One of the keys provisions in the 2007 workers' compensation reform bill was the requirement that the private carriers make a deposit into the Aggregate Trust Fund in all cases where a claimant was classified as having a permanent partial disability, if the classification took place on or after July 1, 2007. The only exceptions were in those cases in which the private workers' compensation carrier had filed for relief under §15(8) of the Workers' Compensation Law for reimbursement from the Special Funds Conservation Committee or had a pending third party action. The provision in Workers' Compensation Law §27(2) had no limitation as to the applicable dates of accident.
Clearly this was not an amendment that the private workers' compensation carriers in New York State liked. The provisions were challenged in a lawsuit against the Workers' Compensation Board in federal court directly and within the Workers' Compensation Board and New York State court system. The federal claim was denied based upon Burford Abstention Doctrine in Liberty Mutual v. Hurlbut. In the spring of 2009 the Workers' Compensation Board issued Full Board Review decisions in nearly 100 cases in which they upheld the provisions of the 2007 reform bill requiring the Aggregate Trust Fund deposits.
On the third anniversary of the requirement to make the Aggregate Trust Fund deposits, the Appellate Division – Third Department in two separate decisions involving six cases unanimously affirmed the Workers' Compensation Board and found no basis to strike down the Aggregate Trust Fund deposit provision of the Workers' Compensation Law.
The more important of the two decisions is Collins v. Dukes Plumbing and Sewer Service, Inc., 2010 NY Slip Op 05832 (July 1, 2010). This is because in Collins the court reached the constitutional issues that were not raised by the parties in Parkhurst v. United Rentals Aerial Equipment, Inc., 2010 NY Slip Op 05833 (July 1, 2010). Obviously both cases dealt with statutory interpretation as well. In fact the analysis of statute was basically the exact same decision in both cases right down to the typographical error as to the effective date of the capping of permanent partial disability cases. (Both decisions transposed the date from March 13, 2007 to March 31 2007 in error.)
The workers' compensation carriers raised the following issues before the court to attack the statute on its face:
The court dealt with the issues in such a manner as to not create any wiggle room for the workers' compensation carriers to attempt additional arguments around the Aggregate Trust Fund deposits in other cases. The court said that the first argument made by the workers' compensation carriers did not involve retroactive application of the law. The amendment to §27(2) applied to what the Workers' Compensation Board was required to do in the future. It did not in any way affect what had happened in the past.
As for the interpretation urged that the deposits only applied to capped cases the court indicated that this was not true because the express language of the section did not include any such limitation. The express language of the section did not support the workers' compensation carriers’ argument.
The plain reading of the text of Workers' Compensation Law §27(2) as amended says that it applies to “any such award” under Workers' Compensation Law §15(3)(w) made after July 1, 2007. Citing cases from both the United State Supreme Court and the New York State Court of Appeals the court stated that “any” is meant to be interpreted in a broad fashion. Section 15(3)(w) was part of the Workers' Compensation Law prior to the 2007 reform bill becoming law. The use of the word “any” was meant to include all cases in which an award was made under §15(3)(w) and not just the capped cases.
Furthermore, in enacting the amendments to §15(3)(w) and §27(2) of the Workers' Compensation Law the legislature indicated that the controlling date was to be the date of the award and not the date of accident. This was further proof to show that the deposit requirement was looking forward and not a retroactive amendment of the law.
Because the legislature was very clear in its intention to have the deposit to apply to all cases any argument that the requirement to make an Aggregate Trust Fund deposit was unfair was an argument to be made to the legislature and not the courts.
The workers' compensation carriers also tried to use the rationale of Burns v. Varriale, 9 N.Y. 3d 207 (2007) (the multiple variables that can limit, suspend, increase or decrease the rate of workers' compensation benefits) against having to make the deposit. The court said based upon the language of §27(2) that those arguments were irrelevant in this situation. The legislature has mandated that the Workers' Compensation Board make the calculations and for the workers' compensation carriers to make the deposit. Because the Workers' Compensation Board complied with the law’s requirement for a deposit the calculations are not arbitrary and capricious.
That was the end of the analysis in the Parkhurst case. As stated above in Collins the workers' compensation carriers also raised constitutional challenges to the Aggregate Trust Fund deposits. The constitutional issues raised were:
The “Taking” argument was rejected by the court because although the monies are payable to the State of New York there was no taking of the property of the workers' compensation carriers for a public use. They reached this conclusion by weighing the cost to the workers' compensation carriers against its interference with their investment backed expectations and the character of the governmental action involved. The court believed that the workers' compensation carriers conceded that there was no increase in their liability to the injured workers. (This is disputed by the workers' compensation carriers.) The goal of the amendment to the Workers' Compensation Law was to secure “the payment of long-term benefits and creating an incentive for offering timely and reasonable settlements…” Therefore, there was no taking in violation of the Fifth Amendment.
As for the Contract Clause violation it was rejected because the workers' compensation carriers were liable for a potential discretionary Aggregate Trust Fund deposit before the amendments to the law three years ago.
The workers' compensation carriers claimed that the amendment to the Workers' Compensation Law violated their equal protection rights under the Constitution as well. In their arguments the workers' compensation carriers conceded that there need only be a rational basis for a private workers' compensation carrier to be required to make an Aggregate Trust Fund deposit while the State Insurance Fund and a self-insured employer were exempt from the requirement. The court found that the legislation was rational because its intent to protect injured workers to assure that the benefits would be paid was rational since the State Insurance Fund was backed by the State of New York and there are other mechanisms in place to protect those injured while working for a self-insured employer. Any claim for a denial of substantive due process was also rejected because the Aggregate Trust Fund could settle a case with an injured worker for less than the Aggregate Trust Fund deposit. The court indicated that in order to avoid this scenario all the workers' compensation carrier had to do was settle the case under §32 of the Workers' Compensation Law for a reasonable offer as they are required to do.
Since the decision of the Appellate Division was unanimous it is unlikely than any Justice would grant leave to appeal nor is it likely that the Court of Appeals would give leave to appeal either. However, the workers' compensation carriers will in all likelihood take the necessary steps to continue their appeals. Among other reason is that as long as they appeal they may not be liable to actually make the deposits. The difference between Collins and Parkhurst become significant after all motions are made in the New York State Courts. The workers' compensation carriers involved in Collins can seek to continue their fight to the United States Supreme Court because they have raised federal constitutional issues. The workers' compensation carriers in Parkhurst will come to the end of the line at the Court of Appeals because as unlikely as it is that the Supreme Court could muster four votes to hear Collins, in the absence of a federal question raised in Parkhurst, they will not get even one vote.