Christensen v. H & L Plastics Co., Inc.

CASE NO. 5171 CRB-3-06-12

COMPENSATION REVIEW BOARD

WORKERS’ COMPENSATION COMMISSION

NOVEMBER 19, 2007

WILLIAM J. CHRISTENSEN

CLAIMANT-APPELLEE

v.

H & L PLASTICS CO., INC.

EMPLOYER

and

CIGA

INSURER

RESPONDENT-APPELLANT

and

WAUSAU INSURANCE COMPANY

INSURER

RESPONDENT-APPELLEE

APPEARANCES:

The claimant was represented by David J. Morrissey, Esq., Morrissey, Morrissey & Mooney, LLC, Attorneys at Law, 203 Church Street, P.O. Box 31, Naugatuck, CT 06770. Counsel communicated they would not file a brief or attend oral argument as the issue on appeal was limited to apportionment and only concerned the respondents.

The respondent CIGA was represented by Mark Robins, Esq., Nixon Peabody LLP, 100 Summer Street, Boston, MA 02110-2131 and William C. Brown, Esq., McGann, Bartlett & Brown, 111 Founders Plaza, Suite 1201, East Hartford, CT 06108.

The respondent Wausau Insurance Company was represented by Jeffrey J. Klein, Esq., Maher & Williams, 1300 Post Road, P.O. Box 550, Fairfield, CT 06430-0550.

This Petition for Review from the November 15, 2006 Finding and Award of the Commissioner acting for the Fifth District was heard before a Compensation Review Board panel consisting of the Commission Chairman John A. Mastropietro and Commissioners Scott A. Barton and Ernie R. Walker.

OPINION

JOHN A. MASTROPIETRO, CHAIRMAN. The instant appeal concerns a single issue: Is the Connecticut Insurance Guaranty Association (CIGA) legally obligated to reimburse an insurance carrier when an agreement was reached between two insurance carriers (one now insolvent) to divide the burden of a workers’ compensation claim and the solvent carrier subsequently settles the claim? In this case the solvent carrier, Wausau Insurance, persuaded the trial commissioner to approve such a reimbursement. We believe this decision is in contravention of binding appellate precedent governing CIGA, and therefore we uphold CIGA’s appeal and vacate the Finding and Award.

The parties stipulated to the underlying facts which prompted this dispute. The claimant William Christensen sustained an injury to his back on December 29, 1994 during the course of his employment with H & L Plastics Company (H & L). At that time Wausau Insurance was the carrier for H & L, and they accepted the 1994 claim and paid medical and indemnity benefits, including an additional 8% permanent partial disability award. In October 1997, after the claimant returned to work, H & L replaced Wausau and retained Reliance Insurance as their workers’ compensation carrier. The claimant left H & L’s employment on March 3, 1998 and asserted a repetitive trauma injury from the period from when he returned to work after the 1994 injury (May 8, 1995) to the conclusion of his employment. It was agreed that the new injury the claimant suffered aggravated the claimant’s prior back injury and is a significant factor in his need of medical treatment thereafter. Therefore, Wausau and Reliance reached an agreement as to responsibility for the claimant’s back ailments based on the following terms:

A. Wausau would administer the claim with William Christensen and make payments to and for the benefit of Mr. Christensen;

B. Wausau’s share of responsibility would be ninety percent (90%);

C. Reliance would reimburse Wausau ten percent (10%) of the medical and indemnity benefits paid by Wausau.

Wausau performed its obligations under this agreement. In 2001 Reliance was declared insolvent and responsibility for its claims passed to CIGA. On or about January 25, 2006, Wausau stipulated William Christensen’s workers’ compensation claims for the sum of Two Hundred Fifty Thousand Dollars and 00/100 ($250,000). Wausau then sought reimbursement from CIGA for the 10% share of this settlement Reliance would have been obligated to provide under their agreement, citing as authority § 31-299b C.G.S.

The trial commissioner acting for the fifth district held a formal hearing on this issue commencing on January 25, 2006 and continued to October 13, 2006 for the filing of Briefs and proposed findings. At the hearing CIGA advanced the position that the relief sought by Wausau was barred by the precedent in Hunnihan v. Mattatuck Manufacturing, 243 Conn. 438 (1997), which determined CIGA was not obligated to honor claims from solvent insurers. Wausau asserted that CIGA was the successor in interest to Reliance and should honor the terms of their agreement concerning this claim. The trial commissioner concluded that Wausau’s position was “more credible and persuasive,” Findings, ¶ 15, as CIGA was the “last carrier of record.” Findings, ¶¶ 16-17.1 He ordered CIGA to reimburse Wausau for the share of the settlement Reliance would have been obligated to pay. CIGA has appealed from this award.

On appeal we have a limited scope of review, as our standard of review is deferential to the finder of fact. “As with any discretionary action of the trial court, appellate review requires every reasonable presumption in favor of the action, and the ultimate issue for us is whether the trial court could have reasonably concluded as it did.” Daniels v. Alander, 268 Conn. 320, 330 (2004).

This presumption, however, can be challenged by the argument that the trial commissioner did not properly apply the law or has reached a finding of fact inconsistent with the evidence presented at the formal hearing. As we held in Caraballo v. Specialty Foods Group, Inc./Mosey’s Inc., 5082 CRB-1-06-4 (July 3, 2007).

In Sullivan v. Madison-Police Department, 4893 CRB-3-04-12 (June 9, 2006) we explained that although we are deferential to the finding of facts reached at the trial level, our appellate review must consider whether the facts found are supported by competent evidence and are legally consistent with the ultimate outcome of the case.

“While this board cannot retry the facts of this case, it must review the sufficiency of the evidence against the legal standards required for granting an award. ‘The power and duty of determining the facts rests with the commissioner, the trier of facts. Czeplicki v. Fafnir Bearing Co., 137 Conn. 454, 457, 78 A.2d 339 (1951). The conclusions drawn by him from the facts found must stand unless they result from an incorrect application of the law to the subordinate facts or from an inference illegally or unreasonably drawn from them.’ Tovish v. Gerber Electronics, 32 Conn. App. 595, 602 (1993).” Id.

We also noted in Sullivan that it is our responsibility as an appellate body to correct a commissioner’s misapplication of the law to the subordinate facts. See Carroll v. Flattery’s Landscaping, Inc., 4499 CRB-8-02-2 (March 25, 2003).

Upon review we conclude the trial commissioner did not properly apply the law pertaining to claims made against CIGA.

In our recent decision in Esposito v. Simkins Industries, Inc., 5065 CRB-3-06-3 (March 1, 2007) we discussed at length precedent which permits self-insured parties to seek payment from CIGA, but specifically bars CIGA from reimbursing insurance carriers. In Esposito we reviewed the recent Connecticut Supreme Court decision in Connecticut Ins. Guaranty Assn. v. State, 278 Conn. 77 (2006) for this proposition.

The Supreme Court clearly delineated that self-insured employers are entitled to seek reimbursement from CIGA when carriers are insolvent. “[t]he present case, unlike Besack involves no attempt to exercise an insurer’s claim for reimbursement.” Id., 89. (Emphasis in original). The Court also restated the principle behind Doucette v. Pomes, [247 Conn. 442 (1999)], supra. “This court previously has concluded, and the parties do not dispute, that a self-insurer is not an ‘insurer’ for the purposes of the act and may, therefore, recover from the association. Doucette v. Pomes, 247 Conn. 474.”’ CIGA, 84, fn.6.

Esposito, supra.

Our decision in Esposito also cited our decision in Konovaluk v. Graphite Die Mold, Inc., 4437 CRB 3-01-9 (August 8, 2002) which reviewed the Hunnihan case. In Esposito, we relied heavily on our decision in Konovaluk pointing out this Board in Hunnihan had originally taken the same position on insurer reimbursement as the trial commissioner reached in the present case, only to be reversed on appeal.

In Hunnihan, this board had determined that § 31-299b permitted the last insurer on the risk to seek reimbursement from the Connecticut Insurance Guaranty Association (CIGA) for the share of liability attributable to the coverage period of American Mutual Insurance Co., which was determined to be insolvent as of March 9, 1989. Hunnihan, 16 Conn. Workers’ Comp. Rev. Op. 72, 2297 CRB-5-95-2 (October 30, 1996). Our Supreme Court reversed this board’s ruling, holding that the definition of “covered claim” in § 38a-838(6) C.G.S. did not include amounts due to any insurer, including an insurer whose liability is premised on being the last insurer under § 31-299b.

Konovaluk, supra.

In their brief Wausau argues that they are not seeking reimbursement for a “covered claim” Appellee Brief, p. 8. However, under Hunnihan CIGA is limited only to the reimbursement of a “covered claim.”

Pursuant to General Statutes § 38a-841, the association is authorized to pay only covered claims, and must deny all other claims. In order to be reimbursable by the association, a claim against the association must be encompassed within the definition of a covered claim contained in § 38a-838 (6). The language relied upon by the association as excluding the Fireman’s Fund claim provides that “the term ‘covered claim’ shall not include any amount due any . . . insurer . . . as subrogation recoveries or otherwise . . . .” (Emphasis added.) General Statutes § 38a-838(6)(c) (Emphasis added). Hunnihan, supra, 450-451.2

The Supreme Court further discussed the purpose of CIGA in the Hunnihan decision and made a clear declaration that public policy provided a rationale against permitting CIGA to honor demands from insurers for claim reimbursement.

The legislative history confirms that the association was established for the benefit of consumers. . . . An interpretation of the covered claim definition that excludes claims by insurers is in accord with this legislative purpose to provide protection for policyholders and claimants from insurer insolvency. The exclusion of claims by insurers leaves the risk of insurer insolvency on the insurance industry. The result is that policyholders, who in effect fund the association, pay only for protection for fellow policyholders and claimants in the event that an insurer becomes insolvent. Hunnihan, 452.

While the Supreme Court in Doucette v. Pomes, 247 Conn. 442 (1999) has decided to afford self-insured parties the same rights against CIGA as policyholders and claimants, Wausau advances no authority that the prohibition on insurer reimbursement enunciated in Hunnihan has been materially altered by either the legislature or the judiciary. Instead, Wausau argues that CIGA must assume “the fiduciary duties of the insolvent carrier.” Appellee’s Brief, p. 9. The plain language of the Hunnihan decision demonstrates our Supreme Court has rejected this interpretation. As a decade has elapsed since the Hunnihan decision, we must presume the General Assembly has ratified this posture based on the doctrine of “legislative acquiescence.” Hummel v. Marten Transport, Ltd., 282 Conn. 477, 496-502 (2007); Hanson v. Transportation General, 245 Conn. 613, 618-619 (1998).3

We note the parties in this appeal have argued whether CIGA can be the lead carrier for the purposes of § 31-299b C.G.S. apportionment. We are puzzled at the apparent misunderstanding. Had a repetitive trauma claim occurred and CIGA was the carrier responsible for the claim at the time of its filing, CIGA would have the statutory right to seek apportionment from previous carriers on the risk. The Hunnihan case means there is no reciprocity of obligation, however, as a solvent carrier who is the last carrier on the risk cannot apportion against CIGA for an insolvent carrier’s share of the loss. Wausau is correct that in the absence of an agreement between Reliance and Wausau CIGA would have administered the claim for repetitive trauma and would have sought apportionment against Wausau. Wausau’s decision to reach an agreement with Reliance renders this issue moot. We also note that based on the timeline of the stipulated facts Wausau’s agreement with Reliance was subsequent to the second injury. While Wausau may not have anticipated an agreement with Reliance for this claim would cause it to bear a greater burden of the claim were Reliance to become insolvent, such a result is a consequence of that agreement, as Wausau undertook to administer the claim itself.

Essentially, Wausau’s position is that since they made an agreement with the now-defunct Reliance Insurance, and CIGA has stepped in to honor claims against Reliance as a result of the insolvency, that CIGA should be obligated to perform all of Reliance’s contractual obligations.4 While the trial commissioner may well have been persuaded of the equity of this result, we cannot find legislative authority to expand the role of CIGA to become a de facto receiver responsible for addressing the commercial undertakings of insolvent insurance carriers. Wausau may have recourse against Reliance’s receiver or may lobby the General Assembly to amend the statute so as to address this issue. We cannot provide the relief they desire in this forum, however.

The appeal is sustained and the Finding and Award is herein set aside.

Commissioners Scott A. Barton and Ernie R. Walker concur in this opinion.

1 We presume that this was based on a “successor in interest” approach as this claim was filed when Reliance was still solvent and was the carrier on this risk. BACK TO TEXT

2 This statute has been amended and the relevant provision is now § 38a-838(5) C.G.S. We note that this statute specially offers a remedy to an insurer seeking contribution to settlement of a claim, as while such claims are not defined as covered claims “that a claim for any such amount, asserted against a person insured under a policy issued by an insurer which has become an insolvent insurer, which, if it were not a claim by or for the benefit of a reinsurer, insurer, insurance pool or underwriting association, would be a “covered claim” may be filed directly with the receiver of the insolvent insurer.” The record is silent on whether Wausau pursued this avenue of recovery. BACK TO TEXT

3 Counsel for CIGA has provided a massive amount of authority regarding the issues in this case. We decline to comment on most of the cases cited as we have previously held that it is the quality of a party’s argument which is dispositive before the Commission, not the quantity of documentation that is provided Arnott v. Taft Restaurant Ventures, LLC, 4932 CRB-7-05-3 (March 1, 2006). Much of the authority offered were from courts in other jurisdictions, which are not binding on this panel. Atkinson v. United Illuminating Company, 5064 CRB-4-06-3 (April 19, 2007); especially as we find existing Connecticut precedent adequately addresses the issues at hand. BACK TO TEXT

4 The record is silent on whether Wausau made an effort to obtain the consent of CIGA prior to settling the claims presented by the claimant. Since Wausau was presumably aware as of 2006 that Reliance Insurance was not in a position to perform their terms of the agreement, we query whether it was reasonable to expect the guaranty fund to fund a settlement had they not been privy to its negotiation. BACK TO TEXT