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14-P-1356 Appeals Court
THE HOME INSURANCE COMPANY vs. WORKERS' COMPENSATION TRUST
FUND.
No. 14-P-1356
Suffolk. June 2, 2015. - September 3, 2015.
Present: Vuono, Grainger, Blake, JJ.
Workers' Compensation Act, Reimbursement of insurer, Cost of
living allowance. Insurance, Insolvency of insurer.
Practice, Civil, Standing. Administrative Law, Agency's
interpretation of statute. Statute, Construction.
Appeal from a decision of the Industrial Accident Reviewing
Board.
Eric A. Smith (Donald E. Wallace with him) for the
plaintiff.
Douglas S. Martland, Assistant Attorney General, for the
defendant.
W. Frederick Uehlein & Dorothy M. Linsner, for Lumbermens
Mutual Casualty Company, amicus curiae, submitted a brief.
Joseph C. Tanski, Gregory P. Deschenes, & Kurt M. Mullen,
for Massachusetts Insurers Insolvency Fund, amicus curiae,
submitted a brief.
GRAINGER, J. We are called upon to analyze certain rights
and obligations resulting from the liquidation of a New
Hampshire insurance company that issued workers' compensation
2
policies in Massachusetts. At issue in this appeal is the
company's entitlement pursuant to G. L. c. 152, § 65(2), to
reimbursement for cost of living adjustments (COLA, COLA
increases), as prescribed by G. L. c. 152, § 34B, to eleven
individuals receiving workers' compensation benefits. Both an
administrative judge (judge) and the reviewing board (board) of
the Department of Industrial Accidents (DIA) determined, albeit
on different rationales, that the company was not entitled to
reimbursement.
Background. The undisputed facts, excerpted below, are
recounted in detail in the board's comprehensive decision.
COLA payments as part of the workers' compensation scheme.
Persons receiving workers' compensation benefits in
Massachusetts are entitled to receive annual COLA increases to
reflect changes in the cost of living. See G. L. c. 152, § 34B.
These COLA increases are funded, then subject to reimbursement,
as follows: Revenues to fund the defendant Workers'
Compensation Trust Fund (trust fund) are raised by an annual
assessment1 on employers pursuant to G. L. c. 152, § 65. Under
normal circumstances (i.e., involving solvent insurers), the
1
These assessments are determined with reference to the
amount an employer paid out to satisfy workers' compensation
claims for the prior twelve-month period and by projecting what
proportion of the fund's budget that employer is likely to
require in the current year. See G. L. c. 152, §§ 65(3) and
(4)(d).
3
yearly assessments are collected from employers by their
insurers such as the plaintiff Home Insurance Company (Home),
who transmit them to the trust fund. The insurers then pay the
COLA increases together with other monthly benefits to injured
workers. See G. L. c. 152, § 65(2). This, in turn, entitles
the insurers to reimbursement from the trust fund for the COLA
payments on a quarterly basis. Ibid.
Home's conduct of business and eventual withdrawal from the
Commonwealth. Home, a New Hampshire Corporation since 1973 now
in liquidation (the estate), was licensed to issue workers'
compensation insurance policies in Massachusetts. As a foreign
insurer issuing policies in Massachusetts, Home was required to
provide a bond to the Commonwealth securing any obligations that
might be outstanding upon its withdrawal from the state that it
would not otherwise be able to satisfy (the insolvency bond).
See G. L. c. 152, §§ 61 and 62.2 As an additional condition of
doing business in Massachusetts, Home was required to deposit
funds "with the state treasurer . . . in exclusive trust for the
benefit and security of its policyholders in an amount
satisfactory to the [Massachusetts] [C]ommissioner [of
2
The bond is required, by its terms, to secure the
obligations relating to the deposit of funds by a foreign
insurance company at the time it withdraws from the transaction
of business in the Commonwealth. See G. L. c. 152, § 62.
4
Insurance]" (insolvency fund). G. L. c. 175, § 151, as inserted
by St. 1993, c. 226, § 46.
In June of 1995, the New Hampshire Commissioner of
Insurance became concerned about Home's solvency and ordered the
company to stop issuing policies. Home was placed into
rehabilitation, also referred to as a "run-off" period, whereby
it could not issue new policies but continued to administer
existing policies.3 The run-off period ended in June of 2003,
when Home was placed into liquidation.
The COLA reimbursement process outlined above was not
followed during the run-off period. As of June, 1995, Home was
no longer writing policies and had stopped collecting
assessments from employers, even while it continued paying
benefits, including COLA, to injured workers under existing
policies.
When Home was liquidated in 2003, its estate was ordered to
cancel existing policies. Consequently, the Massachusetts
Insurers Insolvency Fund (MIIF) became obligated to pay valid
outstanding claims arising from any policies Home had previously
issued in Massachusetts, including workers' compensation
3
As of December, 1995, Home's business essentially
consisted of managing, adjusting, and administering claims made
against previously existing policies.
5
policies. See G. L. c. 175D, § 5(1)(a) and (b). These claims
included COLA.
MIIF paid outstanding Home claims from the insolvency fund
it administers pursuant to G. L. c. 175D, § 5(1)(c). After
making these payments, MIIF sought reimbursement from the
estate's liquidator in New Hampshire. The liquidator, in turn,
authorized MIIF to apply the proceeds of the aforementioned
insolvency bond paid by Home to the Commonwealth. See G. L. c.
152, § 61.4 Accordingly, MIIF received reimbursement for its
payments to workers directly from the insolvency bond proceeds
until those proceeds were exhausted. Once the bond proceeds
were exhausted, MIIF became one of the unsecured creditors of
the estate and could no longer rely on reimbursement in full.
Administrative proceedings. In 2008, the former principals
of Home, purporting to represent the company, initiated
administrative proceedings in the DIA for reimbursement of COLA
payments made to injured workers both during the run-off period
and after the company was placed into liquidation. The
administrative judge determined that the company lacked standing
4
The liquidator reimbursed MIIF directly from the estate
for the administrative costs associated with the payment of
claims; the claims themselves were reimbursed after the
liquidator authorized the Massachusetts Commissioner of
Insurance, designated as the estate's ancillary receiver, to
petition the Supreme Judicial Court for permission to receive
reimbursement from the insolvency bond created pursuant to § 62.
6
to apply for reimbursement of payments it had made during either
period.
The board affirmed the judge's ruling that the company
lacked standing to apply for reimbursement of payments made
after liquidation. The board reversed the judge's determination
with respect to standing during the run-off period, and ruled
that Home did enjoy standing to apply for reimbursement of
payments made during that time. However, with respect to the
merits, the board ruled that while the company had standing to
assert the claim, it nevertheless would not be entitled to
reimbursement for run-off period payments.
Discussion. As stated, Home's standing to seek
reimbursement for COLA payments is disputed by the parties with
respect to two different periods of time. The more
straightforward question, relating to standing after the company
was placed into liquidation in 2003, need not detain us. We
agree with both the judge and the board that the commencement of
liquidation proceedings deprived Home of standing.
Home's claim of postliquidation standing is based on its
assertion that it enjoys a property interest in the insolvency
bond. The first flaw in this approach is the fact that the bond
fund's proceeds are depleted. In response, Home asserts that
the reimbursements it seeks would be applied to replenish the
bond fund. That assertion, however, founders on the board's
7
ruling, discussed infra, that Home's failure to collect
assessments during the run-off period is fatal to its claim for
reimbursement. As Home is not entitled to reimbursement with
which to replenish the fund, its argument that it has a property
interest in the nonexistent contents of the fund cannot succeed.
Finally we note that, even if Home were entitled to
reimbursement, any resulting proceeds would not inure to the
benefit of the bond fund. Under the provisions of G. L. c. 175,
§ 180E, the insurance commissioner, as ancillary receiver,
"shall, as soon as practicable, liquidate from their respective
securities such special deposit claims and secured claims as are
approved and allowed in the ancillary proceedings in this
commonwealth, and, under the orders of the court, shall pay from
the assets in his hands as receiver the necessary costs and
expenses of such proceedings, including compensation, and shall
transfer all remaining assets to the domiciliary receiver."
Thus, if Home were able to obtain any funds for reimbursement,
any surplus not expended for administrative costs or benefits
would simply be paid from the bond fund to the New Hampshire
estate.
With respect to the run-off period, the board conditioned
Home's standing to claim any reimbursement for COLA payments on
its transmittal to the trust fund of assessments collected from
8
employers.5 The board reasoned that the "pay as you go" concept
underlying the workers' compensation scheme makes the collection
and transmittal of assessments an integral part of the
reimbursement process. The board emphasized, notwithstanding
the fact that Home's COLA payments to injured workers provided
at least a facial basis for it to claim reimbursement, that
collection and transmittal of assessments provide the underlying
funding for reimbursement. Accordingly, it determined that
noncontributors of assessments cannot claim reimbursement.
The board's ruling falls within its area of expertise and
within the authority delegated by the legislature.
Consequently, the board's interpretation of G. L. c. 152, § 65,
that Home is not entitled to COLA reimbursements from the trust
fund deserves deference. See generally Molly A. v. Commissioner
of the Dept. of Mental Retardation, 69 Mass. App. Ct. 267, 280
(2007). Our deference is especially warranted in a situation,
as here, where the board has chosen between "two equally
plausible readings of the statutory language." Falmouth v.
Civil Serv. Commn., 447 Mass. 814, 821 (2006).6
5
The board initially ordered a remand to the administrative
judge for a factual determination whether any such assessments
had occurred. Home, however, thereafter stipulated that it had
not collected any such assessments, successfully requested a
final decision from the board, and has now appealed.
6
In this context, the trust fund makes a separate argument,
asserting that standing to claim reimbursement for COLA payments
9
Accordingly we discern no error in the board's rulings with
respect to either the run-off or the liquidation periods.
Decision of reviewing
board affirmed.
under the statute requires a party to qualify as an "insurer."
G. L. c. 152, § 34B(c) ("Insurers shall be entitled to quarterly
reimbursement . . .") (emphasis supplied). The trust fund
contends that Home did not qualify as an insurer because it
could not issue new policies during the run-off period so it did
not meet the statutory definition of "[a]ny insurance company
. . . authorized to do so, which has contracted with an employer
to pay the [workers'] compensation provided for by this chapter"
(emphasis added). G. L. c. 152, § 1(7), as appearing in St.
1991, c. 398, § 85. The board did not address this argument; we
find it unnecessary as well to the resolution of the appeal and
note that we consider it an appropriate subject for the board
under the doctrine of primary jurisdiction. See Lumbermens Mut.
Cas. Co. v. Workers' Compensation Trust Fund, 88 Mass. App. Ct.
, (2015).