In a decision issued July 1, the Massachusetts Supreme Judicial Court ruled that the Massachusetts Insurers Insolvency Fund (MIIF) is entitled to recover over $15 million in cost-of-living adjustment (COLA) reimbursements from the state’s Workers’ Compensation Trust Fund. The ruling overturned the Department of Industrial Accidents Reviewing Board’s denial and clarified the statutory rights of MIIF when handling claims for insolvent insurers.
MIIF had filed claims between 2015 and 2021 seeking reimbursement for COLA payments it made between 2013 and 2020 on behalf of multiple insolvent insurers. These included long-liquidated carriers such as Reliance Insurance Company, Home Insurance Company, and American Mutual Liability Insurance Company. The DIA Reviewing Board had ruled that MIIF did not qualify as an “insurer” under the Massachusetts Workers’ Compensation Act and was therefore ineligible for reimbursement.
The court, however, found that MIIF is statutorily deemed to be the insurer when it assumes responsibility for a covered claim. Under G.L. c. 175D, § 5(1)(b), MIIF “shall be deemed the insurer to the extent of its obligation on the covered claims and shall have all rights, duties and obligations of the insolvent insurer to such extent.” The court emphasized that this language unambiguously entitles MIIF to seek reimbursements that the original insurer would have been eligible to claim, including for COLA payments under G.L. c. 152, §§ 34B and 65.
In its defense, the Trust Fund argued that reimbursement was limited to entities that collect and transmit assessments to the fund. But the court dismissed that reasoning, pointing out that the fund is financed through assessments on employers, not insurers. While insurers are tasked with billing and collecting those assessments, the financial burden rests with employers. Therefore, MIIF’s inability to collect or transmit assessments did not disqualify it from reimbursement eligibility.
The ruling also clarified that MIIF does not fall within any of the three statutory exclusions listed in G.L. c. 152, § 65(2), which bar reimbursement for “non-insuring public employers,” “self-insurers,” and “self-insurance groups” that have opted out of funding participation. Since MIIF is not among those categories, the court found no legal basis to deny its claims.
The decision parallels the court’s holding in a related case, Arrowood Indemnity Co. v. Workers’ Compensation Trust Fund, decided the same day. In both cases, the justices rejected prior interpretations that had limited access to statutory reimbursements based on an overly narrow reading of eligibility provisions.
MIIF, created by statute in 1970, provides coverage for certain claims left behind by insolvent insurers licensed in Massachusetts. It is funded by assessments levied on active insurers and is limited to handling “covered claims” as defined by law.
The Supreme Judicial Court’s ruling affirms MIIF’s role in maintaining the stability of the workers’ compensation system by ensuring that eligible reimbursements continue to flow even when insurers fail. For insurance professionals managing legacy portfolios, insolvency claims, or statutory reimbursements, the decision provides crucial clarity on how these obligations are treated under Massachusetts law.
No insurance policy provisions were interpreted in the decision, as the matter hinged entirely on statutory construction. Still, the ruling holds practical importance for the business of insurance, particularly in understanding how public and private mechanisms interact when insurers become insolvent and statutory benefits must be maintained.
