1. BART vs. GENERAL REINSURANCE CORPORATION:
WHEN WORKERS’ COMPENSATION REINSURANCE ISN’T?
Bill Armstrong, Jessica Williams and Owen Fennern, Armstrong Law Firm
In a case of first impression in California, a Federal District Court Magistrate Judge has concluded that
a stipulation concerning the date of injury by the parties in a WCAB matter is not binding in a
subsequent breach of contract action between the self-insured employer and its reinsurer, even when
the stipulation is approved and adopted by a Workers’ Compensation Judge. If upheld, the opinion
which, seemingly, expands the rights and defenses of reinsurers adds one more unwelcome challenge
for California employers which are self-insured or utilize large loss deductibles to address their
Workers’ Compensation obligations.
Factually, the WCAB action involved a claim for benefits for multiple myeloma cancer by a BART
Police Officer. The application was filed as a cumulative exposure claim covering the period of
employment to October 13, 2006. The opinion is not specific as to the reason for the ending date of the
cumulative claim. It is possible it was the date of diagnosis, it is possible it was the first date of
medical care, it is possible it was the first date of disability (inability to work), and it is equally
possible it was some combination of each.
As the case progressed, an AME was chosen. That AME appears to have provided a number of
opinions on the medical issues in contention, which included the conclusion that cancer was caused by
work place exposures. Following a number of inquiries, the AME, who is now deceased, concluded
the last deleterious exposure contributing to the causation of the cancer was during the employment
period of 1991 and 1992. Applying the AME opinion on last deleterious exposure under Labor Code
Section 5500.5, BART and its employee entered into a WCAB stipulation that the date of injury was
the same as the causation period, i.e., 1991-1992. That stipulation was approved by a Judge.
Based on the stipulation, and having made payments exceeding its retention level of $500,000, BART
and its adjusting agency tendered the matter for reimbursement to the reinsurer with coverage during
the 1991-1992 policy period. The reinsurer, General Reinsurance, issued reimbursements for a number
of years in amounts exceeding $327,000. In 2012, General Reinsurance reversed position and denied
the claim and further reimbursement. The denial appears to be based on the legal theory that the date
of injury should have been determined by applying Section 5412 of the Labor Code. Labor Code
Section 5412 provides that the date of injury for cumulative trauma and occupational disease is the date
of first “compensable disability” coupled with knowledge (usually medical knowledge) of the
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2. BART vs. GENERAL REINSURANCE CORPORATION
July 6, 2015
Page 2
relationship of the medical condition and work. The reinsurer contended that Labor Code Section
5412 provided a date of injury which was different than the WCAB stipulation. Inevitably, the date of
injury was later in time and not covered by the General Reinsurance policy.
BART sued for breach of contract for unreimbursed payments exceeding the retention for the 1991-
1992 policy, which were growing and exceed $300,000. General Reinsurance counter-claimed, seeking
reimbursement from BART for the $327,000 previously paid before the denial issued in 2012.
In the action, which is now pending in Federal Court, the matter was bifurcated, with the initial issue
being BART’s position and contention that the WCAB stipulation between BART and its employee
was binding on the reinsurer.
In her opinion dated June 24, 2015, Magistrate Judge Jacqueline Scott Corley concluded BART’s
position was not correct. In her lengthy analysis, the Judge assessed many issues. At its core, the Court
concluded that since General Reinsurance was not a party to the stipulation made at the WCAB, and
since a decision in the contract action would have no impact on the benefits BART is obligated to pay
to the injured worker pursuant to the stipulation before the WCAB, the re-insurer was fully entitled to
litigate the issue as to whether the correct date of injury would be determined using Labor Code
Section 5412 rather than Section 5500.5 and if so, whether that would result in a different date than
1991-1992.
The evidence and analysis which leads to a decision on a Section 5412 date of injury can be very
different from the evidence and analysis which determines the deleterious exposure period of liability
under Section 5500.5. Certainly, if the dates are different, and depending on the wording of its policy
of coverage as to these terms, General Reinsurance may not have any further liability to BART and
“may be” entitled to recover its prior payments exceeding $327,000, from BART.
For California employers who are self-insured or who provide Labor Code Section 3700 coverage
through a large loss deductible policy, this opinion and the Court’s conclusion suggests certain critical
decisions made in the administration and defense of large reserve claims may be second guessed by
reinsurers in ways which not only delay and make reimbursement far more costly, they could leave the
employer feeling the full financial impact of no reinsurance coverage and reimbursement. One might
suppose that frictional fallout between the employer, claims entity and legal counsel would not be far
behind.
While the holding of the current case addresses and allows a trial of only a date of injury question, the
rationale and legal analysis suggests the approach to deny coverage, reimbursement, or both, could be
applied by reinsurers in a number of other situations. These could include matters involving multiple
dates of injury and apportionment, compromise and release decisions and payments, especially with
open medical care, and improper classification of the payor of Awards and settlements under Coldiron
type situations.
Without making suggestions on any individual matter, our firm believes some of the following
considerations to be appropriate:

3. BART vs. GENERAL REINSURANCE CORPORATION
July 6, 2015
Page 3
1.) An increased emphasis and training so that the knowledge of how Labor Code Section
5500.5 and Section 5412 apply and interact in cumulative trauma and occupational
disease claims is properly appreciated and consistently applied;
2.) Public agencies and their TPA’s should closely monitor the management of all
occupational disease and cancer presumption matters in the context of the Court’s
holding in the BART breach of contract action;
3.) Any potential stipulation or trial involving the date of injury on a large exposure
cumulative injury claim should be reviewed independently of those working the claim
and WCAB defense. It is a very reasonable risk tool to have such a review completed
by those with demonstrated expertise on such issues and who are provided with full
access to the case documents and medical information. This review should fully
appreciate the coverage and applicable provisions of the reinsuring policy, with
opinions afforded in the context of an attorney client and work product opinion. Such a
review must be completed before any final agreements or trial before the WCAB;
4.) Additional focus on and consideration of the use of Labor Code Section 5307(b) join
reinsurers in WCAB proceedings, when such joinder is because the reinsurer has “an
interest in the proceedings” due to issues such as BART has encountered. Other
potential situations for joinder consideration may also relate to the amount of payments,
level of retention and the proximity of payments to piercing the retention;
5.) Recognition that future reinsurer strategies could involve efforts to settle their liability
in a commuted manner with a lump sum payment for far less than the exposure, and
with the employer paying the loss required by the WCAB decision, even though those
payments are above the retention;
6.) Potentially, an increased emphasis and oversight to confirm that payments are being
properly allocated when multiple claims for one employee are involved.
7.) Moving forward, Risk Managers of self-insured employers or employers with large loss
deductibles, along with their brokers, claims professionals and attorneys, should
develop and implement strategies and approaches which appreciate the post WCAB
implications for reinsurance recovery on potential claims which could penetrate
retention policies.
Bill Armstrong and the lawyers at the Armstrong Law Firm are
particularly well suited to assist and advise about the challenges of these
intricate issues arising from employer obligations before the WCAB.