Source: https://loisllc.com/new-york/workers-compensation-amendment-found-unconstitutional-how-it-affects-fund-for-reopened-cases/
Timestamp: 2019-10-20 01:45:29
Document Index: 133403141

Matched Legal Cases: ['§25', '§ 25', '§ 10', '§ 25', '§25', '§25']

Workers’ Compensation Amendment Found Unconstitutional; How It Affects Fund for Reopened Cases | LOIS LLC
Workers’ Compensation Amendment Found Unconstitutional; How It Affects Fund for Reopened Cases
April 18, 2016 Declan Gourley
The New York Appellate Division First Department last week addressed the validity and constitutionality of a 2013 amendment to New York Workers’ Compensation Law §25-a.
The plaintiffs in American Economy, private insurance companies that underwrite workers’ compensation insurance policies in New York, challenged the validity and constitutionality of the 2013 amendment to Workers’ Compensation Law § 25-a to the extent it imposes liability on them with respect to policies issued before October 1, 2013. The plaintiffs successfully argued the existence of the Special Fund meant that reopened workers’ compensation claims were not included when insurers’ premium rates were calculated by the New York Compensation Insurance Rating Board (CIRB) and approved by the New York State Department of Financial Services (DFS). The plaintiffs also argued that because reopened claims were handled and paid by the Special Fund rather than by insurers, insurers did not maintain reserves to cover future reopened claim losses. The plaintiffs argued that policies written on or after October 1, 2013, DFS approved an increase in premiums to address the additional liability resulting from the closure of the Fund to future reopened cases; however, that premium increase would not cover policies issued before October 1, 2013. Therefore, as a result of the amendment closing the Special Fund, the amendment will impose on the insurer a liability that was not contemplated when the premium for the pre-October 1, 2013 policy was calculated.
The court in American Economy ruled “the central question here is whether closing the Fund to new applications and requiring the insurers to handle and pay on reopened claims arising out of accidents that occurred before October 1, 2013 impermissibly ‘attache[d] new legal consequences to events completed before its enactment.” [Link]
The court ruled the 2013 amendment:
violates the Contract Clause of the US Constitution because it retroactively impairs an existing contractual obligation to provide insurance coverage “[w]here *** the insurer does not have the right to terminate the policy or change the premium rate” (Health Ins. Assn. of Am. v Harnett,44 NY2d 302, 313 [1978] [internal quotation marks omitted] [asterisks in original]; see US Const, art I, § 10, cl 1). Defendants failed to show that the impairment is “reasonable and necessary to serve” “a significant and legitimate public purpose *** such as the remedying of a broad and general social or economic problem” (19th St. Assoc. v State of New York, 79 NY2d 434, 443 [1992] [internal quotation marks omitted] [asterisks in original]). Indeed, the legislation’s stated purpose of preventing a windfall to insurance carriers was based upon the erroneous premise that premiums already cover this new liability.
The court ruled “that Workers’ Compensation Law § 25-a(1-a) as retroactively applied to policies issued before October 1, 2013 is unconstitutional.”
As a result, New York workers’ compensation claims that meet the criteria from policy years prior to October 1, 2013 should now be able to be apply for relief under §25-a.
If you have any questions about §25-a, do not hesitate to contact me directly via e-mail or join our live Q & A session offered April 22, 2016. Register here for the live event.
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