Ms. Lopez resolved her workers' compensation claim by entering into a compromise and release agreement with Care West and Ullico for $15,000. No lien claimant participated in the settlement.

In the compromise and release agreement, the insurers stipulated they would “pay, adjust, or litigate all liens of record,” would “share equally for liability for med-legal charges,” and would allocate 52 percent of liability for the treatment charges to Care West and 48 percent to Ullico, “according to proof and with rights to contribution and reimbursement between the two being reserved.”

The workers' compensation administrative law judge (“WCJ”) approved the compromise and release, including the insurers' stipulation apportioning liability, and issued an award in Ms. Lopez's favor for $15,000.

Ullico, however, became insolvent and was liquidated and responsibility for third party claims against it was assumed by the California Insurance Guarantee Association (“CIGA”), which the California legislature had established in 1969 to protect against loss to insureds “arising from the failure of an insolvent insurer to discharge its obligations under its insurance policies.”

CIGA subsequently filed a petition for dismissal from the workers' compensation case, arguing that all lien claims were excluded from CIGA's mandate by Insurance Code Section 1063.1(c)(9), which prohibited 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 Ms. Lopez's injury, its policy constituted “other insurance” that covered 100 percent of any outstanding claims notwithstanding the insurers' compromise and release agreement apportioning liability.

Care West objected to CIGA's petition, arguing that the insurers' apportionment of liability limited Care West's liability to 50 percent of any remaining legal-medical charges and 52 percent of any remaining medical charges. Therefore, Care West argued, CIGA was liable for 50 percent of any outstanding legal-medical charges and 48 percent of any outstanding medical lien claims.

The WCJ denied CIGA's petition, finding that the compromise and release agreement operated as a final judgment apportioning liability between the insurers and was binding on CIGA as Ullico's successor.

CIGA petitioned for reconsideration from the Workers' Compensation Appeals Board. The WCJ recommended denial of the petition.

The board denied reconsideration, holding that “insurers are not jointly and severally liable where they have entered into a stipulation as to apportionment of liability between them.” The board said that, “[i]n essence,” after the stipulation, liability was “no longer joint and several, but [was] rather divided between the insurers in accordance with the stipulation.”

The dispute reached a California court.

The Court's Decision

The court reversed the board's ruling.

In its decision, the court ruled that the Care West/Ullico compromise and release agreement did not relieve Care West of its liability for third party claims.

In its decision, the court explained that if two or more insurers provided workers' compensation coverage for a cumulative injury, they were jointly and severally liable for claims arising from that injury. When two or more insurers were jointly and severally liable for workers' compensation benefits, the court continued, and one of them became insolvent, the policy issued by the solvent insurer constituted “other insurance” for purposes of Insurance Code Section 1063.1(c)(9).

Because Care West and Ullico were jointly and severally liable for lien claims relating to Mr. Lopez's injury, Care West's insurance constituted “other insurance” for purposes of CIGA's mandated statutes, and lien claims relating to Mr. Lopez's injury could not be covered claims, the court reasoned.

Several liability, the court concluded, had “nothing to do with,” and could “not be changed by, apportionment of an obligation between promissors.”

The case is California Ins. Guarantee Ass'n v. Workers' Compensation Appeals Board, No. B263869 (Cal. Ct.App. March 22, 2016). Attorneys involved include: Guilford Sarvas & Carbonara, Frank E. Carbonara, Richard E. Guilford; Benthale, McKibbin & McKnight, Robert A. Mata for Petitioner; Anne Schmitz, James T. Losee, Margaret W. Hosel for Respondent Workers' Compensation Appeals Board.