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Employer Reimbursement Under the Second Injury Fund

Most states require employers to offer employees some form of Workers’ Compensation insurance for job-related injuries and occupational diseases. The Worker’s Compensation claim usually becomes the employee’s sole remedy against the employer for the injury or disease. In other words, an employee who is injured that has Workers’ Compensation coverage may not also sue the employer for damages.

Earlier this century, complications arose in the Workers’ Compensation system when an employee (who was covered by Workers’ Compensation insurance) was injured with one employer, and then subsequently, suffered a related injury with a different employer. More specifically, there was a problem when the second injury was caused by the injury which occurred with the previous employer.

In such circumstances, either the employer or the employee would be penalized. The employee would be penalized by having benefits limited to the disability related to the second injury, or the employer would be penalized by having to pay for the resulting combined and greater disability.

For example, an employee working for employer “A” suffers an injury and totally loses sight in one eye. While working for employer “A” the injured employee is compensated through the employer’s Workers’ Compensation insurance carrier. Then, after rehabilitation, the employee begins work for employer “B” and is again injured, losing sight in the other eye. For this second injury, the employee can either be compensated for the loss of sight in one eye or for the total disability, for now he is blind.

Second Injury Fund

A solution, first adopted by New York in 1916, is the “Second Injury Fund” (Fund). In short, the Fund allows employers to limit the potentially excessive Workers’ Compensation costs they might otherwise have to pay when an employee with a preexisting injury (from a previous employment) suffers a new, compensable injury on the job. The intended result is usually that the Fund will pay the extra costs that might have been borne by the employer.

Although such Funds are purely creations of state law and vary in significant aspects, virtually all states now have some version of the Fund.

Criteria for Reimbursement Eligibility

As noted, the eligibility requirements vary by state, but common requirements include:

  1. A previously injured or disabled employee sustains a new work-related injury
  2. The preexisting disability is permanent and a hindrance or obstacle to employment
  3. The employer knew of the employee’s condition prior to the new injury
  4. The preexisting condition substantially increased the Workers’ Compensation claim for the new injury, either causing or intensifying the new injury
  5. The Fund claim is timely made after the first medical or lost-time benefit payment

The Second Injury Fund and the Americans With Disabilities Act

The Americans with Disabilities Act (ADA) prohibits employers from discriminating against disabled prospective employees in the hiring process. When a “fund” is available, employers may hire employees with preexisting disabilities —in compliance with the ADA— without fear that the preexisting injuries will result in additional injuries for which the employer may be required to provide compensation.

Since the ADA prohibits requiring physicals or asking health-related questions prior to hiring, post-hiring screenings should be considered (if acceptable in the employer’s jurisdiction). In any event, an attorney should be consulted to ensure proper compliance and eligibility under the applicable state fund.

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