New York Court of Appeals Rules Amendment to §25-a Is Constitutional

What is the Fund?
As a background, §25-a provides for a Special Fund to be set up especially to administer and pay claims arising from the reopening of closed cases. The primary purpose of §25-a is to transfer liability for awards from self-insured employers and insurance carriers to the Special Fund where the claim has become “stale.” Under §25-a, claim is “stale” if it meets certain criteria:

  1. more than seven years has elapsed from the date of the injury or death, and;
  2. where more than three years has elapsed after the last payment of compensation.

Essentially, insurance carriers and self-insured employers could potentially shift liability to the Special Fund in claims that met the criteria of §25-a. Whether a case has been officially closed so as to shift liability to the Special Fund is a decision for the Board to make. Upon transfer to the Special Fund, the carrier or self-insured employer is no longer responsible for payment or management of the claim.

The Law was changed in 2013 to close the Fund to new claims.
In an effort to phase out the Special Fund/Fund for Reopened Cases, the Business Relief Act of 2013 created an amendment to §25-a that no application by an employer or insurance carrier to transfer liability to the Fund for Reopened Cases would be accepted by the Board on or after January 1, 2014. In short, the amendment to be addressed in American Economy Ins. Co. v State of New York closed the reopened case fund to newly reopened claims as of January 1, 2014. Following the amendment to §25-a, any claims that were reopened that previously would have transferred to the Fund became the obligation of the carrier, liability would not shift to the Special Fund.

On October 24, 2017, the Court of Appeals ruled that retroactive closure of the Fund for Reopened Cases was not unconstitutional.
Insurance carriers and self-insured employers have been waiting anxiously for the Court of Appeals to render a decision of the appeal filed by The State of New York and will not be happy with the ruling.

The New York Appellate Division previously ruled that a 2013 amendment to New York Workers’ Compensation Law §25-a which closed the Special Fund for Reopened Cases (the Fund) to new applications after January 1, 2014 was unconstitutional as applied to policies issued before October 1, 2013.

In yesterday’s decision, the Court of Appeals (highest state court) ruled Workers’ Compensation Law § 25-a (1-a) as applied to policies issued before October 1, 2013 is not unconstitutional. The Court of Appeals held the amendment’s retroactive impact is constitutionally permissible and any retroactive impact of the legislation is justified by a rational legislative purpose

Impact of this new decision
For now, the Fund remains closed. You can anticipate further litigation. The next step will be the United States Supreme Court, presuming they agree to hear the case.

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Declan is an attorney licensed to practice law in New Jersey, New York and the U.S. District Court of New Jersey. Declan is a Partner at Lois LLC where he defends employers and carrier in New York workers’ compensation claims. He can be reached directly at dgourley@loisllc.com or 201-880-7213.