Retroactive application of worker’s compensation statutes
By org jforward wisbar Joe Forward, Legal Writer, State
Bar of Wisconsin
July 16, 2010 – The Wisconsin Supreme Court recently struck down
as unconstitutional the retroactive application of worker’s
compensation statutes that reopened a private insurers liability for
Insurance v. LIRC, 2010 WI 68 (July 8, 2010), the supreme court
affirmed the circuit court’s conclusion that retroactive
application of Wis. Stat. section 102.17(4) and 102.66(1), as
amended, violated Society’s due process rights and impaired
its contractual obligation.
Gary Liska sustained a work-related injury in 1982 that required
amputation of his right leg below the knee. Society Insurance, his
employer’s insurer, paid worker’s compensation benefits of
approximately $32,000 through 1990.
In 2002, 12 years after Society’s last payment, Society’s
worker’s compensation liability to Liska expired under the section
102.17(4) statute of limitations period.
In 2004, Liska filed for $14,364, and made additional claims
thereafter. Society rejected the claims as time-barred under the
statute’s limitations period.
However, in 2006, the Wisconsin Legislature removed the time
limitations period for traumatic injuries. The amendment required
insurers to continue payments for traumatic injuries that became due
after the 12-year limitations period expired.
The Work Injury Supplemental Benefit Fund (Fund), which supplements
worker’s compensation benefits in addition to what insurers are
required to pay by statute, covered those expenses rejected by Society
after the 12-year expiration.
The Fund began forwarding Liska’s treatment expense invoices to
Society. That is, the Fund asserted that statutory amendments applied
retroactively to reopen Society’s liability.
After two administrative hearings, the circuit court concluded that
retroactive application of sections 102.17(4) and 102.66(1), as amended,
violated Society’s due process rights and the contract clause of
both the U.S. and Wisconsin constitutions. The appeals court certified
the case for supreme court review.
Wis. Stat sections 102.17(4) and 102.66(1)
Amended section 102.17(4) provides, in pertinent part, that in the case
of traumatic injury, including impairment of a leg, “there shall
be no statute of limitations.”
That is, “benefits or treatment expense for a traumatic injury
becoming due 12 years after [the last payment of compensation] shall be
paid by the employer or insurer.”
In addition, amended section 102.66(1) removed “traumatic
injuries” from the category of meritorious claims entitled to
supplemental benefits from the Fund. Under this amendment, Liska was not
entitled to payments from the Fund after the statute’s effective
As the court explains, and as the parties conceded, the legislature
intended these amendments to apply retroactively, meaning Society, and
not the Fund, was liable for claims that arose beyond the 12-year
limitations period previously in place.
However, the supreme court held that retroactive application, as
applied to Society, “unconstitutionally deprives Society of
property without due process of law and violates the contract clauses of
the state and federal constitutions.”
Noting a two-part test to determine whether retroactive statutes
comport with due process, the supreme court held that retroactive
application violated Society’s due process rights.
First, the court must determine whether the statute has a retroactive
effect. The statute has a retroactive effect if the challenging party
has “vested right,” the court explained.
Here, the statute had a retroactive effect because Society had a
“vested right” in its statute of limitations defense, which
became effective 12 years from the date of its last compensation payment
to Liska, the court concluded. In other words, the retroactive
legislation renewed Society’s liability, impacting Society’s
vested right to “fixed exposure to liability.”
Second, the court must determine whether the retroactive statute has a
rational basis, the court explained. That is, the court must determine
whether the public interest in applying the retroactive statute
outweighs the private interest that retroactive application would
Here, Society’s potential liability for future claims is
significant, the court explained, and retroactive application
“deprived Society of any meaningful notice of the potential
increase in exposure to claims.” Retroactive application also
prevents Society from recouping, through increased premiums, the expense
of increased exposure, the court noted.
The Fund argued that the public interest was keeping the Fund solvent,
but the court noted that nothing in the record suggested that
retroactive application would impact the Fund’s solvency. Thus,
the court held that Society’s interest outweighed the interest of
Fund and therefore, there was not a rational basis for retroactive
Retroactive legislation may not unconstitutionally impair contract
obligations under the contract clauses of the U.S. and Wisconsin
constitutions, the court explained, and “we generally interpret
the state and federal contracts clauses coextensively.”
The court noted a “multipart test to analyze whether retroactive
legislation impairs a contractual obligation such that it rises to the
level of a constitutional violation.”
The first step is to determine how severely the legislation impairs the
contractual relationship. The more severe the impairment, the higher the
level of scrutiny, the court explained.
Here, the court concluded, retroactive application altered
Society’s expectations under the contract with Liska’s
employer by renewing Liska’s claims after expiration, and the
impairment was substantial, the court wrote.
Substantial impairment requires the legislation to have a significant
and legitimate public purpose, the court noted. Because “the
retroactive legislation is not justified by a rational legislative
purpose,” the court wrote, “we must necessarily conclude
that it is not justified by a significant and legitimate public
purpose.” Thus, the court held that retroactive application
violates both state and federal contract clauses.
Justice N. Patrick Crooks filed a dissenting opinion that was joined by
Chief Justice Shirley S. Abrahamson and Justice Ann Walsh Bradley.
Justice Crooks argued that statutes are presumed constitutional, the
challenging party bears the burden to prove otherwise beyond a
reasonable doubt, and “the record was missing facts
necessary” to weigh public versus private interests.
Assistant Attorney General David Hart III, and Attorney General J.B.
Van Hollen represented the Work Injury Supplemental Benefit Fund. James
Goonan and Grace Kulkoski of Peterson, Johnson & Murray S.C.,
Madison, represented Society Insurance and James Meyer Inc.