B & E Convalescent Center v. State Compensation Ins. Fund

Decision Date17 July 1992
Docket NumberNo. B056936,B056936
Citation8 Cal.App.4th 78,9 Cal.Rptr.2d 894
CourtCalifornia Court of Appeals Court of Appeals
Parties, 70 Fair Empl.Prac.Cas. (BNA) 1219 B & E CONVALESCENT CENTER, Plaintiff and Appellant, v. STATE COMPENSATION INSURANCE FUND, et al., Defendants and Respondents.

Krimen, Bjornsen & Klein, Charles Savage, Barbara Gallios, Monterey Park, for defendant and respondent.

CROSKEY, Associate Justice.

B & E Convalescent Center ("B & E") appeals from the summary judgment entered against it and in favor of defendant and respondent State Compensation Insurance Fund ("State Fund") on B & E's action for declaratory relief, breach of contract, and insurance bad faith. The sole issue on appeal is whether, as a matter of law, State Fund was obligated to defend B & E for the claims asserted in an action brought by Dorothy Bryson ("Bryson"), 1 a former employee of B & E, in which she alleged wrongful termination and related causes of action, including a violation of the Fair Employment and Housing Act (Gov.Code, § 12940 et seq.; "FEHA").

As the employee's claims in the underlying action against the insured employer consist solely of willful misconduct involving the intentional termination of the employee in violation of fundamental and substantial public policies, including those expressed in California's anti-discrimination statutes, there is no potential for coverage under the employer's liability policy because Insurance Code section 533 precludes any duty to indemnify. Under such circumstances and in the absence of any contrary provisions in the policy, the insured employer can have no reasonable expectation of a defense and there is no duty on the part of the insurer to provide one. We will therefore affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

From approximately 1977 through November 1984, Bryson was employed by B & E as the Administrator of its Gardena Convalescent Center. She was discharged from her employment on November 30, 1984. Shortly thereafter, Bryson filed suit against B & E alleging causes of action for wrongful termination, breach of the implied covenant of good faith and fair dealing, intentional infliction of emotional distress, and violation of the FEHA.

In her cause of action for wrongful termination, Bryson alleged that, despite seven years of exemplary performance in her employment, B & E discharged her after she (1) refused to carry out instructions to interfere with the efforts of a union which had sought to organize the employees of the Gardena Convalescent Center 2 and (2) refused the demands of her employer that she systematically terminate the Convalescent Center employees and replace them with employees of Filipino national origin, who, the employers believed, would be less likely than others to vote for the union. 3 In her cause of action for violation of the FEHA, she alleged she was terminated on the basis of her gender, age, and ethnic origin, in that she was a woman over sixty years of age and of English national origin and was replaced by a man, younger than she, and of Filipino descent. 4 The causes of action for breach of the implied covenant of good faith and fair dealing and for intentional infliction of emotional distress essentially repeated the allegations of these two principal causes of action. 5

B & E tendered the defense of Bryson's action to State Fund, but State Fund refused to provide a defense on the purported ground that Bryson had alleged that her emotional injuries did not arise out of and in the course and scope of her employment, 6 and hence were not covered 7 by B & E's policy with State Fund. 8

In March of 1989, Bryson settled her lawsuit against B & E. On September 25, 1989, B & E brought the present action against State Fund for declaratory relief, breach of written contract, and for insurance bad faith. On September 20, 1990, B & E filed a motion for summary adjudication of issues. On November 1, 1990, State Fund responded with its own motion for the same relief. Both motions were heard on December 4, 1990. B & E's motion was denied, and State Fund's was granted.

The court found that, as a matter of law, Bryson's complaint alleged facts giving rise only to causes of action for breach of contract and for intentional, tortious, and illegal acts by B & E, which included charges of age, sex and race discrimination, none of which causes of action fell within the scope of coverage provided by the State Fund policy. 9

The granting of State Fund's motion for summary adjudication of issues disposed of all material issues in the action and summary judgment was thereafter entered in favor of State Fund. This timely appeal followed.

CONTENTIONS ON APPEAL

B & E contends that State Fund had a duty to provide a defense, because the suit alleged causes of action which arose from injuries occurring within the course and scope of Bryson's employment. B & E further contends that State Fund was not excused from providing a defense, because the defense clause in B & E's policy of workers' compensation and employers' liability insurance with State Fund did not exclude the defense of claims based upon intentional conduct, such as wrongful termination. Finally, B & E argues that section 533 of the Insurance Code ("section 533"), which states that "[a]n insurer is not liable for a loss caused by the wilful act of the insured," 10 did not exonerate State Fund from such liability because it was not alleged, let alone proven, in Bryson's action that B & E acted with "a preconceived design to inflict injury."

State Fund responds that it had no duty to defend against the Bryson action, first, because Bryson's complaint alleged injuries for which the sole remedy was under the Workers' Compensation Act, and secondly, because the complaint alleged only wilful and "inherently harmful" conduct for which indemnity by insurance is prohibited by Insurance Code section 533.

DISCUSSION
1. Standard of Review

Summary judgment is properly granted when the evidence in support of the moving party establishes that there is no material issue of fact to be tried. (Code Civ.Proc., § 437c; Mann v. Cracchiolo (1985) 38 Cal.3d 18, 35, 210 Cal.Rptr. 762, 694 P.2d 1134; Johnson v. Berkofsky-Barret Productions, Inc. (1989) 211 Cal.App.3d 1067, 1071, 260 Cal.Rptr. 67.) The trial court must decide if a triable issue of fact exists. If none does, and the sole remaining issue is one of law, it is the duty of the trial court to determine the issue of law. (State Farm Fire & Casualty Co. v. Eddy (1990) 218 Cal.App.3d 958, 964, 267 Cal.Rptr. 379.) These rules apply equally to the summary adjudication of specific issues. (Code Civ.Proc., § 437c, subd. (f); Starkman v. Mann Theatres (1991) 227 Cal.App.3d 1491, 1495, 278 Cal.Rptr. 543.)

Appellate review of summary judgment is limited to the facts contained in the documents presented to the trial court. This court exercises its independent judgment as to the legal effect of the undisputed facts disclosed by the parties' papers. (State Farm Fire & Casualty Co. v. Eddy, supra, 218 Cal.App.3d at p. 965, 267 Cal.Rptr. 379; Downey Savings & Loan Assn. v. Ohio Casualty Ins. Co. (1987) 189 Cal.App.3d 1072, 1086-1087, 234 Cal.Rptr. 835.)

With the foregoing principles in mind, we examine the two arguments raised by State Fund that there was no coverage under the employer liability portion of the policy as (1) the sole remedy for Bryson's claim was workers' compensation and (2) the provisions of Insurance Code section 533 precluded both indemnity and any duty to defend. 11

2. Workers' Compensation Exclusivity Rule

State Fund is incorrect when it argues that the exclusive remedy provisions of the Workers' Compensation Act (Lab.Code, § 3602, subd. (a)) barred Bryson's causes of action for wrongful termination in violation of public policy and in violation of the FEHA. The nature of the allegations made by Bryson clearly remove this case from those which can be limited to compensation proceedings. (Shoemaker v. Myers (1990) 52 Cal.3d 1, 23, 276 Cal.Rptr. 303, 801 P.2d 1054 (" Shoemaker II"); Gantt v. Sentry Insurance, supra, 1 Cal.4th 1083, 1101, 4 Cal.Rptr.2d 874, 824 P.2d 680 ("Gantt"); Shoemaker v. Myers (1992) 2 Cal.App.4th 1407, 1413, 4 Cal.Rptr.2d 203 ("Shoemaker III").)

Ordinarily, injuries arising from termination of employment arise out of and occur in the course of employment within the meaning of Labor Code section 3600. (Shoemaker II, supra, 52 Cal.3d at pp. 19-20, 276 Cal.Rptr. 303, 801 P.2d 1054; Pichon v. Pacific Gas & Electric Co. (1989) 212 Cal.App.3d 488, 496, 260 Cal.Rptr. 677.) If the actions of the employer in terminating the employee "constitute a normal part of the employment relationship," injuries which result are subject to the exclusive remedy provisions of Labor Code section 3602. (52 Cal.3d at p. 18, 276 Cal.Rptr. 303, 801 P.2d 1054.) This is so even if the injuries flow from intentional misconduct by the employer, and even if such conduct might be characterized as egregious, manifestly unfair, outrageous, or intended to cause emotional disturbance resulting in disability. (Id. at p. 15, 276 Cal.Rptr. 303, 801 P.2d 1054; Cole v. Fair Oaks Fire Protection Dist., supra, 43 Cal.3d at p. 160, 233 Cal.Rptr. 308, 729 P.2d 743; Livitsanos v. Superior Court, supra, 2 Cal.4th at pp. 754-755, 7 Cal.Rptr.2d 808, 828 P.2d 1195.) A separate civil action for damages may lie, however, where an employee is injured as the result of employer misconduct, whether in the form of discharge or otherwise, not seen as reasonably coming within the "compensation bargain." (Shoemaker II, supra, 52 Cal.3d at p. 20, 276 Cal.Rptr. 303, 801 P.2d 1054.) 12

In Tameny v. Atlantic Richfield Company (1980) 27 Cal.3d 167, 164 Cal.Rptr. 839, 610 P.2d 1330 ("Tameny"), our Supreme Court held that an action in tort lies for wrongful discharge in...

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