The Problem
There is a lot of confusion as to what is Contribution and what is Reimbursement, and of course what is the appropriate method of dispute resolution for each. By knowing what type of supplementary proceeding you are dealing with we can take the appropriate action to protect or even advance our client’s interests.
The Law
Contribution is when more than one defendant (either insurance carriers or employers) have coverage over the last year of injurious exposure of a cumulative trauma injury per LC5500.5. LC5500.5(e) gives the defendant one year from the issuance of the award or order approving C&R to petition for contribution. Note it is the initial award of benefits which triggers the one year Statute of Limitations, which is not extended by a Petition for Reconsideration [see Rex Club v. WCAB (1997) 62 CCC 441]. In a contribution proceeding, the defendants have an unrestricted right to full and complete examination or cross-examination per LC5500(c). This means the applicant can be subpoenaed as a witness or compelled to undergo further medical examination [see Greenwald v. Carey Distributing Co (1981) 46 CCC 703]. Contribution disputes under LC5500.5 are resolved by mandatory arbitration per LC5275(a).
Reimbursement on the other hand is when the applicant has suffered two or more separate injuries with each occurring at different employers or insured with different carriers. Thus LC5500.5 would not be applicable as no two defendants share a CT. If a defendant enters into a separate C&R with the applicant concerning its respective injury, the Board has held it may have jurisdiction to determine among and between the various carriers any rights and liabilities arriving out of or incidental to the recovery of compensation [see Lucky Stores v. WCAB (Ahern) (1195) 60 CCC 1119 (writ denied) and Transportation Insurance Company v. WCAB (Avery)]. The typical scenario is two separate injuries which include at least one common body part where one defendant pays benefits or settles a claim which should have been paid by the other defendant. In reimbursement, the rules of contribution generally do not apply. Specifically, there is no one year Statute of Limitations and there is no mandatory arbitration (of course the parties can elect to use arbitration to resolve a reimbursement issue, but it is not mandatory).
An employer or insurance carrier that has erroneously made compensation payments to an injured employee, e.g. when it was not the employer or carrier at the time of the injury, is arguably entitled to file a lien claim under Labor Code §4903(c) in the employee’s claim against the correct employer or carrier. However, that section permits liens for the “reasonable value of an injured employee’s living expenses” and workers’ compensation benefits are considered payments of living expenses [see Argonaut Insurance Company v. IAC (Waddell) (1958) 23 CCC 169]. Additionally, where one party makes a payment for disability upon another party’s liability, credit will ordinarily be followed for disability indemnity paid mistakenly by the wrong carrier or paid under another compensation system.
Likewise, the wrong carrier will ordinarily have a lien claim for such mistakenly paid compensation against any compensation for the same period which may be due to the employee.” St. Clair-California Workers’ Comp Law & Practice §22196. Moreover, in Beal v. Belcher (1940) 5 CCC 275 it was held that an insurance company mistakenly paying the indemnity of another party was entitled to a lien for expenditures by it against any benefits thereafter due from the proper carrier.
Thus the cases allowing reimbursement for mistaken payment by one insurance carrier against another insurance carrier have all been predicated upon the fact that a lien has been filed as the mechanism upon which to seek reimbursement. It is confirmed by the CEB California Work Comp Practice Guide §23.53 that the proper way to seek reimbursement when there are two separate carriers for two separate injuries is to file a lien. Case and statutory law suggest that the filing of a lien in the other case is a condition precedent for reimbursement.
Thus, if a Petition for Contribution has been filed where a lien (with a Petition for Reimbursement) should have been filed, or vice versa, the Board may not have jurisdiction! The result is that a Statute of Limitations may have been blown.
Reimbursement Statute of Limitations: This raises the question of whether or not there is a Statute of Limitations for filing a lien for reimbursement. Note that a lien for reimbursement is distinguishable from a traditional lien. While Labor Code § 4903.5 provides a Statute of Limitations on filing a lien it does not apply to lien claims for reimbursement. However, research suggests there is under CCP §338. CCP §338(d) sets the Statute of Limitations at three years for an action for relief on the grounds of fraud or mistake. The cause of action in that scenario is not deemed to have accrued until the discovery by the aggrieved party of the facts constituting the fraud or mistake. While there is no specific statute in the Labor Code for filing a lien for reimbursement, arguably it could be three years from the time of the Order Approving Compromise and Release by the party paying benefits which should have been paid by the other defendant of the separate injury [see Super Value v. Wexford Underwriting Managers (2009) 74 CCC 720].
There is a minority opinion which suggests there is no Statute of Limitations to file a lien for reimbursement. In Lucky Stores v. WCAB (Ahern) (1995) 60 Cal. Comp. Cases 1119, the applicant sustained specific injury against Lucky Stores that was resolved by C&R and sustained a subsequent injury against another employer that was also resolved by C&R who then petitioned for contribution against Lucky for vocational rehabilitation benefits required by both injuries. The Board found LC 5500.5 did not apply but held that it had jurisdiction under Labor Code section 5300 to “determine rights as among and between various carriers,” that “[s]ection 5300(a) provides for proceedings before the Appeals Board concerning “any right or liability arising out of or incidental’ to the recovery of compensation,” and that “[p]resumably the rights and liabilities of carriers are contained therein.” The Board further found that the WCJ erred in finding that “contribution rights cannot be asserted by one Defendant against another, except by filing a lien claim, when Applicant’s claim against each Defendant is for a separate specific injury.” This therefore implies the Board has jurisdiction pursuant to Labor Code § 5300 even where no lien is filed.
Note that CIGA requests for reimbursement can be distinguished as CIGA has special protections afforded by Ins. Code Section 1063.1 which prevents them from paying on a “covered claim.”
However the majority of the case law and practice guides suggest that a lien is a condition precedent to seeking reimbursement, and it can be inferred form CCP 338.
Practice Tips
It is important to identify if you are in a Contribution or Reimbursement situation. Next, determine if are you seeking or defending against the claim. For contribution, be mindful of the one year Statute of Limitations to file the Petition for Contribution.
For Reimbursement, it is recommended that you file a lien with a Petition for Reimbursement in the other case or cases which belong to the other defendant. If you are defending against Reimbursement and the other party did not file a lien, you do have an argument against Reimbursement if the Statute of Limitations per CCP338 has expired. This can be used as leverage as appropriate.
If you do have a Contribution issue which cannot be resolved, you will have to go to arbitration to decide the issue. Some practical tips would be:
- Complete the Arbitration Submittal Form if at a hearing, but otherwise try to agree upon an Arbitrator with opposing counsel and have that noted on the Minutes of Hearing;
- The date, time and place for arbitration hearings are usually agreed upon by all parties, and the parties typically share the costs equally;
- An Arbitration brief and all evidence “shall” be submitted on the opposing parties and to the arbitrator per LC5276(c). The purpose of this rule is to give the arbitrator a chance to review the data prior to the proceeding. However, the failure to comply with the 10 day rule is difficult to enforce because there is no statutory remedy and an arbitrator cannot raise sanctions against the non-complying party. The only real “remedy” is to give the other party more time to respond.
- A deposition is preferred over the production of the applicant at an arbitration proceeding, but live testimony can be taken.
- The arbitrator has 30 days to serve its decision per LC5277(a). However, the parties generally waive this requirement as a courtesy to the arbitrator (and give 90 days). This should be done on the record.
- The decision shall be like a typical F&A per LC5313, such that there should be a findings, decision, order or award served upon the parties to the proceeding with a summary of evidence received and relied upon with the reasons and grounds upon which the determination was made.
- The aggrieved party can appeal the arbitrator’s decision in the same manner as appealing a WCJ’s decision per CCR10866, LC5900 and LC5911. Thus, a timely verified Petition for Reconsideration is necessary, and all the steps which would apply to a “regular” case would apply. The other party can file an Answer. The arbitrator then issues and serves a report on Recon per CCR10860.
By identifying the legal issues involved in supplementary proceedings and being cognizant of the appropriate procedures, we can place ourselves in the best possible position for a successful outcome.