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Cordero v. State Auto Sales, Inc.

CASE NO. 5699 CRB-6-11-11



NOVEMBER 5, 2012











The claimant was represented by Meghan A. Woods, Esq., McHugh, Chapman and Montalbano, LLC, 140 Washington Street, Middletown, CT 06457.

David Brancale, 333 South Broad Street, Meriden, CT 06450, appeared in his capacity as Vice President of State Auto Sales, Inc.

The Second Injury Fund was represented by Michael J. Belzer, Esq., Assistant Attorney General, Office of the Attorney General, 55 Elm Street, PO Box 120, Hartford, CT 06141-0120.

This Petition for Review from the November 8, 2011 Finding and Award of the Commissioner acting for the Sixth District was heard April 27, 2012 before a Compensation Review Board panel consisting of the Commission Chairman John A. Mastropietro and Commissioners Jodi Murray Gregg and Daniel E. Dilzer.


JOHN A. MASTROPIETRO, CHAIRMAN. The present appeal is from a Finding and Award where the trial commissioner dealt with the impact of an uninsured employer declaring bankruptcy. The trial commissioner levied an award directly against the Second Injury Fund, (“Fund”) believing that he was legally prevented from assessing an award against the respondent-employer by virtue of its bankruptcy. The Fund has appealed this decision. We believe this decision was an incorrect application of the law. We remand this matter to the trial commissioner to assess initial liability for the award to the respondent-employer; with the Fund responsible pursuant to statute for any benefits due the claimant that the respondent is unable to pay.

The trial commissioner reached the following findings of fact which are pertinent to this appeal. He found the claimant suffered a compensable thumb injury on May 14, 2009, and the claimant suffered lost wages, had a fifteen percent permanent partial disability rating, and had unpaid medical bills from the incident. An investigator from the State Treasurer’s office presented evidence that the respondent-employer was uninsured for workers’ compensation. The commissioner took administrative notice that the respondent-employer, State Auto Sales, Inc., had filed a petition under Chapter 7 at the United States Bankruptcy Court, District of Connecticut (“Bankruptcy Court”). The trial commissioner also took administrative notice of an Order of the Bankruptcy Court lifting the automatic stay in favor of the claimant. The order reads as follows:

“ . . . the automatic stay . . . is modified to the extent necessary to permit Rafael Cordero and/or his successors and assigns to pursue recovery from the Second Injury Fund pursuant to Conn. Gen. Stat. §31-355; provided, however, subject to further order of the court, recovery shall be limited to distributions from the Second Injury Fund.” Findings, ¶ 5.

Based on these facts the trial commissioner concluded the claimant was entitled to an award for his injuries, and that the respondent-employer was unable to pay indemnity benefits or medical expenses to the claimant as a result of its bankruptcy filing. The trial commissioner also concluded, however:

While the Order Granting Relief From Stay in the bankruptcy allows the Claimant to pursue benefits from the Second Injury Fund, the effect of the bankruptcy proceeding precludes a finding against the Respondent-Employer. Conclusion, ¶ F.

The trial commissioner explained his reasoning that due to the bankruptcy filing the Fund should consider the statutory prerequisite of an unpaid award against the respondent having already been satisfied.1 The commissioner issued orders against the Fund directing them to make payment to the claimant and various medical providers. The Fund filed a Motion to Correct seeking that the “statutorily necessary step” of entering an award against State Auto Sales, Inc., be done so as to enable it to jurisdictionally take responsibility for the award. The trial commissioner denied the Motion to Correct in its entirety and the Fund has pursued this appeal.

The Fund argues in its appeal that it is strictly limited in its statutory authority and in the absence of an award against the respondent-employer it may not take further action. The Fund cites Going v. Cromwell Fire District, 159 Conn. 53 (1970) and Everett v. Ingraham, 150 Conn. 153 (1962) for this stance. In the Fund’s view, in the absence of an award first levied against the respondent-employer any payment to the claimant or his medical providers would be ultra vires.

The claimant argues that the Bankruptcy Court order prohibited a Finding and Award against the respondent-employer. Based on the claimant’s interpretation of the Bankruptcy Court order the respondent-employer is already “unable to pay” any award in accordance with the statute and the Fund should immediately commence payment. The claimant argues that the trial commissioner had the power, pursuant to Hunnihan v. Mattatuck Mfg. Co., 243 Conn. 438 (1997), to interpret statutes other than Chapter 568 if it was necessary to render a decision in a workers’ compensation hearing. The claimant believes the trial commissioner properly applied the Bankruptcy Code to the facts in this case.

We agree with the claimant’s position that Hunnihan, supra, enables a trial commissioner to consider statutes such as the Bankruptcy Code when rendering a decision. However appellate authority on this point leads us to a different legal conclusion.

Over thirty years ago the Sixth Circuit Court of Appeals issued its decision in In re Mansfield Tire and Rubber Company, 660 F.2d 1108 (1981). The Mansfield Tire case stands for the principle that administration of workers’ compensation claims by a state agency are a valid exercise of the government’s police or regulatory powers, and therefore, were exempt from the automatic stay provisions (11 USC § 362) of the bankruptcy code. Id. The Mansfield Tire case continues to be good law, and suggests a different interpretation of law than that espoused by the trial commissioner.

Reading the order of the Bankruptcy Court in the context of the Mansfield Tire decision it is clear that while the Commission may not be able to enforce an order against the assets of the bankrupt employer-respondent, this Commission is not barred from issuing an order.2 The plain language of the Bankruptcy Court order permits the trial commissioner to take actions “to the extent necessary” to pursue recovery against the Fund. The claimant was limited to recovery against the Fund “subject to further order of the court.” This clause suggests that in the event the Bankruptcy Court dismissed the respondent-employer’s petition, or determined assets were available to creditors, the claimant would retain rights to recovery. We presume that by citing § 31-355 C.G.S. in its order the Bankruptcy Court was aware that this statute requires an award to be levied and unpaid so as to allow the Fund to administer the claim; therefore, we do not presume the order would prevent the trial commissioner from placing an award against the respondent-employer. Had the Bankruptcy Court intended such a prohibition, we believe the order would have specifically said that.

The facts herein are distinguishable from Pascarelli v. Moliterno Stone Sales, 14 Conn. Workers’ Comp. Rev. Op. 328, 2115 CRB-4-94-8 (September 15, 1995), aff’d, 44 Conn. App. 397 (1997), which the claimant cites. In that case, there had been no modification to the employer-respondent’s automatic stay prior to the hearing on the claim. We held that while the claimant believed § 31-287 C.G.S. would allow his claim to proceed; this position was not persuasive.3 We held that since these proceedings would directly affect the debtor’s estate the trial commissioner could reasonably conclude these issues went beyond the exemption from the automatic stay granted workers’ compensation commissions in Mansfield Tire. We do not find Pascarelli particularly relevant in cases where the automatic stay has already been modified by the Bankruptcy Court.

We believe an appropriate reading of the relevant precedent and the plain meaning of the Bankruptcy Court order would enable an order to issue against the employer-respondent with its enforcement stayed barring further court order. This would establish the statutory basis for the Fund to pay the claim. We believe this reading is more consistent with the statutes herein and the intent of the Bankruptcy Court.

The matter is remanded to the trial commissioner for further proceedings consistent with this opinion.

Commissioners Jodi Murray Gregg and Daniel E. Dilzer concur in this opinion.

1 The relevant statute, § 31-355(b) C.G.S. reads as follows:

(b) When an award of compensation has been made under the provisions of this chapter against an employer who failed, neglected, refused or is unable to pay any type of benefit coming due as a consequence of such award or any adjustment in compensation required by this chapter, and whose insurer failed, neglected, refused or is unable to pay the compensation, such compensation shall be paid from the Second Injury Fund. The commissioner, on a finding of failure or inability to pay compensation, shall give notice to the Treasurer of the award, directing the Treasurer to make payment from the fund. Whenever liability to pay compensation is contested by the Treasurer, the Treasurer shall file with the commissioner, on or before the twenty-eighth day after the Treasurer has received an order of payment from the commissioner, a notice in accordance with a form prescribed by the chairman of the Workers’ Compensation Commission stating that the right to compensation is contested, the name of the claimant, the name of the employer, the date of the alleged injury or death and the specific grounds on which the right to compensation is contested. A copy of the notice shall be sent to the employee. The commissioner shall hold a hearing on such contested liability at the request of the Treasurer or the employee in accordance with the provisions of this chapter. If the Treasurer fails to file the notice contesting liability within the time prescribed in this section, the Treasurer shall be conclusively presumed to have accepted the compensability of such alleged injury or death from the Second Injury Fund and shall have no right thereafter to contest the employee’s right to receive compensation on any grounds or contest the extent of the employee’s disability. BACK TO TEXT

2 In Pascarelli v. Moliterno Stone Sales, 14 Conn. Workers’ Comp. Rev. Op. 328, 2115 CRB-4-94-8 (September 15, 1995), aff’d, 44 Conn. App. 397 (1997) we noted that actions “aimed solely at advancing a pecuniary interest” were held to violate the automatic stay provisions of 11 USC § 362 subsequent to the In re Mansfield Tire and Rubber Company, 660 F.2d 1108 (1981) decision. In the present matter, as we find as the Bankruptcy Court order directs the claim to proceed, we find the court has recognized the exercise of police or regulatory powers in this instance. BACK TO TEXT

3 We also note that in Pascarelli, supra, the claimant had already had compensability of his claim accepted by the insurer and liability had been transferred previously to the Second Injury Fund. The claimant in that case was seeking to reopen an old award to obtain additional relief. We note the factual scenario in Pascarelli is akin to Kalinowski v. Meriden, 5028 CRB-8-05-11 (January 24, 2007), where the trial commissioner could have had alternative grounds to deny relief even in the absence of a bankruptcy filing. BACK TO TEXT

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