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Court Rules That Name Changes Do Not Prevent Workers’ Compensation Payout

A series of company name changes and internal corporate mergers do not prevent an employer from tapping the California Insurance Guarantee Association, a state appeals court ruled Monday, October 5.

In Catholic Healthcare West v. California Insurance Guarantee Assn., a hospital nurse suffered a back injury in 1985. By 2004, workers’ compensation indemnity and medical benefits costs for the claim had grown to $1.6 million.

The nurse’s employer first paid out $150,000 in benefits, meeting its self-insured retention under an excess workers’ comp policy. But by the time it exceeded the $150,000 retention, the employer’s insurer, Mission Insurance Co., was insolvent, court records show.

The employer continued to pay claim expenses while requesting that CIGA reimburse it for the amount its insurer would have paid.

The initial CIGA claims were presented under one employer name, while subsequent claims were presented by an affiliated corporation that the first entity eventually merged into under corporate restructuring.

When a legal battle resulted over whether CIGA should pay the claims, the guarantee fund argued the employer was not covered because Mission insured a company by a different name.

A trial court granted summary judgment in favor of CIGA, agreeing that California law excludes “any claim by any person other than the original claimant under the insurance policy in his or her own name,” court records state.

The appeals court overturned, ruling the claims were covered “despite the fact that the corporation changed its name to a name not listed in the insurance policy.”

The appeals court also said the original insured includes the affiliated corporation into which the first corporation was merged because the merger was an internal restructuring of a family of corporations.

The appeals court remanded the case.

Filed by Roberto Ceniceros of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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