So the California Insurance Guarantee Association has joined you to a case (or filed a petition for reimbursement and/or change of administrator). CIGA is demanding reimbursement and insisting that your client take over the case, including administering benefits, discovery and medical treatment. What now? How do you assess the strength of CIGA's arguments?

What is CIGA?

First off, CIGA is a unique entity: It is a legally mandated association of insurers created by California Insurance Code section 1063. It is not a simple "successor in interest" that takes over the entire liability of insolvent carriers. Rather, CIGA has the authority and obligation to pay "covered claims" for such insurers. CIGA's position — which it litigates vigorously and with great success — is that it has no obligation and no authority to pay any claim that is a not a "covered claim."

Covered claims

In most matters in which CIGA is a co-defendant, the key issue is "other insurance." Per Insurance Code section 1063.1, "covered claims" do not include claims for which there is "other insurance." CIGA does not pay any benefit for which another insurer is legally mandated. This means that if the injured worker has the ability to receive benefits from any other comp insurer, CIGA is likely to pursue the "other insurance" doctrine. In cases of ongoing benefits, CIGA can obtain an order of change of administrator compelling another insurer to take over the providing of benefits. Additionally, case law has established CIGA can request reimbursement from "other insurance" if CIGA paid benefits for which another insurer is liable.

Joint and several liability

If CIGA and another insurer have "joint and several" liability to pay benefits, then the other insurer must pay all benefits. CIGA pays nothing. In other words, in any situation in which liability is normally shared or subject to contribution, CIGA pays no benefits; the other liable insurer or insurers must pay all benefits, including what would otherwise be CIGA's share. This primarily comes up in three types of situations:

• Cumulative claims under Labor Code section 5500.5.
• Joint or multiple employment.
• Overlap of periods or parts of body for temporary disability and/or medical treatment.

Cumulative trauma & LC section 5500.5 contribution

Inasmuch as all insurers during a liability period defined by section 5500.5 are jointly and severally liable for all benefits to the injured worker (with, of course, a right of contribution against other insurers), CIGA pays no benefits for CT cases in which another insurer has coverage for any portion of the liability period. CIGA pays for a CT claim when the entire liability period falls within coverage of an insolvent carrier (or carriers) administered by CIGA. Two separate periods of coverage by different insolvent carriers do count against CIGA for this purpose.

Joint or multiple employment

In cases involving general/special employment, temporary agencies, labor contractors and professional employer organizations, all entities with which the injured worker has an employment relationship are jointly and severally liable for benefits. However, liability is to be assigned by means of a contract or service agreement. Nevertheless, if the insurer that would normally be liable for comp benefits becomes insolvent, CIGA's insurance code defenses trump the contract or service agreement. CIGA does not pay if there are any other insured entities having an employment relationship with the injured worker at the time of injury.

Overlap of periods or parts of body for temporary disability and medical treatment

Medical treatment and temporary disability are subject to joint and several liability. Thus, if another insurer is liable for temporary disability or medical for a part of body, then the other insurer must pay the entire benefit. This also applies to the situation in which there is no overlap of body parts but there is overlap of disability periods. For the time period of the overlap, the other employer is liable for the entire TD benefit.

Does all this mean CIGA wins every time?

Definitely not! Although the insurance code, CIGA's unique status and the "other insurance" rule combine to give CIGA rights that other defendants do not have, CIGA still must prove every element of any claim it is asserting, just like any other party holding the affirmative in an action. Specifically, in regard to "other insurance," CIGA must meet its burden of proof.

For cumulative trauma, CIGA must present admissible, substantial evidence demonstrating a period of liability that includes the coverage of "other insurance." The period of liability is the one year before either the last day of exposure to the hazards of employment, or the date of injury under Labor Code Section 5412, whichever comes first.

Under SCIF v. WCAB (Rodarte) (2004) 119 CA4th 998, the 5412 date of injury requires evidence of compensable industrial disability of at least three days' duration, combined with knowledge that the disability is industrial. Therefore, in cumulative trauma cases the attorney defending against CIGA should carefully review the factual and medical evidence to determine whether CIGA can fix the period of liability on the "other insurer." 

Want to move the CT to periods during which CIGA — and only CIGA — has coverage? Definitely review the law on point found in Western Growers v. WCAB (Austin) (1993) 16 Cal. App. 4 th 227; 58 CCC 223.

For joint or multiple employment, CIGA must prove the existence of an actual employment relationship between the injured worker and the special or joint employer. This is based on the factors found in Kowalski v. Shell Oil Co. (1979) 23 Cal.3d 168. The mere assertion that a general or joint employer placed an applicant with the specific work site is not enough. Typically CIGA must show direction and/or control of the applicant's work duties to prevail.

For overlap of periods or parts of body, CIGA must show overlap. This will almost always require medical reporting, and that reporting must qualify as substantial evidence. Conclusory medical opinions or conclusions without a mechanism of causation based on reasonable medical probability will not carry the day.

In conclusion, CIGA has special rights under the Insurance Code, but still holds the burden of establishing each and every element of its position. Assessing a CIGA claim means carefully reviewing evidence to determine if it truly supports the legal position CIGA is taking. Be prepared to test CIGA's case and hold its feet to the fire. Good luck.

Daniel J. Ban is an attorney with Bradford & Barthel, a California workers' compensation defense law firm. This blog post is republished with permission.