Sacramento, CA – In a case against Lumbermens Mutual Casualty Company, the Appellate Court of Illinois issued its decision supporting Insurance Commissioner Dave Jones and the California Insurance Guarantee Association’s (CIGA), position requiring Lumbermens California workers’ compensation deposits may not be used to reimburse overhead and administrative expenses incurred in connection with the company’s liquidation, which began in 2013.
“As regulator of largest insurance market in the country, I am committed to making sure California workers are protected and insurance companies keep their promises to policyholders,” said Insurance Commissioner Dave Jones. “The court’s ruling upholds my position that Lumbermens Mutual Casualty Company must use funds reserved for workers’ compensation claims on actual claims-and not other expenses. This ruling preserves financial protections for California’s workers and businesses that rely on workers’ compensation insurance.”
The department argued that the California Insurance Code plainly states special deposit proceeds must be used solely for the payment of compensable workers’ compensation claims. The department contended that general administrative expenses are not related to the payment of a specific workers’ compensation claims, so it is improper for Lumbermens to require CIGA to pay general administrative expenses such as rent, postage, telephone, lighting, cleaning, heating and electricity with funds held in a special deposit.
The court agreed and determined the special California workers’ compensation deposit is security for the payment of workers’ compensation claims in California and must be used exclusively to protect policyholders from insolvent insurers by providing an asset from which to pay compensable workers’ compensation claims.