In re Michael Dufresne's Case2/27/2001
ra. As stated in note 2, the purposes of the offset are first to preclude double recovery by the employee ("once by way of compensation and once by way of damages," Richard v. Arsenault, supra at 524, quoting from McDonald v. Employers' Liab. Assur. Corp. Ltd., 288 Mass. 170, 174 ), and second, to maintain the policy of reimbursement for the compensation insurer, Richard v. Arsenault, supra.
However, the doctrine of the Hunter offset has no applicability when the third party's insurer is insolvent and indemnification is available to the injured person only through the Fund as the substitute for the insolvent insurer. In that event, distributions from the Fund are limited to "covered claims" defined in G. L. c. 175D, ? 1(2), second par., to exclude insurers and the insured of insolvent insurers, among others. See note 5, supra. These exclusions reflect the Fund's purpose "to indemnify injured persons, not the insurance industry." Ferrari v. Toto, 9 Mass. App. Ct. at 487.
Further, regarding insolvency proceedings, to maintain the policy precluding double recovery by the employee, Ferrari v. Toto decided that the Fund, in determining amounts due an employee who had received benefits on account of a workplace injury covered by the Workers' Compensation Act, was required to reduce its limit of liability by an amount equal to the amount of uncompensated payments of benefits and medical expenses disbursed by the compensation insurer, such as Wausau. 9 Mass. App. Ct. at 486. Moreover, Ferrari held that the "covered claims" limitations which had been imposed on the Fund by G. L. C. 175D, ? 1(2), second par., prohibited any distribution by the Fund or by the insured of an insolvent insurer to an insurer. (There was nothing in the record that suggests that the claim exceeded the policy limits.) See id. at 486 (" he Fund is excused from paying claims [of the employee] if the ultimate beneficiary is an insurance company").
The result of this statutory/decisional configuration was that the compensation insurer, in the event an injured employee successfully maintained a third-party action, would receive reimbursement for benefits paid by it either by way of cash from the proceeds of the third-party claim (the result required by G. L. c. 152, ? 15) or, as to future benefits to be paid by the insurer, by way of a Hunter offset (the result required by the Richard v. Arsenault decision), and in the event the proceeds of the disposition of the third-party action, after deducting the employee's share of attorney's fees and costs, yielded an amount in excess of the amount due the compensation insurer, the excess was the exclusive property of the injured employee. See Richard v. Arsenault, 349 Mass. at 525.
If, however, the third party's insurer had become insolvent, the compensation insurer would receive no reimbursement for benefits and medical expenses previously paid by it, either by way of cash or as an offset. Instead, the Fund would reduce its limit of liability to the employee by the amount of the unpaid benefits and expenses, as described above, and the lien of the compensation insurer was wiped out, as ordered by the Superior Court judge. Cf. Ferrari v. Toto, 9 Mass. App. Ct. at 484.
We arrive, now, at the question presented by this case. To recapitulate the material background facts: In a third-party action brought by the employee, the insurer of the third-party defendant had become insolvent so as to bring into play c. 175D, and after the Fund had properly reduced its limit of liability to the employee by the unpaid amount due the compensation insurer for benefits and expenses, and after the lien of the compensation insurer had, accordingly, been "extinguished" by co
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