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California Ins. Guarantee Association v. San Diego County Schools Risk Management Joint Powers Authority

California Court of Appeals, Fourth District, First Division

October 30, 2019

CALIFORNIA INSURANCE GUARANTEE ASSOCIATION, Plaintiff, Cross-defendant and Appellant,
SAN DIEGO COUNTY SCHOOLS RISK MANAGEMENT JOINT POWERS AUTHORITY et al., Defendants, Cross-complainants and Respondents.

         [254 Cal.Rptr.3d 356] APPEAL from a judgment of the Superior Court of San Diego County, Katherine A. Bacal, Judge. Reversed. (Super. Ct. No. 37-2016-00004801-CU-IC-CTL)

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         Law Offices of Adrienne Dee Cohen, Santa Ana, Adrienne D. Cohen and Julie R. Ursic, for Plaintiff, Cross-defendant and Appellant.

         TencerSherman, Sam G. Sherman, San Diego, and Jessica L. Mulvaney for Defendants, Cross-complainants and Respondents.


         DATO, J.

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          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’ [254 Cal.Rptr.3d 357] 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 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

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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 Fed.Appx. 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.


          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 [254 Cal.Rptr.3d 358] 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

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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."

          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.

          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 [254 Cal.Rptr.3d 359] coverage in May 2014, ...

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