Court of Appeals September Session: Arguments of Interest for September 7, 2017

The Court of Appeals wraps up the first week of argument for the September session with three cases on the docket (the Court’s case summaries can be found here). The Court will hear arguments on the following issues: (1) whether Workers’ Compensation Law § 25-a(1-a), which phases out a special fund that pays benefits to injured workers whose cases were closed and later reopened, was unconstitutionally applied retroactively to policies prior to October 1, 2013, violates the Contracts Clause, and constitutes a regulatory taking; (2) whether a criminal defendant was entitled to an adverse inference charge where the People were slow to turn over blood samples from the crimes scene, which were ultimately destroyed just before trial by the flooding caused by Hurricane Sandy; and (3) whether the Excess Line Association of New York has capacity to sue excess line insurance brokers to collect stamping fees that are supposed to be imposed on all excess line insurance policies under the Insurance Law.

No. 96 American Economy Insurance Company v State of New York

In a clash of legal titans, one of Attorney General Eric Schneiderman’s top solicitors, Steven Wu, faces off against former United States Solicitor General and one of the premier Supreme Court advocates, Seth Waxman, in a case concerning the phase out of a special workers’ compensation fund that pays benefits to injured workers whose cases were closed and later reopened. The plaintiff, represented by Waxman, argued that retroactively applying the amendment to phase out this fund for policies prior to October 1, 2013 violated its due process rights and the Contracts and Takings Clauses of the U.S. Constitution.

After Supreme Court rejected the claims, the Appellate Division, First Department reversed, and declared the amendment unconstitutional as applied to the pre-October 2013 policies. Particularly, the Court held, because the workers compensation premiums for these policies assumed that reopened claims would be transferred to the now phased out fund for payment, retroactive application of the phase out amendment to the pre-October 2013 policies imposed a brand new liability on the insurers after the premiums had already been charged. This, the Court held, violated due process, impaired existing contractual obligations in violation of the Contracts Clause, and constituted an unconstitutional regulatory taking.

In what promises to be a must watch argument, the Court of Appeals will now decide whether the amendment to Workers’ Compensation Law § 25-a(1-a) passes constitutional muster.

The Appellate Division, First Department’s order can be found here.