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Department of Industrial Accidents Review Board Holds that When Bondholder Runs Out of Funds to Pay Benefits, Employee’s Widow Remains Protected by Massachusetts Workers’ Compensation Law

The Massachusetts Reviewing Board of Industrial Incidents recently addressed whether issues concerning workers’ compensation coverage and a bond to pay benefits could be settled without the involvement of the workers’ compensation claimant or the Department of Industrial Accidents. The Board held such an agreement was contrary to the statute’s requirements concerning maintaining reinsurance.

The employee in this case suffered from asbestosis, which he contracted while working for Polaroid Camera, beginning in 1959.  In 1989, the asbestosis rendered him unable to work, and he was awarded benefits from that point and continuing. Those benefits were paid by the self-insurer and then exhausted.  After that, section 34A benefits were paid, and in 1998, the employee passed away as a result of his injury. His widow then received section 31 survivor benefits.

Massachusetts law makes clear that a self-insurer may obtain a bond that can cover workers’ compensation obligations.  Without notifying the claimant or the Department of Industrial Accidents, in 2007, the re-insurer denied the bond holder’s request for reimbursement, and the bond holder filed a lawsuit. When settling this lawsuit, the two parties entered into an agreement, and the re-insurer agreed to reimburse the bond holder for 70% of the documented benefits paid to the claimant.

Then, the self-insurer’s bond with the bondholders was exhausted, and the employee’s widow’s payments were terminated. She filed a claim to seek section 31 survivor benefits. The judge ordered the Workers’ Compensation Trust Fund to pay her benefits and stated that the re-insurer  was obligated to reimburse 70% of those benefits.  The problem, the judge stated, was that the bondholder ran out of funds and terminated the widow’s payments.  This resulted in the employer being “uninsured,” and therefore the Workers’ Compensation Trust Fund must pay her benefits.  Since the Workers’ Compensation Trust Fund was not limited by the settlement agreement, the judge stated they should be reimbursed 100%.

The Reviewing Board stated that the arguments, on appeal, included the Workers’ Compensation Trust Fund contending that the re-insurer should pay the widow her benefits directly, at a rate of 100% of the benefits due.  The re-insurer claimed the judge was correct in ordering the WCTF to pay the claimant’s benefits, but he erred in finding that the settlement agreement was contrary to the statute and requiring 100% of reimbursement, rather than 70% as set forth in the agreement.

The Board concluded that the re-insurer must pay the benefits at a rate of 100% of the benefits due. The Board also stated that precedent makes clear that reinsurance arrangements are not to be compromised or modified without department involvement, since there must be funds in place to secure the payment of workers’ compensation benefits.

At the Law Offices of Attorney Michael O. Smith, we provide experienced representation for injured individuals pursuing workers’ compensation benefits.  If you or someone you love has been injured in a job site accident, you may be entitled to compensation for your lost wages from work, medical expenses, and other costs.  We offer a free consultation with an experienced Boston workers’ compensation attorney, and our office can be reached at (617) 263-0060.

More Blog Posts:

Massachusetts Reviewing Board Holds Self-Insurer Must Pay Improperly Withheld Sums to Employee After Reaching Negotiated Amount for Benefits in Agreement, Boston Workers Compensation Attorney Blog, September 29, 2016

Successive Insurance Rule Appropriate; Massachusetts Department of Industrial Accidents Reviewing Board Upholds Insurance Coverage for Employee’s Repetitive Injury to Right Shoulder, Boston Workers Compensation Attorney Blog, November 11, 2016

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