Monday, August 24, 2009
City, Not Injured Officer, Held Entitled to Settlement Over Fight
C.A. Ruling on CIGA Payment ‘Does Not Seem Fair,’ but Is Legally Compelled, Presiding Justice Writes
By KENNETH OFGANG, Staff Writer
A payment made by the California Insurance Guarantee Association after it steps into the shoes of a third-party tortfeasor’s insurer is credited against the liability of an injured worker’s employer for workers’ compensation benefits, the Third District Court of Appeal ruled Friday.
In a result that its presiding justice said in a concurring opinion “does not seem fair,” the court affirmed the Workers’ Compensation Appeals Board’s ruling in favor of the city of Stockton. The ruling entitles the city to credit against future benefits for the $50,000 settlement that CIGA agreed to pay a police officer injured in a fight with a suspect, less costs and attorney fees.
The officer, Lance Baur, was injured in an August 2003 altercation with Richard Thomas Beck. His suit against Beck was settled with CIGA after Beck’s insurer, Vesta Fire Insurance Company, became insolvent.
The city, which had paid Baur more than $70,000 in benefits, filed a lien against the proceeds of the lawsuit, which it released as part of a mediated settlement agreement signed by Baur, Beck, their respective attorneys and a representative of CIGA.
The city then notified Baur, however, that it was entitled to a $50,000 credit against future benefits because of the settlement. Baur objected, citing an Insurance Code provision prohibiting subrogation on a settlement paid by CIGA.
The workers’ compensation judge allowed the credit, citing Labor Code Sec. 3861, which provides:
“The appeals board is empowered to and shall allow, as a credit to the employer to be applied against his liability for compensation, such amount of any recovery by the employee for his injury, either by settlement or after judgment, as has not theretofore been applied to the payment of expenses or attorneys’ fees...or has not been applied to reimburse the employer.”
In seeking review in the Court of Appeal, Baur argued that requiring him to pay for his future medical costs with money received from CIGA would violate portions of Insurance Code Sec. 1063.1 excluding subrogation claims and claims “covered by any other insurance” from the definition of “covered claims” payable by the guarantee association.
Justice Ronald Robie, joined by Presiding Justice Arthur Scotland and Justice Vance Ray, disagreed. Robie emphasized the “any recovery” language of Sec. 3861.
“This means the city is entitled to a credit whether the tortfeasor’s insurer was a solvent company or CIGA and whether the recovery was for general or special damages,” the justice explained. “The effect of this credit provision is to reduce the cost to the workers’ compensation system by making the employee apply any net recovery to pay for future medical costs tied to his injury.”
He cited a 1987 ruling by the WCAB that the company that paid workers’ compensation death benefits to the widow of a truck driver killed in an accident was entitled to credit against the settlement that the widow received from CIGA after the other driver’s insurer failed.
The purpose of Insurance Code Sec. 1063.1, he explained, is to “protect CIGA’s coffers by allowing CIGA to remain an insurer of last resort.” Once CIGA pays a settlement or judgment, Robie allowed, its coffers are no longer at risk, so the statute’s purpose is not frustrated by the allowance of credit to the employer against future benefits.
“Had Vesta remained solvent, Labor Code section 3861 unquestionably would have applied and the city would have been entitled to a credit in the amount of Baur’s net recovery of $30,909.44,” the jurist wrote. “There is no basis in law for a different result just because Beck’s insurer was insolvent.”
In his concurrence, Scotland acknowledged the apparent unfairness of the situation in which an employee—whose general damages are paid by the employer through the workers’ compensation system, but who can collect special damages only from the tortfeasor—has negotiated for those damages but “could end up with no such compensation.”
That result, unfair as it may be, is compelled by the statute, the presiding justice said.
Citing 10 of his prior opinions, Scotland wrote:
“As I have often said, if there is a flaw in a statutory scheme, it is up to the Legislature, not the courts, to correct it.”
The case is Baur v. Workers’ Compensation Appeals Board, 09 S.O.S. 5109.
Copyright 2009, Metropolitan News Company