Massachusetts Supreme Judicial Court Holds that Insurance Fund can Recoup Costs for Workers’ Compensation Claims Made on Behalf of High-Net-Worth Insureds

The Massachusetts Supreme Judicial Court issued a decision stating that the state’s insolvent insurers fund was able to recover for workers’ compensation claims paid on behalf of high-net-worth insureds.  In this case, Berkshire Bank argued that the Massachusetts Insurers Insolvency Fund could not recover workers’ compensation payouts made on behalf of an employee hurt while lifting a bag of coins. The superior court had found in favor of the bank, noting that amounts paid by the Fund would not have been “on behalf of” the insured employer and therefore would not have been able to be recouped.  The Supreme Court focused on the term “on behalf of” under Massachusetts law, concluding that the funds were paid “on behalf of the Bank” and could be recouped.

The Supreme Court reiterated Massachusetts law stating that the Massachusetts Insurers Insolvency Fund (Fund) may recover certain amounts paid “on behalf of” insureds, when those amounts were first paid by high-net-worth insureds. In this case, the employee who suffered an injury while working at a bank received workers’ compensation benefits under section 34, allowing for temporary total incapacity benefits, until those were exhausted, and she received section 35 benefits for partial incapacity.  The employee sought permanent and total disability compensation after her entitlement to section 35 benefits was exhausted.

The Fund, after agreeing to pay the employee $85,000 and all future medical expenses from her injury, then sought to recoup payments from Berkshire Bank.  The Bank refused to pay, and the Fund brought the underlying lawsuit. The Fund sought a declaratory judgment making the Bank liable for future payments and expenses for the employee’s workers’ compensation claim.

First, the Supreme Court stated that the Fund exists as a limited form of protection from insurer insolvencies. It is obligated to pay “covered” claims against an insurer.  The issue, the court stated, involved interpreting the phrase “on behalf of the insured.”

The Bank argued that the Fund did not make payments on its behalf, since once the employer pays workers’ compensation insurance, it is the liability of the insurer to pay compensation, and the employer does not have any further responsibility. The Supreme Court made clear that Massachusetts law provides an employer can meet its obligation by purchasing a workers’ compensation insurance policy or becoming licensed as a self-insurer.  “On behalf of” means “in the interest of,” and the insurer acts under a contract entered into by the employer to satisfy its legal obligation. The court stated the Fund’s payments to the employee met the requirement that they paid “on behalf of the insured.”

The court turned to public policy and stated that reading an exception into the insurance claim would be contrary to the purpose of the Fund’s creation.  The Legislature, in enacting section 17, did not mean to preclude the Fund’s recovery from high-net-worth employers for workers’ compensation claims.

The court reversed the judgment of the Superior Court, remanding for an entry of judgment in favor of the Fund.

At Pulgini & Norton, our experienced Boston workers’ compensation attorneys offer legal representation to injured employees seeking compensation for work-related injuries, including lost wages and medical costs. Contact our office today to discuss your claim with a skilled workers’ compensation lawyer. You can call us at (781) 843-2200 or contact us online.

More Blog Posts:

Reviewing Board Holds Massachusetts Law Requires Funding Mechanisms to Remain in Place to Ensure Payment of Workers’ Compensation Benefits Even for Employees of “Defunct Self-Insurers”, Massachusetts Workers’ Compensation Lawyer Blog, November 17, 2016

Massachusetts Reviewing Board Applies Successive Insurance Rule, Finding Coverage for Employee’s Ongoing Work-Related Injuries, Massachusetts Workers’ Compensation Lawyer Blog, November 10, 2016

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