Excess Insurer Held Liable for LHWCA Special Fund Assessments of Insured

Excess Insurer Held Liable for LSHWCA Special Fund Assessments of Insured 

Century Indem. Co. v. Matson Terminals, Inc., 2015 U.S. Dist. LEXIS 62929, 2015 WL 2248746 (N.D. Ca. May 12, 2015, Beeler, Mag.)

Special Fund Assessments Indirect Compensation

Assessments made 30 Years Ago Viable

By: John Berteau

            Matson Terminal, a self-insured employer under the LSHWCA, filed a claim against its excess insurer, Century Indemnity, for reimbursement of the assessments against it for payments made by the Special Fund (Second Injury Fund). The policy was entered into in 1979 and covered injuries which occurred from Jan. 1, 1980 through Jan.1, 1982. In 1984, the manner in which employers were assessed contributions to the Special Fund was changed by Congress. Consequently, the insured employer’s assessments to the fund changed with 13 employees collecting compensation benefits from the Special Fund; but, the insured employer did not track these assessments until 2013 when it finally made a claim from the excess insurer for reimbursement.The magistrate held that the policy did cover the special assessments which were indirect compensation. The court reasoned that the insured employer would become liable for the compensation if it failed to pay its assessments and has a right even to monitor the claim even when employees are paid from the Special Fund. More importantly, the policy did not limit indemnity to direct compensation. The policy covered any payments the insured was required to pay because of compensation or other benefits. Further, the determination by the DOL that the employees were eligible for the Special Fund constituted adjudication under the policy.The insurer also maintained that the claim was barred by the applicable 4 year statute of limitations of California. This was rejected on the basis that the claim against the insurer did not accrue until the insurer denied the claim in 2013 relying on precedent from the California Supreme Court.The magistrate also addressed two prior conflicting decisions of district courts in California, namely, Dil Trust v. Aetna Cas. & Sur. Co., 1991 U.S. Dist. LEXIS 22079 (N.D. Ca. 1991) favored by the insured employer and Nat'l Steel & Shipbuilding Co. v. Century Indem. Co., 959 F. Supp. 2d 1264 (S.D. Ca. 2013) favored by the insurer. The court sided with the former case.