Friday, November 26, 2010

SJC holds that workers' compensation self-insurance group is an insurer

I posted here about a Superior Court decision in Mass. Care Self-Ins. Group, Inc. v. Mass. Insurers Insolvency Fund . That case held that a worker's compensation self-insurance group, Mass Care, is an insurer within the meaning of Mass. Gen. Laws ch. 175D, which creates a fund that provides insurance benefits when an insurer that would otherwise provide coverage has become insolvent.

Mass Care provided coverage up to a self-insured retention limit to an injured employee of one of its members. The group had an excess carrier over the SIR that had become insolvent. When the damages paid to the injured employee exceeded the SIR, the group sought coverage from the fund.

The Superior Court held that the group was not entitled to reimbursement, because the Fund does not reimburse insurers.

In Mass. Care Self-Ins. Group, Inc. v. Mass. Insurers Insolvency Fund, 458 Mass. 268 (2010), the SJC affirmed.

The SJC adopted the dictionary definition of insurer as "[o]ne who agrees, by contract, to assume the risk of another's loss and to compensate for that loss." The court noted that Mass Care accepts premiums in exchange for the provision of workers' compensation coverage, and described its functions as including many operations ordinarily associated with the insurance business. Without more, Mass Care would be considered an insurer.

The court then turned to the enabling statute, Mass. Gen. Laws ch. 152 §§25E-25U, under which Mass Care and other worker's compensation self-insurance groups are created. It noted that §25E states that self-insurance groups are not to be deemed insurers, and that the reason is to prevent such groups from being subject to the traditional framework of insurance regulation. However, the definitions section of the statute, Mass. Gen. Laws ch. 152 §1(7), makes self-insurance groups subject to consumer laws and regulations applicable to workers' compensation insurers.

The court reconciled the clauses and concluded that Mass Care is a member of the insurance industry whom ch. 175D was not intended to benefit.

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