A Massachusetts appeals court ruled on January 30 that a reinsurer retains the right to claim trust fund reimbursement even after a self-insured employer enters bankruptcy.
The decision reverses an earlier denial by the reviewing board and reshapes how long-tail workers’ compensation obligations survive corporate collapse.
The case centers on reimbursement sought by Employer’s Reinsurance Corporation following the insolvency of Polaroid Corporation.
The board previously rejected ERC’s claim for repayment of cost-of-living adjustments it paid years after Polaroid failed. The appeals court disagreed, restoring ERC’s right to pursue recovery.
The underlying injury dates back decades. In 1979, Polaroid employee Annie Talbert suffered a workplace injury while the company operated as a licensed self-insurer under Massachusetts workers’ compensation law.
Polaroid posted a bond through Greenwich Insurance Company and purchased excess reinsurance from ERC to manage severe loss exposure.
After Talbert was deemed totally and permanently disabled in November 1986, Polaroid paid statutory benefits, including cost-of-living adjustments. Because the injury predated October 1986, Massachusetts law allowed partial COLA reimbursement from the trust fund, which Polaroid received for years.
Once total payments exceeded $250,000, ERC’s reinsurance coverage attached. ERC covered base benefits but excluded COLA payments, an arrangement that remained in place until Polaroid filed for bankruptcy in 2004.
At that point, Greenwich stepped in under the bond to pay both base benefits and COLA, while ERC continued reimbursing only the base portion.
By 2013, the bond was exhausted. ERC then began paying benefits directly to Talbert and, in May 2017, sought trust fund reimbursement for the COLA payments.
The trust fund denied the request, and regulators upheld the denial based on a 2015 precedent barring reimbursement to insurers not actively participating in the system.
That precedent no longer stood by the time this case reached appellate review. Both the appeals court in 2024 and the Massachusetts Supreme Judicial Court in 2025 overturned it in rulings involving Arrowood Indemnity Company.
Those decisions held that the statute identifies only three categories barred from reimbursement, leaving regulators no authority to add another.
The trust fund attempted to distinguish the Polaroid case by arguing that here the employer itself had ceased operations and stopped contributing.
Justice Ditkoff, writing for the panel, rejected the argument. He said the Legislature clearly defined the exclusions, and neither insolvency nor insurer runoff status creates a fourth exception.
The court noted that the Supreme Judicial Court had already contemplated this outcome.
When a self-insured employer fails, the shortfall in trust fund revenue falls on remaining participating employers, not on insurers or reinsurers paying benefits.
The trust fund raised an additional argument on appeal, claiming ERC did not qualify as an insurer under state law.
The court dismissed the claim as illogical, observing that if ERC were not an insurer, it would not be obligated to pay the worker at all.
Massachusetts law defines an insurer broadly, covering any company authorized to contract with an employer to pay workers’ compensation benefits.
ERC met that definition through its reinsurance agreement with Polaroid and its long history of benefit payments, both indirectly and directly.
The court also emphasized that Massachusetts treats reinsurance obligations as direct to injured workers, regardless of contractual language.
Any attempt to disclaim that responsibility is void under state law, a principle reaffirmed in the court’s 2018 Janocha decision.
Procedural timing also mattered. The reviewing board issued its decision in November 2021 but failed to notify ERC, sending notice only to the trust fund and the employee.
ERC learned of the ruling nearly three years later, in November 2024, and appealed within 30 days. The court held the appeal timely, faulting the agency for the notification failure.
The ruling sends the case back to the reviewing board for further proceedings. More broadly, it confirms that reinsurers remain eligible for trust fund reimbursement when the original employer collapses, so long as the employer participated in the system at the time of injury.
