Articles & Updates

The Second Injury Fund Prevails in the Supreme Court, But What Does This Mean for Employers?

by James B. Kennedy and Maria W. Daugherty

The Missouri legislature’s efforts to restore, and then preserve, the viability of the Second Injury Fund (SIF), primarily by restricting the availability of benefits, have generated many legal challenges. However, on June 25, 2019 the Supreme Court put to rest one major issue arising out of the 2013 SIF amendments. In Cosby v. Treasurer, the Supreme Court issued a decision en banc effectively putting an end to claims for permanent partial disability (PPD) against the SIF for work injuries occurring after January 1, 2014.  

Cosby (claimant) injured his left knee at work on January 22, 2014. He filed a claim against his employer and the SIF alleging he was permanently and totally disabled (PTD), or alternatively had PPD, as a result of his knee injury (primary or last injury) in combination with his preexisting disabilities. Prior to hearing, Cosby settled the primary injury claim against employer and proceeded to hearing against the SIF only. The Administrative Law Judge (ALJ) determined that Cosby was not entitled to benefits of any kind in light of Sec. 287.220.3.  The Commission affirmed the ALJ’s decision. In the dicta of its decision, the Commission alluded to the notion that liability for the benefits which were once paid by the SIF may have shifted to the employer. Cosby appealed, arguing that the Commission erroneously interpreted Sec. 287.220. Alternatively, he argued that the elimination of PPD benefits violated the Missouri open courts provision as well as his due process and equal protection rights.

The Supreme Court affirmed the Commission’s decision by holding that the Cosby was not entitled to PPD benefits under Sec. 287.220.3(2) because his primary injury occurred after January 1, 2014. The Court found that Sec. 287.220.3 pertains to all claims against the SIF for injuries occurring after January 1, 2014, and did not authorize an award of PPD benefits to the claimant in light of the fact that his injury occurred after January 1, 2014. His claim for PPD benefits was correctly denied because the 2013 legislative changes ended that cause of action.

The Court similarly rejected the claimant’s assertion that the changes that eliminated PPD claims against the SIF violate the open courts provision or a claimant’s due process and equal protection rights. The Court found that the failure to authorize PPD claims against the SIF did not arbitrarily deny access to Missouri courts; rather, it eliminated a statutory cause of action after January 1, 2014. The Court’s holding has put an end to claims for PPD where the date of accident of the primary injury occurs after January 1, 2014. Going forward, only claims for permanent partial disability (PPD) with a date of accident prior to January 1, 2014 can be pursued against the SIF. Presumably then, open claims where the date of accident occurred prior to January 1, 2014 are not affected by this case.

Interestingly, in a footnote, the Court found that Gattenby v. Treasurer of Missouri should no longer be followed to the extent it is inconsistent with their decision in Cosby. The requirements for a finding of PTD against the SIF under Sec. 287.220.3 (“new law”) are stricter than those of the requirements pursuant to Sec. 287.220.2 (“old law”). Gattenby held that the “new law” applied only where both the preexisting and primary accidental injuries occur after January 1, 2014. As such, if any of the preexisting injuries occurred prior to January 1, 2014, the “old law” would apply, but that is no longer true.

Given that the “new law” has yet to be judicially scrutinized, it remains to be seen how the Supreme Court’s limitation on the holding in Gattenby will affect employers (and insurers). Restricting PTD benefits against the SIF will likely put more pressure on the ALJ and Commission to find PTD benefits are owed by the employer instead. In fact, claimants may go as far as minimizing their prior injuries and disabilities to increase their chances of obtaining a PTD award in the primary injury case.

The Takeaway: Claimants who have primary injuries that occur after January 1, 2014 can no longer pursue PPD benefits against the SIF. They can pursue PTD benefits against the SIF under the “new law” which has stricter requirements for PTD claims. Restriction of these benefits against the SIF may encourage the claimants’ attorneys to pursue PTD benefits against the employer. The primary concern of Industry throughout the “downsizing” of the SIF has been exactly that, the shifting of PTD liability from the SIF to the employer where the Administrative Law Judge or Commission would otherwise have to deny benefits beyond PPD in a primary injury case where the employee can no longer work.

Questions or comments? 

Jim Kennedy: 314-552-4020 | jkennedy@evans-dixon.com 

Maria Daugherty: 314-552-4124 | mdaugherty@evans-dixon.com

COPYRIGHT: Evans & Dixon, LLC 2019