Kaiser Foundation Hospitals v. Workers' Comp. Appeals Bd.

• Decision Date: 25 July 1985
• Docket Number: S.F. N
• Court: California Supreme Court
• Parties: , 702 P.2d 197 KAISER FOUNDATION HOSPITALS, Permanente Medical Group, Petitioner, v. WORKERS' COMPENSATION APPEALS BOARD, City of Daly City et al., Respondents. o. 24759.

Page 115

216 Cal.Rptr. 115

39 Cal.3d 57, 702 P.2d 197

KAISER FOUNDATION HOSPITALS, Permanente Medical Group, Petitioner, v. WORKERS' COMPENSATION APPEALS BOARD, City of Daly City et al., Respondents.

S.F. No. 24759.

Supreme Court of California In Bank.

July 25, 1985.

[702 P.2d 199] [39 Cal.3d 59] Barry M. Wally, Burlingame, for petitioner.

Richard W. Younkin, William B. Donohoe, Alvin R. Barrett, Mullen & Filippi and David V. Costa, San Francisco, for respondents.

LUCAS, Justice.

This case involves the issue of whether the workers' compensation statute of limitations is tolled as to a lien claimant, until the employer with knowledge of the work-related injury notifies the employee of his workers' compensation rights. We conclude that when Labor Code section 5405, subdivision (a) (all further statutory references are to this code unless otherwise cited) applies, the limitations period specified therein runs from the date of injury. If the employer breaches its statutory duty to notify an employee unaware of his workers' compensation rights of those rights, the limitations period is tolled for the period of time that the employee remains unaware of his rights. No tolling occurs if the employee has actual knowledge of his rights before the employer's breach. The employer has the burden of proving when the injured employee gained actual knowledge of his workers' compensation rights. The employee must know that he may be entitled to relevant benefits under the workers' compensation system. We reach this conclusion after examining the language of the statutes involved, the case law, and the policies underlying the statutes.

FACTS

On February 25, 1981, while working for the City of Daly City (City), Marvin Martin slipped and fell, injuring his left leg. The injury worsened and on March 6, 1981, Martin was admitted to Kaiser Foundation Hospital (Kaiser) in Redwood City where he was furnished medical services. Because of his injury, Martin did not return to work until May 1981.

On April 23, 1981, Kaiser, as required by section 6409, sent a first report of work injury to Scott, Wetzel Services, Inc., insurance adjusters for City. There is no evidence that either Kaiser or City knew before Kaiser sent this letter that Martin's injury was possibly work related. On July 2, 1981, the adjusters, as required by section 5402 and administrative regulations, ¹ sent Martin a letter rejecting any employer liability for the injury, and advising Martin that if he was not satisfied he could contact Kaiser forwarded the case to its attorney in January 1982. In March 1982, Kaiser's attorney wrote to Martin's attorney asking if Martin planned to file a workers' compensation claim. After it received a negative response, Kaiser, on April 15, 1982, filed an application for adjudication of claim with the Workers' Compensation Appeals Board (WCAB) as a medical lien claimant. (The right to file such a claim is discussed infra. ) Kaiser's application was filed more than one year after Martin sustained his injury, but less than one year after City's adjusters sent the notice denying liability and advising Martin of his workers' compensation rights; i.e., more than one year from the date of injury, but less than one year after the employer notified the employee of his workers' compensation rights.

the state Division of Industrial Accidents or consult an attorney. A copy of the letter was sent to Kaiser. Both parties concede that this letter adequately notified Martin of his workers' compensation rights. A copy of the letter was sent to Kaiser. Martin acknowledged receiving the letter on August 13, 1981. There is no evidence that he had any knowledge of his workers' compensation rights prior to receiving this notice.

The WCAB held that Kaiser's action was barred by section 5405, subdivision (a), which states that workers' compensation proceedings must be commenced within one year from the date of injury. As will appear, we disagree.

DISCUSSION

1. Section 5405: Language and Underlying Policy

Section 5405 specifies in relevant part that workers' compensation proceedings must be commenced within one year from the later of "(a) The date of injury; or ... [p] (c) The date of last furnishing of any benefits provided for in [ §§ 4600-4605]...." Sections 4600-4605 specify that an employer must provide all competent medical care reasonably required to treat a work-related injury.

The purpose of any limitations statute is to require "diligent prosecution of known claims thereby providing necessary finality and predictability in legal affairs, and ensuring that claims will be resolved while the evidence bearing on the issues is reasonably available and fresh." (Kaiser Foundation Hospitals v. Workers' Comp. Appeals Bd. (Webb) (1977) 19 Cal.3d 329, 336, 137 Cal.Rptr. 878, 562 P.2d 1037; see also 3 Larson, Workmen's Compensation Law (1983) § 78.10 ["The purpose ... of any limitations statute [is] to protect the employer against claims too old to be successfully investigated and defended"]; 2 Hanna, Cal. Law of Employee Injury and Workmen's Compensation (2d ed. 1984) § 18.02 [the purpose of a statute of limitations in workers' compensation cases "is to cause an early submission of controversies while it is possible to obtain competent evidence concerning the alleged injury and its effects, and thus to afford protection against false claims or those based upon remote and unsatisfactory speculation as to the cause of a disability ..."].)

We must decide how section 5405 is to be interpreted in light of various Labor Code sections and administrative regulations that require an employer with notice of a work-related injury to inform the injured employee of his workers' compensation rights. ² As we will show, this court and the Court of Appeal previously have dealt with similar issues.

2. The Reynolds Decision and Subsequent Amendments to the Labor Code

In Reynolds v. Workmen's Comp. Appeals Bd. (1974) 12 Cal.3d 726, 117 Cal.Rptr. 79, 527 P.2d 631, the employee had a heart attack at work on February 20, 1968, and his supervisor called an ambulance. Because of the heart attack, the employee did not work for one year; he paid all his own medical expenses. In December 1970, a relative suggested to the employee that he might have a workers' compensation claim, a possibility that he had not considered previously. He consulted an attorney and filed a claim on January 22, 1971, almost three years after the date of injury.

In Reynolds, we held the claim was not barred by section 5405's one-year limitations period because the employer never notified the employee of his workers' compensation rights, ³ and the employee was unaware of those rights at the time of his injury. We observed that, under section 138.4, "The administrative director [of the Division of Industrial Accidents, Department of Industrial Relations] shall, with respect to injuries involving loss of time: [p] (a) Prescribe reasonable rules and regulations for the serving on the employee of reports dealing with the payment or nonpayment of benefits...." (P. 729.) Pursuant to section 138.4, the administrative director had promulgated rules effective at the time of the employee's injury in Reynolds, requiring an employer to notify employees of their workers' compensation rights when an employee's injuries resulted in hospitalization or loss of more than seven days of work. (Cal.Admin.Code, tit. 8, §§ 9816, 9817, 9859.) ⁴ As we stated in Reynolds, "The clear purpose of these rules is to protect and preserve the rights of an injured employee who may be ignorant of the procedures or, indeed, the very existence of the workmen's compensation law." (12 Cal.3d at p. 729, 117 Cal.Rptr. 79, 527 P.2d 631.) Reynolds stands for the proposition that when an employer fails to perform its statutory duty to notify an injured employee of his workers' compensation rights, and the injured employee is unaware of those rights from the date of injury through the date of the employer's breach, then the statute of limitations will be tolled until the employee receives actual knowledge that he may be entitled to benefits under the workers' compensation system. ⁵

Following the Reynolds decision, the Legislature in 1975 added new section 138.3, and amended section 5402. Section 138.3 states: "The administrative director shall, with respect to all injuries, prescribe ... reasonable rules and regulations requiring the employer to serve notice on the injured employee that he may be entitled to benefits under this division." The 1975 amendment to section 5402 added the following relevant language: "Upon receiving ... knowledge [of an injury], the employer shall notify the injured employee ... that he may be entitled to benefits under this division. Such notice by the employer shall be within the time period and in the manner prescribed by the administrative director for such purpose...." Thus, sections 138.3 and 5402 codify Administrative Code, title 8, sections 9816, 9817, and 9859, and by implication confer legislative approval on the result reached in Reynolds. (See Review of Selected 1975 Cal. Legislation (1976) 7 Pacific L.J. 237, 568-569; Mastoris, The Statutes of Limitation in Workers' Compensation Proceedings (1979) 15 Cal. Western L.Rev. 32, 55 & fn. 88.)

In 1977, pursuant to the 1975 legislation, the administrative director added a rule requiring employers, within five days of receiving notice of any employee's work-related injury, to notify the employee in writing of his workers' compensation rights. (Cal.Admin.Code, tit. 8, § 9880.) Apart from lending support to the Reynolds decision, the net result of the 1975 legislation and subsequent addition to the Administrative Code was to expand the employer's duty to inform the injured employee. Under section 5402, the duty now arises when the employer has actual or constructive knowledge of any work-related injury, including those requiring no...