In a decision that clarifies how insurers in run-off interact with Massachusetts’ workers’ compensation system, the state’s highest court ruled on July 1 that Arrowood Indemnity Company is entitled to receive second-injury reimbursements from the Workers’ Compensation Trust Fund.
The Massachusetts Supreme Judicial Court overturned a decision by the Department of Industrial Accidents, which had denied Arrowood’s request for reimbursements on the grounds that the company, in run-off since 2003, no longer collected and remitted employer assessments to the trust fund. The ruling is likely to be significant for insurers managing closed books of business and long-tail workers’ compensation exposures.
Arrowood insured Scully Signal Company from January 2001 to January 2002. In early 2001, a Scully employee suffered a severe work-related back injury, exacerbating a prior injury from 1994. Arrowood began paying benefits under its policy and continued doing so after entering run-off. Although no longer writing new policies, Arrowood remained responsible for administering existing claims, including this one.
In 2009, Arrowood and the trust fund reached a settlement under Massachusetts General Laws Chapter 152, Section 37, agreeing on reimbursement terms for the second-injury claim. Between 2009 and 2013, Arrowood received payments from the trust fund in line with that agreement.
But in 2015, the trust fund reversed its position. Officials cited precedent from Panu v. Chrysler Motors Corp. and Home Insurance Co. v. Workers’ Compensation Trust Fund, where an insurer in run-off was denied cost-of-living adjustment (COLA) reimbursements due to non-payment of assessments. Based on that reasoning, the trust fund argued Arrowood was no longer eligible for second-injury reimbursement because it had not collected employer assessments during its run-off status.
Arrowood contested the denial, arguing that the statutory exclusions in Sections 37 and 65 of the workers’ compensation law only apply to self-insurers, group self-insurers, and public employers that choose not to participate in the trust fund. As a licensed insurer fulfilling its payment obligations, Arrowood maintained that it was still entitled to reimbursement, even though it no longer collected premiums or assessments.
The Department of Industrial Accidents upheld the denial. Arrowood appealed through the court system, and in 2024, the Appeals Court reversed the decision, abrogating the Home case. The Supreme Judicial Court then granted further appellate review.
Writing for the unanimous court, Justice Scott Kafker concluded that nothing in the statute supported the exclusion of insurers in run-off from receiving second-injury reimbursements.
“The statute’s plain meaning does not support the board’s interpretation,” the court stated, noting that the Legislature had clearly identified which entities are excluded. Insurers in run-off were not among them.
The court emphasized that assessments funding the trust are paid by employers, not insurers. Insurers merely facilitate those payments, and their reimbursement eligibility is tied to the employer’s participation in the fund. In this case, Scully remained a participant in the trust fund through its policies with other insurers after Arrowood’s run-off began.
Addressing concerns about a potential “windfall,” the court noted that Arrowood had paid the benefits out-of-pocket and was merely seeking partial reimbursement under the terms of its policy and the statute.
The ruling also explicitly overturned the Home decision, in which the court acknowledged it had previously deferred too heavily to administrative interpretation, at the expense of statutory clarity. The justices concluded that the Department of Industrial Accidents had erred in applying reimbursement restrictions that the Legislature did not include.
The case will now return to the Department of Industrial Accidents for further proceedings consistent with the court’s ruling.
The decision reinforces insurers’ rights to reimbursement when managing long-tail liabilities under Massachusetts workers’ compensation law. It is particularly relevant for insurers with closed books or inactive licenses who continue to administer existing claims. For such insurers, the ruling ensures continued access to statutory reimbursement mechanisms, provided the employer involved has fulfilled its trust fund obligations.
While the case involved no direct interpretation of specific policy language, it focused squarely on the statutory framework for trust fund access. Insurers with similar reimbursement disputes, especially those arising from prior denials under Home, may now have grounds for reconsideration.
Arrowood’s victory, while grounded in the specifics of a long-standing case, carries broader weight for insurers navigating the complexities of workers’ compensation liabilities over time.
