From Casetext: Smarter Legal Research

California Insurance Guarantee Association v. Workers Compensation Appeals Board

Court of Appeal of California
Dec 14, 2006
No. B189208 (Cal. Ct. App. Dec. 14, 2006)

Opinion

B189208

12-14-2006

CALIFORNIA INSURANCE GUARANTEE ASSOCIATION, Petitioner, v. WORKERS COMPENSATION APPEALS BOARD and ELOY GUTIERREZ, Respondents; UNIVERSITY OF CALIFORNIA, Real Party in Interest.

Guilford Steiner Sarvas & Carbonara, Richard E. Guilford; Stockwell, Harris, Widom, Woolverton & Muehl and Shea Conway for Petitioner. No appearance for Respondents. Robert Feinglass for Real Party in Interest.


INTRODUCTION

After the real party in interest, University of California, Davis Medical Center (UC), provided medical care to disabled worker Eloy Gutierrez, UC filed a lien claim for reimbursement with the Workers Compensation Appeals Board (Board). The Board approved a settlement agreement between the insurer and Gutierrez, but left UCs lien to be paid, adjusted, or litigated at a later time. The insurer subsequently became insolvent. Under applicable California law (Ins. Code, § 1063 et seq.), California Insurance Guarantee Association (CIGA) assumed the insolvent carriers obligations but refused to satisfy UCs lien. CIGA argued that it was only required to pay a "covered claim," and UCs lien is excluded from the definition of "covered claims" because it is an obligation to the State of California. (§ 1063.1, subd. (c)(4).) CIGA also relied on the decision in California Ins. Guarantee Assn. v. Workers Comp. Appeals Bd. (Karaiskos) (2004) 117 Cal.App.4th 350, 354 (Karaiskos), which held that the Employment Development Departments (EDD) lien was not a covered claim under section 1063.1, subdivision (c)(4) because EDD is a state agency.

UC may file a lien for reimbursement of medical treatment costs with the Board. (Lab. Code, §§ 4903, subd. (b), 4904, subd. (a).)

The Board may approve such a settlement if the insurer agrees to pay the amount subsequently determined to be due under the lien claim. (Lab. Code, § 4904, subd. (e).)

All further references are to the Insurance Code unless otherwise indicated.

Section 1063.1, subdivision (c)(4) provides: "`Covered claims does not include any obligations of the insolvent insurer arising out of any reinsurance contracts, nor any obligations incurred after the expiration date of the insurance policy or after the insurance policy has been replaced by the insured or canceled at the insureds request, or after the insurance policy has been canceled by the association as provided in this chapter, or after the insurance policy has been canceled by the liquidator, nor any obligations to any state or to the federal government." (Italics added.)

The workers compensation judge (WCJ) held that CIGA was liable for UCs lien. The WCJ relied on North Orange County Community College Dist. v. CM School Supply Co. (1998) 63 Cal.App.4th 362, which determined that a community college district is not the "state" for purposes of section 11870. Further, the WCJ declared that equity required "rigorous examination" of the word "state." The WCJ distinguished Karaiskos, finding that UC was not the "state" because it does not receive funding from the State of California, but rather receives payments from patients. Additionally, the WCJ cited Estate of Royer (1899) 123 Cal. 614, 620, which found that The Regents of the University of California is a public corporation. CIGA filed a petition for reconsideration. The Board denied the petition and adopted the WCJs report as its decision.

Section 11870 lists those public entities which may obtain workers compensation insurance coverage from State Compensation Insurance Fund.

CIGA petitioned this court for a writ of review. (Lab. Code, § 5950.)

We hold that UCs lien is an obligation to the state pursuant to section 1063.1, subdivision (c)(4) because UC is an agency of the State of California. Therefore, UCs lien claim is not one that CIGA is required to pay. (§ 1063.1, subd. (c)(4).) Accordingly, we annul the Boards decision.

DISCUSSION

1. The standard of review and rules of statutory interpretation.

Construction of a statute is a question of law that appellate courts review de novo. (California Ins. Guarantee Assn. v. Liemsakul (1987) 193 Cal.App.3d 433, 438.)

"[W]e apply the usual rules of statutory interpretation. `The fundamental rule . . . is to ascertain the intent of the Legislature in order to effectuate the purpose of the law. . . . In doing so, we first look to the words of the statute and try to give effect to the usual, ordinary import of the language, at the same time not rendering any language mere surplusage. The words must be construed in context and in light of the nature and obvious purpose of the statute where they appear. . . . The statute "`must be given a reasonable and commonsense interpretation consistent with the apparent purpose and intention of the Legislature, practical rather than technical in nature, and which, when applied, will result in wise policy rather than mischief or absurdity. . . ." [Citation.]" (Klajic v. Castaic Lake Water Agency (2001) 90 Cal.App.4th 987, 997.) When statutory language is "clear and unambiguous there is no need for construction, and courts should not indulge in it." (California Ins. Guarantee Assn. v. Liemsakul, supra, 193 Cal.App.3d at p. 439.)

2. CIGA is not obligated to pay UCs lien .

a. Principles governing CIGA.

CIGA was created by legislation to establish a fund from which insureds could obtain financial and legal assistance in the event their insurers became insolvent. "`[F]unded by a compulsory membership of insurance companies doing business in California, CIGA "was created to provide a limited form of protection for insureds and the public, not to provide a fund to protect insurance carriers." [Citations.] CIGAs role in guaranteeing workers compensation claims is therefore limited: [¶] `"`CIGA is not, and was not created to act as, an ordinary insurance company. [Citation.] It is a statutory entity that depends on the Guarantee Act for its existence and for a definition of the scope of its powers, duties, and protections. [Citation.] `CIGA issues no policies, collects no premiums, makes no profits, and assumes no contractual obligations to the insureds. [Citation.] `CIGAs duties are not co-extensive with the duties owed by the insolvent insurer under its policy. [Citation.]"" (California Insurance Guarantee Assn. v. Workers Comp. Appeals Bd. (2003) 112 Cal.App.4th 358, 363, italics added, quoting Dennys Inc. v. Workers Comp. Appeals Bd. (2003) 104 Cal.App.4th 1433, 1438.) We consider CIGAs responsibility in the present case in light of the fact it is strictly a creation of statute.

b. CIGA is not authorized to pay "obligations to any state." (§ 1063, subd. (c)(4).)

"`"`CIGAs authority and liability in discharging `its statutorily circumscribed duties are limited to paying the amount of `covered claims. [Citations.]"" (California Insurance Guarantee Assn. v. Workers Comp. Appeals Bd., supra, 112 Cal.App.4th at p. 363.) With certain exceptions, "covered claims" are "the obligations of an insolvent insurer" (§ 1063.1, subd. (c)(1)), including the obligation "to provide workers compensation benefits under the workers compensation law of this state." (§ 1063.1, subd. (c)(1)(vi).) Specifically excluded from the definition of "covered claims" is among others, "any obligations to any state." (§ 1063.1, subd. (c)(4), italics added.) "The logical and natural reading of the statute, then, is that covered claims do not include obligations to `any state. Period." (Karaiskos, supra, 117 Cal.App.4th at p. 357, citing County of Orange v. FST Sand & Gravel, Inc. (1998) 63 Cal.App.4th 353, 357 (County of Orange).)

c. UC is the "state."

In County of Orange, a companion to North Orange County Community College Dist. v. CM School Supply Co., supra, 63 Cal.App.4th at p. 363, relied on by the Board here, the Court of Appeal found that the County of Oranges tort claim was a covered claim because, pursuant to Government Code section 900.4, the "state" does not include local governmental entities. The court reasoned that section 1063.1, subdivision (c)(4) does not permit the "state" to be construed so as to include all of its subdivisions. The court found, without exception, that throughout the Insurance Code, when entities other than those ascribed to the state were included the Legislature said so. The numerous statutes compared by the court included section 795.25, which refers to "`the federal government, the state, any agency of either, or any other entity," section 1077.3, which refers to `"a department, agency, or instrumentality of this or another state," and section 1192.9, which refers to `"states or their political subdivisions, agencies, and instrumentalities." (County of Orange, supra, 63 Cal.App.4th at p. 358.) Additionally, the court noted that in Government Code section 900.4, the Legislature differentiated local public entities from the "state" for purposes of tort liability. The court concluded, "[b]ecause local governments are not the `state for purposes of tort liability, it would make sense for the Legislature to `give them a break and allow them to press claims against CIGA while prohibiting entities in whom sovereignty resides—the state itself, and the federal government—from making such claims. The statute thus boils down to the Legislatures decision as to who should bear a loss as between local governments and CIGA." (County of Orange, supra, at p. 361.)

Government Code section 900.4 provides: "`Local public entity includes a county, city, district, public authority, public agency, and any other political subdivision or public corporation in the State, but does not include the State." (Gov. Code, § 900.4;County of Orange, supra, 63 Cal.App.4th at p. 361.)

Tort claimants against local public entities have separate requirements. (See Gov. Code, § 905;County of Orange, supra, 63 Cal.App.4th at p. 361.)

In the companion case, North Orange County Community College Dist. v. CM School Supply Co., supra, 63 Cal.App.4th 362, the court found that even though a school district is an agency of the state for the local operation of the state school system, it is not the "state" for purposes of section 11870. The court reasoned that "[t]he very sentence structure of section 11870 shows that the Legislature does not consider a community college district to be synonymous with `state. Here is the list of public entities as the Legislature wrote it: `The state, any agency, department, division, commission, board, bureau, officer or other authority thereof, and each county, city and county, city school district, irrigation district, any other district established by law, or other public corporation or quasi public corporation within the state, including any public utility operated by a private corporation may insure against its liability for compensation with the State Compensation Insurance Fund. . . . (Italics added.) [¶] The telltale word in section 11870 is `thereof. The word follows the various permutations of state government (`The state, any agency, department, division, commission, board, bureau, officer or other authority thereof . . . ), but it precedes the reference to school districts." (North Orange County Community College Dist. v. CM School Supply Co., supra, 63 Cal.App.4th at p. 365.)

County of Orange and North Orange County Community College Dist. v. CM School Supply Co. differentiated local agencies from state agencies. Because UC is a state agency, not a local agency, these cases are readily distinguishable. (See, e.g., Gov. Code, § 4475 [defining state agency to include "the Board of Regents of the University of California"]; Code Civ. Proc., § 1235.200 [defining "state" to include The Regents of the University of California for purposes of eminent domain]; 63 Ops.Cal.Atty.Gen. 132 (1980) [for the purpose of its acquisition of surplus state land, "The University of California is a state agency as that term is used in Government Code section 11011 et seq. . . . ."].)

Likewise, the Boards reliance upon Estate of Royer for the proposition that UC is a public corporation and not the "state" is misplaced. Estate of Royer did not find that UC is a public corporation separate from the state; rather it found that it was a state agency. (Estate of Royer, supra, 123 Cal. at p. 621.) In fact, the Court expressed no doubt that UC was a state agency, commenting: "It would seem clear enough that the university comes plainly within the commonly accepted definition of a public corporation. It was founded by the state; its original and primary endowment was by the United States by grant to the state for this special purpose; all its property is property of the state; it was created by the state and is subject to the laws of the state as a state institution within the limits of the new constitution, which has declared it to be a public trust, . . . ." (Ibid.; see also Goldberg v. Regents of the University of California (1967) 248 Cal.App.2d 867, 874 ["Accordingly, the University is a constitutional department or function of the state government [citations]"]; Regents of University of California v. City of Santa Monica (1978) 77 Cal.App.3d 130, 137 ["However, [Government Code] section 53090, which defines `local agency, excludes `the state and, by implication, such statewide agencies with plenary constitutionally granted powers as [T]he Regents"].)

It is worth noting that obligations of the state are not the only obligations from which CIGA has been excused by law. For example, in cases where both an insolvent and a solvent insurer would each be liable for a portion of a cumulative trauma injury, CIGA is excused from contributing its percentage and the solvent insurer must absorb the entire cost. (§ 1063.1, subd. (c)(9); Dennys Inc. v. Workers Comp. Appeals Bd., supra, 104 Cal.App.4th 1433; Industrial Indemnity Co. v. Workers Comp. Appeals Bd., (Garcia) (1997) 60 Cal.App.4th 548.) CIGA also is not liable for penalties for unreasonable delay in payment of workers compensation benefits by the insolvent insurer for which the insurer would be liable under Labor Code sections 5814 and 5814.5. (§ 1063.1, subd. (c)(8).) And, even when CIGAs obligations were expanded to include obligations of insolvent self-insured employers, section 1063.1, subdivision (c)(13) limited that obligation to $500,000 per claim.

The amendment reads, in relevant part: "(13) `Covered claims shall also include obligations arising under an insurance policy written to indemnify a permissibly self-insured employer pursuant to subdivision (b) or (c) of Section 3700 of the Labor Code for its liability to pay workers compensation benefits in excess of a specific or aggregate retention, provided, however, that for purposes of this article, those claims shall not be considered workers compensation claims and therefore are subject to the per claim limit in paragraph (7) and any payments and expenses related thereto shall be allocated to category (c) for claims other than workers compensation, homeowners, and automobile, as provided in Section 1063.5." (Stats. 2005, ch. 395, § 1.)
Section 1063.1(c)(7) provides: `"Covered claims does not include that portion of any claim, other than a claim for workers compensation benefits, that is in excess of five hundred thousand dollars ($500,000)."

Furthermore, we address UCs argument raised for the first time in its answer to CIGAs petition. UC contends section 1063.1, subdivision (c)(4) excludes only noncovered obligations to the state. UC misreads the statute. Section 1063.1, subdivision (c)(1) defines covered claims as "the obligations of an insolvent insurer . . . to provide workers compensation benefits under the workers compensation law of this state." (§ 1063.1, subd. (c)(1)(vi).) Subdivision (c)(4) excludes from the definition of "covered claims" "any obligations to any state or to the federal government." (§ 1063.1, subd. (c)(4), italics added.) The statute permits no understanding other than this, obligations of the insolvent insurer to any state or to the federal government normally covered are not covered claims for which CIGA is liable. There is no dispute about what the governmental exclusion of section 1063.1, subdivision (c)(4) says: Claims requiring the payment of any obligation to any state are not "covered claims" for which CIGA is liable. (County of Orange, supra, 63 Cal.App.4th at p. 357; Karaiskos, supra, 117 Cal.App.4th at p. 357.)

UC also implied that the plain reading of the statute would have a chilling effect on the ability of injured workers to obtain medical treatment at UC facilities in the future. "While denying payment to the [UC] under these circumstances may increase the [UCs] financial burden, this fact does not justify ignoring the statutes clear language. [Citation.] . . . `The Legislature has balanced these competing concerns for protecting the insured public in the creation and statutory duties of CIGA. We shall not take it upon ourselves to change the balance. [California Ins. Guarantee Assn. v. Argonaut Ins. Co. (1991) 227 Cal.App.3d 624, 636]." (Karaiskos, supra, 117 Cal.App.4th at p. 362.)

In short, section 1063.1, subdivision (c)(4) "`thus boils down to the Legislatures decision as to who should bear a loss as between [the State of California] and CIGA." (Karaiskos, supra, 117 Cal.App.4th at p. 362, quoting County of Orange, supra, 63 Cal.App.4th at p. 361.) As CIGA is also a state agency, the Legislature apparently determined that CIGA should not be responsible for a debt that could be absorbed equally well by another state agency. "`[T]he acid test of statutory interpretation based on principles of statutory construction is always whether the interpretation yields an absurd result. (County of Orange v. FST Sand & Gravel, Inc., supra, 63 Cal.App.4th at p. 360.) The clear, unambiguous, and unavoidable conclusion is that [UCs lien] . . . is an obligation to a state and is thus not a `covered claim that CIGA is obligated to pay. (Ins. Code, § 1063.1, subd. (c)(4).) It defies logic and produces a ludicrous result to conclude that a payment to a department of the State is not a payment to a state." (Karaiskos, supra, 117 Cal.App.4th at p. 362.)

DISPOSITION

We annul the Boards orders after consideration.

We concur:

BOREN, P. J.

DOI TODD, J.


Summaries of

California Insurance Guarantee Association v. Workers Compensation Appeals Board

Court of Appeal of California
Dec 14, 2006
No. B189208 (Cal. Ct. App. Dec. 14, 2006)
Case details for

California Insurance Guarantee Association v. Workers Compensation Appeals Board

Case Details

Full title:CALIFORNIA INSURANCE GUARANTEE ASSOCIATION, Petitioner, v. WORKERS…

Court:Court of Appeal of California

Date published: Dec 14, 2006

Citations

No. B189208 (Cal. Ct. App. Dec. 14, 2006)