DUNCAN v. WORKERS' Comp. APPEALS Bd.

• Decision Date: 26 August 2008
• Docket Number: No. C056727.,C056727.
• Citation: 166 Cal.App.4th 294,82 Cal.Rptr.3d 664
• Parties: John DUNCAN, as Director, etc., Petitioner, v. WORKERS' COMPENSATION APPEALS BOARD, Linda Silva et al., Respondents.
• Court: California Court of Appeals

166 Cal.App.4th 294

82 Cal.Rptr.3d 664

John DUNCAN, as Director, etc., Petitioner,

v.WORKERS' COMPENSATION APPEALS BOARD, Linda Silva et al., Respondents.

No. C056727.

Court of Appeal, Third District, California.

Aug. 26, 2008.

Vanessa L. Holton, San Francisco, Steven A. McGinty, Los Angeles, and Michael S. Geller, Moreno Valley, for Petitioner.

Esequiel Solorio for Respondent Linda Silva.

SCOTLAND, P.J.

The California Uninsured Employers Fund (UEF), also called the Uninsured Employers Benefits Trust Fund (UEBTF), was created by the Legislature in 1971 “to ensure that workers who happen to be employed by illegally uninsured employers are not deprived of workers' compensation benefits....” (Lab.Code, § 3716, subd. (b); further section references are to the Labor Code unless otherwise specified.) Thus, the UEBTF in the State Treasury is a “source of funds for injured workers whose employers have failed or refused either to obtain workers' compensation insurance coverage or to qualify as self-insurers for the employers' liability.” ( DuBois v. Workers' Comp. Appeals Bd.(1993) 5 Cal.4th 382, 388-389, 20 Cal.Rptr.2d 523, 853 P.2d 978 (hereafter DuBois ).) The fund “shall pay the claimant only such benefits allowed, recognizing proper liens thereon, that would have accrued against an employer properly insured for workers' compensation liability.” (§ 3716.2.)

Ordinarily, if an employer unreasonably delays or refuses to pay workers' compensation benefits, a penalty will be assessed up to 25 percent of the benefits or $10,000, whichever is less (§ 5814, subd. (a)), and, in addition to the penalty authorized by section 5814, there may be an award of reasonable attorney fees incurred in enforcing the payment of compensation awarded. (§ 5814.5.) But the Legislature has specified that the UEBTF “shall not be liable for any penalties or for the payment of interest on any awards.” (§ 3716.2.) Thus, “sections 3716 and 3716.2, defining the obligations and limiting the liability of the [UEBTF], do not permit imposition of any penalty mandated by section 5814 against the [UEBTF], even for its own unreasonable delay in paying valid claims for workers' compensation.”

( DuBois, supra, 5 Cal.4th at p. 385, 20 Cal.Rptr.2d 523, 853 P.2d 978.)

As we will explain, the limitation of liability specified by section 3716.2 also precludes the imposition of a sanction against the UEBTF that otherwise could be imposed against “a party, the party's attorney, or both, to pay any reasonable expenses, including attorney's fees and costs, incurred by another party as a result of bad-faith actions or tactics that are frivolous or solely intended to cause unnecessary delay” and to pay, as “additional sanctions,” an amount not exceeding $2,500 to the General Fund of the State Treasury. (§ 5813.)

BACKGROUND

When Clifford Silva was killed in an industrial accident, he was a truck driver for D-Best Express, which was illegally uninsured for workers' compensation liability. Hence, the UEBTF was “joined as a party defendant” regarding the claim for workers' compensation benefits sought by Silva's spouse and son.

On June 19, 2006, the parties agreed to an award whereby the UEBTF would pay to the applicants a death benefit of $145,000, less $17,400 in attorney fees which the UEBTF would pay to their attorney, Esequiel Solorio.

By September 13, 2006, Solorio had not received payment of the attorney fees. On that date, and on other occasions, the law firm informed the UEBTF that it had failed to pay said fees. When on October 3, 2006, the fees remained unpaid, Solorio filed a “petition for penalties,” seeking a “25% penalty over [the] attorney fees that remain unpaid,” plus interest “pursuant to [sections] 5800 and ... 5814.5.”

On October 11, 2006, the UEBTF issued a $17,400 check to Solorio to cover the attorney fee award, but declined to pay the requested penalty or interest, informing him that such a payment is prohibited by section 3716.2.

Solorio then filed against the UEBTF an amended petition for “sanctions pursuant to [section] 5813 and attorney fees pursuant to [section] 5814.5” for the fund's “delay in payment of applicant's attorney fees.”

Finding that Solorio's law firm had contacted the UEBTF on “no less than [five] separate” occasions from September 13, 2006, through October 3, 2006, about the unpaid attorney fee award, a Workers' Compensation Judge (WCJ) found the UEBTF's failure to make the attorney fee payment after repeated contacts constituted “bad faith action under Labor Code Section 5813.” Concluding that a sanction against the UEBTF for bad faith action is not prohibited by section 3716.2, the WCJ ordered the UEBTF to pay a sanction of $100 to the Workers' Compensation Appeals Board (WCAB). The WCJ deferred, to another date, “the issue of attorney fees.”

The UEBTF sought reconsideration by the WCAB, asserting the California Supreme Court's interpretation of section 3716.2 in DuBois, supra, 5 Cal.4th 382, 20 Cal.Rptr.2d 523, 853 P.2d 978 (it precludes an award of penalties pursuant to section 5814) applies equally to an award of sanctions pursuant to section 5813.

Granting the petition for reconsideration, the WCAB concluded (1) a “sanction” imposed as authorized by section 5813 is different than a “penalty” imposed pursuant to section 5814, and (2) because section 3716.2 states only that the UEBTF is not liable for “any penalties,” it does not preclude an award of “sanctions” pursuant to section 5813. Accordingly, the WCAB held: “When a sanction is warranted under section 5813 and Rule 10561 [Cal.Code Regs., tit. 8, § 10561 (hereafter Rule 10561) ],” the UEBTF “may be sanctioned, like any other party.” Nevertheless, the WCAB found there was a “complete lack of evidence on why the payment of attorney's fees was delayed”; thus, the WCJ erred in holding that the UEBTF acted in bad faith in delaying the payment. The WCAB returned the matter to the WCJ “for further proceedings, including testimony by [the UEBTF's] claims adjuster, to determine the reason for the delayed payment of attorney's fees,” and ordered that “[b]efore imposing a sanction, the WCJ should consider the requirements of section 5813 and Rule 10561 and decide, based on the evidence, whether [the UEBTF's] failure to comply with the award of attorney's fees resulted from willful or bad faith actions, or from mistake, inadvertence, surprise, or excusable neglect.”

We issued a writ of review requested by the UEBTF and now shall annul the WCAB's order.

DISCUSSION

I

A party “affected by an order, decision, or award” of the WCAB may apply to the Court of Appeal for a writ of review “for the purpose of inquiring into and determining the lawfulness” of the order, decision, or award. (§ 5950.) However, appellate review of WCAB decisions is limited to “final” orders that determine a substantial right or liability of a party. ( Safeway Stores, Inc. v. Workers' Comp. Appeals Bd. (1980) 104 Cal.App.3d 528, 533-535, 163 Cal.Rptr. 750.)

Here, the WCAB's decision did not resolve all of the issues in this workers' compensation proceeding; it returned the matter to the WCJ for further evidence and rulings. Nonetheless, it is final for the purpose of judicial review on the issue whether section 5813 sanctions may be imposed against the UEBTF for bad-faith actions or tactics that are frivolous or solely intended to cause unnecessary delay. This is so because the WCAB's ruling that the statutory scheme permits such sanctions against the UEBTF “ ‘settle[d], for purposes of the compensation proceeding, an issue critical to the claim for benefits, whether or not it resolve[d] all the issues in the proceeding or represent[ed] a decision on the right to benefits.’ [Citation.]” ( Wal-Mart Stores, Inc. v. Workers' Comp. Appeals Bd. (2003) 112 Cal.App.4th 1435, 1438, fn. 3, 5 Cal.Rptr.3d 822; see also Kosowski v. Workers' Comp. Appeals. Bd.(1985) 170 Cal.App.3d 632, 636, 216 Cal.Rptr. 280) ¹

II

To determine whether section 5813 sanctions can be imposed against the UEBTF, we look to the language of the applicable statutes.

Section 3716.2 provides that when an employee suffers an injury qualifying for workers' compensation benefits, but the employer is not insured for such liability, the UEBTF “shall pay the claimant only such benefits allowed, recognizing proper liens thereon, that would have accrued against an employer properly insured for workers' compensation liability.” (Italics added.) Section 3716.2 further specifies that the UEBTF “shall not be liable for any penalties or for the payment of interest on any awards.”

Section 3716.2 thus exempts the UEBTF from the “penalty” (§ 5814, subd. (b)) authorized by subdivision (a) of section 5814, which states: “When payment of compensation has been unreasonably delayed or refused, either prior to or subsequent to the issuance of an award, the amount of the payment unreasonably delayed or refused shall be increased up to 25 percent or up to ten thousand dollars ($10,000), whichever is less. In any proceeding under this section, the appeals board shall use its discretion to accomplish a fair balance and substantial justice between the parties” (§ 5814, subd. (a)). ( DuBois, supra, 5 Cal.4th at pp. 385, 387-390, 20 Cal.Rptr.2d 523, 853 P.2d 978.)

Section 3716.2 also exempts the UEBTF from additional penalties authorized by sections 5814.1 and 5814.5 when a section 5814 penalty is imposed because payment of compensation is unreasonably delayed or refused. Section 5814.1 states: “When the payment of compensation has been unreasonably delayed or refused prior to the issuance of an award, and the director has provided discretionary compensation pursuant to Section 4903.3, the appeals board shall award to the director a penalty to be paid by the employer in the amount of 10 percent of the compensation so provided by the director, such penalty to be in addition to the penalty imposed by Section 5814. The question of delay and the...