KAISER FOUNDATION HOSPITAL v. WORKERS COMPENSATION APPEALS BOARD (1984)

In this case the Workers' Compensation Appeals Board (Board) denied the request of an employer (Kaiser) for a credit against a settlement amount obtained by its employee (John Tawney) in a personal injury action against a third party.   We denied Kaiser's petition for writ of review, accepting the Board's conclusion that the statutes under which Kaiser sought relief do not apply to facts such as are presented here.   Subsequently the Supreme Court granted Kaiser's petition for hearing and retransferred the case to us.   We now conclude that the statutes are applicable, and accordingly, that the Board must examine the facts to determine whether, and if so in what amount, Kaiser is entitled to the credit it seeks.

I.

Tawney worked at a hospital, for Kaiser and its predecessor in interest, from 1973 until the end of 1978.   He had suffered back trouble for many years, and had only recently recovered from back surgery when he started this job.   He suffered specific industrial injuries to his back in 1975 and 1978, and a cumulative back injury during the period 1975 through 1978.

On January 1, 1979, Tawney fell on some dimly-lighted steps in a restaurant.   He left the restaurant and went to the hospital as a patient where he underwent back surgery a few days late.   That surgery was unsuccessful, and a further operation was performed in December, 1981.   As of 1983, his disability had prevented Tawney from working ever since the day he fell in the restaurant.

Tawney filed suit against the restaurant owner.   The evidence in this record concerning that lawsuit consists of two depositions bearing the case caption and a bit of testimony from Tawney to the effect that the dispute was settled for a gross amount of $50,000.

There was much dispute in the medical evidence concerning the period of temporary disability, the extent of permanent disability, and the degree, if any, to which the permanent disability should be apportioned to non-industrial causes.   The Board ultimately found an unapportioned permanent disability of 63 percent, yielding an award of $23,240.   It found that Tawney was temporarily totally disabled from December 1978, into June 1982, yielding further benefits of well over $20,000.   It found that the employers were liable for Tawney's past and future medical expenses.

Kaiser requested a credit against the tort settlement, under Labor Code section 3861.¹  The Board denied credit, reasoning:   “The third party credit or subrogation the defendant seeks applies only to industrial injuries involving third party tortfeasors.  (Lab.Code, §§ 3850 et seq.)   The lawsuit and settlement involving the January 1, 1979, injury at the ․ restaurant was not an industrial injury.”

Kaiser thereafter filed its writ petitions challenging primarily the decision on the credit issue.   Kaiser also contends that the finding of 63 percent unapportioned permanent disability lacks the support of substantial evidence, and that in some minor respects the Board failed to make necessary findings.

II.

A. Credit issue.

Chapter 5 of Part 1 of Division 4 of the Labor Code (§§ 3850 et seq.) concerns subrogation rights of employers.   Each party makes a reasonable argument in support of its interpretation of that chapter.

 The respondents note that section 3852 prescribes subrogation by lien, and section 3861 prescribes subrogation by credit, where the employee has tort rights against, or gains a tort recovery from, a third party, arising out of the employee's “injury.” ²  Section 3208 provides:  “ ‘Injury’ includes any injury or disease arising out of the employment ․”  (Emphasis added.)   Section 3204, governing section 3208, states:  “Unless the context otherwise requires, the definitions hereinafter set forth in this chapter shall govern the construction and meaning of the terms and phrases used in this division.”  (Emphasis added.)   Respondents argue that the subrogation rights arise only in cases of industrial injury, i.e., injury arising out of and in the course of the employment (§ 3600), and plainly the injury Tawney suffered in the restaurant was not industrial.   They note that in no case has the subrogation right been recognized where the tortious injury was not one and the same with the industrial injury, or one incurred in the treatment of the industrial injury.

On the other hand, Kaiser focuses upon the sentence in section 3852 providing that “[a]ny employer who pays, or becomes obligated to pay compensation [may exercise subrogation rights].”  (Emphasis added.)   This language, Kaiser contends, clearly is not limited to “industrial” injuries.

 The statutory language is somewhat contradictory.   We have concluded that it must be interpreted to mean that employers have subrogation rights whenever, and to whatever extent, an employee suffers a tortious injury which also increased the employer's liability for compensation.   Subrogation rights arise when the tort injury is also compensable in some manner, whether or not it is an industrial injury.

The assumed exception for cases in which there is negligence in treating an industrial injury is revealed upon analysis not to be an exception at all.   It is instead a normal application of a rule of subrogation in all cases of tortious and compensable injury.

Heaton v. Kerlan (1946) 27 Cal.2d 716, 166 P.2d 857, is a good illustration of this point.   The employee suffered a broken arm at work.   The injury was misdiagnosed as a sprain and the arm healed improperly, with the result that the disability was greater than the employee would have suffered had the medical treatment been adequate.   The Supreme Court reversed a judgment of dismissal on the employer's Labor Code lien claim in the employee's civil action against the physician.   The employee argued, as respondents do here, that the tort injury was not industrial.   The court responded:  “It has been settled by decisions in tort actions that the aggravation of injuries by the negligence of a doctor is within the scope of the risk created by the original tortious act.  (Citations.)  The same rule applies in this state in workmen's compensation cases:  ‘․ “under the great weight of authority the employer is liable for all legitimate consequences following an accident ․” ’ ”  (Id., 27 Cal.2d at p. 720, 166 P.2d 857;  emphasis added.)   Ipso facto, the concept of “legitimate consequences” includes the employer's “ ‘expenditures for compensation.’ ”  (Id., 27 Cal.2d at p. 719, 166 P.2d 857.)   It is readily inferable from the dicta of Heaton that the true question is not whether the tort injury was “industrial,” but whether it had compensable effects.

Other cases have articulated the subrogation concept in like terms.   (Harvey v. Boysen (1975) 50 Cal.App.3d 756, 123 Cal.Rptr. 740;  Eckman v. Arnold Taxi Co. (1944) 64 Cal.App.2d 229, 148 P.2d 677.)  “Where an employer is required to provide financial benefits to a workman because of disability brought about by a third party's negligence” (Harvey, supra, 50 Cal.App.3d at p. 760, 123 Cal.Rptr. 740;  emphasis added), the subrogation rights come into play.   The statutory subrogation rights attach to the claim of “the employee, or any other person to whom a claim for compensation accrues, against any person liable for damages as the result of the injury of the employee ․”  (Eckman, supra, 64 Cal.App.2d at p. 234, 148 P.2d 677;  emphasis added.).  (See also, 2 Hanna, Cal. Law of Employee Injuries and Work. Comp. (2d ed. 1984), § 24.01[6], p. 24–6.)

 This rule obviously applies to cases of physician's negligence, but there is no reason to suppose it is limited to that situation.  Heaton indicates that the “legitimate consequences” test is met when the tort injury results in additional compensation.   And this is harmonious with the general distinctions between workers' compensation and tort law.   In workers' compensation “legitimate consequences” not only means reasonably foreseeable, or proximate consequences, as it would in the context of tort law.   In workers' compensation employers are frequently held liable, legitimately, for unforeseeable remote consequences.

Thus, subrogation rights are recognized where the tort injury was more remote from the industrial injury than in the physician-negligence situation.  (E.g., Hodge v. Workers' Comp. Appeals Bd., supra, 123 Cal.App.3d at p. 501, 176 Cal.Rptr. 675;  Rhode v. National Medical Hosp. (1979) 93 Cal.App.3d 528, 155 Cal.Rptr. 797.)   In Rhode the employee was reinjured when, after back surgery for the industrial condition, a hospital bed rail collapsed.   The employee did not even challenge the availability to the employer of the Labor Code subrogation rights.  (93 Cal.App.3d at p. 532, 155 Cal.Rptr. 797.)   In Hodge the employee was being transported home by an ambulance service, after surgery for his industrial back injury.   As he was being borne in a stretcher the stretcher was dropped and he was reinjured.   Again, the propriety of the employer's having invoked the subrogation statutes was not challenged.  (123 Cal.App.3d at p. 507, 176 Cal.Rptr. 675.)   In each case the employee conceded that the reinjury was a “legitimate consequence” of the industrial injury, presumably because the reinjury resulted in additional compensation.

 Such additional compensation arises by virtue of the well-established rule that temporary disability benefits and medical benefits cannot be apportioned.   Where the need for either or both of them is caused partly by industrial and partly by non-industrial factors, the employer is liable for all of such costs, including those related to the non-industrial incident if needed to cure the industrial condition.  (Braewood Convalescent Hospital v. Workers' Comp. Appeals Bd. (1983) 34 Cal.3d 159, 165–166, 193 Cal.Rptr. 157, 666 P.2d 14;  Granado v. Workmens' Comp. App. Bd. (1968) 69 Cal.2d 399, 402–406, 71 Cal.Rptr. 678, 445 P.2d 294;  McGlinn v. Workers' Comp. Appeals Bd. (1977) 68 Cal.App.3d 527, 535, 137 Cal.Rptr. 326;  C.E.B., Cal.Work.Comp.Prac. (June, 1982 Supp.), §§ 14.16, 14.45, pp. 192, 207.)   The existence of this rule furnishes a compelling practical reason to recognize that the availability of subrogation rights must turn upon whether the tort injury was compensable in some respect, not whether it was “industrial.”   The policy underlying the subrogation statutes is avoidance of double recovery by the employee.  (E.g., Heaton v. Kerlan, supra, 27 Cal.2d at p. 719, 166 P.2d 857;  Harvey v. Boysen, supra, 50 Cal.App.3d at p. 761, 123 Cal.Rptr. 740;  see 1 Herlick, Cal.Work.Comp.Law (3d ed. 1984), § 12.1, p. 395.)   This policy could not be properly effectuated unless subrogation were allowed in all instances where increased compensation is one effect of the tort injury.³

B. Sufficiency of evidence for 63 percent industrial disability.

 The workers' compensation judge found permanent disability of 63 percent and apportioned one-quarter of it each to the three industrial injuries and the non-industrial injury in the restaurant.   He therefore awarded permanent disability benefits based on a finding of 47 1/414 percent industrial disability.   On reconsideration the Board held that Kaiser had failed to carry its burden to prove that a portion of the overall disability would have resulted even in the absence of the industrial injuries.  (See, e.g., Pullman Kellogg v. Workers' Comp. Appeals Bd. (1980) 26 Cal.3d 450, 456, 161 Cal.Rptr. 783, 605 P.2d 422.)   Kaiser contests this portion of the decision on reconsideration.

The burden on employers in this respect is a heavy one.   The employer must proffer informed medical opinion establishing in detail the exact nature and degree of the non-industrial disability, to ensure that a decision to apportion is not based improperly upon mere speculation, or conjecture, or an erroneous legal theory.  (See Zemke v. Workmen's Comp. App. Bd. (1968) 68 Cal.2d 794, 798–799, 69 Cal.Rptr. 88, 441 P.2d 928;  Ditler v. Workers' Comp. Appeals Bd. (1982) 131 Cal.App.3d 803, 182 Cal.Rptr. 839;  Gay v. Workers' Comp. Appeals Bd. (1979) 96 Cal.App.3d 555, 562, 158 Cal.Rptr. 137;  Callahan v. Workers' Comp. Appeals Bd. (1978) 85 Cal.App.3d 621, 629–630, 149 Cal.Rptr. 647.)

Having reviewed the medical evidence in this case, we are satisfied both that there was sufficient competent evidence to support the 63 percent finding, and that apportionment was not mandated by the evidence.   The medical reports on which Kaiser relies fail to state in detail the exact nature and degree of the non-industrial disability.   The reports which Kaiser criticizes are not shown to be invalid or nongermane.   We will not disturb the Board's finding on this factual question.

C. Findings on employers' proportionate shares.

 The judge made a joint and several award for temporary disability and medical benefits, leaving it to the two employers in the first instance to adjust their respective shares.   He reserved jurisdiction to decide that issue in contribution proceedings in the event the employers failed to agree.   This mechanism is commonly employed in the largely self-executing workers' compensation system.

Kaiser neither engaged in the adjustment negotiations nor requested contribution proceedings.   Instead it argues in the writ petition that findings of proportionate shares must be made.

No one disputes that findings must be made if Kaiser demands them.   The authority for doing so was reserved by the workers' compensation judge, for decision by him in the first instance.   Until such time as Kaiser has requested contribution proceedings and either such proceedings have been denied or a result unsatisfactory to Kaiser has been reached, this issue is not ripe for review.   If in the future Kaiser finds itself aggrieved by any final order which the Board might issue in this respect, Kaiser can then avail itself of the right to petition this court for review.  (See § 5950.)

D. Lien claim.

 The workers' compensation judge allowed an insurance company's lien for amounts it had paid Tawney under a group disability policy.  (See § 4903.1, subd. (c).)  In the writ petition Kaiser asserts it was error not to set the exact dollar amounts of its liability in this respect.

This issue is much like the one just discussed.   The Board made clear (in correspondence of February 29, 1984) that it was anticipated the affected parties would adjust or negotiate the exact dollar amount of the lien, and that jurisdiction was reserved to decide the issue if the parties failed to agree.   Kaiser failed to exhaust this avenue before filing a writ petition, and accordingly, the issue Kaiser purports to present is not ripe for review.

III.

 Under sections 3850 et seq., employers have subrogation rights whenever and to whatever extent the employee suffers injury, increasing the employer's liability for compensation, at the hands of a third party tortfeasor.⁴  In all other respects we hold that the Board's decision was correct.

 With regard to the subrogation issue the respondents have raised two related concerns which we expressly do not address.   It is contended that the evidence was not sufficient to support a finding that the fall in the restaurant actually did increase the employers' liability for compensation.   It is also contended that Kaiser failed adequately to prove the settlement with the third party, or to prove that the settlement included such amounts as would eventuate in a double recovery for Tawney.

We do not purport to make findings on these factual issues, as it is the Board, and not this court, which is empowered to find the facts.  (§§ 5952, 5953.)   It is clear upon this record that the Board has not yet reached these factual issues.   It only decided as a matter of law that the subrogation statutes do not apply in cases where the employee recovers from a tortfeasor for a non-industrial injury which occurred after the industrial injuries.   It remains the Board's duty to make appropriate findings on these issues upon remand.

The opinion and decision after reconsideration dated October 4, 1983, is annulled.   The cause is remanded for further proceedings consistent with the views expressed in this opinion.

FOOTNOTES

1.   All further statutory references will be to the Labor Code.Section 3861 provides:  “The appeals board is empowered to and shall allow, as a credit to the employer to be applied against his liability for compensation, such amount of any recovery by the employee for his injury, either by settlement or after judgment, as has not theretofore been applied to the payment of expenses or attorneys' fees, pursuant to the provisions of Sections 3856, 3858, and 3860 of this code, or has not been applied to reimburse the employer.”

2.   Section 3852 provides:  “The claim of an employee, including, but not limited to, any peace officer or firefighter, 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.   Any employer who pays, or becomes obligated to pay compensation, or who pays, or becomes obligated to pay salary in lieu of compensation, or who pays or becomes obligated to pay an amount to the Department of Industrial Relations pursuant to Section 4706.5, may likewise make a claim or bring an action against the third person.   In the latter event the employer may recover in the same suit, in addition to the total amount of compensation, damages for which he or she was liable including all salary, wage, pension, or other emolument paid to the employee or to his or her dependents.   The respective rights against the third person of the heirs of an employee claiming under Section 377 of the Code of Civil Procedure, and an employer claiming pursuant to this section, shall be determined by the court.”  (Emphasis omitted.)Further aspects of the lien right are defined in sections 3853 and 3856.   The employer may avail itself of either the lien remedy or the credit remedy, and may in fact utilize both in sequence.  (See generally, Construction & Engineering Co. v. Workers' Comp. Appeals Bd. (1978) 22 Cal.3d 829, 833, 150 Cal.Rptr. 888, 587 P.2d 684;  Roe v. Workmen's Comp. Appeals Bd. (1974) 12 Cal.3d 884, 887–888, 893, 117 Cal.Rptr. 683, 528 P.2d 771 [dis. opn.];  Hodge v. Workers' Comp. Appeals Bd. (1981) 123 Cal.App.3d 501, 511–512, 176 Cal.Rptr. 675;  Herr v. Workers' Comp. Appeals Bd. (1979) 98 Cal.App.3d 321, 327–328, 159 Cal.Rptr. 435.)The Board contends, in part, that an employer may not utilize the section 3861 credit device if the employer has not previously asserted its lien rights in the tort action.   This argument is flatly refuted by the case law.  (See Construction & Engineering Co., supra, 22 Cal.3d at pp. 838–840, 150 Cal.Rptr. 888, 587 P.2d 684;  Herr, supra, 98 Cal.App.3d at pp. 327–328, 159 Cal.Rptr. 435.)

3.   Where the tort is “non-industrial” as here, the employer may not recover under the subrogation statutes as those amounts it pays for permanent disability.   Under sections 4663, 4750, and 4750.5, permanent disability benefits are apportionable.   Accordingly, the permanent disability which is attributable solely to the industrial injury.   It does not include any compensation attributable to the tort injury, and no possibility of double recovery is presented.

4.   We have no intent to affect the established rules that (1) in such cases employers may recover only to the extent the tort injury exacerbated the employee's condition, i.e., only to the extent compensation was increased by the tort injury (see Heaton v. Kerlan, supra, 27 Cal.2d at p. 723, 166 P.2d 857;  Hodge v. Workers' Comp. Appeals Bd., supra, 123 Cal.App.3d at pp. 512, 515, 176 Cal.Rptr. 675;  Rhode v. National Medical Hosp., supra, 93 Cal.App.3d at p. 535, 155 Cal.Rptr. 797;  1 Herlick, supra, § 12.6, p. 402);  and (2) under section 3861 the employer may obtain credit only against its future compensation liability (see Rodgers v. Workers' Comp. Appeals Bd. (1984) 36 Cal.3d 330, 334, 204 Cal.Rptr. 403, 682 P.2d 1068;  Construction & Engineering Co. v. Workers' Comp. Appeals Bd., supra, 22 Cal.3d at p. 833, 150 Cal.Rptr. 888, 587 P.2d 684;  Herr v. Workers' Comp. Appeals Bd., supra, 98 Cal.App.3d at pp. 327–329, 159 Cal.Rptr. 435).

KING, Justice.

LOW, P.J., and HANING, J., concur.