Court Opinion

ID: 5869085
Source: CourtListenerOpinion
Date Created: 2022-01-13 01:42:13.230964+00
Date Added: 2024-06-11T08:44:39.249811
License: Public Domain

Kassal, J. (dissenting).
I disagree with the conclusion by the majority and find that chapters 55 and 404 of the Laws of 1982, mandating a transfer of $190 million from the State Insurance Fund to the general fund of the State, are unconstitutional, amounting to a deprivation of property without due process and a taking of private property for *384public purpose without just compensation, in violation of the Fifth and Fourteenth Amendments to the United States Constitution and sections 6 and 7 (subd [a]) of the New York Constitution. In addition, in my view, the challenged legislation constitutes an impairment of contractual obligations, invalid under section 10 of article I of the United States Constitution.
The legislation at issue on this appeal directed the transfer of $190 million from the State Insurance Fund (Fünd) to the general fund of the State on March 1, 1983 and provided for future annual transfers in the same sum. Through an amendment to the Workers’ Compensation Law (adding § 87-f) there was provision for an annual “dry” appropriation of $190 million by the State which was deemed an “admitted asset of the state insurance fund” (Workers’ Compensation Law, § 87-f, subd 2). Concededly, the annual appropriation effected a transfer of a substantial sum to the State to be used for general revenue purposes, interest free, and with no real obligation to make repayment. As argued by appellants, the transfer results in the loss to the Fund of substantial moneys for future investment and does thereby have a negative impact upon the ability of the fund to offer discount premium rates which, in the past, had been offered to preferred insureds. Inasmuch as section 89 of the Workers’ Compensation Law mandates premiums be fixed “at the lowest possible rates consistent with the maintenance of the solvent fund and of reasonable reserves and surplus”, it is patently clear that the annual transfer of $190 million would effect a substantial reduction of income from future investment, which, in turn, would result in a loss of interest to the Fund of about $30,000,000 each year. This will directly increase future premium rates.
The majority places undue emphasis upon the finding that the State Insurance Fund is a State agency and, from that, concludes that all of its assets are State funds which may be used as the Legislature deems appropriate. While I agree that the Fund is a State agency, of significance is the fact that it is funded entirely through private sources, namely, employers, and, in its operation and underlying purpose, has many of the attributes of a private insurance
*385carrier. Employers who secure compensation coverage through the Fund have a basis for concluding that premium payments will be used in accordance with the statutory directives, including subdivision 1 of section 76 of the Workers’ Compensation Law, which provides that the Fund “shall consist of all premiums received and paid into the fund, of property and securities acquired by and through the use of moneys belonging to the fund and of interest earned upon moneys belonging to the fund and deposited or invested” and section 85 thereof, which makes the Commissioner of Taxation and Finance “the custodian of the state insurance fund” and permits the Commissioner to “deposit any portion of the state fund not needed for immediate use,” directing that interest earned “shall be collected by him and placed to the credit of the fund.” In addition, subdivision 1 of section 76 of the Workers’ Compensation Law requires that funds collected “shall be applicable to the payment of losses sustained on account of insurance, to the payment of expenses * * * and to the payment of premiums for reinsurance”. The statutory scheme does not authorize the use of such funds for general State purposes nor is there any such legislative intent shown. The legislation at issue here subverts the underlying statutory scheme by diverting funds from their sole intended purpose, i.e., the payment of claims and investment.
Stripping the statutory structure tp its bare essentials and taking into account that the Fund operates as a mutual insurance pool, solely funded by premium payments by policyholders and money earned on investments from employer contributions, I fail to perceive the rationale of the majority in concluding that plaintiffs, as insureds, do not have a property interest in the Fund’s surplus. The policies create contractual rights which have been infringed upon and the substantial loss of assets each year will have a negative impact upon the ability of the Fund to offer reduced premiums, as in the past. In addition, while the payment of dividends is a discretionary act, it is undisputed that the Fund did maintain a long-standing practice of paying dividends based upon available surplus. The loss of funds and the consequential future loss of *386income will have an adverse effect upon the ability to continue that policy.
In short, the legislation amounts to an improper diversion of Fund assets from their intended purpose, contrary to the reasonable expectation of insured employers, who paid premiums to purchase insurance coverage, not to fund the general treasury of the State. Taking cognizance of the fact that the funds are held in a fiduciary capacity and their use and purpose earmarked by express statutory provision, no basis exists to sustain the legislation which, in effect, amounts to a raid upon the Fund. By analogy, the position of the majority would create a precedent which would inevitably lead to sustaining a legislative diversion of other specially earmarked funds, such as public pension and retirement funds. In either situation, there would be a taking of property without due process and without just compensation and, which in my view, is constitutionally infirm.
Nor may the legislation be sustained on the majority’s finding that the State guarantees payments to injured claimants. The fact that the Fund is secured by the general assets of the State is not at all dispositive on whether those assets may be used for other State purposes. It is reasonable to conclude that any payment required of the State, as guarantor, will be thrust upon the insured employers by the higher premiums or surcharges. Moreover, the State’s status as guarantor does not afford it a license to appropriate the Fund’s assets, which are derived solely from private sources and investment. The appropriation, essentially directing the use of assets contrary to the express purpose for which the Fund was created, impinges upon the contractual rights of the policyholders and constitutes a taking of property without due process or just compensation. If additional surplus exists, more than reasonably necessary to satisfy anticipated claims, that surplus ought to be available in the future for investment purposes or distributed to policyholders in the form of additional dividend payments or reduced premiums, within the discretion of the State Insurance Fund, consistent with the statutory scheme of the Workers’ Compensation Law.
*387Accordingly, the judgment, Supreme Court, New York County (William P. McCooe, J.), entered February 24, 1983, denying plaintiffs’ motion for summary judgment and granting the cross motion by defendants State Comptroller Regan and State of New York for summary judgment, declaring as constitutional chapters 55 and 404 of the Laws of 1982, should be reversed, on the law, the motion granted, the cross motion denied and the legislation declared to be unconstitutional.
Carro, J. P., Fein and Milonas, JJ., concur with Alexander, J.; Kassal, J., dissents in an opinion.
Judgment, Supreme Court, New York County, entered on February 24,1983, affirmed, without costs and without disbursements.