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Court of Appeal, Fifth District, California.


No. F025121.

Decided: September 16, 1996

Dennis J. Hershewe, Encino, for Petitioner. No appearance for Respondent. Krimen, Klein, Da Silva, Daneri & Bloom and Louis Harris, San Francisco, for Real Party in Interest. Finnegan, Marks & Hampton, Michael A. Marks and Ellen Simms Langille, San Francisco, as Amicus Curiae on behalf of Real Party in Interest.


Petitioner Tri-Spur Investments (Tri-Spur) seeks review of an order issued by respondent Workers' Compensation Appeals Board (WCAB) denying reconsideration of its earlier decision (1) dismissing Tri-Spur as a party in compensation proceedings initiated by an employee of Tri-Spur and (2) quashing Tri-Spur's subpoena duces tecum for the complete claim file of real party in interest State Compensation Insurance Fund (SCIF), the compensation insurer for Tri-Spur. We will conclude that the WCAB did not err and consequently deny the petition.


In 1993 while employed by petitioner, Russell Mason filed for workers' compensation benefits claiming a work-related knee injury. Petitioner was insured for such claims by SCIF. Tri-Spur advised SCIF that Mason may not have been injured on the job. Eventually, however, SCIF paid benefits to Mason.

Dissatisfied with the manner in which SCIF was handling the claim, Tri-Spur retained counsel who demanded that SCIF substitute him as attorney of record for Tri-Spur in the compensation proceeding. The attorney also unsuccessfully sought payment from SCIF of his fees as purported Cumis counsel for Tri-Spur. Thereafter, counsel for Tri-Spur served SCIF with a subpoena for all of SCIF's records and reports pertaining to Mason. SCIF moved to quash the subpoena and served a “notice of intention of defendant insurer to seek dismissal of employer” pursuant to Labor Code sections 3755 and 3757.1

Initially the workers' compensation judge denied SCIF's motion to quash and found no reason to dismiss Tri-Spur as a party. On reconsideration, however, the WCAB held section 3755 was determinative; the WCAB concluded:

“Pursuant to the mandatory language of § 3755 and § 3757, and in accordance with the principle of strict construction, we find that the employer should have been dismissed from the case. Furthermore, it follows that once the employer is dismissed from the case, the employer has no right to seek discovery.”

The WCAB therefore ordered Tri-Spur dismissed as a party and quashed the subpoena duces tecum.

In February 1996, this court summarily denied Tri-Spur's petition for a writ of review. Tri-Spur then petitioned for review in the California Supreme Court. The Supreme Court granted the petition and transferred the matter to this court “with directions to vacate its order denying review and to issue a writ of review to be heard before that court when the proceeding is ordered on calendar.”



Tri-Spur contends the WCAB should not have dismissed it from the underlying proceedings pursuant to section 3755 because as the employer it disputed liability and wanted its “day in court.” Section 3755 provides:

“If the employer is insured against liability for compensation, and if after the suffering of any injury the insurer causes to be served upon any compensation claimant a notice that it has assumed and agreed to pay any compensation to the claimant for which the employer is liable, such employer shall be relieved from liability for compensation to such claimant upon the filing of a copy of such notice with the appeals board. The insurer shall, without further notice, be substituted in place of the employer in any proceeding theretofore or thereafter instituted by such claimant to recover such compensation, and the employer shall be dismissed therefrom.

Such proceedings shall not abate on account of such substitution but shall be continued against such insurer.”

Tri-Spur acknowledges that section 3755 has nothing to do with a dispute between an employer and its carrier over liability to the claimant. Nevertheless, it is Tri-Spur's position that section 3755 requires an employer to be dismissed as a party only when the insurer assumes and agrees to pay compensation and both the insurer and the employer agree there is liability to the injured employee.

We decline Tri-Spur's invitation to rewrite the statute to insert a provision that dismissal of the employer is authorized only if the employer and the insurer each concede liability. Section 3755 contains no such term. The statute rather clearly says that an employer shall be dismissed from the proceeding if the insurer for the employer gives notice that it “has assumed and agreed to pay any compensation to the claimant for which the employer is liable.” (§ 3755.) There is nothing in the language of the statute which conditions dismissal of the employer upon an admission of liability to the employee by either the insurer or the employer. We must give effect to compensation statutes “‘according to the usual, ordinary import of the language”’ used. (Moyer v. WCAB (1973) 10 Cal.3d 222, 230.)

Ordinarily, an employer cannot be prejudiced by the substitution of its insurer into, and the employer's dismissal from, a compensation proceeding.2 Section 3755 assures that the employer will receive the benefits of its compensation policy; the policy by law must render the insurer directly and primarily liable, subject to the terms and conditions of the policy, to pay all benefits for which the employer is found to be liable, as Tri-Spur's policy here provides. (See Ins. Code, § 11651.) In addition, Tri-Spur's policy with SCIF requires the insurer to defend at its expense any claim, proceeding or suit for compensation benefits brought against Tri-Spur. In exchange for these promises by SCIF to defend against and pay legitimate claims, Tri-Spur has contractually given SCIF the right to investigate and settle such claims, and has promised to cooperate with and assist SCIF as requested in the investigation, settlement or defense of any claim.

However, the courts have found an exception to the application of section 3755 in those situations where the employer is exposed to possible prejudice by its dismissal from a compensation action. (Hanna, California Law of Employee Injuries and Workers' Compensation, (rev. 2d ed.) § 25.28.) Thus, a dismissal is not required, despite the mandatory language of the statute, where the insurer is substituted into the proceeding and a possible conflict of interest between the employer and insurer appears to exist. (Scott v. Industrial Acc. Com. (1956) 46 Cal.2d 76, 86; citing Giacalone v. Industrial Acc. Com. (1953) 120 Cal.App.2d 727, 734.3 ) The requisite conflict may arise when the employer is exposed to an uninsured risk because (1) the employee's employment status is at issue; (2) the employee alleges that the serious and willful misconduct of the employer caused the injury (§ 4553; see Giacalone v. Industrial Acc. Com., supra, 120 Cal.App.2d at p. 734),4 or (3) the employee alleges discriminatory retaliation by the employer (§ 132a). In these situations the insurer might not be enthusiastic about taking a position which, if accepted, would require it to pay policy benefits. Similarly, the insurer might be unconcerned about defending the employer from a claim that would not be a charge against the compensation policy. (See Giacalone v. Industrial Acc. Com., supra, 120 Cal.App.2d at p. 734 [“[I]t would be to the insurer's interest to join with the widow in an endeavor to prove her husband's status as that of an independent contractor.”].) Permitting the employer to continue as a party enables it to protect its own interests with respect to the employee's claims to the extent such interests diverge from those of the insurer.

The record in the instant case simply does not disclose the existence of a conflict between SCIF and Tri-Spur implicating potential policy coverage.5 So far as this record shows, no claim has been made by Mason that any serious and willful misconduct on the part of Tri-Spur played any role in his alleged injury or that he was the subject of discriminatory retaliation. In addition, while Tri-Spur apparently asserts Mason's injury was not employment related, nothing before us suggests that Tri-Spur contends it could be liable to Mason outside the compensation scheme for the injury. Tri-Spur believes Mason's injury resulted from a non-employment related cause for which Tri-Spur bears no responsibility whatsoever, under the worker's compensations scheme or otherwise. Thus, because SCIF has accepted the obligation to pay any benefits awarded to Mason in the compensation proceeding, Tri-Spur is not in a position of inherent conflict with SCIF.

Tri-Spur argues the presence of the word “injury” in section 3755 requires us to conclude that the employer may not be dismissed under the statute if the employer disputes the claimant's allegation the injury was employment related. Tri-Spur rests this contention on the fact that the word “injury” for purposes of the worker's compensation laws is defined as “any injury or disease arising out of the employment.” (§ 3208: see Livitsanos v. Superior Court (1992) 2 Cal.4th 744, 752-753.) Thus, Tri-Spur maintains that as long as the employer does not agree that the claimant's injury occurred during the course of the employment, the employer must be allowed to remain and participate in the compensation proceeding.

Even if Tri-Spur's construction of section 3755 were correct, it would not change the outcome of this case. The problem for Tri-Spur is that there are no facts before us which demonstrate that a cognizable dispute exists, or ever existed, between Tri-Spur and Mason about whether Mason 's injury arose out of his employment with Tri-Spur. The record shows that Tri-Spur was notified (see § 5401) by Mason of his injury on September 29, 1993, and there is nothing elsewhere in the record which establishes that Tri-Spur rejected liability within 90 days of that date (§ 5402). So far as we know, then, Mason's injury was under the law presumed to be compensable (§ 5402).

Nothing we have said means that Tri-Spur cannot have a legitimate dispute with SCIF. To the contrary, as we understand it Tri-Spur is concerned that, because SCIF assumed liability to compensate Mason's claim, the future premiums paid by Tri-Spur for compensation coverage might increase. However, the possibility that an employee claim could affect the employer's future policy premiums does not involve coverage and is not the sort of conflict addressed by Giacalone v. Ind. Acc. Com., supra, 120 Cal.App.2d at p. 724. If it were, an employer could never be dismissed from a compensation action.

If its subsequent premiums are Tri-Spur's worry, it would appear to have independent remedies should its fears ultimately materialize. It may present a complaint to the Workers' Compensation Insurance Rating Bureau. (See Ins. Code, § 11750 et seq.; P.W. Stephens, Inc. v. State Compensation Ins. Fund (1994) 21 Cal.App.4th 1833.) Alternatively, Tri-Spur may have recourse in the civil courts under several theories of liability, including breach of contract and breach of the implied covenant of good faith. (See e.g. Lance Camper Manufacturing Corp. v Republic Indemnity Co. (1996) 44 Cal.App.4th 194; Tricor California, Inc. v. State Compensation Ins. Fund (1994) 30 Cal.App.4th 230; Security Officers Service, Inc. v. State Compensation Insurance Fund (1993) 17 Cal.App.4th 887; and Courtesy Ambulance Service of San Bernardino v. Superior Court (1992) 8 Cal.App.4th 1504.) Tri-Spur has made no effort to demonstrate to us that any claims it may hereafter have arising out of the amount of premiums charged by SCIF, as such premiums may be affected by the way SCIF handled the Mason compensation proceeding, could not be entertained by either of these two forums.

Tri-Spur also relies upon sections 3761 and 3762, referred to as the Employer's Bill of Rights.6 The statutes did not take effect until January 1, 1994 (Stats. 1993, ch. 121, §§ 27, 28, 77), after the alleged injury to Mason. However, even if we assume Tri-Spur was entitled to the benefit of these sections throughout the Mason proceeding, we cannot see how they would have operated to bar the WCAB from dismissing Tri-Spur from the action under section 3755. Section 3761 essentially gives the employer the right (1) to be notified of claims filed directly with the insurer and to submit information about the claim to the insurer (§ 3761, subd. (a)); (2) under certain conditions to be notified, if it disputes the employee's claim, of the pendency and date of hearing on any proposed agreement regarding compensation between the insurer and the claimant (§ 3761, subd. (b)); (3) to be notified about the amount and basis of any reserve established by the insurer with respect to a claim (§ 3761, subd. (c)); and (4) to be reimbursed for any premiums paid which are based upon payments made to a claimant whose claim was disputed by the employer and denied by the WCAB (§ 3761, subd. (d)). Section 3762 directs the insurer to tell the employer everything about a claim that affects the employer's premium and, with certain exceptions for privileged papers, to give the employer copies of all documents in the employer's claims file which affect that premium.

We find nothing in the language of these two statutes which betrays a legislative intent that the dismissal of the employer mandated by section 3755 may not be implemented when the employer contests liability to a compensation claimant. Tri-Spur has not supported such a proposition with any authority whatsoever. Moreover, while section 3762 does give the employer the right to premium-related documents in the insurer's claims file, it does not permit the employer to enforce that right by subpoena issued in the employee's compensation proceeding. We strongly suspect the legislators would have spelled out such a right if this is what they had in mind. Tri-Spur has not provided us with anything which warrants such a construction of the statute. In any event, section 11783 of the Insurance Code provides in part that SCIF may “be sued in all actions arising out of any act or omission in connection with its business and affairs.” On its face this statute would appear to open the superior court to Tri-Spur to vindicate its rights under section 3762 or otherwise, and Tri-Spur has not shown that such an action would not lie.

To conclude, the conflict of interest which provides an exception to the mandatory dismissal of an employer under section 3755 does not involve the question of the effect the outcome of a compensation claim will have upon the employer's premiums for future coverage. Tri-Spur has not demonstrated that there existed a conflict between it and SCIF concerning anything other than such a problem, and has thus not met its burden to affirmatively show error. (See 9 Witkin, Cal. Procedure (3d ed. 1985) Appeal, § 268, p. 276-277.) Consequently, the WCAB properly applied section 3755 in dismissing petitioner as a party in the underlying proceedings. It also did not err in refusing to enforce Tri-Spur's subpoena to SCIF.7


Alternatively, Tri-Spur maintains the WCAB order of dismissal violated its federal due process rights. Beyond simply stating this contention and quoting extracts from Massachusetts Bonding and Insurance Company v. Industrial Accident Commission (1946) 74 Cal.App.2d 911, Tri-Spur does not enlighten us with reasoned argument demonstrating how it was denied due process in this case. Massachusetts Bonding involved a claim by an insurer that it had been deprived of the right to cross-examine and rebut the testimony given by witnesses for the claimant, and thus provides no assistance to Tri-Spur here.8 (Massachusetts Bonding and Insurance Co. v. Industrial Accident Commission, supra, 74 Cal.App.2d at pp. 912-913.)

We cannot fathom how this contention could have merit. The Fourteenth Amendment provides in relevant part: “nor shall any State deprive any person of life, liberty, or property, without due process of law.” Neither section 3755 nor the WCAB's application of this statute in anyway deprived Tri-Spur of life, liberty or property with respect to any benefits claimed by Mason. The dismissal authorized by section 3755 occurred because SCIF assumed liability for any benefits found owing to Mason. (§§ 3755, 3757.) Thus, Tri-Spur was relieved of any obligation to pay, from its own pocket, compensation to Mason. Furthermore, insofar as this record shows and as we have previously explained, the dismissal will not put Tri-Spur in the position of paying unfair or illegal premiums without a means of redress.


The petition is denied. We decline to award costs in this proceeding to any party.


1.  All statutory references are to the Labor Code.

2.  Section 3755 governs when dismissal of the employer is sought by the insurer. Sections 3756 and section 3757 govern when dismissal is sought by the employer itself.

3.  The Scott court disapproved Giacalone on another point. (Scott v. Industrial Acc. Com., supra, (1956) 46 Cal.2d at p. 87.)

4.  Under Insurance Code section 11661, “an insurer shall not insure against the liability of the employer for the additional compensation recoverable for serious and willful misconduct of the employer or his agent.” (See Azevedo v. Abel (1968) 264 Cal.App.2d 451, 457.)

5.  The workers' compensation judge found there was “no apparent conflict of interest for any issue that is to be adjudicated before the WCAB.” The employer did not seek of reconsideration of this decision by the workers' compensation judge.

6.  Section 3761 provides:“(a) An insurer securing an employer's liability under this division shall notify the employer, within 15 days, of each claim for indemnity filed against the employer directly with the insurer if the employer has not timely provided to the insurer a report of occupational injury or occupational illness pursuant to Section 6409.1. The insurer shall furnish an employer who has not filed this report with an opportunity to provide to the insurer, prior to the expiration of the 90-day period specified in Section 5402, all relevant information available to the employer concerning the claim.“(b) An employer shall promptly notify its insurer in writing at any time during the pendency of a claim when the employer has actual knowledge of any facts which would tend to disprove any aspect of the employee's claim. When an employer notifies its insurer in writing that, in the employer's opinion, no compensation is payable to an employee, at the employer's written request, to the appeals board, the appeals board may approve a compromise and release agreement, or stipulation, that provides compensation to the employee only where there is proof of service upon the employer by the insurer, to the employer's last known address, not less than 15 days prior to the appeals board action, of notice of the time and place of the hearing at which the compromise and release agreement or stipulation is to be approved. The insurer shall file proof of this service with the appeals board.“Failure by the insurer to provide the required notice shall not prohibit the board from approving a compromise and release agreement, or stipulation; however, the board shall order the insurer to pay reasonable expenses as provided in Section 5813.“(c) In establishing a reserve pursuant to a claim that affects premiums against an employer, an insurer shall provide the employer, upon request, a written report of the reserve amount established. The written report shall include, at a minimum, the following:“(1) Estimated medical-legal costs.“(2) Estimated vocational rehabilitation costs, if any.“(3) Itemization of all other estimated expenses to be paid from the reserve.“(d) When an employer properly provides notification to its insurer pursuant to subdivision (b), and the appeals board thereafter determines that no compensation is payable under this division, the insurer shall reimburse the employer for any premium paid solely due to the inclusion of the successfully challenged payments in the calculation of the employer's experience modification. The employee shall not be required to refund the challenged payment.”Section 3762 provides:“The insurer shall discuss all elements of the claim file that affect the employer's premium with the employer, and shall supply copies of the documents that affect the premium at the employer's expense during reasonable business hours. The right provided by this section shall not extend to any document that the insurer is prohibited from disclosing to the employer under the attorney-client privilege, any other applicable privilege, or statutory prohibition upon disclosure, or under Section 1877.4 of the Insurance Code.”

7.  As we read Tri-Spur's petition, it makes no independent argument in support of its objection to the quashing of its subpoena to SCIF; it simply takes the position that if the dismissal was improper the rejection of the subpoena was likewise error.

8.  The opinion in Massachusetts Bonding is confusing because it appears to have in some instances mixed the references to the petitioner and the respondent. (See Massachusetts Bonding and Insurance Co. v. Industrial Accident Commission, supra, 74 Cal.App.2d at pp. 912-913.)

DIBIASO, Associate Justice.

MARTIN, Acting P.J., and HARRIS, J., concur.

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