139 A.D.3d 138
N.Y. App. Div.2016Background
- Plaintiffs are private workers’ compensation insurers challenging a 2013 amendment to Workers’ Compensation Law § 25-a that closed the State’s reopened-case Special Fund (the Fund) to new claims as of Jan. 1, 2014 and left reopened claims with carriers.
- Historically the Fund paid benefits on reopened claims; premiums and carrier reserves for policies issued before Oct. 1, 2013 were calculated on the expectation that eligible reopened claims would transfer to the Fund.
- For policies issued on/after Oct. 1, 2013, regulators approved premium increases to reflect the Fund’s closure; those increases do not apply to pre-Oct. 1, 2013 policies.
- Plaintiffs contend the amendment retroactively imposes substantial unfunded liabilities on carriers for injuries that occurred before Oct. 1, 2013 but whose claims reopened after Jan. 1, 2014. They seek declaratory relief and summary judgment.
- The trial court dismissed the complaint; the Appellate Division reversed, holding the retroactive application to pre-Oct. 1, 2013 policies is unconstitutional and entering declaratory relief in plaintiffs’ favor.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Retroactivity — does § 25-a(1-a) impermissibly operate retroactively as to policies issued before Oct. 1, 2013? | § 25-a(1-a) attaches new legal consequences to past transactions by imposing liability carriers did not anticipate and for which premiums/reserves were not set. | The statute only changes who pays future benefits and therefore is not retroactive; benefits awarded after enactment are governed by the new law. | Court: The amendment, as applied to pre-Oct. 1, 2013 policies, is retroactive because it increases carriers’ liability for past transactions and impairs vested expectations. |
| Contract Clause — does retroactive application impair contractual obligations? | Retroactive shift impairs existing insurance contracts where carriers cannot terminate policies or recoup premium; unconstitutional impairment. | The change is a legitimate regulation and not an unreasonable impairment of contracts. | Court: The impairment is unconstitutional; defendants failed to show the change is reasonable and necessary to serve a significant public purpose. |
| Takings Clause — does retroactive liability constitute a taking? | Imposes severe retroactive liability disproportionate to carriers’ expectations, amounting to a regulatory taking. | Not addressed robustly; characterized as allocation of burdens. | Court: Retroactive application would constitute a regulatory taking in violation of the Takings Clause. |
| Remedy / procedural disposition — entitlement to summary judgment and injunction? | Plaintiffs sought declaratory relief and an injunction; moved for summary judgment. | Defendants argued triable issues of fact precluded summary judgment. | Court: Plaintiffs entitled to declaratory judgment that retroactive application is unconstitutional; summary judgment granted on declaratory relief; injunction denied; no attorneys’ fees awarded. |
Key Cases Cited
- Majewski v. Broadalbin-Perth Cent. School Dist., 91 NY2d 577 (1998) (retroactivity disfavored; distinguish effective date from application to existing rights)
- Landgraf v. USI Film Products, 511 U.S. 244 (1994) (test for impermissible retroactivity: impairs rights, increases liability, or imposes new duties for completed transactions)
- Eastern Enterprises v. Apfel, 524 U.S. 498 (1998) (retroactive imposition of heavy, unexpected liability can raise constitutional concerns)
- Matter of Raynor v. Landmark Chrysler, 18 NY3d 48 (2011) (statute altering time/manner of payments held non-retroactive where liability unchanged)
- Becker v. Huss Co., 43 NY2d 527 (1978) (legislative reallocation of economic burdens not always retroactive where no right is created or impaired)