California: Court of Appeal Reverses W.C.A.B. Ruling on Res Judicata

California: Court of Appeal Reverses W.C.A.B. Ruling on Res Judicata

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The 2nd Appellate District has ordered publication of an opinion previously issued as unpublished which provides important clarification of the rights of the California Insurance Guarantee Association C.I.G.A.) in its pursuit of contribution/restitution rights against solvent carriers. In this case, State Farm v W.C.A.B. the appellate court ruled C.I.G.A.’s failure to seek review of an order rejecting its claim for reimbursement and later asserting essentially the same right at a different stage in the proceedings. The Court determined C.I.G.A.’s failure to appeal the original order precluded its ability to seek reimbursement at a later stage under the doctrine of res judicata (“the thing is decided”). State Farm Gen. Ins. Co. v. Workers' Comp. Appeals Bd., 2013 Cal. App. LEXIS 592 (Cal. Ct. App. 2013) [2013 Cal. App. LEXIS 592].

In this matter the employee was working as a personal assistant to the president of a company insured by Fremont Indemnity and Paula Insurance Company (now both insolvent). Several years into the claim, State Farm was joined into the proceedings on the basis the employee was a domestic/residential employee of the company president (whose homeowner’s coverage was provided by State Farm) and not employed by Fremont/Paula’s insured. At a hearing on 3/15/2002, the parties entered into joint stipulations which compromised the issue of coverage and State Farm agreed to contribute 25% of the overall benefits to Paula who agreed to administer the award. Fremont’s status was deferred. In June of 2002 and July of 2003, Paula Insurance and Fremont respectively were liquidated and their liabilities were taken over by C.I.G.A.

In Sept of 2003, C.I.G.A. petitioned to be dismissed arguing Paula Insurance Company was not the proper defendant as the employee was a domestic/household employee. State Farm opposed the request on the basis that the issue had already been resolved and that the 3/15/2002 stipulated award was binding on C.I.G.A. The record at the W.C.A.B. does not indicate any final action on this petition. However 5 years later in February, 2008, C.I.G.A. sought to be relieved as administrator raising essentially the same arguments that State Farm was “other insurance” under Insurance Code § 1063.1 sufficient to make the claim against C.I.G.A. a non-covered claim and further arguing that the applicant was a domestic employee which required coverage by State Farm and not Paula/C.I.G.A.

On April 4, 2008 the WCJ ruled against C.I.G.A.

"Labor Code section 5804 [LC 5404]confers limited power upon the Board to rescind, alter or amend its Awards. That power is limited by the statutory language as to time and as to content. Specifically, that Section states 'that after an award has been made finding that there was employment and the time to petition for a rehearing or reconsideration or review has expired . . . , the appeals board upon a petition to reopen shall not have the power to find that there was no employment.' This includes determination of the identity of the employer previously determined by the Award. [¶] Neither does the subsequent liquidation of the Paula Insurance Company and Fremont Indemnity . . . permit CIGA to upset the final legal determination as to employment. . . . [¶] In essence, CIGA avers that it is not bound by the Award entered against the then-solvent carriers for which CIGA is now responsible to the extent the Insurance Code requires. [¶] No determination is made as to the extent of CIGA's ultimate liability under the March 15, 2002 Award. It is found nevertheless that the Award binds CIGA."

No appeal was filed from this order but 2 months later C.I.G.A. again filed a petition for reimbursement and change of administrator raising the same arguments. State Farm raised the issue of res judicata arguing C.I.G.A.’s failure to appeal the 4/4/2008 ruling precluded it from relitigating the same issue. The trial judge determined C.I.G.A. was bound by its prior stipulation in 2002 and further was now precluded from relitigating the case as it had allowed the 4/4/2008 ruling to become final. C.I.G.A. did appeal this decision but the W.C.A.B. upheld the trial judge’s decision and denied C.I.G.A.’s appeal. C.I.G.A. did not appeal to the next level (the Court of Appeal).

In 2010 the case in chief proceeded to hearing on the usual issues of PD, Future medical care and an EDD lien. An award issued granting PD and future medical care against C.I.G.A. (the Award to EDD was later reversed). C.I.G.A. once again appeal arguing the award should have been made jointly against State Farm with State Farm obligated for all benefits to the applicant based on Ins. Code 1063.1. The W.C.A.B. granted reconsideration to correct some clerical errors (including the award to EDD) but denied C.I.G.A. its relief citing the prior unappealed awards which were now final. Once again C.I.G.A. did not appeal the W.C.A.B. determination further and the decision became final.

Undeterred by having litigated the issue of employment and reimbursement 3 times and having allowed all 3 decisions to become final, C.I.G.A. raised the issue again in April, 2011 asserting there as a dispute between it and State Farm. Once again the WCJ ruled C.I.G.A. was bound by the finality of the 3 prior decisions and denied its request for relief. However the W.C.A.B. granted reconsideration as noted the Court of Appeal in its opinion “notwithstanding its contrary decision 11 months earlier”. The W.C.A.B. ruled C.I.G.A. was not a party to the stipulation and its right to seek reimbursement was not barred by either the stipulation nor the now 8 year lapse in time from the original award. The W.C.A.B. further determined there had been no final decision on C.I.G.A.’s petition for reimbursement as held by the WCJ. State Farm filed a Petition for Reconsideration of the W.C.A.B. decision allowing C.I.G.A. to proceed which was denied by the W.C.A.B. Appeal to the 2nd district followed.

The Court framed the issue in terms of whether C.I.G.A. was barred from relitigating the case against State Farm. C.I.G.A. argued none of the prior determinations addressed C.I.G.A.'s right to reimbursement however the Court of Appeal disagreed:

“In 2008, CIGA filed a formal "Petition for Reimbursement," requesting resolution of the question whether the homeowner's insurance policy qualified as "other insurance" to make the claim against CIGA a non-covered claim under Insurance Code section 1063.1 [IC 1063.1]. The WCJ found the WCAB lacked jurisdiction to rescind or alter the 2002 stipulated settlement agreement and that CIGA was bound by it. In 2009, CIGA again asked the WCJ to resolve the questions whether it should be dismissed pursuant to Insurance Code section 1063.1 because "other solvent insurance" was available, whether joint and several liability existed for State Farm, and whether administration of the claim should be changed. On October 15, 2009, the WCAB adopted the WCJ's findings that CIGA was bound by the 2002 stipulated settlement and barred by laches from attempting to avoid it. Finally, on January 18, 2011, the WCAB rejected CIGA's contention that liability should be re-allocated to State Farm because State Farm was jointly and severally liable for the applicant's injuries. Contrary to CIGA's contention, its entitlement to reimbursement was expressly raised in these proceedings in 2008, 2009, and 2011, and determined adversely to it. CIGA did not seek judicial review of any of these decisions. Consequently, these decisions have become final and conclusive. CIGA is barred by res judicata from relitigating its right to reimbursement.

The Court also addressed C.I.G.A.’s claim that it right to reimbursement was statutory and could not be abrogated:

“CIGA adds that its right to reimbursement is statutory and it has no statutory liability for claims covered by other available solvent insurance. (Ins. Code, § 1063.1, subd. (c)(9).) CIGA argues that State Farm's agreement to pay 25 percent of the applicant's benefits does not "trump" CIGA's statutory obligations.

We need not address the ultimate question of whether State Farm is jointly and severally liable for 100 percent of the applicant's claim, or whether its homeowner's insurance policy is "other insurance" under Insurance Code section 1063.1, subdivision (c)(9), because CIGA did not preserve its right to pursue these issues. Right or wrong, the WCJ's decision in 2008, and the WCAB's 2009 and 2011 decisions are final, and CIGA may not invoke the jurisdiction of the WCAB or this court to review the lawfulness of those decisions.”

The Court reversed the W.C.A.B.’s ruling and remanded for further proceedings consistent with its award.

COMMENTS AND CONCLUSIONS:

There are several unusual aspects to this case, not the least of which is this represents one of the few defeats suffered by C.I.G.A. in an appellate case in the past dozen or so years. However the circumstances are rather unique as it is somewhat unusual (at least in my experience) that C.I.G.A. allows any adverse decision to become final without appealing as far as necessary to obtain a reversal. Based on the courts descriptions of events, it certainly appears the issues of reimbursement and Ins Code 1063.1 was raised repeatedly and were repeated rejected by the WCJ and the W.C.A.B.

Don’t count on this happening too often. It is going to take these kind of unique circumstances for C.I.G.A. to not get its way in a case where a codefendant has agreed to a 25% contribution. We may not see another one anytime soon.

© Copyright 2013 Shaw, Jacobsmeyer, Crain & Claffey PC. All rights reserved. Reprinted with permission.

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