On March 22, 2016, the Second District Court of Appeal, Division One, published its opinion in California Insurance Guarantee Assn. v. Workers’ Comp. Appeals Bd., No. B263869, Cal.App.4th, in which it determined that the WCAB may order modification of the obligations for payment of workers’ compensation benefits to be paid to an Applicant or lien claimant, even though the insurers previously apportioned their liability through a judicially approved compromise and release.
Rosa Lopez (Applicant) filed an application for workers’ compensation benefits for a cumulative trauma allegedly arising out of her work as a grocery clerk. During the period of claimed injury, the employer was insured under successive policies issued by two different insurers—Care West Pegasus (Care West) and Ullico Casualty Company (Ullico). As part of their compromise and release agreement with Applicant, the insurers agreed to apportion between themselves the payment to Applicant, and agreed to an approximate 50/50 split of any remaining liens. The workers’ compensation administrative law judge (WCJ) approved the compromise and release.
Approximately a year later, Ullico became insolvent and was liquidated. Pursuant to the Insurance Code, the California Insurance Guarantee Association (CIGA) assumed liability for Ullico’s “covered claims.” But, CIGA petitioned for dismissal from Ms. Lopez’s case, arguing that its obligations for unpaid lien claims were excluded by Insurance Code section 1063.1(c)(9), which prohibits CIGA from paying any “claim to the extent it is covered by any other insurance.” CIGA argued that, because Care West was jointly and severally liable for claims arising from Lopez’s injury, Care West’s policy constituted “other insurance” that covered 100 percent of any outstanding claims notwithstanding the insurers’ C&R agreement apportioning liability.
The WCJ ruled against CIGA. The Workers’ Compensation Appeals Board (Appeals Board), in denying reconsideration, held that “insurers are not jointly and severally liable where they have entered into a stipulation as to apportionment of liability between them.” After the Court of Appeal summarily denied CIGA’s writ petition, the California Supreme Court granted review and remanded the case with directions for the Court of Appeal to hear the matter.
The Court of Appeal analyzed “whether the insurers’ agreement apportioning liability, and the WCJ’s approval of that agreement, rendered the insurers’ liability no longer joint and several.” The court held that it did not—Care West remained jointly and severally liable. The court reasoned that joint and several liability “has nothing to do with, and cannot be changed by, apportionment of an obligation between promisors.” It explained that the joint and several nature of an obligation is a policy-driven rule intended to facilitate a claimant’s recovery from multiple obligors. While contributing carriers will continue to apportion liability between themselves, their apportionment agreement, whether made part of the resolution of a contribution claim or a settlement, or whether before or after payment of any portion of the employee’s claim, is of no consequence to the employee or lien claimant “and can have no effect on the obligations owed to them.”
This decision adds yet another risk factor in the workers’ compensation insurance calculus. Each contributor to a C&R thus effectively insures every other contributor, and there is no contract language that can reduce that risk. The financial stability of any participating contributor is nearly impossible to anticipate by their co-contributors. Thus, mitigating the risk of insolvency on the Applicant or lien claimants by imposing it on co-contributors results in increased and perhaps unappreciated exposure for each contributor.
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