Daily Blast March 22, 2016

The Court of Appeal, Second Appellate District, Division One (Los Angeles), issued an opinion in California Insurance Guarantee Association v. Workers’ Compensation Appeals Board (Mar. 22, 2016, B263869) __ Cal.App.4th __analyzing whether the California Insurance Guarantee Association (“CIGA”) is responsible for third party claims when two insurers are jointly and severally liable and one of the insurers becomes insolvent. (Slip opn., p. 2.) The court concluded CIGA is not responsible for third party claims when coverage exists and the insurers are jointly and severally liable. (Id. at pp. 2, 8.)

The case involved injuries sustained by a grocery store clerk during her employment. Her employer was insured under successive policies by two different insurance companies. (Slip opn., p. 2.) The two insurance companies settled with the injured employee. In the settlement agreement, the two insurers agreed to apportion between themselves 50/50 liability for remaining third party claims. (Ibid.) Subsequently, one of the insurers became insolvent and CIGA assumed responsibility for its third party claims. (Ibid.)

CIGA is excluded, by statute, from paying claims “to the extent that [they are] covered by any other insurance.” (Slip opn., p. 2.) On this ground, CIGA moved to be dismissed from the case, arguing that the remaining insurance company constituted “other insurance,” and that the remaining insurer was severally liable for 100 percent of third party claims with a right to recover against the insolvent insurer’s estate. (Ibid.) The Workers’ Compensation Appeals Board (WCAB) denied the motion finding that the settlement agreement apportioned liability 50/50 leaving CIGA liable for the half allocated to the insolvent insurer. (Ibid.) The Court of Appeal denied writ review. The Supreme Court granted review and remanded to the Court of Appeal to hear the case on the merits. (Ibid.)

On remand, the Court of Appeal determined that the settlement agreement “apportioned liability . . . [but] did not change the joint and several nature of the . . . liability.” (Slip opn., p. 8.) The court noted that several liability is “a rule of joinder” rather than a rule of liability, and thus “cannot be changed by apportionment of an obligation between promisors.” (Id. at p. 6.) The court held that although liability was apportioned during settlement, it remained joint and several, thus leaving the remaining insurer liable for 100 percent of third party claims when the other became insolvent. (Id. at p. 8.) Accordingly, the Court of Appeal annulled its previous denial of reconsideration and instructed the WCAB to dismiss CIGA from the action. (Ibid.)

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