Courtesy Ambulance Service v. Superior Court, No. E010816

CourtCalifornia Court of Appeals
Writing for the CourtDABNEY; RAMIREZ, P.J., and TIMLIN
Citation8 Cal.App.4th 1504,11 Cal.Rptr.2d 161
Parties. SUPERIOR COURT OF the state of California for the county of San Bernardino, Respondent. State Compensation Insurance Fund, Real Party in Interest. Court of Appeal, Fourth District, Division 2, California
Decision Date21 August 1992
Docket NumberNo. E010816

Page 161

11 Cal.Rptr.2d 161
8 Cal.App.4th 1504
COURTESY AMBULANCE SERVICE OF SAN BERNARDINO, Petitioner,
v.
SUPERIOR COURT OF the state of California for the county of San Bernardino, Respondent.
State Compensation Insurance Fund, Real Party in Interest.
No. E010816.
Court of Appeal, Fourth District, Division 2, California.
Aug. 21, 1992.
Review Denied Nov. 12, 1992.

Page 162

[8 Cal.App.4th 1509] Roxborough & Associates, Nicholas P. Roxborough and Esteban G. Gallegos, Los Angeles, for petitioner.

No appearance for respondent.

Krimen, Bjornsen & Klein, Monterey Park, and Sheppard, Mullin, Richter & Hampton, Finley L. Taylor, Justine M. Casey and Anthony Castrilli, Jr., Newport Beach, for real party in interest.

OPINION

DABNEY, Associate Justice.

The question presented in this original proceeding is whether the State Compensation Insurance Fund (hereinafter "SCIF"), when sued in tort, can be held liable for punitive damages. We conclude that it can, and that the trial court accordingly erred in granting SCIF's motion to strike the request for such damages from the complaint.

The facts of the case--or, more properly, the allegations of the complaint--need not be recited in detail. Petitioner Courtesy Ambulance Service of San Bernardino (hereinafter "Courtesy") has been for several years insured for workers' compensation coverage by SCIF. It has sued SCIF both in contract and in tort, alleging generally that SCIF has, or may have, improperly calculated premiums by overestimating the amounts necessary for reserves, and has also compelled itself to charge higher premiums by its inefficient handling of claims. 1 The complaint includes two causes of action, those for 1) breach of the covenant of good faith and for 2) constructive fraud, upon which Courtesy bases a claim for punitive damages.

[8 Cal.App.4th 1510] SCIF filed a demurrer and a motion to strike. The trial court overruled the demurrer, but granted SCIF's motion to strike the claims for punitive damages on the basis that, as a public entity or agency, it was not liable for such damages pursuant to the provisions of Government Code section 818. 2

SCIF, of course, takes the position before this court that the trial court's ruling was correct. Courtesy, however, asserts that SCIF has been deprived of this statutory immunity by the enactment of Insurance Code section 11873. 3 That statute, with exceptions not here relevant, provides that "... the fund [SCIF] shall not be subject to the provisions of the Government Code made applicable to state agencies generally or collectively, unless the section specifically names the fund as an agency to which the provision applies." Resolution of the problem requires an analysis of the origins and function of SCIF.

First, however, we dispose of the argument that the issue is not properly before us. SCIF devotes considerable time in an attempt to persuade this court that the petition should be rejected on procedural or technical grounds. SCIF argues that

Page 163

Courtesy has an adequate remedy at law by way of appeal from the eventual judgment. Certainly we are not overly willing to review issues at the pleading stage; however, where a ruling on the pleadings deprives a party of a substantial part of its claim, and where a significant issue of law is involved, extraordinary review is appropriate. (Babb v. Superior Court (1971) 3 Cal.3d 841, 851, 92 Cal.Rptr. 179, 479 P.2d 379.) Our issuance of the alternative writ operated as a necessary and conclusive determination that this is such a case. 4 (People ex rel. Younger v. County of El Dorado (1971) 5 Cal.3d 480, 492, 96 Cal.Rptr. 553, 487 P.2d 1193.)

[8 Cal.App.4th 1511] SCIF then points out that in 1991, another insured of SCIF (represented by the same counsel) filed a similar petition with Division Five of the Second District, claiming error in the trial court's grant of summary adjudication on the issue of the availability of punitive damages, and that this petition was summarily denied on the basis that the remedy at law was adequate. We simply state that our view of the matter is different, and that we are not bound to do as the Second District does--even if the Supreme Court denied review of that order. 5

We proceed to the merits of the case.

I.

A.

The Statutory Framework

Former article 20, section 21 of the state Constitution, as amended in 1918 (now art. 14, § 4) authorized the Legislature to create the State Compensation Insurance Fund as part of the grant of power to establish a general system of compensation for industrial injuries. (In fact, SCIF had actually been created as part of a comprehensive scheme for workers' compensation enacted in 1913; the Constitutional amendment five years later was designed "[t]o give legality to an already accomplished fact." (State Comp. Ins. Fund v. McConnell (1956) 46 Cal.2d 330, 337, 294 P.2d 440.) The surrounding historical circumstances suggest that the creation of SCIF was prompted by the desire to ensure that affordable workers' compensation insurance would be available to employers, when coverage became mandatory. (See State Comp. Ins. Fund v. McConnell, supra, at p. 345, fn. 2, 294 P.2d 440, quoting Governor Hiram W. Johnson's criticism of " 'the rapacity of insurance companies' concerning insurance for industrial accidents.")

SCIF is designed to be "fairly competitive with other insurers" and to be "neither more nor less than self-supporting." (§ 11775.) It is authorized to "transact workers' compensation insurance required or authorized by law of this state to the same extent as any other insurer." (§ 11778.) Once SCIF was established, the State retained no further liability for its obligations beyond SCIF's specific assets. (§ 11771.) Notably, property belonging to SCIF is not considered "state property" for the purposes of exemption from state taxes,

Page 164

[8 Cal.App.4th 1512] and SCIF is generally subject to the payment of taxes on the same basis as any other insurer. (Rev. & Tax.Code, §§ 202, 12203.)

Among SCIF's other unique characteristics is its exemption from the public meeting and public inspection of records requirements of Government Code sections 11120 et seq. and 6250 et seq. (§ 11770.5.) Demands on policies need not be pursued through the claims provisions of Government Code sections 900 et seq. (§ 11793.) Finally, section 11873 excepts SCIF from the provisions of the Government Code made applicable to other state agencies. It is this provision that we will specifically examine below.

As the statutory provisions make clear, SCIF is possessed of "a special and unique character" among state agencies. (Burum v. State Comp. Ins. Fund (1947) 30 Cal.2d 575, 586, 184 P.2d 505.) We now turn to the question of whether this uniqueness extends to its liabilities in tort.

B.

The 1979 Statutory Amendments

In 1979, the Legislature passed legislation which substantially amended the statutes governing SCIF; among that legislation was section 11873, at issue here. Both parties rely on the legislative history surrounding these enactments to support their opposing positions. 6

A summary and analysis prepared by the Assembly Finance, Insurance, and Commerce Committee states that the bill under consideration was designed to increase SCIF's autonomy and lessen its dependence on the Department of Industrial Relations. Section 11773 was amended to establish the Fund as a "public enterprise fund" rather than a state revolving fund. As one item of improving economic efficiency, SCIF was given the authority [8 Cal.App.4th 1513] independently to deposit and maintain its funds in financial institutions (previously, SCIF funds were handled through the State Treasurer), and to make investments of excess funds subject only to the restrictions applicable to private insurers. (See now §§ 11797, 11800.)

The committee report also explicitly recites the effect of the amendments as "to exempt the Fund from all provisions of the Government Code except civil service matters unless the Fund is made specifically subject to particular Government Code sections. Since the purpose of this and earlier legislation is to make the State Fund as much like a private insurance company as possible, it is felt that many provisions of the Government Code ought not to be applicable to the Fund. For example, we have been advised by the Fund that it is not entitled to the provisions of the Government Tort Claims Act and that it may be sued in the same manner as any other private carrier." (Emphasis supplied.)

Similarly, the bill's legislative sponsor, Assemblyman Jim Ellis, advised the Governor when the bill was presented for signature that the express exemption from the provisions of the Government Code was "in recognition of the State Fund's role as an insurer rather than a governmental function." This manifestly reiterates at least SCIF's position with respect to the effect of the amendments, as well as the underlying justification, i.e., the fact that SCIF is not a typical governmental entity.

Page 165

It is elsewhere suggested in the legislative history that SCIF affirmatively wished to free itself from the restrictions of the Government Code; it was a sponsor of the underlying bill. Thus, the Committee Report states that "[w]ithout such an exemption as proposed by Section 15 of the bill, the Fund is concerned that it will have constantly to seek amendments to legislation so as to avoid its becoming unnecessarily subject to certain provisions of the Government Code." Hence it is apparent that SCIF was a moving force behind the adoption of the amendments and was actively involved in seeking the bill's passage.

II.

A.

The Meaning of the Statute

Nowhere in the legislative history is it recited precisely what provisions of the Government Code, if any, were the specific focus of SCIF's concerns; nor is it clear to what extent, if any, the Legislature intended to tailor the [8 Cal.App.4th 1514] amendments in SCIF's favor....

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40 practice notes
  • Jonathan Neil & Associates, Inc. v. Jones, No. F029400.
    • United States
    • California Court of Appeals
    • May 14, 2002
    ...v. State Compensation Ins. Fund (1993) 16 Cal. App.4th 1387, 20 Cal.Rptr.2d 730; Courtesy Ambulance Service v. Superior Court (1992) 8 Cal.App.4th 1504, 11 Cal.Rptr.2d 161.) The other cases cited by the Joneses all involve claims handling and loss reserve practices of the insurer, as those ......
  • Notrica v. State Compensation Ins. Fund, No. B097529
    • United States
    • California Court of Appeals
    • March 17, 1999
    ...between suing in contract or in tort] ). SCIF's position has also been rejected by Courtesy Ambulance Service v. Superior Court (1992) 8 Cal.App.4th 1504, 1509, 1511-1519, 11 Cal.Rptr.2d 161, followed by Maxon Industries, Inc. v. State Compensation Ins. Fund (1993) 16 Cal.App.4th 1387, 1390......
  • Borikas v. Alameda Unified Sch. Dist., A129295
    • United States
    • California Court of Appeals
    • December 6, 2012
    ...“to arguments and discussions which actually took place during” the process. (See Courtesy Ambulance Service v. Superior Court (1992) 8 Cal.App.4th 1504, 1512, fn. 6, 11 Cal.Rptr.2d 161.) 21. Notably, this letter from the school districts, sent after they had been persuaded to “drop any att......
  • Borikas v. Alameda Unified Sch. Dist., A129295
    • United States
    • California Court of Appeals
    • June 12, 2013
    ...“to arguments and discussions which actually took place during” the process. (See Courtesy Ambulance Service v. Superior Court (1992) 8 Cal.App.4th 1504, 1512, fn. 6, 11 Cal.Rptr.2d 161.) 22. The District contends the June 9 opinion letter has no significance in light of a letter from the s......
  • Request a trial to view additional results
40 cases
  • Jonathan Neil & Associates, Inc. v. Jones, No. F029400.
    • United States
    • California Court of Appeals
    • May 14, 2002
    ...v. State Compensation Ins. Fund (1993) 16 Cal. App.4th 1387, 20 Cal.Rptr.2d 730; Courtesy Ambulance Service v. Superior Court (1992) 8 Cal.App.4th 1504, 11 Cal.Rptr.2d 161.) The other cases cited by the Joneses all involve claims handling and loss reserve practices of the insurer, as those ......
  • Notrica v. State Compensation Ins. Fund, No. B097529
    • United States
    • California Court of Appeals
    • March 17, 1999
    ...between suing in contract or in tort] ). SCIF's position has also been rejected by Courtesy Ambulance Service v. Superior Court (1992) 8 Cal.App.4th 1504, 1509, 1511-1519, 11 Cal.Rptr.2d 161, followed by Maxon Industries, Inc. v. State Compensation Ins. Fund (1993) 16 Cal.App.4th 1387, 1390......
  • Borikas v. Alameda Unified Sch. Dist., A129295
    • United States
    • California Court of Appeals
    • December 6, 2012
    ...“to arguments and discussions which actually took place during” the process. (See Courtesy Ambulance Service v. Superior Court (1992) 8 Cal.App.4th 1504, 1512, fn. 6, 11 Cal.Rptr.2d 161.) 21. Notably, this letter from the school districts, sent after they had been persuaded to “drop any att......
  • Borikas v. Alameda Unified Sch. Dist., A129295
    • United States
    • California Court of Appeals
    • June 12, 2013
    ...“to arguments and discussions which actually took place during” the process. (See Courtesy Ambulance Service v. Superior Court (1992) 8 Cal.App.4th 1504, 1512, fn. 6, 11 Cal.Rptr.2d 161.) 22. The District contends the June 9 opinion letter has no significance in light of a letter from the s......
  • Request a trial to view additional results

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