Workers’ Compensation · Primary-source case analysis

Hershman: Section 5814 Penalties Could Be Covered Claims Against CIGA

By Aneeta Mishra and Timothy Chan

Published September 13, 2026

Hershman examined whether CIGA succeeds to statutory delay-penalty liability when an insolvent workers’ compensation carrier left benefits unpaid.

The insolvent carrier had delayed benefits

An award issued against a carrier that later entered liquidation, and CIGA assumed responsibility for covered claims.

The penalty was tied to compensation

The Board treated former section 5814 liability based on unreasonable delay as an obligation arising under the workers’ compensation policy and award.

The punitive-damages exclusion did not control

The statutory exclusion for punitive or exemplary damages did not remove this compensation penalty from covered claims.

The matter returned for the actual penalty decision

The WCAB resolved CIGA’s threshold legal responsibility but remanded for evidence and findings on whether and what penalty should be awarded.

Key takeaways

• Identify the conduct and entity responsible for each delay.
• Separate covered-claim status from proof of unreasonable delay.
• Check the penalty statute applicable to the payment period.
• Develop the liquidation and CIGA-assumption record.