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Second Injury Fund – A Responsible Solution

During the 2011 legislative session, a coalition of 10 business groups, including Associated Industries of Missouri, successfully defeated a proposal supported by the Missouri Chamber of Commerce and Industry and the Missouri Association of Trial Attorneys that would have dramatically increased the amount employers pay into the Second Injury Fund.  The Second Injury Fund is funded with a surcharge on worker’s compensation premiums that is currently capped by statute at 3%.  The Chamber/trial attorney plan would have allowed this surcharge to more than double and, more importantly, would have allowed non-work related claims to be compensated through the worker’s compensation system.  The same non-work related claims that have bankrupted the Second Injury Fund would be covered by employers’ workers compensation, causing these costs to skyrocket!  In recently filed court documents, the Missouri Chamber also admits increasing the surcharge would harm Missouri businesses: “This economic harm will be long lasting and detrimental to the business community in Missouri.”

Associated Industries of Missouri polled our membership and found nearly unanimous opposition to this failed plan and we vigorously fought the plan, along with our 9 partners representing every major business group in Missouri.  Our members indicated they would be favor of reforms to the current system or elimination of the Fund altogether, but were not in favor of additional funding for the Second Injury Fund.

Since adjournment of the legislature in May, this broad coalition of business groups has further developed a responsible solution for addressing the Second Injury Fund problem.  Our plan: either terminate the Second Injury Fund without a surcharge increase; or continue the Second Injury Fund to minimize the impact on worker’s compensation premiums, but do NOT increase costs for employers.  In other words, our members believe we should address the real problem with the Fund – the amount being paid from the Fund, rather than increasing the amount employers must pay into the fund.  Currently, workers with pre-existing conditions and ailments that have nothing to do with their employment are able to get large settlements from the Second Injury Fund – including those with diabetes, obesity, sports injuries, etc.  This must stop!

So what is our plan?  Our plan is a common sense, responsible approach to addressing the Second Injury Fund problem:

Eliminate Permanent Partial Disability Claims

Eliminate permanent partial disability (PPD) claims from the Second Injury Fund (SIF) system. Of the 29 states that have some form of a SIF, the vast majority allow claims solely for permanent total disability.  Missouri’s SIF PPD annual payments (before the Attorney General stopped settling claims) were about $18 million.  The PPD system has been exploited by plaintiffs’ attorneys over time, allowing claimants to file repeated claims against the Fund.  The current system allows employees to receive compensation totaling more than 100% disability.  Recently manufacturers have told us of cases where workers that are 150% disabled are still working at their jobs!

Limit Future Claims to Previous Injuries or Conditions Resulting From Work or Military Service

Only allow pre-existing conditions or injuries to augment a work-related injury claim when the pre-existing condition or injury is due to work or military service. This would greatly reduce the number of claims against the SIF while maintaining benefits for the few that need it the most. The recent Iraq and Afghanistan wars have increased the number of injured veterans with amputations and other injuries that could cause barriers to their entering the workplace and also increase employers’ Workers’ Compensation liability.  Current types of claims that would no longer qualify for SIF awards would include conditions such as diabetes, obesity and sports injuries.

Establish a Priority Order for Payment of Claims

If there are insufficient funds to pay claims, a priority order for payment of claims should be established in statute.  We suggest the available funds should be used to pay claims in the following order:

  1. Expenses related to the legal defense of the fund.  In 2010 89% of SIF claims were dismissed, but dismissal is only possible with adequate defense of the fund by attorneys in the Office of Attorney General.  If the current attorneys are no longer able to defend the fund, these 89% of claims could potentially add to the cost of the SIF system;

  2. Permanent Total Disability awards in the order settled or finally adjudicated;

  3. Permanent Partial Disability awards in the order settled or finally adjudicated (for claims settled or adjudicated prior to the effective date of the bill); and,

  4. Medical expenses.

Coordinate Second Injury Fund Awards With Social Security Disability Benefits

Claimants against the Second Injury Fund are usually also eligible for SSDI benefits under current law.  Federal law provides that the amount of benefit received from other sources, such as the Second Injury Fund, result in a reduction of SSDI benefits for the claimant.  This should be reversed: awards from the Second Injury Fund should be reduced by the amount of Social Security Disability benefits received by the claimant.  This results in no financial loss for the injured worker, but would reduce the amount awarded from the Second Injury Fund.

We believe this plan will address the real problem with the Second Injury Fund – the payout of claims for non-work related injuries – and bring sensibility back to the system.  Every business group in Missouri that has expressed an opinion, except one, have endorsed this plan.  We will keep you posted of any developments.

If you are a member of Associated Industries of Missouri and would like to weigh in with your opinion on this subject, please send an email to Ray McCarty at rmccarty@aimo.com .

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