Mass. Top Court Sides with MIIF, Green Lights COLA Reimbursements

Case File

Because the Massachusetts Insurers Insolvency Fund takes over an insolvent insurer's rights and responsibilities under the commonwealth's workers' compensation law, it has a right to collect cost-of-living adjustment reimbursements as the insurer would have had it not gone insolvent. Simply Research subscribers have access to the full text of the decision.

Case

Massachusetts Insurers Insolvency Fund v. Workers' Compensation Trust Fund, No. SJC-13686 (Mass. 07/01/25)

What Happened

Between 1989 and 2013, the Massachusetts Insurers Insolvency Fund initiated payment of workers' compensation benefits on behalf of several insurers declared insolvent. The claims handled and paid by MIIF during this period included claims for cost-of-living adjustment payments.

MIIF filed six claims with the trust fund between March 2015 and September 2021, seeking $15,418,924.84. In August 2016, the trust fund denied MIIF's March 2015 reimbursement claim because:

(1) MIIF was not an "insurer."

(2) The "statutory purpose" of the reimbursement provisions "is no longer applicable when an insurer becomes insolvent and MIIF commences payment of covered claims," citing Home Ins. Co. v. Workers' Compensation Trust Fund, 88 Mass. Ct. 189 (2015), which held that insolvent insurers that are not remitting assessments are not entitled to reimbursements.

In 2018, MIIF initiated administrative proceedings with the Department of Industrial Accidents, and an administrate judge denied all 89 claims. A different AJ designated one of the claims as a "test case" and stayed the remaining 88 cases.

The AJ determined that MIIF was neither an insurer nor entitled to COLA-payment reimbursements and denied MIIF's claim. On appeal, the DIA reviewing board affirmed.

MIIF appealed, and the Supreme Judicial Court transferred the case from the Appeals Court.

Rule of Law

MIIF administers and pays certain "covered claims" filed against an insolvent insurer prior to the insurer's declaration of insolvency. MIIF raises its revenue via mandatory assessments on Massachusetts insurers.

A provision of Massachusetts law provides that MIIF is an "insurer to the extent of its obligation on the covered claims and shall have all rights, duties, and obligations of the insolvent insurer" when it takes on an insolvent insurer's covered claims.

Under the Massachusetts workers' compensation act, insurers are entitled to quarterly reimbursements for COLA payments made to injured employees receiving workers' compensation benefits through insurers' policies.

On the other hand, the act's COLA-payment reimbursement provisions expressly exclude certain entities that do not participate in the trust fund from reimbursement eligibility; specifically, self-insurers, self-insurance groups, or municipalities that have chosen non-participation in the assessment provisions for funding such reimbursement" aren't included.

What the Supreme Judicial Court Said

According to the Supreme Judicial Court, the plain language of the relevant statute did not support the interpretations put forth by the trust fund relative to MIIF's entitlement to COLA-payment reimbursements.

The court highlighted:

(1) MIIF is an insurer for purposes of the Worker's Compensation Act because, under the act, MIIF "stands in the shoes" of an insolvent insurer, making it an "insurer" eligible for reimbursement. "To exclude MIIF from reimbursement rights under the act would fail to give effect to [the statute's] plain and unambiguous instruction that MIIF 'shall have all' of the rights of the insolvent insurer it supplants," the court wrote.

(2) The express eligibility exceptions for COLA-payment reimbursements. The act contains three express exceptions to reimbursement eligibility for non-insuring public employers, self-insurers, or self-insurance groups. "MIIF does not fall into any of these three expressly excepted categories, nor does the plain language [of the statute] contemplate MIIF or a similarly situated entity in the provisions' reimbursement exceptions," the court wrote.

(3) The trust fund's statutory funding mechanism. The court explained that the trust fund is paid for by employers, not insurers, and so "an insurer, and thus MIIF when it assumes the rights and obligations of an insolvent insurer, is being reimbursed for payments it has already made to injured employees, not for ongoing or past payments made to the trust fund.

Verdict: The Supreme Judicial Court reversed the board's decision denying COLA-payment reimbursements to MIIF.

Takeaway

The plain language of the relevant statutes and the funding and reimbursement requirements they contain entitle the Massachusetts Insurers Insolvency Fund to receive COLA-payment reimbursements.

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