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Hegger v. Valley Farm Dairy Co. – A Retroactive Election?

July 1, 2019 | John Kellogg

Effective 2014, the Missouri legislature amended certain provisions of the Workers Compensation Act, Mo.Rev.Stat. 287.010 et seq. A key goal was to make the Workers Compensation Act the exclusive remedy for employees who suffered occupational diseases like asbestos-caused mesothelioma. In Hegger v. Valley Farm Dairy Co. decision, 2019 Mo. App. LEXIS 816, 2019 WL 2181663 (Mo. App. May 21, 2019), the Missouri Court of Appeals addressed the application of the Act’s new occupational disease provisions in the situation where the employer went defunct before the enactment of the amended statute.

Facts

The facts of Hegger are straightforward:  Vincent Hegger worked for Valley Farm Dairy Company maintaining industrial equipment from 1968 to 1984.  Over this time, Mr. Hegger had continued exposure to asbestos fibers in the equipment he maintained.   Amerisure Insurance Company provided Valley Farm workers compensation coverage from 1983 to 1984 while Travelers Indemnity Company provided coverage from 1984 to 1985.  Valley Farm later went out of business, in 1998.  

In 2014 Hegger was diagnosed with mesothelioma caused by asbestos exposure.   In March 2014, Mr. Hegger filed for workers compensation benefits.   Specifically at issue was whether Hegger was entitled to the enhanced workers compensation benefits for mesothelioma provided for in the recently enacted Mo.Rev.Stat. 287.200.4, even though his employer Valley Farm went defunct long before the statutory amendment.   The administrative law judge and subsequently the Labor and Industrial Relations Commission ruled that because Valley Farm went defunct well before the 287.200.4 came into effect, Hegger was not entitled to enhanced workers compensation benefits. The Court of Appeals reversed.

The Statute

Section 287.200.4 of the Workers Compensation Act provides in relevant part:

For all claims filed on or after January 1, 2014, for occupational diseases due to toxic exposure which result in a permanent total disability, or death, benefits in this chapter shall be provided as follows:

(2) For occupational disease due to toxic exposure, but not including mesothelioma, an amount equal to two hundred percent of the state's average weekly wage as of the date of diagnosis for one hundred weeks paid by the employer; and

 (3)  In cases where occupational diseases due to toxic exposure are diagnosed to be mesothelioma:

(a)  For employers that have elected to accept mesothelioma liability under this subsection, an additional amount of three hundred percent of the state’s average weekly wage for two hundred twelve weeks shall be paid by the employer or group of employers such employer is a member of.  Employers that elect to accept mesothelioma liability under this subsection may do so by either insuring their liability, by qualifying as a self-insurer, or by becoming a member of a group insurance pool.  A group of employers may enter into an agreement to pool their liabilities under this subsection.  If such group is joined, individual members shall not be required to qualify as individual self-insurers.  Such group shall comply with section 287.223.  In order for an employer to make such an election, the employer shall provide the department with notice of such an election in a manner established by the department.  The provisions of this paragraph shall expire on December 31, 2038; or

(b)  For employers who reject mesothelioma under this subsection, then the exclusive remedy provisions under section 287.120 shall not apply to such liability.  The provisions of this paragraph shall expire on December 31, 2038 . . .

(Emphasis added.). The trade-off for employers is clear.  Elect to provide enhanced workers compensation benefits and enjoy the exclusivity protections of the Act; versus potentially being exposed to civil lawsuits for your employees’ asbestos-related occupational diseases.

Defunct employers can elect to provide enhanced workers compensation benefits

In holding that Valley Farm’s insurers were liable for enhanced workers compensation benefits, the Court of Appeals focused on the “elect to accept” language in the statute, and the three aforementioned ways an employer can accept the enhanced mesothelioma benefits (and thus become immune from a civil action for personal injuries based thereon):  (1) "insuring their liability," (2) qualifyingas a self-insurer, or (3) becoming a member of a group insurance pool.   The Labor and Industrial Relations Commission held that this election required an affirmative act, possibly entailing the purchase of new insurance policies providing for the enhanced benefits.

The Court of Appeals disagreed, holding that the plain language of 287.200.4 does not require the employer to purchase a new policy and does not state when a policy covering these enhanced benefits must be purchased.   Rather, the court observed that because the workers compensation law required an employer to insure their entire liability under the workers compensation law, Valley Farms’ provision of workers compensation coverage back in 1984 retroactively satisfied the section 287.200.4 election requirements.  This is so even if the subject insurance policies did not provide for the enhanced benefits now contemplated by the statute.   The court reasoned that Missouri precedent had typically held that the insurer providing coverage at the time of last exposure (here 1984) was liable for workers compensation benefits, while the law in effect at the time of diagnosis (here 2014) governed the amount of the claim.  Given this precedent, the Court of Appeals had no problem holding Valley Farms’ insurers liable for enhanced benefits that were not contemplated in 1984. 

The Court of Appeals criticized the Labor and Industrial Relations Commission ruling, observing that the Commission’s requirement of an affirmative election would yield what it believed to be inconsistent results with regard to defunct employers or employers that had moved out of state.   As noted, defunct employers would always yield a rejection of enhanced workers compensation benefits for mesothelioma because they were not capable of making an affirmative election.

The court compared this result to the statute’s treatment of occupational diseases other than mesothelioma under section 287.200.4(2).  That section does not provide a similar election requirement for these other diseases.   The court reasoned that in the cases of defunct employers, mesothelioma sufferers may not be entitled to workers compensation benefits while the sufferers of other diseases would be.  The court found this potential disparate result untenable given the severity of mesothelioma compared to “other serious but less virulent occupational diseases due to toxic exposure.”

The Dissent

At the heart of the Court of Appeals’ majority opinion is the desire to protect sick employees who may be without civil recourse against a judgment-proof defunct employer.   But this appears to be a results-oriented decision that effectively removes any requirement that the employer make an affirmative election, despite express statutory language requiring the same.

In arguing that the Commission’s ruling was correct, the dissent observed that the majority was playing “temporal” games interpreting the phrase “by insuring” to include any past acts.   However, the phrase “elect to accept” connotes a present action.  By interpreting the statute to allow past acts to fulfill the present election requirement, the majority rewrote the statute.

The dissent also observed that the majority’s reading of the statute now allows one to make an election by simply relying on a past act or abstaining from a decision, both incompatible with the ordinary meaning of the phrase “elect to accept.”  The majority’s interpretation also presents a problem when viewed in the context of an employer that is still in business but that has failed to add enhanced benefits coverage to their workers compensation policy.  Per the majority analysis, that employer has still elected to adopt the enhanced benefits despite doing nothing.  Finally, the dissent noted that the majority’s reading would render 287.400.4(3)(b) meaningless, as an employer who previously had workers compensation insurance could not then reject the enhanced benefits available under (3)(a). 

While sympathizing with the majority’s concern that numerous employees could be without recourse against defunct employers who never made an election, the dissent noted that this was an issue that doubtlessly was analyzed and taken into account by the legislature.

Conclusion

Perhaps encouraged by the strong and well-reasoned Court of Appeals dissent, defendants are seeking transfer of the case to the Missouri Supreme Court.  The majority decision appears to take substantial liberties with the statutory language used by the legislature.  Under the majority's reasoning, the election contemplated by section 287.200.4 has two different meanings depending on whether the subject employer is still a going concern or defunct.   Regardless of the ultimate judicial outcome, the legislature may want to circle back and address the specific circumstances raised in Hegger
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About Employment & Labor Law Blog

The BSCR Employment & Labor Law Blog examines topics and developments of interest to employers, Human Resources professionals, and others with an interest in recent legal developments concerning the workplace. This blog will focus on Missouri and Kansas law, and on major developments under federal law, and at the EEOC and NLRB.  Learn more about the editor, David M. Eisenberg, and our Employment & Labor  practice.

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