California Insurance Guarantee Ass'n v. Workers' Compensation Appeals Board

DOI TODD, Acting P. J., Concurring.

I concur with the outcome. I write separately because I disagree with the majority’s conclusion that the medical providers qualify as “original claimants” making “covered” liability claims. In my opinion, Insurance Code section 1063.1, subdivision (c)(9) addresses only claims made by an insured and has no application to a third party claim asserted by a lien claimant under Labor Code section 4903. In other words, lien claims are different than liability claims asserted under an insurance policy.

I. The Statutory Lien Scheme

The Insurance Code recognizes there is an entire body of law governing workers’ compensation. The threshold provisions of Insurance Code section 1063.1, subdivision (c)(1) defining “covered claims” includes in paragraph (F) “In the case of a policy of workers’ compensation insurance, to provide workers’ compensation benefits under the workers’ compensation law of this state.” (Ins. Code, § 1063.1, subd. (c)(1)(F).)

It is undisputed by the California Insurance Guarantee Association (CIGA) that the medical providers have statutory medical lien claims arising from medical services provided to the injured worker. Medical liens in the workers’ compensation system are governed by the Labor Code. (See Hand Rehabilitation Center v. Workers’ Comp. Appeals Bd. (1995) 34 Cal.App.4th 1204, 1210 [40 Cal.Rptr.2d 734].) Labor Code section 4901 provides, “No claim for compensation nor compensation awarded, adjudged, or paid, is subject to be taken for the debts of the party entitled to such compensation except as hereinafter provided.” In other words, “there can be no lien against a workers’ compensation award for any kind of debt except as the Labor Code specifically provides.” (Rangel v. Interinsurance Exchange (1992) 4 Cal.4th 1, 15 [14 Cal.Rptr.2d 783, 842 P.2d 82].) Labor Code section 4903 provides that the Workers’ Compensation Appeals Board (WCAB) “may determine, and allow as liens against any sum to be paid as compensation” reasonable medical expenses.¹ (Lab. Code, § 4903; Hand Rehabilitation Center, supra, at p. 1210.)

“[Labor Code] [s]ection 4903 itemizes the ‘debts’ which may be allowed as liens against a compensation award by the appeals board. These two sections [(4901 and 4903)] indicate a clear legislative intent to remove such awards from the operation of the usual remedies available to creditors, to limit and regulate the kinds of debts which may be allowed, and to insure that the award is made available to the injured employee for his recovery and rehabilitation in accordance with the purposes of the act.” (Ogdon v. Workmen’s Comp. Appeals Bd. (1974) 11 Cal.3d 192, 196-197 [113 Cal.Rptr. 206, 520 P.2d 1022], fn. omitted.) The allowance of liens specifically identified in Labor Code section 4903 is the only exception to the requirement that compensation be paid directly to the injured worker.

Article XIV, section 4 of the California Constitution mandates expeditious, inexpensive and unencumbered payment of compensation to injured workers.² Because injured workers and their employers are often ready to resolve the worker’s claim for indemnity before resolution of claims by lien claimants, the law grants a lien claimant an independent right to prove its claims in a separate proceeding. (Lab. Code, § 4903.4.) A lien claimant can also initiate the action even if the injured worker never pursues his or her claim. (Lab. Code, § 5501; Permanente Medical Group v. Workers’ Comp. Appeals Bd. (1985) 171 Cal.App.3d 1171, 1178 [217 Cal.Rptr. 873].) The WCAB “may order the amount of any lien claim, as determined and allowed by it, to be paid directly to the person entitled, either in a lump sum or in installments.” (Lab. Code, § 4904, subd. (c).) The WCAB is vested with discretion to determine the reasonableness of the claimed amount (Lab. Code, § 4906), and the priorities among lien claimants (Lab. Code, § 4903).

II. Statutory Construction and Legislative History

The majority has set forth the fundamental rules of statutory construction, and I will not repeat them. But applying these rules here makes clear that the exclusions set forth in Insurance Code section 1063.1, subdivision (c)(9) do not include situations involving qualified or partial assignment', collection agreement by a collection agency or attorney, or a company administering lien claims for another company. The commonsense interpretation is that section 1063.1, subdivision (c)(9) has no application to a third party claim asserted by a lien claimant under Labor Code section 4903.

The legislative history supports this conclusion. “To determine the most reasonable interpretation of a statute, we look to its legislative history and background.” (Goodman v. Lozano (2010) 47 Cal.4th 1327, 1332 [104 Cal.Rptr.3d 219, 223 P.3d 77], citing Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 543 [67 Cal.Rptr.3d 330, 169 P.3d 559].) CIGA was created in 1969 on an “urgency” basis at the request of the Department of Insurance “for the immediate preservation of the public peace, health or safety” following the insolvency of insurers that had provided workers’ compensation insurance policies “to persons of modest means.” (Assem. Bill No. 1310 (1969 Reg. Sess.) as amended Aug. 1, 1969, § 5.) The 1969 legislative history of Insurance Code section 1063.1 does not include any discussion of the term “assignee,” but the statement of intent describes the need to deal with the “extreme hardship” upon “insureds, claimants, public agencies and the public at large.” (Assem. Bill No. 1310 (1969 Reg. Sess.) as amended Aug. 1, 1969, § 5.) While the meaning of the word “claimants” is not defined in this statement of intent, the term is used as a category separate from “insureds.” Because the lien claim process under the Labor Code was already in effect at the time section 1063.1 was enacted, we may reasonably presume that the Legislature was aware of the process by which medical lien claimants utilized third parties to assert their claims. There is nothing in the legislative history to show that the Legislature specifically intended to exclude claims by workers’ compensation lien claimants who utilize collection agencies for processing their CIGA claims, or that the Legislature considered such arrangements to be assignments that were not covered claims under CIGA.

The legislative history is notably silent with respect to any potential impact on the role that collection agencies play in the processing of workers’ compensation claims, or with respect to the manner in which injured worker’s claims for medical services should be processed under CIGA. The bill’s sponsor, the Department of Insurance, did not describe any problems relating to this process. If the Legislature had intended to prohibit the use of collection agencies in processing CIGA claims, such prohibition would have most likely generated significant opposition or at least concern and discussion. The legislative history does not document any such opposition or concern.

Insurance Code section 1063.1 has been amended several times since 1969, most recently in 2010. We have not been made aware of any problems arising from having collection agencies pursue medical lien claims, and assume that had there been problems, the Legislature would have addressed them. As the court stated in California Ins. Guarantee Assn. v. Workers’ Comp. Appeals Bd. (2005) 128 Cal.App.4th 307, 316 [26 Cal.Rptr.3d 845], “if the Legislature had wanted to make an exception for workers’ compensation claims from [section 1063.1], it could and would have said so.” (See also California Ins. Guarantee Assn. v. Argonaut Ins. Co. (1991) 227 Cal.App.3d 624, 634 [278 Cal.Rptr. 23] [“In our view, if the Legislature views workers’ compensation as significantly different from other insurance so as to necessitate different treatment in recovering claims from CIGA, the Legislature can say so. Insurance Code section 1063.1 shows that the Legislature knew how to make an exception for workers’ compensation benefits when it so intended.” (fn. omitted)].)

III. Insurance Code Section 1063.1, Subdivision (c)(9) Does Not Apply to Lien Claims

Based on the above, I believe that third party lien claims are different from third party liability claims asserted against an insurance policy. The fundamental differences between lien claims and liability claims are: (1) The lien claimant has performed a service for which it is entitled to be paid, while a claimant under an insurance policy has sustained an injury for which it may or may not be compensated under the insurance policy; (2) A workers’ compensation lien is asserted against compensation to be paid (Lab. Code, § 4903), while a claim against an insurance policy is made against the policy; and (3) A lien obligation is not based on a contractual relationship; rather, it is an obligation imposed by law, while obligations arising from an insurance policy are contractual in nature. In light of these distinctions, I believe that lien claims are entirely different from insurance policy claims, and as such should be treated differently from claims made against an insurance policy.

None of the cases upon which the majority relies involved lien claims. Black Diamond Asphalt, Inc. v. Superior Court (2003) 114 Cal.App.4th 109 [7 Cal.Rptr.3d 466] involved an indemnity claim asserted between defendant tortfeasors; Catholic Healthcare West v. California Ins. Guarantee Assn. (2009) 178 Cal.App.4th 15 [100 Cal.Rptr.3d 125] dealt with the problem of successor corporations and whether successors were “original claimants”; and Nowlon v. Koram Ins. Center, Inc. (1991) 1 Cal.App.4th 1437 [2 Cal.Rptr.2d 683] involved a negligence action by an injured employee against a liability broker. Although the majority quotes at length from Nowlon, that case simply noted in dicta that Insurance Code section 1063.1, subdivision (g) would allow an injured employee to bring a third party claim against CIGA. Moreover, in Baxter Healthcare Corp. v. California Ins. Guarantee Assn. (2000) 85 Cal.App.4th 306, 313 [102 Cal.Rptr.2d 87], the court stated: “CIGA’s contention that ‘original claimant’ means ‘original insured’ is the only rational way to read the phrase ‘original claimant under the insurance policy in his or her own name.’ Any other reading of the statute would do violence to the phrase.” (Ibid.) I agree with this conclusion, and therefore disagree with the majority that the medical providers are original claimants

asserting liability claims. Because a lien claim is fundamentally different from a liability claim, Insurance Code section 1063.1, subdivision (c)(9) simply does not apply to the medical lien claims asserted here.

1 Labor Code section 4903 allows the following liens: (a) reasonable attorney fees; (b) reasonable medical expenses; (c) reasonable value of the living expenses of an injured employee or of his or her dependents; (d) reasonable burial expenses; (e) reasonable living expenses of the spouse; (f) unemployment compensation disability benefits; (g) unemployment compensation benefits and extended duration benefits; (h) family temporary disability insurance benefits; (i) indemnification granted by the California Victims of Crime Program; and (j) amounts paid by the Asbestos Workers’ Account.

2 California Constitution, article XIV, section 4 provides that “[t]he Legislature is hereby expressly vested with plenary power, unlimited by any provision of this Constitution, to create, and enforce a complete system of workers’ compensation, by appropriate legislation, and in that behalf to create and enforce a liability on the part of any or all persons to compensate any or all of their workers for injury or disability, and their dependents for death incurred or sustained by the said workers in the course of their employment, irrespective of the fault of any party.... [T]he administration of such legislation shall accomplish substantial justice in all cases expeditiously, inexpensively, and without incumbrance of any character; all of which matters are expressly declared to be the social public policy of this State, binding upon all departments of the State government.”