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Press Releases Cost-Saving Victory For NYS Employers After Unanimous Court of Appeals Decision

Press Releases

November 6, 2017

Additional Workers' Compensation Savings from 2013 Business Relief Act Now Possible

New York State's highest court has unanimously upheld the portion of the 2013 Business Relief Act that closed the Workers' Compensation Reopened Case Fund, effectively saving millions of dollars in assessments for New York State's employers and ending a four-year legal battle.

The New York State Court of Appeals unanimously reversed the decision of the Appellate Division, First Department in American Economy Ins. Co. et al v. State of New York et al, and upheld the closing of the Fund as constitutional.

"The Board is very pleased that the Court of Appeals cleared the way for more of the savings of the 2013 Business Relief Act by unanimously upholding the closing of the Reopened Case Fund," Workers' Compensation Board Chair Clarissa M. Rodriguez said. "Had the Court reached an opposite conclusion, all New York's employers would have faced an increased assessment to cover additional liability from reopening the Fund."

In 2013, Governor Cuomo signed the Business Relief Act, closing the Reopened Case Fund to new claims effective January 1, 2014, because the Fund no longer served its intended purposes. Closing it will save New York's employers – municipalities, school districts and businesses – hundreds of millions of dollars. The plaintiffs, insurance carriers who benefited from shifting their responsibility for workers' compensation claims to the Fund, argued that the Fund should remain open and challenged the legislation as unconstitutional.

The Court of Appeals reversed the Appellate Division, First Department, which had agreed with the claims of the insurance carriers. The Court of Appeals noted that the measure was constitutional and that leaving the Fund open to claims would have delayed the substantial economic benefit of the closing of the Fund for years, if not decades. View Decision

The Reopened Case Fund, established in 1933, was originally intended to ensure injured workers with "closed claims" that unexpectedly reopened after many years due to unforeseen circumstances would continue to receive workers' compensation benefits, even when the carrier that paid their benefits was no longer in business. It was also intended to shield insurance carriers from unexpected liability for those cases. The Fund is outmoded today because safeguards have been implemented since the Depression to protect the delivery of benefits. The Worker's Compensation Law also allowed for an annual assessment on insurance carriers, which was passed on to New York employers as a premium surcharge. That surcharge can now be phased out.

Determining whether insurers or the Fund was liable for these claims delayed benefits for injured workers because they became one of the most contentious litigation points in the workers' compensation system, both before the Workers' Compensation Board and before the Appellate Division, Third Department. Compounding these frictional costs to the system, the costs of the transferred claims themselves increased exponentially, growing from approximately $95 million in 2006 to in excess of $300 million by 2012.