Special Disability Fund, and the Second Injury Fund
Fund for Reopened Cases

The Special Funds Conservation Committee (the "Special Funds") was organized in 1938 for the purpose of conserving assets of the special funds, created under Subdivision 8 of Sections 15 and 25-a of the WCL of the State of New York. Special Funds, through its attorney, inves-tigates claims against such funds and cooperates with the Chairman and members of the New York Workers' Compensation Board, the Superintendent of Insurance and any other public official whose duties concern the operation of these funds.

The Executive Committee of the Special Funds consists of five voting members, one each to represent the stock carriers, the mutual carriers, the State Insurance Fund, the New York Compensation Insurance Rating Board and self-insurers. There are also three non-voting advisory members representing the American Insurance Association, the New York State Insurance Association and the Alliance of American Insurers.

Special Funds Conservation Committee occupies a unique niche in New York claims environment:

- The Special Funds Conservation Committee's administrative budget is funded through assessments against New York's carriers and self-insurers. Insurance carriers and self-insured customers expect and receive fair, equitable and efficient claim handling service with their C-251/C-251.1 Submission for Reimbursement requests.
- Special Funds Conservation Committee acts as the insurance carrier for claims that are established under 25-a of the Workers' Compensation Law. Thus, claimants are also customers and are entitled to prompt and fair payment of benefits as well as expeditious resolution of their claims.

The following excerpts are taken from the Workers' Compensation Special Funds Study Commission's Report to the Governor.

Special Disability Fund, a.k.a. the Second Injury Fund:

"The Second Injury Fund is responsible for reimbursing carriers for all payments properly paid pursuant to Section 15(8) and Section 14(6) of the Workers' Compensation Law:

Second injuries-Where an employee with a "permanent physical impairment" incurs a subsequent disability as a result of a work-related injury or occupational disease which results in a permanent disability caused by both conditions combined greater than what would have resulted from the second injury or occupational disease alone, the employer or carrier is reimbursed from the Special Disability Fund for all benefits after the first 260 weeks of disability. (Reimbursement is after the first 104 weeks of disability where the date of accident or disability was before August 1, 1994.) WCL Section 15-8(d). Further, if a second injury results in the employee's death and either the injury or death would not have occurred except for the pre-existing permanent condition, the employer or carrier shall be reimbursed from the Special Disability Fund for all death benefits payable in excess of 260 weeks (or 104 weeks for accidents or disablements before August 1, 1994). WCL Section 15(8)(e).

Silicosis or other dust diseases- If an employee is disabled or dies from silicosis or other dust disease, the employer or carrier is reimbursed by the Special Disability Fund for all benefits after the first 260 weeks of disability or death benefits. (For accidents or disablements before August 1, 1994, reimbursement is after the first 104 weeks.) It is not required that the employee had any previous physical condition or disability. WCL Section 15(8)(ee).

Concurrent employment- Where an injured employee is concurrently engaged in more than one employment at the time of injury, the employer in whose employment the employee was injured pays the full compensation rate and is reimbursed by the Special Disability Fund for the additional benefits resulting from the employee's increased average weekly wage due to concurrent employment. WCL Section 14(6), Section 15(8)(l).

As per the Workers' Compensation history of the Fund, "the Special Disability Fund was created in 1916, but at that time it only applied in very limited situations. As background, in 1915, the Court of Appeals held that an employee who had previously lost a hand became entitled, upon the loss of the remaining hand in a work-related accident, to compensation for permanent total disability instead of just a schedule award for the loss of the second hand. Claim of Schwab v. Emporium F. Co., 216 N.Y. 712 (1915). In response to the Schwab case, in 1915 the legislature amended WCL Section 15 to provide that an employee shall only receive compensation for an injury when considered by itself and not together with any previous disability.

However, the next year, 1916, the legislature further amended WCL 15 to create what eventually became the Special Disability Fund and to provide for a limited situation whereby a claimant's prior disability could be considered together with a new injury: where the claimant previously incurred permanent partial disability through the loss of one hand, arm, foot, leg or eye and then incurs permanent total disability through the loss of another member or organ, after the cessation of schedule award payments for the loss of the second member, the claimant shall be paid a special additional compensation for the remainder of claimant's life of 66 2/3% of claimant's average weekly wage. This special additional compensation was to be paid out of the newly created special fund. The amended statute provided that this special fund was to be funded by carriers paying the state treasurer $100 for death cases in which there was no persons entitled to compensation.

Expansion of Disability Fund at the time of World War II: Following its creation in 1916, there were no significant legislative changes involving this special funds until 1944, when c. 686 of the Laws of 1944 was enacted, which was in initial attempt to establish the Special Disability Fund as we know it today. The 1944 Act amended WCL Section 15 to greatly expand this fund to help returning World War II veterans and other partially disabled persons. However, there were many problems with this 1944 Act, such as insufficient funding for the new provisions and an unreliable method of payments to claimants.

In 1945, the legislature repealed the 1944 legislation and enacted a new, more carefully drawn Subdivision 8 to WCL Section 15. The 1945 Act contains a declaration of policy and legislative intent that was placed in Section 15(8)(a) and remains in the statute today:

(a) Declaration of policy and legislative intent. As a guide to the interpretation and application of this subdivision, the policy and intent of this legislature is declared to be as follows:

First: That every person in this state who works for a living is entitled to a reasonable opportunity to maintain his independence and self-respect through self-support even after he has been physically handicapped by injury or disease;

Second: That any plan which will reasonably, equitably and practically operate to break down hindrances and remove obstacles to the employment of partially disabled persons honorably discharged from our armed forces or any other physically handicapped persons, is of vital importance to the state and its people and is of concern to this legislature;

Third: That it is the considered judgment of this legislature that the system embodied in this subdivision, which makes a logical and equitable adjustment of the liability under the workmen's compensation law, which an employer must assume in hiring employees, constitutes a practical and reasonable approach to a solution of the problem for the employment of physically handicapped persons.

Pursuant to the 1945 law, if an employee who has a permanent physical impairment incurs a subsequent disability by accident arising out of or in the course of employment or an occupational disease. A resulting in a permanent disability caused by both conditions that is materially and substantially greater than that which would result from the subsequent injury or occupational disease alone, the employer or carrier shall be reimbursed from the Special Disability Fund for all compensation and medical benefits subsequent to those payable for the first 104 weeks of disability. (The current law provides that for claims made after August 1, 1994, reimbursement is after the first 260 weeks of disability.)

The purpose of the 1945 bill is described in a memorandum dated April 16, 1945 from Chair Mary Donlon of the Workers' Compensation Board to the Counsel of Governor Thomas E. Dewey:

This bill amends and improves legislation enacted in 1944 to encourage the employment of disabled veterans and others who are physically handicapped, by transferring part of the cost of workers' compensation to a special fund.

This bill should stimulate the employment of disabled veterans and other handicapped persons, by removing all grounds for discrimination save only qualification of the individual for the work to be done. Wartime experience has shown that disabled persons have compensation abilities and attitudes, which for special tasks, counter-balance their handicaps and make them desirable employees.

This bill will protect employers from disproportionate workmen's compensation costs by providing a special fund to absorb that part of the compensation payments, which are attributable to the previous permanent physical impairment of a worker. Thus a serious handicap of disabled persons is removed at a time when returning veterans need this important help in developing their employment opportunities.

With regard to providing adequate finding for the Special Disability Fund, a memorandum from the Superintendent of Insurance to Governor Dewey dated April 2, 1945 describes the difference in assessment method between the 1945 bill and the 1944 legislation:

The bill provides that the Second Injury Fund shall take over the existing Fund and assume its liabilities. Under present subdivision 8 the revenue of the Fund is derived from payments by employers and their insurance carriers at the rate of $500 for each non-dependent death case. The amendment provides a more substantial amount of revenue of the Fund and a definite means of replenishing it by requiring an initial assessment upon insurance carriers, including the State Insurance and self-insurers, of 1% of their total compensation payments of the year previous, and each year thereafter an assessment in an amount representing their proportionate share of the total disbursements made from the Fund in the preceding year.

With regard to obtaining support for the bill, in a letter May 11, 1945 from the General Manager of the Compensation Insurance Rating Board to the Governor's counsel, the writer offered the following suggestion: May I offer the thought that wide publicity at this particular time of the talk of returning veterans might be helpful.

The 1945 legislation also included a provision which allows the Chair of the Workers' Compensation Board to appoint the attorney for the Special Funds Conservation Committee (SFCC) to represent the Special Disability Fund when a claim is made against the fund, although the provision does not specifically name the SFCC. WCL Section 15(8)(i).

Silicosis and Other Dust Diseases: In 1947, Section 15(8) was amended to provided that in cases where the claimant is disabled by silicosis or other dust diseases, employers and carriers shall be reimbursed from the Special Disability Fund for all compensation and medical benefits subsequent to those payable for the first 104 weeks of disability (now 260 weeks). WCL Section 15(8)(ee). This provision does not require that the employee had any previous physical condition or disability, which may result in total disability or death. With this legislation, a new paragraph was added to the Declaration of policy and intent in Section 15(8)(a):

Moreover, because of the insidious nature of slowly developing diseases such as silicosis and other dust diseases and because of the reluctance on the part of employers to employ persons previously exposed to silica or other harmful dust, means should also be provided whereby employers will be encouraged to employ and to continue the employment of such persons, by apportioning liability fairly between the employer and industry as a whole without at the same time removing any incentive for the prevention of harmful dust diseases.

Concurrent Employment. Prior to 1985, if an injured employee had two or more jobs, the wages for the employment in which the injury occurred were used to determine average weekly wage in order to calculate compensation benefits. The wages from any concurrent employment could only be considered in the calculation of average weekly wage if the concurrent employment was found to be similar to the employment in which the injury occurred.

In 1985, the legislature amended the Workers' Compensation Law to provide the average weekly wage includes all concurrent employment, not just similar employment. WCL Section 14(6). Amendments to Section 15(8) and 14 further provided that the employer or carrier would be reimbursed from the Special Disability Fund for the extra amount of compensation, above what it would have paid if just its own employment was considered for average weekly wage.

The purpose of this 1985 legislation was described in a July 1, 1985 letter from Barbara Deinhardt, then General Counsel of the Workers' Compensation Board, to the Counsel to Governor Cuomo:

The existing law can be extremely harsh for an employee who is injured while working in a low-paying, part-time job and who becomes disabled from his or her full-time job as well. Unless the employments are similar in nature, the employee will receive no compensation for the wages he or she loses from the full-time employment. A disabled worker under these circumstances may receive benefits in an amount that bears no relation to his or her total loss of wages, and which is far too low for the employee to live on. This is contrary to a basic premise of the Workers' Compensation Law, which is to compensate disabled workers for two-thirds of the wages lost due to an accident on the job.

This proposal provides that the employer will be liable for the exact same amount of benefits for which it would have been liable if the injured employee had no other employment. The additional benefits, if any, will be the liability of the Special Disability Fund, thereby spreading the cost of additional benefits among all employers.

At a minimal cost to employers as a whole, workers who have more than one job will be adequately protected under the law. It should also be mentioned that a growing number of other states combine earnings from all employments.

Knowledge of employer not necessary. In 1987, the Workers' Compensation Law was amended to provide that an employer does not have to have knowledge of an employee's pre-existing injury or condition in order to be entitled to reimbursement from the Special Disability Fund when the employee becomes disabled following a work related injury or occupational disease.

The purpose of this amendment was described by the bill's sponsor, Senator Walter J. Floss, Jr., in a letter to the Governor's Counsel dated July 8, 1987:

Case law required employers to have had knowledge of an employee's pre-existing physical impairment before the second injury fund could be used. On the other hand, employers are forbidden by the State Civil Rights Law from inquiring about a prospective employee's pre-existing physical disabilities. Since it is a primary purpose of a second injury fund to encourage employers to hire persons with disabilities, this complication in using the fund should be removed. That is the purpose of this bill.

However, in a letter to the Governor's Counsel dated July 15, 1987, then General Counsel Gladys Carrion of the Workers' Compensation Board stated that the bill changed the purpose the Second Injury Fund.

The bill changes the purpose of the Section from one that encourages the hiring of partially disabled or handicapped persons to one that enables insurance carriers to shift the burden of full liability in certain cases from their shoulder and place it on the Second Injury Fund, whether or not the employer had knowledge of a pre-existing permanent physical impairment. We have no objection to the purpose of this proposal, as it will help carriers by removing an important barrier to second injury fund relief and eliminate a source of much litigation.

We have a problem with the manner in which the bill has been drafted. Since the bill will no longer encourage an employer to hire permanently disabled workers or continue such a worker in employment after obtaining knowledge of a permanent impairment…we believe that technically the bill is defective. It should amend section 15(8) to remove the currently existing prologue to section 15(8), which is part of the law. The Declaration of policy and legislative intent should be omitted from the law.

In any case, the 1987 legislation eliminating the employer knowledge requirement was enacted and the prologue describing the 1945 legislature's intent regarding Section 15(8) remains in the statue.

Apportionment provision added. In 1992, subdivision (d) of WCL Section 15(8) was amended to add a provision regarding apportionment of liability between the Special Disability Fund, carriers, self-insures or employers:

Notwithstanding anything to the contrary in this chapter, there may be apportionment of liability for the special disability fund under this subdivision within a single claim by disposition between the fund, carriers, self-insurers or employers.

The purpose of this legislation was explained in the support memorandum of the Worker's Compensation Board, which states in part:

In order to forestall litigation and insure some reimbursement out of the Special Funds, employers and carriers are often willing to stipulate to accept a lesser amount of reimbursement than the post-104 weeks limit set forth under Workers' Compensation Law Section 15(8) in return for a concession of liability on the part of Special Funds. This is accomplished either by having the carrier agree to accept a percentage of reimbursement for all payments beyond two years or having the carrier agree not to file its first reimbursement request until something beyond the two-year period. Such agreements have apparently been fairly common in the past, but have been brought to the Board's attention recently due to emphasis being placed upon the need for law judges to spell out stipulations of the parties on the record and incorporate them into Board decisions.

In practical terms, it is clear that these agreements will continue to take place, with or without the Board's knowledge and approval… Given that such arrangements are virtually a fact of life, it would appear preferable to have them spelled out on the record, where everyone can be fully aware of the terms and conditions underlying Board awards, and settlements. Better yet would be the passage of this proposal to statutorily authorize the making of such agreements.

Furthermore, the entering by the Second Injury Fund into stipulating with carriers in 15(8) cases or in lump sum settlement involving Section 15(8) has no effect whatsoever on a claimant's right to workers' compensation benefits.

1996 Legislation. In 1996, the Legislature changed the 104-week criteria for the trigger of payment from the Special Disability Fund to 260 weeks (from two years to five years), effective for accidents occurring on or after August 1, 1994. There was also a change in the assessment of carriers, and self-insured employers from 175% of the previous year's disbursements to 150%. Additional changes were made to the assessment method in 1999.

The Special Disability Fund is administered by the Workers' Compensation Board and is represented in claims against the fund by the Special Funds Conservation Committee. The Commissioner of Taxation and Finance is the custodian of the Special Disability Fund and disbursements from such fund shall be made by the commissioner of taxation and finance upon vouchers signed by the chairman of the workers' compensation board. WCL Section 15(8)(h)."

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Fund for Reopened Cases:

Special Funds acts as the insurance carrier for those claims that are the liability of the Fund for Reopened Cases under Section 25a of the Workers' Compensation Law.

The history of this fund is detailed below and the following quotes are excerpted from material provided by the Governors' Special Commission on Special Funds:

"The Special Fund for Reopened Cases, created in Section 25-a of the Workers' Compensation Law, provides:

  • Direct payment to claimants and health care providers for cases reopened after 7 years from the date of injury or death and 3 years from the date of the last payment of compensation
  • Reimbursement to employers or carriers for supplemental benefits paid to increase old benefit rates made obsolete by inflation
  • Reimbursement to employers or carriers for 1999 retroactive increases to volunteer firefighter and volunteer ambulance worker benefits

Creation of Fund. The Special Fund for Reopened Cases (WCL Section 25-a) was created in 1933 in conjunction with the elimination of a three-year time limit on the reclassification of disabilities. As background, as the result of a 1927 amendment to the Workers' Compensation Law, a case could not be reclassified unless it was done within one year from the date of accident. (WCL Section 15-6-a, Laws of 1927; Schaefer v. Buffalo Steel Car Co., 250 NY 507, 166 NE 183 (1929).) In 1931, this time period was increased to three years. According to the then Attorney General, the three-year time limit on reclassification caused hardship to claimants whose conditions worsened after three years:

It has been our experience, from time to time, that an award is based on a particular classification of injury and later it develops the injury really belongs in another classification. This results, many times, in injustice to injured workmen.

The purpose of Senate Int. 1627 is to give the Industrial Board wider discretionary power to reclassify a disability "at any time without regard to the date of accident," upon proof that there has been a change in condition or that the previous classification was erroneous and not in the interest of justice. Under the present law the Board could do this only within three years from the date of accident. (Emphasis in original.)

Memorandum for Governor Herbert H. Lehman from Attorney General John J. Bennett, Jr., Dated April 20, 1933

However, the elimination of the reclassification time limit would make it difficult for employers and carriers to ascertain definitely their liability for compensation cases. (Letter to Governor from American Car and Foundry Co., dated April 19, 1933.)

Therefore, when the legislature eliminated the reclassification time limit in 1933, it also created a new special fund to which liability would be shifted for cases that were reopened beyond certain time periods. The dual purpose of the 1933 legislation was reviewed in an April 20, 1940 memorandum to Governor Lehman from his counsel, Nathan R. Sobel:

Prior to 1931, the law provided that no case could be reclassified after one year. In 1931 we extended this period for three years.

It is very evident that any such provision in our law was entirely unjust. No doctor could determine within so short a period whether the injury was going to be permanent or only partial. This was particularly true in tuberculosis cases, etc.

Therefore, in 1933 we abolished any limitation and provided that a compensation case be reclassified at any time. However, this change in the law made it very difficult for the insurer to established adequate reserves. For that reason the fund for reopened cases was established. Any person who had his case reclassified after seven years from the original injury would look to the fund instead of the insurer for his compensation.

When Section 25-a was enacted in 1933, it used the same passage of time criteria currently in the statute today for the shifting of liability to Special Fund for Reopened Cases-reopened 7 years from the date of accident and 3 years from the date of the last payment. To fund this new Rehabilitation Fund created under Section 15(9) and for employers or carriers to pay $300 into the Special Fund for Reopened Cases for every nondependent death case.

Early Insolvency and Attempts to Remedy. By 1938, the Special Fund for Reopened Cases was insolvent, and the representatives of industry and insurance carriers agreed to $150,000 special assessment to cover the shortfall in the fund, with the understanding that a study be made to indicate what would be necessary to insure a solvent fund. (Supporting Memorandum of Frieda S. Miller, Industrial Commissioner, in bill jacket to L. 1940, c.686, undated.)

During 1939, cases charged against the 25-a fund were studied by a committee representing labor, industry, insurance carriers and the Superintendent of Insurance. Id. Also in 1939, legislation was enacted which included the $150,000 assessment referred to above and which amended Subdivision 5 of WCL Section 25-a to give the Chair of the Workers' Compensation Board the power to appoint the Special Funds Conservation Committee to represent the Special Fund for Reopened Cases. The counsel to Governor Lehman explained this latter provision in an April 7, 1939 memorandum to the governor:

Some minor changes are also made in the bill for representation by the Fund in connection with the appeal of such 7 years old cases. Formerly a representative of the carrier, which originally insured the employer, handled the appeal. Now the Fund is permitted to appoint a special attorney whose compensation shall be paid out of such fund.

Further information on the establishment of the SFCC in 1938 was provided in a May 20, 1991 letter to the Workers' Compensation Board from Morris N. Lissauer, attorney for the SFCC:

The Special Funds Conservation Committee was established in 1938. Prior to that time the Second Injury Fund (15(8)) and the Reopened Cases Fund were insolvent on an actuarial basis. The investigations of the claims against the two funds were carried out by the individual carrier or self-insurer involved, leading many to believe that this was the cause of the financial conditions of the Funds.

The genesis of the idea for a Special Funds Conservation Committee, to conserve the assets of the Second Injury Fund and the Fund for the Reopened Cases, originated at a meeting of the Medical and Claims Committee of the Compensation Insurance Rating Board.

The General Manager of the Rating Board was authorized to appoint an advisory committee comprised of representatives of stock and mutual carriers and the State Insurance Fund. This advisory committee was to meet with a representative of the Self Insurers Association. As a result of these meetings, the Special Funds Conservation Committee was organized and Rules of Procedure adopted.

According to Mr. Lissauer's 1991 letter, on September 16, 1938, the Industrial Board adopted a resolution, which stated in part:

RESOLVED, that the Industrial Board hereby expresses itself in favor of the proposed plan submitted by Mr. Leon S. Senior of the Compensation Insurance Rating Board, setting up a Special Funds Conservation Committee, with respect to the funds created under the Section 15-subdivision 8 and Section 25-a of the Workmen's Compensation Law…..

Thereafter, in 1940, legislation was enacted which amended Section 25-a to provide additional funding for the Special Fund for Reopened Cases, including a second $150,000 special assessment from insurers and an increased assessment of $1,000 in nondependent death cases, up from the previous $300. In the same 1940 Act, the legislature also added a time limit in Section 123 of the Workers' Compensation Law, providing that no award shall be made after a lapse of eighteen years from the date if injury or death and also a lapse of eight years from the date of the last payment of compensation. In a memorandum in support of the 1940 legislation (L. 1940, c 686), Frieda S. Miller, Industrial Commissioner, stated that the study of cases charged against the Special Fund for Reopened Cases showed that the proposed time limitations were reasonable and would afford relief to carriers and employers:

While these limitations are a departure from the accepted theories underlying the principles of the Workmen's Compensation Law in this State, which are, that a worker should always have the right to reopen his case at any time, the study which was made of the cases charged against the special fund indicates that the statue of limitation is reasonable and it will afford a relief to the insurance carriers and self-insurers in the State by eliminating the necessity of carrying reserves indefinitely.

1948-Provision for Permanent Plan to Replenish the Fund. Following the 1940 legislation, various additional amendments were made to Section 25-a in an attempt to get more money into the Special Fund for Reopened Cases and insure its solvency. These included provisions for additional special assessments and assessments of $5 to $10 on every schedule award. However, despite these attempts, the Special Fund for Reopened Cases continued to have solvency problems. Then, in 1948, Subdivision 3 of Section 25-a was amended to provide a permanent plan for financing the fund. This 1948 amendment provides that there shall be maintained in the fund assets at least equal in value to the sum of (1) the value of awards charged against the fund, (2) the value of all claims that have been reopened by the Board as a charge against the fund but as to which awards have not yet been made, and (3) a reserve of $250,000. Pursuant to the 1948 amendment, Subdivision 3 further provides that when the assets of the fund fall below the prescribed minimum, the Chair of the Workers' Compensation Board shall assess and collect from all carriers an amount sufficient to restore the fund to the prescribed minimum.

The reason for this 1948 change in financing for the Special Fund for Reopened Cases was described in a March 20, 1948 letter from Chair Mary Donlon of the Workers' Compensation Board to the counsel to Governor Dewey:

Established in 1934 (sic), this Fund, it was initially thought, would be of small proportions, therefore its financing was left to casual revenues and special statutory assessments levied from time to time by special act. In the first year after the Reopened Cases Fund was established, there were only nine cases charged against it; but last year this Board charged against the Fund awards in 1,014 cases. The magnitude of the obligations of this Fund at the present time makes it necessary to insure that the Fund can command the revenue necessary to discharge the obligations charged against it.

With this viewpoint, all parties concerned in the solvency of the Fund were in agreement. Many conferences were held in order to develop an adequate scheme of financing, satisfactory to those who bear the cost, namely the insurance companies and self-insured employers. The bill, which is before the Governor was developed as the result of these conferences and was introduced with the approval of all concerned parties.

This permanent plan for financing the Special Fund for Reopened cases remain in effect today, except that the required amount is now 10% of the sum of items (1) and (2), and the amount paid for supplemental benefits is also included in the amount required to be in the fund."

The history of these funds is well documented and provides a great insight as to why it was established and the important role that it continues to provide in today's insurance industry. The number of established 25a files has grown to 28,195 and Special Funds reimburses carriers on approximately 54,370 open established 15.8 claims. The benefit to all insurance carriers is great and Special Funds continues to strive for fair and prompt resolution of claims and excellence in service to all carriers.

For additional information on Section 15.8 and 25a, we have extracted the following excerpts from the Workers' Compensation Law for your review:

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