DIA wrongfully denied insurer reimbursement claim

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An insurance carrier’s claim for reimbursement for past cost-of-living payments to a totally and permanently disabled employee should not have been denied on grounds that are not explicitly recognized under the statute governing the payment obligations of the Workers’ Compensation Trust Fund.

The Appeals Court made the ruling in reversing a decision by the review board of the Department of Industrial Accidents.

Under G.L.c. 152, §65, the Workers’ Compensation Trust Fund shall not provide reimbursement of benefits “to any non-insuring public employer, self-insurer or self-insurance group which has chosen not to participate in the fund.”

The case before the Appeals Court involved plaintiff Employer’s Reinsurance Corp.’s efforts to obtain reimbursement of cost-of-living benefits paid to former Polaroid employee Annie Talbert under the terms of a reinsurance policy with the self-insured employer.

After Polaroid filed for bankruptcy in 2004, ERC began paying Talbert’s base and COLA pursuant to the terms of its reinsurance contract. But unlike ERC’s base benefit payments, the trust fund did not reimburse the insurer for its COLA payments.

In 2021, the DIA’s review board denied ERC’s claim for reimbursement, relying on the Appeals Court’s 2015 decision in Home Insurance Co. v. Workers’ Compensation Trust Fund. In that case, the court denied a reimbursement claim on grounds that the insurer was no longer writing policies. Following the analysis in Home Insurance, the DIA review board concluded that ERC was not entitled to reimbursement as its insured, Polaroid, was insolvent.

But in ERC’s appeal, the panel recognized that Home Insurance had subsequently been overruled first by the Appeals Court in 2024 and then on review by the Supreme Judicial Court in 2025 in the case Arrowood Indemnity Co. v. Workers’ Compensation Trust Fund.

The courts in Arrowood recognized that the review board’s authority to deny reimbursement claims was limited to the three categories specified in G.L.c. 152, §65. On that basis, the courts found that the board could not deny a reimbursement claim on grounds that the insurer was no longer writing new policies.

In ERC’s appeal, the panel concluded Arrowood required the reversal of the review board’s denial of reimbursement.

“The Legislature has stated that three categories of employers are ineligible for reimbursement — those that chose to opt out of the trust fund — which does not include insolvent employers,” Judge Joseph M. Ditkoff wrote for the panel. “The board cannot create a fourth exception, whether for insurers in run-off or for insolvent employers or for anything else. The board can no more rewrite a statute than we can.”

The 14-page decision is Employer’s Reinsurance Corporation v. Workers’ Compensation Trust Fund, Lawyers Weekly No. 11-010-26.

Course correction?

Springfield attorney Ronald C. Kidd, who represents ERC, declined to comment on the decision. In his client’s brief on appeal, Kidd argued that the review board’s denial of reimbursement was contrary to the plain language of G.L.c. 152, §65.

“The only exceptions to the reimbursement process were/are those self-insurers, self-insured groups and municipalities who have chosen to exempt themselves from the assessment program,” Kidd wrote. “ERC is and was neither a self-insurer, a self-insured group, nor a municipality. While the Reviewing Board alleged, without judicial or legislative support, that ERC ‘stood in the shoes of a self-insurer,’ it is important to remember that the self-insurer in this case (Polaroid) did pay its [required annual assessment to the trust fund] until its bankruptcy. After the bankruptcy, there was no ‘employer’ from which to collect the assessment.”

Assistant Attorney General Arjun Jaikumar argued the case on behalf of the trust fund. The AG’s Office did not respond to a request for comment, but in his appellate brief, Jaikumar submitted that Arrowood did not necessitate a reversal of the board’s denial of reimbursement.

“[I]n abrogating Home, this Court’s opinion in Arrowood held that ‘insurers are eligible for reimbursement so long as the insured employer participates in the assessment provisions that supply the revenues for the [trust f]und,’” Jaikumar wrote. “But where, as here, an employer is no longer paying assessments, either as a self-insurer or through any private insurer, to the Trust Fund, Arrowood itself, and several of this Court’s prior precedents, counsel that no entity has any entitlement to reimbursement.”

Boston attorney John J. Canniff represents insurers in workers’ comp disputes as part of his appellate practice. Canniff said he sees the overruling of Home Insurance by the Arrowood courts as a pivotal development in favor of claimants seeking reimbursement from the trust fund.

“Home was the linchpin for denying reimbursement in these instances,” Canniff said. “Arrowood specifically defined that there are only three instances where an employer or the insuring entity is not be entitled to reimbursement, whether the case is about COLA — as in this [ERC] case — or the second-injury fund reimbursements at issue in Arrowood.”

I just see [the courts] going back to the principle that the statute says what the statute says, and our job as a court is to interpret the statute. And if the statute says there are three exceptions, there are three exceptions, and we can’t rewrite it.

— Robert P. Powers, Boston

Noting that ERC originally sought COLA reimbursement in 2018, Canniff credited the persistence of the insurer’s attorneys in pursuing their client’s claim even during a period when the case law — namely the Home Insurance decision — was against them.

“You have to really give credit to Ronnie Kidd and [co-counsel] Charlie Casartello for handling this case for as long as they did,” Canniff said. “If a normal case is nine innings, this was 18.”

Boston litigator Robert P. Powers said he sees the Arrowood cases as a course correction from the Appeals Court’s decision in Home Insurance.

“The original Home decision came out of a desire to achieve something that was right and fair,” Powers said. “In that case, the board was saying that we’re a ‘pay-as-you-go’ system and, if we’re not getting the funds in, we shouldn’t be obligated to reimbursement.”

But while that position by the board may have seemed fair at the time, Powers said the Appeals Court and SJC recognized in the later Arrowood case that it did not comport with the language of the reimbursement statute.

“I just see [the courts] going back to the principle that the statute says what the statute says, and our job as a court is to interpret the statute,” Powers said. “And if the statute says there are three exceptions, there are three exceptions, and we can’t rewrite it.”

COLA reimbursement claim

According to court records, Talbert suffered an industrial injury in 1979 as an employee of Polaroid. Pursuant to its obligations as a self-insured employer under the Workers’ Compensation Act, Polaroid obtained an excess reinsurance policy with ERC to cover any extraordinary losses.

In November 1986, Polaroid began paying Talbert workers’ compensation benefits, including COLA benefits, after Talbert was declared totally and permanently disabled. Polaroid received reimbursement from the trust fund for a portion of the COLA benefits paid to Talbert.

Later, the total amount of benefits paid by Polaroid to Talbert reached $250,000, triggering ERC’s obligation to pay Talbert’s base benefit.

Polaroid’s declaration of bankruptcy in 2004 triggered coverage of Talbert’s base benefit and COLA payments under a bond the employer had secured from Greenwich Insurance Co. In turn, pursuant to its contract with Polaroid, ERC reimbursed Greenwich for the base portion of Talbert’s benefits.

Greenwich paid Talbert’s benefits until the bond was exhausted in 2013.

In February 2013, Talbert filed a claim with the Department of Industrial Accidents seeking payment of her benefits by ERC. Later, the DIA’s review board issued a decision requiring ERC to pay Talbert directly both her base and COLA benefits.

After the trust fund denied ERC’s request for reimbursement of COLA benefit payments, the insurer in 2018 filed an action with the DIA against the trust fund seeking the reimbursement. The insurer subsequently appealed after the review board, relying on Home Insurance, found that ERC was not eligible for reimbursement from the trust fund.

‘Arrowood’ indistinguishable

The Appeals Court found unavailing the trust fund’s argument that Arrowood was distinguishable from the case before it.

“Indeed, in Arrowood Indem. Co., the Supreme Judicial Court considered in dicta this very situation,” Ditkoff wrote. “As the court stated, ‘even if that employer had gone out of business, which is a possibility emphasized by the trust fund, it would be other participating employers, not the insurance companies, that would have to make up the loss in trust fund revenues.’”

Given the holding in Arrowood, the panel concluded ERC otherwise met the statutory requirements for eligibility to be reimbursed by the trust fund.

“At the time of Talbert’s injury, Polaroid was a self-insurer that participated in the trust fund,” Ditkoff wrote. “Similarly, ERC does not fall into any of the three exceptions. Accordingly, it is entitled to reimbursement under the plain meaning of the statute.”

He proceeded to dispense with the trust fund’s alternate argument raised for the first time on appeal that ERC did not qualify as an “insurer” for purposes of qualifying for reimbursement from the trust fund.

“ERC, an insurance company, issued a reinsurance policy to Polaroid, and was authorized to do so,” Ditkoff said. “The policy purported not to require ERC to pay benefits directly to any employee, but nonetheless was specifically a contract to ‘pay the compensation provided for by this chapter.’ G.L.c. 152, §1(7). Pursuant to the contract, ERC agreed to pay the employer for workers’ compensation benefits if necessary and, in fact, paid Polaroid and then Greenwich for base benefits each paid to the employee. Accordingly, ERC qualifies as an insurer under the Workers’ Compensation Act.”