Burns v. State Compensation Ins. Fund

• Citation: 71 Cal.Rptr. 326,265 Cal.App.2d 98
• Court: California Court of Appeals
• Decision Date: 22 August 1968
• Parties: Dennis Henry BURNS, Plaintiff and Appellant, v. STATE COMPENSATION INSURANCE FUND, a corporation, and California Inspection Rating Bureau, a corporation, Defendants and Respondents. Civ. 23841.

Page 326

71 Cal.Rptr. 326

265 Cal.App.2d 98

Dennis Henry BURNS, Plaintiff and Appellant, v. STATE COMPENSATION INSURANCE FUND, a corporation, and California Inspection Rating Bureau, a corporation, Defendants and Respondents.

Civ. 23841.

Court of Appeal, First District, Division 2, California.

Aug. 22, 1968.

Hearing Denied Oct. 17, 1968.

Edwards, Friborg & Duda, Oakland, for appellant.

Bronson, Bronson & McKinnon, San Francisco, for respondent California Inspection Rating Bureau.

Maloney, Chase, Fisher & Hurst, San Francisco, for respondent State Compensation Insurance Fund.

AGEE, Associate Justice.

Plaintiff suffered a serious industrial injury while employed at a sawmill operated by Pickering Lumber Corporation. After receiving his workmen's compensation benefits, plaintiff brought this action for damages against State Compensation Insurance Fund (hereafter Fund) and California Inspection Rating Bureau (hereafter Bureau).

The Fund is Pickering's workmen's compensation insurer and the Bureau is a nonprofit, unincorporated association comprised solely of all of the workmen's compensation insurers licensed to do business in California.

In the first cause of action in the amended complaint, appellant alleges that the Fund and the Bureau, and each of them, for several years prior to his injury, performed safety inspections at the mill where he was injured; that the Fund and the Bureau agreed to and did inspect the mill for unsafe conditions and made written reports as to unsafe features, places, and practices they observed; that appellant's employer, Pickering, regularly received reports from the Fund and the Bureau and relied heavily upon their reports in carrying out its duties as an employer to provide a safe place to work; that Pickering recognized and accepted the purportedly skilled and highly qualified inspections made by the safety engineers, agents and servants of the Fund and the Bureau; that the Fund and the Bureau consulted and conferred together, making inspections and recommendations to Pickering for the carrying out of programs and practices to eliminate hazards as had been found in the mill; that these duties were either made gratuitously or in the alternative, by contract between Pickering, the Fund, and the Bureau; that the Fund and the Bureau breached their agreement to carefully inspect the mill and place of injury; that as a result of their breached agreement appellant was injured as a result of a dangerous and hazardous condition which the Fund and the Bureau failed to inspect and declare unsafe.

In the second cause of action in said amended complaint, appellant alleges that the Fund and the Bureau negligently and carelessly performed safety inspections at the mill under the agreement, or gratuitously agreed to be performed, and failed to note and recommend the unsafe condition to be corrected; that as a direct and proximate result of this negligence appellant was injured, as a result of which his leg was amputated.

The Fund's general demurrer to the foregoing amended complaint was sustained without leave to amend and judgment was entered accordingly. The Bureau's motion for summary judgment was granted. Plaintiff appeals from both judgments.

Right of Appellant to Sue Respondent Fund

Appellant contends that the Workmen's Compensation Law (Lab.Code, § 3201 et seq.) should be interpreted so as to permit an injured employee to maintain a cause of action in the superior court for negligence against his employer's compensation insurer where the alleged negligence of said insurer is a failure to fulfill its commitments with the employer regarding safety inspections of the working premises.

This issue was squarely decided in State Comp. Ins. Fund v. Superior Court (1965) 237 Cal.App.2d 416, 46 Cal.Rptr. 891 (hearing denied by Supreme Court), which is hereafter referred to as the Breceda case.

There the employee, one Breceda, was injured when a pile of lumber fell on him. After receiving medical expenses and a compensation award, he sued his employer's compensation insurer, alleging that it had negligently failed to inspect or negligently inspected the premises, as required by its policy, ¹ and that this obligation of the policy was for the benefit of employees as well as employers.

A writ of prohibition was directed to the superior court on the ground that exclusive jurisdiction of the claim was vested in the Industrial Accident Commission.

Appellant here advances the same statutory and policy arguments discussed and rejected in the Breceda case (237 Cal.App.2d, at 419--424, 46 Cal.Rptr. 891). Likewise, the Breceda case considered and distinguished the authorities cited by appellant from other jurisdictions, noting that since 'the statutes there being interpreted differ from California's system of workmen's compensation laws, the force of Stare decisis does not have the magnetic pull it otherwise would have.' (P. 418, 46 Cal.Rptr. p. 892. Cases cited and discussed in Breceda at 425--427, 46 Cal.Rptr. 891.) ² Breceda also discussed and analyzed Duprey v. Shane (1952) 39 Cal.2d 781, 249 P.2d 8, which is relied upon by appellant. No useful purpose would be served in reiterating the wellreasoned discussion of these points in the Breceda opinion.

Appellant acknowledges the existence of Breceda and makes no attempt to distinguish it factually. Instead he urges that 'There are compelling circumstances in this case and the application of the rule of stare decisis should not be blindly followed.'

Nevertheless, it is well settled that when the precise question of law has been decided by a Court of Appeal and the Supreme Court has denied a hearing, such decision will be followed as settling the law in the absence of a later decision of the Supreme Court qualifying or modifying the prior case. (Cole v. Rush (1955) 45 Cal.2d 345, 351, 289 P.2d 450, 54 A.L.R.2d 1137; Housing Authority of City of Los Angeles v. Peters (1953) 120 Cal.App.2d 615, 616, 261 P.2d 561.) Since we agree with the conclusion and reasoning of the Breceda case, our acceptance of that case as authority is not equivalent to blindly following the rule of Stare decisis.

Right of Employee to Sue Respondent Bureau

Appellant next urges that the trial court was incorrect in granting the Bureau's motion for summary judgment, arguing that the Bureau is 'an entity entirely separate and apart from the Fund.'

This raises the question of whether California law allows appellant, an injured employee, to sue the Bureau for negligence in its inspection of his employer's plant.

Contrary to appellant's contention, the Insurance Code expressly grants immunity to respondent Bureau from a suit such as the instant one.

California Insurance Code, Division 2, Part 3, Article 3 (§§ 11750--11759), contains the various legislative provisions governing workmen's compensation rating organizations. For purposes of the article, 'Rating organization' includes an organization, such as the Bureau, ³ which has as its primary purpose the collecting of rating information, the making of rates, rating plants and rating systems for workmen's compensation insurance and employer's liability insurance (Ins.Code § 11750.1, subd. b.)

Insurance Code section 11750.3 provides in relevant part that 'A rating organization may be organized pursuant to this article and maintained in this State for the following purposes: * * * (d) To inspect risks for classification or rate purposes and to furnish to the insurer and upon request of the employer and after notice to the insurer, to furnish to the employer full information concerning the rates applicable to his insurance.' This statute's express authorization of inspections of risks obviously comprehends the inspection of places of employment since the only 'risks' relevant to workmen's compensation insurance are those encountered within the scope of employment.

Insurance Code section 11758 provides that 'No act done, (or) action taken * * * pursuant to the authority conferred by this article shall constitute a violation of or grounds for * * * civil proceedings under any other law of this State heretofore or hereafter enacted which does not specifically refer to insurance.'

The Bureau therefore enjoys immunity from civil suits for any negligence issuing from its inspection of employment plants, since inspections are actions taken pursuant to the authority conferred by the article.

Contrary to appellant's apparent contention, there is no reason why the inspections' 'indirect effect of safety promotion' brings them outside the purview of statutory immunity from liability.

A new section, 11759, which has recently been added to this article of the Insurance Code, specifically grants rating organizations, such as the Bureau, exemption from liability for inspection deficiencies. (Ins.Code, § 11759, added Stats.1967, ch. 1083, § 1.) The 1967 effective date of this section was subsequent to the instant summary judgment entered in 1966. However, the section offers support for our interpretation of the relevant statutes because it provides that 'This section shall not be construed * * * as implying a legislative recognition that, except for the enactment of this section, a liability has existed or would exist in circumstances stated in this section.'

Appellant contends that respondent Bureau has waived this defense by failure to raise it below, citing the general rule that ordinarily a point cannot be raised for the first time on appeal. However, it is well settled that the rule is inapplicable when, as in the present...