At the very least, 2005 has been a year of mixed results for the California Insurance Guaranty Association (CIGA). In the legislature, it was successful in securing enactment of AB 1761 (Vargas), legislation that clarifies who is entitled to loss reimbursements under workers' compensation deductible policies written by an insolvent insurer. On the other hand, pending in its last committee and likely to be sent to the governor is AB 817 (Matthews), a curious piece of legislation designed to stave off litigation against CIGA stemming from its decision to stop making payments on excess workers' compensation policies written for qualified self-insureds.

In a fairly remarkable sleight of hand, this legislative equivalent of a settlement between CIGA and some very large businesses here in California will have claims against such policies paid out of the "other liability" account of CIGA rather than the perennially anorexic workers' compensation account. It was a deal completely oblivious to the general media and to most of the business community, which it affects most.

The courts have been even-handed on the issue. On the one hand, CIGA continues to succeed in claiming "other insurance" and avoiding claims when the joint and several liability provisions of California's cumulative-injury statutes come into play. [CIGA v. WCAB (American Motorists)] In a more important, or at least better-publicized decision, General Casualty Insurance v. WCAB, better known as the Remedy-Temp case, the Second District Court of Appeal took the unusual step of reconsidering its own opinion and decided that the general-special employment relationship did indeed trump CIGA's rightfully pathological urge to avoid paying claims.

Consequently, California employers (through CIGA) are now on the hook for claims in which a temporary employment agency is insured by an insolvent insurer.

Had the original Court of Appeal decision held, it could have sounded the end of the temporary-employment industry in California, a service that employs hundreds of thousands of workers in this state on behalf of primary employers.

The court originally found that businesses that hire temporary employees are equally responsible for workers' compensation costs. Problem is that none of these workers are covered under the special employer's workers' compensation insurance policy. Costs involved in doing that, either through additional coverage or exclusions that the court found unworkable, would be staggering. Ultimately, the court found that the only way to give applicable provisions in the Insurance Code effect was to acknowledge the impracticality of its original decision, and it reversed itself.

Although these recent decisions may be looked at as a push, in fact CIGA likely comes out ahead in its efforts to minimize claims exposure, even if doing so adds significantly to other insurers' frustration. Still, being slightly ahead isn't nearly good enough for CIGA. As the Insurance Commissioner noted recently, premiums are going down-way down. Even though they are not going down as quickly as the commissioner or other candidates for statewide office would like, more and more employers are seeing relief from recently enacted reforms. That also means that CIGA's 2% cut of the premium dollar is being taken out of a shrinking pie. In other words, as insurers reduce premium to gain market share, CIGA's revenue goes down.

That little conundrum is not lost on the commissioner, but political problems associated with addressing this issue head-on aren't lost on him either. Indeed, the clock also is ticking on the 2% assessment, which sunsets on December 31, 2007. This gives the legislature two years to address the long-term financial stability of CIGA. You might as well forget next year, because it is extremely unlikely that the legislature will want to make the 2% assessment permanent in an election year, or even extend it, for that matter.

It is even more unlikely that the legislature would contemplate a number of other issues already enacted in other states-such as making the assessment applicable to the deductible portion of the policy or making the statutory deposit (the money that insurers are required to set aside every year in case of insolvency) based on gross premiums rather than premiums net of deductible credits. Why worry about that when you can simply issue a press release and say rates are still too high?

CIGA also is getting ready to float another bond to address its challenging cash flow issues. That authority expires on January 1, 2007. Although there is a cap on the amount CIGA can raise through the bond process, laws authorizing this are also clear that CIGA can assess whatever it needs to assess to pay off these bonds. Bonding to date has not resulted in additional assessments, but issuing bonds solves only the immediate cash flow crisis, not CIGA's underlying financial problems.

In claims involving cumulative injuries, liability among employers is joint and several. For those familiar with this doctrine, there is also the issue of the "empty chair"-the party liable for the loss but unable to pay, or in CIGA's case, not required to pay. So far, the empty chair reserved for CIGA exists only in these cases.

If the industry doesn't help the legislature remove its collective head from where it is and address these fundamental problems with CIGA's finances, that chair is going to pop up, like a hemorrhoid, in all sorts of unwanted places.