George The Bartender – CIGA, A Change of administrator and Labor Code §5803

Still working from home, yesterday my wife Nancy, my dog Freeway and I were out for a stroll, taking advantage of a warm and sunny winter afternoon. As frequently happens, we ran into our friend and neighborhood applicant attorney extraordinaire, Steve Brewberry, and his dog Litigate. 

As infrequently happens, our dogs had a disagreement about smelling each other and personal space, so Nancy took Freeway up the street. I stayed behind to chat shop with Steve. Litigate, having settled down now, instinctually knew this was going to take some time and decided to sit down. 

Steve said something crazy was happening with one of his old cases, where CIGA was trying to take action, which spooked his client. In this case his client broke her neck in 2000. Ten years, three-neck surgeries and numerous PTPs and QMEs later, the carrier stipulated to 99% permanent disability (PD) and future medical for her injured neck. 

Extensive treatment continued each year well into 2019, when the carrier went into liquidation. The California Insurance Guarantee Association (CIGA) then took over the liquidated carrier’s claims. Steve closed his file after his fees were paid in 2010 and it had been destroyed in 2018. He had heard nothing from his client until just recently. 

The client told Steve that the applicant had received high-quality and extensive treatment all this time. Even though CIGA took over the claim, treatment continued uninterrupted. Nothing had been denied by utilization review (UR). 

However, in 2020 CIGA petitioned to join another insurance carrier. Steve’s client received a copy of that petition in the mail and the proof of service showed service on Steve as well. Steve at the time though had not seen it. Last week the client received a second petition from CIGA in the mail. This time it was a Petition to Change Administrator, dated February 1, 2021. This scared the client and she phoned Steve. 

As it turns out Steve had not seen the original petition or the subsequent one because his assistant could not find a digital file under the applicant’s name, as all records of the case had been deleted in 2018.  She therefore had not scanned it as new mail. After hearing from his client, Steve asked his assistant about it. The assistant had it on his desk but had forgotten to mention it to Steve. At Steve’s request, the Petition was scanned and emailed to him just minutes before he and I ran into each other. 

“What the heck is CIGA trying to do?!” shouted Steve. “There is a final Award with open medical. Treatment has continued since the injury even through the liquidation of the carrier up to the present. CIGA is bound by that Award! The WCAB has no jurisdiction to get them out from under it. Labor Code §5804 says five years from the date of injury the Award became final. The Award may not be altered, amended, or rescinded!”

Something in Steve’s rant struck me, as I realized that perhaps he had overlooked something in his angry and cursory analysis of the facts before him. Doing my best to walk Steve back from the precipice I said in my calmest voice, “Take a deep breath for me. In. Out. Great. Now realize what I am about to tell you comes from a place of mutual respect and friendship. As you know, I handle a lot of CIGA cases. I am into defending CIGA. Some might even say I am pro CIGA. However, despite my allegiances trust what I am about to say - CIGA should be permitted to this change of administration of the medical benefits to the solvent carrier if one in fact does exist from the time of the applicant’s injury.” 

Steve had calmed down some but here he gave me a quizzical look. I told Steve that there is much compelling authority for this. In fact a WCAB panel released an opinion in a similar CIGA case defended by our firm - Morales v. Novestaff Resource Group/Essential Personnel; California Insurance Guarantee Association, For Castlepoint National Insurance Company, In Liquidation; United States Fire Insurance Company, Administered by Crum Forster Orange ADJ7041107 decided on September 4, 2020. 

At this point Litigate was sleeping at Steve’s feet, though he was briefly startled by Steve’s shouting yet managed to again doze off. Nancy and Freeway were down the street talking to some people who had stopped to admire Freeway. It was here that I began my dissertation on Morales for Steve. 

In Morales the applicant had injured his lower back in 2009 stocking shelves by hand in a warehouse. A staffing agency paid the wages and had placed Morales at the warehouse. In this general-special employment situation, the general employer was the staffing agency. The special employer was the warehouse.  

In 2015 the insurance carrier for the staffing agency stipulated to liability for the applicant’s injury while employed by its insured, the staffing agency, while working in the warehouse. The Stipulations and Award specified that the insurance carrier was liable for future medical treatment. In 2017 the insurance carrier became insolvent and went into liquidation. Its files were transferred to CIGA, which took over the administration of future medical treatment for the applicant. 

In 2019 CIGA petitioned to join the insurance carrier for the special employer (the warehouse) and the third-party administrator. CIGA cited as evidence in support of their petition the 2010 deposition of the applicant where he testified he was assigned to this particular warehouse on the date of injury. CIGA argued that the carrier for the special employer was “other insurance” under California Insurance Code §1063.1(c)(9), which states in relevant parts as follows: 

“Covered claims” does not include (A) a claim to the extent it is covered by any other insurance of a class covered by this article available to the claimant or insured …

Steve looked even more perplexed at this point, so I explained to him in plain English this means that when other insurance is available, CIGA is statutorily prohibited from paying benefits. In our case CIGA’s petition was granted and the insurance carrier for the special employer was joined.  

CIGA then sought to change the administration of the future medical to the joined carrier for the special employer on the date of injury. CIGA and that carrier went to trial on May 20, 2020, on the issue of liability of the general employer versus the special employer. Only CIGA offered exhibits, five, which were listed in the Minutes of Hearing. However, they were not the same as the five exhibits in the Electronic Adjudication Management System (EAMS) FileNet. 

The workers’ compensation judge (WCJ) issued a Findings and Award on June 15, 2020. They found that the solvent carrier for the special employer was not liable to administer the medical benefits for the 2009 injury currently being provided by CIGA. The WCJ held that, just as Steve thought, the five-year jurisdictional limit of Labor Code §5804 barred the change of administration, which states in relevant parts as follows:  

No award of compensation shall be rescinded, altered, or amended after five years from the date of the injury except upon a petition by a party in interest filed within such five years … 

The WCJ reasoned that Labor Code §5804 prohibited this particular change of administration because the change would require the WCAB to alter, amend, or rescind the prior Award against the general employer and its now liquidated carrier, whose liabilities had been assumed by CIGA.

CIGA then filed a Petition for Reconsideration. In their Report and Recommendation on Petition for Reconsideration the WCJ argued their application of Labor Code §5804 furthered the public policy in favor of expeditious and inexpensive resolution of workers’ compensation cases and thus CIGA’s petition should be denied. 

At this point loyal Home Bar patron Steve looked elated, as he figured this was where my story ended. Sadly, I told him that was not the case. 

I explained to Steve that the Appeals Board (WCAB) held that the change of administrator was in fact allowed. CIGA was not seeking to “alter, amend or rescind” the stipulated Award. The WCAB held that an order changing the administrator of an Award is actually considered an enforcement issue covered under Labor Code §5803 (which has no time limit) and does not “alter, amend or rescind” the Award. Labor Code §5803 states in relevant parts as follows:

The appeals board has continuing jurisdiction over all its orders, decisions, and awards made and entered under the provisions of this division …  At any time, upon notice and after an opportunity to be heard is given to the parties in interest, the appeals board may rescind, alter, or amend any order, decision, or award, good cause appearing therefor. (emphasis added)

The WCAB cited five cases in support of their decision. The relevant issues in three of them - Key, Aceves, and Stickle - included facts similar to Morales, which made them persuasive in helping the WCAB reach their decision. 

In their decision the WCAB also distinguished the facts of our case from Lutz, which the WCJ had cited in support of their initial finding. In Lutz CIGA was seeking reimbursement from other insurance, State Farm, for a stipulated Award after taking over the administration of an applicant’s claim. Over the course of nine years CIGA “consciously raised and litigated its entitlement to reimbursement from “other insurance,” which included attempts at dismissal and change of administration, which ultimately failed. 

The dagger in CIGA’s case in Lutz was a failure to seek reconsideration of an order issued by the WCJ against their position in 2008 stating that there was no jurisdiction to rescind or alter the prior stipulated Award. Though in 2011 the WCAB ruled in favor of CIGA and their right to peruse reimbursement and, in 2012, denied State Farm’s Petition for Reconsideration. State Farm then petitioned the California Court of Appeal, which found that “right or wrong” since CIGA did not seek judicial review of the 2008 order, the lack of jurisdiction had become final and conclusive.

In Morales the WCAB pointed out that Lutz was not a denial of CIGA’s right for a change of administration barred by Labor Code §5804. Rather, it was barred by res judicata, i.e. a matter that had been adjudicated by a competent court and may not be pursued further by the same parties.

Steve’s eyes had begun to glaze over a bit and Litigate was snoring. I decided to draw my dissertation to a close, explaining to Steve that although the WCAB did rescind and remand the matter back to the trial level in Morales, it did not do this because it disagreed with CIGA’s contentions. Rather, the WCAB remanded the case for several reasons. There had been no holding regarding the general-special employment relationship which was specified to be the issue for trial. The exhibits were messed up. Therefore, the record was incomplete. 

I told Steve that he and his client and the recently-joined solvent carrier for the special employer were unlikely to stop CIGA from changing administration, but Steve’s client’s benefits would presumably not be affected. 

Steve snapped to at this and said, “Oh my God. Please send me that case! I’ll tell my client that benefits will continue uninterrupted until there is a change of administrator. Thanks for taking the time to explain this to me.”

I bid Steve adieu and left him and the still-snoring Litigate to ponder my analysis. I caught up to Nancy and Freeway and we continued on our walk. 

DISCLAIMER: 

All characters at my home bar are fictional and the storyline is simply a product of my lively imagination.

In Morales the WCAB opted to not “make its own finding” because they reasoned it would be a denial of due process. They noted that certain defenses may still be available to the insurer of a special employer, like laches or an endorsement in the special employer’s insurance policy with the solvent carrier in 2000, which excluded employees like Steve’s client who were hired and paid by a staffing agency. No policy may have contained such an exclusion in 2000 though.  

While Morales lacks the designation “significant panel decision,” Joe Truce, formerly a managing shareholder at our firm and creator of George the Bartender, always liked to remind me of one of his favorite portions of the Labor Code, subtitled “Specific Additional Evidence Allowed,” §5703(g) which states in relevant part as follows:

The appeals board may receive as evidence either at or subsequent to a hearing, and use as proof of any fact in dispute, the following matters, in addition to sworn testimony presented in open hearing: … (g) Excerpts from expert testimony received by the appeals board upon similar issues of scientific fact in other cases and the prior decisions of the appeals board upon similar issues. (emphasis added)

He would also draw our attention to California Evidence Code §452(d), which provides that judicial notice may be taken of “Records of (1) any court of this state or (2) any court of record of the United States or of any state of the United States.”

We’re still making our own doubles. May George guide my hand. Bottoms up, friends, and keep washing your hands.

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-Anthony Macauley

Tony Macauley has been a workers' compensation defense attorney since 1988 after he graduated from UC Berkeley and Golden Gate University School of Law. He has been a certified specialist for over 25 years and active with American Bar Association workers' compensation and insurance regulation committees. He presents at national, state and local conferences and webinars. He has written extensively including law review articles, reconsiderations, and appellate briefs. He has been with Kegel Tobin since 2014. This is his second George the Bartender with the neighborhood storyline. GTB is a highlight of his legal career. www.kttlaw.us