Proceedings to review a decision of the Workers‟ Compensation Appeals Board. Affirmed. (Super. Ct. Nos. STK0191710, ADJ2866919).
The opinion of the court was delivered by: Robie, J.
CERTIFIED FOR PUBLICATION
Under Labor Code section 3861, the employer of an injured employee is entitled to a credit against the employer‟s liability for future workers‟ compensation benefits out of "any recovery" the employee receives for his injury, either by settlement or after judgment, from a third party tortfeasor.
In this case, petitioner Lance Baur, a police officer employed by respondent City of Stockton (the city), was injured on the job during an altercation with suspect Richard Thomas Beck. The city provided Baur workers‟ compensation benefits. Baur then filed a lawsuit against Beck, but Beck‟s insurance company was insolvent. As a result, Baur settled his lawsuit with the California Insurance Guarantee Association (CIGA).*fn1 The city then claimed a credit pursuant to Labor Code section 3861, up to the amount of the net settlement, against its liability for future workers‟ compensation benefits. A workers‟ compensation administrative law judge granted the credit.
Baur argues to this court that since CIGA is not permitted to pay for claims covered by other insurance (Ins. Code, §§ 1063.2, subd. (a) & 1063.1, subd. (c)(9)), it was improper to grant the city a credit under Labor Code section 3861 against its liability for future workers‟ compensation benefits resulting from Baur‟s injuries.
Baur‟s reasoning appears to be as follows: A judgment or settlement paid by a solvent insurer can include money for future medical costs (which are covered by workers‟ compensation), and thus applying the credit in that circumstance simply requires the employee to pay for future medical costs with money received for that purpose. When CIGA is involved, however, a judgment or settlement paid by CIGA cannot include future medical costs (because those costs are covered by workers‟ compensation). Thus, applying the credit would require the employee to pay for future medical costs with money received for an entirely different purpose, such as to compensate for pain and suffering. In Baur‟s view, this essentially requires CIGA to indirectly pay for future medical costs in violation of the Insurance Code provisions governing CIGA.
Baur is partially correct. Applying the Labor Code section 3861 credit to a settlement or judgment paid by CIGA will require the employee to pay for future medical costs with money received from CIGA for another purpose. As we will explain, however, this result does not violate the governing Insurance Code provisions, and it is compelled by the plain language of section 3861, which mandates a credit against "any recovery."
FACTUAL AND PROCEDURAL BACKGROUND
Officer Baur was employed by the city in August 2003 when he was injured on the job by suspect Beck. As a result of Baur‟s injuries, the city provided Baur with $74,408.79 in workers‟ compensation benefits.
Baur then filed a civil lawsuit against Beck, and the city filed a lien in the lawsuit, seeking reimbursement for workers‟ compensation benefits in the amount of $73,340.69.
Beck‟s insurance carrier, Vesta Fire Insurance Company (Vesta), became insolvent, so CIGA stepped in on behalf of Vesta. In settlement of the lawsuit, CIGA agreed to pay $50,000 to Baur, and the city agreed to release its lien.*fn2
In light of the settlement, the city advised Baur that it was entitled to a credit against its liability for future workers‟ compensation benefits up to $50,000.
Baur objected to the credit, claiming the city "has no credit rights in this matter for the same reasons . . . it has no lien rights." Specifically, Baur asserted that the credit was not allowed because the Insurance Code prohibits subrogation on a settlement paid by CIGA.
The workers‟ compensation administrative law judge held that the Labor Code specifically allowed the credit, finding that "CIGA is not involved nor a party to this [workers‟ compensation] action." The judge calculated the credit to which the city was entitled after costs and ...