An Act Relative to Further Regulating Workers' Compensation Insurance

Bill Summary for An Act Relative to Further Regulating Workers' Compensation Insurance (Private Right of Action)

(formerly An Act Relative to Protecting Honest Employers in Regards to Workers' Compensation)

Lead Sponsors: Senator John Hart and Representative Martin Walsh

Bill Number: SB2375/HB1870

General Law Affected: Chapters 152

Problem/Current Situation:
Currently, honest employers must compete against too many unscrupulous employers who have a competitive advantage by evading their responsibilities to pay workers compensation premiums. That is, they cheat by using illegally deflated prices and bids. This cheating hurts honest employers who follow the law, because honest prices reflect the honest costs of mandated insurance coverage. Cheating also endangers the occupational and financial health of workers. For example, honest employers double-check for safety to avoid, among other reasons, paying higher premiums. Cheaters that avoid premiums altogether or substantially have less of an incentive to care about safety issue that might raise premium rates, as they don’t pay them anyway. Current laws have not succeeded in fully protecting honest businesses against this illegal deflation of prices and bids, for example, in janitorial service contracts (for schools, high rise and other private and public buildings, restaurants, etc.), construction, health care facilities’ staffing, garbage collection, and etc.

This Bill:
 Allows 3 persons (likely honest employers in a particular industry who see the cheater in their industry first hand) to sue to ensure that the cheating employer pays the same premiums all other employers must pay. It also hinders the cheaters’ ability to benefit from its illegally deflated pricing achieved by premium evasion.
 Requires notice to the insurance carrier that a suit may come, if the carrier chooses (for whatever reason(s)) to collect the premium. Often, where no carrier exists it allows immediate suit.
 Requires that any award obtained be deposited directly into the State’s Special Fund established by GL c. 152, §65. This Fund is exclusively used to cover workers injured where the employer failed to have any policy. Current honest employers pay to maintain this Fund and it pays uninsured employees millions per year.
 Limits plaintiffs to no more than 25%, not to exceed $25,000, and an additional equal amount as liquidated damages, plus attorney fees and costs, as the remaining 75% goes to the Special Fund.
 Allows that anytime before suit ends, an insurance carrier may seek, with court approval, to replace the 3 plaintiffs. In that event, the carrier may recover the full amount of the award and avoid the amount going to the Special Fund.
 Provides a protective mechanism that avoids frivolous actions, i.e., allows early motions to dismiss where no evidence is shown upon filing the complaint. Note also the current frivolous or bad faith claims statutes and rules. For example, GL 231, §6F and the Mass Rule of Civil Procedure, at Rule 11 (financially punishing lawyers and litigants for bad faith, unsupported claims).
 Avoids the expensive expenditure of tax dollars spent to chase cheaters, while preserving the right of government to continue its current efforts. That is, the bill supplements government’s effort in this fight against fraud, and does not reduce its power.
 Does not create a new cause of action (carriers or the State may currently sue). It only widens by a small margin (via standing) potential competitors harmed by the cheating they witness daily. They must bear up front the enormous cost of investigation and trial, and they risk not recovering any of those costs, unless successfully, but even then only partially.