Who Pays What: The Pitfalls of Contribution and Reimbursement Among Co-Defendants in Workers’ Compensation

Per Labor Code §3208.1, a “cumulative” injury occurs due to repetitive mentally or physically traumatic activities over time, the combined effect of which causes disability or need for medical treatment.

Under Labor Code § 5500.5, when multiple employers or insurers are on the risk for a single cumulative injury, they share liability. Labor Code § 5500.5(a) states that cumulative injury liability is limited to employers during the one year preceding the earliest of either (1) when the employee first suffered disability and knew, or should have known, that the disability was caused by their employment, per Labor Code §5412, (2) or the last date of employment and exposure to the cumulative injury.

There are many ways in which multiple employers can be implicated in the same or separate injuries; in the case where a single cumulative trauma period implicates multiple employers or carriers, an injured worker may elect to proceed against just one employer or proceed against each employer separately. If an employer is elected against, the elected employer may seek contribution from other responsible parties after paying benefits. An applicant is not required to make an election of a “lead defendant,” but will often do so in order to simplify discovery, as the lead codefendant is the only party entitled to conduct discovery once elected against.

Joint and Several Liability

When a cumulative injury spans multiple employments or insurance policies, all employers or insurers during the last year of the exposure or injury are jointly and severally liable – meaning any one of them could be responsible for the full claim. In practice, whether at the time of settlement or once the case in chief has resolved, liability for the costs of the claim is often divided among them based on their respective share of the risk.

Contribution vs. Reimbursement

When multiple insurers or employers are involved in a workers’ compensation claim, there are two primary ways to divide costs:  contribution or reimbursement.

Contribution applies to shared cumulative periods. This is when two or more defendants are responsible for covering the same cumulative injury. If one party is elected against and pays the majority, if not the entirety of the benefits, it may seek contribution from the others. In cumulative trauma claims, liability is typically divided based on the length of exposure during each insurer’s coverage period. Litigation regarding contribution is resolved via mandatory arbitration per Labor Code §5275(a). Contribution has a statute of limitations; under Labor Code § 5500.5(e), a co-defendant has one year following an Award for compensation benefits to file a Petition for Contribution.

Reimbursement may apply where an applicant has separate injuries with different employers, and the injuries have overlapping body parts or periods of cumulative trauma.  If one defendant initially covers benefits, and medical evidence attributes the need for treatment or disability to a separate prior or overlapping injury, then the paying party may seek repayment from the other responsible party by filing as a lien claimant in that separate claim, or joining a responsible party to the claim.

When an injured worker has a pre-existing condition or a prior injury affecting the same body part, determining liability may become even more difficult.  If a worker previously injured their back with Employer A and then suffered another back injury while working for Employer B, both employers (and their insurers) may be responsible for a portion of the claim. In these cases, one insurer may pay benefits initially, especially if the new injury aggravated the prior condition. However, if medical evidence supports that the prior injury contributed significantly to the current disability, the paying insurer may seek reimbursement from the prior employer’s carrier. This is particularly important when dealing with apportionment issues, as failing to assert reimbursement rights early can leave one party covering more than its fair share. Litigation regarding reimbursement is resolved via the Workers Compensation Appeals Board per Labor Code § 5300.

In Barahona, the applicant had two jobs and claimed a cumulative trauma injury with overlapping body parts against both employers. The applicant made no election, and pursued her cases with each employer separately, filing the claim against the second employer only after resolving her first claim via Compromise and Release. Then, the employers sought contribution and reimbursement against each other.

Denying both employer’s Petitions for Contribution and Reimbursement, the Workers’ Compensation Appeals Board held that when multiple employers are involved in a cumulative case, the elected employer has primary responsibility for benefits. However, the decision reaffirmed that employers must undertake discovery to find any pre-existing settlement agreements with prior employers, or risk losing their right to contribution and reimbursement. In addition, the elected employer in a shared cumulative period case can seek contribution from other liable employers after the case is resolved. However, where no employer has been elected yet, all potential employers may still participate in discovery and obtain their own medical evaluations, and an applicant is free to settle with either or both separately or in conjunction.

In Barahona, the applicant pursued a cumulative trauma against one employer, and resolved it via C&R, before filing her second period of cumulative trauma against a concurrent employer for a period that overlapped with the first and had similar injured body parts. In the fact, the second case was file one day after the Compromise and Release in the first case was approved. The defendant in the second case did not file their Petition for Contribution and/or Reimbursement until after resolving their own case via C&R. The WCAB concluded that in resolving the case with the applicant, the prior employer had “extinguished” its liability to the applicant as well as the subsequent employer. The WCAB noted that the law does not require an elected “lead employer” that others must follow—each employer can take an active role in defending its interests. The WCAB noted that the subsequent employer could have exercised “credit rights” against the prior settlement, either through medical evidence establishing apportionment to the prior injury, or by the value of the settlement, but failed to do so timely. It ultimately concluded that neither the prior nor the subsequent employer had contribution rights against one another for the benefits they paid in connection with their claims.

The Barahona decision highlights the risks of failing to assert the proper right against a prior or concurrent stakeholder, whether contribution or reimbursement, in a timely and strategic manner. Without a clear plan to allocate liability among co-defendants, one insurer may end up unfairly burdened with the full cost of a claim.

In order to avoid this situation, the WCAB noted that either defendant could have used discovery to become aware of the other claim and the settlement, and could have pursued the appropriate remedy. For that reason, it is important to address potential cost-sharing claims as soon as they arise to prevent procedural issues, and gather detailed records to help support arguments for proper apportionment and prevent disputes over liability.

For employers and insurers, the key takeaway is this: be proactive, stay organized, and know your rights when it comes to contribution and reimbursement. Properly navigating these complexities can save both time and money while ensuring fair distribution of liability.

Have questions about a multiple-employer claim? LFLM is here to help. Reach out to discuss your case strategy today.