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Senate may be close to breaking logjam on Second Injury Fund changes

This article first appeared in the St. Louis Beacon, Feb. 14, 2013 - After years of inaction and gridlock, the Missouri Senate is on the verge of passing legislation aimed at replenishing the languishing Second Injury Fund.

And the bill – sponsored by Sen. Scott Rupp, R-Wentzville – could also provide finality to a long-standing effort to move occupational disease claims out of civil courts into the workers' compensation system. It received initial approval on Tuesday and was sent to the House on Thursday with a 32-2 vote.

At the heart of Rupp’s bill are major changes to the funding stream and functionality of the Second Injury Fund, which was set up in the 1940s to protect businesses that hire people -- notably World War II veterans – with pre-existing injuries. 

The fund’s revenue comes from a surcharge on employers based on their workers' compensation insurance premium. Until 2005, the amount of the surcharge – a percentage of the total premium – varied from year to year. But in 2005, under then-Gov. Matt Blunt, the Republican-controlled General Assembly imposed a 3 percent cap on the size of the surcharge.

That decision appeared to substantially damage the fund’s solvency. In January, state Auditor Tom Schweich released a report showing that the fund had a cash balance of approximately $3.2 million and unpaid obligations of $28.1 million. There are thousands of pending cases and some claimants have gone to court to get the state to pay up.

Efforts over the past few years to either raise the surcharge cap or limit the benefits of the fund haven’t gone anywhere. But Rupp’s bill may have dislodged the logjam -- at least in the Missouri Senate.

Rupp’s bill would allow the director of the Division of Workers' Compensation to eventually increase the surcharge up to 6 percent, which he said in an interview would help clear the backlog of cases.  

He also said the bill would limit the type of injuries that the fund would pay out for in the future.

“We focused just on total disability,” said Rupp in an interview. “And the way to access that fund now is that if you have a previous injury from the military or a previous work injury. Or if it’s not one of those, you can still access the Second Injury Fund if there is a correlation or a nexus between your first injury that was non-work related and the second one.”

Rupp elaborated on the Senate floor and in his interview with the Beacon, giving specific examples of how somebody could still access the fund under his bill: 

  • If somebody was born blind in one eye, for instance, and he lost his other eye at work, he would have access to the fund because he would be totally disabled.
  • And if somebody had hurt their knee at a previous job and hurt their elbow at a new employer, that person would be covered because both injuries are work related.
  • But if somebody chopped off their foot while working on a boat at home and then cut off their finger while on the job, that person wouldn’t qualify for the fund because those two injuries are not correlated.

“We were trying to get away from the stacking of awards where somebody says ‘I hurt my knee, then I hurt my elbow, then I hurt my wrist,’” Rupp said. “And the way the fund worked previously is you could stack the awards on top of it so that each next injury, you got a higher amount. We were trying to get away from that.”

A tangle – and consensus – on occupational disease?

One of the major points of contention was a provision that would take occupational disease claims out of civil courts and into the workers' compensation system.

That's been a major goal of Republican lawmakers and business groups, especially after unintended consequences occurred after the 2005 overhaul of the state’s workers’ compensation system.

Based on that law, the state's courts have ruled that occupational disease was not an “accident” and didn’t have to be heard in the workers’ compensation system. Gov. Jay Nixon vetoed legislation passed last year that aimed to effecitvely reverse that decision. 

Democratic opponents argued that move curtailed the ability of people who contract catastrophic diseases – such as mesothelioma -- from obtaining maximum restitution.

The inclusion of such a provision prompted some Democratic senators – including Sens. Gina Walsh, D-Bellefontaine Neighbors, and Scott Sifton, D-Affton – to slow down the bill's progress over the past several weeks.

In an interview on Thursday, Sifton said obtaining remedies through the workers' compensation system had "advantages and disadvantages."

"The advantage is that the standard of proof is lower in the workers’ compensation system," Sifton said. "And therefore, the probability of winning is higher. But the remedies are more limited. And one of the big pieces of this discussion was to the extent acknowledging that occupational disease is not your typical workplace industry."

"It’s a terrible condition to suffer from and frequently fatal," he added. "Ordinary workers compensation remedies are not sufficient to make somebody whole with that." 

Walsh -- a retired insulation worker -- said on Wednesday that slowing things down ended up buying time to find a legislative solution.

“I just kind of felt in the beginning when we were putting the bill up a couple weeks ago that if we wanted to fix the Second Injury Fund, then why are we Christmas treeing it with occupational diseases?” said Walsh, who unsuccessfully sought to remove the occupational disease portion from the bill. “If we really want to fix it, let’s stick to the issue we want to fix. Well, you know how it is up here. Sen. Rupp is very genuine. He really wanted to fix this.”

“I think he got what he wanted,” she added. “And I think I got what I wanted to a degree.”

What Walsh was referring to was “an expanded benefit” for toxic disease claims.

“There’s an argument to be made that if you have a toxic disease and die just because you showed up at work every day, there should be an enhanced benefit,” Rupp said. “The governor when he vetoed the bill last year, he said there needed to be an enhanced benefit. So we just sat down and we came up with a two-tiered system for the toxic diseases.”

Under the bill, a worker could receive around $150,000 if he or she suffers from a certain occupational disease due to exposure of chemicals.  It could also provide up to $600,000 for workers suffering from mesothelioma as a result of exposure to asbestos.

Those toxic exposure awards would be drawn out of a subaccount within the Second Injury Fund that would be paid for by a .27 percent surcharge on business, Rupp said. He said that small amount of money could be helpful to companies down the road.

"Compared with having that risk of ‘if I did have a big exposure claim – I’m losing my business' or 'my work comp premiums go up and I’m paying a huge rate for 20 years because of one thing,' [it's] ‘if I did have that, I’m mitigating that with a minute surcharge.’"

Added Sifton: “Is the remedy for those folks provided in the final bill ideal? No. Was it a fair compromise to strike in light of all the factors involved? I think the vote tally speaks for itself – I believe it was 33-2.”>

More evidence of a new Senate?

The bill -- which received a favorable reception from Missouri Chamber of Commerce President Dan Mehan -- still is a long way from becoming law. It must get through the Missouri House, a body that may have a different view on the issue.

Start of update: But in perhaps a hopeful sign, the bill's movement received a supportive statement on Thursday from Attorney General Chris Koster. Koster, a Democrat, is in charge of overseeing the fund.

"I thank the Senate, especially Senator Scott Rupp, for prioritizing legislation to address the insolvency of the Second Injury Fund," Koster said. "It is a challenging issue, but Missouri workers and businesses deserve continued attention toward a fiscally sound resolution to this problem. The SIF cannot endure another year without a viable funding source." End of update.

More than anything, the bill may be small piece of evidence that the Senate is becoming more functional after several years of turmoil. Sifton, for instance, said the bill's passage sets "an optimistic tone" for the future.

And while she said she was "absolutely not" "100 percent happy" with the final product, Walsh said she was "thrilled to find out the Missouri Senate is what I thought it might be and that I was able to make an impact on that legislation.”

To get to this point, Rupp said he had to take a different approach than in years’ past.

“The reason it got done in the Senate is that in the years’ past, the main people working on this issue were the lobbyists for the various different interest groups: Business. Trial attorneys. Labor,” Rupp said. “And they were trying to control the finished product. And this year, I listened to them. I got what they wanted. I got what they all requested. And just shut the door. We worked on it internally, pulled in experts just for clarification purposes. My own caucus didn’t see the final product until yesterday morning in our caucus.

“We had to reclaim it. Not everybody is going to happy with it,” he added. “They’ve had several years to come up with a solution. They failed. And we’re reclaiming this.”

Sifton said other reasons legislators found consensus was fear that courts could force the state’s hand on how the Second Injury Fund operates. But he also said the fund’s insolvency drove legislators to hash out a solution.

“We’ve seen this coming for a while,” Sifton said. “But now, the state is in default of its obligations. And as the attorney general’s put it, it kind of makes us look like Illinois. And so from a fiscal responsibility standpoint, it looks bad when the state has a judgment against it that it can’t pay and won’t pay.” 

For her part, Walsh said that Rupp’s intense focus on passing the bill was key.

“This is what he really wanted to accomplish,” she said. “It’s something that he’s seen broken. It was broken for businesses. It was broken for getting relief to employees. We can always go back in history and say ‘well yeah, it’s broken because of this or it’s broken because of that.’ That’s counterproductive. That was then. We’re up here now to fix it.”

Rupp said he’ll be talking on Thursday with House leadership about the bill’s fine points, but added he doesn’t know how it’ll be received. But he added that he thinks the bill provides a promising pathway to becoming law.

“Everybody kind of won in some way, shape or form. But everybody had to give up something in some shape or form,” Rupp said. “Big guys that have huge exposure? Yeah, they’re taken care of. And the small guy that probably not might ever have that exposure but it’s out there, it’s mitigated with pennies on the dollar.”

Beacon reporter Jo Mannies provided information for this story.

Jason is the politics correspondent for St. Louis Public Radio.