The Law Office of Kurt H King

January 31, 2013

The “State” of the Insolvent Second Injury Fund in Missouri–Skirvin v. Treasurer of the State of Missouri

Missouri’s Second Injury Fund pays part of the disability of injured workers who suffer re-injury.  The theory being that otherwise employers would be far less likely to hire workers that have already been hurt.  Since employers presumably pay less on work comp claims than they would if injured workers could sue for their injuries in circuit courts with jury trials, punitive damages and the whole nine yards, lawmakers have saddled employers with the cost of funding the Fund so it can pay the “load factor” part of permanent partial work comp awards, as well as on permanent total disability awards.

A few years ago, in an effort to reduce the costs of work comp insurance for Missouri businesses, lawmakers capped the “surcharge” at 3%–thus the most a business would have to pay into the State for the Fund each year would be no more than 3% of the total amount of its net work comp insurance premiums.  This effort to appease business backfired as that amount of surcharge falls far short of an adequate supply of money to the Fund for payment of the continuous flow of work comp awards against the Fund.

By and large, due to lack of funding, the Fund has not paid any Permanent Total Disability awards dated after March 6, 2011.  There are said to be at least sixty cases on file in courts throughout Missouri seeking orders that the Fund pay the injured worker the amount awarded that worker by the Division of Workers Compensation.  One of those cases recently reached the Western District of the Missouri Court Appeals, where it was decided by Judges Ahuja, Howard, and Martin.  The case is Skirvin v. Treasurer of the State of Missouri, WD75541 (opinion filed 01.22.2013).  At the trial which led to this appeal, Skirvin won an order (on a writ of mandamus) that the Fund pay the money awarded by the Division of Workers Compensation on his permanent total disability claim where the “last” part of the disability combined with  disability from previous injuries to cause the employee to be totally disabled.  The last employer picks up the tab for the “last” disability but the Fund is charged with payment for the remainder of the workers’ disability.

Having lost  at trial, the Fund appealed to the Western District.  In doing so, the Fund admitted that it is insolvent–bankrupt–and so it stopped paying permanent total injury awards as of March 6, 2011.  Evidence at trial showed that the Fund then owed $21 million but had only $6.5 million with which to pay.   Thus, the Fund was upside down $15 million.   The Fund also testified to annual income of $43 million, of which $40 million was paid out within six months, leaving only $3 million for the remaining six months.  This has been going on for nearly two years now and the hole yawns blacker and deeper.

No way the Fund can pay the past due awards pro rata as there are significant differences in how the claims affect employee Social Security, the number and amount of claims constantly fluctuates, and it simply would not be fair.  The alternate, to pay on a “first come, first serve” basis, would quickly break the bank.  Missouri’s lawmakers should have raised the legal limit on the surcharge or provided additional funding but they have not.  The economic times of late have not led to surpluses, and who wants to vote for representatives who pass laws which increase your work comp costs and cut your thin profits?

What the court of appeals decided in the main opinion by Judge Martin is that the trial court erred in ordering the Fund to pay Skirvin as the Fund lacks the money to pay him and the other claims like his.  Skirvin did not request a pro rata payment of his and similar claims and that would be nearly impossible to accomplish.  But while the court of appeals could not help Skirvin, they could send his case to the Missouri Supreme Court and so they ordered it transferred.  If that high court hears this case, it may do so expeditiously.  Meanwhile, Missouri lawmakers may realize that they must act now or the supreme court may fix things in a way that they do not like.

Judge Ahuja agreed with the transfer to the supreme court, although he would simply have reversed the trial court for the reasons that, (1) the Fund is insolvent and cannot pay all the judgments outstanding against it, and (2) Skirvin did not request  a pro rata payment.  [Maybe a request to put the Fund into receivorship is another option.]

Finally, Judge Howard in his dissent makes several good points, including that the Fund is just an account of the State of Missouri, and the State has the money or can raise it to pay the outstanding claims against the Fund.  The State also has full power to increase the surcharge or otherwise fund the Fund so that it has sufficient money to pay its debts.  So, affirm the trial court and uphold Skirvin’s order that the Fund/State of Missouri pay him what it owes him by law.

Embarrassing for a STATE to say to an injured employee, in effect–

“Hey, here is your work comp judgment and by the way the Fund is not going to pay you.  Sorry you may starve.  Hope you find a good homeless shelter or maybe your spouse can float all the bills by herself.”  Does the state let tax debt ride indefinitely when a taxpayer says, “Can’t pay you, I’m almost clear broke?”

Perhaps the Missouri Supreme Court will decide this case and turn up  the heat on our lawmakers who knew, or should have known, they were drowning the Fund and injured employees when they capped the surcharge at 3%.

Kurt H. King

Law Office of Kurt H. King, 20 E. Franklin, Liberty, Clay County, Missouri 64068

816.781.6000

Workers’ Compensation, Personal Injury, Bankruptcy, General Litigation and other matters

http://www.kurthking.com

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