Tennessee's Workers' Compensation Second Injury Fund: Purpose and Practice

McDowell, David G

I. INTRODUCTION

In 1919, the Tennessee Legislature enacted Tennessee's Workers' Compensation Act,1 with the principal purpose of providing injured employees compensation for lost wages.2 The statute represents a quid pro quo: employees give up certain common law causes of action in return for a system of more certain compensation in the event of injury.3 The resulting balance allows employees to bring claims against their employers under the statute without the burden of proving liability under traditional common law negligence principles,4 and it shields employers from common law liability.5 The statute is to be liberally construed to favor employee compensation.6 Tennessee Code Annotated section 506-116 provides that the rules of common law statutory construction should not apply to a claim under the Tennessee Workers' Compensation Act:

The rule of common law requiring strict construction of statutes in derogation of common law shall not be applicable to the provisions of the Workers' Compensation Law, but the same is declared to be a remedial statute which shall be given an equitable construction by the courts, to the end that the objects and purposes of this chapter may be realized and attained.7

The fact that the statute contains liberal construction language and that it is declared to be remedial in nature favors compensating injured employees.8

Before the enactment of Tennessee's Second Injury Fund, both employers and employees suffered when an employee sustained successive injuries.9 Tennessee and other states used various systems to address the liability of an employer to an employee for successive injuries. One such system is the full responsibility or non-apportionment rule which holds the employer liable for the total resulting disability of the employee's successive injuries.10 Conversely, the apportionment rule provides that the "employer only pays for the single member lost in its employment."11 In states that follow the full responsibility rule, employers have great incentive not to hire, or fire, employees who come to the job with a pre-existing injury for fear that the employee would sustain another injury, making the employer liable for the total disability award to the employee.12 Application of either of these two systems produced adverse effects on employees because implementation of an apportionment scheme left employees with awards "far less than their actual condition required to prevent destitution," and full-responsibility schemes led to the non-hiring or discharge of employees with prior injuries.13

When Tennessee enacted its second Injury Fund Statute in 1945, the purpose was clear: to promote the hiring of employees who have been previously injured.14 Tennessee's Second Injury Fund statute encourages the hiring of employees with prior injuries15 by providing assurance to employers that they will be liable for the disability caused only by the second injury16 or that the employer will not be liable beyond one hundred percent of an employee's disability award17 if the employee suffers a second injury. This note defines and explains the second Injury Fund statute, analyzes the different situations for which the statute is intended to apply, and addresses problems raised by the statute's application.

II. TENNESSEE'S SECOND INJURY FUND STATUTE: T.C.A. § 50-6-208

Tennessee Code Annotated section 50-6-208 provides for an application of the second Injury Fund in two situations.18 These two situations are covered by subsections (a) and (b), respectively, of the second Injury Fund statute.

A. T.C.A. § 50-6-208(a)

To illustrate how and when section 50-6-208(a)19 applies to the first situation, consider the following:

IF:

a) an employee has previously sustained a permanent physical disability, regardless of whether the disability stems from a work or non-work related injury;20 and

b) the employer has actual knowledge of the permanent and preexisting disability at the time the employee was hired or at a time prior to injury;21 and

c) the employee suffers an additional injury, while working for the second employer, that, in conjunction with the preexisting injury, now renders the employee permanently and totally disabled;22 and

d)the court determines that the employee has sustained some percentage of the permanent and total disability from the second injury,23

THEN:

the employer only pays for the disability that would have resulted from the second injury, and the Second Injury Fund pays for the remaining disability.24

1. Previous Permanent Physical Disability

The first requirement that an employee must show before section 50-6-208(a) applies is that the employee must have "previously sustained a permanent physical disability."25 Although courts rarely define "permanent disability," a permanent physical disability can be either a partial disability as enumerated in Tennessee Code Annotated section 50-6-207(3) or a total disability26 as defined in Tennessee Code Annotated section 50-6-207(4)(B). Further, an analysis of Tennessee case law dealing with application of section 50-6-208(a) reveals that an award or finding of some percentage of permanent disability will satisfy the "previous permanent physical disability" requirement.27 In the case where an employee comes to work with a non-work related permanent disability but there has been no assessment of the extent of the disability before the employee sustains a work related injury that in conjunction with the prior non-work related injury renders the employee permanently and totally disabled, the trial court is supposed to make a finding based upon expert testimony of the extent of the prior permanent disability before the second injury.28

Tennessee courts have also used the physical requirement of section 50-6-208(a) to exclude cases from the purview of the Second Injury Fund. The two most notable areas are cases involving obesity and mental disorders. For example, in Cox v. Hartford Accident & Indemnity Co.,29 the Tennessee Supreme Court held that obesity is not a "permanent physical disability" by explaining that "[t]o construe this section otherwise, this Court would be required to expand the statute's coverage beyond what appears to be the legislative intent."30

In Bryant v. Genco Stamping & Manufacturing Co.,31 the Tennessee Supreme Court, relying on the statute's use of "physical injuries," held that section 50-6-208(a) applies only to preexisting physical, and not psychological, injuries.32 The Bryant court applied basic rules of statutory construction that presume the legislature used each word to convey some meaning and purpose.33 The meaning of that word was found in the dictionary which defines "physical" as '"pertaining to the body, as distinguished from the mind.'"34

2. "Actual Knowledge of the Permanent and Preexisting Disability"

The second requirement that an employee must show before section 50-6-208(a) applies is that the "employer had actual knowledge of the permanent and preexisting disability at the time that the employee was hired or at the time that the employee was retained in employment after the employer acquired such knowledge, but in all cases prior to the subsequent injury."35 In E.I. du Pont de Nemours & Co. v. Friar,36 the Tennessee Supreme Court first addressed the issue of whether an employer's knowledge of an employee's preexisting disability was a prerequisite for Second Injury Fund liability." The Friar court, having found no express requirement of the employer's knowledge of an employee's preexisting permanent disability in the then existing second Injury Fund provision,38 looked to the purpose behind the second Injury Fund for guidance.39 In recognizing that the most basic purpose behind the Second Injury Fund was to encourage employers to hire employees with disabilities,40 the court found that an employer first must be aware of the employee's disability for the employer to have any incentive to hire the injured employee.41 The court found authority for this proposition in the Tennessee Supreme Court case of Green v. Combustion Engineering, Inc.,42 where the court stated:

As a matter of general principle, it would probably be more accurate to say that the second-injury legislation, in line with its basic purpose, should not be extended to prior conditions of such character that employers would presumably be unaware of them and would therefore be unaffected by them in their hiring policies.43

Both Green and Friar recognize that to carry out the Second Injury Fund's purpose of encouraging employers to hire employees with preexisting injuries, an employer must have knowledge of the employee's disabilities at the time of hiring the employee.44 As a result, the Friar court held that if an employer was not aware of the employee's prior permanent disability at the time of hiring the employee, the employer would be liable for the entire disability of the employee upon subsequent injury resulting in the absence of liability for the Second Injury Fund.45

In 1973, the Tennessee Supreme Court revisited the knowledge requirement in Strong v. Insurance Co. of North America.46 The Strong court recognized that requiring knowledge at the time of hiring the disabled employee "would severely limit the basic object of the [Second Injury Fund] legislation."47 To require knowledge at the time of hiring would encourage an employer to discharge an employee who did not inform the employer of a prior disability at the time of hiring but discovered such disability during the course of the employment.48 Such a result runs contrary to the entire purpose of the Second Injury Fund.49 In furtherance of encouraging the employment of employees with prior permanent injuries, the Strong court held that the knowledge requirement is met when the employer learns of the disability at the time of hiring or when the employer gains notice of an employee's prior permanent disability during the course of employment and continues to employ the employee.50

Subsequent to the Strong decision, Tennessee Code Annotated section 50-6-208(a)(2) was amended to codify the holding in Strong.51 The statute presently requires that an "employer ha[ve] actual knowledge of the permanent and preexisting disability at the time that the employee was hired or at the time that the employee was retained in employment after the employer acquired such knowledge, but in all cases prior to the subsequent injury."52

While section 50-6-208(a)(2) of the Tennessee Code expressly requires an employer to have knowledge of an employee's prior disability before the employer can limit its liability to only the disability resulting from the subsequent injury, section 50-6-208(b) does not require an employee to put his employer on notice of his injury as a condition to second Injury Fund liability.53 In the case of Sitz v. Goodyear Truck Tire Center,54 the Tennessee Supreme Court upheld the absence of a knowledge requirement for imposition of Second Injury Fund liability in section 50-6-208(b) cases.55 The court, while acknowledging the presence of a knowledge requirement in section 50-6-208(a) cases, rejected a reading of the statute that would carry forward the knowledge requirement in subsection (a) to subsection (b).56 Instead, the court focused on the plain language and purpose of the statute by finding that nothing in the statute indicated such a reading.57 In addition, the court reasoned that imposing a knowledge requirement on subsection (b) would frustrate rather than enhance the intent of the second injury fund provision by increasing the exposure of employers who have hired injured employees.58

3. "Permanently and Totally Disabled Through a Subsequent Injury"

The third requirement that must be met before section 50-6-208(a) applies is that the employee must sustain a subsequent injury that renders the employee permanently and totally disabled.59 Although courts and practitioners have had trouble defining this requirement,60 recent cases have clarified subsequent injuries that in combination with the prior disability renders the employee permanently and totally disabled.61

A brief description of the earlier cases is useful in understanding the court's current interpretation of this requirement. In Minton v. State Industries, Inc.,62 the Tennessee Supreme Court found that the employee's injuries, which amounted to an aggregate permanent disability of sixty percent, were not covered by section 50-6-208(b) because the aggregate amount of injuries did not amount to one hundred percent.63 As a result, the court analyzed the employee's injuries under section 50-6-208(a) to determine whether the Second Injury Fund was liable for any of the employee's injuries.64 The court held that because the plaintiff's injuries did not amount to a disability of one hundred percent, the employee was not totally and permanently disabled.65 Thus, Minton required that an employee's injuries combine to an amount equal or greater than one hundred percent disability for either subsection (a) or (b) of the Second Injury Fund to apply.66

Courts have since departed from the Minton requirement that an aggregate disability equivalent to one hundred percent must be found for a finding of permanent and total disability.67 The first case to depart from the Minton analysis was Perry v. Sentry Insurance Co.68 In Perry, the employee had sustained two compensable injuries which in combination resulted in a permanent disability of 62.5 percent.69 Despite the holding in Minton, the Perry court held that the employee was totally and permanently disabled.70 The basis for the finding of total and permanent disability was a medical expert who testified that "[the] subsequent injury rendered the employee permanently and totally disabled," regardless of the disability percentage to the body as a whole.71

While this discussion of the court's departure from Minton might appear confusing, an analysis of recent case law reveals a simple definition of permanent and total disability. In Watt v. Lumbermens Mutual Casualty Insurance Co.,12 the court looked to Tennessee Code Annotated section 50-6-207(4)(B)73 that defines total disability as "[w]hen an injury not otherwise specifically provided for in this chapter, as amended, totally incapacitates the employee from working at an occupation which brings the employee an income, such employee shall be considered 'totally disabled.'"74 The court stated that the inquiry is whether the injuries have disabled or incapacitated the employee to such a degree that she cannot return to the type of work that provides her income.75 Finally, a finding of permanent and total disability does not require a percentage of disability to the body as a whole equal to or greater than one hundred percent.76

4. Finding of Fact "for the Disability that Would Have Resulted From the Subsequent Injury"

The final requirement that must be met before section 50-6-208(a) applies is that the trial court must make a specific finding of fact "for the disability that would have resulted from" the second injury.77 While there is no explicit requirement for such a finding in section 50-6-208(a), courts have construed portions of subsection (a)'s language to require the trial court to determine the disability resulting solely from the second injury before compensation can be allocated between the second Injury Fund and the employer.78 The trial court should first make a finding that the employee is permanently and totally disabled,79 then proceed to make a specific finding of the disability of the second injury that would have been caused had the employee not sustained a prior injury.80

One reason that courts have required the finding of disability stemming solely from the second injury is to prevent courts from merely subtracting the disability attributed to a prior injury from one hundred percent to determine the extent of disability stemming from the second injury.81 Under section 50-6-208(a), a finding of permanent and total disability does not require a finding by the court that the employee is one hundred percent disabled,82 rather the determination of permanent and total disability depends on whether the employee's disability "totally incapacitates the employee from working at an occupation which brings the employee an income, such employee shall be considered 'totally disabled.'"83 In Allen v. City of Gatlinburg,84 the employee had received an award of twenty percent for his prior injuries, and the trial court, upon finding that the employee was totally and permanently disabled, apportioned eighty percent disability to his subsequent injury by merely subtracting the twenty percent disability award from one hundred percent.85 The Tennessee Supreme Court reversed the trial court's apportionment and remanded the case back to the trial court with specific instructions to make a specific finding of fact regarding the disability from the second injury.86 A specific finding of fact regarding the extent of disability from the second injury allows the court to properly apportion liability between the Second Injury Fund and the subsequent employer.87

5. Allocation of Liability between the Second Injury Fund and Subsequent Employer

Once the court has determined that all the requirements of section 50-6-208(a) have been met,88 the court must apportion liability between the Second Injury Fund and the subsequent employer. Section 50-6-208(a)(1) requires that the employer is liable to the employee for an award of the disability caused solely by the second injury sustained while working for the employer.89 Section 50-6-208(a) also requires the second Injury Fund to compensate the employee for the remainder of the disability caused by the first and second injuries of the employee.90 Upon a finding by the trial court of the disability caused by each injury, section 50-6-208(a)(1) requires that the employer first pay the award for disability caused by the subsequent injury and, following the completion of the employer's payments, the second Injury Fund shall pay the remainder of the compensation.91

When the trial court makes the required specific findings of fact regarding the disability caused solely by the second injury, the court then apportions liability to the employer in the amount of disability caused by the second injury, and the Second Injury Fund is then liable to the employee for the remainder of the disability award.92 In Watt, the trial court found that the second injury caused a one hundred percent disability to the employee's leg which equated to a fifty percent disability to the body as a whole.93 The trial court also found that the employee, as a result of the prior and subsequent injuries, was permanently and totally disabled which equated to a 68.75 percent disability to the body as a whole.94

Based on these percentages, the trial court properly apportioned liability to the employer for the fifty percent disability to the body as a whole for the second injury, and the second Injury Fund was liable for the remainder of the disability which amounted to 18.75 percent.95 The court went on to clarify that an employer in Second Injury Fund cases is not limited in its liability to the employee to the 400 week cap that applies to permanent partial disability cases,96 but rather the employee's award is for permanent and total disability.97 As such, the employer and second Injury Fund are liable to the employee "based on a percentage of the total number of weeks to age 65."98

In both Watt and Bomely, where the courts held the employer and the Second Injury Fund liable for a percentage of weeks until the employee reaches eligibility for Social Security, Justice Holder argued in dissent that holding employers liable for an award based on the total number of weeks until an employee reaches retirement exposes "the employer and its insurance company to greater liability than is contemplated under the second Injury Fund legislation."99 In Watt, Justice Holder based her argument on the fact that the employee's second injury was the loss of a leg rendering the employer liable for only 200 weeks of compensation under Tennessee workers' compensation laws.100 As a result, the Second Injury Fund statute is providing a disincentive to hire employees with prior injuries because while it will not be liable for the total disability of the injured employee, the employer will still be liable for a greater number of weeks than it would in hiring an employee with no prior injuries.101

B. T. C. A. § 50-6-208(b)

To illustrate how and when § 50-6-208(b)102 applies to the second situation, consider the following:

IF:

a)an employee has suffered a prior work-related injury; Iro and

b)the work-related injury has resulted in an award for a percentage of disability to the body as a whole;104 and

c)the employee sustains a subsequent work-related injury resulting in an award for a percentage of disability to the body as a whole;105 and

d)the combination of the awards for the first and second injuries exceed one hundred percent permanent disability to the body as a whole;106

THEN:

the employer is required to compensate the employee only for one hundred percent of such award and the Second Injury Fund is required to compensate the employee for the excess of one hundred percent of the award.107

The language of subsection (b) has remained the same since its enactment and has produced relatively little litigation regarding its interpretation. The only issues raised by such litigation are covered in the case of Henson v. City of Lawrenceburg,108 which provides an excellent example of when an employee's injuries are covered by subsection (b) of the Second Injury Fund.

1. Prior Injury Resulting in Disability to the Body as a Whole

In Henson, the employee had received two prior workers' compensation "awards of 20 percent disability to the left knee109 and 50 percent disability to the left leg."110 Both of these awards were for disabilities to scheduled members rather than to the body as a whole.111 The Second Injury Fund argued that it could not be liable under section 50-6-208(b) because the employee's prior awards were for scheduled member disabilities and subsection (b) only covered cases involving employees in receipt of awards for injuries to the body as a whole.112 The court, by looking at the statute's purpose of encouraging employment of persons with prior permanent disability, found no reason for making a distinction between a scheduled-member injury and an injury to the body as a whole.113 Although no distinction was made by the court between the two injuries, the court held that for the injury to be compensable as an injury to the body as a whole under the statute, all scheduled member injury awards would have to be converted to a percentage of injury to the body as a whole by using the American Medical Association's (AMA) guidelines.114 After reference to the AMA guidelines, the employee's injuries of fifty percent to the left leg and twenty percent to the left knee converted to a twenty-eight percent disability to the body as a whole.115

2. Subsequent Injury Resulting in Disability to the Body as a Whole

Subsequent to the two prior awards, the employee suffered an additional injury when he herniated a disc while "sweeping and shoveling debris from a city street" while working for the employer.116 Although the trial court found that this injury caused the employee to be one hundred percent totally disabled, the Tennessee Supreme Court amended that "award of benefits to 75 percent permanent partial disability to the body as a whole."117

3. The Combination of Awards Exceeding One Hundred Percent Disability to the Body as a Whole

When a court has to determine whether the employee's awards of disability to the body as a whole exceed one hundred percent disability, there should be no confusion or comparison with section 50-6-208(a)'s required finding of permanent and total disability.118 A showing that the combination of the awards for disability to the body as a whole must equal or exceed one hundred percent is all that is required for an employee to meet section 50-6-208(b)'s requirement.119

In Henson, after the court found that the employee had sustained multiple work related injuries that resulted in awards for disability to the body as a whole, the court determined that those awards exceeded one hundred percent.120 The employee's prior award of twenty-eight percent disability to the body as a whole when combined with the court's finding of seventy-five percent disability to the body as a whole for the subsequent injury, totaled 103 percent disability to the body as a whole.121

4. Allocation of Liability between the Second Injury Fund and Subsequent Employer

Section 50-6-208(b) requires that when two or more awards combine to exceed one hundred percent disability to the body as a whole, the employer shall not be held liable beyond one hundred percent of the award.122 The remaining benefits, the amount in excess of one hundred percent, are to be paid by the second Injury Fund.123 As required in subsection (a) cases, it is essential in subsection (b) cases that the trial court make a finding regarding the extent or percentage of disability attributable to each of the injuries.124 Once such a finding is made, the court can easily combine the prior and subsequent injury awards to determine whether and how much of those awards exceed one hundred percent.125 In Henson, once the court determined that the employee had sustained injuries that resulted in awards amounting to a 103 percent disability to the body as a whole, the court held the employer liable for one hundred percent of the disability award, and the second Injury Fund was liable for the remaining three percent of the award.126

III. IMPORTANCE OF THE DISTINCTIVE APPLICATIONS OF § 50-6-208(a) AND § 50-6-208(b)

Sections 50-6-208(a) and (b) were intended to apply to different situations with the overall purpose of both to encourage the hiring of injured or handicapped employees by ensuring limited liability to employers.127 This section outlines the different applications of the two sections and addresses some problems and issues that arise in their different applications.

A. Comparison of § 50-6-208(a) with § 50-6-208(b)

As Part II of this note illustrates, subsections (a) and (b) contain different language resulting in coverage of different situations.128 A comparison of the two subsections reveals that subsection (a) is broader in application than (b) in certain contexts, while (b) is broader in application than (a) in other contexts. For example, when an employee has sustained a non-compensable prior injury causing permanent disability and then sustains a subsequent work-related injury that causes the employee to be permanently and totally disabled, the employee's injuries can only be covered by subsection (a).129 In this regard, subsection (a) is broader in its application because subsection (b) requires that the prior injury be compensable while (a) applies regardless of the source of the prior injury.130

Conversely, subsection (a) is more narrow in application by requiring a judicial finding that, as a result of the two injuries, the employee is now totally and permanently disabled while subsection (b) only requires that the employee sustain two injuries that resulted in excess of one hundred percent disability.131 Although an employee may receive two awards in excess of one hundred percent, the employee might not be totally and permanently disabled because the employee could return to the work where the injuries occurred.132 Similarly, subsection (b) is broader because it does not contain the knowledge requirement enumerated in subsection (a).133

B. Subections 50-6-208(a) and 50-6-208(b) are not Mutually Exclusive

When an employee has a preexisting permanent physical disability and the employee suffers an additional injury which, in conjunction with the preexisting injury, renders the employee permanently and totally disabled, the employee's injuries are covered by subsection (a).134 If that same employee's injuries were both compensable and combined to exceed a one hundred percent disability award, then the employee's injuries would also be covered by subsection (b) of the second Injury Fund.135 In this situation, the employee's injuries would be covered by both subsection (a) and (b) of the second Injury Fund statute.136 Although subsections (a) and (b) are intended to apply in different situations, this example illustrates that these subsections are not mutually exclusive.137 In this situation, the court "should apply the one which produces a result more favorable to the employer since the goal of the second Injury Fund statute is to encourage the hiring of injured workers by limiting employer liability."138 The following section discusses when one subsection's application over the other is more favorable to the employer.

C. Liability Compared

Subsection (a) makes the employer liable only for the amount of disability that would have been caused by the second injury had the first injury not occurred, and the second Injury Fund is liable for the remainder of the award.139 Subsection (b) makes the employer liable only up to one hundred percent of the disability, and the second Injury Fund is required to pay the remainder of the award that exceeds one hundred percent.140 Returning to the example presented in the preceding section,141 the employee with a combined disability totaling 125 percent who is also found to be permanently and totally disabled, would be entitled to the complete award of 125 percent. However, the allocation of the award between the second Injury Fund would differ depending on whether subsection (a) or (b) applied. Under subsection (a), the employer would be responsible for the amount of disability caused by the subsequent injury, seventy-five percent, while the second Injury Fund would be responsible for the remainder of the award, fifty percent.142 Under subsection (b), the employer would be responsible for one hundred percent of the award while the second Injury Fund would be liable for the remainder of the award, twenty-five percent, or the excess over one hundred percent."" In this situation, albeit rare, the court must apply subsection (a) because it is the most favorable to the employer.144

IV. STATUTE OF LIMITATIONS

While the second Injury Fund statute does not contain an express statute of limitations, second Injury Fund case law reveals that the statute of limitations used for Tennessee's Workers' Compensation System should be applied to cases involving the second Injury Fund.143 The courts have reasoned that if the legislature had intended a separate statute of limitations to apply to the second Injury Fund, such a statute would have been included.146

The applicable statute of limitations is contained in Tennessee Code Annotated section 50-6-203,l47 which requires that a claim for workers' compensation benefits be brought within one year after the accident that caused the employee's injury or death.148 Determination of when the injury occurs resulting in the commencement of the statute of limitations differs for section 506-208(a)149 and 50-6-208(b)150 cases.

Two notable exceptions apply to the one-year statute of limitations. The first exception is contained in the statute and allows the statute of limitations to toll until the cessation of voluntary payments by the employer to employee or the end of the employee's authorized treatment provided by the employer.151 The second exception is the discovery rule which is discussed in the next section.

A. Discovery Rule

Tennessee's second Injury Fund has also borrowed from the workers' compensation system's use of the discovery rule. The discovery rule allows the statute of limitations period to commence when an employee knows or "in the exercise of reasonable diligence should" know that the employee has sustained a compensable injury.152

The only second Injury Fund case addressing the discovery rule's application to the statute of limitations is Powers v. Johnson Controls.153 In Powers, the employee sustained a prior non-work related injury in 1996 or 1997 and a subsequent work-related injury in May 1998 when the employee fell over a jack, landing on her right shoulder.154 The employee continued to work despite this injury until January 1999 when the pain became so great that she could no longer work.155 Finally, in February 1999, the employee underwent unsuccessful rotator cuff surgery.156 The trial court, finding that the employee satisfied the requirements of section 50-6-208(a), ruled that the employee first knew that she was permanently disabled on the date of the unsuccessful surgery rather than the date of the actual injury.157

On appeal, the second Injury Fund argued that the statute of limitations commenced on the date of the May 1998 injury rather than on the date of the February 1999 surgery.158 The Special Workers' Compensation Appeals Panel defined the discovery rule's effect on the statute of limitations date as "the date on which the employee's disability manifests itself to a person of reasonable diligence-not the date of accident-which triggers the running of the statute of limitations for an accidental injury."159 As a result, the panel affirmed the trial court's finding and held that the February 1999 surgery date was "the day when a person of reasonable diligence would know, under the facts of the case, that she was permanently disabled."160

Outside of Powers, there is no case law on the discovery rule's application to the second Injury Fund. However, based on the courts' tendency to incorporate the Tennessee Worker's Compensation System's statute of limitations into second Injury Fund applications,161 it is likely that case law dealing with Tennessee's Workers' Compensation System's application of the discovery rule may be used in second Injury Fund litigation.162

B. §50-6-208(a)

In section 50-6-208(a) cases, the general rule is that the oneyear statute of limitations to file suit against the second Injury Fund begins to run from the date of the subsequent injury.163 If an employee fails to bring suit within one year of the subsequent injury, his claim against the Second Injury Fund is barred.164

Once the court has determined that the employee's claim against the second Injury Fund is barred, the question arises as to whether the employer or employee will have to pay the amount that the Second Injury Fund would have been liable for had the suit been timely filed.165 In Hollingsworth v. S & W Pallet Co.,166 the Tennessee Supreme Court was presented with this question and held that the employee who failed to assert a timely claim against the Second Injury Fund would be liable for the amount of the award for which the Second Injury Fund would have been liable.167 In Hollingsworth, the employee suffered a non-compensable heart attack in 1991 and a subsequent work related heart attack in February 1996.168 In June 1996, the employee filed a complaint against his employer, Pallet, for workers' compensation benefits, and Pallet filed an answer in August of the same year.169 In September 1997, Pallet filed an amended answer asserting that because of the employee's prior heart attack, Pallet's liability should be limited by allocating the percentage of disability attributed to the prior heart attack to the second Injury Fund, and finally, in November 1997, the employee amended his complaint to include the second Injury Fund as a defendant.170

The trial court found that the employee was permanently and totally disabled and that all the other requirements of section 50-6-208(a) were met but found that an action against the second Injury Fund could not be maintained because the suit was not filed against the second Injury Fund by February 1997.171 As a result, the trial court determined that the employee's second heart attack caused forty percent of the permanent and total disability and held Pallet liable for that amount of the award.172 The remaining sixty percent of the award that would have been allocated to the second Injury Fund, had the claim been timely brought, was left unpaid.173

On appeal, the Special Workers' Compensation Appeals Panel held that the "Second Injury Fund statute created an 'affirmative defense of pre-existing disabilities' and that Pallet [the employer] waived this defense by failing to raise it within the statute of limitations period."174 The Panel reasoned that when section 50-6-208 does not apply because the statute of limitations has not been met, the employer's liability is not limited, but rather it is liable for one hundred percent of the award to the employee.175 Pallet appealed the Panel's decision to the Tennessee Supreme Court which faced the issue of "whether allegations of pre-existing conditions covered by the Fund should be regarded as an affirmative defense that is waived if not timely raised by the employer."176 In answering the question, the court relied on prior case law which treated an employee's prior disability as "a cause of action to be raised by the employee" and not an affirmative defense that must be raised by the employer.177 As a result, the employee, not the employer, bears the responsibility of bringing a timely claim against the second Injury Fund and suffering the consequences of an incomplete award if the statute of limitations is not met.178

C. Section 50-6-208(b)

The analysis for the application of the statute of limitations for section 50-6-208(b) differs from its application for 50-6-208(a) claims. For an injury to be covered under section 50-6-208(a), an employee must sustain two injuries that render the employee totally and permanently disabled: the first injury may come from whatever source but the second must be work-related.179 The general rule for 50-6-208(a) claims is that the statute begins to run on the date of the subsequent compensable injury.180 For an injury to be covered under subsection (b) of the second Injury Fund, there must be two work-related injuries which produce awards that exceed one hundred percent.181 As a result, the general rule that the statute begins to run on the date of the subsequent injury still applies, but there might be situations where an employee sustains a subsequent work-related injury prior to the adjudication of a prior work-related injury. In that case, the question becomes whether the statute begins to run from the time of the subsequent injury or from the time of the adjudication of the prior injury.

In Gibson v. Swanson Plating and Machine of Kentucky, Inc.182 the Tennessee Supreme Court faced this question. In Gibson, the employee was diagnosed with black lung disease from his work as a coal miner in Kentucky in 1986, and he filed a worker's compensation claim for that injury in May 1987.183 A week after filing the claim in Kentucky, the employee suffered an additional work-related injury while working on another job in Tennessee.184 The employee filed a claim for the second injury in October 1987.185 In October 1989, the employee received a fifty percent disability award from the Kentucky case.186 Less than a year later, the employee amended his complaint filed in Tennessee to include the second Injury Fund as a defendant in response, and the Second Injury Fund moved to dismiss the claim because it had been filed nearly three years after the second injury.187

The trial court found that the employee did not miss the statute of limitations because the employee filed his complaint within one year of the adjudication of the prior injury.188 The Tennessee Supreme Court affirmed the trial court's verdict that the statute of limitations began to run from the time of adjudication of the prior injury rather than the date of the subsequent injury.189 The court reasoned that an employee cannot realize that he has a claim against the Second Injury Fund under section 50-6-208(b) until such a claim actually arises and, in this instance, that was not until the adjudication of the first compensable injury.190

V. LIMITATIONS OF SECOND INJURY FUND

A. State Funding

Section 50-6-208(c) describes the process by which the Second Injury Fund is to be funded.191 Under that subsection, a tax authorized by section 50-6-401(b) of Tennessee's Workers' Compensation System is the source of funding for the Second Injury Fund.192 Section 50-6-401(b) requires any person, corporation, or organization that is eligible to write workers' compensation insurance to pay a four percent tax on all revenues generated by premiums collected.193

In Brock v. McWherter,194 employees, who had not received full compensation from an award to be paid by the Second Injury Fund, brought a §1983 claim against the governor of Tennessee alleging that the state's inability to maintain sufficient funds in the Second Injury Fund denied them their right to due process.195 Before dismissing the employees' §1983 claim for failure to state a claim, the Sixth Circuit stated that "[i]n sum, we discern no guarantee to plaintiffs that [the] [Second Injury Fund] will not be under funded."196

B. Pneumoconiosis

Courts have found pneumoconiosis, or black lung disease, to be compensable under Tennessee's Workers' Compensation System.197 However, "the Second Injury Fund is not liable for benefits due an employee by reason of the employee's having pneumoconiosis."198

C. Benefits to Dependents in Death Cases

The Second Injury Fund applies to situations where an employee sustained subsequent injuries, but in the case where the subsequent injury results in the death of the employee, the Second Injury Fund is not liable for the benefits to the dependents of the deceased employee.199 In Delashmit v. City of Covington, 200 the employee was a police officer who received an award for a prior injury of forty percent to the body as a whole.201 Subsequent to that injury, the employee died of a heart attack brought on by the stress of his job.202 The court held that the Second Injury Fund applied in cases where the employee was permanently and totally disabled and that the language of the statute did not include death benefits within that definition.203 Although the Second Injury Fund does not provide benefits for dependents in death cases, the workers' compensation system specifically addresses death benefits in section 50-6-210.204

D. Psychological and Emotional Injuries

Subsection 50-6-208(a) applies when "an employee has previously sustained a permanent physical disability."205 The physical requirement of subsection (a) has led at least one court to conclude that emotional or psychological injuries are not physical and, as a result, not covered by subsection (a) of the Second Injury Fund.206 Although subsection (a) specifically requires a physical injury, subsection (b) does not contain the word physical in its description of the injuries that it covers.207 No court has addressed whether emotional or psychological injuries would be covered under subsection (b).

VI. CONCLUSION

With few exceptions, the legislation and litigation surrounding the Second Injury Fund has retained the overriding purpose of encouraging employers to hire injured employees.208 To encourage employers to hire injured employees, Tennessee Code Annotated section 50-6-208 provides incentive by creating the Second Injury Fund to share the liability of a twice-injured employee's disability.209 However, there are two instances where the litigation stemming from section 50-6-208 has produced results adverse to the purpose of the Second Injury Fund.

The first instance is the absence of the knowledge requirement for section 50-6-208(b) cases. The Tennessee Supreme Court held in Sitz that while subsection (a) requires the employer to have knowledge of an employee's prior injuries, subsection (b) does not have the same requirement.210 As a result, the court, looking at the plain language of the statute, could not infer such a knowledge requirement.211 However, this court's strict construction of subsection (b) runs contrary to the legislative mandate that the workers' compensation system should be liberally construed to effectuate the purposes of the statutes.212 The result of Sitz disregards the purpose of the Second Injury Fund by failing to impose a knowledge requirement which provides the necessary encouragement for employers to hire injured employees. Subsection (b)'s omission of the language necessary to impose a knowledge requirement could indicate a simple legislative oversight. Another explanation for its omission, as Justice Drowota argued in his dissent to the Sitz decision, is that the legislature intended to carry the knowledge requirement of subsection (a) forward to subsection (b) as the legislature intended for other requirements appearing in subsection (a) but not in (b).213

The second instance of case law producing results contrary to the purpose of the Second Injury Fund is the duration of employer liability for the employee's second injury. In Watt,214 the Tennessee Supreme Court held that in subsection (a) cases, the trial court must find the employee to be totally and permanently disabled, and that finding requires the employer to be liable to the employee "based on a percentage of the total number of weeks" until the employee reaches retirement.215 In subsection (a) cases, the employer is liable for a percentage of disability attributed solely to the second injury.216 In Watt, the second injury was a loss of the employee's leg which would render the employer liable for only 200 weeks of compensation under Tennessee's usual workers' compensation system.217 However, Watt required the employer's liability for a percentage of weeks until the employee's age of retirement because the employee's second injury, combined with a prior injury, rendered the employee permanently and totally disabled.218

As Justice Holder recognized in her dissent, extending the employer's liability beyond that of the regular workers' compensation system creates an incentive for employers not to hire previously injured employees.219 While an employer's liability is less than it would be under the full responsibility rule, that is liablity for the employee's total disability,220 the purpose of encouraging employers to hire previously injured employees is not being achieved. A solution that would avoid the harshness of the full responsibility rule and the disincentive created by the Watt decision is to determine liability according to subsection (a) and hold the employer liable "only for the disability that would have resulted from the subsequent injury."221 The finding of the disability resulting from the second injury should not include the employee's resulting disability from the combination of prior and subsequent injuries in determining the duration of the employer's liability. Rather, the Second Injury Fund should be liable for the remaining duration of liability of the total disability of the employee that exceeds the liability stemming from the second injury.222

DAVID G. MCDOWELL*

* Managing Editor, The University of Memphis Law Review 20022003; J.D., cum laude, 2003, University of Memphis, Cecil C. Humphreys School of Law; B.A., 2000, Furman University. The author is currently serving as a judicial clerk for the Honorable David R. Farmer of the Tennessee Court of Appeals. The author would like to thank Professor Sam L. Grain, Jr. and R. Linley Richter, Jr. for their invaluable insight and assistance in the writing of this note.

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