Appellate Court Of Massachusetts Finds That Reinsurer Must Pay Workers' Compensation Benefits Of Bankrupt Self-Insured Employer

In a recent opinion, a Massachusetts appeals court was required to determine who is liable to pay workers' compensation benefits owed by a self-insured employer that has gone bankrupt? In a choice between the state created Workers' Compensation Trust Fund and a reinsurer of that bankrupt employer, the court chose the reinsurer.

The case involved benefits due to Robert Janocha, whose employer at the time of his injury was self-insured for workers' compensation claims. In compliance with Massachusetts law, the employer had ensured its ability to pay such claims with a $2.4 million surety bond and a reinsurance contract with ACE American Insurance Company, which had a $400,000 retention provision applicable to each injured employee. In 2007, the employer went bankrupt, and in 2012 the surety bond was exhausted. However, Mr. Janocha's benefits had not reached the $400,000 retention floor, and ACE argued that, until that floor was reached, his benefits were the responsibility of the Workers' Compensation Trust Fund under a statute requiring the Trust Fund to pay benefits...