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16-P-1181                                             Appeals Court

                          ROBERT JANOCHA'S CASE.


                             No. 16-P-1181.

            Suffolk.       November 2, 2017. - May 2, 2018.

               Present:    Neyman, Henry, & Lemire, JJ.


Insurance, Workers' compensation insurance, Self-insurer, Bond.
     Workers' Compensation Act, Reimbursement of insurer,
     Decision of Industrial Accident Reviewing Board.
     Department of Industrial Accidents. Statute, Construction.
     Words, "Uninsured."


     Appeal from a decision of the Industrial Accident Reviewing
Board.


     Jonathan D. Hacker, of the District of Columbia (John J.
Canniff, III, also present) for ACE American Insurance Company.
     Douglas S. Martland, Assistant Attorney General, for
Workers' Compensation Trust Fund.
     Robert H. Barry, Jr., for the employee.
     Rachel J. Eisenhaure, for Self-Insurance Institute of
America, Inc., amicus curiae, submitted a brief.


    LEMIRE, J.    This is an appeal by ACE American Insurance

Company (ACE), from a decision of the reviewing board (board) of

the Department of Industrial Accidents (department).      The board

held that ACE, rather than the Workers' Compensation Trust Fund
                                                                      2


(trust fund), was responsible for the continued payment of

compensation benefits to Robert Janocha (employee) because G. L.

c. 152, § 25A(2)(c), of the Workers' Compensation Act (act),

G. L. c. 152, as amended, requires ACE as a reinsurer to pay

benefits in the event of exhaustion of a self-insurer's surety

bond.    We affirm.

     Factual and procedural background.     All parties agree that

there are no material facts in dispute.     The employee worked for

Malden Mills Industries, Inc. (employer), until the date of his

workplace injury.     The employee's injury resulted in permanent

and total incapacity for work, and the employee is entitled to

benefits under the act.

     On the date of the employee's injury, the employer was an

approved self-insurer pursuant to G. L. c. 152, § 25A(2).     In

accordance with § 25A(2)(b), the employer also held a surety

bond in the amount of $2.4 million1 with Safeco Insurance Company

of America (Safeco or bond holder).     In addition, the employer

maintained a reinsurance policy with ACE in accordance with

§ 25A(2)(c).2   The reinsurance policy between the employer and


     1 In 2006, the department approved the employer's
application to reduce the bond amount from $4.3 million to $2.4
million. The process by which the bond became exhausted is not
material to our decision.

     2 Although referred to as an "excess policy" in ACE's brief,
no party disputes that the policy at issue is a reinsurance
contract as required by G. L. c. 152, § 25A(2)(c).
                                                                   3


ACE contained a retention provision in the amount of $400,000.3

All terms of the bond and the reinsurance policy were approved

by the department in accordance with § 25A(2) during initial

approval and after every yearly review.

     From the employee's date of injury until the employer's

bankruptcy in 2007, the employer as the self-insurer issued

direct benefit payments to the employee.   Following the

employer's insolvency, the bond holder issued direct benefit

payments to the employee.   In 2012, the $2.4 million bond became

exhausted and payments to the employee ceased.4   On the date of

exhaustion, and on the date of oral argument, the employee had

not reached the $400,000 retention floor contained within the

reinsurance contract.




     3 The retention provision requires ACE to indemnify the
employer for covered losses once the retention floor of $400,000
per qualifying accident is reached. The plain language of G. L.
c. 152, § 25A(4)(e), precludes interpreting the retention
provision as a deductible, and the employee's argument to the
contrary is unavailing.

     4 The employee is not entitled to any recovery under the
Massachusetts Insurers Insolvency Fund because a self-insurer is
not an insurer under the definition provided by G. L. c. 175D,
§ 1. See Ulwick v. Massachusetts Insurers Insolvency Fund, 418
Mass. 486, 490 (1994). See also Massachusetts Care Self-Ins.
Group, Inc. v. Massachusetts Insurers Insolvency Fund, 458 Mass.
268, 272 (2010).
                                                                    4


     Upon the exhaustion of the bond, the employee filed a claim

with the department against ACE for resumption of benefits.5

After a full evidentiary hearing, the administrative judge ruled

that once the employer's bond was exhausted, the employer became

"uninsured in violation of [the statute]" under the provisions

of G. L. c. 152, § 65(2)(e), as amended by St. 1991, c. 398,

§ 85.    The administrative judge concluded that this

interpretation of the act made the trust fund the "responsible

party for providing workers' compensation benefits" and that ACE

was not required to make payments until the employee's benefits

reached the $400,000 retention amount.    The trust fund appealed

to the board.

     The board reversed the administrative judge, interpreting

§ 65(2)(e) to apply only where an employer is uninsured "on the

date . . . of injury."    Accordingly, the board ordered ACE to

make direct payments to the employee upon the exhaustion of the

bond, and to reimburse the trust fund for any payments it had

made that were not covered by reimbursement from Safeco.    The

board also ruled that § 25A(2)(c) required ACE to pay the

employee's benefits because in the event of bond exhaustion, the

reinsurer must act as a "further guarantee of a self-insurer's




     5 General Laws c. 152, § 11C, provides the department with
jurisdictional authority to interpret questions of law related
to the act.
                                                                   5


ability to pay the [employee's] benefits" (emphasis added).6

Relying on Insurance Co. of the State of Pa. v. Great Northern

Ins. Co., 473 Mass. 745, 750 (2016) (Great Northern), the board

also voided the $400,000 retention provision as a matter of law

because it is in direct conflict with ACE's "statutory

obligation to assure that benefits are received by the

employee."   ACE appealed the board's decision to this court

pursuant to G. L. c. 152, § 12(2).7

     Standard of review.    We review the board's decision in

accordance with the standards set forth in G. L. c. 30A,

§ 14(7)(a)-(d), (f), and (g).    See Scheffler's Case, 419 Mass.

251, 257-258 (1994).    "The board, as the agency charged with

administering the workers' compensation law, is entitled to

substantial deference in its reasonable interpretation of the

statute."    Sikorski's Case, 455 Mass. 477, 480 (2009).   However,

this principle is one of deference, not abdication, and

     6 General Laws c. 152, § 25A(2)(c), as appearing in St.
1949, c. 441, § 4, provides in full:

     "As a further guarantee of a self-insurer's ability to pay
     the benefits provided for by this chapter to injured
     employees, every self-insurer shall make arrangements
     satisfactory to the department, by reinsurance, to protect
     it from extraordinary losses or losses caused by one
     disaster."

     7 Safeco was a party to the proceedings before the
administrative judge and the board. During the pendency of the
instant appeal, the parties stipulated to dismissal with
prejudice as to Safeco pursuant to Mass.R.A.P. 29(b), as
amended, 378 Mass. 943 (1979).
                                                                     6


"ultimately the duty of statutory interpretation is for the

courts."    Carpenter's Case, 456 Mass. 436, 439 (2010) (quotation

omitted).

    Discussion.      1.   Trust fund's liability.   General Laws

c. 152, § 65, establishes the trust fund as a State administered

fund that compensates injured employees and reimburses insurers

for payment of benefits under statutorily defined circumstances.

ACE contends that nothing in § 65(2)(e), or the act as a whole,

supports the board's interpretation that "uninsured in violation

of [the act]" means uninsured on the date of injury.      After an

independent review of the text, structure, and purpose of the

act, we agree with the board's interpretation of § 65(2)(e).

    "[A] statute must be interpreted according to the intent of

the Legislature ascertained from all its words construed by the

ordinary and approved usage of the language, considered in

connection with the cause of its enactment, the mischief or

imperfection to be remedied and the main object to be

accomplished, to the end that the purpose of its framers may be

effectuated."    Scheffler's Case, 419 Mass. at 255, quoting from

Board of Educ. v. Assessor of Worcester, 368 Mass. 511, 513

(1975).     Additionally, the act must be analyzed "as a whole

. . . so that the various portions taken together shall

constitute a harmonious and consistent legislative enactment."
                                                                   7


Spaniol's Case, 466 Mass. 102, 107 (2013), quoting from Price v.

Railway Express Agency, Inc., 322 Mass. 476, 480 (1948).

    Section 65(2)(e) conditions payment of benefits by the

trust fund to a qualifying employee whose employer is "uninsured

in violation of this chapter."   While the act contains an

extensive list of definitions, nothing in the chapter expressly

defines the word "uninsured," and § 65(2)(e) does not

specifically identify the applicable operative date of the

employer's uninsured status.   Despite the absence of a

definition connecting the employer's uninsured status to the

date of the employee's injury, viewing the statute as a whole,

it is clear that the date of injury is essential to determining

who is eligible to receive benefits as well as who is obligated

to pay them.   Because § 65(2) is the sole source of the trust

fund's obligation to pay workers' compensation benefits,

examining the provisions that surround § 65(2)(e) provides

clarity as to whether 'uninsured' implicitly means uninsured on

the date of injury.   See People for the Ethical Treatment of

Animals, Inc. v. Department of Agric. Resources, 477 Mass. 280,

287-288 (2017), quoting from Kenney v. Building Commr. of

Melrose, 315 Mass. 291, 295 (1943) ("A general term in a statute

or ordinance takes meaning from the setting in which it is

employed").
                                                                    8


    We begin with § 65(2)(a)-(b).    Section 65(2)(a) refers to

§ 34B and § 65(2)(b) refers to § 35C.    This court has concluded

that both of those cross-referenced sections expressly look to

the date of workplace injury when considering the insurer or

self-insurer's right to reimbursement from the trust fund for

benefits paid to employees under these provisions.   See, e.g.,

Beatty's Case, 84 Mass. App. Ct. 565, 568 (2013)

("Section 34B[c] goes on to narrow the right to reimbursement by

the date of injury").

    The date of injury is also implicitly important for other

cross-referenced provisions in § 65(2).   Section 65(2)(c), (f),

and (g), by means of § 37, § 26, and § 37A, respectively,

authorizes certain reimbursements from the trust fund to the

insurer or self-insurer for payments to an employee who has

suffered a personal injury "arising out of and in the course of

his employment."   G. L. c. 152, § 26.   A plain and ordinary

reading of the "arising out of" condition, which is contained in

§ 26, § 37, and § 37A, imparts a meaning that the date of the

employee's injury is an essential factor to be considered in

determining reimbursements from the trust fund to the insurer or

self-insurer.   See Pearson's Case, 341 Mass. 576, 576-577 (1960)

(interpreting "arising out of" necessarily requires examining

the employee's "place of employment at the time of . . .

injury").   A contrary interpretation of "arising out of" leads
                                                                   9


to the absurd result that an employee injured outside the course

of employment on the date of injury would still be entitled to

benefits under the act.    See Caswell's Case, 305 Mass. 500, 502-

503 (1940).

    Here, the relevant surrounding provisions all strongly

suggest imparting the temporal restriction into § 65(2)(e).

Thus, the board's interpretation that "uninsured in violation of

[the statute]" means uninsured on the "date of . . . injury" is

not reading additional language into the text but, instead,

constitutes a reasonable interpretation of § 65(2)(e) consistent

with § 65(2) and the act as a whole.    See Franklin Office Park

Realty Corp. v. Commissioner of the Dept. of Envtl. Protection,

466 Mass. 454, 462 (2013) ("Words grouped together in a statute

must be read in harmony").

    Even aside from the express language of the statute, the

system of workers' compensation has long been interpreted to

rest on the principle that "[a]n insurer is not responsible

unless the period covered by its policy includes the time of the

injury."    Crowley's Case, 287 Mass. 367, 371 (1934) (quotation

omitted).   See Brophy's Case, 327 Mass. 557, 559 (1951) ("One of

the most vital factors in determining to whom and by whom

compensation is to be paid under the statute is the date on
                                                                  10


which the injury occurs").8   While an explicit legislative

mandate may have been preferred, the structure, history, and

purpose of § 65(2)(e) clearly show that "uninsured" status must

be determined on the date of injury.   To separate "uninsured"

from the date of injury is inconsistent with the purpose of the

statute.   The board's interpretation of G. L. c. 152,

§ 65(2)(e), which reads "date of injury" as an implied term of

§ 65(2)(e), is necessary to assure that the distribution of

benefits from the trust fund will be in harmony with the

provisions of § 65(2) and, thus, is entitled to deference.9     See

generally Molly A. v. Commissioner of the Dept. of Mental

Retardation, 69 Mass. App. Ct. 267, 280 (2007).   Here, it is


     8 We acknowledge that date of injury is only "[o]ne of the
most vital factors in determining to whom and by whom
compensation is to be paid under the statute." Brophy's Case,
327 Mass. at 559. In the instant case, no other factor is
relevant to our interpretation of § 65(2)(e).

     9 We acknowledge the amicus brief of the Self-Insurance
Institute of America, Inc., and its argument that the board's
interpretation may result in an increase in premiums charged for
excess workers' compensation insurance. However, the "pay-as-
you-go" nature of the act, which funds the trust fund through
annual assessments based on anticipated payments, suggests that
the burden on self-insurers in the Commonwealth will be minimal.
See Markos-Waiswilos v. Salem Hosp., 67 Mass. App. Ct. 904, 905-
906 (2006). Interpreting "uninsured" to mean "uninsured at date
of injury" avoids decades-old claims against the trust fund that
could require the trust fund to obtain supplemental funding from
employers. Thus, all participating employers may benefit under
this reading because they avoid increased payments into the
trust fund as a result of retroactive claims that become ripe
only when a bond is exhausted. See Beatty's Case, 84 Mass. App.
Ct. at 571-572.
                                                                   11


undisputed that the employer qualified as a self-insurer on the

date of the employee's injury, and therefore was not uninsured

on that date, and in fact paid benefits until it went bankrupt

some two years later.     Therefore, the trust fund has no

obligation under § 65(2)(e) to pay compensation benefits to the

employee.

    2.      ACE's liability.   Having determined that the trust fund

is not liable to pay the employee's benefits, we now examine

ACE's statutory obligation.     "In order to promote the health,

safety and welfare of employees," § 25A of the act, inserted by

St. 1943, c. 529, § 7, requires every employer operating within

the jurisdiction of Massachusetts to obtain workers'

compensation insurance in one of two ways:      employers may either

purchase insurance, pursuant to § 25A(1), or, as here, they may

apply to become self-insurers who pay benefits to injured

employees directly, pursuant to § 25A(2).

    In order to receive or maintain licensure as a self-

insurer, the department requires the employer to keep either a

bond or surety running to the Commonwealth for the benefit and

security of the employees in accordance with § 25A(2)(a) or (b).

In addition, § 25A(2)(c) requires the employer acting as a self-

insurer to purchase reinsurance in such amount and form as the

department may approve.     Section 25A(2)(c), which we have set
                                                                  12


out in the margin (see note 6, supra), forms the background for

the reinsurance policy between the employee and ACE.

    Section 25A, like every part of the act, must be given an

interpretation that protects the rights of employees because the

act's exclusivity provision often makes the act the only avenue

for financial compensation for the impairment of an injured

worker's earning capacity.   See Walker's Case, 443 Mass. 157,

161 (2004).   The act as a whole "is a remedial statute and

should be given a broad interpretation, viewed in light of its

purpose and to 'promote the accomplishment of its beneficent

design.'"   Neff v. Commissioner of the Dept. of Industrial

Accs., 421 Mass. 70, 73 (1995), quoting from Young v. Duncan,

218 Mass. 346, 349 (1914).   ACE argues that despite the

beneficent design of the act as a whole, the reinsurance

requirement of § 25A(2)(c) was not intended as a protection for

the injured employee in the event of the self-insurer's

inability to continue paying benefits but, instead, as a

protection for the employer from "extraordinary losses or losses

caused by one disaster."   See note 6, supra.   We disagree.

    The language of § 25A(2)(c) specifically provides that

reinsurance shall further guarantee the self-insured's ability

to pay benefits to injured employees.   To the extent the statute

is concerned about a self-insurer incurring extraordinary

losses, it is in the context of ensuring that a self-insured
                                                                     13


will continue to be able to pay benefits to injured employees in

the event of such losses.     A review of the legislative history

of § 25A shows that any argument that the statute is concerned

about the success of the self-insurer separate and apart from

its ability to pay benefits to injured employees is specious.

    Section 25A was added to G. L. c. 152 in 1943 to require

every employer to cover workplace injuries through insurance or

self-insurance, replacing an elective system.     See St. 1943,

c. 529, § 7.    See also New England Survey Sys., Inc. v.

Department of Industrial Accs., 89 Mass. App. Ct. 631, 635

(2016).    The 1943 legislation also created a reinsurance

provision, G. L. c. 152, § 25A(2)(c), which applied to self-

insurers in the discretion of the department.     See St. 1943,

c. 529, § 7 ("As a further guarantee of a self-insurer's ability

to pay the benefits provided for by this chapter to injured

employees, the department may require that a self-insurer

reinsure his compensation risk against catastrophe" [emphasis

added]).

    Five years later, § 25A(2)(c) was amended to add what is

now a second paragraph.     That amendment expressly extended the

department's regulatory authority beyond solely the self-insurer

to the reinsurer as well.     See St. 1948, c. 176.   The section

was again amended in 1949 to add new language to the second

paragraph.     The 1949 amendment requires reinsurance proceeds to
                                                                  14


be used exclusively for the benefit of injured employees by

precluding creditors from attaching the reinsurance proceeds,10

and making the use of "any money received by a self-insurer . .

. subject to the approval of the [department]."    St. 1949, c.

441, § 4.

     These amendments demonstrate that the Legislature's purpose

in fashioning the workers' compensation reinsurance provision

was the protection of injured employees.    If the primary purpose

of § 25A(2)(c) were to protect the employer rather than the

employee, the Legislature would have permitted creditors to

attach reinsurance proceeds like any other corporate asset

rather than allow department regulation of reinsurers once an

employer becomes insolvent.

     The 1949 amendment to § 25A(2)(c) additionally made

reinsurance mandatory for self-insurers; previously, this had

been left to the discretion of the department.    Making

reinsurance mandatory, instead of merely at the discretion of

the department, shows that the phrase "further guarantee of

[the] ability to pay . . . benefits" in § 25A(2)(c) is


     10   The 1949 amendment provides, in pertinent part:

     "[N]o . . . money [received by a self-insurer under the
     reinsurance provision] shall be assignable or subject to
     attachment or be liable in any way for the debt of the
     self-insurer unless incurred under this chapter."

St. 1949, c. 441, § 4.
                                                                  15


controlling because even self-insurers with a low risk of

catastrophic injuries to their workers were required to obtain

reinsurance.

    In sum, the amendments to § 25A(2)(c), which has remained

largely unchanged since 1949, demonstrate a clear legislative

intent to continually strengthen the reinsurance requirement not

for the employer's protection from "extraordinary losses or

losses caused by one disaster," but primarily to "further

guarantee [payment of] benefits . . . to injured employees."

    Reading these amendments in light of the broad public

policy to provide compensation for injured workers, we agree

with the board's interpretation that the "further guarantee"

clause of § 25A(2)(c) requires the reinsurer to pay benefits to

employees in the event the self-insurer becomes insolvent and

the bond becomes exhausted, avoiding an otherwise inevitable gap

in coverage.   See New England Survey Sys., Inc., 89 Mass. App.

Ct. at 635 ("The fundamental aim of public policy in the area of

workers' compensation is to provide relief to injured workers

and their families and remedy the deprivation of wages that

results from their injuries").

    ACE contends that despite this statutory obligation, the

insurance policy's retention provision precludes ACE's payment

of benefits to the employee until the $400,000 amount is

reached.   However, a party is unable to contract away its
                                                                  16


statutory obligation, and we routinely void provisions that run

contrary to the law.11   This is especially true in the instant

context because "[w]orkers' compensation insurance is a creature

of statute, and all workers' compensation insurance policies

must be interpreted to comply with applicable statutes and

regulations governing workers' compensation."   Great Northern,

473 Mass. at 750.   See Frost v. David C. Wells Ins. Agency,

Inc., 14 Mass. App. Ct. 305, 307 (1982).   Simply put, ACE

entered into a reinsurance policy between itself and the

employer with full knowledge that the act required ACE to

"further guarantee" payment of compensation to the employee.

Accordingly, the instant retention provision is null and void,

and ACE must assume its obligation to pay benefits to the

employee under § 25A(2)(c).

                                    Decision of the reviewing
                                     board affirmed.




     11Because of the unique nature of the act, other cases in
which Massachusetts courts have refused to void insurance
retention policies are inapplicable. Compare Great Northern,
473 Mass. at 750-751 (nullifying policy provision in context of
workers' compensation insurance) with Vickodil v. Lexington Ins.
Co., 412 Mass. 132 (1992) (motor vehicle liability insurance);
Massachusetts Bay Transp. Authy. v. Allianz Ins. Co., 413 Mass.
473, 479-480 (1992) (liability insurance); and Allmerica
Financial Corp. v. Certain Underwriters at Lloyd's, London, 449
Mass. 621, 623 (2007) (professional services liability
insurance).
