The Occupational Accident Policy and Workers’ Compensation: The Misclassified Injured Worker Quagmire And California Law


California workers who are injured on the job, and have been misclassified as independent contractors, often face systemic impediments to pursuing workers’ compensation benefits under California law.  This can occur through an insidious insurance policy provision in occupational accident policies, which workers are often required to purchase to obtain employment.  The policy provision suspends benefits if the worker pursues a workers’ compensation claim.

Workers classified by employers as independent contractors often purchase, frequently through their employer, occupational accident coverage, which is supposed to provide coverage if the worker is injured on the job.  The coverage is regularly sold under a group policy issued by the insurance company to the employer.  Indeed, the employer frequently purchases a contingent liability policy in tandem with the accident occupation policy, to defend and protect the employer if the worker files a workers’ compensation claim.

The employer often requires its workers to purchase the occupational accident coverage to obtain employment, and deducts the cost of the coverage from the workers’ paychecks.  Many of these occupational accident policies contain a provision suspending payment of benefits following a work-related injury if the worker makes a workers’ compensation claim.  Such policies are often seen in the trucking industry, but exist in other arenas as well.

The provision suspending benefits for injured workers if they make a workers’ compensation claim puts the worker in a difficult position if they want to pursue their rights to workers’ compensation benefits under California labor law.  The policy provision suspending benefits if a workers’ compensation claim is pursued following a work-related injury works to pressure the worker from relinquishing or not pursuing his or her worker’s compensation claim.  If the worker files a workers’ compensation claim asserting he or she is in fact an employee, they will lose or risk losing needed insurance benefits under the occupational accident policy.

In this way, it often appears that employers and insurers are working together to deny workers employment status, or adequate benefits for work-related injuries.   The built-in disincentive to pursue workers’ compensation benefits supports the employer’s classification of the worker as an independent contractor, rather than employee, a classification which is often suspect.

The way this structure has been established, which appears to discourage the pursuit of workers’ compensation benefits for fear of losing occupational accident insurance benefits, may violate California law and public policy.  Under California’s Labor Code, employers cannot deduct money “from the earnings of any employee” to cover workers’ compensation costs, and workers’ compensation benefits cannot be “reduced or affected” by other available insurance.  (Labor Code §§3751 and 3752.)

The accident occupation policies also often have sweeping exclusions and limitations.  This makes the coverage illusory or ineffective, and not comparable to the benefits available under workers’ compensation.  The exclusions and limitations are frequently not adequately disclosed.  The covered worker often only receives a certificate of coverage when they obtain the insurance, not the complete policy.  The certificate of coverage usually just provides a basic outline of the coverage and policy limits, but provides inadequate information or notice of the expansive exclusions and limitations, including the workers’ compensation provision.  These exclusions and limitations are subject to challenge under California law requiring advance notice of exclusions and limitations.  (Insurance Code §§10604 -10605.)

Injured workers who desire to make a workers’ compensation claim, but have insurance coverage containing a provision making the pursuit of such a claim problematic, may want to consider seeking legal advice. The injured worker should not be placed in a position of forfeiting legal rights under California law simply to obtain insurance benefits they have a right to receive.

ERISA Claims, Administrative Exhaustion, And The Time Limit For Bringing Suit


When you have a health, disability, or life insurance claim, it is important to understand whether it is governed by ERISA (the acronym for the Employee Retirement Income Security Act) or California common law. When a claim comes under ERISA, it preempts (takes the place of) all state laws, including California’s bad faith laws. There are many differences under the law for an ERISA claim versus a claim under California law, including the timing for filing suit and the requirement in an ERISA case that administrative remedies be exhausted.

In general if you received your policy through an employer under a group plan, it will most likely be subject to ERISA. Conversely, where a person obtains an individual policy directly from the insurer, the policy and any claims are governed by California law.

Under ERISA, a claimant whose claim is denied must pursue and “exhaust internal review” procedures under the insurance plan before he or she can file a suit for ERISA benefits. (Heimeshoff v. Hartford Life & Accident Ins. Co. (2013) 134 S.Ct. 604, 610.)   This means that the injured claimant must, before he or she can file a lawsuit, pursue any informal process the insurance company or plan administrator has set up.

One problem with this is that exhausting the appeal or review process after an initial denial takes time. It used to be assumed that the time to file suit was tolled (i.e., stopped running) during the time the insurance company or plan administrator was considering a claim or an appeal. This is because the claimant has no right to file a lawsuit during the insurer’s administrative review process. However, the United States Supreme Court’s decision in Heimeshoff holds that the time to file suit runs while the claimant pursues the mandated administrative process.

In Heimeshoff, the insurance plan that was under consideration provided that suit must be brought within three years of after the claimant’s proof of loss is due. The proof of loss due date is necessarily before a claim is denied and administrative remedies are exhausted, as the proof of loss form is part of the claims process.   Yet,Heimeshoff holds that a suit limitation is enforceable even though it “starts to runbefore the cause of action accrues . . . as long as the period is reasonable.” (Id.)

This creates a potential trap for claimants who must pursue the appeal process, even while the time to file suit ticks down. It is unclear what is a “reasonable” period after exhaustion until the deadline to file suit expires. Moreover, the rule announced inHeimeshoff creates the potential for gamesmanship, as insurance companies may be tempted to delay the administrative review to reduce the time a claimant has to file ERISA litigation. Indeed, the Supreme Court has acknowledged that “the administrative exhaustion requirement will, in practice,shorten the contractual limitation period.” (Id. at 608.)

Where a limitation period is tied to an event occurring before administrative exhaustion is complete (like the due date for a proof of loss), claimants pursuing benefits under an ERISA insurance plan face uncertainty regarding the deadline to file suit following exhaustion of administrative remedies. The “reasonable” period after exhaustion of the administrative remedies standard set forth in Heimeshoff leaves a lot of room for interpretation. Insureds faced with an ERISA denial under these circumstances should be aware of this issue, and act quickly where appropriate following exhaustion of an appeal or administrative remedies of an insurance claim denial.

Insurers Are Joining With Financial Institutions And Employers To Sell Accident, Life And Disability Insurance


There has been a trend in recent years for insurance companies to join with large institutions or employers, and sell accident, disability and life insurance to their customers or employers under group insurance plans.  I have previously blogged about this in connection with Occupational Accident policies issued to misclassified truck drivers through trucking companies.  Another group that is targeted are bank and credit card customers, who are also sold accident injury, disability and life policies, including what is referred to as Accidental Death and Dismemberment policies.  The customers or employers of the financial institution or employer are sometimes referred to by insurers as a “captive market.”  Many of the policies sold through this kind of group coverage turn out to be inadequate, a fact which an insured often learns of only after a loss.

The way the practice frequently works is that insurance companies make an agreement to sell insurance with a bank, credit card company, employer, or other entity with a large pool of potential insurance consumers.  The customer or employee list of the financial institution or employer is turned over to the insurance company, who markets the insurance coverage directly to those customers or employees.  Generally, there are separate insurance programs for each financial institution or employer.  The insurance company issues one group or master policy to the financial institution or employer, and then issues certificates of coverage under that policy to each customer or employee who signs up as an insured.  (See Reiner v. U.S. Life Ins. Co. in the City of New York (10th Cir. 2003) 69 Fed.Appx. 965, 969.)  The premium for the coverage is usually deducted directly from the insured’s bank account, credit card, or paycheck.

There are many problems with this practice of insurance companies issuing a group policy to a large institution, and selling coverage to the institution’s captive customers.  First, insurance companies are using an entity in a position of trust (either a bank, credit card company, or employer) to solicit the sale, in itself creating potential conflicts of interest.  The marketing of coverage under these group policies is often less than forthright.  Frequently the accident, disability and life insurance coverage under these group policies provide very limited coverage, a fact which is often not disclosed to the consumer.  For instance, the Accidental Death and Dismemberment policy, as its name implies, typically only cover disability caused by dismemberment, or other loss of similar severity, like total paralysis.  This is very limited coverage, that is not standard for individual disability policies negotiated directly by insureds with insurance companies.  During marketing, consumers are frequently not told they are purchasing an Accidental Death and Dismemberment policy, but instead it is often referred to generally as disability or life insurance.  Most typically, the customers who actually purchase the insurance are not provided with a copy of the policy or notice of the policy’s limits and exclusions, and only learn of them after a claim is made.  It is unlawful under California law not to disclose a disability insurance policy’s exclusions or limitations, but it nevertheless occurs in connection with group policies.

Persons in California who have purchased disability or life insurance coverage under a master policy through their bank, credit card company, employer, or other large institution, and have had a claim denied, may have been sold a limited policy, without adequate notice.  Because there are legal challenges that can be brought to the denial of a claim based on exclusions or limitations in group policies like this, persons who find themselves in such a position may want to consider seeking legal advice.

When An Accident Or Trauma Causes Stroke: Disability Coverage Under California Law


Stroke is one of the leading causes of disability in the United States. There are different causes of a stroke, but head trauma can cause stroke, particularly if the stroke occurs shortly after the accident. When a stroke is caused, or arguably caused, by an accident, it can create complicated coverage issues under disability policies. This is because injuries from an accident are often covered, but stroke caused by illness is often excluded.

This leads directly to the “efficient primate cause” doctrine, which is the rule for determining if coverage exists in first party cases “‘when a loss is caused by a combination of a covered and specifically excluded risks.”  (Julian v. Hartford Underwriters Insurance Company (2005) 35 Cal.4th 747, 750.) The efficient proximate cause has been described by the California Supreme Court as the “the ‘prime,’ moving,’ or ‘efficient’ cause of the accident.”  (State Farm Mut. Auto Ins. Co. v. Partridge (1973) 10 Cal.3d 94, 104-105.)  Under the efficient proximate cause doctrine, “the loss is covered if the covered risk was the efficient proximate cause of the loss’ . . .’”  (Julian, supra, 35 Cal.4th at 750.)

Where a stroke follows an accident, the coverage question becomes whether the accident (a covered event) or the stroke (an excluded event) are the efficient proximate cause of the disability.   The insurance company has the “burden of establishing that the efficient proximate cause of [plaintiff’s] loss was an excluded peril.” (Alex R. Thomas & Co. v. Mut. Serv. Cas. Ins. Co. (2002) 98 Cal. App. 4th 66, 76.)  A recent California federal case held, in the context of a stroke exclusion, that “to avoid coverage  . . ., Defendant must prove that [the insured’s] poor health, rather than the accident, was the ‘efficient proximate’ or ‘predominate’ cause of death.”  (Sawyer v. Hartford Life and Accident Insurance Company (S.D. Cal. 2012) 2012 WL 353775, *8.)

Whether the stroke exclusion applies under the efficient proximate cause analysis where it follows a head trauma accident is usually a factual question.  The proximity of time the stroke occurred in relation to the accident, the circumstances of the accident, the age of the insured, the health risks the insured posed for stroke (i.e., high blood pressure) are examples of factual issues relevant to the efficient proximate cause analysis where a stroke is involved in causing a disability following a head injury.

One of the challenges facing insureds who have had strokes and become disabled can face is loss of cognitive functions.  This can make it difficult for them to offer evidence about what occurred pre-stroke to establish the efficient proximate cause of the disability.  Nevertheless, the facts can be demonstrated based on other evidence, including witnesses to the accident and circumstantial evidence.  The insurance company has a duty to investigate, analyze, and make a coverage decision based on the information available.

Insurers are often quick to deny coverage anytime a stroke is involved in a disability under a policy containing a stroke exclusion, without adequately analyzing the role an accident may have played in causing the stroke.  If an insured has suffered a stroke following an accident, and the insurance company denies coverage based on a stroke exclusion, there may be a basis to challenge that decision under California law.

Misclassified Truck Drivers and Junk Work Injury and Disability Policies Under California Law


Truck drivers who work at the ports in California, primarily in Los Angeles, Long Beach and San Diego, have been in the news over the last few years because of the refusal of trucking companies to treat them as employees, rather than independent contractors.

One of the many ways these drivers are left more vulnerable as a result of their misclassification as independent contractors is that, if they are injured or disabled on the job, they do not have access to worker’s compensation.  Instead, the trucking companies usually obtain and charge drivers for “occupational accident” insurance policies.  However, these policies are often junk policies, providing little if no actual coverage, and nothing comparable to the workers compensation system, if a driver is disabled or injured on the job.

The way it works is that the trucking companies usually get a group, or “master” policy, from an insurance company.  Certificates of coverage pursuant to the master policy are then “issued to the individual . . . persons who are insured thereunder.’” (Reiner v. U.S. Life Ins. Co. in the City of New York (10th Cir. 2003) 69 Fed.Appx. 965, 969 (internal citations omitted).)  The cost of the policies is usually deducted by the trucking companies from the drivers’ paychecks.  The drivers usually never receive a copy of the  policy, and have no notice of what coverage they actually have.  The failure to deliver actual copies of the policy violates California law, which requires that disability policies be disclosed, which disclosure “shall include . . . the principal benefits and coverage . . . [and] the exceptions, reductions, and limitations that apply to such policy.”  (Insurance Code §§10604 -10605.)

It is usually only after they are injured or disabled, and attempt to obtain compensation, that drivers find out how illusory the coverage is under these occupational accident policies.  It is at that time, when their claim is denied, that the drivers first learn of the actual limited coverage, and broad exclusions. Moreover, the policies often work in tandem with the trucking companies’ effort to misclassify, and explicitly provide for no payment of policy benefits if the driver challenges his misclassification and files a worker’s compensation claim.

Thus, drivers are often caught in a classic Catch-22, and left with no means of compensation for work-related injuries.  They are denied worker’s compensation because they are labeled independent contractors, and the policies sold to them through the trucking companies fail to provide meaningful coverage.

In this way, insurance companies are working with trucking companies, to assist in their misclassification, and profit while evading providing actual coverage and benefits to injured and disabled truck drivers.  This practice, however, is highly vulnerable to challenge.  California Courts have refused to “allow a master policy to prevail over an inadequate Certificate,” where the insurer’s disclosures provide “inadequate information” regarding the actual coverage provided. (Hall v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA(S.D. Cal. 2010) 2010 WL 2650271, *9.) Drivers are almost never provided with advance notice of the limited coverage that is provided under these master policies.  Under California law, “an exclusion or limitation contained in a policy which the insured has never seen cannot possibly provide adequate notice . . .”  (Russell v. Bankers Life Co. (1975) 46 Cal.App.3d 405, 413-14.)  The lack of notice provided by drivers about the limited coverage under these accidental occupation policies provides a strong basis for challenging any denial of benefits.