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Kamin: More Policy Exclusions Would Reduce Losses

  • State: California

Insurance carriers could be saving millions of dollars by properly using exclusions to bar coverage for staffing agencies, thanks to a published decision from 2019.

John P. Kamin

John P. Kamin

The 2nd District Court of Appeal’s decision in Travelers Property Casualty Co. of America v. WCAB (Mastache) provides a way for insurance companies to avoid liability for staffing agency employees. In the case, the appellate court ruled that an endorsement, aka exclusions of staffing agency employees, can withstand judicial scrutiny and bar coverage for staffing agency employees. The ruling was premised upon the following fact pattern:

  • If the staffing agency (aka the general employer) sends a staffing agency employee over to a special employer, and the special employer’s insurance policy has an exclusion on a form approved by the Department of Insurance that excludes coverage for the staffing agency, then the exclusion is valid if it is signed by both parties.
  • Exception: If the exclusion is unsigned, additional evidence can be used to prove intent to exclude coverage for the staffing agency. (Example: The additional evidence could be an LC 3602(d) contract or some other documentary or witness evidence.)

The use of exclusions to bar coverage for staffing agency employees dates to the late 2000s, as appellate courts began to focus on the practice in various coverage disputes.

Even after that, case law still favored the California Insurance Guarantee Association when a staffing agency, aka the general employer, would report that its workers’ compensation carrier was insolvent. When that happened, CIGA would point the finger at the alleged special employer and argue that its carrier was “other insurance.”

That worked well for CIGA until the Mastache decision came along, which was one of the first cases to rule against the association under that fact pattern. Suddenly, carriers that disclaimed coverage for staffing agency employees on state-approved endorsements had a published case they could use to defeat CIGA’s “other insurance” arguments.

View from the ground level

Workers’ compensation defense attorneys will tell you that we still do not see enough endorsements or exclusions barring coverage for staffing agencies. We would like to see more of these, and it appears that this is one area that insurers could improve upon.

For insurers, it is difficult because their insureds are not always honest about the use of staffing agencies. Practically speaking, the more insurers can touch base with their employers to question the use of staffing agencies, the better off they will be.

These endorsements that exclude coverage would be well-served to disclaim coverage for specific staffing agencies by name. The more specific the exclusions are, the higher the probability it will withstand judicial scrutiny.

The other area underwriters will want to focus on is ensuring that they are using the latest state-approved endorsements that exclude coverage. That can be a bit confusing because the forms have evolved over the years.

Still, it’s a piece of the puzzle that is worth the time and energy to focus on, because doing so could avoid liability for hundreds, if not thousands of claims per year.

If I had a dollar for every time someone said CIGA’s “other insurance” argument was disproportionately unfair to other carriers and employers, I could probably afford to start my own staffing agency.

On the bright side, the Mastache decision does even the playing field when fighting with CIGA or the Uninsured Employers Benefits Trust Fund.


Insurers, please talk to your employers about the staffing agencies they are using. Next, use a state-approved endorsement to disclaim coverage for any staffing agencies you don’t want to provide coverage for. This will save you big bucks in the long run.

John P. Kamin is a workers’ compensation defense attorney and equity partner at Bradford & Barthel’s Woodland Hills location. He is WorkCompCentral's former legal editor. This entry from Bradford & Barthel's blog appears with permission.

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