Understanding the Importance of Second Injury Claims:
The Insurer’s Perspective
Ryan L. Schaiberger
The Massachusetts Second Injury Fund (“SIF”) operates as a form of subrogation for insurers since successful claims can significantly reduce costs on some of the highest exposure workers’ compensation claims. Under § 37, insurers may recover up to 75% of §§ 31, 32, 33, 34A, 36A, and 30 payments made after the 104th week of disability.[1] The SIF also covers § 37A which relates to disabled war veterans and can result in reimbursement of 50% of payments made within the first 104 weeks of disability, and 100% thereafter.[2] For recovery to be obtained from the SIF, the insurer, self-insurer, self-insurance group, or municipality seeking recovery must not have opted out of payment of assessments pursuant to the procedures described in § 65(4)[3].
Elements to SIF Recovery
On “New Act” claims with dates of injury after December 23, 1991, an insurer must be capable of filing a claim within 2 years of the date of the payment upon which reimbursement is being requested that satisfies six (6) elements.[4] To obtain recovery the insurer must be able to show:
1) the existence of a prior physical impairment;
2) actual employer knowledge of the prior physical impairment;
3) the prior impairment was a likely hindrance or obstacle to employment;
4) the employee had an accepted subsequent industrial personal injury (“second injury”);
5) the prior impairment resulted in the second injury being substantially greater than the disability that would have resulted absent the prior impairment; and
6) the employee was paid benefits that represent permanent and total disability benefits under § 34A.[5]
A claim for SIF recovery requires that each of these elements be demonstrated. If even one of these elements is not satisfied then the claim will fail.
On “Mid Act” claims with dates of injury between November 1, 1986 and December 22, 1991, SIF recovery is significantly expanded since the insurer may also recover up to 75% of §§ 34 and 35 benefits in addition to the benefits that are reimbursable under the New Act.[6] The elements to a claim for recovery under the Mid Act are essentially the same as with the New Act except that employer knowledge can be established constructively through the presentation of medical records relating to the prior physical impairment.[7] Also, pursuant to the Case of Alves there is no statute of limitations on the filing of Mid Act claims for SIF recovery.[8] Therefore, claims need not be filed within 2 years of the date of the payment upon which reimbursement is being requested.
On “Old Act” claims with dates of injury prior to October 31, 1986, the insurer may be reimbursed up to 50% of all workers’ compensation benefits paid after the 104th week of disability.[9] Constructive knowledge that the employer was aware of the employee’s prior physical impairment is sufficient.
1. Prior Physical Impairment
The prior physical impairment in a claim for SIF recovery must be due to a previous accident, disease or congenital condition.[10] The prior physical impairment does not need to arise out of a work-related injury. An insurer can satisfy this element by providing medical records relating to an employee’s preexisting impairment. The records should describe any major events or injuries and include information about surgeries, treatment and permanent impairment. The records should also all be dated prior to the second injury. Records after the second injury that diagnose an employee with a degenerative condition are typically not acceptable in the absence of additional evidence showing significant treatment before the second industrial injury. The strongest claims will support that an employee treated for the prior physical impairment up to the time of the second injury. Significant gaps in treatment may result in deductions to any SIF recovery.
Obtaining information relating to the employee’s treatment before the second injury is often an insurer’s biggest obstacle to the prior physical impairment element. Medical facilities or physicians can be reluctant to release information prior to the second injury even with a medical authorization. They have argued that these records are unrelated to the industrial injury and therefore should not be disclosed. Insurers should maintain that the complete medical records are needed in order to determine the existence of prior non-work-related injuries that may support a § 1(7A) defense to the underlying claim and are therefore discoverable. In order to identify potential SIF recoveries, and have claims prepared to file for maximum recovery within the statute of limitations, it is essential to obtain the injured employee’s complete medical records and history early in the claim process.
In disabled veterans claims under § 37A, the employee’s prior impairment must result from a military related disability which is certified by the United States Veterans Administration.[11] Obtaining these records and reports can often be the biggest obstacle to claims under § 37A.
2. Employer Knowledge
Employer knowledge of the employee’s prior physical impairment is undoubtedly the most difficult element for insurers to establish on any claim for Second Injury Fund recovery. § 37 requires that on New Act claims the employer had “actual knowledge” of the employee’s prior physical impairment within 30 days of hire or retention.[12] This is often misunderstood as requiring the employer to know of the impairment within 30 days of hire. However, the “or retention” language supports that an employee that has worked for an employer beyond 30 days and subsequently disclosed a physical impairment, or had a previous industrial injury and was able to return to work can also be sufficient as long as the evidence suggests that it presented as a likely hindrance or obstacle to the employee’s continued employment.
The best way to satisfy employer knowledge on a New Act claim is through affidavits from the employer supporting that they did in fact have actual knowledge of the employee’s prior physical impairment. The employer will need to attest that they did in fact know of the employee’s preexisting physical impairment prior to the subsequent industrial injury. The affidavit also needs to be completed by the owner, supervisor, HR representative, or someone capable of sufficiently acting as a representative of the employer with respect to the injured employee. Affidavits from co-workers or individuals under the supervision of the injured employee are not sufficient to establish this element. Any individual providing an affidavit should also be willing to appear and testify should litigation be required on the claim.
Employer knowledge on New Act claims can also be shown through the employer’s personnel records suggesting actual knowledge of the employee’s prior physical impairment. This is best established with injury reports, medical records, attendance records and any workers’ compensation filings that may be related to an earlier injury. These records should also support where modifications to an employee’s job duties have been necessary as a result of a prior physical impairment. It is recommended that employers be advised to keep thorough records supporting any of their employee’s complaints of pain, injuries, job modifications, missed time or leaves of absence.
3. Likely Obstacle or Hindrance to Employment
The prior physical impairment must have likely been an obstacle or hindrance to employment.[13] Insurers should be encouraged to take note of the “likely” language in § 37 since it suggests that evidence showing actual accommodations to an employee’s job duties is not necessary. However, if evidence of job modifications or accommodations can be provided it will certainly strengthen the argument that this element has been satisfied.
The preferred method of establishing this element is in an affidavit from the employer. The same affidavit used to address the employer knowledge element should also address whether the employer made any accommodations, or support that the employer was aware that the prior impairment was a likely hindrance or obstacle to employment. The employee’s personnel records can also be used if they reflect modifications or accommodations.
Insurers may also rely on medical records relating to the employee’s prior physical impairment in satisfying this element. Medical records suggesting permanent impairment, significant treatment, and/or major medical procedures can be argued to be highly suggestive of obstacles or hindrances to employment. Medical records supporting extended treatment relating to a prior injury will support this element. These will often times also indicate whether prior work-related injuries resulted in awards for permanent loss of function or disfigurement benefits under § 36. This is particularly important on Mid Act claims since affidavits are not necessary to support employer knowledge of the employee’s prior physical impairment. Furthermore, since these dates of injury are at least 21 years old, it is difficult to locate employers with recollection of specific employees let alone modifications and/or accommodations.
Insurers should also be cognizant of whether a prior physical injury is classified as creating a permanent impairment by the AMA’s Guides to the Evaluation of Permanent Impairment. Specifically, prior spinal injuries may be classified as creating a permanent physical impairment even if an individual is essentially asymptomatic at the time of the second injury.[14] This is because these medical issues can predispose an individual to a significantly worse disability should they suffer another injury. While this may not support a specific hindrance or obstacle it can help to support this argument if there is a significant period where an employee did not actively treat for a prior physical impairment before the second injury.
4. Second Injury
The “second injury” is the work-related injury that subsequently results in the employee becoming permanently and totally disabled.[15] The second injury needs to result in payment of benefits pursuant to § 34A or a lump sum settlement payment that reasonably represents exposure to permanent and total disability payments.[16] This must also be an accepted injury by the insurer. Injuries that are not accepted by the insurer are not sufficient since the insurer is not accepting that an actual work-related “second injury” did occur.
In order to satisfy this element, the insurer should provide any reports of injury, including the Form 101 First Report of Injury, any and all medical records relating to the second injury with operative reports and evidence of any significant treatment. The insurer should also provide any IME and/or impartial examination reports that would support a permanent and total disability resulted. Information relating to any claim for permanent and total disability benefits under § 34A or lump sum settlement should also be provided in support of the severity of the second injury.
5. Substantially Greater Disability
Insurers must show that the disability following the second injury was substantially greater as a result of the employee’s prior physical impairment.[17] The Trust Fund is very aggressive with this element and does require that the specific “substantially greater” language is used in any report supporting this element. Records and reports that are highly suggestive of this element but do not outright state it may result in this element not being satisfied, or deductions being made to any settlement offers.
If “substantially greater” language is not used in any medical records or reports then the preferred method of establishing this element is to obtain a medical records review from a physician. The reviewing physician should be provided all of the employee’s treatment records for the prior impairment and second injury in order to opine whether the prior impairment did combine with the second injury to create a substantially greater disability. Any physician performing a medical records review should be asked to provide specific analysis regarding how the prior impairment ultimately has impacted the second injury.
It is of note that the prior physical impairment and second injury do not need to be to the same body part to support that a prior impairment did result in the disability from the second injury being substantially greater. In some states this is a requirement, however, in Massachusetts it simply needs to be shown that the prior impairment and the second injury combined to result in a substantially greater disability. For instance, if an individual’s prior impairment was to a lower extremity and the second injury was to the back, it could be argued that gait issues arising from the knee impairment resulted in the back injury being worse and thus makes the disability arising from the second injury substantially greater.
In disabled veterans claims under §37A, the insurer is required to show that the employee’s prior military-related disability aggravated or prolonged the employee’s disability from the subsequent industrial injury.[18] This standard is lower than the substantially greater disability standard that is used in typical SIF claims under § 37. It is also best established through medical opinions using this specific language.
6. Permanent and Total Disability Payments and Settlements
The benefits that are reimbursable on New Act SIF claims pursuant to § 37 include §§ 31, 32, 33, 34A, 36A, and 30 payments made after the 104th week of disability.[19] Typically, the Second Injury Fund is most commonly applicable when payments are made that reasonably represent permanent and total disability benefits pursuant to § 34A. Some states Second Injury Funds allow for recovery of temporary or partial disability benefits, but Massachusetts is very specific that only the above-mentioned disability benefits will be reimbursed on New Act claims. On Mid Act claims an employee must still be shown to be permanently and totally disabled as a result of the second injury, but once this is established it may be possible to recover some of the temporary total and temporary partial disability payments that were made after the 104th week of disability.
The best way of demonstrating this element is by providing agreements to pay, conference orders and hearing decisions that award permanent and total disability benefits under § 34A. The insurer should also provide payment history records supporting that the employee was actually paid any and all benefits they were due from an industrial injury.
The difficulty with this element is when a claim settles prior to § 34A benefits being awarded since the insurer has the burden of proving that any benefits payable through a lump sum settlement reasonably represent § 34A benefits.[20] In this situation it is important that the settlement indicates that the employee’s work status is “permanently and totally disabled” or “in dispute”. If any work capacity is suggested then the Trust Fund will maintain that the employee was not in fact permanently and totally disabled, the settlement does not represent permanent and total disability payments, and the SIF is not applicable. Insurers can further support their argument that a settlement represents permanent and total disability benefits with medical opinions that show that an employee is permanently disabled and an award of § 34A was likely.