Twenty Second Injury Funds have been abolished throughout the nation as insurers continue the push to eliminate them as part of workers' compensation system reforms, according to a leading expert.

The funds were first formed after World War II to encourage wary employers to hire veterans whose injuries, they feared, might later result in workers' compensation claims.

Steve Bennett, assistant general counsel for the American Insurance Association, said the funds have outlived their usefulness in that they lead to “friction” costs that do not serve the working public.

So far, in addition to the 20 states where SIFs have been abolished, the issue has sprung up in more than a dozen others. Most recently, South Carolina abolished its SIF, while lawmakers in Missouri are currently debating the issue.

SIFs are funded by assessments each year on carriers, which are passed onto policyholders based on the projected second injury claims. Many states have run up large deficits.

According to the Missouri Department of Labor and Industrial Relations, the state SIF's liabilities are projected to increase from $8 million this year to $227 million by 2011.

Mr. Bennett said it is hard to pinpoint the arguments SIF advocates make for their continued existence. “Any time you get a change in the law, you will always need a certain educational process,” he said.

Since the SIF assessment carriers impose on policyholders has no direct relationship to the claims they cause, Mr. Bennett said it ends up a “socialized, subsidized system” ripe for gaming.

Special Reports /

Second Injury Funds Heading Into History

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