Shelby Mut. Ins. Co. v. Com.

• Decision Date: 08 May 1995
• Parties: SHELBY MUTUAL INSURANCE COMPANY v. COMMONWEALTH (and three companion cases 1 ).
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 732

649 N.E.2d 732

420 Mass. 251

SHELBY MUTUAL INSURANCE COMPANY v. COMMONWEALTH (and three companion cases ¹).

Supreme Judicial Court of Massachusetts,

Suffolk.

Argued Nov. 8, 1994.

Decided May 8, 1995.

W. Frederick Uehlein and Leonard Y. Nason, Natick, for Merchants' Ins. Co. & others.

James A. Sweeney, Asst. Atty. Gen. (Stephen M. Linsky, Sp. Asst. Atty. Gen., with him), for the Com.

Donald H. Jackson, Jr., Hanover, for Shelby Mut. Ins. Co., was present but did not argue.

Before LIACOS, C.J., and ABRAMS, NOLAN, O'CONNOR and GREANEY, JJ.

O'CONNOR, Justice.

Shelby Mutual Insurance Company, Merchants Insurance Company, Central Mutual Insurance Company, and Nationwide Mutual Insurance Co. paid workers' compensation claims to employees whose disabilities were caused by compensable injuries in combination with previous injuries. The insurers claim a right to be partially reimbursed out of the Workers' Compensation Trust Fund (Trust Fund) established by St.1985, c. 572 § 55, effective December 10, 1985 (St.1985, c. 572, § 67), or out of the Commonwealth's general fund.

To encourage employers to hire handicapped workers, the General Court in 1919 created a fund to reimburse insurers a portion of their workers' compensation payments made when a previously injured employee has suffered a further work-related injury. St.1919, c. 272. Although the statutory provisions have changed substantially over the years, the right to reimbursement has always been codified at G.L. c. 152, §§ 37 and 37A, while the funding mechanism has been codified at G.L. c. 152, § 65. Before December 10, 1985, the effective date of St.1985, c. 572, § 55, the fund was known as the "Second Injury Fund" and was totally financed by assessments on workers' compensation insurers and self-insurers. Statute 1985, c. 572, § 55, however, rewrote G.L. c. 152, § 65, by establishing two new funds, financed by assessments on employers, in place of the Second Injury Fund. One of those funds, the Special Fund, was to pay the operating expenses of the Department of Industrial Accidents (department). The other fund, the Trust Fund, was to pay the claims of insurers for partial reimbursement of their payment of second injury claims made by employees.

Shelby Mutual Insurance Company (Shelby) paid compensation to Richard Manning for a second injury he sustained in November, 1975. Shelby sought reimbursement from the Second Injury Fund, predecessor to the Trust Fund, in 1981, and in May of 1982 Shelby and an assistant attorney general agreed in writing that Shelby would be paid $12,270.65. No payment has been made. Shelby brought an action in contract against the Commonwealth in the Superior Court. Summary judgment was ordered requiring the Commonwealth to pay Shelby $12,270.65 out of the Commonwealth's general fund. The Commonwealth has appealed.

Merchants Insurance Company (Merchants) paid compensation to Mark Sutcliffe, a disabled veteran, for a second injury he sustained on March 6, 1981. In April, 1988, Merchants filed a request for reimbursement. Central Mutual Insurance Company (Central) paid compensation to William F. Lanoue for a second injury he sustained on June 14, 1978. Central filed a claim for reimbursement on August 9, 1983. Nationwide Mutual Insurance Co. (Nationwide) paid compensation to Carl Vivace for a second injury that occurred on September 17, 1974, and filed a petition for reimbursement from the Second Injury Fund on May 19, 1980. Merchants, Central, and Nationwide's claims for reimbursement, like Shelby's claim, have not been paid. Merchants, Central, and Nationwide brought their claims for payment from the Trust Fund before the department. The department's reviewing board, on appeal from the decision of an administrative judge, determined that the insurers were not entitled to payment from the Trust Fund.

The Commonwealth appealed to the Appeals Court from the judgment in the Superior Court favorable to Shelby, and Merchants, Central, and Nationwide appealed to the Appeals Court from the reviewing board's decision favorable to the Commonwealth. After consolidating the appeals, the Appeals Court affirmed the reviewing board's decision in favor of the Commonwealth and reversed the judgment for Shelby in the Superior Court. Shelby Mut. Ins. Co. v. Commonwealth, 36 Mass.App.Ct. 317, 631 N.E.2d 63 (1994). We now reverse the decision of the reviewing board and affirm the judgment of the Superior Court.

General Laws c. 152, § 37, as appearing in St.1991, c. 398, § 71, provides in material part:

"Whenever an employee who has a known physical impairment which is due to any previous accident, disease or any congenital condition and is, or is likely to be, a hindrance or obstacle to his employment, and who, in the course of and arising out of his employment, receives a personal injury for which compensation is required by this chapter and which results in a disability that is substantially greater by reason of the combined effects of such impairment and subsequent personal injury than that disability which would have resulted from the subsequent personal injury alone, the insurer or self-insurer shall pay all compensation provided by this chapter....

"Insurers making payments under this section shall be reimbursed by the state treasurer from the trust fund created by section sixty-five...."

General Laws c. 152, § 37A, as amended through St.1973, c. 855, § 3, provides in material part:

"Any employee who is a war veteran and disabled as a result of his military or naval service and has been certified as such by the United States Veterans Administration and who, in the course of and arising out of his employment, receives a personal injury which is aggravated or prolonged by such disability for which he is receiving compensation from said administration, shall receive the compensation provided by this chapter, or said compensation shall be paid to his dependents, if death results from the injury. Such compensation shall be paid by the insurer or self-insurer, who shall be reimbursed ... by the state treasurer from the fund created by section sixty-five. In the event that said fund becomes exhausted, the state treasurer shall make such payments from the general fund without appropriation."

General Laws c. 152, § 65(2), as appearing in St.1991, c. 398, § 85, provides in relevant part:

"(2) There is hereby established a trust fund in the state treasury, known as the Workers' Compensation Trust Fund, the proceeds of which shall be used to pay or reimburse the following compensation: ... (c) reimbursement of certain apportioned benefits pursuant to section thirty-seven; ... and (g) reimbursement of certain apportioned benefits pursuant to section thirty-seven A.... Revenues for the special fund and the trust fund established herein shall be raised by an assessment on all employers subject to this chapter."

As we have said, St.1985, c. 572, § 55, rewrote G.L. c. 152, § 65, by...