JAMES POTVIN v. LINCOLN SERVICE & EQUIPMENT et al., SC 18357

Compensation Review Board

     Workers' Compensation; Whether the Workers' Compensation Commissioner has Statutory Authority to Impose Sanctions Against the Connecticut Insurance Guaranty Association.  After suffering a work-related injury, the claimant entered into a voluntary agreement with his employer for the payment of workers' compensation benefits, which was approved by the workers' compensation commissioner (commissioner).  Later, the employer's insurer became insolvent, and the Connecticut Insurance Guaranty Association (CIGA), which was established by the Connecticut Insurance Guaranty Act (guaranty act), General Statutes § 38a-836 et seq., to reimburse "covered claims" against insolvent insurers, became responsible for the insolvent insurer's obligations under the voluntary agreement.  Subsequently, the claimant sought sanctions against CIGA for unreasonably contesting and delaying the payment of his medical bills.  The commissioner agreed with the claimant and imposed sanctions against CIGA.  Specifically, pursuant to General Statutes § 31-300, the commissioner ordered CIGA to pay the claimant $8000 in attorney's fees and a penalty of $500 under General Statutes § 31-288 (b) (1).  CIGA appealed to the compensation review board, challenging the commissioner's power to impose sanctions against CIGA.  CIGA first claimed that the commissioner was without authority to levy the sanctions because it was not "an insurer" within the scope of the Workers' Compensation Act. The board rejected CIGA's claim, noting that, under General Statutes § 38a-841 (1) (b) of the guaranty act, CIGA is "deemed the insurer" on a "covered claim."  Next, CIGA argued that General Statutes § 38a-850 provides it with absolute immunity against any and all forms of civil liability, including the sanctions at issue here.  While acknowledging that the language of § 38a-850 is ambiguous as to whether the statute provides CIGA immunity from sanctions, the board nevertheless rejected CIGA's interpretation of § 38a-850.  It concluded that its interpretation of the statute was untenable because it would cause substantial interference with the commission's statutory obligation to operate an effective system of workers' compensation.  Finally, CIGA argued that, because statutory sanctions do not fall within the definition of "covered claim" under General Statutes § 38a-838 (5), CIGA could not be subject to them.  Noting that there was no dispute that the original insurer would have been subject to the statutory sanctions, the board also rejected this claim, ruling that CIGA's interpretation of § 38a-838 (5) conflicted with Connecticut Ins. Guaranty Assn. v. Fontaine, 278 Conn. 779 (2006), which held that CIGA was liable to the same extent that the insolvent insurer would have been liable under its policy.  Additionally, the board observed that CIGA's interpretation of § 38a-838 (5) ignored the fact that a motion for sanctions procedurally cannot be separated from the underlying claim for workers' compensation benefits and that sanctions are part of the award due to the claimant.  Accordingly, the board dismissed CIGA's appeal.  In this appeal, the Supreme Court will review the board's decision.