New case: Does Second Injury Fund contribute where 'continuing to work' was the second injury?

The ‘Second Injury Fund’ refers to the special fund established by N.J.S.A. 34:15-95. This part of the Workers’ Compensation Act allows the Department of Labor to collects a surcharge on all workers compensation policies issued in New Jersey. The fund used to be called the “2% Fund” because the surcharge was originally set at 2%. Now the surcharge is closer to 8%. Practitioners use the terms ‘Second INjury Fund’ and ‘2% Fund’ interchangeably.

The Second injury fund was established to encourage employers to hire workers who had prior disabilities. After World War I, there were a great many former soldiers returning to employment. Many had amputated limbs, internal injuries, and other conditions. Employers did not want to hire these former soldiers because they feared that a new industrial incident, such as the loss of another limb in a machine accident, could leave the employer exposed for paying ‘total disability’ benefits to the soldiers.

So, the Second Injury Fund was established. The Fund was instructed to pay compensation for “pre-existing illness, injury, or disease” when the pre-existing disability, considered together with the effects a new accident or injury, made the employee totally disabled. For example, imagine a fact scenario where a factory hires a worker who was missing a lower leg. The employee is then injured while working for the new employer – losing his other lower limb. Under the New Jersey Law (“loss of any two limbs shall constitute total disability”) the claimant is ‘totally disabled.’

Under the current law, the employer compensates the claimant for the percentage of overall disability contributed by the employer’s accident. In this case, presume that figure to be 50%. Applying the Second Injury Fund law, the State of New Jersey’s fund then compensates the claimant for the rest of his life – starting to pay once the employer’s contribution is exhausted (i.e., the 50% award has been paid out).

The Second Injury Fund pays in only the following situations:
(1) The claimant is now totally disabled;
(2) The claimant had a measurable disability before he came tot he employment; and
(3) It was the combination of the prior disability plus the employment accident which now renders the claimant totally disabled (in other words, the Second Injury does NOT pay where the claimant is totally disabled as a result of the ‘last accident’ alone).

In the case decided June 15, 2009, the respondent argued that yes, the claimant did sustain a compensable injury at work (he hurt his neck in 1998). The respondent went on to argue that the claimants subsequent employment duties (which were off-and-on during 1998 and 1999) worsened the claimant, causing him to be permanently and totally disabled. Basically the employer was asking the Court to find that the original work accident was the ‘pre-existing disability’ and that the “subsequent work-related aggravation of the condition” due to “occupational aggravation” was the ‘final accident.’ According tot he respondent’s argument, these two separate injuries combined to make the claimant totally disabled, thereby triggering exposure (and contribution from) the Second Injury Fund.

The Judge of Compensation held that the respondent could not show ‘subsequent occupational aggravation’ and that it was the natural progression of the first, specific incident, which caused the claimant’s total disability. By ruling this way, the Judge of Compensation denied the employer the possibility of reduced exposure – because the employer could not ‘shift’ part of it’s exposure to the Second Injury Fund.

Case: Falk v. Central Jersey Mechanical, Inc., A-4467-07T1 (App. Div. June 16, 2009).

Greg Lois is the managing partner of LOIS LLC and dedicates his practice to defending employers and carriers in New York and New Jersey workers' compensation claims. Greg is the author of a popular series of "Handbooks" on workers' compensation, and is the co-author of the 2016 & 2017 Lexis-Nexis New Jersey Workers' Compensation Practice Guide. Greg can be reached at 201-880-7213 or glois@loisllc.com