Attorney General: The Honorable Joseph M. Suggs, Jr., Office of the Treasurer, 1993-026 Formal Opinion, Attorney General of Connecticut

Attorney General's Opinion

Attorney General, Richard Blumenthal

September 7, 1993

The Honorable Joseph M. Suggs, Jr.
Office of the Treasurer
55 Elm Street
Hartford, CT 06106

Dear Mr. Suggs:

This will respond to your request for advice regarding how the Second Injury Fund should proceed on the administration of Conn. Gen. Stat.  31-284b, 31-349(e) and (f) in light of the United States Supreme Court's recent ruling in District of Columbia v. Greater Washington Board of Trade, _U.S._, 113 S. Ct. 580 (1992) (hereinafter referred to as Board of Trade).

Your letter states that in light of this ruling the Second Injury Fund has presently suspended the reimbursement to employers for payments made under the provisions of subsection (d) of 31-284b and under 31-349(e). The letter further states that the Fund, pursuant to Conn. Gen. Stat. 31-349(f) has continued to provide health insurance coverage for claimants whose employers have left the state.

It is our opinion that reimbursement to employers for payments made under the provisions of subsection (d) of 31-284b and subsection (e) of  31-349 is no longer required. Likewise, payment of the cost of health insurance coverage for claimants under 31-349(f) should also be discontinued. As you know, the United States Supreme Court in the Board of Trade case held that 2(c)(2) of the District of Columbia Workers' Compensation Equity Amendment Act of 1990 was preempted by 514(a) of the Employee Retirement Income Security Act of 1974 ("ERISA"), as it was applied. Section 2(c)(2) required the employer to provide such health insurance coverage for up to 52 weeks "at the same benefit level that the employee had at the time the employee received or was eligible to receive workers' compensation benefits." D.C. Code Ann. 36-307 (a-1) (1) (Supp. 1992).

In concluding that 2(c)(2) of the D.C. Compensation Act was preempted by 514(a) of ERISA, the United States Supreme Court reasoned that because 2(c)(2) specifically refers to welfare benefit plans regulated by ERISA, it is preempted and therefore unconstitutional. District of Columbia v. Washington Board of Trade 113 S.Ct. at 584-85. The Supreme Court rejected the two-tier analysis which had been employed by the Second Circuit Court of Appeals in R.R Donnelley & Sons v. Prevost, 915 F.2d 787 (2nd Cir. 1990), cert. denied, 111 S.Ct.1415 (1991), which upheld the constitutionality of 31-284b.

The Supreme Court based its decision on the "relates to" language in ERISA, 514(a), 29 U.S.C. 1144(a), Board of Trade, 113 S. Ct. at 583-585. The court said that "a law relate[s] to 'a covered employer benefit plan for purposes of 514(a)' if it has a connection with or reference to such a plan [citations omitted]." Id. at 583. The Court found important the fact that the coverage required by  2(c)(2) "is measured by reference to 'the existing health insurance coverage' provided by the employer and 'shall be at the same benefit level.'" Id. at 583-584. Under Connecticut law the coverage required by 31-284b and 31-349(e) and (f) (which refer back to the coverage required by  31-284b) is clearly measured by reference to the existing coverage and is at the same level. Section 31-284b(a) states that "any employer...who provides accident and health insurance or life insurance coverage... shall provide to such employee equivalent insurance coverage...."

The Supreme Court also stated that 2(c)(2) is preempted simply because it specifically refers to welfare benefit plans regulated by ERISA. Board of Trade, 113 S.Ct. at 583-584. Similarly,  31-284b refers to such plans. Section 31-284b provides in pertinent part:

(a) In order to maintain, as nearly as possible, the income of employees who suffer employment-related injuries, any employer, as defined in 31-275, who provides accident and health insurance or life insurance coverage for any employee or makes payments or contributions at the regular hourly or weekly rate for full-time employees to an employee welfare fund, as defined in 31-53, shall provide to such employee equivalent insurance coverage or welfare fund payments or contributions while the employee is eligible to receive or is receiving workers' compensation payments pursuant to this chapter, or while the employee is receiving wages under a provision for sick leave payments for time lost due to an employment related injury.

It is clear from reading the Supreme Court decision in the Board of Trade case that 31-284b suffers from the same constitutional infirmities as the District of Columbia statute. In fact, the Supreme Court stated they granted certiorari "[b]ecause the opinion below [292 U.S. App. D.C. 209, 948 F.2d 1317 (1991)] conflicts with the Second Circuit's decision in R.R. Donnelley and Sons v. Prevost, 915 F.2d 787 (1990), cert. denied, 111 S. Ct. 1415 (1991), which upheld against a preemption challenge a Connecticut law substantially similar to 2(c)(2)...." Board of Trade, 113 S. Ct. at 584 footnote 3. Since the Supreme Court resolved the conflict by upholding the D.C. Appellate Court in Board of Trade, it explicitly rejected the Second Circuit's decision in Donnelley, supra.

On April 27, 1993, the Connecticut Supreme Court, ruling from the bench, followed the United States Supreme Court's decision in the Board of Trade case and reversed the decision of the Compensation Review Board in Frank Luis, et. al v. Frito-Lay, Docket No. S.C. 14536 (1993) for the reason that 31-284b is preempted by ERISA.

Section 31-284b was challenged by the Appellant employer Frito-Lay when the second district compensation commissioner ordered Frito-Lay to continue making contributions to the employee welfare benefit plan on behalf of the claimants pursuant to 31-284b. The Compensation Review Board affirmed the decision of the compensation commissioner and Frito-Lay appealed the CRB's decision to the Appellate Court. The appeal was transferred to the Supreme Court. Since the Connecticut Supreme Court has ruled that 31-284b is preempted by 514(a) of ERISA, any obligation by private employers to maintain health insurance coverage while an injured employee is receiving workers' compensation benefits or is eligible to receive workers' compensation benefits no longer exists. Frank Luis et. al v. Frito Lay, Docket No. S.C. 14536 (1993).

Conn. Gen. Stat. 31-284b also requires, in certain circumstances, the Second Injury Fund to pay the cost of accident and health or life insurance coverage. Section 31-284b provides in subsection (d) that "[i]n any case where compensation payments to an individual for total incapacity under the provision of 31-307 continue for more than 104 weeks, the cost of accident and health insurance or life insurance coverage after the-one-hundred-fourth week shall be paid out of the second injury fund in accordance with the provisions of 31-349." Under 31-349(e), after 104 weeks, the Fund is required to reimburse employers for the cost of such insurance.

In addition, 31-349 contains another provision which requires payment by the Fund for such benefits. Subsection (f) states that "if an employer removes all or substantially all of its...operations to a location outside of the state of Connecticut or permanently shuts down all its operations... and fails to comply with the provisions of 31-284b, the cost of...insurance for any employee receiving compensation pursuant to this chapter shall be paid out of the second injury fund."

The provisions of the workers' compensation statute governing the application of the Second Injury Fund do not create liability but rather an apportionment that limits employer liability previously imposed. Levanti v. Dow Chemical Co., 218 Conn. 9, 17 (1991). While under  31-349, certain employer obligations under the Workers' Compensation Act are shifted to the Second Injury Fund, the Fund's obligations are only derivative of the employer's general obligations.

Under this statutory framework, where there is no valid obligation on the part of the employer, there is no obligation which can be imposed upon the Fund. Since the Connecticut Supreme Court has now held 31-284b to be preempted by ERISA, thereby removing any obligation on the part of the employer in the first instance to provide health insurance coverage to injured workers, it is our opinion that the Fund no longer has the derivative obligation to pay the cost of health insurance benefits under 31-284(d) and 31-349(e) and (f).

Therefore, reimbursement to employers for payments made under the provisions of subsection (d) of 31-284b and subsection (e) of  31-349 are no longer required. Likewise, payment of the cost of health insurance coverage for claimant's under 31-349(f) should also be discontinued.

It is important to note that the Board of Trade decision does not affect plans that are exempt from ERISA, such as "governmental" or "church" plans. 29 U.S.C. 1003(b) (1) and (2). The term "governmental plan" means "a plan established or maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing..." 29 U.S.C. 1002(32). Where the employer's plan is exempt from ERISA, the Fund remains liable for insurance benefit costs under 31-284b, and 31-349(e) and (f) because the Fund's liability is derivative of the employer's liability.

In summary, in light of the decisions in Board of Trade and Frito Lay, reimbursement by the Fund to employers maintaining employee benefit plans subject to ERISA for the cost of health insurance coverage under 31-284b and 31-349(e) should be discontinued. Likewise, payment by the Fund of the cost of health insurance coverage for claimants under 31-349(f) should also be discontinued. The obligations of the Fund are unchanged with respect to insurance benefit costs relating to non-ERISA plans.

Very truly yours,

RICHARD BLUMENTHAL
ATTORNEY GENERAL

Robin L. Wilson
Assistant Attorney General

RB/RLW/ps

SECOND INJURY FUND
HEALTH INSURANCE BENEFITS
WORKERS' COMPENSATION

Conn. Gen. Stat. 31-284b(d), 31-349(e) and (f) are unconstitutional as applied to insurance coverage which relates to plans covered by ERISA and thus reimbursement by the Fund to employers under 31-284b(d) and 31-349(e) should be discontinued. Likewise, payment of the cost of health insurance coverage for claimant's under 31-349(f) should also be discontinued. Employers claims for reimbursement per C.G.S. 31-284b(d) and 31-349(e) prior to the Board of Trade and Frito-Lay decisions should be paid by the Fund.


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