Opinion ID: 1825934
Heading Depth: 2
Heading Rank: 2

Heading: Substantive Due Process: Reimbursement

Text: If the weekly benefit is reduced or rescinded by a final determination, the carrier shall be entitled to reimbursement in a sum equal to the compensation paid pending the appeal in excess of the amount finally determined. Reimbursement shall be paid upon audit and proper voucher from the second injury fund established in chapter 5. Appellant carriers contend in this case that the reimbursement provision of 1975 PA 34 provides for an unconstitutional taking of property without substantive due process of law because the reimbursement to which appellants are entitled, if they are successful on appeal, must come from the Second Injury Fund, [8] and not from the recipients of the 70% benefits. Appellants reason that since they are required to finance the Second Injury Fund they are, in fact, required to reimburse themselves for benefits paid but not owed. This, they maintain, constitutes a confiscatory taking of property without due process. While we agree with appellant carriers' reading of the statutory provision, we do not agree that provision provides for an unconstitutional taking. The clear wording of the statute provides that reimbursement for benefits paid during the pendency of an appeal, which subsequently reduces or rescinds those benefits, shall be paid    from the second injury fund. The word shall clearly means that payment is mandatory or imperative from the fund. Southfield Twp v Drainage Board for 12 Towns Relief Drains, 357 Mich 59; 97 NW2d 821 (1959). However, appellant carrier's position regarding the constitutionality of this reimbursement scheme is premised on two incorrect assumptions: (1) that reimbursement is constitutionally mandated and (2) that reimbursement from a state insurance fund, such as the Second Injury Fund, constitutes self-reimbursement. While 1975 PA 34 provides for reimbursement, we submit that the no-stay provision of the statute would still be constitutional even if no method of reimbursement were provided for in the statute. [9] The Legislature reasonably found that the withholding of compensation due claimants pending appeal operated to frustrate the general purpose of the act. Therefore, it is not unreasonable that the Legislature, within the constitutional exercise of its police power, could require employers and their carriers to bear the risk of paying benefits during the limited pendency of an appeal. The New Hampshire Supreme Court reached a similar conclusion in construing the no-stay provision in its worker's compensation act. The Court held the lack of a reimbursement clause did not render its no-stay provision constitutionally infirm: Secondly, we agree that the statute makes no provision for recoupment of payments made, in the event that the decision of the commissioner is overturned on appeal. We hold that no such right of recoupment was implied or intended. See Hagerty v Great American Indemnity Co, 106 NH 425; 213 A2d 424 (1965). The absence of provision therefor is to us an indication of the legislative intent that no such right should arise. It has long been established that workmen's compensation is remedial in character, designed to provide, in substitution for unsatisfactory common-law remedies in tort, a liability without fault for limited compensation, capable of ready and early determination. Mulhall v [Nashua Manufacturing] Co, 80 NH 194, 196-199; 115 A 449, 453 (1921); see Carbonneau v [Hoosier Engineering] Co, 96 NH 240, 244; 73 A2d 802, 806 (1950). The provisions of the 1971 amendment were designed to further this purpose, and to assure prompt payment of compensation to workmen found to be entitled thereto, after administrative hearing of the parties involved. Granted that in the event of successful appeals by employers, the statute will place upon them a new or additional burden. The legislature could reasonably find that the withholding of compensation by employers pending appeal had operated to frustrate the purposes of the law. Hence in the exercise of the police power, it could properly require employers, and more broadly the enterprises which they represent, to bear for a limited period the risk of payments made during appeal, rather than the injured employee, who as the plaintiffs point out is usually in no financial position to carry that risk. (Citations omitted.) Hartford Accident & Indemnity Co v Duvall, 113 NH 28, 31; 300 A2d 732, 734 (1973). [10] The rationale and holding of the New Hampshire Supreme Court, to which we subscribe, reflects what we perceive to be the majority position in most states which have incorporated no-stay provisions into their worker's compensation schemes. The Legislature has an option as to whether or not it wishes to provide for reimbursement. However, the Legislature's choice regarding provision for reimbursement in no way affects the ultimate constitutionality of the no-stay provision. See, for example, Merchants Mutual Ins Co v Newport Hospital, 108 RI 86; 272 A2d 329 (1971). Also see St Paul Fire & Marine Ins Co v Treadwell, 263 Md 430; 283 A2d 601 (1971); Tompkins v George Rinner Construction Co, 196 Kan 244; 409 P2d 1001 (1966), and the cases cited therein. The Michigan Legislature elected to provide for a unitary system of reimbursement for carriers via the Second Injury Fund; this was the Legislature's prerogative and we respect it. However, the constitutionality of 1975 PA 34's no-stay provision does not hinge on the Legislature's so providing. [11] While we need not address appellant carriers' second assumption since reimbursement is not constitutionally mandated, nevertheless we would reject outright the notion that reimbursement from the Second Injury Fund constitutes self-reimbursement and is therefore a confiscatory taking. The Second Injury Fund is a state insurance fund created by the Legislature to insure carriers and self-insured employers against certain losses occurring due to worker's compensation claims. MCLA 418.501 et seq.; MSA 17.237(501) et seq. See also Copperweld Steel Co v Industrial Commission, 143 Ohio St 591; 56 NE2d 154 (1944). The Second Injury Fund does not belong to the carriers. No employer or carrier has a direct or vested interest in the fund. Rather, the carriers and self-insured employers pay annual assessments to the fund. Once paid, these assessments become state or public moneys. Like any insurance scheme, the Second Injury Fund spreads the risk of worker's compensation among all the self-insured employers and carriers. It would be improper to conclude that because self-insured employers and carriers are required by law to pay into the fund, reimbursements received from the fund constitute self-reimbursement. Pursuant to traditional insurance concepts, the state reimburses the self-insured employers or carriers from assessed premiums. Some employers and carriers receive substantial reimbursements from the fund; others receive nothing. Nevertheless all involved are required to pay insurance premiums into the fund, predicated upon their proportional share of the total funds disbursed during the previous year. [12] Since the Second Injury Fund is a creature of the state, no property right would inure to the employers or carriers. Without a corresponding property right, it could not be maintained that the instant reimbursement provision constitutes a confiscatory taking without due process of law. [13]