The realities and complexities of the business world often require companies to file bankruptcy and close down. When such a situation arises, workers’ compensation benefits are generally still available to the injured worker.
When an employer is insured for workers’ compensation benefits, they have purchased coverage from an insurance company for the liabilities of an injury claim. Where an insurance policy exists, the injured worker is still entitled to all the benefits provided by the Labor Code inclusive of lost wage indemnity and medical treatment. In this situation, the claim proceeds against the insurance coverage that stands in for the obligations of the employer and all benefits are provided by the insurance company.
Depending on the type of coverage the insurance policy provides, the only impact may be at the time of settlement. For example in a lump sum settlement situation where all future benefits are being resolved, if the value of your case exceeds the value of the policy and there is no longer an employer to cover the difference this option may be limited.
An employer may also be self-insured, meaning the company takes responsibility for paying its own claims rather than purchasing coverage from an insurance coverage. The self-insured employer typically hires a third party administrator to manage these workers’ compensation claims on behalf of the company, but the company is paying for all the benefits. When a self-insured employer files for bankruptcy, the situation becomes more complex as the insolvent employer may no longer have funds to administer the claim. The California Insurance Guarantee Association (or “CIGA”) would assume responsibility for further workers’ compensation obligations under the Labor Code in such a situation. CIGA is funded in part by contributions from each workers’ compensation insurance policy written in the state for events where an employer can no longer uphold their responsibilities for workers’ compensation coverage. Unfortunately, however, CIGA operates just like an insurance company meaning an injured worker is still limited to CIGA’s medical care control and the other limitations on workers’ compensation benefits within the Labor Code.
In sum, although an employer’s filing for bankruptcy may prove to be a stressful event for you in many ways, if you have a workers’ compensation claim you are still be entitled to benefits. The entity which administers those benefits may change, but you will still get your wage loss indemnity and medical treatment where needed to stay on the road to recovery. If you need to pursue a claim against an entity like CIGA, it can be complex and delayed, the attorneys at Gerald D. Brody & Associates are experienced in handling these matters and will help you keep your claim on track.
As always, should your employer become insolvent and you have questions or concerns about how the workers’ compensation system may affect you in this event, please call our office for a free consultation to discuss your claim and how we may be able to assist you in obtaining your maximum benefit.