Arrowood Indemnity Company v. Workers' Compensation Trust Fund

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23-P-699 Appeals Court

ARROWOOD INDEMNITY COMPANY vs. WORKERS' COMPENSATION TRUST
FUND.

No. 23-P-699.

Suffolk. March 5, 2024. - July 11, 2024.

Present: Green, C.J., Henry, & Ditkoff, JJ.

Workers' Compensation Act, Reimbursement of insurer, Decision of
Industrial Accident Reviewing Board. Department of
Industrial Accidents. Insurance, Workers' compensation
insurance. Administrative Law, Agency's interpretation of
statute. Statute, Construction.

Appeal from a decision of the Industrial Accident Reviewing
Board.

Eric A. Smith for the plaintiff.
Douglas S. Martland, Assistant Attorney General, for the
defendant.

GREEN, C.J. This appeal concerns the Workers' Compensation

Trust Fund (trust fund), a statutorily created entity that

reimburses insurers for certain workers' compensation benefits,

including a portion of the benefits paid to previously injured

employees who suffer further work-related injuries. See G. L.
2

c. 152, § 37; Shelby Mut. Ins. Co. v. Commonwealth, 420 Mass.

251, 252 (1995). See also G. L. c. 152, § 65 (2) (listing other

types of reimbursements). Revenues for the trust fund come from

assessments on employers that are collected by their insurers,

calculated on the basis of premiums collected from those

employers. See G. L. c. 152, § 65 (2), (5). However, the

statute allows certain employers to opt out of the assessments,

for example by self-insuring and filing a notice of

nonparticipation. See id. In their capacities as insurers,

these employers are ineligible for reimbursement. See id. See

also G. L. c. 152, §§ 34B (c), 37.

In Home Ins. Co. v. Workers' Compensation Trust Fund, 88

Mass. App. Ct. 189, 193 (2015) (Home), we held that the

reviewing board of the Department of Industrial Accidents

(reviewing board) had reasonably concluded that the bar on

receiving reimbursements also applied to an insurance company

that did not have any assessments to collect. This appeal asks

us to revisit our decision in Home. We agree that we should do

so, as the statute's plain language does not support the

reviewing board's interpretation.

Background. Roque Pena worked for Scully Signal Company

(Scully). In October 1994, he sustained an initial back injury

in the course of his employment. Despite receiving treatment,

he continued to suffer from chronic back pain. In January 2001,
3

Pena sustained a second back injury that rendered him unable to

return to substantial gainful employment. The combined effects

of the initial injury and the second injury resulted in a

substantially greater disability than that which would have

resulted from the second injury alone. Following Pena's second

injury, Scully's insurer, Arrowood Indemnity Company (Arrowood),1

commenced paying workers' compensation benefits to him.

In 2003, Arrowood stopped issuing new policies in

Massachusetts. Because the amount of an employer's assessment

is calculated on the basis of the employer's premium, see G. L.

c. 152, § 65 (5),2 once Arrowood did not have any premiums to

collect, it also did not have any assessments to collect.

However, Arrowood has continued to service claims under

previously issued policies, and has continued to pay workers'

compensation benefits to Pena. That is to say, Arrowood is in a

"run-off period," a period during which an insurance company

1 As a technical matter, Scully's insurer at the time was a
predecessor to Arrowood. Where the distinction between the
Arrowood and any of its predecessors is immaterial to our
analysis, we refer to them all interchangeably as Arrowood.

2 "For each insured employer, the assessment shall be equal
to the product of its standard workers' compensation premium and
the assessment rate determined pursuant to subsection (4),
multiplied by the ratio of the aggregate base amount for all
insured employers as reported pursuant to subsection (3), to the
aggregate written estimated premium for these said employers for
the next twelve-month period beginning January first and ending
on the last day of December." G. L. c. 152, § 65 (5).
4

stops issuing new policies but continues to administer and pay

claims under previously issued policies.

Throughout the time that Arrowood has paid workers'

compensation benefits to Pena, it has requested second-injury

reimbursements from the trust fund. For a time, the trust fund

approved those requests. Then, in 2014, the reviewing board

decided another case involving an insurance company in a run-off

period. The reviewing board concluded that the insurance

company became ineligible for reimbursement "once it ceased

collecting assessments," and we upheld that decision in Home, 88

Mass. App. Ct. at 193.3 Following the reviewing board's

decision, the trust fund applied the same rationale to Arrowood

and began to deny Arrowood's requests for reimbursement.

Arrowood filed an administrative appeal with the Department of

Industrial Accidents. An administrative judge concluded that

Arrowood was ineligible for reimbursement, and the reviewing

board affirmed that decision. Arrowood's appeal to this court

followed.

Discussion. "[T]he interpretation of a statute is a matter

for the courts." Onex Communications Corp. v. Commissioner of

Revenue, 457 Mass. 419, 424 (2010). "The [reviewing] board, as

3 We note that, while the case before us involves second-
injury reimbursements, Home, 88 Mass. App. Ct. at 190, involved
cost of living adjustment (COLA) reimbursements. Nothing in our
decision turns on this difference.
5

the agency charged with administering the workers' compensation

law, is entitled to substantial deference in its reasonable

interpretation of the statute." Sikorski's Case, 455 Mass. 477,

480 (2009). However, "principles of deference . . . are not

principles of abdication" (citation omitted). Shrine of Our

Lady of La Salette Inc. v. Assessors of Attleboro, 476 Mass.

690, 696 (2017). "If an agency interpretation were to collide

with the plain meaning of a statute, the agency view would have

to give way." Anheuser-Busch, Inc. v. Alcoholic Beverages

Control Comm'n, 75 Mass. App. Ct. 203, 209 (2009).

In its 2014 decision underlying our decision in Home, the

reviewing board stated that there was no material difference

between (1) an insurance company that, as a result of being in a

run-off period, did not have any premiums or assessments to

collect and (2) employers that choose not to pay the

assessments. According to the reviewing board, "the end result

was the same" because the insurance company did not participate

in the assessment provisions. The reviewing board concluded

that, because the assessments provide the revenues for the trust

fund, the insurance company was ineligible for reimbursement.

In affirming that decision, we deferred to the reviewing board's

decision that the insurance company's "failure to collect

assessments" was "fatal to its claim for reimbursement." Home,

88 Mass. App. Ct. at 192.
6

We must revisit our decision in Home because there is a

critical difference between the roles that employers and

insurers play with respect to the trust fund, both as a matter

of practical effect in the administration of the trust fund and,

more importantly, as described in the statutory language

governing the trust fund's administration. As we explain in

more detail below, employers pay the assessments that provide

the revenues for the trust fund, while insurers merely transmit

those payments to the trust fund. See G. L. c. 152, § 65 (2),

(5). When an employer chooses not to pay the assessments, that

deprives the trust fund of revenues; when an insurance company

enters a run-off period and no longer has any premiums or

assessments to collect, that does not deprive the trust fund of

revenues. By its own terms, the statutory exception to

reimbursement applies only to employers that choose not to pay

the assessments. See G. L. c. 152, § 65 (2). See also G. L.

c. 152, §§ 34B (c), 37. Neither the language of the exception

nor the logic behind it applies to an insurance company that, as

a result of being in a run-off period, does not have any

premiums or assessments to collect.

Prior to December 1991, all employers were required to

participate in the trust fund. See Markos-Waiswilos v. Salem

Hosp., 67 Mass. App. Ct. 904, 904 (2006). That month, the
7

Legislature amended G. L. c. 152, § 65 (2). See St. 1991,

c. 398, § 85. As the statute now reads,

"No private employer with a license to self-insure and no
private self-insurance group[4] shall be required to pay
assessments . . . and neither the commonwealth, nor any
city, town, or other political subdivision of the
commonwealth or public employer self-insurance group shall
be required to pay assessments . . . if such employer or
group has given up an entitlement to reimbursement . . . by
filing a notice of non-participation with the department."

G. L. c. 152, § 65 (2). However, the Legislature made further

amendments to the statute so that choosing not to pay the

assessments "comes at a price." Markos-Waiswilos, supra. As

noted, employers that choose not to pay the assessments into the

trust fund, for example by self-insuring and filing a notice of

nonparticipation, are ineligible for reimbursement from the

trust fund. See G. L. c. 152, § 65 (2). See also G. L. c. 152,

§§ 34B (c), 37.

This narrow exception to reimbursement is plainly stated in

three different places. Pursuant to G. L. c. 152, § 65 (2), no

reimbursements shall be made "to any non-insuring public

employer, self-insurer or self-insurance group which has chosen

not to participate in the fund as hereinafter provided." While

the statute refers to "self-insurer[s]" and "self-insurance

4 As we explain, infra, self-insurance groups are groups of
employers that have entered into agreements to pool their
liabilities for workers' compensation benefits. See G. L.
c. 152, § 25E.
8

group[s]," self-insurers are simply employers that have obtained

a license to self-insure, see G. L. c. 152, § 25A (2), and self-

insurance groups are simply groups of employers that have

entered into agreements to pool their liabilities for workers'

compensation benefits, see G. L. c. 152, § 25E. Similarly,

G. L. c. 152, § 34B (c), provides that "[n]o self-insurer, self-

insurance group or municipality that has chosen non-

participation in the assessment provisions for funding [COLA]

reimbursements pursuant to section sixty-five shall be entitled

to [COLA] reimbursements." General Laws c. 152, § 37, provides

that insurers shall receive second-injury reimbursements unless

the insurer is "a self-insurer, a group self-insurer or

municipality that has chosen not to be subject to the

assessments which fund said reimbursements."

In contrast, the statute does not contain language

prohibiting insurance companies that are in run-off periods from

receiving reimbursements. Under the plain and clear terms of

the statute, an insurance company in a run-off period is neither

a "non-insuring public employer, self-insurer [n]or self-

insurance group which has chosen not to participate in the fund

as hereinafter provided." G. L. c. 152, § 65 (2). Accordingly,

such insurers are not within the category of those excluded by

the statute from reimbursement.
9

Moreover, an insurance company in a run-off period stands

on different footing than an employer that chooses not to pay

the assessments. Taking Arrowood as an example, Arrowood issued

policies to employers that contributed to the trust fund. For

as long as Arrowood collected premiums from those employers, it

also collected the corresponding assessments. When Arrowood

stopped issuing new policies, its insured employers were

required to obtain policies with new insurers and pay the

corresponding assessments to their new insurers. Scully, for

example, obtained a new policy from and began paying assessments

to OneBeacon Insurance Company. In other words, Arrowood's

actions did not deprive the trust fund of any revenues, and the

logic behind the narrow exception to reimbursement does not

apply to Arrowood.

The reviewing board's interpretation, though entitled to

deference, is unsupported by either the plain language of the

statute or the legislative intent evident in that language. In

such circumstances, it is the legislative intent, and the

statutory language, that control. See Plymouth Retirement Bd.

v. Contributory Retirement Appeal Bd., 483 Mass. 600, 604

(2019). We also note that public policy considerations support

allowing insurance companies that are in run-off periods to

receive reimbursements. The purpose of the second-injury

reimbursements is to encourage employers to hire persons with
10

disabilities. See Shelby Mut. Ins. Co., 420 Mass. at 252. The

incentive works as follows. While the reimbursements go to the

insurer, the reimbursements reduce the amount of the loss and

improve the employer's experience modification factor, which is

used in determining the employer's premium. As a result, the

employer's premium is reduced. See G. L. c. 152, § 53A (4).

See also, e.g., Deerfield Plastics Co. v. Hartford Ins. Co., 404

Mass. 484, 488 (1989). An employer that has contributed to the

trust fund should be able to receive this benefit, even if its

insurer has stopped issuing new policies and therefore does not

have any premiums or assessments to collect.

In sum, 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." Beatty's Case,

84 Mass. App. Ct. 565, 566 (2013). Because the insured employer

here, Scully, participated in those assessment provisions,

Arrowood is eligible for reimbursement.

In revisiting our decision in Home, we are mindful of the

principles of stare decisis and the many reasons that our

preferred course is to adhere to precedent. See Shiel v.

Rowell, 480 Mass. 106, 108-109 (2018). However, the principle

"is not absolute. No court is infallible, and this court is not

barred from departing from previous pronouncements if the

benefits of so doing outweigh the values underlying stare
11

decisis." Stonehill College v. Massachusetts Comm'n Against

Discrimination, 441 Mass. 549, 562, cert. denied sub nom.

Wilfert Bros. Realty Co. v. Massachusetts Comm'n Against

Discrimination, 543 U.S. 979 (2004). Our decision in Home

focused on an insurance company's standing to seek reimbursement

for COLA payments during the run-off period both before and

after the company was placed into liquidation proceedings. In

retrospect, we accorded too much deference to the reviewing

board's decision, at the expense of the language of the statute.

Because the statute's plain language does not support the

reviewing board's interpretation, we must depart from our

pronouncement in Home and now reverse the decision of the

reviewing board.

So ordered.