The California Insurance Guarantee Association is only authorized by statute to pay “covered claims.” (California Insurance Code Section 1063.1). “CIGA is an insurer of last resort and does not assume responsibility for claims where there is any other insurance available. R.J. Reynolds Company v. California Insurance Guarantee Association, 235 Cal. App. 3d 595, 600 (1991). Accordingly, equitable and legal claims for contribution, indemnity and subrogation by solvent insurers are prohibited. Section 1063.1(c)(4).
The California Court of Appeal has ruled in Baxter Healthcare Corporation v. California Insurance Guarantee Association, No. B132317 (Cal. App. December 7, 2000) that a breast implant manufacturer could not obtain reimbursement from CIGA for sums that would otherwise have been owed to it by the insolvent insurers of a predecessor company. The Second Appellate District declared that the protection of CIGA only extends to the original insureds under an insolvent policy and therefore did not cover Baxter, which was claiming under an “assignment and assumption” agreement with the original insured.
The California Court of Appeal has ruled that the normal rules of priority concerning the distribution of the assets of an insolvent insurance company are not changed by the fact that the claimant insured also happens to be an insurance company. In American National Ins. Co. v. Low, B137765 (Cal. App. November 8, 2000), the Second District declared that even though the definition of “covered claims” excludes insurers that language is only meant to preclude claims for subrogation, contribution or indemnity, as distinguished from an insurer’s claims under a policy issued directly to it by the insolvent carrier.
1063.1(c)(1) “Covered claims” means the obligations of an insolvent insurer…(i) imposed by law and within the coverage of an insurance policy of the insolvent insurer, (iii) which are presented as a claim to the liquidator in this state or to the association on or before the last date fixed for the filing of claims in the domiciliary liquidating proceedings.
1063.1(c)(4) “Covered claims” does not include any obligations of the insolvent insurer…to any state or to the federal government.
1063.1(c)(5) “Covered claims” does not include any obligations to insurers, insurance pools, or underwriting associations, nor their claims for contribution, indemnity, or subrogation, equitable or otherwise, except as otherwise provided in this chapter.
An insurer, insurance pool, or underwriting association may not maintain, in its own name or in the name of its insured, any claim or legal action against the insured of the insolvent insurer for contribution, indemnity or by way of subrogation, except insofar as, and to the extent only, that the claim exceeds the policy limits of the insolvent insurer’s policy. In those claims or legal actions, the insured of the insolvent insurer is entitled to a credit or setoff in the amount of the policy limits of the insolvent insurer’s policy, or in the amount of the limits remaining, where those limits have been diminished by the payment of other claims.
1063(c)(7) ”Covered claims” does not include that portion of any claim, …that is in excess of five hundred thousand dollars ($500,000.00).
1063.1(c)(8) ”Covered claims” does not include any amount awarded as punitive or exemplary damages.
1063.1(c)(9) ”Covered claims” does not include (i) any claim to the extent it is covered by any other insurance…available to the claimant or insured nor (ii) any claim by any person other than the original claimant…in his or her own name…and does not include any claim asserted by an assignee or one claiming by right of subrogation…”
1063.2(a) The association shall pay and discharge covered claims.
1063.2(e) Any person having a claim or legal right under any governmental or guaranty program which is also a covered claim, shall be required to first exhaust his or her right under the program. Any amount payable on a covered claim shall be reduced by the amount of the recovery under the program.
1063.2(g) ”Covered claims” shall not include any judgments adjacent or obligations or liabilities of the insolvent insurer or the commissioner, as liquidator, or otherwise resulting from alleged or proven torts, nor shall any default judgment or stipulated judgment against the insolvent insurer, or against the insured of the insolvent insurer, be binding against the association.
CIGA can only pay statutorily defined covered claims. Any claim covered by any other insurance is not covered under CIGA statute. Therefore, CIGA is not authorized to disperse its fund by statute.
Indemnity Company v. Workers' Compensation Appeals and CIGA
In absolving CIGA from any liability, the Board concluded (1) CIGA was only required to pay "covered claims"; (2) "covered claims" did not include claims covered by other insurance available to the claimant or insured (Ins. Code, § 1063.1, subd. (c)(9)); and (3) Garcia's claim was covered by other insurance since all carriers during Garcia's period of exposure were jointly and severally liable for benefits to an employee for cumulative trauma.
Proposition 51 would not absolve CIGA as to non-economic damages.
Gina vs. CIGA
L. White vs. The City of Huntington Beach
Co. vs. Tubbs Cordage Co.
Investment Company v. California Insurance Guarantee Association
Court of Appeal ruled in C.D. Investment Company v. California Insurance
Guarantee Association, B134895 (Cal. App. November 27, 2000) that the $500,000
statutory cap for “covered claims” against insolvent insurers applies separately
to each triggered policy. Further, payments that a policyholder may
have received from solvent insurers do not offset the amount that CIGA
is obligated to pay under the policies of the insolvent insurers. (Caselaw)
Insurance Co. v. United States Fire Insurance Company
Later that same year, the California Legislature amended then section 1063.1(c)(4) to expressly exclude equitable indemnity claims of insurers from the statutory "covered claims" payable by CIGA. As amended Insurance Code section 1063.1(c)(4) [now codified as (c)(5)] provided "Covered claims" does not include any obligations to insurers, insurance pools, or underwriting associations, nor their claims for contribution, indemnity, or subrogation, equitable or otherwise, except as otherwise provided in this chapter." (Italics added.) In so doing, the Legislature acted swiftly to close the "loophole" that the Phoenix court created and unequivocally express the Legislative intent to protect CIGA.
Phoenix involved an equitable indemnification claim by Phoenix, a solvent excess carrier, against CIGA to recover indemnity payments Phoenix made to settle a malpractice action against the insured of the insolvent carrier, Signal.
The court found that the Phoenix policy simply did not cover the claims against the insured on an excess basis over the Signal primary policy. In effect, the court found that there was no "other insurance," pursuant to then Insurance Code section 1063.1 (c)(7)(i) [currently subdivision (c)(9)(i)].
opinion in Ross vs. Canadian Indemnity Insurance Company (1983) 142 Cal.App.3rd
396 [191 Cal.Rptr.99] requires Lyon's direct insurers to defend and indemnify
on a primary basis, vis-à-vis CIGA, even if their policies provide
that their insurance is excess over any other insurance available to Lyon.
In Ross, the court held that a solvent secondary insurer had the primary
obligation to defend and indemnify its insured where the insured's primary
insurer had become insolvent. (Caselaw)
ISRAEL P. CHAMBI, vs.
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA (1/9/2002)
Aloha Pacific, Inc.,
et. al. vs. CIGA
Serena Community Association
vs. Brehm Communities
The CIGA statute does not limit the type of insurance that must be available, but rather includes “any” other insurance within its ambit. All that is required is that the insurance is “available” to pay the claim by Serena against MJS.
The CD Investment case does not support Brehm and Serena’s position. The settlement agreement in CD Investment exceeded the policy limits of the solvent insurers, leaving CD Investment’s only recourse a claim against CIGA for amounts covered under the insolvent insurer’s policies.
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