Cervantes v. Great American Ins. Co.

• Decision Date: 14 March 1983
• Citation: 140 Cal.App.3d 763,189 Cal.Rptr. 761
• Court: California Court of Appeals
• Parties: Jesus CERVANTES, Plaintiff and Appellant, v. GREAT AMERICAN INSURANCE COMPANY, a Corporation, et al., Defendants and Respondents. Civ. 27829.

Page 761

189 Cal.Rptr. 761

140 Cal.App.3d 763

Jesus CERVANTES, Plaintiff and Appellant, v. GREAT AMERICAN INSURANCE COMPANY, a Corporation, et al., Defendants and Respondents.

Civ. 27829.

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

March 14, 1983.

Hearing Denied May 18, 1983.

[140 Cal.App.3d 765] Miller, Winking, Madden & Theios, Olen G. Miller and Lawrence J. Winking, San Bernardino, for plaintiff and appellant.

Bruyneel & Waxman and Laura G. Bruyneel, San Francisco, as amicus curiae on behalf of plaintiff and appellant.

Rose, Klein & Marias and Alan J. Stein, Los Angeles, as amicus curiae on behalf of plaintiff and appellant.

Bruggeman & Smith, Steven K. Beckett and Randall Johnson, San Bernardino, for defendant and respondent Great American Ins. Co.

Kegel, Tobin & Hamrick and Charles Schoemaker, Jr., Los Angeles, as amicus curiae on behalf of defendant and respondent Great American Ins. Co.

OPINION

McDANIEL, Associate Justice.

The question presented by this appeal is whether appellant's complaint against the Great American Insurance Company (Great American), the workers' compensation carrier for his employer, based upon an alleged willful delay in payment of benefits, states facts sufficient to remove the cause from the exclusive jurisdiction of the Workers' Compensation Appeals Board. We hold that it does not.

In May 1980, plaintiff, Jesus Cervantes, sustained an injury to his back in the course of his employment by Great American's insured. Although the injury required medical care, including surgery, Great American refused to pay or extend Cervantes any benefits. Otherwise, Great American neither requested to have Cervantes examined by a physician of its choice nor contacted Cervantes' treating physician.

As a result, within 30 days or so of his injury, Cervantes filed an application to adjust his claim with Workers' Compensation Appeals Board (Board). After a hearing in July 1981, the Board issued its findings in September. The Board found that Cervantes' injury was work-related, and awarded medical costs and temporary and permanent disability benefits. Shortly after the award, Great American attempted to settle with Cervantes for less than the amount awarded in exchange for its agreement not to appeal the Board's decision. When Cervantes refused to settle, Great American then paid the award in full.

Cervantes, aggrieved by this handling of his claim, commenced this civil action in Superior Court against Great American, alleging that the latter had: (1) breached a duty of good faith owed to him; (2) violated certain provisions of Insurance Code section 790.03; ¹ and (3) intentionally caused him to suffer severe emotional distress. In the key charging allegations, the complaint alleged Great Western "refused at all times before trial to pay temporary disability, medical bills, or permanent disability to the plaintiff" and failed to have plaintiff "examined by a doctor," all of which Great Western allegedly knew "was creating financial hardship and emotional upset to the plaintiff." The complaint further alleged that Great Western's "threat of appeal was a sham." All of the above activities were alleged to have been done by Great Western "intentionally and in bad faith," and with "wanton" and "reckless" disregard of the consequences to plaintiff.

The trial court sustained Great American's demurrer ² on the ground that the action was barred because of the exclusive remedies prescribed for employees under the California Workers' Compensation Act. This appeal followed.

The California Workers' Compensation Act provides an elaborate scheme for adjudication of claims by employees against employers for injuries "arising out of and in the course of" their employment. (Lab.Code, § 3600.) Although the employee's right to compensation under section 3600 is generally his exclusive remedy (Lab.Code, § 3601), he may sue "any person other than the employer" for damages proximately resulting from such an injury (Lab.Code, § 3852). Labor Code section 3850 protects workers' compensation insurance carriers from third party liability by defining the term "employer" to include insurers.

When an insurer refuses to pay compensation benefits the employee may seek a remedy under Labor Code section 5814, which provides: "When payment of compensation has been unreasonably delayed or refused, either prior to or subsequent to the issuance of an award, the full amount of the order, decision or award shall be increased by 10 percent. The question of delay and the reasonableness of the cause therefor shall be determined by the appeals board in accordance with the facts. Such delay or refusal shall constitute good cause under Section 5803 to rescind, alter or amend the order, decision or award for the purpose of making the increase provided for herein."

In Unruh v. Truck Insurance Exchange, 7 Cal.3d 616, 102 Cal.Rptr. 815, 498 P.2d 1063, the California Supreme Court recognized an exception to the protection afforded insurance carriers against third-party actions. In Unruh, an insurance investigator placed the injured employee under surveillance and then caused her to become romantically involved with him. He then took her to Disneyland where he enticed her to cross a rope bridge and a barrel bridge. As she crossed, he shook the bridge violently and a colleague of his filmed the scene. When the defendant insurance company revealed the relationship and showed the film at the Board hearing the employee suffered an emotional breakdown. She then sued the insurer for negligent and intentional infliction of emotional distress. The Unruh court's analysis relied on the "dual capacity" doctrine enunciated in an earlier decision, Duprey v. Shane, 39 Cal.2d 781, 249 P.2d 8. In Duprey, the court held that a nurse could sue her physician-employer for malpractice on the ground that the doctor had stepped outside of his role as employer when he rendered medical aid. By analogy, the court in Unruh held that the investigator's conduct was so unique and outrageous as to fall well outside the normal scope of the customary insurance investigation, and therefore that the insurer could be sued at law for intentional infliction of emotional distress. "[W]e are unable to conclude that a compensation insurer remains within its proper role as such, when, as in the instant case, through its agents or others employed by it, such insurer intentionally embarks upon a deceitful course of conduct ... which causes injury to the subject of the investigation ... Our condemnation in Redner [Redner v. Workmen's Comp. Appeals Bd., 5 Cal.3d 83, 95 Cal.Rptr. 447, 485 P.2d 799] leaves no doubt that such conduct goes beyond the normal role of an insurer in a compensation scheme intended to protect the worker. [Citation.]" (Unruh v. Truck Insurance Exchange, supra, 7 Cal.3d 616, 630, 102 Cal.Rptr. 815, 498 P.2d 1063.) ³

In Unruh, what the carrier did constituted affirmative acts actually designed to influence if not distort the outcome of the WCAB hearing. Such conduct could not possibly be characterized as coming within the ambit of section 5814.

Here, plaintiff argues that the actions of Great American constituted precisely the sort of intentional torts recognized by Unruh. Such contention is specious. Unruh clearly created an exception only for behavior which was so extreme and outrageous that it fell well outside the scope of behavior that could reasonably be expected of insurers. Moreover, it was directed at influencing the outcome of the hearing and was not essentially a delay or refusal to pay benefits. Our conclusion is reinforced by six recent appellate decisions which have considered and rejected similar claims.

In Everfield v. State Comp. Ins. Fund, 115 Cal.App.3d 15, 171 Cal.Rptr. 164, the applicant, having received an award from the Workers' Compensation Appeals Board, sued the carrier alleging consistent delay and arbitrary reduction in the payment of compensation benefits, plus disobedience of a subpoena duces tecum, which conduct was said to constitute bad faith and intentional infliction of emotional distress. The trial court sustained defendant's demurrer. The appellate court affirmed, stating: "These three acts in themselves are not fraudulent, deceitful, outrageous, perfidious or so extreme or abnormal as to fit in the class of misconduct considered in Unruh." (Id. at [140 Cal.App.3d 769] p. 19, 171 Cal.Rptr. 164.) The court noted that merely labeling as intentional or outrageous an unreasonable delay in payment, was not in and of itself sufficient to state a cause of action; to hold otherwise would be to defeat the whole purpose of the workers' compensation system. "If every case in which there is a delay, a change of amount, or a disobedience to a subpoena could be brought into a court of law by an unhappy worker by merely alleging that the acts were intentional, deceptive, outrageous and fraudulent without alleging the specific conduct and how it was carried out, it would make shambles of the workers' compensation system now quickly and efficiently handled for the benefit of the insured workers by the Workers' Compensation Appeals Board. [p] The reasons for the delay, whether intentional or negligent, whether excusable or not, can be well inquired into by the board and where necessary discipline imposed." (Everfield v. State Comp. Ins. Fund, supra, 115 Cal.App.3d 15, 19, 171 Cal.Rptr. 164.)

In Fremont Indemnity Co. v. Superior Court, 133 Cal.App.3d 879, 184 Cal.Rptr 184, plaintiff's complaint, as here, consisted of three causes of action: breach of duty of fair dealing, breach of statutory duties under Insurance Code section 790.03, and intentional infliction of emotional distress. The plaintiff alleged consistent delay and arbitrary reduction of benefit payments. Relying on Everfield, the court held that plaintiff had failed to allege facts which would remove the case from the exclusive jurisdiction of the ...