Court of Special Appeals Provides Clarity to Subsequent Injury Fund

In the case of Schaffer v. Subsequent Injury Fund, 207 Md. App. 255; 52 A.3d 122. (2012) Russell Schaffer was involved in a serious automobile accident during the course of his employment. Due to pre-existing medical issues, Mr. Schaffer sought part of his compensation benefits from the Subsequent Injury Fund (“SIF”).  Prior to the “Nature & Extent” hearing, Mr. Schaffer settled for a lump sum with the employer/insurer. The settlement amount was $91,025.00, and was approved by the Commission.  The hearing proceeded with the SIF, and the Commission found Mr. Schaffer to be permanently and totally disabled.  The Commission found the employer/insurer liable for 55% and the SIF liable for the remaining 45%.  From the standpoint of the employer/insurer, the award would have been payable weekly for 367 weeks, with a scheduled end date in June of 2015.  The Commission further ordered SIF to commence payments on October 9, 2009, as opposed to after the 367 weeks would have been paid by the employer/insurer.  

The SIF objected to the commencement date and filed a Motion for a Rehearing. In its motion, the SIF argued that the commencement of its payments should begin when the employer/insurer’s payments would end. Md. Code Ann., Lab. & Empl. §9-802, sub-section (c), states that “[c]ompensation from the Subsequent Injury Fund shall be paid after the completion of payment of the compensation by the employer or its insurer.” Md. Code Ann., Lab. & Empl. § 9-802(c).  The SIF argued it would be unfair to begin payments on October 9, 2009 rather than June of 2015. Further, the SIF argued that if it began payments on the earlier 2009 date, it would be responsible for approximately $117,000 more than if the payments commenced in 2015 for the sole reason that Mr. Schaffer had entered into a settlement agreement with the employer/insurer, to which the SIF was not a party.  As a point of reference, SIF payments terminate upon the death of the claimant. Following a re-hearing on the issues, the Commission modified the order to reflect that the SIF payments commence in June of 2015, the date when the employer’s share of the award would be paid had the case not settled.

Mr. Schaffer filed a Petition for Judicial Review in the Circuit Court for Baltimore County.  By way of a Motion for Summary Judgment, the Circuit Court upheld the decision of the Commission’s modified order requiring SIF to begin payments in June 2015.  It stated that the statutory scheme of workers’ compensation is based on weeks and making an individual whole, not collecting from two sources.  The Court stated that a finding for Mr. Schaffer would result in a costly expansion of the SIF’s liability far beyond what was intended by the General Assembly.  Further, the Court stated that a finding for Mr. Schaffer may also entice insurer/employers to shift the financial burden to the SIF by making unreasonable settlements with significant discounts. 

Mr. Schaffer appealed and the Court of Special Appeals upheld the Circuit Court’s decision. In its opinion, the Court echoed the lower court’s sentiments, and further stated that “the policies underlying the creation of the [SIF] do not support a shifting of the employer’s portion of liability to the SIF, resulting in the SIF bearing more than its lawful proportionate share.” 52 A.3d at 130. Further, the Court reiterated that by settling with the employer/insurer, an employee could potentially increase his recovery beyond what was originally contemplated by the statutory scheme, and the employer could reduce its liability below what it originally would have been obligated to pay. The Court’s ruling clarified the statutory language and reduced the potential for abuse of the statutory benefit computations in the Labor and Employment Act. 

Article submitted by Alicyn Campbell, Esq.