The Rise… and Fall… of Workers’ Compensation Second Injury Funds

Second (or subsequent) injury funds (SIF’s) have been abolished in 19 states. Alabama and Maine began this movement in 1992, with Arkansas and New York being the most recent converts; each ending its respective program in 2007.

Some states, such as South Carolina, have already passed laws that call for the end of their second injury funds over the next several years.

Further, the American Insurance Association has been at war against second injury funds since at least the mid -1990s, working to convince the remaining states to abolish or substantially alter the fund programs that still exist.

Has the time for second injury funds passed? It depends on whom is being asked. Regardless of which side is making the argument, the focus is on MONEY; the cost if the plan is kept intact or the cost if the plan is abolished. It is all about the money, regardless of the eloquence of any other reason presented.

History of Second Injury Funds

New York created the nation’s first second injury fund in 1916. Few states followed suit until World War II with most states adopting them in the early-to-mid 1940’s based on a national model code.

The rush to provide this employer protection was intended to clear a path for veterans who had sustained injury during the war. Injured veterans were not being hired due to employers’ fears of being held financially responsible for the cumulative effect of an injury suffered on the job coupled with a pre-existing war injury. SIF’s were designed to temper if not completely remove this fear.

Employers’ fears arose from several court cases culminating in a 1925 Oklahoma Supreme Court ruling, Nease v. Hughes Stone Company. This proved to be a landmark case regarding an employer’s liability for an employee’s injuries that compound a pre-existed condition.

W.A. Nease was already blind in one eye when he began work for Hughes Stone Co. During his employment, an explosion destroyed Nease’s remaining eye leaving him blind and permanently and totally disabled. The employer through the insurance carrier provided 100 weeks of indemnity payments as was required by statutory provisions governing the loss of one eye. Nease argued that since he was permanently disabled not merely partially disabled he was due lifetime benefits.

The Oklahoma Supreme Court agreed, awarding him lifetime benefits and making the employer and the insurer responsible for total disability indemnity benefits.

A U.S. Labor Department report stated that between 7,000 and 8,000 one-eyed, one-legged and one-handed men in Oklahoma lost jobs immediately following this ruling. Employers did not want to take the chance of being held financially responsible for an employee’s total disability. A mechanism to relieve employers of this responsibility was required. SIFs were created to encourage employers to hire and retain workers with pre-existing injuries or conditions; and provide economic relief to employers for an employee’s subsequent injury.

Benefit Requirements

Not every injury suffered by an individual with a pre-existing condition is compensable under the SIFs still in operation. Certain requirements must be met. States differ but all apply the following requirements to varying degrees. To be eligible for SIF protection:

There must be a prior injury that is a hindrance or obstacle to employment. Some states allow the prior injury to be from any cause while others require the prior injury to be work-related. Successive injuries do not have to be to the same or similar body part to be eligible for SIF protection; or

There must be a pre-existing medical condition that affects employment. This is a list of medical conditions such as epilepsy, diabetes, Parkinson’s disease, arthritis and others (34 to 37 different conditions). Some states consider it an “exclusive list,” meaning that only those conditions listed are eligible for SIF protection; other states consider it a “presumptive list,” meaning that those listed are the only ones SIF protection, but the compensable conditions are not limited to the list.

The prior injury or condition must be diagnosed and documented by the employer before the second injury occurs. Massachusetts is the only state that places a time limit (30 days) on when the employer must know about the pre-existing condition. Other states only require that the condition be known and documented before the subsequent injury.

A few states require the prior injury to be classified as a permanent partial disability.

Some states require a certain percentage of impairment; and others only pay if the second injury results in permanent total disability.

The fund must be put on notice when an employee with a pre-existing condition is injured; regardless whether benefits are going to be requested. A waiting period must be satisfied during which time the primary workers’ compensation carrier pays all disability/indemnity benefits. The waiting period can range between 52 and 104 weeks.

Topics Workers' Compensation Talent Oklahoma