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November 23, 1976 

The Honorable Cue 0. Boykin Opinion No. H-902 

Chairman 

Texas Industrial Accident Board Re: second Injury Fund 

8. 0. BOX 12757, Capitol Station replenishment. 

Austin, Texas 78711 

Dear Mr. Boykin: 

You have asked: 

[When should1 

payments into 

this Board . . . stop requiring 

the Second Injury Fund, or . . more.specifically, what is meant ny tne 

phrase 'existing liabilities' as used in 

Article 8306, Section 12c-2(b). 

The legal history of the Second Injury Fund, a creation 

of the Workmen's Compensation Law, is recounted in Texas 

Rmployers' Ins. Ass'n v. Haunschild, 527 S.W.Zd 270(Tex. 

Civ. App. -- Amam m75, writ ref'd n.r.e.). Generally, 

sections 12~ and 12c-1 of article 8306, V.T.C.S., provide 

that when an employee who has previously suffered a compensable 

injury is reinjured and the second injury combines with the 

first to produce a greater incapacity than the second injury 

alone would have caused, the employer is liable for the 

entire resulting incapacity. 

But the employer can recover from the Second Injury 

Fund the extra amount he has to pay as a result of combining 

the losses of capacity if the previous injury was of a 

specific type and if the combined effects of the two injuries 

totally and permanently disabled the employee. See Houston 

General Ins. Co. v. Teague, 531 S.W.2d 457 (Tex. Civ. App. -- 

Waco 1§75,ritrz'd n.r.e.1. 

p. 3782 
The Honorable Cue 0. Boykin - page 2 (H-902) 

Section 12c-2 of the statute reads: 

The special fund known as the 'Second 

Injury Fund' shall be created in the 

following manner: 

(a) In every case of the death of an 

employee under this Act where there is no 

person entitled to compensation surviving 

said employee, the association shall pay to 

the Industrial Accident Board the full death 

benefits, but not to exceed 360 weeks of 

compensation . . . to be deposited with the 

Treasurer of the State for the benefit of 

said Fund and the Board shall direct the 

distribution thereof. 

(b) When the total amount of all such 

payments into the Fund, together with the 

accumulated interest thereon, equals or 

exceeds Two Hundred Fifty Thousand Dollars 

($250,000) & excess of existing liabilities, 

no further payments sii&l be required to be 

paid to said Fund; but whenever thereafter 

the amount of such Fund shall be reduced 

below One Hundred Twenty-Five Thousand 

Dollars ($125,000) by reason of payments 

from such Fund, the payments to such Fund 

shall be resumed forthwith, and shall continue 

until such Fund again amounts to Two Hundred 

Fifty Thousand Dollars ($250,000) including 

accumulated interest thereon. (Emphasis added). 

Inconstruing the provisions of the Second Injury Fund 

Act, that interpretation will be employed which is most 

beneficial to injured employees and which will best promote 

the purposes of the Act. Industrial Accident Board v. Parker, 

348 S.W.2d 188 (Tex. Civ. App. -- Texarkana 1960,rE m 

n.r.e.). The purpose of the Legislature in setting up the 

Second Injury Fund Act was to compensate the injured employee 

for the total and permanent incapacity he has actually 

suffered without sacrificing the policy of encouraging the 

employment of physically handicapped workers. Miears v. 

Industrial Accident Board, 232 S.W.2d 671 (Tex. Sup. lE0). 

The Supreme Court exmed: 

P. 3783 
The Honorable Cue 0. Boykin - page 3 (H-902) 

The employer's insurer remains liable only 

for the compensation payable for the second 

injury considered alone; the remainder of 

the compensation is paid out of the fund 

which is made up of sums which, except for 

this statute, would be windfalls to insurers 

in other cases. Id. at 675-76. - 

You report that on a particular date late last year a 

payment to the Second Injury Fund caused the balance in the 

fund to exceed $250,000, but the fund at that time was 

obligated on a long term basis to make direct payments to an 

injured worker on behalf of his employer in one case, and 

there were three pending claims against the fund for reimbursement, the subsequent payment of which reduced the fund 

below the $250,000 mark. Additionally, there were at that 

time eight other claims against the fund which the Board 

had denied but which were on appeal to the courts and which 

would substantially reduce the balance in the fund if they 

were ordered paid by the courts. Also, you advise, there 

were, perhaps, twenty or thirty potential claims against the 

fund in existence on that date which had not yet been reported, 

the payment of which would substantially reduce the fund 

balance if allowed. 

We believe the Supreme Court of Texas would construe 

the term "existing liabilities" as used in section 12c-2 to 

mean those liabilities known or reasonably anticipated to 

exist and not merely those previously and finally determined 

payable. A contrary interpretation would endanger the 

capacity of the Second Injury Fund to respond when its 

liabilities are finally determined and would produce an 

unintended wmfall for otherwise liable insurers. Cf 

Bd. of Ins. Commissioners v. Texas Employers' Ins. Ass'n, 192 

s.w.m m(Tex. Sup. 1946x 

The Second Injury Fund responds in a manner similar to 

that of an excess insurance carrier and unless its legitimate 

reserves for probable losses are considered liabilities which 

reduce its available current assets, its fiscal strength will 

be overstated and subject to unexpected and imprudent depletion. See V.T.C.S., Ins. Code § 21.39; V.T.'C.S. art. 8308, 

5 23. Wedo not believe the Texas Legislature intended such 

a result. 

p. 3784 
. 

The Honorable Cue 0. Boykin - page 4 (H-902) 

A somewhat similar provision requires the Employers 

Insurance Association to suspend assessments against its 

members when at the end of a calendar year it has accumulated 

"an admitted surplus in excess of incurred losses, expenses 

and unearned premiums or other liabilities amounting to the 

sumof. . . ($200,000) or more . . . ." V.T.C.S. art. 

8308, S 16a. 

co., 103 S.W.2d Emex. clv. 

refia), 

In Texas "pl?yer~.,~nsl-A~~;~~~o~~~~~~O~it 

Humble argued that the Aisociation had no legal 

authority to reduce the surplus distributable to subscribers 

by maintaining a reserve against anticipated costs, but the 

Court disagreed, saying that in doing so the directors of 

the Association did not.abuse their discretion. 

In our opinion, the Industrial Accident Board should 

stop requiring payments into the Second Injury Fund when 

the amount in the fund, exclusive of reserves for known or 

reasonably anticipated liabilities, exceeds $250,000. 

SUMMARY 

The Industrial Accident Board should 

stop requiring payments into the Second 

Injury Fund when the amount in the fund, 

exclusive of reserves for known or 

reasonably anticipated liabilities, 

exceeds $250,000. 

-JOHE L. HILL 

Attorney General of Texas 

APPROVED: 

Opinion Committee