Cal. Ins. Guarantee Assn. v. San Diego County Schools etc. ( 2019 )

Filed 10/30/19
CERTIFIED FOR PUBLICATION
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
CALIFORNIA INSURANCE GUARANTEE D074360
ASSOCIATION,
Plaintiff, Cross-defendant and
Appellant, (Super. Ct.
No. 37-2016-00004801-CU-IC-CTL)
v.
SAN DIEGO COUNTY SCHOOLS RISK
MANAGEMENT JOINT POWERS
AUTHORITY et al.,
Defendants, Cross-complainants and
Respondents.
APPEAL from a judgment of the Superior Court of San Diego County,
Katherine A. Bacal, Judge. Reversed.
Law Offices of Adrienne Dee Cohen, Adrienne D. Cohen and Julie R. Ursic for
Plaintiff, Cross-defendant and Appellant.
TencerSherman, Sam G. Sherman and Jessica L. Mulvaney for Defendants, Cross-
complainants and Respondents.
School bus driver Colleen Knowles sought workers' compensation from her
employer, Mountain Empire Unified School District (the District). The District is a self-
insured employer under the workers' compensation scheme, and its workers'
compensation claims are administered through the San Diego County Schools Risk
Management Joint Powers Authority (JPA). JPA purchased excess workers'
compensation insurance to cover claims exceeding a set retention. The District is an
additional insured under those policies.
When a dispute over compensation arose, Knowles and the District sought
adjudication before the Workers' Compensation Appeals Board (WCAB). An
administrative law judge ultimately approved their stipulation that Knowles suffered a
"specific" injury on May 6, 2003. The distinction between a "cumulative" and a
"specific" injury matters for determining which of JPA's excess insurance policies was
triggered. As JPA's excess insurer during the stipulated injury date, Kemper Insurance
Company (Kemper) indemnified JPA until it went insolvent. JPA then approached
California Insurance Guarantee Association (CIGA), a statutorily created insolvency
insurer of last resort, to make up what Kemper had failed to pay.
But CIGA is only obligated to pay "covered claims," defined to exclude claims for
which other insurance is available. (Ins. Code, § 1063.1, subd. (c)(9).) On this basis
CIGA denied coverage, asserting Knowles suffered a cumulative injury, which meant that
JPA might recover from a different excess insurer (other than Kemper). CIGA sued JPA
and the District (collectively, defendants) for declaratory relief, asserting that because
Knowles suffered a cumulative injury, JPA's claim was not a "covered claim." In their
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cross-complaint, defendants sought reimbursement from CIGA of benefit payments made
to Knowles after Kemper went insolvent.
Defendants moved for summary judgment on the complaint and cross-complaint.
The trial court granted both motions and entered judgment in their favor, requiring CIGA
to reimburse $129,836.91 plus costs. Central to the court's ruling, and to CIGA's appeal,
is a jurisdictional question: Does the superior court have jurisdiction to find that
Knowles suffered a cumulative injury even if this conflicts with the stipulation before the
WCAB, or is injury characterization an issue within the WCAB's exclusive jurisdiction?
The court granted defendants' motions because it believed the WCAB had exclusive
jurisdiction to decide the nature of Knowles's injury.
Although this issue appears to be one of first impression in California, federal
courts have rejected WCAB exclusivity in similar cases involving excess workers'
compensation insurance. (San Francisco BART Dist. v. General Reinsurance Corp.
(N.D.Cal. 2015) 111 F. Supp. 3d 1055, 1074 (BART I), affirmed (9th Cir. 2017) 726
F.App'x. 562 (BART II); San Diego Cty. Schs. Risk Mgmt. Joint Powers Auth. v. Liberty
Ins. Corp., et al. (2018) 339 F. Supp. 3d 1019, 1030 (Liberty).) For reasons we explain,
we agree with these authorities and conclude based on the purpose of excess insurance
that the superior court has jurisdiction to characterize Knowles's injury in this action
differently than was reflected in the WCAB stipulation. Accordingly, we reverse the
judgment and direct the court to enter a new order denying defendants' motions for
summary judgment.
3
FACTUAL AND PROCEDURAL BACKGROUND
A. Knowles Is Injured and Files a Workers' Compensation Action
Knowles began working for the District as a substitute school bus driver in 1986
and became a permanent driver in 1993. She injured her elbow in 1995 and felt muscle
strain after bus accidents in 1998 and 2002. Her upper body pain seemed to worsen in
2002 and early 2003.
On May 6, 2003, Knowles informed her supervisor that she was experiencing
pain. The supervisor told her to fill out a claim form for workers' compensation benefits.
She did so a week later, listing tendonitis in her right elbow from "repeated usage over a
long period of time [from] 1995 to 2003." Her supervisor filed a contemporaneous report
likewise attributing Knowles's injury to "repeated use over a long period of time."
Following a medical evaluation, Knowles was placed on a modified work schedule in
February 2004. She filled out an amended claim form in March listing tendonitis in her
right elbow and carpal tunnel syndrome in her right wrist, again from "repeated use over
a long period of time [from] 1995−2003."
Knowles worked a modified schedule from February 2004 until her last day on
June 16, 2004. In September, she submitted a third claim form indicating she had
suffered an injury on May 6, 2003, in her "right upper extremity−neck" from driving a
bus. As Knowles would later explain, May 6 was simply the date she reported the pain to
her supervisor, not the date of any specific workplace injury. Medical reports
consistently stated Knowles had pain from "repetitive overuse."
4
On September 3, 2004, Knowles filed an Application for Adjudication before the
WCAB. In its July 2005 answer, the District accepted her right elbow injury but disputed
injuries to her neck and upper extremities. It also disagreed she was injured on May 6,
2003, stating Knowles had instead suffered "CT [cumulative trauma] ending on
05/06/03." Dr. Gregory Mack performed an Agreed Medical Evaluation in 2006 to
resolve disputed issues regarding Knowles's injuries. Knowles continued to seek
treatment over the next several years.
In July 2011, Knowles and the District signed a Stipulation and Request for Award
in the WCAB action. Notwithstanding the District's prior objection, the parties stipulated
that Knowles suffered a "specific injury" on May 6, 2003, to her shoulder, wrist, upper
extremities, and neck. They further agreed on a payment schedule to cover Knowles's
temporary and permanent disabilities. A workers' compensation judge entered an Award
(hereafter Award) in August 2011, indicating by checking a box that he had approved the
parties' factual stipulations.
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B. Kemper Provides Excess Coverage for JPA
The District is a lawfully self-insured employer under the workers' compensation
scheme. (Lab. Code, § 3700.)1 It is a member of JPA, which administers a self-
insurance program for workers' compensation claims involving its members. JPA, in
turn, opted to purchase excess workers' compensation insurance. (§ 3702.8, subd. (c).)
The District is an additional insured on JPA's excess insurance policies.
After the WCAB Award, JPA tendered compensation to Knowles and sought
reimbursement from its excess carrier, Kemper. Kemper's policy covered JPA from July
2002 to July 2003, meaning it was in effect on the May 6, 2003 stipulated specific injury
date. (JPA previously satisfied the self-insured retention of $100,000 on the Kemper
policy.) Kemper made payments totaling $207,908 until 2013, when it became insolvent.
C. After Kemper's Insolvency, JPA Seeks Reimbursement from CIGA
JPA then turned to insolvency insurer CIGA for reimbursement. CIGA denied
coverage in May 2014, explaining there was no evidence Knowles had suffered a specific
injury.2 If her injury was found to be cumulative, CIGA believed that JPA could pursue
other available insurance—namely, under the Swiss Re Group (Swiss Re) excess
workers' compensation insurance policy that covered JPA from July 2003 to June 30,
2004.
1 Further statutory references are to the Labor Code unless otherwise indicated.
2 The record indicates that even after stipulating to a specific injury before the
WCAB, JPA's claim specialist continued to describe Knowles's injury as "an accepted CT
[cumulative trauma] claim" despite the WCAB Award.
6
In November 2015, defendants filed a request for "Reimbursement by CIGA" in
the WCAB. The WCAB corrected the original Award in April 2016 to reflect that the
District was "Self-Insured," delete the erroneously named insurance carrier, and indicate
that the District would be the responsible party under the Award. The amendment did not
affect the parties' stipulation that the Award was for a "specific injury" occurring on May
6, 2003. CIGA was not joined as a party to the WCAB action until May 6, 2016.
Meanwhile in February 2016, CIGA filed this action in superior court. It sought
declaratory relief that JPA's reimbursement request is not a covered claim because
Knowles suffered a cumulative injury for which other insurance is available. The parties
agreed in October 2016 to stay WCAB proceedings pending resolution of the superior
court action. Defendants answered the complaint and filed a cross-complaint for
reimbursement of funds paid to Knowles after Kemper went insolvent.
D. The Motions for Summary Judgment
Defendants filed motions for summary judgment on the complaint and cross-
complaint. They argued the court lacked jurisdiction to determine Knowles suffered a
cumulative injury, as this fact had already been settled before the WCAB. The court
agreed, distinguishing BART I, supra, 111 F. Supp. 3d 1055 and concluding injury
characterization was within the WCAB's exclusive jurisdiction.
After defendants filed proposed judgments, CIGA promptly objected and sought
reconsideration or clarification, claiming the court's jurisdictional ruling did not resolve
CIGA's reimbursement obligation under the cross-complaint. Even if the WCAB had
exclusive jurisdiction over injury characterization, CIGA suggested the parties could
7
litigate in that forum whether defendants' reimbursement request was a "covered claim."
The court denied CIGA's motion for reconsideration as untimely, but set a hearing to
determine "the form of judgment" to satisfy its request for clarification.
At that hearing CIGA argued the court had simply ruled it lacked jurisdiction to
decide Knowles suffered a cumulative injury, which did not support a reimbursement
award on the cross-complaint. Defendants disagreed, noting they had clearly requested
summary judgment on the cross-complaint and included evidence supporting their
request for reimbursement. The court took the unusual step of allowing supplemental
briefing as to whether the proposed judgment awarding reimbursement reflected the
court's ruling. The court ultimately entered judgment in defendants' favor on their cross-
complaint, requiring CIGA to reimburse JPA $129,836.91 plus $3,335.87 in costs. It also
entered judgment in defendants' favor on CIGA's complaint, requiring CIGA to pay
$3,335.87 in costs.
DISCUSSION
Central to CIGA's appeal is whether the superior court has jurisdiction to
determine that Knowles suffered a cumulative injury after the WCAB approved a
stipulation that her injury was specific in nature. Concluding that the court has such
jurisdiction, we must reverse.
Context matters. This action addresses whether CIGA must cover a claim for an
insolvent excess insurer. A court's resolution of a factual question underpinning excess
coverage has no bearing on Knowles's recovery under the WCAB Award, since the
District was a self-insured employer under the Workers' Compensation Act (WCA;
8
§ 3200 et seq.). Knowles is entitled to compensation pursuant to the Award. CIGA's
action cannot change that; it will resolve only whether it must indemnify the District and
JPA for their benefit payments. Although "perhaps not optimal, and a situation to be
avoided if possible" (BART I, supra, 111 F.Supp.3d at p. 1065), the superior court has
jurisdiction in this context to characterize Knowles's injury, even if its finding conflicts
with the WCAB stipulation.
1. Background Concepts
This action involves an interplay between the workers' compensation scheme,
excess coverage for self-insured employers, CIGA's role as an insolvency insurer, and the
distinction between a specific and a cumulative injury for purposes of CIGA's liability.
We briefly discuss each concept before turning to the jurisdictional inquiry.
a. The Workers' Compensation Scheme and Excess Insurance
Pursuant to its constitutional authority (Cal. Const., art. XIV, § 4), the Legislature
enacted the WCA as "a comprehensive statutory scheme governing compensation given
to California employees for injuries incurred in the course and scope of their
employment." (Charles J. Vacanti, M.D., Inc. v. State Comp. Ins. Fund (2001) 24
Cal. 4th 800, 810 (Vacanti).) This scheme rests on a presumed "compensation bargain":
an employer assumes no-fault liability for workplace injuries in exchange for limits on
recoverable compensation; employees gain swift and certain payment without proof of
fault but lose broader remedies in tort. (Id. at p. 811; see §§ 3600, subd. (a) [conditions
of compensation], 3602, subd. (a) [exclusive remedy].)
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All employers except the state must "secure the payment of compensation" by
either carrying workers' compensation insurance or self-insuring. (§ 3700; La Jolla
Beach & Tennis Club, Inc. v. Indus. Indem. Co. (1994) 9 Cal. 4th 27, 36 (La Jolla).) Self-
insureds must demonstrate a financial ability to administer and pay potential workers'
compensation claims to their employees. (§ 3700, subd. (c).) The District is a self-
insured employer. Its workers' compensation claims are managed by JPA, a joint powers
authority created under Government Code section 6500 et seq. The WCA permits, but
does not require, self-insured employers to purchase excess workers' compensation
insurance to discharge their compensation obligation. (§ 3702.8, subd. (c).) In this case
JPA purchased an excess policy covering the July 2002 to July 2003 period from
Kemper; a subsequent excess policy covering the July 2003 to June 30, 2004 period was
obtained from Swiss Re.
Workers' compensation benefits are automatically paid to an injured worker by a
workers' compensation insurer or self-insured employer. If a dispute arises, the parties
may litigate it before the WCAB. (Vacanti, supra, 24 Cal.4th at p. 811; see §§ 5501,
5501.5.) Applications for adjudication in the WCAB are decided by a workers'
compensation administrative law judge. Those decisions are subject to administrative
review before a three-member panel of the seven-member WCAB. (1 Cal. Workers'
Compensation Practice (Cont.Ed.Bar 4th ed. 2019) § 1.16, p. 1-10; see Lab. Code,
§§ 111, 112.) The WCA provides only narrow grounds for judicial review of WCAB
decisions. (§ 5952.)
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b. California Insurance Guarantee Association
CIGA is a compulsory association of state-regulated insurance companies created
by statute. (Ins. Code, § 1063 et seq.) To insure against loss arising from an insolvent
insurer's failure to discharge its policy obligations, CIGA "collects premiums from its
member insurers to the extent necessary to pay statutorily defined 'covered claims' on
behalf of insolvent insurers. (Ins. Code, §§ 1063.1, 1063.2, 1063.5; [citations].) CIGA is
not an insurer which issues policies and assumes contractual obligations or collects
premiums and makes profits, and does not stand in the shoes of the insolvent insurer for
all purposes." (Fireman's Fund Ins. Co. v. Workers' Comp. Appeals Bd. (2010) 189
Cal. App. 4th 101, 111–112 (Fireman's Fund).) Nor is it a fund for insurance companies
or self-insureds. (Id. at p. 112.) Instead, it is an insolvency insurer of last resort created
to provide "limited financial protection for insureds and the public." (Ibid.)
CIGA's powers, duties, and liabilities are strictly governed by statute, and its
coverage is not coextensive with an insolvent insurer's. (Denny's Inc. v. Worker's Comp.
Appeals Bd. (2003) 104 Cal. App. 4th 1433, 1438 (Denny's).) It is only obligated to pay
" 'covered claims' " (Ins. Code, § 1063.2, subd. (a)), as defined in Insurance Code
sections 1063.1, subdivision (c) and 1063.2, subdivisions (g) through (h). Among the
prerequisites for CIGA's coverage, the claim must fall "within the coverage of an
insurance policy of the insolvent insurer." (Ins. Code, § 1063.1, subd. (c)(1).)
Two exclusions from statutorily defined "covered claims" are raised here. First,
CIGA "is not liable where a solvent insurer or self-insured employer is jointly and
severally liable for the claim under the Labor Code." (Fireman's Fund, supra, 189
11
Cal.App.4th at p. 112; see Ins. Code, § 1063.1, subd. (c)(9).) "When two or more
insurers are jointly and severally liable for workers' compensation benefits and one of
them becomes insolvent, the policy issued by the solvent insurer constitutes 'other
insurance' for purposes of Insurance Code section 1063.1, subdivision (c)(9), which
excludes the benefits from coverage by CIGA." (California Ins. Guarantee Assn. v.
Workers' Comp. Appeals Bd. (2016) 245 Cal. App. 4th 1021, 1027.) Second, CIGA is not
bound by default judgments or stipulated judgments against an insolvent insurer. (Ins.
Code, § 1063.2, subd. (g).) This limitation protects CIGA from collusion by requiring
the validity of a claim to be determined in an adversarial proceeding before being reduced
to a judgment that CIGA must honor. (Aloha Pacific, Inc. v. California Ins. Guarantee
Assn. (2000) 79 Cal. App. 4th 297, 309.)
c. Cumulative Versus Specific Injuries
Central to this coverage dispute is whether Knowles suffered a specific injury or a
cumulative one. The WCA defines a " 'specific' " injury as one caused by a single
incident or exposure. (§ 3208.1, subd (a).) By contrast, a " 'cumulative' " injury results
from repetitive trauma over a period of time. (§ 3208.1, subd. (b).) For liability
purposes, a specific injury happens on the date of the alleged incident or exposure
(§ 5411), meaning the workers' compensation policy or excess policy triggered is the one
in effect on that date. By contrast, a cumulative injury occurs when a worker becomes
disabled and should reasonably know the disability was job-related. (§ 5412.) Multiple
employers can be liable for a cumulative injury. The WCA extends liability to those
employers who employed the injured worker during the year preceding the earlier of:
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(1) her date of injury under section 5412, or (2) the last date the worker was employed in
an occupation exposing her to the hazard. (§ 5500.5, subd. (a).)
Knowles filed her first claim for disability benefits on May 12, 2003, but
continued to work at full capacity until February 6, 2004. Kemper's excess worker's
compensation policy was in effect for the 12-month period beginning July 2002, and
Swiss Re's was in effect for the 12-month period beginning July 2003. If Knowles
suffered a specific injury on May 6, 2003, Kemper would bear sole responsibility for
providing excess insurance coverage to JPA. Once Kemper became insolvent in 2013,
insolvency insurer CIGA would be obligated to pay if the remaining statutory
requirements were met. (Ins. Code, §§ 1063.1, subd. (c)(1)−(13), 1063.2, subds. (g)−(h).)
However, if Knowles suffered a cumulative injury, CIGA suggests that the liability
period would cover the 12 months preceding February 6, 2004, when she could no longer
work at full capacity. In other words, a cumulative injury might trigger coverage under
the Swiss Re policy.
2. The Superior Court Has Jurisdiction Over CIGA's Action.
"As a creature of the Legislature, the [WCAB] has no powers beyond those
conferred on it." (Victor Valley Transit Auth. v. Workers' Comp. Appeals Bd. (2000) 83
Cal. App. 4th 1068, 1072 (Victor Valley).) The WCA gives the WCAB exclusive
jurisdiction over proceedings "[f]or the recovery of [workers'] compensation, or
concerning any right or liability arising out of or incidental thereto." (§ 5300, subd. (a).)
The superior court and WCAB do not have concurrent jurisdiction over any given
action—depending on the injuries claimed, one entity will lack jurisdiction to grant any
13
relief whatsoever. (La Jolla, supra, 9 Cal.4th at p. 35.) "The only point of concurrent
jurisdiction of the two tribunals is jurisdiction to determine jurisdiction; jurisdiction once
determined is exclusive, not concurrent." (Ibid.) Relying on section 5300, the trial court
concluded the WCAB had exclusive jurisdiction to determine that Knowles suffered a
cumulative, rather than specific, injury. As we explain, this was incorrect.
"It is by now well established that the WCA's exclusivity provisions preempt not
only those causes of action premised on a compensable workplace injury, but also those
causes of action premised on injuries ' "collateral to or derivative of" ' such an injury."
(King v. CompPartners, Inc. (2018) 5 Cal.5th 1039, 1051 (King); Vacanti, supra, 24
Cal.4th at p. 811.) Thus, our first step is to evaluate whether the alleged injury is
collateral to or derivative of an injury compensable exclusively under the WCA. If it is,
the cause of action may be barred; otherwise, it is not barred. (Vacanti, at p. 811.) Here,
there is no dispute that the characterization of Knowles's injury is collateral to or
derivative of injuries compensable under the WCA.
We therefore proceed to the next step to evaluate "whether the alleged acts or
motives that establish the elements of the cause of action fall outside the risks
encompassed within the compensation bargain." (Vacanti, supra, 24 Cal.4th at
pp. 811−812.) "Where the acts are 'a "normal" part of the employment relationship'
[citation], or workers' compensation claims process [citation], or where the motive behind
these acts does not violate a 'fundamental policy of this state' [citation], then the cause of
action is barred." (Id. at p. 812.) By contrast, actions to recover economic or contract
damages incurred independent of a workplace injury are not barred. (Id. at p. 814.)
14
This second step is where the court erred. Although perhaps prompted by
Knowles's workplace injuries, CIGA's coverage dispute falls "outside the risks
encompassed within the compensation bargain." (Vacanti, supra, 24 Cal.4th at p. 812.)
The question of whether a workers' compensation claim against a self-insured employer
is covered by the employer's excess insurance policy is not a " ' "normal" part of
the . . . workers' compensation claims process.' " (Ibid.) CIGA's action can have no legal
effect on Knowles's ability to recover workers' compensation. As a self-insured
employer, the onus is on the District to provide "compensation" to Knowles. (§ 3700
[employers must "secure the payment of compensation" by purchasing workers'
compensation insurance or self-insuring].) " 'Compensation' . . . includes every benefit or
payment conferred by this division [Workers' Compensation and Insurance] upon an
injured employee . . . , without regard to negligence." (§ 3207, italics added.) As an
excess insurer, Kemper was not obligated to provide compensation to Knowles; it merely
had a contractual obligation to indemnify JPA for certain claims. CIGA's action only
determines who—as between the District/JPA, CIGA, and another excess insurer—bears
the ultimate cost of the District's compensation obligation. Accordingly, it does not fall
within the WCAB's exclusive jurisdiction.
Although California courts have not decided this precise question, cases
addressing the scope of the WCAB's exclusive jurisdiction are instructive. Courts have
rejected exclusive WCAB jurisdiction where the action does not implicate the payment of
benefits to the injured worker. For instance in Victor Valley, supra, 83 Cal. App. 4th 1068,
the WCAB determined that a public transit employee of a joint powers authority was
15
entitled to certain workers' compensation benefits. Afterwards, one city sought
contribution from another municipal member of the authority to recover some of the
benefits paid to the injured worker. The WCAB interpreted the cities' respective rights
and obligations pursuant to their joint powers agreement (id. at pp. 1070−1071), but the
appellate court reversed, concluding the WCAB lacked jurisdiction to do so. The cities'
dispute had no bearing on the worker's receipt of benefits, since the prior WCAB award
ensured that someone would pay. (Id. at pp. 1073, 1076.) Similarly in United States
Fidelity and Guaranty Co. v. Lee Investments, LLC (9th Cir. 2011) 641 F.3d 1126, the
Ninth Circuit applying California law determined that courts, not the WCAB, had
jurisdiction over an insurer's action against an employer to rescind its workers'
compensation insurance policy as void. (Id. at p. 1134.) While perhaps prompted by the
workplace accident, the action affected only who had to pay, not whether the employee
could recover workers' compensation. (Id. at pp. 1134−1135.)
By contrast, where a dispute implicates a normal part of the workers'
compensation claims process, the WCAB—and not the court—has exclusive jurisdiction.
(See King, supra, 5 Cal.5th at p. 1053 [worker's action against employer for errors in
utilization review process required under the WCA]; Vacanti, supra, 24 Cal.4th at p. 820
[medical providers' action against insurer for mishandling workers' compensation lien
claims].) Taken together, the cases support a conclusion here that the superior court has
jurisdiction to make a factual finding necessary to determine excess insurance coverage.
We find further support in a WCAB panel decision, which we consider for its
persuasive value. (See Cannon v. Industrial Acci. Comm. (1959) 53 Cal. 2d 17, 22.) In
16
Millman v. Contra Costa County, the WCAB addressed the flip side of the jurisdictional
issue here. ((Dec. 5, 2013, WCK 0005092) 2013 Cal.Wrk.Comp. P.D. Lexis 615
(Millman).) A self-insured employer had asked the WCAB to decide whether certain
expenses were covered under its excess insurance policy. The WCAB concluded it
lacked jurisdiction because "this particular dispute is a contract dispute between an
insurer and insured rather than a workers' compensation insurance coverage dispute."
(Id. at p. *3.) As the panel explained, although many self-insured employers purchase
excess insurance, "excess insurance is not a method of securing compensation" pursuant
to section 3700. (Millman, at p. *4.) Excess insurers do not assume primary and direct
liability for the payment of compensation, whereas workers' compensation policies must
contain a clause to that effect. (Id. at pp. *5–*6; Ins. Code, § 11651.) Unlike workers'
compensation insurers, excess insurers "may not be substituted for the self-insured
employer as the sole entity that may be held liable under Labor Code section 3755."
(Millman, at p. *6.) Likewise, Department of Insurance "regulations affecting excess
insurance are much less extensive" than regulations for primary workers' compensation
insurance. (Ibid.) Although the panel concluded it lacked jurisdiction, it advised the
parties they could "seek declaratory relief in civil court." (Id. at p. *7.)
Millman's conclusion makes sense. Under a primary workers' compensation
insurance policy, " 'the insurer agrees to pay all workers' compensation and other benefits
that the employer must legally provide to covered employees who are occupationally
injured or disabled.' " (La Jolla, supra, 9 Cal.4th at p. 36.) An employer who "secure[s]
the payment of compensation" (§ 3700) through workers' compensation insurance is
17
relieved from liability and dismissed from WCAB proceedings once its workers'
compensation carrier assumes liability. (§§ 3755, 3757.)
Excess insurance works differently. An excess workers' compensation policy
indemnifies a self-insured employer for claims exceeding a certain retention, thereby
limiting a self-insured's potential exposure. Policy limits to excess coverage do not
expose the injured worker to the risk of nonrecovery—"coverage is had through
[employer's] being self-insured. The only risk is to [the employer] as to how much it can
minimize its losses for benefits it is required to pay." (General Reinsurance Corp. v. St.
Jude Hospital (2003) 107 Cal. App. 4th 1097, 1109.) We agree with Millman that a
coverage dispute between a self-insured employer and its excess workers' compensation
carrier is essentially a contract dispute between insurer and insured. (Millman, supra,
2013 Cal.Wrk.Comp. P.D. Lexis 615 at p. *3.) Such an action falls outside the
compensation bargain and is not a part of the normal workers' compensation claims
process. Accordingly, CIGA's action does not trigger exclusive jurisdiction of the
WCAB pursuant to section 5300.3
Consistent with Millman, federal courts applying California law have rejected
exclusive WCAB jurisdiction on similar facts. The BART cases are particularly helpful.
3 Defendants construe Millman as addressing a narrow question of whether the
WCAB had jurisdiction to decide whether certain utilization and bill review expenses
were covered by an excess insurance policy. As we read it, both Millman and this action
involve which forum has the power to consider an excess coverage dispute. Defendants
contend Millman involved a "coverage dispute" whereas CIGA attempts to recharacterize
Knowles's injury. But CIGA's action is a coverage dispute, irrespective of the factual
inquiry its resolution necessarily entails.
18
A Bay Area Rapid Transit (BART) employee filed a multiple myeloma workers'
compensation claim before the WCAB. As a self-insured employer, BART had
purchased excess insurance from General Reinsurance Corporation (GRC) to cover
workers' compensation claims exceeding a retention limit. (BART I, supra, 111
F.Supp.3d at pp. 1059−1060.) The parties initially disputed the employee's injury date,
but ultimately signed a Compromise and Release stipulating to a cumulative injury
between 1990 and 1991. This injury period triggered coverage under GRC's policy. (Id.
at p. 1062.) GRC initially made payments but then stopped and sought reimbursement.
(Id. at p. 1063.) BART then sued GRC for breach of contract. In phase one of trial, the
court had to decide whether it had jurisdiction to make a factual finding as to the
employee's date of injury inconsistent with the WCAB and, if it did, whether GRC was
nevertheless bound by the WCAB's determination under principles of estoppel, waiver, or
laches. (Id. at p. 1064.)
Citing Millman, the district court concluded it had jurisdiction to revisit the date-
of-injury determination. Section 5300's exclusivity bar was "limited to claims involving
compensation to the employee." (BART I, supra, 111 F.Supp.3d at p. 1065.) An excess
insurance policy was not a workers' compensation policy and therefore not subject to the
workers' compensation scheme. (Ibid.) The possibility that the court might make a
finding inconsistent with one already made by the WCAB did not deprive it of
jurisdiction. (Ibid.) It was not reviewing any decision of the WCAB, and its ruling
would not affect the WCAB's decision that BART, as a self-insured employer, owed
compensation to its employee. (Ibid.) "Put simply, regardless of the case's outcome,
19
BART will remain liable to [its employee] as a self-insured employer even if it is
determined that General Reinsurance is not the proper excess carrier because the date of
injury fell outside of the Policy period." (Ibid.)
Next, the district court concluded that GRC was not otherwise bound by the
WCAB's date of injury determination under principles of collateral estoppel, equitable
estoppel, waiver, or laches. (BART I, supra, 111 F.Supp.3d at p. 1067.) Collateral
estoppel might have applied had GRC been joined in the WCAB action, but absent
joinder it lacked privity with BART so as to be bound. (Id. at pp. 1068−1069, 1074.)
The Ninth Circuit affirmed.4 As it explained, excess insurer GRC did not
challenge BART's liability as a self-insured employer to its injured worker. Nor did it
challenge the amount of the award against BART. "Instead, GRC seeks to litigate a
factual question that goes to coverage under its policy. It is not barred from doing so by
the stipulation between BART and its employee or by the WCAB's finding in approving
that agreement." (Bart II, supra, 726 F.App'x. at p. 564.) Moreover, GRC could not
otherwise be bound where it was not notified of the underlying proceeding until one week
after BART's compromise and release had been approved by the WCAB. (Ibid.)
BART I and BART II stand for the notion that a trial court has jurisdiction to make
a factual finding underlying excess workers' compensation coverage even if that finding
is inconsistent with one made or approved by the WCAB. Central to this result is the
4 Although nonpublished and nonprecedential under Ninth Circuit rules (U.S. Cir.
Ct. Rules (9th Cir.), rule 36-3(a)), we may rely on BART II as persuasive authority. (See
Pacific Shore Funding v. Lozo (2006) 138 Cal. App. 4th 1342, 1352, fn. 6.)
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nature of excess workers' compensation insurance, compared to primary workers'
compensation insurance policies.
Although the summary judgment motions in this case did not squarely address
collateral estoppel, the BART cases further stand for the notion that issue preclusion does
not apply where an excess insurer takes no part in WCAB proceedings. Defendants
repeatedly assert that Kemper "authorized" or "approved" their stipulation before the
WCAB. As support, they cite solely to paragraph No. 8 of the declaration of JPA claims
administrator Tammy Le: "On or about June 2, 2011, Kemper authorized settlement of
the Claim pursuant to the proposed stipulation and award for an injury occurring on May
6, 2003." But CIGA objected to this evidence on foundation and lack-of-personal-
knowledge grounds, the court sustained the objection, and defendants do not challenge
the court's evidentiary ruling. In short, here as in BART, there is no competent evidence
that the excess insurer participated in the WCAB action so as to be bound by stipulated
findings approved in an Award.
We agree with BART I that successive litigation of foundational facts concerning a
worker's injury is "perhaps not optimal, and a situation to be avoided if possible." (BART
I, supra, 111 F.Supp.3d at p. 1065.) But under the present circumstances, the trial court
does not lack jurisdiction to decide the factual question underlying the excess coverage
21
dispute, even if it reaches a finding contrary to the WCAB. (Ibid.)5 Contrary to
defendants' strenuous objection, CIGA's requested relief would not "modify the WCAB
award" even if the court finds that Knowles suffered a cumulative injury.
Liberty, supra, 339 F. Supp. 3d 1019, a federal case involving respondent JPA, also
supports our jurisdictional conclusion. During a two-year span, JPA purchased excess
insurance first from Liberty Insurance Corporation and then from Wesco Insurance
Company. (Id. at p. 1024.) Two school district employees had cumulative injuries
spanning both coverage periods, each with their last date of exposure after Liberty's
policy ended. (Id. at pp. 1024−1025.) Liberty and Wesco initially agreed to allocate
costs. Then Liberty stopped paying, saying its insurance policy excluded coverage where
the workers' last exposure occurred outside the policy period. (Id. at pp. 1025−1026.) A
contract dispute ensued between JPA, Liberty, and Wesco. (Ibid.) At summary
judgment, Liberty pointed to its policy exclusion while Wesco argued Liberty's
interpretation of its policy conflicted with statutory liability for cumulative injury claims
under the WCA (§ 5500.5). (Liberty, at pp. 1026−1027.) The court held in Liberty's
favor. Citing BART I and Millman, it reasoned, "an excess policy is not a workers'
compensation policy and thus the provisions of Division Four [of the Labor Code]
5 CIGA argues the WCAB approved the parties' stipulation but "did not make a
factual determination based on the evidence that [Knowles] suffered a specific injury."
We assume without deciding that there is no meaningful difference between a factual
determination made by the WCAB and a WCAB Award based on the parties' stipulations
of fact.
22
regulating workers' compensation policies—such as Section 5500.5—do not apply." (Id.
at p. 1029.)
As Liberty and BART I explain, there is an important distinction between
employers who purchase primary workers' compensation insurance and self-insured
employers who purchase excess workers' compensation insurance. "As the self-insurer,
the JPA is the party required to 'place itself in the position of a private insurer.'
[Citation.] The excess insurer, on the other hand, does not pay any worker's
compensation benefits but rather reimburses the JPA after the JPA has paid those
benefits." (Liberty, supra, 339 F.Supp.3d at p. 1029.) Excess insurance is optional under
the workers' compensation scheme. (§ 3702.8, subd. (c).) Whether Kemper's policy
covers the claim does not affect the WCAB's determination that Knowles is entitled to
compensation from the District for workplace injury, or the amount awarded for her
permanent and temporary disabilities. Knowles will be compensated the same amount
even if the court finds in this action that she suffered a cumulative injury rather than a
specific one. (BART I, supra, 111 F.Supp.3d at p. 1065.)
The trial court did not consider the nature of excess coverage when it reached a
contrary result. Citing Western Growers, Ins. Co. v. Workers' Comp. Appeals Bd. (1993)
16 Cal. App. 4th 227, 234, the court believed injury characterization fell squarely within
the WCAB's expertise. But the question of exclusive jurisdiction does not turn on the
extent to which a particular factual inquiry lies within or outside of the WCAB's
expertise. Instead it depends on whether the claim being asserted implicates "the risks
encompassed within the compensation bargain." (Vacanti, supra, 24 Cal.4th at p. 812.)
23
Depending on the context, either the WCAB or the superior court is fully capable of
determining whether an injury is specific or cumulative. Thus, in reviewing by writ a
WCAB decision, it is hardly surprising that the court in Western Growers would explain
that the nature of an injury—whether it is specific or cumulative—was a question of fact
for the WCAB to resolve in a dispute between the employee and primary insurer.
(Western Growers, at pp. 234–235.) The case does not stand for the proposition that the
WCAB has exclusive jurisdiction to decide the nature of an injury in every conceivable
context in which that factual question may arise.
The trial court further reasoned that BART I permitted litigation of the worker's
injury date, not injury type. But there is little distinction between the "date of injury"
determination in BART I and the "type of injury" determination here. If the court were to
decide that Knowles suffered a cumulative injury, that would determine the injury period
and, in turn, the applicable excess insurance policy for purposes of evaluating CIGA's
coverage obligation. Whereas in BART I the injury date directly determined which
excess policy applied, here the injury type determines the injury date, which in turn
determines which excess policy applies. The effect is the same.
We likewise reject defendants' argument that the BART I court "was merely
completing the equation" by deciding a question left open by the WCAB. Both this
action and BART I address whether a court has the power to decide a factual issue
necessary to determine excess workers' compensation insurance coverage, even if its
finding differs from the WCAB's. During the WCAB proceedings in BART I, the parties
stipulated to an injury date that triggered GRC's excess coverage, but the court was not
24
without jurisdiction to find an injury date different from that approved by the WCAB.
(BART I, supra, 111 F.Supp.3d at p. 1065.) A similar conclusion follows here.
Nor are we persuaded by the trial court's reasoning that "BART was a coverage
dispute based on the terms of the policy" whereas "CIGA's obligations are based on
statute." A prerequisite for coverage under the CIGA statute is a determination that the
obligation is covered by the insolvent insurer's policy. (Ins. Code, § 1063.1, subd.
(c)(1)(A).) CIGA disputes the extent of Kemper's coverage obligation. It asserts that
Knowles suffered a cumulative injury, triggering coverage under Swiss Re's policy. The
factual prerequisite for excess coverage here is analogous to that in BART I.
In short, CIGA's action for declaratory relief is not subject to the WCA's
exclusivity bar. The WCAB's exclusive jurisdiction over actions involving "the recovery
of compensation, or concerning any right or liability arising out of or incidental thereto"
(§ 5300, subd. (a)) does not extend to contract-based disputes between a self-insured
employer and its excess carrier (or that carrier's insolvency insurer). The court is not
without jurisdiction to make a factual determination that Knowles suffered a cumulative
injury, even if its finding contradicts a stipulated fact approved by the WCAB.
Defendants' policy arguments do not compel a different result. First, they claim
that allowing CIGA to litigate Knowles's injury type would result in inconsistent rulings
between the WCAB and the superior court and interfere with Knowles's claim rights. But
as noted, Knowles is entitled to compensation from the District, a lawfully self-insured
employer, irrespective of defendants' indemnification rights. Second, they argue their
WCAB stipulation might prevent recovery from other excess insurers. Accepting this
25
premise for the sake of argument, defendants brought this predicament on themselves by
stipulating to a specific injury before the WCAB. The possibility that their improvidence
might leave them without other excess insurance coverage does not change the legal
parameters of CIGA's statutory obligation. (See Parkwoods v. Community Assn. v. Cal.
Ins. Guarantee Assn. (2006) 141 Cal. App. 4th 1362, 1368 [insured could not "bootstrap
its claim against CIGA by releasing its right to recover under an available policy and
claiming that as a result there is no other coverage"]; Denny's, supra, 104 Cal.App.4th at
p. 1442 [CIGA was not created to protect self-insured employers].)
Finally, defendants suggest that allowing CIGA to litigate whether Knowles
suffered a cumulative injury will "overrun" courts with coverage disputes by CIGA,
"even where coverage was never at issue and payments [by the insolvent insurer] had
previously been made on claims." Defendants overstate the risk—our ruling only
implicates CIGA's coverage as to excess workers' compensation carriers. And collateral
estoppel could apply where a self-insured employer joins its excess insurer or CIGA in
WCAB proceedings. (BART I, supra, 111 F.Supp.3d at p. 1074.) We share the BART I
court's view that although perhaps not optimal, the superior court is not without
jurisdiction to decide a factual issue underpinning CIGA's coverage obligation.
3. Effect of Jurisdictional Ruling
The trial court concluded it lacked jurisdiction to find Knowles suffered a
cumulative injury. Because it believed exclusive jurisdiction to make that determination
rested with the WCAB, it entered judgment in defendants' favor on the cross-complaint
and ordered CIGA to reimburse defendants $129,836.91 plus costs.
26
CIGA argues this was error. Even if the court lacked jurisdiction to find Knowles
suffered a cumulative injury, CIGA argues defendants' reimbursement request was not a
"covered claim" because: (1) it is not bound by a stipulated judgment against Kemper
(Ins. Code, § 1063.2, subd. (g)); (2) "other insurance" was available from excess insurer
Swiss Re (Ins. Code, § 1063.1, subd. (c)(9)); and (3) there has never been a determination
of coverage under Kemper's policy (Ins. Code, § 1063.1, subd. (c)(1)).
Given our jurisdictional ruling, we do not reach these contentions.6 Defendants
moved for summary judgment; CIGA did not. Our conclusion that the court has
jurisdiction to make a factual determination regarding injury type leaves triable issues to
resolve. The parties may proceed to litigate whether Knowles suffered a specific or
cumulative injury, and the court may make a factual finding on this question to reach a
final coverage determination.
6 Nor do we reach CIGA's arguments that the superior court did not comply with
Code of Civil Procedure, section 437c, subdivision (g) or provide a sufficient statement
of reason when it entered judgment for defendants on their cross-complaint for
reimbursement.
27
DISPOSITION
The judgment is reversed. The matter is remanded to the trial court with
directions to vacate its order granting summary judgment and enter a new order denying
defendants' motions on both the complaint and cross-complaint. CIGA is entitled to
recover its costs on appeal.
DATO, J.
WE CONCUR:
McCONNELL, P. J.
O'ROURKE, J.
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