CIGA and Competing Public Policies

I'm sure that the good people that work at the California Insurance Guarantee Association (CIGA) are busy folks, but someone there needs to get a good diary system to avoid losing meritorious cases on procedural lapses due to expiration of time limits.

Follow these facts and let me know if you don't agree that CIGA has some file management issues.

JoAnn Lutz suffered industrial injuries in 1999 and 2000 while working as a personal assistant and caregiver for Linda McDonald, one of the owners of Roto Rooter. Lutz injured her right shoulder, neck and back, as well as the right side of her head, right upper extremity and right lower extremity in both accidents, which involved falls at McDonald's home.

The Paula Insurance Co. and the Fremont Insurance Co. carried coverage for Roto Rooter at that time, and State Farm provided homeowners insurance to McDonald.

Paula, Fremont and State Farm stipulated to the compensability of Lutz's injuries in 2002, and State Farm agreed to contribute 25% of the benefits payable to Lutz.

Paula and Fremont, however, were liquidated shortly after the agreement, and CIGA assumed liability for their covered claims.

Under the Insurance Code, CIGA is liable for "covered claims" of insolvent member insurers, but code Section 1063.1(c)(9) says the phrase "covered claims" does not include any claim to the extent it is covered by any other insurance policy.

In September 2003, CIGA petitioned to be relieved from the obligations incurred by Paula as part of the stipulated award since Paula had not provided workers' compensation coverage for residential or domestic employees of Roto Rooter.

Though State Farm opposed the petition, the parties took no further actions related to CIGA's petition.

Five years later (what caused this to happen?), CIGA filed another petition to be relieved of its obligations to Lutz, and that request was heard by a workers' compensation administrative law judge on April 4, 2008.

The judge denied CIGA's position, concluding that the WCAB lacked jurisdiction to rescind or alter the stipulated award because more than five years had passed from its issuance.

No party appealed from or sought reconsideration of that decision.

In June 2008, CIGA again sought to discharge its liability, asserting that State Farm's policy to McDonald provided "other insurance" to cover Lutz's claim. A workers' compensation administrative law judge rejected CIGA's motion, ruling the nonappealed April 2008 decision had become the law of the case.

CIGA petitioned the WCAB for reconsideration and removal of the judge's ruling, but the board denied CIGA's petition in September 2009. Again, CIGA did not seek judicial review of that decision.

In January of 2010, CIGA proceeded to trial on Lutz's claim of permanent disability, future medical treatment, a lien claim by the Employment Development Department and other related issues.

The workers' compensation administrative law judge determined that Lutz had a permanent disability of 39% and ordered CIGA to pay for her future medical treatment.

CIGA sought reconsideration, arguing again, that State Farm should be jointly liable for all the benefits due to Lutz.

The judge recommended that reconsideration be granted in part to correct certain miscalculations he had made in the amount of permanent disability and to eliminate CIGA's obligation to reimburse the EDD. However, he recommended denial of CIGA's reconsideration petition in all other respects.

The WCAB adopted all of the judge's recommendations, and once again, CIGA did not seek judicial review.

In April 2011, CIGA filed a declaration of readiness, renewing the issue of reimbursement. A workers' compensation administrative law judge held a hearing and then denied CIGA's request for trial of its claim for reimbursement and/or contribution from State Farm.

The judge found that the respective liabilities of the parties had previously been finally determined and could not be "relitigated by way of seeking contribution or reimbursement."

CIGA then petitioned the WCAB for reconsideration, and this time, curiously, the WCAB reversed.

The WCAB reasoned that the 2002 stipulated award did not change State Farm's joint and several liability to Lutz "because agreements between employers and/or their insurers cannot diminish or eliminate an applicant's right to recover benefits from the employers and insurers that are jointly and severally liable for the injury."

The board further posited that when Fremont and Paula became insolvent, State Farm became "available" to Lutz as "other insurance" under Insurance Code Section 1063.1(c)(9).

Finally, the WCAB concluded that there was no basis for denying CIGA's petition for reimbursement on the grounds of res judicata or collateral estoppel, since there had been no earlier final decision on CIGA's petition to obtain reimbursement from State Farm.

Well, at least CIGA was persistent. But persistence in the face of procedural rules and limitations on time only go so far, as it found out when State Farm petitioned for writ review in April.

On appellate review, the 2nd District Court of Appeal (DCA) determined that CIGA's entitlement to reimbursement was expressly raised in the proceedings in 2008, 2009 and 2011. Since CIGA did not seek judicial review after adverse decisions were returned, the court said those decisions were final and conclusive.

Thus, "CIGA is barred by res judicata from relitigating its right to reimbursement," the court said.

The 2nd DCA acknowledged the public policy behind the Insurance Code's limitation on CIGA's liability, but it said that this public policy could not outweigh the public policy interests in an expeditious and inexpensive system of workers' compensation as well as the importance of there being an end to litigation.

The case is State Farm General Insurance Co. v. WCAB (Lutz), No. B240742, 07/01/2013, unpublished.