NEWS / Legal News - May 2019

Supreme Court Rules that interest is not a penalty and is due any time a payment is delayed

An employee suffered a work injury leaving him permanently and totally disabled. The permanent total disability benefits paid to the employee by the employer and insurer were offset by the amount of Public Employee's Retirement Account ("PERA") retirement benefits. After the employee died, the Minnesota Supreme Court issued decisions in Ekdahl v. Independent School District #213 and Hartwig v. Traverse Care Center. The decisions held that employers and insurers could not offset permanent total disability benefits with PERA retirement benefits. Following these decisions, the insurer issued payment to the employee's estate for the underpaid benefits.
The employee's estate filed a claim for interest on the underpayment and the compensation judge found in the estate's favor and awarded interest.
On appeal, the Minnesota Workers' Compensation Court of Appeals reversed the compensation judge's decision holding that the deadline for issuing the underpayment was determined by Minn. Stat. 176.1292, which the employer and insurer had complied with and therefore no interest was due.
The Supreme Court held that Minn. Stat. 176.1292 deals with employer and insurer liability to the Special Compensation Fund and does not affect the rights of individual employees.
The Court further determined that the interest is not a penalty and is due any time a payment is delayed. In this case, interest would start running each time an underpayment was made until the correct payment was finally made. The interest rate would also vary and would need to be determined on the date of each underpayment.
It is important to make sure that all payments are made promptly. Even if this case, where the employer and insurer could not have known what the Minnesota Supreme Court's decisions in the Eckdahl and Hartwig would be decades later, the employer and insurer were still liable for interest. Clearly, the interest in this case was unavoidable and illustrates that interest will not be excused in any case.

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