JEFFERSON CITY — A Missouri appeals court on Tuesday reversed a lower judge's order that directed officials to pay an injured worker's award from a financially troubled state fund. But then it transferred the case to the state Supreme Court, expressing concerns about a cap on charges paid by businesses to finance the fund.
The ruling came the same day that a Senate committee was considering legislation that supporters contend would help bolster the Second Injury Fund. Created 70 years ago, the fund compensates disabled workers who suffer additional job-related injuries, but its financial footing has faltered in recent years.
The state auditor reported that the fund had $25 million in reserves in 2005. At the end of 2012, the balance was $3.2 million with unpaid obligations of $28.1 million and a deficit of about $25 million.
Sen. Scott Rupp, who is sponsoring legislation dealing with the Second Injury Fund, said lawmakers have faced the issue for several years. He said it was time for action and highlighted the court's ruling.
"We're failing the employers and we're failing the employees of Missouri by kicking the can down the road," said Rupp, R-Wentzville.
The Second Injury Fund is financed by employers through a surcharge on their workers' compensation insurance premiums. A 2005 law capped the surcharge at 3 percent of the premiums instead of allowing it to fluctuate based upon the fund's annual expenses.
The Missouri attorney general's office is responsible for defending the fund against claims. To help relieve some of the immediate financial pressure against the fund, it stopped offering cash settlements in 2009 to workers with certain types of injuries and instead forced them to go through a longer hearing process. In 2011, the state started delaying payments to people awarded new judgments — which led to lawsuits.
In one legal challenge, a three-judge panel of the Missouri Court of Appeals Western District reversed a trial judge's order requiring the state treasurer and the director of the workers' compensation division to pay a permanent total disability award for Raymond Skirvin. The appellate court concluded it couldn't compel the payment because the fund is legally insolvent, which means there is not enough money to pay all claims and the officials do not have the authority to replenish the fund.
The Labor and Industrial Relations Commission entered an award for Skirvin in May 2011. He was to receive $99.37 per week starting July 26, 2006, for 60 weeks. Then he was to receive $464.56 each week.
But in July 2011, Skirvin received a letter from the attorney general's office stating the Second Injury Fund could not make the payment because of its balance and that he would be notified if future payments could be made.
Judge Cynthia Martin wrote in the panel's majority opinion that the situation is untenable. She said the Legislature has limited the compensation that injured workers' can claim for preexisting injuries to the Second Injury Fund while not allowing for sufficient funding.
"We express reservations, but no opinion, as to the constitutionality of the General Assembly's cap on the surcharge given the General Assembly's mandate that an injured employee's ability to recover for the preexisting portion of second injuries is restricting to (the Second Injury Fund)," Martin wrote.
Another judge wrote in his dissent that he would have upheld the lower court's order because Skirvin has the right to be paid in full and the state has the "ability and obligation" to replenish the fund.