Shelby Mut. Ins. Co. v. Com., s. 92-P-1407

• Decision Date: 26 May 1994
• Docket Number: 93-P-1626,Nos. 92-P-1407,s. 92-P-1407
• Citation: 36 Mass.App.Ct. 317,631 N.E.2d 63
• Parties: SHELBY MUTUAL INSURANCE COMPANY v. COMMONWEALTH (and a companion case). 1
• Court: Appeals Court of Massachusetts

Page 63

631 N.E.2d 63

36 Mass.App.Ct. 317

SHELBY MUTUAL INSURANCE COMPANY v. COMMONWEALTH (and a companion case). ¹

Nos. 92-P-1407, 93-P-1626.

Appeals Court of Massachusetts,

Plymouth and Suffolk.

Argued Jan. 28, 1994.

Decided April 7, 1994.

Further Appellate Review Granted May 26, 1994.

Donald H. Jackson, Jr., Hanover for Shelby Mut. Ins. Co.

W. Frederick Uehlein, Natick (Leonard Y. Nason with him) for Merchants' Ins. Co. & others.

James A. Sweeney, Asst. Atty. Gen., for the Com.

Before ARMSTRONG, FINE and GILLERMAN, JJ.

FINE, Justice.

These two appeals involve so-called "second injury claims" by four workers' compensation insurance companies. Each of the insurers, as required by law, paid the entire compensation claim for an employee's disability which was caused by a compensable injury in combination with a previous injury. The insurers claim the right to reimbursement of a portion of their payments from the Workers' Compensation Trust Fund (Trust Fund) or from the Commonwealth's general fund. Shelby Mutual Insurance Co. (Shelby) filed a breach of contract claim against the Commonwealth in the Superior Court, and summary judgment was ordered in Shelby's favor for $12,270.65, to be paid from the Commonwealth's general fund. Merchants' Insurance Company (Merchants), Central Mutual Insurance Company (Central), and Nationwide Insurance Company (Nationwide) brought their claims for payment from the Trust Fund before the Department of Industrial Accidents (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. We consolidated the Commonwealth's appeal from the Superior Court judgment and the three insurers' appeals from the reviewing board's decision because they involve the same issues of law. Relying on a 1989 statute (St.1989, c. 565), which we determine to be a valid measure that remains in effect, we affirm the decision of the reviewing board of the Department of Industrial Accidents and reverse the Superior Court judgment.

1. The insurers' claims and the statutory background. To encourage the employment of previously injured persons, legislation has provided, since 1919, for a fund to pay insurers a portion of their compensation burden when a previously injured employee suffers a further work-related injury. The right to reimbursement appears in G.L. c. 152, §§ 37 ² and 37A, ³ and the machinery for creating and operating the fund appears in G.L. c. 152, § 65. ⁴ These provisions have undergone substantial changes over the years. The history is outlined in American Mut. Liab. Ins. Co. v. Commonwealth, 379 Mass. 398, 401-403, 398 N.E.2d 491 (1979), and Daly v. Commonwealth, 29 Mass.App.Ct. 100, 101-103, 557 N.E.2d 758 (1990). See also Nason & Wall, Massachusetts Workers' Compensation Reform Act §§ 1.1-1.6, § 9.7 (1990, supplementing Locke, Workmen's Compensation, 2d ed. 1981).

Each of the insurers is seeking reimbursement for claims paid as a result of injuries that occurred before December 10, 1985. The facts underlying the four claims are as follows:

a. Shelby paid compensation to Richard Manning for a second injury he sustained on November 25, 1975. Shelby sought reimbursement from the Second Injury Fund, predecessor to the Trust Fund, in 1982. On May 18, 1982, Shelby and a special assistant attorney general representing the fund executed a memorandum of agreement for payment in the amount of $12,270.65. The Commonwealth also agreed that reimbursement would continue at the rate of forty-five percent of future payments to Manning. In 1984, counsel for the Industrial Accident Board issued a letter stating that the "State Treasurer is ordered" to pay the stated amount to Shelby from the Second Injury Fund. Payment has not been made.

b. Central paid compensation to William F. Lanoue for a second injury he suffered on June 14, 1978. Central filed a petition for reimbursement under § 37 on August 9, 1983. In three memoranda of agreement, two on November 14, 1985, and the other undated, a special assistant attorney general representing the Trust Fund agreed to reimburse Central for sixty-five percent of its payments to Lanoue and requested an order of payment on the Treasurer of the Commonwealth. The third memorandum, a final agreement for reimbursement of $42,343.77, was signed by an assistant attorney general and by an administrative law judge. Payment has not been made.

c. Nationwide paid compensation to Carl Vivace for a second injury he suffered on September 17, 1974, and filed a § 37 petition on May 19, 1980, for reimbursement from the Second Injury Fund, in the amount of $22,755. No agreement for reimbursement was reached.

d. Merchants paid compensation to Mark Sutcliffe, a disabled veteran, for a second injury he sustained on March 6, 1981. In April of 1988, Merchants filed a request for § 37A benefits. Agreement was reached with a special assistant attorney general representing the Trust Fund on June 8, 1990, for payment to Merchants in the amount of $175,000. The Commissioner of the Department refused to approve the agreement.

There is no dispute that each of the insurers has a claim that has at all relevant times fallen within § 37 or § 37A, and that each insurer would have had the right to reimbursement out of the Second Injury Fund which existed before the Workers' Compensation Act was substantially amended by St.1985, c. 572, § 55. Before that amendment, § 65 provided for a Second Injury Fund which drew its resources from insurers and self-insurers in the workers' compensation system. The financing mechanism was significantly altered by the 1985 amendment. After that amendment, § 65 provided for two funds to be financed by assessments on employers: one fund to pay operating expenses of the Department; the other, the Trust Fund, to pay, among other things, second injury claims under §§ 37 and 37A. At no time did the Commonwealth contribute directly to the fund.

In Daly v. Commonwealth, 29 Mass.App.Ct. 100, 557 N.E.2d 758 (1990), this court determined, in connection with a claim for unpaid legal fees incurred in the administration of the Second Injury Fund, that the two funds established as a result of the 1985 amendment were successors to the old Second Injury Fund and that the legal fees should be paid out of one of those new funds. Although the claim in the Daly case involved an administrative expense and was, therefore, significantly different from the claims in this case, the decision strongly suggests that all claims which could have been brought against the old Second Injury Fund could, after the effective date of the 1985 amendments, be brought against the new Trust Fund.

The situation changed with respect to the instant claims with the Legislature's enactment of St.1989, c. 565. That statute provides:

Notwithstanding the provisions of section two A of chapter one hundred and fifty-two of the General Laws, section sixty-five of said chapter one hundred and fifty-two shall apply to an injury occurring on or after December tenth, nineteen hundred and eighty-five, except said section sixty-five shall apply to an injury for which compensation is payable under section thirty-four B and thirty-five C of said chapter one hundred and fifty-two, regardless of the date of such injury.

As neither § 37 nor § 37A is listed among the exceptions, the statute, on its face, makes the Trust Fund available only for claims related to injuries occurring after December 10, 1985.

Apparently, in enacting the 1989 amendment, the Legislature was responding to the chaotic situation then existing with regard to old second injury claims: assessments on insurers were inadequate and, as a result, the Second Injury Fund was insolvent; a large number of claims (perhaps as many as 1,500) were pending in an undetermined amount, estimated to be in the millions; many insurers with valid claims were not filing them; there was uncertainty as to whether the Trust Fund was responsible for payment of second injury claims that related to injuries predating the 1985 amendment; and the employer community lacked the desire to pay claims that preexisted their direct involvement in the system. See Daly v. Commonwealth, 29 Mass.App.Ct. at 101, 557 N.E.2d 758; Nason & Wall, supra, § 9.7. See also the opinion of the dissenting member of the reviewing board in this case. Given this background and the language of the statute, we think the plain intent of the Legislature ⁵ was to extinguish second injury reimbursement claims based upon injuries occurring before December 10, 1985. ⁶ Thus, if the 1989 statute remains in effect and was a constitutionally valid measure, the insurers may not recover against the Trust Fund.

2. The 1989 statute has not been repealed. Contrary to the insurers' contention, the 1989 amendment was not repealed by amendments to the Workers' Compensation Act adopted in 1991. There is no reference in the 1991 amendments to the 1989 statute or its subject matter. The only procedural changes that would have any effect on earlier legislation limited payments from the Trust Fund for employees injured while working for uninsured employers. There is no inconsistency between that provision and the 1989 statute. There was, therefore, no explicit or implicit repeal of the 1989 statute. See Boston Hous. Authy. v. Labor Relations Commn., 398 Mass. 715, 718, 500 N.E.2d 802 (1986).

3. The 1989 statute is not unconstitutional. The insurers claim that the 1989 amendment, if interpreted to extinguish their contracts, is in violation of Art. 1, § 10, cl. 1, of the United States Constitution, which commands that "[n]o state shall ... pass any ... Law impairing the Obligation of Contracts...." The insurers claim, further, that the extinguishment of their valid claims, even those which had not ripened into formal contracts, constitutes a taking of their property without just compensation...