Low, Ball & Lynch’s
WEEKLY LAW RESUME
October
14, 2004 Issue By: Raymond
Coates
Coverage - Offset of Disability
Benefits - CIGA Claim
Jocelyn Cole v.
Court of Appeal, Second District
(September 20, 2026)
The California Insurance Guarantee Association (“CIGA”) was established by
the California Legislature to pay and discharge covered claims of insolvent
insurance carriers. CIGA pays only claims that are imposed by
Jocelyn Cole had automobile liability insurance through National Automobile
and Casualty Insurance Company (National), a member of CIGA. Ms Cole’s policy
with National contained uninsured and underinsured motorist coverage with a
$100,000 limit. During the National policy period, Cole was injured in a
multi-party accident. Four other persons were also injured in the accident. The
driver of the other vehicle had a minimum liability insurance policy of
$15,000/$30,000 per occurrence. Cole received an allocated share of that policy
totaling $5,500.
Cole claimed damages in excess of $100,000. She submitted an underinsured
motorist claim to National, her carrier, for the $94,500 difference between
what she received from the tortfeasor’s carrier and the underinsured limits of
the National policy. National disputed the claim, and the matter was submitted
to arbitration. While arbitration was pending, National became insolvent and
CIGA assumed its defense, pursuant to Cal. Insurance Code section 1063 et
seq.
CIGA also disputed the claim. In particular, Ms. Cole received SSDI benefits
from the Social Security Administration and UCI benefits from the State of
On appeal, the Second Appellate District reiterated that CIGA serves to
enhance public confidence in the insurance industry. The Court focused its
analysis on Ins. Code section 1063.2, subd. (e), which sets forth that any
person making a claim to CIGA, and who also has coverage under any governmental
insurance or governmental program, is required to first exhaust his or her
right under the program. Any amount payable on a covered CIGA claim is to first
be reduced by the amount of any recovery under the program. Here, CIGA argued
that the SSDI and UCI benefits amounted to other coverage, which should be
reduced from any CIGA payment to Ms. Cole.
The Appellate Court disagreed, holding that CIGA is only entitled to a
set-off for covered claims. Insurance Code section 1063.1, subd. (c)(3) states
that covered claims do not include obligations arising from “disability
insurance.” Further, to permit an offset, the covered claim and the right of
recovery from the government benefit program must compensate the claimant for
the same loss. CIGA argued that the SSDI and the UCI benefits stemmed from her
inability to work, because of injuries sustained in the accident. The Court
pointed out, however, that National’s uninsured motorist coverage included
damages for bodily injury, but nothing in the policy provided unemployment
compensation arising out of disability. Consistent with holdings in other
states, the court therefore held that because SSDI and UCI constitute
disability insurance, they could not be credited against Cole’s recovery from
CIGA. While the court was conscious of the Legislature’s intent for CIGA to be
the “payer of last resort,” it felt that public policy would not be offended,
because the Insurance Code required exclusion of disability claims as a
“covered” claim, and there would be no double-recovery for Ms. Cole. The court
reversed the trial court order.
Comment
____
To order a printed version of this analysis,
or change your subscription information, reply to this transmission.
Information regarding this and other WEEKLY LAW RESUME TM articles is available from Raymond Coates at (650) 366-4000,
[email protected] or at WWW.LOWBALL.COM. The WEEKLY LAW RESUME TM is published fifty-two times a year, and is a
complimentary publication of LOW, BALL & LYNCH, Attorneys at Law, a
Professional Corporation, with offices in