Roe v. Workmen's Comp. Appeals Bd.

• Decision Date: 27 November 1974
• Docket Number: S.F. 23111
• Citation: 12 Cal.3d 884,528 P.2d 771,117 Cal.Rptr. 683
• Court: California Supreme Court
• Parties: , 528 P.2d 771 Harold H. ROE, Petitioner, v. WORKMEN'S COMPENSATION APPEALS BOARD and Aerojet General Corporation et al., Respondents. In Bank

Page 683

117 Cal.Rptr. 683

12 Cal.3d 884, 528 P.2d 771

Harold H. ROE, Petitioner, v. WORKMEN'S COMPENSATION APPEALS BOARD and Aerojet General Corporation et al., Respondents.

S.F. 23111.

Supreme Court of California,

In Bank.

Nov. 27, 1974.

William H. Whittington, Jr., Sacramento, for petitioner.

Charles Lawrence Swezey, Sheldon C. St. Clair, Robert A. Seligson, Mullen & Filippi and William J. O'Neil, Jr., San Francisco, for respondents.

BY THE COURT

Petitioner Harold Roe seeks annulment of an award of respondent Workmen's Compensation Appeals Board (Board) in favor of petitioner and against respondent Transport Indemnity Company insofar as said award orders that Transport Indemnity Company be granted credit for the net amount of the third party recovery secured by petitioner for damages proximately resulting from the accident involved.

After decision by the Court of Appeal, Third Appellate District, directing the Board to vacate its order granting the employer/carrier's claim of credit for the net amount of the third party recovery and to reconsider such claim, we granted a hearing in this court for the purpose of giving further consideration to the issues raised. Having made a thorough examination of the cause, we have concluded that the opinion of the Court of Appeal prepared by Acting Presiding Justice Friedman and concurred in by Justice Regan and Justice Janes correctly treats and disposes of the issues involved and we adopt such opinion as and for the opinion of this court. Such opinion (with appropriate additions and deletions) is as follows: ^*

Roe, an employee, received severe industrial injuries in an accident featured by the negligence of a third party. He received temporary disability workmen's compensation benefits and also filed a damage action against the third party. The employer/carrier knew of the lawsuit but stayed out of it. Roe and the third party settled the lawsuit without reference to the employer's status. Roe's net recovery was over $16,000.

Roe then applied to the Workmen's Compensation Appeals Board for permanent disability benefits. The compensation insurance carrier asserted that Roe's net settlement should be credited against its own liability for permanent disability. Roe's attorney sought to raise the employer's concurrent negligence as a bar to the credit. The referee refused to inquire into the employer's concurrent negligence, awarded Roe a permanent disability rating of 96 1/2 percent and ordered that Roe's net settlement be credited against the insurance carrier's liability for permanent disability. The Workmen's Compensation Appeals Board refused reconsideration. ( ) (The Court of Appeal issue a writ of review.)

Various provisions of the Labor Code ¹ subrogate an employer (or his workmen's compensation insurer) to the common law tort recovery of an injured employee, permitting the employer/carrier to recover its workmen's compensation outlays from a negligent third party through an independent lawsuit, or by joining the employee's lawsuit or by claiming a lien on the employee's recovery. (§§ 3852, 3853, 3854, 3856, subd. (b).) Witt v. Jackson (1961) 57 Cal.2d 57, 17 Cal.Rptr. 369, 366 P.2d 641, attaches a substantive condition to the employer's recovery; holds that the employer may not recover from the third party if his own negligence has contributed to the accident; reduces the employee's recovery of third party damages by the amount of workmen's compensation payments he has received from the employer/carrier.

The Witt v. Jackson indemnification cycle requires the settlement or adjudication of claims in two forums--the Workmen's Compensation Appeals Board and the courts. Workmen's compensation benefits which have been paid before resolution of the lawsuit provide a mathematical factor for allocating monetary responsibility. Accidental or manipulated time relationships may obstruct fulfillment of the indemnification cycle. Quantification is not possible when the lawsuit culminates in a settlement or award before the workmen's compensation benefits are fixed, or when the lawsuit is concluded without resolving the issue of employer negligence.

In this case the employee had received only temporary disability benefits before settlement of the lawsuit; the employer/carrier stayed out of the litigation; the third party settled without asserting any deduction for employer negligence; the employer/carrier then turned to the appeals board, seeking to deduct the settlement from future workmen's compensation benefits. The board's grant of credit was based on section 3861, which declares: '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 theretofor 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.'

In Nelsen v. Workmen's Comp. App. Bd. (1970) 11 Cal.App.3d 472, 89 Cal.Rptr. 638, ( ) (the) court held that the subrogation provisions of the Labor Code (including § 3861) were not designed to permit a negligent employer to take advantage of his own wrong; hence, where the employer's negligence had been established in a prior lawsuit, the employee could assert this adjudication as a bar to the employer's claim of credit before the appeals board. ² Other courts have followed suit. (Serrano v. Workmen's Comp. Appeals Bd. (1971) 16 Cal.App.3d 787, 94 Cal.Rptr. 511; Maillet v. Workmem's Comp. Appeals Bd. (1972) 23 Cal.App.3d 107, 99 Cal.Rptr. 925.)

In fairly direct conflict with these decisions is Corley v. Workman's Comp. Appeals Bd. (1971) 22 Cal.App.3d 447, 99 Cal.Rptr. 242, a split decision of the Court of Appeal, Fourth District, Division Two. In Corley, as here, the lawsuit culminated in damage recovery from the third party without inquiry into the employer's concurrent negligence. The court sustained the appeals board, which had credited the employee's third party damage recovery against the employer's compensation liability without inquiry into the employer's negligence. By dictum, the majority opinion in Corley expressed doubt that the appeals board could decide the issue of employer negligence consistently with the constitutional provision for establishment of a workmen's compensation system irrespective of fault. (Cal.Const., art. XX, § 21.)

In Witt v. Jackson, denial of the concurrently negligent employer's recovery from the third party was premised on the law's policy to prevent the former from taking advantage of his own wrong; while the latter's credit for workmen's compensation payments against his own tort liability was grounded on the policy of denying the employee double recovery. (57 Cal.2d at pp. 72--73, 17 Cal.Rptr. 369, 366 P.2d 641.) Cases like this require selection or reconciliation between these policies. In Nelsen ( ) (the) court implied that the policy of preventing the employer from reaping financial benefit from his own negligence outweighed the policy against the employee's double recovery. (11 Cal.App.3d at pp. 476--479, 89 Cal.Rptr. 638.) In Corley the court embraced the inhibition against double recovery even at the cost of permitting a negligent employer to reduce his workmen's compensation liability (22 Cal.App.3d at pp. 453--454, 99 Cal.Rptr. 242.) ( )

(We agree with both the decision and the rationale of the Nelsen court.) The majority opinion in Corley overemphasizes the employer's interest in preventing the employee's double recovery. The policy against double recovery primarily protects the third-party tortfeasor, not the employer. In De Cruz v. Reid (1968) 69 Cal.2d 217, 225, 70 Cal.Rptr. 550, 555, 444 P.2d 342, 347, ( ) (this court) declared that Witt v. Jackson was not 'a sweeping interdict against double recovery . . ..' It explained that the inhibition against double recovery is designed to allow the third party a Pro tanto reduction of a liability which he shares with a concurrently negligent employer. (Cf. Sanstad v. Industrial Acc. Com. (1959) 171 Cal.App.2d 32, 39, 339 P.2d 943.) Nelsen too points to the third party, rather than the employer, as beneficiary of the policy against double recovery. (11 Cal.App.3d at pp. 479--480, 89 Cal.Rptr. 638.)

Especially if he is vulnerable to the charge of negligence, the employer may avoid participation in the third party lawsuit; the third party, as defendant, may litigate or settle without seeking credit for the workmen's compensation payments. When the employer/carrier then goes before the appeals board protesting the employee's double recovery, one asks: 'What's Hecuba to him or he to Hecuba, that he should weep for her?' If the employer's negligence contributed to the accident, the double recovery was gained not from him but from the third party, who did not claim a deduction for employer negligence. If the employer was free of negligence, he gained (but did not assert) a subrogated right to recover his compensation payment as damages. It is doubtful, in any event, whether a double recovery is created by a settlement which does not cover the totality of claims, including those of the employer. (Van Nuis v. Los Angeles Soap Co. (1973) 36 Cal.App.3d 222, 230, 111 Cal.Rptr. 398; LaBorde v. McKesson & Robbins, Inc. (1968) 264 Cal.App.2d 363, 370, 70 Cal.Rptr. 726, approved in Brown v. Superior Court (1970) 3 Cal.3d 427, 432, 90 Cal.Rptr. 737, 476 P.2d 105, and disapproved in unspecified respects, Id., at p. 433, 90 Cal.Rptr. 737, 476 P.2d 105.)

Opportunities for conceptual error multiply by exaggerating the substantive effect of the Labor Code subrogation provisions. These are primarily procedural, substantive only in isolated aspects. (Van Nuis v. Los Angeles Soap Co., Supra, 36 Cal.App.3d at p. 228, fn. 2, 111 Cal.Rptr. 398.) Literally, section...