Employers Mutual Liability Ins. Co v. Tutor-Saliba Corp.

• Citation: 17 Cal.4th 632,71 Cal.Rptr.2d 851,951 P.2d 420
• Decision Date: 02 March 1998
• Docket Number: No. S058283,TUTOR-SALIBA,S058283
• Parties: , 951 P.2d 420, 98 Cal. Daily Op. Serv. 1447, 98 Daily Journal D.A.R. 1988 EMPLOYERS MUTUAL LIABILITY INSURANCE COMPANY OF WISCONSIN, Plaintiff and Respondent, v.CORPORATION, Defendant and Appellant
• Court: United States State Supreme Court (California)

Page 851

71 Cal.Rptr.2d 851

17 Cal.4th 632, 951 P.2d 420, 98 Cal. Daily Op. Serv. 1447,

98 Daily Journal D.A.R. 1988

EMPLOYERS MUTUAL LIABILITY INSURANCE COMPANY OF WISCONSIN, Plaintiff and Respondent, v. TUTOR-SALIBA CORPORATION, Defendant and Appellant.

No. S058283.

Supreme Court of California

March 2, 1998.

Millard, Pilchowski, Holweger & Child, Los Angeles, Jeniffer Wilder, Boston, MA, and Bradford T. Child, Los Angeles, for Defendant and Appellant.

Robert T. Moulton, Glendale, for Plaintiff and Respondent.

BROWN, Associate Justice.

A subcontractor's workers' compensation insurance carrier brought an action against the general contractor to recover compensation benefits paid to the subcontractor's employee. The issue in this case is whether an express provision for attorney fees in the contract between the general contractor and the subcontractor (the injured worker's employer) applies to permit recovery of fees in the action between the insurance carrier and the general contractor. The Court of Appeal concluded that attorney fees are not available. We disagree, and therefore reverse its judgment.

I. FACTS AND PROCEDURAL BACKGROUND

George Staehling was injured when he fell down a flight of stairs while working for Staehling also filed a personal injury action against Cowelco and Tutor-Saliba. Wisconsin intervened in the lawsuit pursuant to Labor Code ¹ sections 3852 and 3853 ² to recover the benefits paid to Staehling. Staehling's personal injury action and all other claims were settled and dismissed, except for Wisconsin's claim for reimbursement of workers' compensation benefits from Tutor-Saliba and Cowelco. A jury placed a value of $1,491,000 on Staehling's injuries and apportioned liability as follows: Staehling 20 percent, PDM 20 percent, Cowelco 50 percent, and Tutor-Saliba 10 percent. Because the resulting sum of damages attributed to PDM's negligence exceeded the amount of workers' compensation benefits paid by Wisconsin to Staehling, Wisconsin recovered nothing. (See Aceves v. Regal Pale Brewing Co. (1979) 24 Cal.3d 502, 512, 156 Cal.Rptr. 41, 595 P.2d 619, overruled on other grounds in Privette v. Superior Court (1993) 5 Cal.4th 689, 702, fn. 4, 21 Cal.Rptr.2d 72, 854 P.2d 721 ["Since [employer's] percentage share of responsibility for plaintiff's recovery is greater than the compensation benefits it paid, its carrier's claim for reimbursement should be denied."].)

PDM Strocal, Inc. (PDM), a subcontractor on an office building and parking structure. Tutor-Saliba Corporation (Tutor-Saliba) was the general contractor, and Cowelco, Inc. (Cowelco) was the subcontractor that had installed the stairs. Staehling received workers' compensation benefits from PDM's workers' compensation insurer, Employers Mutual Liability Insurance Company of Wisconsin (Wisconsin).

As relevant here, Tutor-Saliba filed a memorandum of costs and a motion for $91,218.95 for attorney fees incurred since the filing of Wisconsin's complaint in intervention. The attorney fees motion was based on the fees clause in Tutor-Saliba's subcontract with PDM, which provided that with the exception of claims by PDM against the owner, "All other claims and disputes between the parties shall be decided by the appropriate California State Court in the County of Los Angeles. The prevailing party, shall be entitled to recover its attorneys' fees, witness fees and other expenses related to preparation and presentation of its case in a reasonable amount." The trial court found that Tutor-Saliba was not the prevailing party and denied the motion for attorney fees, but exercised its discretion to allow Tutor-Saliba recovery of certain costs other than attorney fees.

Tutor-Saliba appealed from the order denying the motion for attorney fees. The Court of Appeal affirmed. It did not consider whether Tutor-Saliba was the prevailing party under Code of Civil Procedure section 1032, subdivision (a)(4), or whether the terms of the subcontract provided for attorney fees under these circumstances. Rather, it held that Tutor-Saliba was not entitled to attorney fees because of what it perceived to be the unique context of workers' compensation law.

We granted Tutor-Saliba's petition for review.

II. DISCUSSION

A. General Workers' Compensation and Insurance Principles

In general, "when a worker is entitled to workers' compensation benefits for an injury, those benefits constitute the worker's exclusive remedy against his or her employer for injuries sustained in the course of employment. (Lab.Code, § 3602, subd. (a).)"

(Phelps v. Stostad (1997) 16 Cal.4th 23, 30, 65 Cal.Rptr.2d 360, 939 P.2d 760, italics omitted.) "[T]he legal theory supporting such exclusive remedy provisions is a presumed 'compensation bargain,' pursuant to which the employer assumes liability for industrial personal injury or death without regard to fault in exchange for limitations on the amount of that liability. The employee is afforded relatively swift and certain payment of benefits to cure or relieve the effects of industrial injury without having to prove fault but, in exchange, gives up the wider range of damages potentially available in tort." (Shoemaker v. Myers (1990) 52 Cal.3d 1, 16, 276 Cal.Rptr. 303, 801 P.2d 1054.)

Despite the exclusivity of the workers' compensation remedy against the employer, the worker may recover a judgment from a negligent third party. (§ 3852; Phelps v. Stostad, supra, 16 Cal.4th at p. 30, 65 Cal.Rptr.2d 360, 939 P.2d 760.) Likewise, an employer who pays or becomes obligated to pay workers' compensation benefits to an injured employee may seek reimbursement from the third party. (Ibid.) "[W]e have indicated that, in granting employers the right to sue third parties, the Legislature simply gave statutory recognition to principles of equitable subrogation. [Citations.]" (County of San Diego v. Sanfax Corp. (1977) 19 Cal.3d 862, 876, fn. 7, 140 Cal.Rptr. 638, 568 P.2d 363.) "Apparently, even if the Legislature had not acted, an employer would have been able to recover from a third party who was responsible for the employer having to pay workers compensation...." (Ibid.)

Reimbursement may be pursued in three ways: "the employer 'may bring an action directly against the third party (§ 3852), join as a party plaintiff or intervene in an action brought by the employee (§ 3853), or allow the employee to prosecute the action himself and subsequently apply for a first lien against the amount of the employee's judgment, less an allowance for litigation expenses and attorney's fees (§ 3856, subd. (b)).' [Citation.]" (Associated Construction & Engineering Co. v. Workers' Comp. Appeals Bd. (1978) 22 Cal.3d 829, 833, 150 Cal.Rptr. 888, 587 P.2d 684.) An employer is accountable for its own negligence in causing the employee's injury, and therefore is only reimbursed for the amount by which its compensation liability exceeds its proportional share of the injured employee's recovery. (Aceves v. Regal Pale Brewing Co., supra, 24 Cal.3d at p. 512, 156 Cal.Rptr. 41, 595 P.2d 619.) The employee's fault in causing the injury is not attributed to the employer for purposes of reducing reimbursement. (Cal. Workers' Damages Practice (Cont. Ed. Bar 1985) § 4.1, p. 75.)

The employer can be sued apart from the employee by the third party for indemnification if the employer has executed an indemnification contract with the third party prior to the time of the injury. (§ 3864.) Section 3864 provides: "If an action ... prosecuted by the employee, the employer, or both jointly against the third person results in judgment against such third person, or settlement by such third person, the employer shall have no liability to reimburse or hold such third person harmless on such judgment or settlement in absence of a written agreement so to do executed prior to the injury." Section 3864 "enforces the exclusivity of workers' compensation by precluding concurrent tortfeasors from seeking indemnification from negligent employers" absent a written agreement executed prior to the injury. (Western Steamship Lines, Inc. v. San Pedro Peninsula Hospital (1994) 8 Cal.4th 100, 113, 32 Cal.Rptr.2d 263, 876 P.2d 1062, fn. omitted.) Prior to the statute's enactment in 1959, the employer was potentially liable not only for the injured employee's workers' compensation benefits, but also for additional damages awarded to the employee at common law. (Ibid.) " ' "The California legislature felt that this double burden placed upon the employer was in contravention of the exclusive remedy theory of the workmen's compensation statutes" ', and therefore enacted Labor Code section 3864 to abolish any right to indemnity other than by express contract. [Citation.]" (Ibid.)

"In California, every employer except the state is required to 'secure the payment of compensation.' (Lab.Code, § 3700.) This mandate is satisfied by either purchasing workers' compensation insurance, or self-insuring. (Ibid.)" (La Jolla Beach & Tennis Subrogation is a right, not an obligation, and the employer cannot force the insurer to pursue a reimbursement claim against the third party. (See New Plumbing Contractors, Inc. v. Nationwide Mutual Ins. Co. (1992) 7 Cal.App.4th 1088, 1092, 1095, 9 Cal.Rptr.2d 469 [Insurer is not liable for employer's increased premiums because insurer is not required to pursue particular method of reimbursement, and "[f]urthermore, because subrogation is a right, not an obligation, the insurer presumably has the option of not pursuing subrogation recovery at all."].) If an insurer is not persuaded of the merit of a claim against the third party, it can simply decline to either bring suit or intervene in the employee's action.

                Club, Inc. v. Industrial Indemnity Co.  (1994) 9 Cal.4th 27, 36, 36 Cal.Rptr.2d 100, 884 P.2d 1048.)  "Employers who comply with the insurance requirement [citation] are relieved of liability for compensation, and the insurance carrier assumes liability."  (2

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