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General Reinsurance Corp. v. St. Jude Hospital3/26/2003
In this case an injured employee obtained a 10 percent increase in her workers' compensation award under Labor Code section 5814 because her self-insured employer unreasonably delayed or refused payment of benefits. The employer's excess insurance carrier obtained a judgment declaring it was not required to reimburse the employer for the 10 percent increase because the policy excluded indemnification for payments made in excess of "benefits regularly required by the Workers Compensation Law" if such benefits were required because "the Insured violated or failed to comply with any Workers Compensation Law." The employer contends the exclusion does not apply to section 5814 benefits and the exclusion is too ambiguous and overbroad to be enforceable. We disagree and affirm.
FACTS AND PROCEDURE
The Policy
St. Jude Hospital self-insures for workers' compensation . General Reinsurance Corporation is St. Jude's excess insurance carrier. The General Reinsurance policy provides St. Jude indemnification for losses over $300,000 and defines a "loss" as "amounts actually paid by the Insured as a self-insurer under the Workers Compensation Law."
Section D of the General Reinsurance policy contains the following exclusion: "The Insurer will not indemnify the Insured for any payments made by the Insured in excess of benefits regularly required by the Workers Compensation Law[ ] if such excess payments are required because: [ ] (1) of serious and willful misconduct of the Insured; [ ] (2) the Insured employed an employee in violation of law; [ ] (3) the Insured failed to comply with a health or safety law or regulation; [ ] (4) in violation of the Workers Compensation Law, the Insured discharged, coerced, or otherwise discriminated against any employee; or [ ] (5) the Insured violated or failed to comply with any Workers Compensation Law." The policy also provides "the Insurer has no duty to investigate, handle, settle or defend any claim, proceeding or suit against the Insured."
The Ballard Action
Pamela Limousin-Ballard (Ballard) was a St. Jude employee injured on the job in 1987. In 1992, Ballard and St. Jude stipulated to an award of workers' compensation benefits that contemplated payment of Ballard's future medical expenses.
In August 1994, Ballard filed a petition against St. Jude for penalties under section 5814. Apparently St. Jude's independent claims administrator, believing St. Jude was entitled to a credit for amounts Ballard had recovered from a third party, had unilaterally discontinued payment of all of Ballard's medical expenses without having first obtained authorization from the Workers' Compensation Appeals Board (WCAB).
In June 1997, a Workers' Compensation Judge (WCJ) issued an opinion and issued findings and orders on Ballard's petition. In the opinion, the WCJ explained that while there are no statutes or regulations specifying how third party credits are to be pursued, decisional authority makes clear that WCAB intervention to establish the right to such credit must be had before benefits may be withheld from an injured employee. The WCJ found St. Jude had acted unreasonably in unilaterally withholding payment of Ballard's medical expenses.
St. Jude compounded the problem when, after the WCAB found St. Jude was not entitled to the credit, it continued to refuse to pay Ballard's medical expenses while it pursued appellate remedies. And, even though the Supreme Court had denied St. Jude's petition for review of the earlier decision on the credits in March 1996, St. Jude continued to deny Ballard's medical expenses for over a year; it did not recommence paying her medical expense
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