Maximizing recovery: Second injury funds

April 15th, 2005 by Julie Ferguson

One of the nooks and crannies of workers comp that often gets short shrift is the issue of recovery. Many employers and insurers can recoup claim expenditures through second injury funds or subrogation, for example. Since this is a large area, today we’ll briefly discuss second injury funds, and return to subrogation at another juncture.
Second injury funds were designed to encourage employers to hire employees with disabilities and pre-existing conditions by offering a mechanism for cost relief should the employee experience an injury that aggravates the existing condition. In recent years, many states have eliminated these funds, but they still exist in about half the states. In most instances, these funds are financed by assessments on insurers and employers.
For a primer on second injury funds see Second Injury Funds: Still a Valuable Cost Containment Tool (PDF) by Mark Nevils of Insurance Recovery Group (IRG). This article describes the various types of state funds, and the way they work.
IRG makes the case that there is as much as $1 billion in untapped potential, and that failure to recognize and pursue these opportunities can be costly since qualified claims are usually longterm in nature, often over $100,000.
“Each year, an estimated $800 million is paid out on second-injury-fund claims, with an estimated $100 million added annually in new claims. In addition, we estimate that there is a “clean up” potential of $1 billion nationally, most of which resides in key jurisdictions such as Alaska, Georgia, Louisiana, Massachusetts, Nevada, New Hampshire, New York, South Carolina, and Washington D.C.”
To learn more about this untapped potential, see IRGs articles Second Injury Funds: Maximizing Your Recovery Results (PDF) by Fred Uehlein and Dorothy Linsner and Closing the Recovery Gap (PDF) by David Jollin and Fred Uehlein.