Albillo v. Intermodal Container Services
| Decision Date | 11 December 2003 |
| Docket Number | No. B156444.,B156444. |
| Court | California Court of Appeals Court of Appeals |
| Parties | Irwin ALBILLO et al., Plaintiffs and Appellants, v. INTERMODAL CONTAINER SERVICES, INC., et al., Defendant and Appellants. Luis Montoya, Petitioner, v. Workers' Compensation Appeals Board and Intermodal Container Services, Inc., et al., Respondents. |
Named plaintiffs and appellants Irwin Albillo and Luis Montoya are class representatives of the appellant class of independent contractor truck owners and owner-operators, who contracted to transport freight for defendants and respondents Intermodal Container Services, Inc., Intermodal Container Services, Inc. doing business as Harbor Rail Transport, Interstate Consolidation, Inc., and Interstate Consolidation, Inc. doing business as Cartage Service.1 Appellants appeal from the trial court's statement of decision and judgment holding, inter alia, that respondents were not transacting insurance and, therefore, were not subject to Insurance Code regulation; that respondents did not act in a fiduciary capacity; that respondents did not violate the Labor Code by charging appellants to secure workers' compensation coverage; and that appellants were not entitled to an award of attorney fees. Respondents cross-appeal from the trial court's restitution award stemming from the holding that they violated Business and Professions Code section 17200 by failing to make certain disclosures required by the federal Leasing Regulations.
We reverse the trial court's finding that respondents are authorized to charge appellants to obtain workers' compensation coverage. We conclude that appellants' and respondents' election under Labor Code section 4150 to come under the provisions of the workers' compensation law necessarily subjects them to Labor Code section 3751, which bars respondents from requiring appellants to cover any portion of the cost of compensation. In all other respects, we affirm the judgment.
Respondents are related transportation entities. The two primary companies are Intermodal Container Service, Inc. and Interstate Consolidation Service, Inc.2 A division of Intermodal does business as Harbor Rail Transport; a division of Interstate does business as Cartage Service. Together, these entities are involved in local and interstate intermodal freight transportation, which involves the use of two or more modes of transportation for the continuous movement of freight from origin shipper to destination receiver. Intermodal motor carriers, or trucks, are a critical link in the intermodal chain, as they are the only effective means of moving trailers or containers from marine and rail terminals.
Respondents do not own any trucks. Rather, they transport freight by leasing trucks from truck owners and contracting to have those leased trucks operated by the owner or the owner's drivers. Appellants are a class of all truck owner-operators and drivers who drove trucks owned by those owner-operators, who contracted with respondents to provide transportation services at any time from July 1, 1992 to the present. Named plaintiffs Irwin Albillo and Luis Montoya are representative of the appellant class.
The primary agreement between appellants and respondents is entitled a Lease and Subhaul Agreement with Independent Contractor (Lease Agreement). It provides that the "Contractor," or appellant class member, owns a truck suitable for the transportation of freight, that the respondent "Carrier" is legally authorized to engage in interstate freight transportation, and that both parties desire to enter into an agreement to transport freight. The Lease Agreement describes the relationship of the parties as "between co-equal motor carriers, both of whom are engaged in `for hire' motor carriage." Pursuant to the Lease Agreement, appellants agree to transport freight on respondents' behalf in exchange for respondents' agreement to compensate them according to a specified or negotiated rate. In addition, the Lease Agreement specifies that, in order to do business with respondents, appellants are required to purchase and maintain certain types of insurance at their own expense.
In 1992, respondents instituted their own insurance program, which enabled appellants to secure the required coverage by electing to have respondents select, acquire and administer the insurance as part of their fleet or group policy. As a result of this program, respondents modified the Lease Agreement to indicate that appellants have the option of obtaining such insurance under respondents' fleet or group policies. Respondents also supplemented the Lease Agreement with a separate Agreement and Elections by Contractor re Insurance Coverage and Telephone/Radio Use (Election Agreement), which required appellants to elect either to provide a certificate evidencing the required coverage, or to authorize respondents to obtain the required coverage and to deduct the cost by a settlement offset from appellants' compensation.
For those who elect to have respondents obtain the requisite insurance coverage, a Schedule of Insurance Deductions (Insurance Schedule) sets forth the "type, cost, and deductions regarding the parties' agreements as to the acquisition of, and payment for, insurance coverage in connection with the parties' Lease and Subhaul Agreement." According to the Insurance Schedule, respondents charge appellants (1) a weekly administrative fee of 1.055 percent of their revenue, (2) $100 per week per truck for liability insurance, and (3) $18.83 per $100 on 25 percent of an appellant's weekly gross settlement revenue for workers' compensation insurance. The Insurance Schedule authorizes respondents to deduct these amounts from appellants' settlement statements. It also informs appellants that "[t]he amounts charged by [respondents] to provide the requested insurance coverages or services to [appellants] may exceed the estimated or final pro rata cost to [respondents] of providing, or making available, such coverages/services to [appellants]."
As a practical matter, since 1991 all owner-operators with whom respondents have contracted have elected to obtain their insurance coverage, including workers' compensation coverage, through respondents. Between July 2, 1992 and June 30, 1999, the premium payments received from appellants in accordance with the Insurance Schedule exceeded the premiums respondents paid to secure the insurance by $3,221,399.54. According to respondents, they were able to realize such savings by securing reasonably-priced coverage due to their safety program and fleet size. That money was not accounted for as profit, but was used to fund the administration of the insurance program, the safety program and other related expenses.
Beginning in 1997, respondents were also able to achieve some insurance premium savings by eliminating the prior $1,000 deductible on their $1 million liability policy and, instead, providing a self-funded retention of $250,000 per accident. With this change, respondents intended to continue to make appellants individually responsible for no more than the prior $1,000 deductible. By reason of the retention, respondents would be responsible for any amount between $1,000 and $250,000.
Neither the Election Agreement nor the Insurance Schedule informed appellants of any deductible amount — $1,000 or $250,000. Further, respondents did not provide appellants with certificates of insurance indicating the premium cost and deductible amount. At all times, however, respondents verbally represented to appellants that a $1,000 deductible applied.
Appellants Irwin Albillo and Luis Montoya filed the operative first amended complaint on April 8, 1999, on behalf of themselves and similarly-situated individuals. Previously, the named appellants had filed individual actions against respondents, one in superior court and one before the Workers' Compensation Appeals Board (WCAB). By stipulation dated April 3 1999, the parties agreed to consolidate the actions, which resulted in the filing of the first amended complaint and the dismissal of the prior actions. Pursuant to that same stipulation, the parties agreed to certify the matter as a class action and to try the matter before three retired judges to be appointed pro tempore jointly by the superior court and the WCAB.
The first amended complaint set forth eight causes of action, including single causes of action for breach of fiduciary duty, fraud, conversion, money had and received, and four causes of action for violation of Business and Professions Code section 17200. Appellants sought damages, declaratory and injunctive relief, and attorney fees. Respondents answered on April 22, 1999.
Appellants' claims were premised on four basic contentions. First, appellants alleged that respondents erroneously classified them as independent contractors instead of employees, resulting in the improper deduction of workers' compensation insurance premiums and the denial of other employee benefits. Second, appellants claimed that respondents' offering insurance to them constituted the illegal transaction of insurance without a license. Third, appellants alleged that respondents failed to comply with the disclosure requirements contained in the federal Leasing Regulations. Finally, appellants averred that respondents' failure to make adequate disclosures in their insurance program amounted to common law fraud....
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...outweighs any benefit) or fraudulent (i.e., is likely to deceive members of the public)." Albillo v. Intermodal Container Services, Inc., 114 Cal.App.4th 190, 206, 8 Cal.Rptr.3d 350 (2003). Because the law is stated in the disjunctive, it contemplates three distinct categories of unfair com......
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...compensation insurance, in violation of Labor Code section 3751 ( section 3751 ) and Albillo v. Intermodal Container Services, Inc. (2003) 114 Cal.App.4th 190, 8 Cal.Rptr.3d 350 ( Albillo ).The court granted plaintiff's motion for class certification and, on June 9, 2011, it issued an order......