Maryland: Subsequent Injury Fund Assessment Not Reduced Due to Retirement Offset

The 6.5% assessment, payable by a Maryland employer or insurer to the state’s Subsequent Injury Fund on: (i) each award for permanent disability or death, or (ii) each amount payable a settlement agreement approved by the Workers’ Compensation Commission, must be computed based on the Commission’s entire award to the employee, not merely the amount payable after any offsets for retirement benefits, held a state appellate court [see Injured Workers’ Ins. Fund v. Subsequent Injury Fund, 2015 Md. App. LEXIS 43 (Apr. 3, 2015)].

Subsequent Injury Funds

As is the case in a number of other states, Maryland’s SIF was created to pay part of a workers’ compensation claim when an injured employee has a preexisting medical or physical condition that exacerbates his or her work-related injury [see Md. Labor & Empl. § 9–802]. When an employee that has this type of preexisting condition sustains a work-related injury, the employer compensates the employee only for the level of disability directly attributable to the employment-related incident; the SIF compensates the employee for the additional extent of the disability attributable to the preexisting condition. As in other states, the idea is to encourage employers to hire individuals with preexisting medical or physical conditions.

Consolidated Appeal

In the consolidated appeal before the court, two employees who sustained work-related injuries were awarded PPD awards by the Commission. In each case, however, the award was subject to a credit for retirement benefits to which both employees were entitled. The employers and/or insurers contended the 6.5 percent SIF assessment should be based on the net recovery to the injured employees, not the full award.

The appellate court, affirming the Circuit Court’s decision, disagreed. The court said Md. Labor & Empl. § 9–806(a)(1)(i) directs the Commission to “impose an assessment of 6.5%, payable to [SIF], on … each award against an employer or its insurer for permanent disability or death[.]” (Emphasis added by the court). When the Commission issues an award for permanent disability, it determines the percentage loss of the body that the employee has suffered. The court noted that while that percentage is then used to calculate the dollar amount due to the claimant, the “award” itself is based on the claimant’s “permanent disability,” which does not change simply because the employer is entitled to an offset for some other reason.

That is to say that the Commission awards the claimant a particular sum of money based on the extent of his or her injury. The final amount payable directly by the insurer or employer under the award may be reduced because of an offset for retirement benefits, but the “award … for permanent disability” remains the same. The assessment, therefore, should be made on the total award.