The Special Fund for Reopened Cases 101

Section 25-a of the New York Workers Compensation Law (WCL) created a Special Fund for Reopened Cases (“Special Fund”) to administer and pay indemnity and medical benefits in “stale claims” – that is, old, closed claims that were being reopened. The purpose of the Special Fund was to relieve employers and carriers of the liability of these stale claims. The Special Fund was created with the intent of protecting both the claimant and the employers/ carriers, to circumvent the possibility of inadequate reserves to pay out claims, and to ensure that claimants continue to receive the benefits they are entitled to.

The Special Fund was funded by assessments against employers and their carriers, as well as self-insured employers. Employers with an insurance policy were assessed based on their premiums, and self-insured employers and those insured through the State Insurance Fund were assessed based on indemnity payments made. If the funding in the Special Fund fell below a certain amount, the assessments would be adjusted accordingly to ensure there is always enough money in the Special Fund. Simply put, employers and carriers were required to put money in the Special Fund for use when a stale claim is reopened in the future, and the Special Fund would be responsible for handling the reopened claim.

So, what exactly is a stale claim? According to Section 25-a of the WCL, for liability of a stale claim to be shifted to the Special Fund, the following criteria must be satisfied:

  1. more than seven years must have elapsed from the date of the injury or death, and;
  2. more than three years must have elapsed after the last payment of compensation

Payment of compensation refers to indemnity benefits, and not medical benefits. As such, if the claimant has been receiving ongoing medical treatment, this would not bar transfer of liability to the Special Fund. In addition, the claim must have been truly closed before it can even be reopened.

Unfortunately, the statute does not spell out what it means to be truly closed, and as such, this is a factual determination to be made by the Board. The standard that the Board uses to make this determination is whether further proceedings are contemplated at the time of the “closing.” Here are some examples of when further proceedings are contemplated at the time of the “closing”:

  1.  Where the claimant’s doctor submits medical evidence of permanent impairment, but the Board does not address same.
  2. Where additional injuries were raised, but not addressed by the Board.
  3. Where the carrier was directed to produce a C-240 wage statement, but the issue of average weekly wage and lost time were never addressed.

It should be noted that the Board marking the claim “no further action” or “closed” does not necessarily mean that the claim is closed for purposes of shifting liability to the Special Fund.

How are closed claims reopened? A claimant seeking to reopen a closed claim must file a C-25 form. This form must be filed with the Board at the district office where the case was closed. A case can also be reopened by virtue of new medical evidence, but the claimant must file a C-27 form with the supporting medical evidence. The supporting medical evidence must show an actual change in the claimant’s condition.

When an employer or carrier discovers that a claim is ripe for transfer to the Special Fund, it must immediately file a Request for Further Action (RFA-2) to address the issue. The request for transfer to the Special Fund can also be raised at a hearing, but it is recommended that an RFA-2 be filed immediately. When the hearing is scheduled, the carrier must be prepared to show that the claim is more than seven years old, that the last payment of compensation was made more than three years prior, and that the claim was truly closed.

The Special Fund was closed pursuant to the Business Relief Act of 2013, due to the increasing assessment against employers as a result of the increased shifting of liability to the Special Fund. Section 25-a of the WCL was then amended to bar applications for Special Fund relief effective January 1, 2014. However, the Board is still required to litigate claims wherein applications were filed prior to this date.

One of the issues that arose with the closing of the Special Fund and the inability to seek relief for old claims is the retroactive application of the WCL Section 25-a amendment to policies that were in effect prior to the closing of the Special Fund. The amendment prejudiced employers and carriers that paid into the Special Fund prior to its closing, as the payments were made with the expectation that the Special Fund would always be available to assume liability for old claims.

This issue was litigated, and in a new landmark case, American Economy Ins. Co. et al. v State of New York, et al., decided on April 14, 2016, the Appellate Division of the First Department ruled that the retroactive application of the WCL Section 25-a amendment to policies that existed prior to the closing of the Special Fund is unconstitutional. 2016 N.Y. App. Div. LEXIS 2801, 2016 NY Slip Op 02924 (N.Y. App. Div. 1st Dep’t, Apr. 14, 2016). This ruling means if an employer or carrier had a policy that pre-dates October 1, 2013, it can go ahead and seek Special Fund relief under those policies. As such, the Special Fund is now “reopened” for policies that were in existence prior to October 1, 2013, provided that all other requirements are met.

For a detailed analysis of American Economy, please see my colleague, Declan Gourley’s article.

Join In the Learning!

Register for our monthly webinars on New York workers’ compensation law, by clicking here. Sign up for our monthly newsletter here.

The New York Handbook

Our webinar series was designed as a complement to our New York Workers’ Compensation Handbook. The Handbook is written in “plain English” and provides a resource for risk managers and claims professionals who need a complete and easy-to-use reference guide for handling New Jersey claims.

Digital editions of our book on New York workers’ compensation defense are available for download (FREE) here:
New York PDF link: bit.ly/nywcpdf
New York ePUB link: bit.ly/nywcepub
New York Kindle link bit.ly/nywckindle

Tashia Rasul is an Partner at Lois LLC where she defends employers and carriers in New York workers’ compensation claims. Tashia chairs the Firm's Diversity Committee and is active in the national Alliance of Women in Workers' Compensation. She can be reached directly at trasul@lois-llc.com or 201-880-7213.