RemedyTemp to Appeal Workers' Comp Case Appeals Court Ruling

The California Insurance Guarantee Association (CIGA), will not be held responsible for covering workers’ comp claims filed by 500 of the staffing agency’s employees who were insured by insolvent carrier Reliance National Insurance Company, according to a California Court of Appeals panel. The appeals court upheld the lower court’s ruling that the insurers of RemedyTemp Inc.’s clients will be held responsible.

RemedyTemp Inc., which does business as Remedy Intelligent Staffing and RemX Specialty Staffing, will appeal the ruling to the California Supreme Court. The temporary staffing agency believes that CIGA, intended by law to cover the claims of insolvent insurance companies, should be responsible for paying the claims. According to CIGA’s Web site, the association pays for the covered claims of insolvent property/casualty companies, with the insurance code and case law defining which claims are covered.

RemedyTemp approached CIGA and requested that the agency cover Reliance’s obligations after Reliance went insolvent in 2001. CIGA reportedly began pursuing the claims, according to Lawrence Mulryan, executive director for CIGA. But the lower court excused CIGA, ruling instead that the claims filed by RemedyTemp’s employees be paid for by the insurance companies covering the staffing agency’s clients at the time. The Court of Appeals upheld that decision.

“We had been paying up until the court decision was made,” Mulryan said. “I don’t know the exact status of the individual claims at this point. We want to be sure that nobody’s left stranded, but the court definitely has said that we are not obligated on those claims.”

Mulryan said that he did not know if CIGA had paid claims from temporary employees before the RemedyTemp case.

“It’s a relatively new phenomenon of having temporary employee [claims],” he said. “We took the position that if there is other insurance there, and the court has agreed with us, we are not primary on that obligation. We do not pay if there’s other insurance. We cannot.”

Monty Houdeshell, senior vice president and CFO of RemedyTemp, was disappointed that the courts did not enforce a Legislature decision in the case.

“Historically the staffing firm pays all insurance on its employees who are placed on temporary assignment at its clients,” he said. “In 1995 the California legislature enacted a statute that allows employers to contract among themselves for the securing of workers’ comp insurance for employees and thereby avoid any further liability for such coverage.

“The court in our opinion erroneously concluded that other insurance held by the client’s insurance company existed to pay the claims,” he continued. “This decision ignored the intention of the parties to the agreement, the 1995 statute and another California statute that allows insurance companies to avoid workers’ compensation exposure if the insurer’s client never had the employee on their payroll.”

He said that CIGA should cover the claims because RemedyTemp’s clients never intended to absorb the risk of insuring the temp employees and never paid premiums covering the employees.

Houdeshell expressed concern over the effect of the decision on RemedyTemp’s clients and the staffing agency’s overall business.

“If our clients’ insurance companies are forced to cover these claims, they may pass some or all of those expenses back to our clients which would adversely impact our reputation and goodwill in the market,” he said.

Remedy said that the impact of the court’s ruling would be widespread if upheld and would affect thousands of companies that hire temporary employees.

“If allowed to stand, this ruling will impose unnecessary additional costs and potential liability to the users of temporary staffing in a multi-billion dollar industry,” Houdeshell said.

There is no guarantee that the Supreme Court will agree to review RemedyTemp’s case. If the highest court does agree, the staffing agency expects a decision sometime in 2005.

Topics California Carriers Legislation Claims Workers' Compensation