Fremont Compensation Ins. v. Sierra Pine

• Decision Date: 04 August 2004
• Docket Number: No. C034569.,C034569.
• Citation: 17 Cal.Rptr.3d 80,121 Cal.App.4th 389
• Court: California Court of Appeals Court of Appeals
• Parties: FREMONT COMPENSATION INSURANCE COMPANY, Plaintiff and Appellant, v. SIERRA PINE, LTD. et al., Defendants and Respondents.

17 Cal.Rptr.3d 80

121 Cal.App.4th 389

FREMONT COMPENSATION INSURANCE COMPANY, Plaintiff and Appellant, v. SIERRA PINE, LTD. et al., Defendants and Respondents.

No. C034569.

Court of Appeal, Third District.

August 4, 2004.

Laughlin, Falbo, Levy & Moresi and James B. Knezovich, Sacramento, for Plaintiff and Appellant.

Porter, Scott, Weiberg & Delehant, Anthony S. Warburg, Sacramento, and Jack C. Woodside for Defendants and Respondents.

MORRISON, J.

The Workers Compensation Appeals Board (Board) ordered an insurance carrier to pay death benefits to the former wife of an employee killed on the job. The carrier sued alleged third party tortfeasors to recoup the money. Labor Code section 3852 (further unspecified references are to this code) allows a carrier to "bring an action against" third parties. However, the trial court ruled that section 3852 subrogated the carrier to the rights of the former wife, and because she had no standing to sue for wrongful death, the carrier had no right to sue to recoup compensation benefits. The trial court sustained a demurrer without leave to amend and the carrier timely appealed from the judgment.

Section 3852 gives the carrier standing to sue third party tortfeasors. Because the carrier could have sued to recoup benefits paid to the worker while alive, and a statute (§ 3851) provides that a recoupment action survives the death of the worker, the fact the compensation paid was a death benefit, rather than for example, vocational rehabilitation or medical benefits, makes no difference. As we will explain, to allow tortfeasors to escape liability due to the happenstance that the Board ordered benefits to be paid to someone who had no standing to file a wrongful death action would conflict with the letter and spirit of section 3852. We reverse with directions.

STANDARD OF REVIEW

For purposes of this appeal we must accept as true the facts alleged in the complaint, construed in favor of the pleader, and determine whether those allegations state a cause of action. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58.)

FACTUAL AND PROCEDURAL BACKGROUND

Fremont Compensation Insurance Company (Fremont) alleged that Fred Manning, an employee of its insured, was killed while working because of the tortious conduct of defendants Loren Hill, Sierra Pine, Ltd., and Ampine. Cynthia Nesmith, Manning's former wife, was still a member of Manning's household. Fremont paid Nesmith $125,000 in death benefits pursuant to a Board order, and is obligated for other amounts, such as burial expenses.

Although Fremont did not plead Nesmith's divorce from Manning, the fact has been conceded. (See County of El Dorado v. Misura (1995) 33 Cal.App.4th 73, 77, 38 Cal.Rptr.2d 908.) We digress to explain the Board's order. When a worker dies in an industrial accident, the Board may award death benefits. (§ 4700 et seq.) These benefits are paid to: (1) the worker's heirs, if any; or (2) the worker's dependents, if any; or (3) to a state escheat fund. (§ 4706.5.) It seems Manning had no heirs. Some people are presumed to be the worker's dependents; others must show actual dependency. (§§ 3501-3503.) Early cases allowed recovery by persons who in good faith thought they were married to the worker. (Rivieccio v. Bothan (1946) 27 Cal.2d 621, 626, 165 P.2d 677; Brennfleck v. Workmen's Comp.App. Bd. (1970) 3 Cal.App.3d 666, 671-672, 674-675, 84 Cal.Rptr. 50.) Later cases extended recovery to other surviving dependent partners. (Department of Industrial Relations v. Workers' Comp. Appeals Bd. (1979) 94 Cal.App.3d 72, 76-78, 156 Cal.Rptr. 183; see 1 Cal. Workers' Compensation Practice (Cont.Ed.Bar 4th ed.2002) § 7.4, p. 410.) Nesmith's marital status is a red herring because Nesmith, as a member of Manning's household (see Lab.Code, § 3503), was his actual dependent and would have been entitled to benefits even had they never been married.

After paying Nesmith, Fremont sued and defendants demurred to Fremont's amended complaint. They argued that because Nesmith was not Manning's surviving spouse or putative spouse, Nesmith had no standing to sue for Manning's death. (Code Civ. Proc., § 377.60, subd. (a); Villacampa v. Russell (1986) 178 Cal.App.3d 906, 908-910, 224 Cal.Rptr. 73.) Defendants then argued that Fremont's payment made it Nesmith's subrogee. Because a subrogee stands in the shoes of the subrogor, they argued Fremont had no standing to sue to recoup the benefits. The trial court sustained the demurrer without leave to amend.

DISCUSSION

The critical statute is section 3852, but we first describe its context within the Legislature's comprehensive compensation system. (See Lungren v. Deukmejian (1988) 45 Cal.3d 727, 735, 248 Cal.Rptr. 115, 755 P.2d 299 [statutes must be construed in context of statutory scheme].)

In 1911, a voluntary employer's liability law was enacted, "whereby the risk of the employment shall be placed not upon the employee alone, but upon the employment itself." (Governor Hiram Johnson's First Inaugural Address, 1911, see www.governor.ca.gov and links.) The California Constitution was also amended that year to allow for a compulsory system and in 1913, such a system was enacted. The current workers' compensation system is structurally the same as an act passed in 1917 and codified into the new Labor Code in 1937.

The policy is that workers do not have to prove fault, adjudication is swift, but the benefits are smaller than might be obtained as tort damages. (Mathews v. Workmen's Comp. Appeals Bd. (1972) 6 Cal.3d 719, 728-734, 100 Cal.Rptr. 301, 493 P.2d 1165; Boehm & Associates v. Workers' Comp. Appeals Bd. (2003) 108 Cal.App.4th 137, 142, 133 Cal.Rptr.2d 396; 2 Witkin, Summary of Cal. Law (9th ed. 1987) Workers' Compensation, §§ 1-5; Hichborn, Story of the Cal. Legislature of 1911, pp. 236-245; Hichborn, Story of the Cal. Legislature of 1913, pp. 346-347.) The law: (1) spreads the cost of industrial injuries to goods and services; (2) provides prompt, limited compensation to injured workers, regardless of fault; (3) increases industrial safety; and (4) insulates employers from tort liability. (Privette v. Superior Court (1993) 5 Cal.4th 689, 697, 21 Cal.Rptr.2d 72, 854 P.2d 721.)

Private employers may create a self-insurance plan, but most buy insurance. (Witkin, supra, § 134, p. 706.) Then the carrier assumes liability and is "subrogated to all rights of the employer arising out of assumption of liability or payment of compensation." (Id., § 137, p. 708; see Ins.Code 11662; Employers Mutual Liability Ins. Co. v. Tutor-Saliba Corp. (1998) 17 Cal.4th 632, 638-639, 71 Cal.Rptr.2d 851, 951 P.2d 420 (Employers Mutual).) The "employer is subrogated to the personal injury claim of the employee against the third party. Therefore, the employer's insurer is also so subrogated when it stands in the shoes of the employer. The insurer is also, however, subrogated to the employer's additional rights and liabilities against the third party. For example, while the employee has no claim for reimbursement of workers' compensation benefits against the third party, the employer, and therefore its insurer, does." (Employers Mutual, supra, 17 Cal.4th at p. 639, 71 Cal.Rptr.2d 851, 951 P.2d 420, italics added.)

As the italicized passage just quoted indicates, one way to reduce the insurance burden on employers is to allow employers and their insurers to pursue third parties who kill or injure workers and thereby cause the payment of benefits. In contrast, a wrongful death suit is based on a new cause of action which recompenses heirs for their pecuniary losses, and is not a survival of whatever cause of action the decedent may have had for injuries. (Horwich v. Superior Court (1999) 21 Cal.4th 272, 283, 87 Cal.Rptr.2d 222, 980 P.2d 927; see Travelers Ins. Co. v. Sierra Pacific Airlines (1983) 149 Cal.App.3d 1144, 1159, 197 Cal.Rptr. 416 [wrongful death claim "independent of an action for recovery of funds paid out under section 3852"] (Travelers); see Smith v. County of Los Angeles (1969) 276 Cal.App.2d 156, 164, 81 Cal.Rptr. 120 (Smith).)

The carrier may choose how to try to recoup payments it has made. It may: (1) intervene in an injured worker's action, (2) file an independent action, or (3) assert a lien in an injured worker's action. (§§ 3852, 3853, 3856; see Gapusan v. Jay (1998) 66 Cal.App.4th 734, 739, 78 Cal.Rptr.2d 250, fn. 3 (Gapusan); O'Dell v. Freightliner Corp. (1992) 10 Cal.App.4th 645, 653, 12 Cal.Rptr.2d 774 (O'Dell); 16 Couch on Insurance (3d ed.2000) § 225:152.) This ensures the employee does not get a double recovery, the third party does not have to defend two lawsuits and compensation insurance rates are minimized. (O'Dell, supra, 10 Cal.App.4th at p. 653, 12 Cal.Rptr.2d 774; Abdala v. Aziz (1992) 3 Cal.App.4th 369, 376-377, 4 Cal.Rptr.2d 130 (Abdala).)

Section 3852 now provides in part: "The claim of an employee . . . for compensation does not affect his or her claim or right of action for all damages proximately resulting from the injury or death against [third parties]. Any employer who pays, or becomes obligated to pay compensation, or who pays, or becomes obligated to pay [the state pursuant to section 4706.5, where the employee has no dependents], may likewise make a claim or bring an action against the third person. In the latter event the employer may recover in the same suit, in addition to the total amount of compensation, damages for which he or she was liable including all salary, wage, pension, or other emolument paid to the employee or to his or her dependents. The respective rights against the third person of the heirs of an employee [suing for wrongful death], and an employer claiming pursuant to this section, shall be determined by the court." "Employer" includes the insurance carrier. (§ 3850, subd. (b).) A death benefit is compensation. (§ 3207; Travelers, supra, 149 Cal.App.3d at p. 1155, 197 Cal.Rptr. 416.)

The statute...