Second Injury Funds Nationally and in Missouri: Liability, Functionality, and Viability in Modern Times.

AuthorBuchmiller, Rhett

    A Second Injury Fund ("SIF") is a statutory form of workers' compensation relief operating under state law. (1) SIFs allow employers to reduce their own liability for a worker's injury if part of the harm from that injury was caused by a previously existing disability. (2) The need for SIFs arises from the possibility that workers with prior injuries who are then reinjured are likely to experience greater harm than other workers. (3) As a result, employers could be exposed to greater liability, which might incentivize employers to discriminate against potential employees with previous injuries. (4)

    SIFs are designed to prevent discrimination against potential employees who have pre-existing medical disabilities by eliminating the financial burden that may be placed on the employer due to the increased risk associated with employing a previously injured employee. (5) SIF statutes achieve their goals by allowing either the employer/insurer or the injured employee to file claims against the SIF in the state's workers compensation system, requesting either "permanent total disability" benefits, and/or, in some states, "permanent partial disability" benefits. (6)

    While a major component of workers' compensation systems for much of the twentieth century, legislatures across the country have discontinued SIFs over the last twenty years. (7) Two main reasons inform these efforts: funding concerns and perceived redundancies created by the Americans with Disabilities Act ("ADA"). (8)

    Like many other state legislatures, the Missouri General Assembly addressed the issue of what to do with their SIF in 2013. The legislature, ignoring national trends, enacted legislation intended to provide additional funds to the Missouri Second Injury Fund ("Missouri SIF") while simultaneously narrowing its scope. (9) This simple concept was disrupted in 2017 by the decision in Gattenby v. Treasurer of Missouri, (10) where the Missouri Court of Appeals for the Western District effectively nullified the 2013 Amendments for a term of years. (11)

    The reasoning of Gattenby raised several questions about the future of the Missouri SIF. Part II focuses first on the historical origins of SIFs in order to demonstrate their purpose and illustrate how SIFs were designed to achieve their goals. Part III will then discuss recent trends nationally, especially in light of the ADA, which caused the closure of many SIFs. Lastly, Part IV will turn to the Missouri SIF and examine how Missouri conformed to national trends and what this has done recently in light of these trends.


    The SIF for the State of Missouri and similar injury funds across the nation were initially created for similar purposes: to stop discrimination against disabled workers in the hiring process and to encourage the retention of workers by limiting potential employer liability in case of reinjury. (12)

    The operation of SIFs is best illustrated with a hypothetical scenario. (13) During a previous job, an employee lost his right hand. Despite this, later in life he managed to find work with a different employer, one which only required him to use one hand. While working for his new employer, he lost his left hand. Normally the loss of the left hand, while debilitating, would not totally disable him. The problem arises when the prior loss of his right hand is also considered. These two injuries, his prior right hand loss and his subsequent left hand loss, combine to create an overall greater disability--now he cannot perform any jobs at all--rendering him totally disabled. This combined effect is not attributable to either employer as each was only responsible for the injury that occurred while the employee worked for them. After the employers pay for each hand, who compensates the employee for the combined effect of both injuries?

    Without SIF-like statutes, the employee's most recent employer would bear the heavy burden of total disability liability, which in Missouri is defined as an "inability to compete on the open labor market," instead of the injury for which the employer was actually responsible. (14) With SIF-like statutes, the employer is responsible only for the disability caused by the subsequent injury that occurred while the employee was working for the employer. (15) The remaining liability, namely the "extra" liability caused by the combination of the prior and subsequent injuries, would fall to the SIF. (16) In short, each employer would be responsible for paying disability benefits arising from each respective injury that occurred while the employee worked for them. The SIF would be responsible for paying the excess disability caused by the combined injuries. (17)

    New York enacted the first of these funds, the "Special Disability Fund," in 1916. (18) The Special Disability Fund set out a scheme by which employers would not be liable for the entire degree of a worker's injury and the state would fund part of the employee's disability benefits. (19) This fund was only available if the employee was totally disabled due to the combination of a preexisting disability and the work injury itself. (20) An increased demand for protection of previously disabled workers due to World War II prompted the International Association of Industrial Accidents Boards and Commissions ("IAIABC") to create a model for SIF statutes. (21) Thirty-three states adopted a SIF-like statute in the years immediately following World War II, with the majority adopting the model nearly as written. (22) By 1991, practically all states had a SIF. (23)

    1. Typical Historic Variations among Second Injury Funds

      Although adopted by a majority of jurisdictions, the model changed over time. The statutes creating these funds vary in terms of the liability imposed, funding sources, and general structure. (24) The model proposed by the IAIABC only allowed for liability in the event that an employee was totally disabled because the employee had previously lost a body part--hand, arm, or leg--in the past and lost their corresponding body part on the job. (25) Nebraska's statute reflects a typical modern approach, as it was in effect in 1997 prior to its closure. (26) The statute has been reproduced below:

      If an employee who has a preexisting permanent partial disability whether from compensable injury or otherwise, which is or is likely to be a hindrance or obstacle to his or her obtaining employment or obtaining reemployment if the employee should become unemployed and which was known to the employer prior to the occurrence of a subsequent compensable injury, receives a subsequent compensable injury resulting in additional permanent partial or in permanent total disability so that the degree or percentage of disability caused by the combined disabilities is substantially greater than that which would have resulted from the last injury, considered alone and of itself, and if the employee is entitled to receive compensation on the basis of the combined disabilities, the employer at the time of the last injury shall be liable only for the degree or percentage of disability which would have resulted from the last injury had there been no preexisting disability. (27) This statute expanded on the original model in a number of ways but was also self-limited to better conform with the original model's intent. (28) Specifically, the Nebraska statute, which further developed the original model proposed by the IAIABC, makes compensation for the combined effect of preexisting disabilities and subsequent injuries acceptable. (29) It self-limits by requiring the combined effect of the two injuries to make the overall disability "substantially greater," a minimum threshold that is present in many SIF-like statutes. (30)

      1. Acceptable Pre-Existing Disabilities

        States vary in terms of what pre-existing disabilities qualify for coverage under the SIF statute in the event of subsequent injury. Some states have expanded the scope of injuries that qualify as preexisting. (31) For instance, twelve of the most recent SIF statutes require that the preexisting disability be on a specific list of disabilities. (32) Some states, such as Pennsylvania, stick closely to the original model by only allowing SIF compensation in the event of a subsequent injury if the preexisting injury is the loss of use of a hand, arm, foot, leg, or eye. (33) Other SIFs, such as Ohio, specify a lengthy list of potential preexisting disabilities, including epilepsy, amputation, black lung disease, and Parkinson's disease. (34)

        The remaining thirty-six funds have a greater variety of potential preexisting disabilities because they do not specify a list of compensable disabilities. (35) However, many states, such as Nevada, require that the previous disability constitute a "hindrance or obstacle to obtaining employment." (36) Courts have generally interpreted this language to mean only that a pre-existing injury has the potential to combine with a new injury to constitute a hindrance or obstacle in obtaining employment, not that it actually does so. (37) Some states have lowered their potential liability more directly by requiring the minimum threshold of disability to be a certain "percent" before the preexisting disability qualifies. (38) The guidelines for calculating these percentages vary greatly, but many states require medical doctors to determine the percentage of disability. (39) Another variation occurs from the nature of the preexisting injury, with at least five states requiring the cause to be from a prior industrial accident. (40) The remaining forty-three states with functionally-equivalent SIF statutes (41) use language such as "from any cause," (42) or "from compensable injury, occupational disease, pre-existing disease, or otherwise." (43) This kind of language allows a much more expansive set of potential preexisting disabilities to qualify for SIF liability.

        The most common differentiating factor...

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