Johnson v. Cayman Development Co.

• Citation: 108 Cal.App.3d 977,167 Cal.Rptr. 29
• Court: California Court of Appeals Court of Appeals
• Decision Date: 07 August 1980
• Parties: Herbert JOHNSON, Plaintiff, v. CAYMAN DEVELOPMENT COMPANY, Defendant and Respondent; ROYAL INDEMNITY COMPANY, Intervener and Appellant. Civ. 57623.

Page 29

167 Cal.Rptr. 29

108 Cal.App.3d 977

Herbert JOHNSON, Plaintiff, v. CAYMAN DEVELOPMENT COMPANY, Defendant and Respondent;

ROYAL INDEMNITY COMPANY, Intervener and Appellant.

Civ. 57623.

Court of Appeal, Second District, Division 3, California.

Aug. 7, 1980.

Francis P. Licata and Mercer & Gallagher, Santa Ana, for plaintiff in intervention and appellant

W. Michael Hartman, Marilyn Zalkowitz, and Chase, Rotchford, Drukker & Bogust, A Law Corporation, Los Angeles, for defendant in intervention and respondent.

KLEIN, Presiding Justice.

Plaintiff in intervention and appellant Royal Indemnity Company (Royal) appeals from a judgment disallowing it any recovery from defendant and respondent Cayman Development Company (Cayman).

INTRODUCTION AND STATEMENT OF FACTS ¹

This case arises out of an injury to plaintiff in the case in chief, Herbert Johnson (Johnson), who was employed as a plaster tender for Norpal Plastering, Inc. On April 17, 1974, Johnson was working on a job site where Cayman was the general contractor, and he fell while carrying a hod of plaster down a hill. Royal was the insurer for Norpal Plastering.

Subsequent to the accident, Johnson filed an application with the Workers' Compensation Appeals Board, and benefits totaling $22,538.90 were ultimately paid to Johnson by Royal.

Meanwhile, Johnson filed a third party action against various defendants, including Cayman. Royal intervened in the action to protect its lien rights.

Before the trial, Johnson purportedly settled with Cayman for $30,000. However, since no similar agreement could be arrived at between Royal and Cayman, Royal proceeded to try the lawsuit separately against Cayman.

At the trial, evidence was presented regarding the amount of benefits paid to Johnson and the physical injuries giving rise to the payments. The position and responsibilities of Cayman and Norpal Plastering were introduced and examined. The jury was eventually instructed based on comparative negligence principles. The jury thereafter determined that the value of Johnson's case if he had been participating in the trial would have been $150,000. Liability due to negligence was allocated as follows: Johnson-5%; Cayman-15%; Norpal Plastering-80%.

Based on the verdict and the application of principles set forth in Arbaugh v. Procter & Gamble Mfg. Co. (1978) 80 Cal.App.3d 500, at pp. 508-509, 145 Cal.Rptr. 608, that the concurrently negligent employer (or its workers' compensation carrier) may receive reimbursement from the third party defendant only for the amount by which the employer's workers' compensation liability exceeds its proportional share of the employee's total tort damages, the trial court denied Royal any recovery on its lien. Judgment was entered and this appeal was taken.

CONTENTION

Royal contends that the Arbaugh principles should not apply in the present particular fact situation, wherein Johnson had settled for a lesser amount than his actual damages and was not participating as a

party at the trial, and Cayman did not have to bear the full burden of loss envisioned by the court in Arbaugh. As a consequence of this fact situation, an unfair procedural burden is placed upon an intervenor and jury damages are merely speculative.

DISPOSITION

Application of the Arbaugh principles to the instant case is mandated by case law and therefore the judgment is affirmed.

DISCUSSION

The landmark case of Witt v. Jackson (1961) 57 Cal.2d 57, 17 Cal.Rptr. 369, 366 P.2d 641 has served as the foundation for third party lawsuits arising out of workers' compensation fact situations.

The court therein stated that "whether an action is brought by the employer or the employee, the third party tortfeasor should be able to invoke the concurrent negligence of the employer to defeat its right of reimbursement, since, in either event, the action is brought for the benefit of the employer to the extent that compensation benefits have been paid to the employee." (Citation.) (Id., at p. 72, 17 Cal.Rptr. at p. 377, 366 P.2d at p. 649.) " 'It is contrary to the policy of the law for the employer, or his subrogee, the insurance carrier, to profit by the wrong of the employer.' (Citations.)" (Ibid.)

However, the "all or nothing" rule of contributory negligence applied in Witt v. Jackson, supra, was replaced by comparative negligence principles in third party actions for the first time in the Arbaugh case. The court therein held that: "In this type of case, the third party tortfeasor should be required to reimburse the employer or his insurance carrier for compensation benefits paid only to the extent that such benefits have exceeded the proportionate share of damages attributable to the employer's negligence. Under this method of apportionment, the employer is liable for either the total amount of workers' compensation benefits paid or the difference between the third party's proportionate share of liability and the employee's total damages, whichever is less. . . . This approach is thus in accord with the concern shown by the court in American Motorcycle that the entire burden of a loss for which two or more defendants were responsible should not be shouldered by one alone. (American Motorcycle Assn. v. Superior Court . . . 20 (Cal.) 3d 578, 608, 146 Cal.Rptr. 182, 578 P.2d 899.) Furthermore, implementation of the above-described rule will not contravene the policies of the workers' compensation system: employer liability will still be limited to the payment of compensation benefits (Lab. Code, § 3601, subd. (a)), while the employer's incentive for maintaining safe working conditions will be reinforced (Lab. Code, § 6400 et seq.)." (Arbaugh v. Procter & Gamble Mfg. Co., supra, 80 Cal.App.3d 500, at pp. 508-509, 145 Cal.Rptr. 608, at p. 615; Kramer v. Cedu Foundation, Inc. (1979) 93 Cal.App.3d 1, 155 Cal.Rptr. 552.)

The trial court herein appropriately applied the Arbaugh formula, although the facts in the present case differed slightly therefrom, in that a settlement between Johnson and Cayman in the amount of $30,000 had been accomplished before the trial, admittedly a figure much less than the potential jury award of $150,000. Royal had paid Johnson compensation benefits totaling $22,538.90. The judgment recited "that Defendant Cayman's negligence was a proximate cause of 15% of Mr. Johnson's injury; that Mr. Johnson was negligent and his negligence was a proximate cause of 5% of his injury; that Plaintiff's employer, Norpal was negligent and that their negligence was a proximate cause of 80% of Mr. Johnson's injury; the jury further found that Mr. Johnson's injury was $150,000. (P) It appearing that by reason of those special verdicts, . . . that Plaintiff in Intervention, Royal Indemnity Company, recover nothing from Defendant, Cayman Development Company; . . ."

In the case of Associated Construction & Engineering Co. v. Workers' Comp. Appeals Bd. (1978) 22 Cal.3d 829, 150 Cal.Rptr. 888, the Supreme Court applied comparative negligence principles to a situation where plaintiff and a third party defendant had also settled prior to proceedings before the board. The plaintiff-employee brought suit against a third party which settled. Subsequent to the settlement, the employee sought a permanent disability award before the Workers' Compensation Appeals Board. The employer claimed a credit only in accordance with its comparative fault against its workers' compensation liability under Labor Code section 3861. The Supreme Court reversed the disallowance...