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Appeals Court of Massachusetts, Suffolk

May 2, 2018


          Heard: November 2, 2017.

         Appeal from a decision of the Industrial Accident Reviewing Board.

         Jonathan D. Hacker, of the District of Columbia (John J. Canniff, III, also present) for ACE American Insurance Company.

          Douglas S. Martland, Assistant Attorney General, for Workers' Compensation Trust Fund.

          Robert H. Barry, Jr., for the employee.

          Rachel J. Eisenhaure, for Self-Insurance Institute of America, Inc., amicus curiae, submitted a brief.

          Present: Neyman, Henry, & Lemire, JJ.

          LEMIRE, J.

         This is an appeal by ACE American Insurance Company (ACE), from a decision of the reviewing board (board) of the Department of Industrial Accidents (department). The board held that ACE, rather than the Workers' Compensation Trust Fund (trust fund), was responsible for the continued payment of compensation benefits to Robert Janocha (employee) because G. L. c. 152, § 25A(2) (c), of the Workers' Compensation Act (act), G. L. c. 152, as amended, requires ACE as a reinsurer to pay benefits in the event of exhaustion of a self-insurer's surety bond. We affirm.

         Factual and procedural background.

         All parties agree that there are no material facts in dispute. The employee worked for Maiden Mills Industries, Inc. (employer), until the date of his workplace injury. The employee's injury resulted in permanent and total incapacity for work, and the employee is entitled to benefits under the act.

         On the date of the employee's injury, the employer was an approved self-insurer pursuant to G. L. c. 152, § 25A(2). In accordance with § 25A(2)(b), the employer also held a surety bond in the amount of $2.4 million[1] with Safeco Insurance Company of America (Safeco or bond holder). In addition, the employer maintained a reinsurance policy with ACE in accordance with § 25A(2) (c) .[2] The reinsurance policy between the employer and ACE contained a retention provision in the amount of $400, 000.[3]All terms of the bond and the reinsurance policy were approved by the department in accordance with § 25A(2) during initial approval and after every yearly review.

         From the employee's date of injury until the employer's bankruptcy in 2007, the employer as the self-insurer issued direct benefit payments to the employee. Following the employer's insolvency, the bond holder issued direct benefit payments to the employee. In 2012, the $2.4 million bond became exhausted and payments to the employee ceased.[4] On the date of exhaustion, and on the date of oral argument, the employee had not reached the $400, 000 retention floor contained within the reinsurance contract.

         Upon the exhaustion of the bond, the employee filed a claim with the department against ACE for resumption of benefits.[5]After a full evidentiary hearing, the administrative judge ruled that once the employer's bond was exhausted, the employer became "uninsured in violation of [the statute]" under the provisions of G. L. c. 152, § 65(2)(e), as amended by St. 1991, c. 398, § 85. The administrative judge concluded that this interpretation of the act made the trust fund the "responsible party for providing workers' compensation benefits" and that ACE was not required to make payments until the employee's benefits reached the $400, 000 retention amount. The trust fund appealed to the board.

         The board reversed the administrative judge, interpreting § 65(2) (e) to apply only where an employer is uninsured "on the date ... of injury." Accordingly, the board ordered ACE to make direct payments to the employee upon the exhaustion of the bond, and to reimburse the trust fund for any payments it had made that were not covered by reimbursement from Safeco. The board also ruled that § 25A(2)(c0 required ACE to pay the employee's benefits because in the event of bond exhaustion, the reinsurer must act as a "further guarantee of a self-insurer's ability to pay the [employee's] benefits" (emphasis added).[6]Relying on Insurance Co. of the State of Pa. v. Great Northern Ins. Co., 473 Mass. 745, 750 (2016) (Great Northern), the board also voided the $400, 000 retention provision as a matter of law because it is in direct conflict with ACE's "statutory obligation to assure that benefits are received by the employee." ACE appealed the board's decision to this court pursuant to G. L. c. 152, § 12(2).[7]

         Standard of review. We review the board's decision in accordance with the standards set forth in G. L. c. 30A, § 14 (7) (a)-(d), (f), and (g) . See Scheffler's Case, 419 Mass. 251, 257-258 (1994). "The board, as 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, this principle is one of deference, not abdication, and "ultimately the ...

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