ERNST v. FIREMAN FUND INSURANCE COMPANIES

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Court of Appeal, Second District, Division 1, California.

Richard K. ERNST, Plaintiff and Appellant, v. FIREMAN'S FUND INSURANCE COMPANIES et al., Defendants and Respondents.

No. B070098.

Decided: March 30, 1993

Meserve, Mumper & Hughes, Bernard A. Leckie, and Joseph B. McGinley, Irvine, for plaintiff and appellant. Glassman & Browning, Inc., Jerome M. Jackson, Beverly Hills, and Doran B. Richart, Rancho Palos Verdes, for defendants and respondents.

Plaintiff Richard K. Ernst appeals from the judgment entered following an order granting the motion of defendants Fireman's Fund Insurance Companies and The American Automobile Insurance Company (collectively “Fireman's”) for judgment on the pleadings.   We affirm.

BACKGROUND

The grant by the trial court of Fireman's motion for judgment on the pleadings was the equivalent of the sustaining of a general demurrer.   Hence, in our review, we accept as true the allegations of Ernst's complaint.  (Tiffany v. Sierra Sands Unified School Dist. (1980) 103 Cal.App.3d 218, 224, 162 Cal.Rptr. 669.)   That complaint, styled as being “For Breach of Implied Covenant of Good Faith and Fair Dealing,” alleged the following.

Ernst is a heavy-duty petroleum truck driver.   In June 1986, while in the course and scope of his employment, he was severely injured when attacked and mauled by three large dogs while making a delivery to Eagle Concrete Sawing and Coring, Inc.   Fireman's was the workers' compensation carrier for Ernst's employer, and paid $105,000 in benefits to Ernst for his injuries.   Ernst also filed a third-party action against Eagle Concrete.

While Ernst “was attempting to negotiate” for the purchase of Fireman's subrogation rights, Fireman's sold its lien to Eagle Concrete for $20,000 “without any prior notice” to Ernst.   Although the fair value of Ernst's claim against Eagle Concrete was $285,000, he was forced to accept only $180,000 due to Eagle Concrete's ownership of the $105,000 workers' compensation lien it had purchased from Fireman's.

Ernst also alleged that Fireman's conduct hampered his prosecution of the third-party action against Eagle Concrete, in that Fireman's failed to supply him with copies of medical reports and bills in any timely fashion and in any semblance of order.

CONTENTIONS

Ernst asserts error in the following respects:

1. The trial court erred in ruling that the exclusive remedy doctrine of the workers' compensation law barred his claim against Fireman's;

2. The trial court erred in denying him leave to file an amended complaint.

DISCUSSION

1. The Exclusive Remedy Doctrine Bars Ernst's Claim Against Fireman's

Labor Code section 3602, subdivision (a), provides in part:  “Where the conditions of compensation set forth in section 3600 concur, the right to recover such compensation is ․ the sole and exclusive remedy of the employee or his or her dependents against the employer․”

The benefit of this doctrine of exclusivity extends not only to an employer, but also to an insurance carrier for the employer.  (Lab.Code, § 3850, subd. (b);  Continental Casualty Co. v. Superior Court (1987) 190 Cal.App.3d 156, 159, 235 Cal.Rptr. 260.)

Ernst contends that the exclusive remedy doctrine has no application where the cause of action asserted against the employer or carrier is for violation of an “economic or property interest.”   He also contends that Fireman's conduct was “outrageous” and “completely outside the normal investigation and processing of claims,” so that exclusivity is no bar.   We discuss each contention separately.

a. Since the Overall Transaction Is Work Related, the Exclusive Remedy Doctrine Bars Ernst's Claim Against Fireman's

 Ernst argues that Fireman's conduct prevented his receiving a fair amount from Eagle Concrete in his third-party action, thereby violating his property rights.   Specifically, Ernst asserts injury through Fireman's sale of its lien to Eagle Concrete for $20,000, and its failure to provide copies of medical reports and bills on time and in order.  (The latter is alleged by Ernst to be a spoliation of evidence by Fireman's.)

In 1987, the Sixth Appellate District remarked that “[a] number of recent cases have wrestled with the issue here, concerning the metes and bounds of the workers' compensation exclusivity doctrine.”  (Continental Casualty Co. v. Superior Court, supra, 190 Cal.App.3d at p. 159, 235 Cal.Rptr. 260.)   Six years and a number of cases later, no “bright line” to assist in resolution of the issue has as yet emerged.

Ernst places total reliance on a recent Fourth Appellate District decision which deals with the exclusive remedy doctrine in the context of a spoliation of evidence claim.   In Coca–Cola Bottling Co. v. Superior Court (1991) 233 Cal.App.3d 1273, 286 Cal.Rptr. 855, a mechanic employed by petitioner Coca–Cola was injured in a crash while driving a Ford truck in the County of San Bernardino within the course and scope of his employment.   The employee and his wife filed a third-party action for negligence and product liability against Ford.   Coca–Cola, a self-insurer for workers' compensation matters, filed a complaint in intervention.   Coca–Cola had custody of the Ford truck, but, during the course of the litigation it was discovered that various of the truck's components were missing.   The employee thereupon added a cause of action against Coca–Cola for spoliation of evidence.   Coca–Cola alleged in a petition for writ of mandamus that the exclusive remedy doctrine barred the spoliation claim.

The Fourth District denied the writ on the ground that the cause of action for spoliation was not barred by the exclusive remedy doctrine.   It reasoned that the spoliation claim was not one for redress of injury to the person of the employee, but was rather for violation of a “property” interest, “i.e., an interference with a valuable, probable expectancy of prevailing in their third party actions, particularly against Ford.   It is an interference with the prospective economic advantage they allegedly stand to obtain if they can prove their civil action against either Ford or County.  [Citations.]”  (Id. at p. 1289, 286 Cal.Rptr. 855, fn. omitted.)

We do not think it possible to reconcile the Coca–Cola holding with that of Continental Casualty Co. v. Superior Court, supra, 190 Cal.App.3d 156, 235 Cal.Rptr. 260, the case relied on by Fireman's.   Once again the real party in interest was an employee injured within the scope of employment, this time when the bottom rung of an allegedly defective ladder collapsed.   The petitioner in the writ proceeding was the workers' compensation insurer, against which a spoliation cause of action had been asserted in a third-party suit brought by the employee.   The court found the exclusive remedy doctrine to be applicable, noting that “the processing of a third-party claim is a fairly normal, routine incident for the compensation carrier in any industrial injury situation where a third party is partly responsible, the transaction is work related, and part and parcel, in an extended sense, of the processing of the benefits claim.   In that sense the activity is within the compensation system.”  (Continental Casualty Co. v. Superior Court, supra, 190 Cal.App.3d at p. 161, 235 Cal.Rptr. 260.)

So here we have two cases, practically mirror images of each other, reaching diametrically opposed results.   The Supreme Court has denied review in both.   Our task being to choose what we believe to be the better reasoned, we elect to follow Continental Casualty.   Our reasons for that choice are as follows.

First, we question the analytical approach used in Coca–Cola.   That approach makes the case turn on whether the claim alleged by the employee against the employer (or insurance carrier) is classified as being for injury to person or injury to property.  (Coca–Cola Bottling Co. v. Superior Court, supra, 233 Cal.App.3d at pp. 1288–1289, 286 Cal.Rptr. 855.)   As stated by the Coca–Cola court, “two separate fact situations here—the accident and the loss of evidence—establish the invasion of separate and distinct rights:  the right to be free from bodily injury, and the right to be free from tortious interference with prospective economic advantage.”  (Id. at p. 1291, 286 Cal.Rptr. 855.)

From a technical standpoint, the analysis may be accurate, but it nonetheless misses the point.   The point is that, were it not for the work situation, there would not have been an injury;  were it not for the injury, there would not have been either the compensation claim or the third-party claim.   Both of those claims relate back to the work situation.   That relationship to the work situation is the essence of the Continental Casualty approach, and demonstrates its utility—it is practical and realistic, and not dependent upon technical distinctions between claims for injury to person or to property.

Second, and despite the pleading labels of interference with economic interest, spoliation of evidence, or what have you, at root we are dealing with damages sought for personal injuries received while on the job.   This is another reason for keeping compensation questions within the workers' compensation system.  (See Continental Casualty Co. v. Superior Court, supra, 190 Cal.App.3d at p. 161, 235 Cal.Rptr. 260 [“the damages sought are mainly for the employee's physical injuries”].)

Third, the Continental Casualty approach avoids the possibility of the double recovery which could result if Ernst were allowed to pursue his claim against Fireman's.   Ernst has already been compensated by Fireman's for his industrial injury to the extent of $105,000.   Upon payment of that sum to Ernst, Fireman's was subrogated to whatever rights Ernst had against Eagle Concrete as the third-party tortfeasor.   Ernst says that the fair value of his personal injury claim in the third-party action was $285,000, but that he accepted $180,000 (losing $105,000) because of the wrongs committed by Fireman's.   However, the point he does not address is this.   Whatever happened in the transfer of lien rights back and forth, someone (either Fireman's or its transferee) was entitled to a claim on, or a set-off against, Ernst's personal injury recovery to the extent of the lien.   However, if Ernst were allowed to pursue his action against Fireman's, he could potentially recover the $105,000 paid by Fireman's for a second time.   Such double recovery would be inconsistent with what, in our view, the workers' compensation system was designed to accomplish.

 Fourth and last, we suggest that a review of the original purpose of the workers' compensation law supports our decision to reject the technical approach used in Coca–Cola.   It was a scandal to a civilized society that, at common law, injured workers were denied compensation because of technical defenses asserted by an employer, such as contributory negligence, assumption of risk, and negligence of a co-employee.   Workers' compensation laws were originally enacted to avoid the inequities caused by the operation of the tort system in a venue that was inappropriate.   As stated in Western Indemnity Co. v. Pillsbury (1915) 170 Cal. 686, 693, 151 P. 398, the workers' compensation statutes “rest on the underlying notion that the common-law remedy by action, with the requirements of proof incident to that remedy, involves intolerable delay and great economic waste, gives inadequate relief for loss and suffering, operates unequally as between different individuals in like circumstances, and that, whether viewed from the standpoint of the employer or that of the employee, it is inequitable and unsuited to the conditions of modern industry.”

That rationale, good then, is as good today.   Matters dealing with job-related injuries should be kept within the workers' compensation system.   Decisions as to what is or what is not within that system should not be based on lawyers' wordplay, quibbling over whether a claim is for injury to person or to property.   It was to avoid the technical rules and delay of civil litigation that the workers' compensation system was instituted in the first place.   We should not complicate its operation by fostering more civil litigation, which proceeds on sophisticated theories that have little relation to the reality of the situation, i.e., compensation for job-related injuries.

b. No Exception to the Exclusive Remedy Doctrine Applies to this Case

 Ernst argues that the exclusive remedy doctrine does not bar an independent tort action where an insurer's conduct goes beyond an insurance company's normal role.   As authority, he cites Unruh v. Truck Insurance Exchange (1972) 7 Cal.3d 616, 102 Cal.Rptr. 815, 498 P.2d 1063.   A review of the facts of Unruh shows that it has no application to this case.   In Unruh, the claimant complained of a back injury related to work.   The insurance carrier placed her under surveillance by a private investigator.   The investigator then befriended her, and took her to Disneyland, where a variety of recreational activities in which the two engaged were secretly filmed by another investigator.   Unruh later viewed the film and apparently suffered a physical and mental breakdown requiring hospitalization.  (Id. at p. 621, 102 Cal.Rptr. 815, 498 P.2d 1063.)   In allowing the tort claim in that case, the Supreme Court held that, when a carrier steps out of its “normal role of an insurer in a compensation scheme intended to protect the worker,” it becomes “a ‘person other than the employer’ within the meaning of [Labor Code] section 3852․”  (Id. at pp. 630–631, 102 Cal.Rptr. 815, 498 P.2d 1063.)

Unruh is later explained in Droz v. Pacific National Ins. Co. (1982) 138 Cal.App.3d 181, 188 Cal.Rptr. 10.   As stated there, the conduct must be so outrageous that it “ ‘goes beyond the normal role of an insurer in a compensation scheme intended to protect the worker ․ [and] frustrates the laudable objectives of the workmen's compensation law.’  [Citation.]”  (Id. at p. 184, 188 Cal.Rptr. 10.)   In other words, to be actionable, conduct must be “ ‘so extreme as to exceed all bounds of that usually tolerated in a civilized community.’  [Citation.]”  (Ricard v. Pacific Indemnity Co. (1982) 132 Cal.App.3d 886, 895, 183 Cal.Rptr. 502.)

A carrier's dealing with a compensation lien, even selling it at a discount to a tortfeasor, is simply not outrageous conduct within the meaning of Unruh.   It does not justify a departure from the salutary doctrine of workers' compensation as an exclusive remedy.

2. The Court Did Not Err in Granting the Motion for Judgment on the Pleadings Without Leave to Amend

In his memorandum in opposition to Fireman's motion, Ernst requested leave to amend if the motion were granted.   Although great liberality is generally the rule with regard to amendment of pleadings, it is nonetheless the law that “[t]he granting of a motion for judgment on the pleadings, without leave to amend, is not an abuse of discretion, where even if leave were granted, the complaint cannot be made to state a cause of action by amendment.  [Citations.]”  (IMO Development Corp. v. Dow Corning Corp. (1982) 135 Cal.App.3d 451, 461, 185 Cal.Rptr. 341.)

In light of our holding that the exclusive remedy doctrine bars Ernst's claim against Fireman's, it would be an exercise in futility to grant leave to amend.   The trial court properly denied such leave.

DISPOSITION

The judgment is affirmed.

MASTERSON, Associate Justice.

ORTEGA, Acting P.J., and MIRIAM A. VOGEL, J., concur.