Massachusetts Workers' Compensation Markets and Liquor Liability

This chapter covers where Massachusetts employers get workers’ compensation coverage other than from an insurer in the voluntary market (the assigned risk plan, self-insurance and self-insurance groups) and the Workers’ Compensation Trust Fund, then the residual market for liquor liability insurance. The previous chapter covered the Workers’ Compensation Act’s coverage rules and benefits.

Workers’ compensation: other sources of coverage

Assigned risk plan (Mass. Gen. Laws ch. 152, §§ 65A–65D, 65G–65M, 65O)

An employer whose application has been rejected, or not accepted within five days, by two insurers may appeal to the Commissioner of Insurance. The Commissioner designates an insurer to issue a policy if the employer substantially complies with the health and safety laws and is not in default on premium (Mass. Gen. Laws ch. 152, § 65A).

• Sharing the losses. Losses on assigned policies are shared among all workers’ compensation insurers through a reinsurance pool. An insurer may not write workers’ compensation in Massachusetts unless it is a member of the pool, which a rating organization designated by the Commissioner administers (Mass. Gen. Laws ch. 152, § 65C). The assigned insurer still has primary liability to pay the benefits (§ 65I).
• Producers. An assigned employer may designate any licensed agent or broker to help it deal with the assigned insurer and the pool, and the producer earns a commission fee set by the Commissioner. An employer may also apply directly to the workers’ compensation plan of Massachusetts, which may not charge it a service, application or transaction fee (Mass. Gen. Laws ch. 152, § 65O).
• Inspection. While an assigned policy is in force, the insurer may inspect the risk to measure the hazards, recommend safety measures and set an adequate rate (Mass. Gen. Laws ch. 152, § 65J).
• Cancellation. An assigned insurer that wants to cancel because the employer is no longer entitled to the insurance notifies the rating organization in writing; the cancellation takes effect unless the employer files objections within 10 days of receiving the notice (Mass. Gen. Laws ch. 152, § 65B).
• Premium appeal. An assigned employer may appeal to the Commissioner within 60 days after the policy’s effective date on the ground that its premium is unreasonable or unfairly discriminatory (Mass. Gen. Laws ch. 152, § 65K).

Self-insured employers and employer groups (Mass. Gen. Laws ch. 152, §§ 25A–25U)

Self-insurers. An employer licensed annually as a self-insurer must either deposit securities worth at least $20,000 with the state treasurer or furnish an annual surety bond of at least $20,000, as the department requires, and must carry reinsurance of at least $500,000 against extraordinary or catastrophe losses (Mass. Gen. Laws ch. 152, § 25A(2)).

Self-insurance groups. A workers’ compensation self-insurance group is a not-for-profit association or corporation of five or more employers that pool their workers’ compensation and employer’s liability. The members must be in the same or a similar business, belong to the same bona fide trade association that has existed for at least two years, or be parties to related collective bargaining agreements (Mass. Gen. Laws ch. 152, § 25E). No one may act as a group without a certificate of approval from the Commissioner of Insurance. An approved group is not an insurer under the insurance laws except as chapter 152 provides, but it is subject to chapter 152 like an insurer (§§ 25E, 25F).

Deductibles. The Commissioner of Insurance requires every workers’ compensation insurer to offer deductibles, including small optional ones. The insurer pays the claim and then seeks reimbursement of the deductible from the employer (Mass. Gen. Laws ch. 152, § 25A(4)).

Massachusetts Workers’ Compensation Trust Fund (Mass. Gen. Laws ch. 152, § 65)

The Workers’ Compensation Trust Fund in the state treasury pays or reimburses listed compensation. That includes the § 37 reimbursements, vocational rehabilitation, and benefits on approved claims against employers that are uninsured in violation of chapter 152. It is funded by an assessment on all employers subject to the chapter (Mass. Gen. Laws ch. 152, § 65).

Other coverages and options

Residual markets: Hospitality Mutual (Joint Underwriting Association) – Liquor Liability (Mass. Gen. Laws ch. 175, §§ 112A, 112B, 113W)

Liquor legal liability insurance covers the insured’s legal liability, and the loss, damage or expense, for claims arising from death or injury to any person as a result of negligence in the distribution, sale or serving of alcohol by a licensee or its employee or agent (Mass. Gen. Laws ch. 175, § 112A).

The liquor liability joint underwriting association created by chapter 223 of the Acts of 1985 was converted into the Hospitality Mutual Insurance Company, which took over its assets, liabilities and policies (Mass. Gen. Laws ch. 175, § 113W). Hospitality Mutual must make liquor liability insurance available to any licensee holding a chapter 138 license to sell alcoholic beverages. It may write any kind of liability insurance other than automobile (§ 113W).

Cancellation. After a liquor liability policy has been in force 60 days, a notice of cancellation or nonrenewal is effective only if the insurer mails or delivers it at least 60 days before the effective date to the insured and to the licensing authorities, unless the cancellation is for nonpayment or the insured has lost its license. For required coverage cancelled for nonpayment, the notice is 30 days, to the licensee and the local licensing authorities (Mass. Gen. Laws ch. 175, § 112B).

When a licensing authority can require it. At a hearing on a violation, a licensing authority that finds a licensee under ch. 138, § 12 served a person under 21 or an intoxicated person within the 24 months immediately before the alleged violation may require, before it renews, reinstates or modifies the license, a certificate of liquor liability insurance of at least $100,000 per person and $200,000 for all persons, with the limits set at the licensing authority’s discretion (Mass. Gen. Laws ch. 138, § 64A).

Surplus lines, the other topic the outline lists here, is covered in another chapter.

Lesson summary

• An employer refused by two insurers may be assigned one through the Commissioner; all insurers share losses through a reinsurance pool (§§ 65A, 65C).
• A self-insurer posts securities or a bond of at least $20,000 and carries at least $500,000 of reinsurance (ch. 152, § 25A); a self-insurance group needs five or more employers and a certificate of approval from the Commissioner of Insurance (§§ 25E, 25F).
• An assigned employer may use any licensed agent or broker, or apply directly to the plan without fees (§ 65O), and may appeal its premium within 60 days (§ 65K).
• The Workers’ Compensation Trust Fund, funded by an assessment on all employers, pays claims against uninsured employers and reimburses second-injury benefits (§ 65).
• Hospitality Mutual Insurance Company, the former liquor liability JUA, must offer liquor liability to any licensee; once a policy has run 60 days, cancellation or nonrenewal needs 60 days’ notice to the insured and the licensing authorities, except for nonpayment or a lost license (ch. 175, §§ 112B, 113W).
• A licensing authority may require liquor liability of at least $100,000/$200,000 from a licensee that served a minor or an intoxicated person within 24 months before the violation at issue (ch. 138, § 64A).