Penalty Against An Insolvent Carrier

Generally this newsletter deals with eases that have been decided by the Court of Appeals.  However, this edition deals with a Writ denied case. Lately, it seems as if there are multiple carriers going into or on the verge of liquidation.  Therefore, this case is important if you are a codefendant on a cumulative trauma case with a carrier that is border line insolvent.

The applicant alleged a cumulative trauma against his employer. The case went to hearing and the Workers’ Compensation Judge (WCJ) issued a Findings and Award and Opinion on Decision. The WCJ found the applicant 100% disabled.  During the period of the cumulative trauma the employer was insured by two insurance carriers.

The WCJ did not issue a joint and several award, but apportioned between the carriers. The WCJ apportioned 75% of the liability to California Compensation and 25 % of the liability to Golden Eagle.  California Compensation was ordered to pay and administer the award and seek contribution from Golden Eagle.

California Compensation failed to pay portions of the award. Applicant then sought multiple penalties for California Compensations failure to pay. California Compensation then became insolvent. It was placed in liquidation. The California Insurance Guarantee Association (CIGA) assumed control of the cases being administered by California Compensation.

The insurer who is primarily responsible for payment of an award is solely responsible for penalties that result from nonpayment of the award.  They are not entitled to contribution from the codefendant who was not ordered to pay.

In Carter v, WCAB (1990) 217 Cal.App.  3d 1359, it was decided that CIGA was liable for penalties for acts that occurred before the carrier became insolvent This case apparently involved a specific injury.

This case involves a cumulative trauma. Therefore, Insurance Code Section 1063.1 ©(9) comes into play.  Since there is more than one carrier Golden Eagle now has to pay the underlying benefits. CIGA would be dismissed pursuant to Insurance Code section 1063.1 ©(9). Therefore, it would appear Golden Eagle is left holding the bag. Golden Eagle will then be responsible for paying the penalty that California Compensation created by not paying timely. It would appear there is no way to alleviate this problem except assuming liability and administering an award in every situation when a carrier feels the other carrier may be on the verge of insolvency.

Case: Golden Eagle tns. V. WCAB (Brown)

Harvey Brown
3501 Jamboree Rd. Suite 602
Newport Beach, CA 92660

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