Attorney General: Honorable Joseph M. Suggs, Jr. , Office of the Treasurer , 1994-011 Formal Opinion, Attorney General of Connecticut

Attorney General's Opinion

Attorney General Richard Blumenthal

May 24, 1994

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

Dear Mr. Suggs:

You have requested our advice on several questions relating to the liability of the Second Injury Fund for payment of workers' compensation claims when an insurer of such claims has been determined to be insolvent. The Second Injury Fund ("the Fund") and the Connecticut Insurance Guaranty Association have asserted differing interpretations of the statutes governing such liability.

Before addressing your specific questions, it would be helpful to provide an overview of the statutory framework relevant to your inquiry. Conn.Gen.Stat.  31-355(b) provides in part:

(b) When an award of compensation has been made under the provisions of this chapter against an employer who fails or is unable to pay medical and surgical aid or hospital and nursing service required under this chapter or any type of compensation for disability, or both, whether for total or partial disability of a permanent or temporary nature, death benefit, funeral expense, or any adjustment in compensation required by this chapter, and whose insurer fails or is unable to pay the compensation, such compensation shall be paid from the second injury fund....

However, subsection (e) of Conn.Gen.Stat.  31-355 limits the liability imposed on the Fund under subsection (b) as follows:

(e) Notwithstanding the provisions of subsections (a) to (d), inclusive, of this section, whenever the employer's insurer has been determined to be insolvent, as defined in section 38a-838, payments required under this section shall be the obligation of the Connecticut Insurance Guaranty Association pursuant to the provisions of sections 38a-836 to 38a-853, inclusive.

The Connecticut Insurance Guaranty Association ("CIGA") is a statutorily mandated association of all insurers who write insurance other than life, title, surety, accident and health, credit, financial guaranty, mortgage guaranty, ocean marine and flood insurance and are licensed to transact insurance in Connecticut. Thus, workers' compensation insurers are members of CIGA. CIGA was formed to protect policyholders in the event that their insurer becomes insolvent. CIGA administers and pays claims filed against insolvent insurers within the prescribed limits of the CIGA Act. CIGA's obligations and the limitations on its liability which are pertinent to your inquiry are set forth in Conn.Gen.Stat.  38a-841(1), which states in part:

Sec. 38a-841. (Formerly Sec. 38-278). Obligations of association. Limitations. Assessments. Investigation of claims. (1) Said association shall: (a) Be obligated to the extent of the covered claims existing prior to the determination of insolvency and arising within thirty days after the determination of insolvency, or before the policy expiration date if less than thirty days after the determination, or before the insured replaces the policy or causes its cancellation, if he does so within thirty days of such determination, provided such obligation shall be limited as follows: (i) With respect to covered claims for unearned premiums, to one-half of the unearned premium on any policy, subject to a maximum of two thousand dollars per policy; (ii) with respect to covered claims other than for unearned premiums, such obligation shall include only that amount of each such claim which is in excess of one hundred dollars and is less than three hundred thousand dollars, except that said association shall pay the full amount of any such claim arising out of a workers' compensation policy, provided in no event shall (A) said association be obligated to any claimant in an amount in excess of the obligation of the insolvent insurer under the policy form or coverage from which the claim arises, or (B) said association be obligated for any claim filed with the association after the expiration of two years from the date of the declaration of insolvency; (b) be deemed the insurer to the extent of its obligations on the covered claims and to such extent shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent; ...

Your questions deal with the statutory limits on CIGA's liability and how these limits affect the liability and operation of the Fund. Your questions are addressed in the order presented.

You have inquired whether, in addition to liability for payment of claims, the workers' compensation coverage provided by the insolvent carrier transfers to CIGA. The answer to this question is yes, CIGA must provide coverage, but only for a maximum of thirty days. Section 38a-841(1)(a) provides that CIGA is obligated to pay covered claims that arise within 30 days after the determination of insolvency, or for a period of less than 30 days as follows: 1) if the policy would have expired in less than 30 days, then until the policy expiration date; or 2) if the insured cancels or replaces the policy within the 30 day period, then until the date of cancellation or replacement of the policy. By requiring CIGA to pay covered claims arising up to thirty days after the insurer's insolvency, this provision has the effect of extending the insured's coverage. This stopgap provision gives insureds thirty days to secure replacement insurance without suffering a gap in coverage. Your second question asks if the Second Injury Fund is liable for all claims filed after the "two year period of liability for [CIGA]" has expired. The two year period you refer to is contained in  38a-841(1)(a)(ii)(B) which states that "in no event shall ... (B) said association [CIGA] be obligated for any claim filed with the association after the expiration of two years from the date of the declaration of insolvency." The foregoing is a statute of limitations, which sets a date after which no new claims will be accepted by CIGA. Although no cases have been decided in Connecticut construing this statute of limitations, Connecticut courts, in other contexts, have enforced statutes of limitations. The court's analysis in Kennedy v. Johns-Manville Sales Corp., 135 Conn. 179 (1948) is representative: The statute of limitations is a statute of repose. At times, it may bar the assertion of a just claim. Then its application causes hardship. The Legislature has found that such occasional hardship is outweighed by the advantage of outlawing stale claims.

Id. at 180; see also Daily v. New Britain Machine Co., 200 Conn. 562 (1986). Statutes of limitations in insurance guaranty association statutes have been strictly enforced by courts in other jurisdictions, even against arguments that they sometimes bar the assertion of just claims. Satellite Bowl, Inc. v. Michigan Property & Casualty Guaranty Association, 165 Mich.App. 768 (1988); Ohio Insurance Guaranty Association v. Berea Roll & Bowl, 482 N.E.2d 995 (Ohio Com.Pl.1984), Kinder v. Pacific Public Carriers Co-op, Inc., 105 Cal.App.3d 657 (1980), Jason v. Superintendent of Insurance, 413 N.Y.S.2d 17 (1979). It is our view that Connecticut courts would enforce the statute of limitations in the CIGA statute, and CIGA would not be liable for any claim filed more than two years after the declaration of insolvency.1

However, it is our opinion that the Second Injury Fund is not liable for claims filed more than two years after the declaration of insolvency, either. It is a well-settled principle of statutory construction that specific terms covering a given subject matter will prevail over general language of the same or another statute which might otherwise prove controlling. Where there are two provisions in a statute, one of which is general and designed to apply to cases generally, and the other is particular and relates to only one case or subject within the scope of a general provision, then the particular provision must prevail; and if both cannot apply, the particular will be treated as an exception to the general provision.

Meriden v. Board of Tax Review, 161 Conn. 396, 401-402 (1971); Budkofsky v. Commissioner of Motor Vehicles, 177 Conn. 588, 592 (1979). Here, although Conn.Gen.Stat.  31-355(b) imposes liability on the Fund to pay compensation when employers or insurers fail or are unable to pay,  31-355(e) deals specifically with cases where the insurer has been declared insolvent, and imposes the liability to pay compensation in such cases on CIGA "[n]otwithstanding the provisions of" subsection (b). The imposition of this liability on CIGA "pursuant to the provisions of sections 38a-836 to 38a-853, inclusive" engrafts the CIGA statutory framework onto workers' compensation claims involving insolvent insurers, including CIGA's two year statute of limitations. Neither  31-355(e), dealing specifically with liability in cases where the insurer has been declared insolvent, or CIGA's statutes impose liability on the Fund after CIGA's statute of limitations has run. Therefore, it is our conclusion that the Fund is not liable for payment of compensation in cases where an insurer has been declared insolvent. CIGA has exclusive liability in such cases, and all workers' compensation claims involving insolvent insurers are subject to CIGA's two year statute of limitations.

In your third and fourth questions you inquire if we concluded in question 2 that the Fund was liable for claims filed after CIGA's two year statute of limitations, whether the Fund must automatically accept claims transferred to it by CIGA and whether the Fund could impose assessments against CIGA under  31-354. Since we concluded that the Fund was not liable for claims filed after CIGA's two year statute of limitations, it is unnecessary to respond to your third and fourth questions.

Finally, you have asked whether an employer must reinsure, that is, obtain insurance coverage or become self-insured as provided in  31-284, "after expiration of the Association's [CIGA's] two year period of liability."

Under  31-284, employers are required at all times to maintain workers' compensation insurance or self-insure as a condition of doing business in this State. As we indicated in answer to your first question, under  38a-841(a)(1), if an employer's insurance company becomes insolvent, CIGA provides insurance coverage for up to thirty days (not two years) after the date an insurance company is declared insolvent. After expiration of the thirty day period, it is again the responsibility of the employer to comply with the insurance requirements of  31-284. Thus, in answer to your question, an employer must not only reinsure, but it must do so within thirty days of the declaration of insolvency.

Very truly yours,

RICHARD BLUMENTHAL
ATTORNEY GENERAL

Shelagh P. McClure
Assistant Attorney General

RB/SPM/db


Footnote:

1 Although the statute of limitations cuts off CIGA's liability to pay new claims filed after the bar date, CIGA would remain liable for claims filed within the two year period, even after the statute has run. Thus, the statute of limitations does not affect CIGA's liability to make compensation payments with regard to timely filed claims.


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