This opinion is uncorrected and subject to revision before
publication in the New York Reports.
-----------------------------------------------------------------
No. 96
American Economy Insurance
Company, et al.,
            Respondents,
        v.
State of New York, et al.,
            Appellants.




          Steven C. Wu, for appellants.
          Seth P. Waxman, for respondents.
          American Insurance Association et al.; Electrical
Employers Self Insurance Safety Plan, amici curiae.




FAHEY, J.:
          Workers' compensation insurance is a heavily regulated
area of the law.   Any modification almost always has a
prospective impact and can sometimes have a retroactive impact on
the parties to the insurance coverage contract.   At issue here is
the New York State Legislature's 2013 amendment to Workers'


                               - 1 -
                               - 2 -                          No. 96

Compensation Law § 25-a.
          We conclude that, assuming the amendment has a
retroactive impact by imposing unfunded costs upon plaintiffs for
policies finalized before the amendment's effective date, that
retroactive impact is constitutionally permissible.
                                I.
          Plaintiffs are approximately 20 insurance companies
that write workers' compensation insurance policies in New York.
They challenge the legislature's 2013 amendment to Workers'
Compensation Law § 25-a, which closed the Special Fund for
Reopened Cases (the Fund) to new applications after January 1,
2014.
                     A. The Fund's Background
          The Fund was established in 1933.     Its original purpose
was to ensure that injured workers with "closed" cases that
unexpectedly "reopened" after many years due to, for example, "a
recurrence of malady, a progress in disease not anticipated, or a
pathological development not previously prognosticated" (Matter
of Ryan v American Bridge Co., 243 App Div 496, 498 [3d Dept
1935], affd 268 NY 502 [1935]), would continue to receive
necessary benefits, even if the insurance carrier had become
insolvent.   The Fund was also created to protect insurance
carriers and employers from uncertain future liability costs they
might incur in these "stale" cases (see id. at 498-499).
          The Fund was initially financed with a one-time


                               - 2 -
                                - 3 -                         No. 96

assessment on insurance carriers, but that funding eventually
became inadequate, and in 1948 the legislature authorized the
Workers' Compensation Board (the Board) to impose annual
assessments on carriers to maintain the Fund.    The carriers were
permitted to pass those assessments on to their insureds through
policyholder surcharges.    The cost of the Fund was therefore
ultimately borne by New York employers, not insurance carriers.
          Before the Fund's closure in 2014, benefits on a
reopened case would be paid by the Fund under the following
conditions.   First, the case must have been previously "closed"
either formally or informally, i.e., "no further proceedings were
foreseen" (Matter of Casey v Hinkle Iron Works, 299 NY 382, 385
[1949]; see Matter of Riley v Aircraft Prods. Mfg. Corp., 40 NY2d
366, 370 [1976]).    Second, the case must have reopened, which
often occurred due to an unanticipated change in the claimant's
medical condition.    Third, a minimum of seven years must have
elapsed from the date of injury.    Finally, three years must have
elapsed from the date of the last payment of compensation
(see former Workers' Compensation Law § 25-a [1]).1   Neither the
Fund nor any carrier or self-insured employer was required to pay
benefits on a claim if both 18 years had elapsed from the date of



     1
          Different provisions applied where death resulted from
the injury, where the initial claim for compensation had been
disallowed, or where the claim had "been otherwise disposed of
without an award of compensation" (see former Workers'
Compensation Law § 25-a [1]).

                                - 3 -
                               - 4 -                            No. 96

injury or death and 8 years had elapsed from the last payment of
compensation (see Workers' Compensation Law §§ 25-a [6]; 123).
          Whether those requirements were met in any particular
case was often the subject of litigation.    For example, the
Appellate Division, Third Department decided cases regarding when
the "last payment of compensation" was made (see e.g. Matter of
Nicpon v Zelasko Constr., Inc., 120 AD3d 66, 67-68 [3d Dept
2014]), and whether additional payment to the claimant
constituted "deficiency compensation" that rendered a case
ineligible for assignment to the Fund (see e.g. Matter of
Marshall v Roth Bros. Smelting Corp., 55 AD3d 1189, 1190-1191 [3d
Dept 2008], lv denied 12 NY3d 702 [2009]).    In that regard, one
of the most litigated issues was whether a case had previously
been "truly closed," or whether further proceedings were
contemplated (see e.g. Matter of Palazzolo v Dutchess County, 132
AD3d 1053, 1054-1055 [3d Dept 2015]; Matter of Bates v Finger
Lakes Truck Rental, 41 AD3d 957, 959-960 [3d Dept 2007]; Matter
of Washburn v Bob Hooey Constr. Co., 39 AD3d 956, 957-958 [3d
Dept 2007]).   Whether the case was truly closed was a factual
determination for the Board to make under the circumstances of
each particular case (see Matter of Reddien v Joseph Davis Inc.,
136 AD3d 1144, 1145 [3d Dept 2016]).   Any party aggrieved by the
decision of the workers' compensation law judge had avenues for
administrative review and appeal (see generally Workers'
Compensation Law § 23).


                               - 4 -
                               - 5 -                          No. 96

          Transfer of any particular case to the Fund was
therefore often a speculative matter based on uncertain future
events, and subject to litigation.     Once it had been determined
that all requirements for transfer to the Fund were met, however,
transfer was mandatory, not discretionary (see former Workers'
Compensation Law § 25-a [1]; Matter of De Mayo v Rensselaer
Polytech Inst., 74 NY2d 459, 462-463 [1989]).
                      B. Closure of the Fund
          The parties dispute the circumstances precipitating the
legislature's decision to close the Fund.    Defendants point to
the Fund's drastically increased costs after 2006.    They
attribute these rising costs to the carriers' practice of
increasingly pushing claims to the Fund, including by engaging in
"indemnity-only" settlements that allowed carriers to apply for
transfer of anticipated future medical costs to the Fund.
Defendants also note that the closure of the Special Disability
Fund2 in 2007 may have inadvertently provided carriers with an
increased incentive to transfer claims to the Fund.    Plaintiffs
dispute this.   They assert that medical costs in general rose
significantly over the same time period, and that they had no
incentive to engage in indemnity-only settlements in order to


     2
          The Special Disability Fund had reimbursed carriers and
self-insured employers, under certain specified conditions, for
benefits paid to a claimant with a preexisting impairment due to
an injury suffered during previous employment (see generally
Martin Minkowitz, New York Workers' Compensation §§ 9:1-9:5 at
424-430 [2d ed 27 West's NY Prac Series 2011]).

                               - 5 -
                               - 6 -                         No. 96

transfer medical costs to the Fund.
          Whatever the reason, it is undisputed that the Fund's
costs had increased dramatically before 2013.   Plaintiffs noted
in their complaint that there had been "a surge in reopened cases
in recent years."   Defendants assert that the annual assessment
required to maintain the Fund was approximately $95 million in
2006, but that number had increased to over $300 million by the
end of 2012.
          Against this backdrop, in 2013, the legislature decided
to close the Fund to new applications.   The amendment was
included in the Budget Reconciliation Act of 2013, as part of
several reforms to the Workers' Compensation Law included in the
"Business Relief Bill" (L 2013, ch 57, part GG, § 13 [effective
March 29, 2013]).   The bill amended Workers' Compensation Law §
25-a to add subdivision 1-a, which provided that "[n]o
application by a self-insured employer or an insurance carrier
for transfer of liability of a claim to the fund for reopened
cases shall be accepted by the board on or after the first day of
January, two thousand fourteen" (L 2013, ch 57, part GG, § 13).
Essentially, the legislature closed the Fund to new applications
after January 1, 2014, providing an approximately nine-month
grace period during which the Board would consider new
applications (see id.).   The Fund remains open to administer
reopened cases previously assigned to the Fund.
          The memorandum in support of that portion of the bill


                               - 6 -
                              - 7 -                         No. 96

concerning the Fund's closure stated:
          "Closing the Fund would save New York
          businesses hundreds of millions of dollars in
          assessments per year. The Fund provides
          payments directly to claimants and health
          providers when the claimant's case is
          reopened under certain circumstances. The
          original intent of the Fund was to provide
          carriers relief in a small number of cases
          where liability unexpectedly arises after a
          case has been closed for many years.
          However, carriers do not need this relief
          because the premiums they have charged
          already cover this liability. This reform
          prevents a windfall for such carriers"
          (Memorandum in Support, 2013-2014 New York
          State Executive Budget, Public Protection and
          General Government Article VII Legislation,
          at 29, available at
          https://www.budget.ny.gov/pubs/archive/fy1314
          archive/eBudget1314/fy1314artVIIbills/PPGG_Ar
          ticleVII_MS.pdf [last accessed October 5,
          2017]).
          Workers' compensation insurance policies are
occurrence-based, meaning that each policy provides coverage for
any claims arising from an accident occurring during that policy
year, regardless of when the claim is made.   As such, the premium
charged in each policy year is calculated to be sufficient to
cover all of the carrier's liability arising from any accidents
occurring during that policy year, including liability that might
arise years after an injury occurred (see generally Minkowitz,
New York Workers' Compensation § 18:11, at 776).
          Premiums charged by carriers to their insureds are
generally a function of two factors: "loss costs," representing
losses carriers are likely to incur under their policies, and
"loss-cost multipliers," representing each individual carrier's

                              - 7 -
                                - 8 -                         No. 96

profit and expense structure.   In New York, the New York
Compensation Insurance Rating Board (NYCIRB) -- a nonprofit
association of insurance carriers -- is responsible for
calculating loss costs used by carriers in setting premiums.
NYCIRB makes an annual recommendation to the Department of
Financial Services (DFS) regarding whether loss cost levels
should be adjusted for the upcoming policy year.   Carriers may
deviate from the DFS-approved rates only with DFS's permission.
          Before the closure of the Fund, NYCIRB did not include
in its loss cost calculations any costs carriers would incur on
claims that would qualify for assignment to the Fund.    Plaintiffs
therefore allege that the premiums they charged for policies
written before October 20133 did not include such costs.
Plaintiffs further allege that, before 2013, their loss reserves
did not account for any liability they might incur on reopened
cases that would qualify for administration by the Fund.
          NYCIRB acknowledged in 2013 that the closure of the
Fund would result in "unfunded liability" for workers'
compensation carriers.   NYCIRB explained:
          "The unfunded liability results from claims
          on current and past policies which were
          closed, may be reopened in the future, and
          would have been subject to the provisions of


     3
          Plaintiffs assert that although the amendment was
effective in March 2013, its alleged retroactive impact
encompasses all policies issued before October 2013, when a DFS-
approved rate increase took effect (see American Economy Ins. Co.
v State of New York, 139 AD3d 138, 141-142 [1st Dept 2016]).

                                - 8 -
                                - 9 -                          No. 96

          Section 25-A. For example, a policy from
          2007 could have had a claim that is now
          closed, and the last payment on which was in
          2012. If this claim reopens in, for example,
          2016, it could have been deferred to the
          Reopened Case Fund, but since the bill
          provides for the Fund's closure, this claim
          would remain the responsibility of the
          carrier. However, the premium charged for
          this policy did not incorporate that
          possibility, and assumed such costs would be
          borne by the Fund. Therefore, there is an
          unfunded liability which will have to be paid
          by the carriers (i.e. a retrospective cost
          impact)" (NYCIRB, Analysis of Proposed Bills
          to Reform the Workers Compensation System,
          March 14, 2013, at 2, available at
          http://nycirb.net/2007/depts/actuary/S2605c.p
          df [last accessed October 5, 2017]).
          NYCIRB estimated that carriers would incur collective
unfunded liability of between $1.1 and $1.6 billion (id. at 3).
Plaintiffs allege that their own share of this unfunded liability
is approximately $62 million.   Both parties assert that the
carriers technically cannot recoup these costs by charging higher
premiums in future policy years because, as an actuarial matter,
the ratemaking process is entirely prospective.   Plaintiffs
further note that in July 2013, DFS approved NYCIRB's recommended
4.5% increase in loss costs on future policies to account for the
Fund's closure.   Plaintiffs assert that this increase constitutes
an acknowledgment that premiums charged before 2013 did not
account for the costs of reopened cases that would have been
assigned to the Fund.
                     C. The Present Litigation
          Plaintiffs commenced the present declaratory judgment


                                - 9 -
                               - 10 -                         No. 96

action in Supreme Court in July 2013.    They alleged that the
legislature's amendment to section 25-a operated retroactively to
the extent that it imposed unfunded liability upon plaintiffs in
connection with future reopened claims made on policies finalized
before the amendment's effective date.    Plaintiffs contended that
this retroactive impact violated the Contract Clause of the
Federal Constitution and the Takings and Due Process Clauses of
the Federal and State Constitutions.    Defendants thereafter moved
to dismiss the complaint, and plaintiffs cross-moved for summary
judgment.
            Supreme Court granted defendants' motion to dismiss the
complaint.   The court concluded that the legislative amendment to
section 25-a operated prospectively, inasmuch as it closed the
Fund only to new applications, and only after a nine-month grace
period.   The court further rejected plaintiffs' constitutional
challenges to the amendment.
            The Appellate Division reversed and entered a judgment
declaring Workers' Compensation Law § 25-a (1-a) unconstitutional
"as retroactively applied to policies issued before October 1,
2013" (American Economy Ins. Co. v State of New York, 139 AD3d
138, 147 [1st Dept 2016]).   The court concluded that the
statutory amendment operated retroactively to the extent that it
imposed unfunded liability on plaintiffs "for reopened cases
arising from accidents occurring before October 1, 2013 that
would have otherwise qualified for transfer under Workers'


                               - 10 -
                              - 11 -                        No. 96

Compensation Law § 25-a" (id. at 143).   The Appellate Division
reasoned that "the closure of the Fund here, by ending
plaintiffs' right to transfer eligible cases to the Fund,
retroactively deprived them of the entirety of the benefit of
this right and created a new class of unfunded liability" (id. at
145).   The court further concluded that "the record fails to
reflect that the legislature amended the statute with an
understanding of the impact it would have on policies issued
before October 1, 2013" (id.).
           With respect to plaintiffs' constitutional claims, the
Appellate Division concluded that the amendment, "as applied
retroactively, violates the Contract Clause of the US
Constitution because it retroactively impairs an existing
contractual obligation to provide insurance coverage '[w]here
. . . the insurer does not have the right to terminate the policy
or change the premium rate'" (id. at 145-146, quoting Health Ins.
Assn. of Am. v Harnett, 44 NY2d 302, 313 [1978]).   The court
rejected defendants' arguments that the legislation was
reasonable and necessary to serve a legitimate public purpose,
concluding that the "the legislation's stated purpose of
preventing a windfall to insurance carriers was based upon the
erroneous premise that premiums already cover this new liability"
(id. at 146).   Finally, the Appellate Division concluded that
"[r]etroactive application would also constitute a regulatory
taking in violation of the Takings Clause" (id.).   The court did


                              - 11 -
                               - 12 -                         No. 96

not address plaintiffs' due process arguments.
            Defendants appealed to this Court as of right pursuant
to CPLR 5601 (b) (1).    We now reverse.
                                II.
            Defendants first contend that the Fund's closure had
only prospective effect, inasmuch as the Fund was closed only to
new applications after a nine-month grace period.    Defendants
therefore argue that the closure altered only plaintiffs' future
costs with respect to cases that might reopen at some uncertain
future date.    Plaintiffs respond that the Appellate Division
correctly held that the amendment operated retroactively by
imposing "'new legal consequences to [a relationship] completed
before its enactment'" (American Economy, 139 AD3d at 143,
quoting Eastern Enterprises v Apfel, 524 US 498, 532 [1998]).
            Both parties rely on the definition of retroactivity
contained in Landgraf v USI Film Products (511 US 244 [1994]).
In that case, the Supreme Court observed that "[a] statute does
not operate 'retrospectively' merely because it is applied in a
case arising from conduct antedating the statute's enactment,
. . . or upsets expectations based in prior law.    Rather, the
court must ask whether the new provision attaches new legal
consequences to events completed before its enactment" (id. at
269-270).    The Court explained that "[e]ven uncontroversially
prospective statutes may unsettle expectations and impose burdens
on past conduct," and that "a statute is not made retroactive


                               - 12 -
                              - 13 -                            No. 96

merely because it draws upon antecedent facts for its operation"
(id. at 269 n 24 [internal quotation marks omitted]).    A statute
has "retroactive effect," however, if "it would impair rights a
party possessed when he acted, increase a party's liability for
past conduct, or impose new duties with respect to transactions
already completed" (id. at 280).
           We have previously confronted the issue of alleged
retroactive impact of amendments to the Workers' Compensation
Law.   Recently, in Matter of Raynor v Landmark Chrysler (18 NY3d
48 [2011]), we noted that "[t]he fact that [an] award may relate
to an injury that occurred prior to the enactment of the statute
does not render it retroactive" (id. at 57).    As the Appellate
Division observed, however (see American Economy, 139 AD3d at
143-144), Raynor concerned a legislative amendment that altered
only the time and manner of workers' compensation insurance
carriers' payments for specified awards, including awards
pertaining to injuries that occurred before the law's effective
date, and not the amount of those payments (see Raynor, 18 NY3d
at 57).
           In Becker v Huss Co. (43 NY2d 527 [1978]), we concluded
that an amendment to the Workers' Compensation Law requiring
carriers to contribute to a claimant's litigation costs in a
third-party action, even with respect to litigation regarding an
injury occurring before the law's effective date, might have some
retroactive impact on carriers.    We recognized that the law


                              - 13 -
                             - 14 -                           No. 96

"saddl[ed carriers] with financial obligations not contemplated
when prior insurance premiums had been computed" (id. at 540).
We acknowledged the difficulty, however, of defining that
retroactive impact, stating that "the amendment neither created a
new right nor impaired an existing one, although the reallocation
might be characterized verbally either way," and we characterized
any "right" the carriers possessed as "inchoate" (id. at 542).
We noted that, viewing the workers' compensation system broadly,
"[t]he allocation of economic benefits and burdens has always
been subject to adjustment" (id. at 541).   That system
"designedly, has flexibility, much greater than that found in the
more traditional forms of law. Thus, it is not unusual that
carriers or employers have had their burdens shifted or increased
with relation to past industrial accidents" (id.).   We concluded
that the legislative amendment should apply to any judgment or
settlement entered after the effective date of the legislation,
"even if the injury occurred or the third-party action was
brought before that date" (id. at 542).
          Similar to the claim of the carriers in Becker that
they had been "saddl[ed] . . . with financial obligations not
contemplated when prior insurance premiums had been computed"
(id. at 540), plaintiffs contend that the 2013 amendment to
section 25-a operates retroactively by imposing upon them
additional, unfunded costs that were not contemplated by premiums
they charged in past policy years, which premiums were approved


                             - 14 -
                              - 15 -                          No. 96

by the state.   Whether this alleged retroactive application of
the amendment "attaches new legal consequences to events
completed before its enactment" (Landgraf, 511 US at 270
[emphasis added]) is debatable.   Nevertheless, even assuming
arguendo that the amendment has retroactive impact to the extent
it imposes unfunded liability costs upon plaintiffs under
policies finalized before the amendment's effective date, we
conclude that this retroactive impact is constitutionally
permissible.
                               III.
          As the Supreme Court has stated, "the constitutional
impediments to retroactive civil legislation are now modest"
(Landgraf, 511 US at 272 [emphasis omitted]).   "Absent a
violation" of a specific constitutional provision, "the potential
unfairness of retroactive civil legislation is not a sufficient
reason for a court to fail to give a statute its intended scope"
(id. at 267).
          Moreover, "'[i]t is well settled that acts of the
Legislature are entitled to a strong presumption of
constitutionality'" (Matter of County of Chemung v Shah, 28 NY3d
244, 262 [2016], quoting Cohen v Cuomo, 19 NY3d 196, 201 [2012];
see Farrington v Pinckney, 1 NY2d 74, 78 [1956]).   Plaintiffs
bear the ultimate burden of overcoming that presumption by
demonstrating the amendment's constitutional invalidity beyond a
reasonable doubt (see County of Chemung, 28 NY3d at 262;


                              - 15 -
                              - 16 -                         No. 96

Overstock.com, Inc. v New York State Dept. of Taxation & Fin., 20
NY3d 586, 593 [2013], cert denied -- US --, 134 S Ct 682 [2013];
LaValle v Hayden, 98 NY2d 155, 161 [2002]; Cook v City of
Binghamton, 48 NY2d 323, 330 [1979]).   Even treating all
allegations in the complaint as true and affording plaintiffs
every possible favorable inference, as we must on defendants'
motion to dismiss (see Leon v Martinez, 84 NY2d 83, 87-88
[1994]), we conclude that the amendment is constitutional.
                        A. Contract Clause
           The Contract Clause of the US Constitution "prohibits
states from enacting '[l]aw[s] impairing the Obligation of
Contracts'" (Raynor, 18 NY3d at 58, quoting US Const, art I, § 10
[1]).   "The Supreme Court has repeatedly held that this language
should not be read literally and that the States retain the power
'to safeguard the vital interests of [their] people'" (19th St.
Assoc. v State of New York, 79 NY2d 434, 442 [1992], quoting Home
Bldg. & Loan Assn. v Blaisdell, 290 US 398, 434 [1934]).    "'The
threshold inquiry is whether the state law has, in fact, operated
as a substantial impairment of a contractual relationship'" (id.,
quoting Energy Reserves Group v Kansas Power & Light, 459 US 400,
411 [1983]).   "In determining the extent of the impairment, we
are to consider whether the industry the complaining party has
entered has been regulated in the past" (Energy Reserves Group,
459 US at 411).   As the Supreme Court "long ago observed: 'One
whose rights, such as they are, are subject to state restriction,


                              - 16 -
                                - 17 -                         No. 96

cannot remove them from the power of the State by making a
contract about them'" (id., quoting Hudson Water Co. v McCarter,
209 US 349, 357 [1908]).
            Before determining whether there has been a substantial
impairment of a contractual relationship, however, we must
determine whether there has been any impairment of a contractual
relationship.    Stated another way, the initial inquiry contains
"three components: whether there is a contractual relationship,
whether a change in law impairs that contractual relationship,
and whether the impairment is substantial" (General Motors Corp.
v Romein, 503 US 181, 186 [1992]).
            There is no dispute that plaintiffs have a contractual
relationship with their insureds in the form of their insurance
policies.    We conclude, however, that the legislative amendment
at issue does not impair that contractual relationship.
            We note that, unlike the obvious contractual
relationship between plaintiffs and their insureds, there is no
contract establishing a legal relationship between plaintiffs and
the Fund in the record before us.    In fact, there is no contract
in the record before us whatsoever.      Plaintiffs have provided us
with a document they refer to as their New York form insurance
policy, which they assert contains the relevant contractual terms
for pre-2013 policy periods.4    This document does not mention the

     4
          The document in the record is entitled "Workers
Compensation and Employers Liability Insurance Policy Quick
Reference." A disclaimer on that document prominently states:

                                - 17 -
                               - 18 -                           No. 96

Fund.   It does not guarantee plaintiffs the right to transfer
reopened cases to the Fund, nor could it bind the Fund to
continue to administer those claims.    It does not condition
plaintiffs' obligation to pay benefits required by the workers'
compensation law on the Fund's continuing existence or acceptance
of applications to transfer liability costs on reopened cases to
the Fund.    The closure of the Fund therefore does not impair any
term of plaintiffs' contracts with their insureds.
            Plaintiffs nevertheless assert that liability for
section 25-a claims was excluded from the scope of the policies'
coverage.    They point to language in the document stating that
plaintiffs will pay "promptly when due the benefits required of
[the employer-insured] by the workers compensation law," and
defining the workers' compensation law to "include[] any
amendments to that law which are in effect during the policy
period."    According to plaintiffs, this language provides
coverage only to the extent required by state law as that state


"This Quick Reference is not part of the Workers Compensation and
Employers Liability Policy and does not provide coverage. Refer
to the Workers Compensation and Employers Liability Policy itself
for actual contractual provisions." Thus, the document
plaintiffs have provided us is not their contract with their
insureds and does not even purport to include that contract's
provisions. Nevertheless, plaintiffs ask us to declare that a
statute unconstitutionally impairs a contract they have not put
before us, and they assert that the Quick Reference contains the
contractual provisions on which their demonstration of
constitutional invalidity relies. As defendants do not challenge
this assertion, we therefore assume, for purposes of this appeal,
that this document contains those relevant contractual
provisions.

                               - 18 -
                              - 19 -                          No. 96

law existed during the policy period, and any later amendments to
the state law that alter plaintiffs' obligations are not included
in the scope of coverage.   At the time these policies were
finalized, the Fund was accepting obligations on reopened cases
that met the requirements for transfer, and therefore, plaintiffs
argue, plaintiffs' contracts with their insureds exclude from the
scope of coverage any benefits paid on a reopened case that would
have qualified for assignment to the Fund before its closure.
Accordingly, plaintiffs argue that the 2013 amendment to section
25-a alters the scope of their coverage under the policies.
          To the extent plaintiffs' contention can be construed
as an argument that their policies do not obligate them to cover
liability on reopened cases that would have been assigned to the
Fund before the amendment, plaintiffs' interpretation of this
policy language is inconsistent with their assertion underpinning
their first contention regarding retroactivity, i.e., that the
amendment has retroactive effect by imposing unfunded liability
upon plaintiffs under policies completed before the amendment's
effective date.   Their interpretation is also inconsistent with
their concession that their insurance policies, written and
finalized before the 2013 amendment, obligate them to cover the
costs of liability on any reopened case that otherwise would have
qualified for transfer to the Fund before the amendment.
          In any event, plaintiffs' Contract Clause claim
confuses their legal liability for reopened cases with their


                              - 19 -
                              - 20 -                           No. 96

ability to transfer the costs of that liability.   Plaintiffs'
contracts with their insureds obligated them to pay all benefits
required of their insureds by the Workers' Compensation Law,
including any amendments to that law which are in effect during
the policy period, and thus require plaintiffs to pay all
necessary benefits on reopened cases.
          Pursuant to those contracts, which consistently assume
the risk of legislative change, liability for any benefit
required of employers by the Workers' Compensation Law ultimately
rested with the carriers.   The amendment merely altered the
allocation of costs of that liability by removing an avenue for
carriers to transfer reopened cases to the Fund, and then to pass
assessments for the costs of those cases onto their insureds.
Inasmuch as plaintiffs did not contract with their insureds for
the right to transfer reopened cases to the Fund, or condition
their liability to pay benefits on reopened cases on the Fund's
continuing acceptance of those cases, plaintiffs' contracts with
their insureds have not been impaired by the amendment.    Put
differently, there is no provision of plaintiffs' contracts with
their insureds relieving them of the obligation to pay an injured
worker's benefits in the event that the Fund did not accept a
reopened case.
          At most, plaintiffs' contracts with their insureds have
become less profitable (see Raynor, 18 NY3d at 58-59).    When
plaintiffs calculated their premiums for pre-2013 policy years,


                              - 20 -
                              - 21 -                          No. 96

those premiums did not include the costs of liability on
qualifying reopened cases, as those costs would have been borne
by the Fund, and their premiums in those previous policy years
are therefore now insufficient to cover the costs of their
liability.   This risk, however -- that the premium charged in any
one policy year will be insufficient to cover the costs of a
carrier's liability -- is a risk inherent in the insurance
market, especially in a highly regulated market such as workers'
compensation insurance, where "[t]he allocation of economic
benefits and burdens has always been subject to adjustment"
(Becker, 43 NY2d at 541).
          Inasmuch as the legislative amendment does not impair
any term of plaintiffs' contracts with their insureds, we need
not consider whether any impairment is substantial, or whether
any substantial impairment is justified by a "significant and
legitimate public purpose" (Energy Reserves Group, 459 US at 411-
412; see General Motors Corp., 503 US at 186-187; Ballentine v
Koch, 89 NY2d 51, 60-61 [1996]).
          Plaintiffs rely on our decision in Health Insurance
Association of America v Harnett (44 NY2d 302 [1978]) to support
their Contract Clause claim, but Harnett is distinguishable.     In
that case, 1976 legislation mandated "the inclusion of maternity
care coverage in health and accident insurance policies issued
after January 1, 1977" (id. at 306).   The Court held that the
legislation was "not unconstitutional as to its substantive


                              - 21 -
                               - 22 -                          No. 96

provisions," inasmuch as it did not violate constitutional due
process requirements (see id. at 306, 308-312).
            The Court further concluded, however, that the
legislature "may not constitutionally require the addition of
such coverage to policies in existence before that date but
thereafter renewed, if the renewal is at the option of the
insured alone without the consent of the insurer" (id. at 306).
We reasoned that our prior decision in Moore v Metropolitan Life
Insurance Company (33 NY2d 304 [1973]) was dispositive, insofar
as the Court held in Moore that "[w]here . . . the insurer does
not have the right to terminate the policy or change the premium
rate without consent of the [insured], renewal, by the payment of
premiums merely continues in force the pre-existing policy, and
statutes enacted subsequent to its original enactment cannot be
applied'" (Harnett, 44 NY2d at 313, quoting Moore, 33 NY2d at
312).   We further concluded that the insurer's right to increase
premiums was not sufficient.    Rather, "[w]hat is required is a
choice open to the insurer to increase premiums or in the
alternative, if it so elects, to terminate -- thus, fail to renew
-- the policy and escape the added risk imposed by the statutory
modification" (Harnett, 44 NY2d at 313).
            Harnett is distinguishable from the present case
because Harnett involved the legislative addition of maternity
coverage to insurance policies that previously included no such
coverage.    The Court held that this was impermissible to the


                               - 22 -
                               - 23 -                         No. 96

extent that the insurer did not have the option to terminate the
policy.    Here, by contrast, the legislative amendment does not
remove, add, or otherwise alter any term of coverage contained
within plaintiffs' insurance policies.    Plaintiffs' contracts
with their insureds obligate plaintiffs to pay any benefits
required of their insureds under the workers' compensation law,
and the 2013 amendment to section 25-a does not alter those
terms.    Rather, as explained above, the amendment merely makes
plaintiffs' contracts with their insureds less profitable.    The
decreased profitability of plaintiffs' contracts -- due to the
fact that the premiums plaintiffs charged in previous policy
years did not account for this subsequent statutory change --
does not constitute an impairment of their contracts with their
insureds because it does not alter any term of those contractual
provisions (cf. Harnett, 44 NY2d at 313).
            To the extent plaintiffs ask us to read the preexisting
statutory provisions regarding the Fund's existence as implied
terms of their contracts with their insureds, we decline to do
so.   As the Supreme Court has explained, "[f]or the most part,
state laws are implied into private contracts regardless of the
assent of the parties only when those laws affect the validity,
construction, and enforcement of contracts" (General Motors
Corp., 503 US at 189).    "[C]hanges in [such] laws that make a
contract legally enforceable may trigger Contract Clause scrutiny
if they impair the obligation of pre-existing contracts, even if


                               - 23 -
                              - 24 -                          No. 96

they do not alter any of the contracts' bargained-for terms"
(id.).
          Here, by contrast, the 2013 amendment to section 25-a
"did not change the legal enforceability of the [insurance]
contracts," and "[t]he parties still have the same ability to
enforce the bargained-for terms of the [insurance] contracts that
they did before" the amendment (id. at 190).   If, as plaintiffs
suggest, we read into their contracts terms that do not exist
based on then-existing statutory language, the Contract Clause
"would protect against all changes in legislation, regardless of
the effect of those changes on bargained-for agreements" (id.).
That construction "would severely limit the ability of state
legislatures to amend their regulatory legislation. Amendments
could not take effect until all existing contracts expired, and
parties could evade regulation by entering into long-term
contracts" (id.).   Furthermore, the contracts at issue in this
case expressly assumed the risk of legislative change.
          Inasmuch as the legislature's 2013 amendment to section
25-a did not impair any term of plaintiffs' contracts with their
insureds, plaintiffs cannot establish a violation of the Contract
Clause.
                         B. Takings Clause
          The Takings Clause of the Fifth Amendment of the US
Constitution, "made applicable to the States through the
Fourteenth Amendment, . . . provides that 'private property'


                              - 24 -
                             - 25 -                          No. 96

shall not 'be taken for public use, without just compensation'"
(Phillips v Washington Legal Foundation, 524 US 156, 163-164
[1998], quoting US Const, 5th Amend).   The New York Constitution
similarly provides that "[p]rivate property shall not be taken
for public use without just compensation" (NY Const, art I, § 7
[a]).
          The threshold step in any Takings Clause analysis is to
determine whether a vested property interest has been identified
(see Phillips, 524 US at 164; Landgraf, 511 US at 266; Alliance
of Am. Insurers v Chu, 77 NY2d 573, 585-587 [1991]).    Plaintiffs
concede that the mere obligation to pay money, without
identification of a vested property interest, cannot constitute a
taking (see James Sq. Assoc. LP v Mullen, 21 NY3d 233, 247
[2013]; see also Swisher Intl., Inc. v Schafer, 550 F3d 1046,
1056 [11th Cir 2008] ["(T)he takings analysis is not an
appropriate vehicle to challenge the power of Congress to impose
a mere monetary obligation without regard to an identifiable
property interest"], cert denied 558 US 932 [2009]).5


     5
          The Supreme Court's decision in Eastern Enterprises v
Apfel (524 US 498 [1998]), upon which the Appellate Division
relied in holding that a taking had occurred (see American
Economy, 139 AD3d at 146), is not to the contrary. In Eastern
Enterprises, a four-Justice plurality of the Supreme Court
concluded that the obligation imposed on Eastern to pay money
under the Coal Act constituted a taking because it imposed
"severe retroactive liability on a limited class of parties that
could not have anticipated the liability, and the extent of that
liability is substantially disproportionate to the parties'
experience" (Eastern Enterprises, 524 US at 528-529; see also id.
at 529-537). Five Justices, however, disagreed with the

                             - 25 -
                              - 26 -                         No. 96

          Plaintiffs cannot identify any vested property interest
impaired by the legislative amendment, and therefore their
takings claim must fail.   Plaintiffs assert that they have a
constitutionally-protected interest in the value of their
contracts with their insureds, and that the diminution in the
value of those contracts constitutes a taking.   We disagree.   "As
a general matter, the government does not 'take' contract rights
pertaining to a contract between two private parties simply by
engaging in lawful action that affects the value of one of the
parties' contract rights" (Palmyra Pacific Seafoods, LLC v United
States, 561 F3d 1361, 1365 [Fed Cir 2009], cert denied 559 US
1106 [2010]).
          This Court's decision in Alliance of American Insurers
v Chu (77 NY2d 573 [1991]) is distinguishable.   In that case, we
held that the plaintiff-insurers had a vested property interest
in the income produced by a security fund to which the insurers



plurality's takings analysis. Justice Kennedy would have held
the Coal Act unconstitutional under the Due Process Clause, and
he opined that the plurality's Takings Clause analysis was
"incorrect and quite unnecessary for decision of the case" (id.
at 539 [Kennedy, J., concurring in the judgment and dissenting in
part]). The four dissenting Justices agreed with Justice Kennedy
that the Takings Clause did not apply because no specific
property interest had been identified (see id. at 554-556
[Breyer, J., dissenting]). Subsequent federal decisions
wrestling with the import of Eastern Enterprises have largely
adopted the view of Justice Kennedy and the dissenting Justices
with respect to the Takings Clause analysis (see e.g. West
Virginia CWP Fund v Stacy, 671 F3d 378, 386-387 [4th Cir 2011],
cert denied 568 US 816 [2012]; Swisher Intl., 550 F3d at 1054-
1057).

                              - 26 -
                              - 27 -                          No. 96

were statutorily obligated to contribute.   The Court made clear,
however, that it was the statutory language itself that granted
the insurers a vested property interest (see id. at 586-587).
For example, the relevant statutes provided that the fund "'shall
be separate and apart from any other fund and from all other
state moneys, and the faith and credit of the state of New York
is pledged for their safekeeping'" (id. at 579), and that "income
earned on new contributions to the fund would be either returned
to the contributors or credited toward future contributions" (id.
at 580).   The Court concluded that "these provisions obligated
the State to act in good faith with respect to the fund and its
contributors and to ensure that the fund's assets and earnings
would be available for their intended purposes" (id. at 587), and
that "these limitations established by the Legislature dictate
that the contributions made by plaintiffs were not to become
State moneys to do with as it wished" (id. at 588).   The Court
held that the legislature could not thereafter "eliminate the
plaintiffs' rights with respect to contributions already made"
(id. at 589).
           Here, by contrast, the "contributions" required to
maintain the Fund were made by employer-insureds, not by the
carriers, inasmuch as the carriers passed through assessments to
their insureds.   More importantly, no statutory language akin to
that at issue in Alliance of American Insurers exists here.     The
statutory language providing that the Fund would accept the costs


                              - 27 -
                              - 28 -                            No. 96

of liability on reopened cases under certain specific
circumstances did not provide plaintiffs with any vested right in
the Fund's continued acceptance of reopened cases.     One cannot
claim a vested property interest in continuing to receive a
statutory benefit unless statutory language clearly granting a
vested right, such as that at issue in Alliance of American
Insurers, is present (see Roman Catholic Diocese of Albany, N.Y.
v New York State Workers' Compensation Bd., 96 AD3d 1288, 1289
[3d Dept 2012]).   Instead, plaintiffs must identify a vested
property interest and then demonstrate how the legislative
amendment adversely impacts that property interest.     They cannot
do so because, like the "right" at issue in Becker, any "right"
that might be recognized here was inchoate and subject to
contingencies (see 43 NY2d at 542).
          Inasmuch as plaintiffs have not identified a vested
property interest adversely impacted by the amendment, their
takings claim fails.
                       C. Due Process Clause
          Finally, we conclude that plaintiffs cannot establish a
substantive due process violation.     Initially, the parties
disagree regarding the standard to be applied to alleged
substantive due process violations when retroactive legislation
is at issue.   Plaintiffs, relying on Alliance of American
Insurers, argue that heightened scrutiny must be applied in the
context of retroactive legislation, and that the deferential


                              - 28 -
                               - 29 -                         No. 96

rational basis standard should be applied only in the context of
prospective legislation.
          Granted, we stated in Alliance of American Insurers
that "where legislation has retroactive effects, judicial review
does not end with the inquiry generally applicable to economic
regulation, i.e., whether the legislation has a rational basis"
(77 NY2d at 586).   The cases we relied on for that proposition,
however, were themselves relying on the "vested rights doctrine,"
i.e., the axiom that "the Legislature is not free to impair
vested or property rights" (Matter of Hodes v Axelrod, 70 NY2d
364, 370 [1987]; see Matter of Chrysler Props. v Morris, 23 NY2d
515, 518-519 [1969]).    As explained, plaintiffs have not
identified a vested right here.    In any event, we have primarily
interpreted Alliance of American Insurers as a Takings case, not
a Due Process case (see e.g. Raynor, 18 NY3d at 58; Matter of
Walton v New York State Dept. of Correctional Servs., 13 NY3d
475, 489-490 [2009]).
          In the context of a substantive due process challenge
to retroactive legislation, we apply the same rational basis
scrutiny as the Supreme Court.    That test requires "a legitimate
legislative purpose furthered by rational means" (General Motors
Corp., 503 US at 191).    Although the justifications that suffice
for the prospective nature of a legislative enactment may not
suffice for its retroactive nature, the test of due process for
retroactive legislation "is met simply by showing that the


                               - 29 -
                              - 30 -                          No. 96

retroactive application of the legislation is itself justified by
a rational legislative purpose" (Pension Benefit Guar. Corp. v
R.A. Gray & Co., 467 US 717, 730 [1984]).
          Assuming that the 2013 amendment to section 25-a has
some retroactive impact, we conclude that the retroactive impact
is justified by a rational legislative purpose (see id.).    As the
Memorandum in Support indicated, the closure of the Fund was
intended to "save New York businesses hundreds of millions of
dollars in assessments per year" (Memorandum in Support, 2013-
2014 New York State Executive Budget, Public Protection and
General Government Article VII Legislation, at 29).   Defendants
assert that if the Fund was closed only to reopened cases arising
from injuries that occurred after the effective date of the
legislation, the Fund would have incurred substantial new
liabilities for many years, given the duration of many workers'
compensation cases.   Defendants contend that, during this
extended period, the assessments required to maintain the Fund
would have continued to increase, and the relief to businesses
sought by the legislature would have been indefinitely delayed.
This constitutes a sufficient showing "that the retroactive
application of the legislation is itself justified by a rational
legislative purpose" (Pension Ben. Guar. Corp., 467 US at 730).
          Plaintiffs assert that the statement in the Memorandum
in Support -- that the premiums carriers charged already cover
this liability -- was incorrect, and that our due process


                              - 30 -
                                - 31 -                         No. 96

analysis should end there.     This argument misunderstands the
nature of a due process inquiry.     "A challenged statute will
survive rational basis review so long as it is rationally related
to any conceivable legitimate State purpose" (Myers v
Schneiderman, — NY3d —, 2017 NY Slip Op 06412, *5 [2017]
[internal quotation marks omitted] [emphasis added]).
             As stated, closing the Fund would save New York
businesses hundreds of millions of dollars in assessments every
year.    In addition, the parties agree that claims on reopened
cases can be administered more efficiently by insurance
carriers.6    Delaying the Fund's closure so that it could pay
benefits on every qualifying reopened case arising from an injury
occurring before the amendment's 2013 effective date would have
delayed this intended legislative benefit to New York businesses
and employers for years, if not decades.     We therefore conclude
that any retroactive impact of the legislation is justified by a
rational legislative purpose (see Pension Ben. Guar. Corp., 467
US at 730).    Plaintiffs therefore cannot establish a substantive



     6
          The savings to New York employers in the form of
reduced and eventually eliminated assessments required to
maintain the Fund would be offset, to some degree, by increased
workers' compensation insurance premiums. Nevertheless, the
parties and the amici curiae agree that the net result would be
savings to New York businesses, inasmuch as carriers can
administer claims on reopened cases more efficiently than the
Fund. Furthermore, the Fund's closure would eliminate litigation
over whether reopened cases qualified for transfer to the Fund,
certainly a source of inefficiency in the administration of
reopened cases.

                                - 31 -
                                 - 32 -                           No. 96

due process violation.
            Accordingly, the order of the Appellate Division should
be reversed, without costs, and judgment granted in favor of
defendants declaring that Workers' Compensation Law § 25-a (1-a)
as applied to policies issued before October 1, 2013 is not
unconstitutional.
*   *   *    *   *   *   *   *     *      *   *   *   *   *   *   *   *
Order reversed, without costs, and judgment granted in favor of
defendants declaring that Workers' Compensation Law § 25-a (1-a)
as applied to policies issued before October 1, 2013 is not
unconstitutional. Opinion by Judge Fahey. Chief Judge DiFiore
and Judges Rivera, Stein, Garcia, Wilson and Feinman concur.

Decided October 24, 2017




                                 - 32 -
