Are Second Injury Funds Going to be History Soon?

Wednesday, May 14, 2008 | 0

By Jon Gelman

Second Injury Funds are now undergoing a critical evaluation as the economy continues to deteriorate. Originally created post-World War II, the SIFs encouraged employers to hire handicapped employees who with pre-existing disabilities. The concept afforded a shared responsibility through pooled insurance and insulated the employer from the burden of on apportioning liability in total and permanent disability cases.

Recently, however, the SIF had become raided by state politicians in an effort to balance their state budgets. New Jersey highlights such a concern, and within the last decade funds have been raided three times in order to satisfy debt in the general treasury. Not only does it renege on the promise of providing benefits to injured workers, it slows down the bureaucracy of administrating a workers’ compensation program by inadequately funding staff.

At recent hearings before the New Jersey State Senate there were a multitude of complaints concerning inadequate staffing of the SIF, including the need for more attorneys to represent SIF. As a result of this outrage there is pending before the state legislature a resolution to amend the New Jersey’s constitution to prohibit such raiding in the future of funds directed to employee benefits.

SIFs had been challenged by the insurance industry over the last 10 years and they have attempted to disband them and wind down their benefit distribution contributions. Such a challenge was recently opposed in Missouri, where an attempt to eliminate the SIF by 2011 was defeated.

Opponents of SIFs indicate that the Americans with Disabilities Act insulates the employee from retaliatory claims, and the SIFs are no longer necessary. Additionally, insurance carriers would like more control over the distribution of the benefit dollars and the SIF appears as an additional obstacle to employers in crafting settlements in total and permanent disability cases.

It is likely that this debate will continue and that the trend towards elimination of SIFs will also continue.

Jon Gelman is a workers' compensation attorney who practices in Wayne, N.J. He wrote Workers’ Compensation Law (West Group 2003), is a contributing member/author of the advisory board of Modern Workers Compensation and  is a former national Vice-President of the Workplace Injury Litigation Group.