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AMENDMENT TO WORKERS’ COMPENSATION LAW WHICH IMPOSED LIABILITY UPON INSURERS FOR REOPENED CASES PREVIOUSLY COVERED BY THE SPECIAL FUND IS UNCONSTITUTIONAL.

The First Department, in a full-fledged opinion by Justice Saxe, reversing Supreme Court, determined an amendment to the Workers' Compensation Law which made insurers liable for reopened cases no longer covered by the special fund (which has been eliminated) was unconstitutional. Although the insurers can adjust their premiums to cover future reopened cases no longer covered by the fund, the insurers can not be compensated for reopened cases from prior to October 1, 2013, when premiums were lower because any reopened cases were the sole responsibility of the fund. The amendment therefore violated the Contract and Takings Clauses:

Plaintiffs … established that the amendment, as applied retroactively, violates the Contract Clause of the US Constitution because it retroactively impairs an existing contractual obligation to provide insurance coverage “[w]here *** the insurer does not have the right to terminate the policy or change the premium rate” … . Defendants failed to show that the impairment is “reasonable and necessary to serve” “a significant and legitimate public purpose *** such as the remedying of a broad and general social or economic problem” … . Indeed, the legislation's stated purpose of preventing a windfall to insurance carriers was based upon the erroneous premise that premiums already cover this new liability.

Retroactive application would also constitute a regulatory taking in violation of the Takings Clause … . American Economy Ins. Co. v State of New York, 2016 NY Slip Op 02924, 1st Dept 4-14-16


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