Understanding New Jersey's Second Injury Fund.

What is the Second Injury Fund?

The Second Injury Fund (“Fund”) refers to a special fund established by the Workers’ Compensation Act (N.J.S.A. 34:15-95) allowing the Department of Labor to collects a surcharge on all workers compensation policies issued in New Jersey. The collected monies create a Fund to reduce the costs of “second Injuries” on New Jersey’s employers in order to encourage employers to hire previously-disabled workers. The Law creating the Fund was enacted in 1923 before the Americans with Disabilities Act made it impermissible to discriminate in the hiring of previously-disabled workers.

The Fund used to be called the “2% Fund” because the surcharge was originally set at 2%. Now the surcharge is 6.76% (as of January 1, 2013). Practitioners use the terms “Second Injury Fund” and “2% Fund” interchangeably.

History of the Fund.

After World War I many former soldiers returning to employment had amputated limbs, internal injuries, and other conditions. Employers did not want to hire these former soldiers because they feared that a new industrial incident, such as the loss of another limb in a machine accident, could leave the employer exposed for paying total disability benefits to the soldier.

For example, imagine a fact scenario where a factory hires a worker who was missing a lower leg. The employee is then injured while working for the new employer – losing his other lower limb. Under the New Jersey Law (“loss of any two limbs shall constitute total disability” – see N.J.S.A. 34:15-12(c)(20)) the petitioner would be “totally disabled” and the post-war employer would be responsible for paying 100% of the compensation then due.

The Second Injury Fund was established to encourage employers to hire workers with prior disabilities.

The Fund was charged with responsibility to pay compensation for “pre-existing illness, injury, or disease” when the pre-existing disability, considered together with the effects a new accident or injury, made the employee totally disabled.

When the Fund pays.

Under the example above, the employer compensates the claimant for the percentage of overall disability contributed by the employer’s accident. In this case, presume that figure to be 50%. Applying the Second Injury Fund law, the State of New Jersey’s fund then compensates the petitioner for the rest of her life – starting to pay once the employer’s contribution is exhausted (i.e., the 50% award has been paid out). Staying with our 50% example, the employer would be responsible for paying compensation for the first 225 weeks. Then, for the remainder of the claimant;s life, the Second Injury Fund would make all payments. Note: medical costs would still be the responsibility of the employer.

The Second Injury Fund pays only when the following the three conditions are met:

  1. The claimant is now totally disabled;
  2. The claimant had a measurable disability before he came to the employment; and
  3. It was the combination of the prior disability plus the employment accident which now renders the claimant totally disabled (in other words, the Second Injury Fund does NOT pay where the claimant is totally disabled as a result of the “last accident” alone).

Effect on employer/carrier exposure.

The effect of the Second Injury Fund is to reduce expsoure for employers who have hired employees with pre-existing disability. The Second Injury Fund takes over payments at a fixed point in the future (at a maximum, 450 weeks after the employer assumes payments).

Who represents the Second Injury Fund?

The Fund is represented by the Attorney General of New Jersey. In practice, the representation is handled by assigned-Deputy Attorney Generals who focus on workers’ compensation (from the AG’s Labor, Personnel, Community Affairs and Elections section.

Claiming Contribution from the Second Injury Fund.

The Second Injury Fund can voluntarily assume responsibility for future benefits. If the Fund will not voluntarily contribute, the matter of Fund liability can be litigated before a Judge of Compensation. However, in order for a Second Injury Fund relief to be available, a Verified Petition must be filed on behalf of the claimant.

Filing a Verified Petition.

As per N.J.S.A. 34:15-95.2 a verified petition must be filed. The law provides (in part):

Applications for benefits under this act shall be made by a verified petition filed in duplicate within 2 years after the date of the last payment of compensation by the employer or the insurance carrier addressed to the Commissioner of Labor who shall refer it to a judge of Compensation to hear testimony and for a decision as to whether the petitioner shall or shall not be admitted to the benefits provided under this act.

After the Verified Petition is filed, the matter will be listed before a Judge of Compensation as a “Motion to Join the Second Injury Fund.”

What the Verified Petition must contain.

The Verified Petition requires that the petitioner provide biographical information, including number of dependents, education history, and a description of prior medical conditions as well as prior workers’ compensation awards. The most important part of the Verified Petition is the following statement that the petititioner is required to sign:

I believe that I am totally and permanently disabled as a result of my pre-existing physical and/or psychiatric conditions and my last compensable injury or disease.

Presenting the proofs: Our checklist.

What the petitioner should have prepared:

  1. A medical report stating that she is currently totally disabled. The medical report should not only address the last compensable disability but also the pre-existing disabilities. Usually, this report will come from the petitioner’s paid expert.
  2. Assembled medical records for the last compensable (work-related) injury.
  3. Assembled medical records for the alleged “pre-existing” disability.
  4. If the petitioner is on Social Security Disability:
    1. Have contacted Social Security to obtain a statement of “Average Current Earnings.” The Division of Workers’ Compensation has provided a form.pdf) for use by petitioner’s counsel to obtain this information.
    2. The names and dates of birth for all Social Security Auxiliaries and payments broken down by Auxiliary.
    3. The date of onset for Social Security Disability. The best proof of this is the actual Social Security Disability Determination (the Decision awarding benefits).
  5. If the petitioner has a pension (accidental or disability):
    1. Onset date of disability as awarded by the pension.
    2. What the pension was awarded for (i.e., was it the same disability claimed in the compensation case?)
  6. Any temporary disability lien information.
  7. Information about any other liens, including private health insurance liens.
  8. Medical Conditional Payment information.
  9. Status of unpaid medical bills (if any).
  10. Child Support lien information (this is also something the Judge of Compensation can look up on the State computer system during a Second Injury Fund conference).
  11. Information regarding a third party claim (if any. At the very least, petitioner’s counsel should be prepared to identify the attorney representing the petitioner in any third-party claim.

What Defense Counsel can have prepared:

  • The wage and rate of compensation.
  • The dates and rate at whch temporary total disability benefits were issued.
  • The final rate at which temporary disability was paid.
  • Copies of the defense IME reports.
  • Information regarding the claimant’s duties at the time of the compensable (last) work-related injury.

Most common issues in Dispute.

Was the last accident totally disabling by itself?

The Second Injury Fund does not pay where the claimant is totally disabled as a result of the “last accident” alone. Therefore, the parties must be prepared to meet the most common defense to contribution by the Fund: that the last (compensable) accident was totally disabling by itself, and the pre-existing conditions did not materially contribute to the overall disability.

There is case law to stand for the proposition that merely adding up the value of prior injuries or even prior awards of compensation is not sufficient to establish a pre-existing disability. If the claimant testifies that he was “feeling fine” and going wabout his regular work and activities of daily living without limitation, then the argument that the last accident was by itself the disabiling event will be found. To respond to this defense, be prepared to demonstrate the claimant’s functional abilities for the time before the last accident.

The petitioner is not totally disabled.

The Deputy defending the Second Injury Fund will often take the position that the petitioner is not totally disabled. If the employer’s medical expert has produced a report finding less-than-total disability, the Deputy Attorney General will often give more weight to that opinion in assessing the claimant’s overall disability. Counsel should be prepared to combat this argument with a thorough knowledge of the case and the impact of the last compensable injury on the claimant.

The “sedentary work” argument.

The Second Injury Fund also will also adopt a position that a claimant is employable in a sedentary or light duty capacity. Often, this position is purely speculative (and often relies on a musing about imaginary “Walmart Greeter” jobs the claimant could perform). As the Workers’ Compensation Law Judge can no longer refer claimants to the Division of Vocational Rehabilitation for work placement, this argument is largely moot.

Best practices for Handling Second Injury Fund Cases.

Neutralize the common “procedural” objections of the Second Injury Fund.

The Deputies defending the Second Injury Fund will start by reviewing the “Second Injury Fund Verified Petition” and the attendant medical proofs (usually, both sides’ medical expert reports). At the initial conference (while the case is pending as a Motion to Join the Fund) the Deputy will usually point out any deficiencies in the filing and request the information from the checklist (above). Before the initial conference with the Judge and Deputy Attorney representing the Second Injury Fund, counsel should make sure that all of the other information discussed in our Checklist (above) is available.

Make sure the reports of party experts are current.

Make sure that the IME reports are up-to-date at the time of conference with the Second Injury Fund. Unfortunately, total disability cases can take the most time to assemble properly, and it is common for the IME reports to have grown stale. Generally speaking, “stale” means more than two years old. See Allen v Ebon, quoting Perez v Pantasote.

Rely on the facts.

Don’t allow speculation and surmise, especially on the part of the Fund, to prevail. One of the most common arguments raised by the Fund is that the claimant is “not totally disabled.” There is an alternative to trying that issue to conclusion: the court allows for “in camera” (off the record) interviews of the petitioner by the Deputy Attorney general as part of the pre-litigation fact-finding process. This can be especially useful if the petitioner is sympathetic and in-person observation and questioning will strengthen the argument that the petitioner is totally disabled. Because this is done “off the record” it is a chance for all the parties to assess the petitioner’s credibility and disability without the spectre of a trial judgment impairing wide latitute in questioning.

Be prepared to demonstrate the claimant’s functional abilities for the time before the last accident.

The employer is in a unique to position to assist the petitioner in obtaining Fund contribution because the claimant’s pre-last-injury status is in issue. By definition, at the time of last injury, all Second Injury Fund candidates are working. The fact that the claimant was working is not held against them: however, the nature of the work, the participation level of the claimant, and the claimant’s description of his pre-last-injury status will be crucial in determining if the Fund contributes.

If the petitioner’s last work for the employer was “light” or can be characterized as “sheltered” the employer should be prepared to present proofs in this respect. If the claimant’s pre-existing disability was know, the employer should produce all documented evidence that the employer was aware of the prior limitations. For example, any pre-injury accomodations made to the employee’s work station, routine, hours, or job duties should be provided to defense counsel.

The Order for Total Disability With Second Injury Fund.

At the conclusion of a case where the Second Injury Fund has either voluntarily agrred to contribute or where the Judge of Compensation has Ordered contribution, an Order for Total Disability will be entered. Due to the added complexity of the “takeover” of benefits at some point by the Fund, the Division has promulgated a special Order to be used in this situation.

Questions about this topic? Contact glois@wglaw.com.
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Greg Lois is the managing partner of LOIS LLC, a 19-attorney law firm dedicated to defending employers and carriers in New York and New Jersey workers' compensation claims. Greg is the author of a popular series of "Handbooks" on workers' compensation, and is the co-author of the 2016 Lexis-Nexis New Jersey Workers' Compensation Practice Guide. Greg can be reached at 201-880-7213 or glois@lois-llc.com