In the 1980s, workers’ compensation insurance was expensive compared to other states. State trial judges decided all issues concerning employee compensation. Few insurance companies were writing coverage. The system was inefficient and costly.
In September 1990, the New Mexico Legislature held a special session on workers’ compensation reform. The session resulted in comprehensive reform, including a set benefit system, a Workers Compensation Administration to administer the act, workers’ compensation administrative judges, an advisory council to consider amendments to the act and an ombudsman.
The state Legislature also provided a loan to establish a new nonprofit mutual insurance company, New Mexico Mutual Casualty Co. This independent company is now the dominant writer of workers’ compensation insurance in New Mexico, with more than 30 percent of the market.
Workers’ compensation reform worked. Rates generally declined for all employers and have remained relatively stable. The number of insurance companies writing workers’ compensation insurance has multiplied exponentially. Litigation decreased and the reformed act has stayed largely intact – until recently.
The New Mexico Supreme Court and Court of Appeals have interpreted the act to add materially to employers’ cost of workers’ compensation coverage.
In June 2014, the Supreme Court decided Fowler v. Vista Care, reversing the Court of Appeals, and held that an employee suffering from “temporary total disability” was not subject to the 700-week limit on benefits that applies to “permanent partial disability,” despite a long history of applying the 700-week limit to “temporary total disability” by the Workers’ Compensation Administration and its administrative judges.
Quinn Lopez, general counsel of New Mexico Mutual, also has listed other cases that impact insurance costs or coverage of the system:
• The Court of Appeals held that a temporarily disabled worker offered a job at less than pre-injury rates and then, terminated for cause, is still entitled to continuation of temporary disability benefits and later permanent benefits.
• In 2013, the Supreme Court held that an undocumented worker was entitled to full benefits, rather than the base minimal impairment rating, because he could not accept offers to return to work due to his immigration status. The court also held that in the absence of full compliance with federal documentation for workers, the employer must bear the employee’s workers’ compensation burden.
• The Court of Appeals held that an employee who retired from his union job and took his union pension and thus could not take any offered employer’s job acted reasonably. He was entitled thereafter to permanent partial disability benefits, even though he did not meet the act’s requirements.
• The Supreme Court held that the widow of a police officer who was on personal business when he drowned rescuing a child was “always on duty.” His estate received death benefits.
Norman Becker, CEO of New Mexico Mutual, described his concerns about the changing workers’ compensation picture in New Mexico.
“The 1990 workers’ compensation reforms created a stable system that was fair to both business and labor. Recent court decisions, along with a system that is no longer predictable, will increase the cost of workers’ compensation in New Mexico. Increases impact those doing business in New Mexico as well as deter businesses looking to grow or build in New Mexico,” Becker said.
“Today, the average workers’ compensation rate paid by employers is approximately half of what it was in the early ’90s. Even with this drop in rates over the last 23 years, New Mexico still only ranks as 25th-lowest premium rate compared to all other states, according to a 2012 study by the state of Oregon. The impact of recent court rulings will likely raise rates and potentially cause New Mexico to decline in ranking.”
Workers’ compensation insurance is important to New Mexico employers and employees. The cost of workers’ compensation and our legal regulatory climate are critically important factors that prospective entrants to our state consider.
Attorney Marshall G. Martin is in private practice in Albuquerque. He has experience in complex litigation, including securities, antitrust and lender liability law. He also has represented banks and private and public companies. He can be reached at 505-768-1500 or email@example.com.