Raynor & ATF: More Questions than Answers?

Thursday, December 1, 2011 | 0

With the matter of mandatory deposits into the Aggregate Trust Fund finally resolved by the Court of Appeals on November 15, 2011, perhaps this matter will come to a conclusion.

But it will not . . . .

On Nov. 15, 2011, in the Matter of Raynor v Landmark Chrysler, the New York Court of Appeals ruled that the State Workers' Compensation Board’s interpretation of the 2007 amendments in Sections 27(2) and 15(3)(w), which mandate that private carriers make deposits into the Agrregate Trust Fund, is correct. (The matters of Collins v Dukes Plumbing, Hardy v Trico, Parkhurst v United Rentals;, and Salgy v Halsted Communications were covered by the Raynor decision.)

This will lead to two major issues: unpaid balances in the ATF and alleged unfair settlement options foisted off on the private carriers as compared to the State Insurance Fund and self-insureds.

Unpaid balances

I see a potential legal issue arising when the ATF settles a claim with a Section 32 settlement for a sum less than what has been deposited. To whom does the balance of the money belong? The fund or the carrier? In its decision, on Line No. 177, the Court of Appeals wrote:

The Takings Clause prohibits the government from taking private property for public use without providing just compensation. The amended statute, as applied, does not violate this clause. The statute neither increases the amount of compensation owed to claimant, nor does it appropriate the carrier’s assets for the use of the State (see Connolly v Pension Benefit Guar. Corp., 475 US 211, 225 [1986]; cf. Alliance of Am. Insurers v Chu, 77 NY2d 573, 577-578 [1991] [statute held unconstitutional because insurers had a property interest in the fund whose earnings were diverted to the State’s general fund]). Here, there is no such diversion, the mandatory deposit only reflects the present value of what is owed to an injured worker.

I read this to state that these funds are held in trust by the ATF for the beneficiary, the injured worker. When events transpire that end that relationship and the terms of the trust, i.e., the trustee’s responsibilities have been completed but the fund not depleted, it seems that the remaining balance of the fund is to be returned to the depositor and not the trustee.

For what other purpose would the ATF hold these funds? But with the state’s overreaching on "surplus" insurance funds, such as those held by the State Insurance Fund, will the state simply move the unused funds into the general budget? This is a question I have been asking practitioners for months and not one of them, probably 40 in total, can answer that question other than to assume that the state will, one way or the other, keep the funds.

Unfair Settlement Options

Historically Section 32 settlements have been for payment of compensation equal to four to seven years. But the mandatory deposits to the ATF are based on actuarial tables and can be for up to 20 years or more worth of payments. The mandatory payments, however, are limited to private carriers. Therefore the cost to a private carrier can be four to five times that of the cost to the State Insurance Fund or self-insured, thus putting the private carrier at a substantial financial disadvantage not just in terms of reserves but in the terms of the need to have higher rates to cover the additional financial exposure.

An interesting question which will undoubtedly occur within the next few months is a Section 32 settlement which has been apportioned, hypothetically, 50% either in one case or because it involved several cases, between a private carrier and the State Insurance Fund (SIF). What will happen when SIF offers five years ($30,000) and the carrier 10 years ($60,000)? Will it be written into the agreement that SIF is to pay $30,000 and the private carrier $60,000?

If I were a claimant, I would want to know why SIF is only paying $30,000 while the private carrier is paying $60,000. Since the carrier is responsible for 50% and is paying $60,000, why am I being cheated by SIF? This is a question whose answer I shall leave to those with more wisdom than have I.

And what impact this will have on the ability of cases of this nature to be resolved, I do not know although I can anticipate there will be some sort of impact. As to whether or not this could result in another case going to the court I cannot anticipate.

Conclusion

While I know that I am preaching to the converted (the workers compensation community) who will consider this problem, it is the deaf (the Board) who should be looking at how these issues will be resolved since it is the Board’s law judges and, ultimately, commissioners will be responsible for making decisions on these issues.

Michael T. Berns is a former commissioner on the State Workers' Compensation Board. This column was reprinted with his permission from his blog, http://insideworkerscompny.com.