Associated Construction & Engineering Co. v. Workers' Comp. Appeals Bd.

• Decision Date: 19 December 1978
• Citation: 22 Cal.3d 829,150 Cal.Rptr. 888,587 P.2d 684
• Court: California Supreme Court
• Parties: , 587 P.2d 684 ASSOCIATED CONSTRUCTION & ENGINEERING COMPANY of California et al., Petitioners, v. WORKERS' COMPENSATION APPEALS BOARD and Jeffery L. Cole, Respondents. L.A. 30693.

Page 888

150 Cal.Rptr. 888

22 Cal.3d 829, 587 P.2d 684

ASSOCIATED CONSTRUCTION & ENGINEERING COMPANY of California et al., Petitioners, v. WORKERS' COMPENSATION APPEALS BOARD and Jeffery L. Cole, Respondents.

L.A. 30693.

Supreme Court of California, In Bank.

Dec. 19, 1978.

Trout, Heggeness & Sweet, Clifford D. Sweet, III, and Perry Trout, Jr., San Diego, for petitioners.

Hanna, Brophy, MacLean, McAleer & Jensen, Warren L. Hanna, Michael G. Lowe, J. J. Vonk, G. S. Bjornsen, San Francisco, Arthur Hershenson, Los Angeles, Louis L. Fayne, Sherman Oaks, Michael J. Brodie, San Francisco, Mansell & Arthur, John L. Maier, Los Angeles, Twohy & Brown, and Kevin R. Twohy, Sacramento, as amici curiae on behalf of petitioners.

Charles L. Swezey, Philip M. Miyamoto, Thomas J. McBirnie, Jr., Joel A. Wallock, San Francisco, Ludecke & Andreos and Alan J. Ludecke, San Diego, for respondents.

Lonergan, Jordan, Gresham, Varner & Savage, Allen B. Gresham, San Bernardino, Barry J. Williams, Oakland, Frank J. Reilly, San Francisco, Robert Goldstein, Los Angeles, Robert Cartwright, San Francisco, Edward I. Pollock, Los Angeles, Leroy Hersh, David B. Baum, San Francisco, Robert G. Beloud, Upland, Ned Good, Los Angeles, Arne Werchick, San Francisco, Stephen Zetterberg, Claremont, Roger H. Hedrick, Daly City, Leonard Sacks, Encino, and Robert B. Steinberg, Los Angeles, as amici curiae on behalf of respondents.

MOSK, Justice.

We must determine whether the principles of comparative negligence prescribed in Li v. Yellow Cab Co. (1975) 13 Cal.3d 804, 119 Cal.Rptr. 858, 532 P.2d 1226, are to be applied to the adjudication of employers' subrogation rights within the workers' compensation system. In particular, we consider whether Witt v. Jackson (1961) 57 Cal.2d 57, 17 Cal.Rptr. 369, 366 P.2d 641, and Roe v. Workmen's Comp. Appeals Bd. (1974) 12 Cal.3d 884, 117 Cal.Rptr. 683, 528 P.2d 771 which prevent a negligent employer from obtaining any credit toward future workers' compensation liability when an injured employee recovers from a third party should be modified to allow a partial credit to the employer.

We conclude that the principles of Li should indeed modify the Roe doctrine, but only to allow the concurrently negligent employer a credit against workers' compensation obligations which exceed the proportionate liability he would incur for indemnification of the third party under a comparative system of allocating tort responsibility among multiple wrongdoers. Only this result carries out the central objective of Witt to allocate responsibility equitably between a negligent employer and a third party tortfeasor, and thereby prevent the employer from taking "advantage of his own wrong." (Civ.Code, § 3517.)

I

Under section 3601 of the Labor Code, the recovery of workers' compensation benefits is, except in certain limited circumstances, the exclusive remedy of the injured employee against his employer. ¹ The claim of those benefits, however, does not affect the employee's right of recovery " for all damages proximately resulting from such injury or death against any person other than the employer." (§ 3852; see De Cruz v. Reid (1968) 69 Cal.2d 217, 222, 70 Cal.Rptr. 550, 444 P.2d 342.) In the event a third party is liable in whole or in part for the employee's injuries, the Labor Code provides the employer with three basic techniques for obtaining reimbursement from the third party for workers' compensation benefits the employer has paid or become obligated to pay: the employer "may bring an action directly against the third party (§ 3852), join as a party plaintiff or intervene in an action brought by the employee (§ 3853), or allow the employee to prosecute the action himself and subsequently apply for a first lien against the amount of the employee's judgment, less an allowance for litigation expenses and attorney's fees (§ 3856, subd. (b))." (Witt v. Jackson (1961) supra, 57 Cal.2d 57, 69, 17 Cal.Rptr. 369, 376, 366 P.2d 641, 648.) The code also allows an employer to receive credit before the Workers' Compensation Appeals Board towards future workers' compensation liability for the amount of an employee's third party 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." (§ 3861; see also § 3858.) ²

Prior to 1971, these credit and reimbursement remedies also gave to the employer the advantage of any recovery the employee obtained by way of settlement with the third party. Section 3860, subdivision (b), then provided that "the entire amount of such settlement, with or without suit, is subject to the employer's full claim for reimbursement for compensation he has paid or become obligated to pay . . . ." Section 3861 required the board to allow, as a credit to the employer, amounts from "Any recovery by the employee for his injury, either By settlement or after judgment . . . ." (Italics added.)

In Witt we confronted the case of a negligent employer who attempted, at the trial of the employee's third party claim, to avail himself of the statutory reimbursement remedies. We noted that nothing in the Labor Code gave "any indication as to whether or not the employer's right to reimbursement is defeated when the employee's injuries are caused by the concurring negligence of the employer or another of his agents and a third party." (Witt, at p. 69, 17 Cal.Rptr. at p. 376, 366 P.2d at p. 648.) We discuss below the underlying rationale of the Witt decision; however, its conclusion may be succinctly related to allow the negligent employer reimbursement would permit him to profit from his own wrong contrary to the mandate of Civil Code section 3517, and such reimbursement should be denied. We further declared, however, that because "the injured employee may not be allowed double recovery, his damages must be reduced by the amount of workmen's compensation he received." (Id. at p. 73, 17 Cal.Rptr. at p. 378, 366 P.2d at p. 650.)

In Roe v. Workmen's Comp. Appeals Bd. (1974) supra, 12 Cal.3d 884, 117 Cal.Rptr. 683, 528 P.2d 771, we encountered the negligent employer in a somewhat different setting claiming a credit under section 3861 after the injured employee had settled his cause of action against the third party without determination of the issue of employer negligence. Two substantial arguments were advanced against extending Witt to bar recovery by a negligent employer in this situation: first, denial of the employer's credit would inure to the benefit of the employee rather than the third party, thereby giving the employee a "double recovery" of both workers' compensation benefits and third party settlement; and second, an adjudication of the employers' negligence by the board would be unconstitutional. ³

Roe held that neither of these problems justified allowing negligent employers to claim a credit. We expressed doubt as to whether the recovery of workers' compensation benefits by an employee following a settlement constituted a double recovery, given the likelihood that any settlement took into account the possibility of such a recovery (12 Cal.3d at p. 889, 117 Cal.Rptr. at p. 687, 528 P.2d at p. 775), and pointed out that in any event "The policy against double recovery primarily protects the third-party tortfeasor, not the employer" the party seeking to assert that policy in Roe. Similarly, we found nothing in the Constitution to prevent the board from determining the employer's fault for the purpose of adjudicating his claim of credit. (Id. at p. 891, 117 Cal.Rptr. 694, 528 P.2d 782.) We concluded "(1) that the concurrent negligence of the employer bars his right to a credit against his liability for compensation for the amount of any recovery for his injury obtained by the employee by settlement of his cause of action against third parties; and (2) that where the employer's negligence has not been adjudicated in such third party action, the applicant is entitled to have it adjudicated before the Board." (Gregory v. Workmen's Comp. Appeals Bd. (1974) 12 Cal.3d 899, 902, 117 Cal.Rptr. 694, 696, 528 P.2d 782, 784.)

II

In the course of his employment as a carpenter for Associated Construction & Engineering Company of California (hereinafter employer), Jeffery L. Cole (hereinafter employee) seriously injured his right ankle. At the time, employer was insured with California Compensation and Fire Company. ⁴ Workers' compensation benefits for temporary disability amounting to $6,144.87 were paid to employee, and he was provided with all necessary medical treatment. Employee brought suit against a third party, Napp Systems, U.S.A., Inc. The record does not reveal the basis of the lawsuit, only that it was settled for $60,000, with the plaintiff-employee actually receiving $40,000. The record also fails to indicate the circumstances surrounding this settlement in particular, whether employer sought a lien against the settlement in order to recoup his prior workers' compensation expenditures, whether employer joined or intervened in the lawsuit, or if the suit was settled without the employer's consent.

Subsequent to settlement of the third party suit, employee sought a permanent disability award. The workers' compensation judge found that the employee had sustained a permanent disability of 29 percent, representing a total monetary award of $8,085, of which $2,270 had theretofore been advanced by employer.

Employer claimed a credit against its workers' compensation liability under Labor Code section 3861 in the amount of employee's $40,000 net recovery in the third party action, which credit would have effectively eliminated employer's further workers' compensation obligations. Employee pleaded the employer's concurrent negligence as a bar to the credit, relying on Roe. Employer in response maintained that the "all-or-nothing" rule of Roe had been...