap in the statute, the agency filled the gap, and the agency's means for filling that gap ..." Martland told the court, and he said the gap involves "what to do when an insurer stops fulfilling its obligations under section 65." He argued administrability and enforcement concerns would follow from a rule that automatically entitles runoff insurers to reimbursement.
Both sides addressed how the assessment and reporting mechanisms operate in practice. Smith said insurers in runoff continue to file Form 50 reporting to the Department of Industrial Accidents but often report zero assessments because they no longer have current insureds to collect assessments from. He said the assessment base remains intact because employers must carry insurance and successor insurers collect and remit assessments. Martland emphasized that Sections 65.3 and 65.5 create reporting and collection duties and provide remedies for noncompliance (including fines and liens), and he said the Trust Fund uses reporting and assessments as practical means to identify companies that have ceased ordinary participation.
The justices pressed both advocates on practical effects. A justice asked for a concrete example of harm to the system from allowing runoff insurers to receive reimbursement; Smith and Martland debated whether the appeals-court decisions that limited reimbursement were addressing real funding shortfalls or administrability and risk-allocation concerns. Martland characterized part of the appeals-court reasoning as an administrable rule that prevents the trust fund from having to investigate the status of every insurer.
No decision was issued from the bench. The case will be decided by the court after consideration of the parties' arguments and the cited statutes and precedents.
