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, according to Massachusetts Insurance News.
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.
