Eddie ANDREINI et al., Petitioners, v. The SUPERIOR COURT of San Mateo County, Respondent. Maurilio SOLORIO, Real Party in Interest.
In what appears to be a case of first impression, we determine that the California Supreme Court's decision in Privette v. Superior Court (1993) 5 Cal.4th 689, 21 Cal.Rptr.2d 72, 854 P.2d 721 (Privette)-barring an independent contractor's employee from relying on the peculiar risk doctrine in seeking recovery for work-related injuries from the nonnegligent hirer of the independent contractor-does not apply where the independent contractor carries no workers' compensation insurance and is not permissibly self-insured.
Petitioners Eddie and Linda Andreini (the Andreinis), are homeowners sued by an independent contractor's employee, real party in interest Maurilio Solorio (Solorio), who was injured while painting the Andreinis' home. The independent contractor who hired Solorio did not carry workers' compensation insurance nor was he permissibly self-insured. The Andreinis moved for summary judgment on numerous grounds, including that they could not be held vicariously liable for the alleged negligence of the independent contractor under Privette. The superior court denied the Andreinis' motion, and they now seek review in this court by way of a petition for writ of mandate. (Code Civ. Proc., § 437c, subd. (l ).) 1 We conclude the Andreinis' motion for summary judgment was properly denied; consequently, we deny their petition.
Privette specifically carved out a discrete exception from the peculiar risk doctrine for nonnegligent hirers 2 who are sued by injured employees of independent contractors covered by workers' compensation insurance. As courts have since recognized, the foundational underpinning for the rule articulated in Privette predominantly arises from the court's concern that the peculiar risk doctrine operates unfairly when the party injured by the independent contractor's negligence is not a member of the general public but is the contractor's own employee covered by workers' compensation insurance. In such a case, the exclusive remedy provisions of the workers' compensation system insulate the negligent independent contractor, the principal wrongdoer, from tort liability while the peculiar risk doctrine shifts that tort liability to the nonnegligent hirer under a theory of vicarious liability. (See Redfeather v. Chevron USA, Inc. (1997) 57 Cal.App.4th 702, 706-707, 67 Cal.Rptr.2d 159; Doney v. TRW, Inc. (1995) 33 Cal.App.4th 245, 250-251, 39 Cal.Rptr.2d 292; Orosco v. Sun-Diamond Corp. (1997) 51 Cal.App.4th 1659, 1669, 60 Cal.Rptr.2d 179.)
The Andreinis contend that the sole basis for the limitation to the peculiar risk doctrine articulated in Privette is a manifest unfairness in holding the hirer of an independent contractor liable where an injured employee receives any form of workers' compensation benefits. Because Solorio may obtain benefits through the state-financed Uninsured Employers Fund (Lab.Code, § 3710 et seq.), the Andreinis argue the rule in Privette is equally applicable to shield them from vicarious liability.
The Andreinis' argument is overly-simplistic and ignores the central reasoning of Privette. As examined more closely in this opinion, the Supreme Court's decision to limit application of the peculiar risk doctrine was premised on all of the following reasons: 1) shifting the financial burden of the independent contractor's negligence to a fault-free hirer was unfair because the hirer was prevented from being made whole by the errant independent contractor who was shielded by the exclusive remedy provisions of the workers' compensation system; 2) the inequity of this shifting was compounded because the hirer presumably was already bearing the expense of workers' compensation insurance as a part of the cost for the work; 3) the goals of the workers' compensation system were consistent with barring an independent contractor's employee from utilizing the peculiar risk doctrine to recover tort damages from the nonnegligent hirer; 4) pursuit of dual remedies seeking tort damages and workers' compensation benefits for work-related injuries provided a “windfall” to the injured employee of an independent contractor not available to any other class of injured employee; and 5) worksite safety was jeopardized by creating an incentive for the hirer to use its own less-experienced workers to perform dangerous work because the hirer's liability for workplace injuries would be limited by the workers' compensation laws.
We find nothing in Privette which indicates an intent to deprive Solorio of his cause of action against the Andreinis under the peculiar risk doctrine. Had the Privette court intended to extend its ruling to bar peculiar risk claims by an injured employee who received any compensation benefits, even those available through the Uninsured Employers Fund, none of the rationales actually utilized by the court would have been pertinent. To the contrary, as we will discuss below, the very justifications which led to the rule announced in Privette could not be applied in the present situation where the independent contractor is uninsured. Thus, we determine the Privette court did not intend its decision to apply to cases involving employees of uninsured independent contractors. Instead, we conclude, relying on the very same considerations of fairness and social policy found important by the Privette court, that the hirer of the uninsured independent contractor here should not be absolved of derivative liability.
The material facts are simple and undisputed. Solorio's action against the Andreinis, as well as other defendants, arises from Solorio's fall from the roof of the Andreinis' home on May 23, 1996. The accident occurred on a windy day when Solorio lost his balance while painting the chimney. At the time of the accident, Solorio was working for Anders Brandi, who was doing business as ME Design & Construction (Brandi). Brandi, an independent contractor, was hired by the Andreinis to do touch-up painting on their house in Half Moon Bay.
The Andreinis were not at home at the time of the accident. They did not control the work being done on their property, nor provide tools or materials for the job. In fact, the Andreinis had no contact whatsoever with Solorio during his employment. It is undisputed that Brandi did not carry workers' compensation insurance, nor had Brandi secured a certificate of consent to self-insure from the Director of Industrial Relations. (See Lab.Code, § 3700.)
Solorio's action against Brandi, the Andreinis, and other defendants commenced in respondent court on October 16, 1996. Solorio alleged that he suffered personal injuries because defendants allowed “a dangerous and defective condition and unsafe workplace to exist in which [Solorio] was exposed to work at height [sic ] with no safe means of avoiding falls.” The Andreinis cross-complained against codefendant Brandi, indicating that under their written agreement he was required to indemnify them from any claims relating to the work performed at their residence.3
The Andreinis moved for summary judgment on numerous grounds, including that under Privette they could not be held vicariously liable as hirers under the peculiar risk doctrine for any work-related injuries to their independent contractor's employee that was proximately caused by the independent contractor's negligence. As Privette explained, “[u]nder the peculiar risk doctrine, a person who hires an independent contractor to perform work that is inherently dangerous can be held liable for tort damages when the contractor's negligent performance of the work causes injuries to others.” (Privette, supra, 5 Cal.4th at p. 691, 21 Cal.Rptr.2d 72, 854 P.2d 721.) However, since the fundamental social policy of providing compensation to the injured worker is achieved by the workers' compensation insurance system, the Privette court found no justification for imposing vicarious liability on a nonnegligent hirer of an independent contractor. (Id. at p. 692, 21 Cal.Rptr.2d 72, 854 P.2d 721.) The Andreinis argued that according to Privette, “[Solorio] must look to his employer for his remedy; ․”
Solorio filed opposition to the Andreinis' motion for summary judgment, arguing that Privette 's elimination of vicarious liability did not apply to hirers such as the Andreinis, who retain independent contractors who do not carry workers' compensation insurance or permissibly self-insure. The trial court denied summary judgment. The Andreinis have petitioned this court for a writ of mandate, contending the trial court was compelled to resolve the single question of law presented by their motion for summary judgment, the application of Privette to the undisputed facts, in their favor, and to enter an order granting them summary judgment.
We issued the order to show cause why this petition for writ of mandate should not be granted and stayed the trial date scheduled for October 27, 1997, because 1) the issue set forth in the writ petition is of widespread interest, and 2) there is a potential for harm or prejudice to the Andreinis by requiring them to proceed to trial if such is not warranted by the current state of the law. (See Lompoc Unified School Dist. v. Superior Court (1993) 20 Cal.App.4th 1688, 1692, 26 Cal.Rptr.2d 122.)
The facts and procedural history of this case find a marked parallel in Privette. Privette hired Jim Krause Roofing, Inc. (Krause) to install a new roof on his duplex. There is no indication Privette directed or supervised the work. Krause's foreman instructed its employee, Contreras, to carry buckets of hot tar up a ladder to the roof. While performing this task, Contreras fell from the ladder and was burned by the hot tar. He sought workers' compensation benefits for his injuries and also sued Privette under the peculiar risk doctrine. The trial court denied Privette's motion for summary judgment, and the Court of Appeal denied Privette's petition for mandamus. Our Supreme Court granted review and directed the trial court to grant Privette summary judgment. In so doing, the court abrogated the peculiar risk doctrine insofar as it imposed vicarious liability on a nonnegligent hirer who retained no control over the work of an independent contractor and who was without independent fault for the injuries sustained by the contractor's employee. (Privette, supra, 5 Cal.4th at p. 692, 21 Cal.Rptr.2d 72, 854 P.2d 721.)
A material difference between Privette and the instant case is that the independent contractor in Privette provided workers' compensation insurance for its workers, while the contractor here left his workers uninsured. Despite the Andreinis' assurance that the difference between insured and uninsured independent contractors is insignificant for purposes of applying Privette, we find the differences between the two groups to be unmistakenly important, as detailed below.
A. The Purposes of Workers' Compensation Insurance and Peculiar Risk
The starting point for the Privette opinion is its recitation of the common law rule that a hirer employing an independent contractor ordinarily is not vicariously liable for torts committed by the independent contractor. The Privette court then examined the historic roots and evolution of the peculiar risk doctrine as one of “the catalog of ․ exceptions” from this general rule of nonliability. (Privette, supra, 5 Cal.4th at p. 693, 21 Cal.Rptr.2d 72, 854 P.2d 721, quoting Van Arsdale v. Hollinger (1968) 68 Cal.2d 245, 252, 66 Cal.Rptr. 20, 437 P.2d 508.) Peculiar risk is a theory of vicarious liability which was created “to ensure that innocent third parties injured by the negligence of an independent contractor hired by a landowner to do inherently dangerous work on the land would not have to depend on the contractor's solvency in order to receive compensation for the injuries. [Citations.]” (Privette, supra, 5 Cal.4th at p. 694, 21 Cal.Rptr.2d 72, 854 P.2d 721.) As Privette explained, “Under the peculiar risk doctrine, a person who hires an independent contractor to perform work that is inherently dangerous can be held liable for tort damages when the contractor's negligent performance of the work causes injuries to others.” (Id. at p. 691, 21 Cal.Rptr.2d 72, 854 P.2d 721.) Therefore, a plaintiff need not prove negligence by the hirer under this doctrine. The liability that attaches is purely vicarious. However, the harsh effect of imposing tort liability on the nonnegligent hirer is normally offset by a concomitant right of the hirer to seek equitable indemnity from the independent contractor for any tort liability incurred in whole or in part because of the contractor's negligence. (Id. at p. 695, 21 Cal.Rptr.2d 72, 854 P.2d 721.) “[I]n its original form the doctrine of peculiar risk made a landowner liable to innocent bystanders or neighboring property owners who were injured by the negligent acts of an independent contractor hired by the landowner to perform dangerous work on his or her land. In turn, the landowner could sue the contractor for equitable indemnity.” (Id. at p. 696, 21 Cal.Rptr.2d 72, 854 P.2d 721.)
In 1962, with its decision in Woolen v. Aerojet General Corp. (1962) 57 Cal.2d 407, 20 Cal.Rptr. 12, 369 P.2d 708, the Supreme Court expanded the peculiar risk doctrine to allow an employee of an independent contractor to recover tort damages from the nonnegligent hirer for on-the-job injuries caused by the independent contractor's negligence. (Id. at pp. 410-411, 20 Cal.Rptr. 12, 369 P.2d 708.) Thus, Woolen extended the peculiar risk doctrine to protect the independent contractor's employees as well as the general public.
Privette reexamined Woolen in light of “the provision of the workers' compensation scheme limiting employer liability for an employee's work-related injury to providing workers' compensation coverage” and concluded the peculiar risk doctrine operated inequitably where the injured party is an employee of the independent contractor. (Privette, supra, 5 Cal.4th at p. 700, 21 Cal.Rptr.2d 72, 854 P.2d 721.) In its holding, the Privette court engaged in a comparison of the policies furthered by the application of peculiar risk liability with the goals of the compulsory workers' compensation system.
The interests sought to be promoted by the peculiar risk doctrine “imposing such liability without fault on the person who hires the independent contractor” included “seek[ing] to ensure that injuries caused by inherently dangerous work will be compensated, that the person for whose benefit the contracted work is done bears responsibility for any risks of injury to others, and that adequate safeguards are taken to prevent such injuries.” (Privette, supra, 5 Cal.4th at p. 691, 21 Cal.Rptr.2d 72, 854 P.2d 721.) Privette stressed that “as between two parties innocent of any personal wrongdoing-the person who contracted for the work and the hapless victim of the contractor's negligence-the risk of loss occasioned by the contracted work was more fairly allocated to the person for whose benefit the job was undertaken. [Citation.]” (Id. at p. 694, 21 Cal.Rptr.2d 72, 854 P.2d 721.)
The Privette court's description of the goals of the workers' compensation insurance system was taken from the court's earlier opinion in S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 354, 256 Cal.Rptr. 543, 769 P.2d 399: “(1) to ensure that the cost of industrial injuries will be part of the cost of goods rather than a burden on society, (2) to guarantee prompt, limited compensation for an employee's work injuries, regardless of fault, as an inevitable cost of production, (3) to spur increased industrial safety, and (4) in return to insulate the employer from tort liability for his employees' injuries. [Citations.]” (Privette, supra, 5 Cal.4th at p. 697, 21 Cal.Rptr.2d 72, 854 P.2d 721.)
Privette found none of the goals of the peculiar risk doctrine would be furthered by continued application of peculiar risk to nonnegligent hirers of independent contractors sued for injuries to the independent contractor's employees. It thus overruled Woolen and its progeny, announcing that a hirer cannot be held liable for injuries to a contractor's employee under the peculiar risk doctrine because “․ when the contractor's failure to provide safe working conditions results in injury to the contractor's employee, additional recovery from the person who hired the contractor-a nonnegligent party-advances no societal interest that is not already served by the workers' compensation system.” (Privette, supra, 5 Cal.4th at p. 692, 21 Cal.Rptr.2d 72, 854 P.2d 721.)
The Andreinis argue that the rationale of Privette is bottomed solely on the right of the injured employee to secure remuneration under the workers' compensation system which is not lost in the case of an uninsured independent contractor. Thus, they read Privette to mandate that wherever the conditions of compensation exist, either through workers' compensation insurance, or through the employer, or the Uninsured Employers Fund, the injured employee is barred a fortiori from pursuing a tort action against the hirer. In support of their view, the Andreinis refer to the fact that the Privette court made periodic reference in its opinion to the “workers' compensation system ” or “the workers' compensation scheme.” (See, e.g., Privette, supra, 5 Cal.4th at pp. 692, 697, 699, 701, 702, 21 Cal.Rptr.2d 72, 854 P.2d 721, italics added.) They argue from this sporadic usage that the Supreme Court must have intended the rule of limitation to apply regardless of whether benefits were derived from insurance, the employer, or the state-administered fund.
We do not read Privette so expansively. First, the Privette decision also refers to “workers' compensation insurance ” and “coverage.” (See, e.g., Privette, supra, 5 Cal.4th at pp. 698, 699, 700, 701, 702, 21 Cal.Rptr.2d 72, 854 P.2d 721.) It would be myopic at best to glean the high court's intent simply by counting which phraseology it used with greater frequency. Certainly, the court nowhere directly expresses the intent to encompass claims of injured employees of uninsured independent contractors within the scope of its decision.4
More importantly, the analysis in Privette did not turn simply on the fact that the workers' compensation scheme provided the injured worker a source of compensation. As we have pointed out at the outset of this decision, the Supreme Court invoked five public policy justifications for repudiating the 30-year-old rule of vicarious liability first announced in Woolen. We have examined each of the considerations found to be crucial to the court's decision, and determine that the public and social policies deemed important by the Privette court would not be advanced, and in fact would be frustrated, by extending the protection of the rule enunciated in that case to hirers of independent contractors who have not secured workers' compensation insurance for their employees.
B. Inequitable Shifting of the Financial Burden for Injured Workers to Hirers
Principal to the analysis by the Supreme Court in Privette was the unique interplay between the remedy provided the injured employee under the workers' compensation scheme and the remedy provided under the peculiar risk doctrine. While workers' compensation is ordinarily an employee's exclusive remedy against an employer for injuries arising out of and in the course of employment (Lab.Code, §§ 3600, 3601),5 an injured employee may still bring an action for tort damages against “any person other than the employer.” (Lab.Code, § 3852.) 6 The Privette court noted that the shifting of the independent contractor's tort liability to the hirer under the peculiar risk doctrine produces an anomaly where the nonnegligent hirer's liability could exceed that of the negligent party. (Privette, supra, 5 Cal.4th at p. 698, 21 Cal.Rptr.2d 72, 854 P.2d 721.) This anomaly was exacerbated by exposing the nonnegligent hirer to tort liability under a theory of vicarious liability while at the same time barring the hirer from obtaining equitable indemnity from the negligent independent contractor, thereby placing the financial risk on someone who is fault-free.7 (Id. at p. 701, 21 Cal.Rptr.2d 72, 854 P.2d 721.)
The Legislature indisputably intended that an employer be granted immunity from tort liability in exchange for providing prompt and sure compensation to injured employees through workers' compensation insurance. However, in the case of the uninsured employer, the Legislature specifically determined that such immunity was not warranted. Under the statutory framework, an employee sustaining work-related injuries may bring a civil action directly against an uninsured employer as if the workers' compensation law did not exist. (Lab.Code, § 3706; 8 Hernandez v. Chavez Roofing, Inc. (1991) 235 Cal.App.3d 1092, 1095, 286 Cal.Rptr. 919 [price that must be paid by each employer for immunity from tort liability is the purchase of workers' compensation insurance]; Rymer v. Hagler (1989) 211 Cal.App.3d 1171, 1177, 260 Cal.Rptr. 76.) Consequently, while employers who meet their statutory obligations to provide workers' compensation insurance are immunized from liability, those who are uninsured for workers' compensation are liable to the injured employee for the full measure of tort damages.9
For this reason alone, the “anomalous result” of imposing greater liability on the nonnegligent hirer than on the negligent employer which was of concern to the Privette court does not eventuate where the employer is uninsured. (Privette, supra, 5 Cal.4th at p. 698, 21 Cal.Rptr.2d 72, 854 P.2d 721.) Under both the workers' compensation system and the peculiar risk doctrine, the employer and hirer may be held equally liable. This palpable difference is so inimical to the fundamental rationale of Privette that it alone renders that decision inapposite.
A corollary concern to the Privette court was the difference in the hirer's indemnity rights depending upon whether the person injured is a third party unconnected with the work, or the employee of an independent contractor. The court pointed out that when a hirer is held liable under the peculiar risk doctrine for injuries to an innocent bystander or the owner of neighboring land, the hirer may obtain equitable indemnity from the independent contractor responsible for the injuries. (Privette, supra, 5 Cal.4th at p. 696, 21 Cal.Rptr.2d 72, 854 P.2d 721.) Significantly, “[t]he availability of equitable indemnity, ․ is but one of several policy reasons that generally support the imposition of peculiar risk liability” because it allows “the person held liable on a peculiar risk theory to be made whole by the party responsible for the injury.” (Id. at p. 701, 21 Cal.Rptr.2d 72, 854 P.2d 721, italics added.) But when the injured person is an employee of the independent contractor who has provided workers' compensation insurance for his or her employees, the exclusivity provisions normally shield the negligent contractor from an action for equitable indemnity. (Lab.Code, § 3864.) In such a case, “if a nonnegligent third party pays damages for an employee's injuries that are attributable in whole or in part to the negligence of the employer, the [Workers' Compensation] Act's limitations on employer liability preclude the third party from obtaining equitable indemnity from the employer. [Citations.]” (Id. at p. 698, 21 Cal.Rptr.2d 72, 854 P.2d 721.) The unavailability of equitable indemnity places an “onerous burden” on someone who is fault-free when peculiar risk liability is assigned to the nonnegligent hirer. (Id. at p. 701, 21 Cal.Rptr.2d 72, 854 P.2d 721.)
Importantly, because public policy seeks to encourage employers to carry workers' compensation insurance, the Privette court stressed that an uninsured employer may not claim the immunity from suit granted by the exclusivity provisions of the workers' compensation scheme: “To encourage employers to obtain workers' compensation insurance for their employees, the [Workers' Compensation] Act's ‘exclusive remedy’ clause does not apply in favor of employers that fail to obtain such insurance, and consequently they are not immune from tort liability for such injuries. [Citation.]” (Privette, supra, 5 Cal.4th at p. 698, 21 Cal.Rptr.2d 72, 854 P.2d 721.) The right to seek apportionment of fault, including an equitable right to obtain indemnity, is now firmly woven into the fabric of actions at law for tort damages. (American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 591, 146 Cal.Rptr. 182, 578 P.2d 899.) 10 Consequently, the right of a hirer to seek equitable indemnity from an uninsured independent contractor is not in question and, in fact, was expressly acknowledged by both parties at oral argument.
At the heart of Privette was the unfairness of imposing financial responsibility for the employee's injury where that liability could not be shifted to the party whose fault caused it. But the peculiar risk doctrine is reconcilable with a statutory scheme which continues to hold the negligent independent contractor liable for the full range of tort damages which could be assessed against any other tortfeasor. Because of the availability of equitable indemnity in the case of an uninsured independent contractor, the hirer held liable for the independent contractor's negligence under a peculiar risk theory can be “made whole by the party responsible for the injury.” (Privette, supra, 5 Cal.4th at p. 701, 21 Cal.Rptr.2d 72, 854 P.2d 721.) Therefore, a primary concern expressed by the Privette court in limiting the peculiar risk doctrine in the case of an independent contractor's employee-avoiding imposing excessive and unfair tort liability on the nonnegligent hirer-is absent where the independent contractor is uninsured.
C. Inequitable Shifting of the Cost of Workers' Compensation Insurance to Hirer
As we have seen, one of the primary purposes for imposing vicarious liability under the peculiar risk doctrine was to ensure that the hirer bears the cost of injuries arising from the work the hirer commissioned. (Privette, supra, 5 Cal.4th at p. 691, 21 Cal.Rptr.2d 72, 854 P.2d 721.) When an independent contractor is hired which provides workers' compensation insurance for its employees, the cost of workers' compensation coverage is presumably passed on to the hirer as part of the contract price. Thus, the Supreme Court reasoned that because the hirer customarily bears the financial risk of injury to employees by paying for workers' compensation insurance, it should in return receive the benefit of not being subjected to a lawsuit. (Id. at p. 699, 21 Cal.Rptr.2d 72, 854 P.2d 721). The Supreme Court found the hirer's assumption of the financial burden of the workers' compensation system compounded the inequity caused by the exclusivity provision of that system which prevented the hirer from being “made whole” by the negligent independent contractor. (Id. at p. 701, 21 Cal.Rptr.2d 72, 854 P.2d 721.)
This same unfairness does not result where the independent contractor is uninsured. As we have seen, when the independent contractor does not participate in the state's compulsory workers' compensation insurance system, not only does the hirer retain the ability to recoup losses attributable to the independent contractor's negligence through equitable indemnification, but there is no inequitable shifting of the cost of providing compensation benefits to the hirer because no such costs have been incurred. Therefore, a primary objective achieved by the Privette court in limiting an independent contractor's employee's reliance on the peculiar risk doctrine-allowing the hirer the benefit of the protection that, in effect, the hirer has purchased-is absent where the independent contractor is uninsured.
D. Preventing a Compensatory Windfall to the Injured Worker
In addition to pursuing a damage action against his or her employer, the statutory scheme permits an uninsured worker to bring an action simultaneously before the Workers' Compensation Appeals Board for workers' compensation insurance benefits which the uninsured employer is obligated to pay. (Lab.Code, § 3715.) However, compensation benefits paid by the uninsured employer must then be credited against any judgment obtained in any tort action against the employer or a third party. (Lab.Code, §§ 3709, 3709.5; Engle v. Endlich (1992) 9 Cal.App.4th 1152, 12 Cal.Rptr.2d 145.) In fact, the employer is entitled to statutory notice from the employee concerning the pendency of any suit or settlement against a third party to enable the employer to better assert its rights. (Lab.Code, § 3860.)
In 1971, the Legislature created the Uninsured Employers Fund (the Fund), funded by the state treasury, “to create a source of benefits to the employee who otherwise would receive no benefits because of the failure or refusal of his or her employer to obtain workers' compensation liability coverage.” (DuBois v. Workers' Comp. Appeals Bd. (1993) 5 Cal.4th 382, 389, 20 Cal.Rptr.2d 523, 853 P.2d 978; Lab.Code, § 3716.) The Fund is utilized to secure payment of workers' compensation insurance benefits in cases of inability to collect from the uninsured employer. A similar right of reimbursement exists in favor of the Fund if the Fund is called upon to provide compensation benefits to the injured worker. (Lab.Code, § 3732.) These statutory lien rights favoring the employer and the Fund are relevant in light of the Supreme Court's concern that unfettered application of the peculiar risk doctrine would yield an “unwarranted windfall” of both workers' compensation benefits and tort damages based on the same conduct-the negligence of the independent contractor. (Privette, supra, 5 Cal.4th at p. 700, 21 Cal.Rptr.2d 72, 854 P.2d 721.) In the case of an uninsured independent contractor, the statutory scheme makes certain that workers' compensation benefits are offset from any tort recovery, thus preventing a windfall to the injured worker.
E. Important Additional Policy Considerations Support Imposing Vicarious Liability on Those Who Hire Uninsured Contractors
The Andreinis reason that since the workers' compensation statutory scheme guarantees the injured employee of an uninsured contractor will have a source of compensation, the purpose of imposing vicarious liability on the hirer has already been served, and allowing the employee a tort remedy against the hirer serves no additional societal interest. They argue it would be unjust to subject them to tort liability because the Fund guarantees the injured worker will have a source of workers' compensation insurance benefits even if the worker's employer, the uninsured independent contractor, is insolvent.
While the Fund is authorized to recoup the Fund's compensation liability and related costs from any damages recovered in a third-party action (see Lab.Code, § 3732), as our Supreme Court has observed, “a recurring problem” since the Fund's inception has been a lack of “full funding due to state budgetary limitations.” (DuBois v. Workers' Comp. Appeals Bd., supra, 5 Cal.4th at p. 397, 20 Cal.Rptr.2d 523, 853 P.2d 978; see, e.g. Morris v. County of Marin (1977) 18 Cal.3d 901, 905-906, fn. 1, 136 Cal.Rptr. 251, 559 P.2d 606.) It has been noted that in a 10-year period, the amount of claims paid through the Fund has increased more than 300 percent, demonstrating the importance of the Fund's reimbursement rights. (See Comment, Civil RICO and Antitrust Law: The Uneven Playing Field of the Workers' Compensation Fraud Game (1993) 25 Pac. L.J. 311, 319-320, fn. 51.) When public funds have been expended to provide compensation to an employee of an uninsured employer who sustains injury in the course of performing work commissioned by the hirer, it would be manifestly unfair to relieve the hirer of any obligation to reimburse the taxpayers for the compensation they have paid. Furthermore, the remedial and penal purpose evident in the legislative scheme allowing an injured worker of an uninsured employer to pursue both workers' compensation and tort remedies would not be served by absolving the hirer, who selected an independent contractor who was unlawfully uninsured, of any liability.
Our Supreme Court has held that “[t]he fundamental policy underlying the workers' compensation laws is that those hiring others to perform services should bear the risk of injuries incurred in the undertakings.” (State Compensation Ins. Fund v. Workers' Comp. Appeals Bd. (1985) 40 Cal.3d 5, 13, 219 Cal.Rptr. 13, 706 P.2d 1146.) It is apparent that if the peculiar risk doctrine is not applied where the independent contractor is uninsured, none of the risk for loss of an injured worker will be spread to the hirer, the person who primarily benefited from the contracted work. The cost of workers' compensation benefits will not be passed on to the hirer, nor will the hirer bear the cost in any way for the injured worker's losses. Therefore, a primary reason for absolving the hirer of an independent contractor from peculiar risk liability as explained in Privette-that the risk of injury had been spread to the person who benefited from the contracted work-is absent in the case of an uninsured independent contractor.
Furthermore, there is clearly a legitimate public policy interest in encouraging those who choose an independent contractor to insist upon appropriate protection for the independent contractor's employees. This policy is furthered by preserving the peculiar risk doctrine in those cases in which the chosen independent contractor is uninsured. The hirer has the power to insist on workers' compensation insurance which protects the hirer, the independent contractor, and the independent contractor's employees. One who fails to impose this requirement should do so at the risk of being held liable.
F. Examination of Peculiar Risk and Workers' Compensation Insurance System Goals
In the final analysis, the Privette court concluded that imposing vicarious liability upon the hirer of an independent contractor “advances no societal interest that is not already served by the workers' compensation system.” (Privette, supra, 5 Cal.4th at p. 692, 21 Cal.Rptr.2d 72, 854 P.2d 721.) This simply cannot be said in the case of an uninsured independent contractor. Public policy goals of retaining the ability to spread the risk 11 while preserving the ability of the hirer to achieve financial equilibrium through a right of indemnity have already been discussed. A further justification for the exception in Privette was the court's concern that imposing liability on a hirer already indirectly bearing the cost of providing workers' compensation insurance to the contractor's employees would encourage the hirer's use of its own less experienced employees to do dangerous work. (Id. at p. 700, 21 Cal.Rptr.2d 72, 854 P.2d 721.) Indeed, improving worksite safety is a goal shared by both the peculiar risk doctrine and the workers' compensation insurance system. (Id. at pp. 694, 697, 21 Cal.Rptr.2d 72, 854 P.2d 721).
Where the cost of providing compensation for work-related injuries is not shouldered by the hirer, a different, but equally important, public policy concern is implicated. If such hirers were protected from liability for the negligence of uninsured independent contractors, the law would promote the utilization of less costly uninsured workers of independent contractors to perform dangerous work. Because a hirer would presumably provide workers' compensation insurance for its own employees, it would be more expensive to utilize one's own insured employees to perform dangerous work or to retain the services of an insured independent contractor, than to hire an uninsured independent contractor. What would be the incentive to pay more for an insured independent contractor or to use one's own insured workers where the hirer would enjoy complete legal immunity from work-related injuries if an uninsured independent contractor is used? Instead of promoting industrial safety, a rule of nonliability would encourage the use of cheaper, uninsured labor. By removing this incentive, the objective of maximizing industrial safety is enhanced.
Workers' compensation insurance is recognized as a bargain, a quid pro quo, reached between employers and employees to ensure that the costs of work-related injuries do not become a burden on society. The system has been viewed as “an unmistakable declaration of legislative policy that the cost of industrial injury, at a scale fixed by the compensation law, shall be borne by the employing enterprise.” (Pacific Gas & Elec. Co. v. Morse (1970) 6 Cal.App.3d 707, 714, 86 Cal.Rptr. 7.) Limiting vicarious liability where the employer is uninsured defeats this objective. Unlike in Privette, important societal interests are furthered by allowing the hirer of an uninsured independent contractor to be held liable for the contractor's negligence while engaged in dangerous work for the benefit of the hirer. The importance of these societal interests and the absence of the inequities found persuasive by the Privette court dictate retention of the peculiar risk doctrine under the facts of this case.
The petition is denied. The stay is vacated. Each party shall bear their own costs.
1. Code of Civil Procedure section 437c, subdivision (l ) states in relevant part: “Upon entry of any order pursuant to this section except the entry of summary judgment, a party may, ․ petition an appropriate reviewing court for a peremptory writ.”
2. As we have previously noted in Grahn v. Tosco Corporation (1997) 58 Cal.App.4th 1373, 1379, footnote 1, 68 Cal.Rptr.2d 806, “[a]uthorities refer interchangeably to the employer of an independent contractor as ‘employer,’ ‘principal,’ and ‘hirer.’ Not uncommonly, the person or entity is also referred to as the ‘general contractor,’ ‘owner,’ or ‘developer,’ depending on the relevant alternative status. To avoid potential confusion, wherever practical we will refer throughout this opinion to the employer of an independent contractor simply as the ‘hirer.’ ”
3. The issue of Andreinis' right to seek express indemnity against Brandi is not before us. However, we note that given our disposition of the motion for summary judgment, we see no legal impediment to pursuit of this subsidiary claim. (Cf. Redfeather v. Chevron USA, Inc.,supra, 57 Cal.App.4th 702, 67 Cal.Rptr.2d 159).
4. A further reason we resist seizing upon allusions to the “workers' compensation system” or the “workers' compensation scheme” to extend Privette 's reasoning to uninsured employers is poignantly exemplified by the following passage in the court's opinion: “When the conditions of compensation exist, recovery under the workers' compensation scheme ‘is the exclusive remedy against an employer for injury or death of an employee. [Citation.]’ ” (Privette,supra, 5 Cal.4th at p. 697, 21 Cal.Rptr.2d 72, 854 P.2d 721, italics added.) Without doubt the court's reference to “the workers' compensation scheme” in this context is necessarily limited to employers who provide workers' compensation insurance for their employees because in the absence of insurance, as we shall explore later in the text, the employer is statutorily-deprived of the protection of the exclusive remedy provision. (Lab.Code, § 3706.) Given the juxtapositional context of the sentence quoted from Privette in which the phrase “workers' compensation scheme” is expressly qualified by a provision of the law applicable only to insured employers, we are confident the court did not use such nomenclature in the all-encompassing, unrestricted sense espoused by the Andreinis to confer blanket immunity from liability upon hirers.
5. Labor Code section 3600 establishes liability of the employer “in lieu of any other liability whatsoever” when the conditions of workers' compensation occur, and eliminates the common law defenses. Labor Code section 3601 provides that, when these conditions occur, the right to recover benefits under the Act constitutes an “exclusive remedy” (with specified exceptions).
6. Labor Code section 3852 states in pertinent part: “The claim of an employee, ․ for compensation does not affect his or her claim or right of action for all damages proximately resulting from the injury or death against any person other than the employer.”
7. Labor Code section 3864 provides: “If an action as provided in this chapter prosecuted by the employee, the employer, or both jointly against the third person results in judgment against such third person, or settlement by such third person, the employer shall have no liability to reimburse or hold such third person harmless on such judgment or settlement in the absence of a written agreement to do so executed prior to the injury.”
8. Labor Code section 3706 provides, “If any employer fails to secure the payment of compensation, any injured employee or his dependents may bring an action at law against such employer for damages, as if this division did not apply.”
9. Because all employees of all uninsured employers share the right to sue their employers in tort, allowing suits based on peculiar risk does not result in “exempting a single class of employees, those who work for independent contractors, from the statutorily mandated limits of workers' compensation. [Citations.]” (Privette,supra, 5 Cal.4th at p. 700, 21 Cal.Rptr.2d 72, 854 P.2d 721.)
10. The only material limitation on traditional tort liability in this context is decreed in Labor Code section 3708, which creates a presumption of employer negligence, and bars the employer from asserting the employee's negligence as a defense. Conspicuous by its absence is any limitation of the employer's or third party joint tortfeasor's rights against each other to obtain equitable indemnity. Clearly, had the Legislature intended to limit the right of indemnity in favor of or against the employer, it would have done so. Its absence raises an inference of statutory construction which is consistent with our view. (Organization of Deputy Sheriffs v. County of San Mateo (1975) 48 Cal.App.3d 331, 340, 122 Cal.Rptr. 210.)
11. At oral argument, the Andreinis claimed Privette sought to minimize the burden peculiar risk imposes on unsophisticated hirers. To the contrary, if anything the Supreme Court recognized the need to favor the plight of the hapless injured party over the hirer for whom the work is benefiting. (Privette,supra, 5 Cal.4th at p. 695, 21 Cal.Rptr.2d 72, 854 P.2d 721.)
RUVOLO, Associate Justice.
KLINE, P.J., and HAERLE, J., concur.