La Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity Co.

Decision Date19 December 1994
Docket NumberNo. S036170,S036170
CitationLa Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity Co., 36 Cal.Rptr.2d 100, 9 Cal.4th 27, 884 P.2d 1048 (Cal. 1994)
CourtCalifornia Supreme Court
Parties, 884 P.2d 1048, 63 USLW 2492, 10 IER Cases 233, 10 IER Cases 608 LA JOLLA BEACH AND TENNIS CLUB, INC., et al., Plaintiffs and Appellants, v. INDUSTRIAL INDEMNITY COMPANY, Defendant and Respondent.

H. Paul Kondrick, Seltzer, Caplan, Wilkins & McMahon and Michael H. Riney, San Diego, for plaintiffs and appellants.

Craig R. Berne, Oakland, James T. Linford, San Francisco, Adleson, Hess, Christensen & Kelly, Randy M. Hess, Duane W. Shewaga, San Jose, Brobeck, Phleger & Harrison, David M. Halbreich, David E. Weiss, Los Angeles, Farella, Braun & Martel, William R. Friedrich, Dennis M. Cusack, Kathryn Oliver, San Francisco, Luce, Forward, Hamilton & Scripps, George S. Howard, Jr., and Albert T. Harutunian, III, San Diego, as amici curiae on behalf of plaintiffs and appellants.

Morris, Polich & Purdy, Lawrence E. Picone, Gerald P. Schneeweis, San Diego, Sonnenschein, Nath & Rosenthal, Paul E.B. Glad, San Francisco, John Leland Williams, Rhonda V. Magee and Andre Hassid, San Francisco, for defendant and respondent.

Craig A. Berrington, Bruce Wood, Washington, DC, Patrick J. McNally, Ipswich, MA, Monika Lussnig, Des Plaines, IL, Crosby, Heafey, Roach & May, Raoul D. Kennedy, Ezra Hendon, Oakland, Chernow & Lieb, Diane Heidenreich, Van Nuys, Victor Rabinowitz, Woodland Hills, McCormick, Barstow, Sheppard, Wayte & Carruth, James P. Wagoner, James H. Wilkins, Wendy S. Lloyd, Fresno, Buchalter, Nemer, Fields & Younger, Roxani M. Gillespie, Richard de Saint Phalle, Marie G. Quashnock, Charles W. Savage, Barbara Gallios-Lee, William P. Molmen, Lewis, D'Amato, Brisbois & Bisgaard, Duane C. Musfelt, San Francisco, Horvitz & Levy, Ellis J. Horvitz, Daniel J. Gonzalez, Julie L. Woods, Encino, Hancock, Rothert & Bunshoft, Ray L. Wong, Paul J. Killion and Monica M. Slakey, San Francisco, as amici curiae on behalf of defendant and respondent.

ARABIAN, Justice.

This case presents a convergence of two distinct but related areas of law: insurance and workers' compensation.In particular, we determine whether a workers' compensation insurer has a duty to defend a former employee's civil suit alleging wrongful termination in violation of public policy.We conclude that no reasonable construction of the workers' compensation insurance contract provides coverage for such a suit, and hence there is no duty to defend.We therefore reverse the Court of Appeal.

I.FACTS AND PROCEDURAL BACKGROUNDThe Underlying Action

On April 24, 1986, Adnan Saleh filed a complaint against the Sea Lodge, the F.W. Kellogg Trust and Estate (Trust), the then owner of the lodge, and Robert Kellogg, manager of the lodge.Saleh alleged that he had been employed at the Sea Lodge as the restaurant manager for approximately six years until his termination on April 1, 1986.According to the complaint Saleh "was terminated in whole or in part because he was not 'white'.Prior to plaintiff's termination, he was told not to hire any more of 'his own kind', i.e. Palestinian or Arabic ancestried [sic] persons, and not to hire any 'foreigners.' "Saleh further alleged that Robert Kellogg told various employees of the Sea Lodge that "they were not to hire any foreigners except for some Mexicans, who should be kept in back."

Saleh alleged this conduct gave rise to claims for breach of an employment agreement, breach of the implied covenant of good faith and fair dealing, wrongful termination, intentional infliction of emotional distress, and violation of the Fair Employment and Housing Act.On May 9, 1986, the Trust tendered defense of the Saleh complaint to its workers' compensation carrier, defendantIndustrial Indemnity Company(Industrial).1

The Trust also tendered defense to its comprehensive general and excess liability carrier, American National Fire Insurance Company(American).Industrial refused to provide the Trust with a defense.American initially accepted the tender under a reservation of rights but later withdrew its defense.

In responding to Saleh's complaint, the Trust raised as an affirmative defense the exclusive jurisdiction of the Workers' Compensation Appeals Board.It also took the position that Saleh had not been terminated but had voluntarily resigned.The Trust denied it had engaged in any discriminatory conduct.The parties eventually settled.Saleh was paid $16,500.

The Current Action

On or about August 29, 1990, plaintiffLa Jolla Beach and Tennis Club, Inc., the Trust's successor in interest, and Kellogg (La Jolla) brought this action against Industrial and American.2La Jolla sought declaratory relief regarding Industrial's obligation to defend and indemnify it in the Saleh action.La Jolla further alleged that Industrial's failure to provide it with a defense or indemnity in that action gave rise to claims for breach of contract and tortious breach of the implied covenant of good faith and fair dealing.

Industrial moved for summary judgment asserting it had no duty to defend or indemnify La Jolla under either Part 1 or Part 2 of the policy.(Seeante, fn. 1.)The trial court granted Industrial's motion, and judgment was entered.La Jolla appealed solely on the ground that Industrial had a duty to defend under Part One of the policy, or the workers' compensation coverage.

The Court of Appeal reversed.Relying on a recent Court of Appeal opinion, Wong v. State Compensation Ins. Fund(1993)12 Cal.App.4th 686, 16 Cal.Rptr.2d 1, the court concluded that Saleh's complaint set forth facts that would support a potential claim covered by Part One.The court noted that Industrial "defines its workers' compensation coverage in terms of amounts payable under the workers' compensation law.Thus, when our Supreme Court defined the scope of the workers' compensation remedy, of necessity the court also defined the scope of Industrial's workers' compensation coverage."

The Court of Appeal further noted that this court has held, "that, in general, workers' compensation is the exclusive remedy for emotional distress caused by a termination of employment."Accordingly, the court reasoned, "where an employee claims he suffered emotional distress as a result of his termination, he has made a claim which comes within the workers' compensation provisions of policies like Industrial's."

The Court of Appeal rejected Industrial's argument that Saleh's choice of a civil forum precluded coverage or defense under the workers' compensation policy.It stated that the policy language did not expressly exclude defense of civil actions."Moreover, it is well established that while the superior court does not have jurisdiction to grant relief for injuries suffered within the course and scope of employment, it does have, concurrently with the Workers' Compensation Appeals Board(WCAB), the jurisdiction to determine jurisdiction.[Citation.]'Thus, if there is a final determination as to the matter of coverage (i.e., of jurisdiction) in either the [WCAB] or the superior court proceedings, such determination will be res judicata in subsequent proceedings before the other tribunal between the same parties or those privy to them.'[Citation.]In our view the undisputed jurisdiction of the civil courts to determine the existence of WCAB jurisdiction lends considerable support to the conclusion ... that insured employers 'could reasonably expect an appropriate defense to any claim based on injuries potentially covered by the policy ... regardless of whether the plaintiff's choice of forum was appropriate.' "

Applying these principles, the Court of Appeal concluded that "Insofar as Saleh alleged he suffered emotional distress upon his termination, his claim" was potentially "within the scope of the workers' compensation act....Thus it had the potential for coming within the coverage provisions of part 1 of the Industrial policy," and this potential gave "rise to a duty to defend."

The court noted, however, that Saleh alleged "discriminatory termination" had caused his emotional distress."Because liability on discrimination claims falls outside the scope of our workers' compensation law, it also falls outside the scope of a workers' compensation insurance policy."Nonetheless, the court concluded Saleh's claims might still fall within Part 1 of the policy.It reasoned, "If La Jolla was able to establish it had not terminated Saleh because of his Palestinian ancestry and that his termination did not otherwise violate public policy, Saleh would still have a remedy under the workers' compensation law for the emotional distress he suffered upon his termination.""Given this potential, La Jolla was entitled to a defense under part 1 of the policy."Industrial's petition for rehearing was denied.

We granted Industrial's petition for review.3

II.DISCUSSION

The question before us is whether Part 1 of Industrial's workers' compensation policy potentially provided coverage for the claims asserted in Saleh's complaint, and thus gave rise to a duty to defend those claims.

A.Background
1.Workers' Compensation

Pursuant to constitutional mandate, the Legislature has vested the Workers' Compensation Appeals Board(WCAB) with exclusive jurisdiction over claims for workers' compensation benefits.(Cal. Const., art. XIV, § 4,Lab.Code, § 5300.)Accordingly, the superior court and the WCAB in this case"do not have concurrent jurisdiction over the whole of the controversy, and one of them will be without jurisdiction to grant any relief whatsoever, depending upon whether or not the injuries were suffered within the course and scope of an employment relationship and so covered by the workmen's compensation laws."(Scott v. Industrial Acc. Com.(1956)46 Cal.2d 76, 82-83, 293 P.2d 18, italics in original.)"It is elementary that the type and extent of relief which can be granted and the factors by which such relief is determined...

Get this document and AI-powered insights with a free trial of vLex and Vincent AI

Get Started for Free

Start Your 3-day Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant

  • Access comprehensive legal content with no limitations across vLex's unparalleled global legal database

  • Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength

  • Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities

  • Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting

vLex

Start Your 3-day Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant

  • Access comprehensive legal content with no limitations across vLex's unparalleled global legal database

  • Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength

  • Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities

  • Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting

vLex

Start Your 3-day Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant

  • Access comprehensive legal content with no limitations across vLex's unparalleled global legal database

  • Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength

  • Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities

  • Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting

vLex

Start Your 3-day Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant

  • Access comprehensive legal content with no limitations across vLex's unparalleled global legal database

  • Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength

  • Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities

  • Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting

vLex

Start Your 3-day Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant

  • Access comprehensive legal content with no limitations across vLex's unparalleled global legal database

  • Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength

  • Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities

  • Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting

vLex

Start Your 3-day Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant

  • Access comprehensive legal content with no limitations across vLex's unparalleled global legal database

  • Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength

  • Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities

  • Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting

vLex
223 cases
  • Quigley v. Travelers Property Cas. Ins. Co., 1:08-CV-01302 OWW DLB.
    • United States
    • U.S. District Court — Eastern District of California
    • 27 Mayo 2009
    ...defense ... is sought potentially seeks relief within the coverage of the policy." La Jolla Beach & Tennis Club, Inc. v. Indus. Indem. Co., 9 Cal.4th 27, 44, 36 Cal. Rptr.2d 100, 884 P.2d 1048 (1994). The duty to defend is broad, however, it is not unlimited and is generally "measured by th......
  • Crosby Estate at Rancho Santa Fe Master Ass'n v. Ironshore Specialty Ins. Co.
    • United States
    • U.S. District Court — Southern District of California
    • 3 Noviembre 2020
    ...theory raise a single issue which could bring it within the policy coverage." La Jolla Beach & Tennis Club, Inc. v. Indus. Indem. Co. , 9 Cal. 4th 27, 39, 36 Cal.Rptr.2d 100, 884 P.2d 1048 (1994) (citations omitted).[I]n an action wherein none of the claims is even potentially covered becau......
  • Britz Fertilizers, Inc. v. Nationwide Agribusiness Ins. Co.
    • United States
    • U.S. District Court — Eastern District of California
    • 3 Octubre 2013
    ...St. Jude Hospital, 107 Cal.App.4th 1097, 1108, 132 Cal.Rptr.2d 540 (2003) (citing La Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity Co., 9 Cal.4th 27, 37, 36 Cal.Rptr.2d 100, 884 P.2d 1048 (1994)); see Cal. Civ. Code, § 1649 ("If the terms of a promise are in any respect ambiguous ......
  • Skanska USA Civil W. Cal. Dist. Inc. v. Nat'l Interstate Ins. Co.
    • United States
    • U.S. District Court — Southern District of California
    • 20 Mayo 2021
    ...theory raise a single issue which could bring it within the policy coverage." La Jolla Beach & Tennis Club, Inc. v. Indus. Indem. Co. , 9 Cal. 4th 27, 39, 36 Cal.Rptr.2d 100, 884 P.2d 1048 (1994), as modified (Mar. 2, 1995). "[I]f, as a matter of law, neither the complaint nor the known ext......
  • Get Started for Free
6 books & journal articles
  • Insurance
    • United States
    • James Publishing Practical Law Books California Causes of Action
    • 31 Marzo 2022
    ...coverage based on the ‘nature and kind of risk covered by the policy. La Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity Co. , 9 Cal.4th 27, 38 (1994). Severability Clause; Intentional Acts In Minkler v. Safeco Ins. Co. of America (2013) 49 Cal. 4th 315, Scott Minkler (Scott) sued D......
  • Table of Cases
    • United States
    • James Publishing Practical Law Books California Workers' Compensation Law and Practice - Volume 1
    • 31 Marzo 2022
    ...47 CCC 1151 (W/D-1982), §6:123 LA County . See Los Angeles County La Jolla Beach and Tennis Club, Inc. v. Industrial Indemnity Co., 9 Cal.4th 27, 59 CCC 1002 (1994), §§2:135, 12:79, 13:249 La Rosa v. WCAB, 52 CCC 215 (W/D-1987), §21:252 LA Times v. WCAB (Pense), 59 CCC 104 (Unpub. CA W/D-19......
  • Jurisdiction
    • United States
    • James Publishing Practical Law Books California Workers' Compensation Law and Practice - Volume 1
    • 31 Marzo 2022
    ...bodily injury which was not intended or expected by the insured. In La Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity Company , 9 Cal.4th 27, 59 CCC 1002 (SC-1994), the California Supreme Court held that a workers’ compensation carrier was under no duty to defend an insured employe......
  • Insurance coverage issues arising from workplace tort claims.
    • United States
    • Defense Counsel Journal Vol. 62 No. 3, July 1995
    • 1 Julio 1995
    ...1 (Cal.App. 1993). (57.)419 P.2d 168 (Cal. 1966). (58.)828 Cal.Rptr. 1195 (Cal.App. 1992). (59.)23 Cal.Rptr.2d 656 (Cal.App. 1993). (60.)884 P.2d 1048 (Cal. (61.)Myers v. Metropolitan Life Ins. Co., 33 A.2d 253, 255 (Pa.Super. 1943). See also Railway Mail Association v. Schrader, 19 N.E.2d ......
  • Get Started for Free

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT