S.F. Bay Area Rapid Transit Dist. v. Gen. Reinsurance Corp.

Decision Date24 June 2015
Docket NumberCase No. 14–cv–01866–JSC
Citation111 F.Supp.3d 1055
Parties San Francisco Bay Area Rapid Transit District, Plaintiff, v. General Reinsurance Corporation, Defendant.
CourtU.S. District Court — Northern District of California

David W. Hughes, Laughlin Falbo Levy & Moresi LLP, Oakland, CA, for Plaintiff.

Stephen David Treuer, Alan H. Barbanel, Nancy Joy Brown, Barbanel & Treuer, P.C., Los Angeles, CA, for Defendant.

OPINION RE: PHASE ONE BENCH TRIAL

JACQUELINE SCOTT CORLEY, United States Magistrate Judge

Defendant General Reinsurance Corporation ("General Reinsurance") issued an excess insurance policy to Plaintiff San Francisco Bay Area Rapid Transit District ("BART"), which is a self-insured employer for workers' compensation. This dispute arises out of a multiple myeloma workers' compensation claim of a former BART employee, Michael Gonsolin ("Gonsolin"), which BART settled with Gonsolin before the Workers' Compensation Appeals Board ("WC Appeals Board"). BART contends that General Reinsurance is obligated to pay the claim because, as stipulated by the parties before the WC Appeals Board, and found by the WC Appeals Board, Gonsolin's injury occurred during the policy period, and BART has reached its retention limit triggering General Reinsurance's coverage. General Reinsurance contends that it has no obligation to pay because Gonsolin's injury in fact occurred after its policy had ended.

The parties agreed to resolve their dispute in a bench trial based upon stipulated facts. In Phase One the Court must decide whether the parties can litigate the date of injury; that is, whether for purposes of the application of the excess policy, General Reinsurance is bound by the decision of the WC Appeals Board. After carefully considering the parties' submissions (Dkt.Nos.35, 36), and having had the benefit of oral argument on May 28, 2015, the Court finds that under the circumstances here General Reinsurance is not bound in this breach of contract action by the date of injury that the WC Appeals Board found.

BACKGROUND1
A. The Policy at Issue

BART is self-insured for workers' compensation claim purposes. It nonetheless purchases excess insurance to cover claims that exceed a particular amount. General Reinsurance issued BART an Excess Insurance Policy For Self–Insurer Of Workers' Compensation and Employers Liability Policy (the "Policy"), effective July 1, 1985 through July 1, 1992. Under the Policy's terms, BART had a $500,000 retention on workers' compensation claims, meaning that BART was obligated to pay the first $500,000 and General Reinsurance was obligated to indemnify BART up to $10,000,000 in excess of that retention. (See Dkt. No. 34–1 at 1.)2 The Policy applies to "losses paid by" BART for "bodily injury by disease," provided

the bodily injury or disease is caused or aggravated by the conditions of employment by the Insured. The employee's last day of last exposure to those conditions of that employment causing or aggravating such bodily injury by disease must occur during the period this policy is in force.

(Id. at 3.) When the Policy ended in 1992, BART obtained an excess insurance policy with a different insurer, but with the same retention amount. Beginning in 2002 and through the present, BART's excess insurance policies have had a much higher retention amount. (Dkt.34–3.)

B. Gonsolin's Workers' Compensation Claim

Michael Gonsolin worked as a BART police officer from 1979 to 2005, except for 1985 to 1987, when he worked as a detective. Gonsolin retired in 2005, and in October 2006 he was diagnosed with multiple myeloma. The following month Gonsolin filed an Application for Adjudication of Claim in WC Appeals Board Case No. SFO 0499837 (the "myeloma case"). Gonsolin claimed that he was entitled to workers' compensation benefits due to his cumulative exposure to carcinogens, specifically benzene,3 while employed as a BART police officer. In his application, he listed the date of injury as "CT [cumulative trauma]" through October 13, 2006. (Dkt. No. 34–40 at 168.)

California's workers' compensation statutory scheme provides that "liability for occupational disease or cumulative injury" is limited to the employer who employed the claimant "during a period of four years immediately preceding either the date of injury, as determined pursuant to Section 5412, or the last date on which the employee was employed in an occupation exposing him or her to the hazards of the occupational disease or cumulative, injury, whichever occurs first." Labor Code § 5505.5(a). Labor Code Section 5412, which governs the date of injury for occupational diseases or cumulative injury, defines date of injury as "that date upon which the employee first suffered disability therefrom and either knew, or in the exercise of reasonable diligence should have known, that such disability was caused by his present or prior employment." Id. § 5412. "The fact of injury (exposure) and the date of injury (disability), by definition, are not equivalent in cases involving the latent effects of an occupational disease." See Chevron U.S.A., Inc. v. WC Appeals Bd., 219 Cal.App.3d 1265, 1271, 268 Cal.Rptr. 699 (1990).

Special rules govern defining and proving injury when the occupational injury is cancer developed by peace officers exposed to carcinogens known to cause cancer. Labor Code § 3212.1. Under such circumstances, California law provides that "[t]he cancer so developing or manifesting itself in these cases shall be presumed to arise out of and in the course of employment." Id. § 3212.1(d) (emphasis added). The presumption relates to the connection between the exposure and the disease, not to a particular date of injury. See Faust v. San Diego, No. SDO 244774, 68 Cal. Comp. Cases 1822, 2003 WL 23148877, at *6–7 (W.C.A.B. Dec. 11, 2003) (en banc). The "presumption is disputable and may be controverted by evidence that the primary site of the cancer has been established and that the carcinogen to which the member has demonstrated exposure is not reasonably linked to the disabling cancer [,]" but "[u]nless so controverted, the [WC Appeals Board] is bound to find in accordance with the presumption." Id. In Ennis v. BART, 72 Cal. Comp. Cases 1694 (2007), the WC Appeals Board held that the Section 3212.1cancer presumption applies to BART police officers.

On January 26, 2007, Athens Administrators, BART's workers' compensation claims administrator, denied Gonsolin's claim, concluding that his "claim for cancer does not fall within the presumptions under Labor Code [Sections] 3213.5 and 3212.6... and there is no medical evidence to indicate that [his] cancer is related to [his] employment." (Dkt. No. 34–39 at 17.) The matter then proceeded through the WC Appeals Board. On March 23, 2007, Gonsolin was deposed in connection with his myeloma case, and on April 19, 2007, Dr. Revels Cayton, a board-certified internal medicine and pulmonary disease specialist chosen to be the Agreed Medical Examiner ("AME") assigned to the case, issued a report regarding Gonsolin's condition. Among other things, Dr. Cayton found that "Mr. Gonsolin's multiple myeloma has reasonably been caused by his benzene exposure in the workplace." (Dkt. No. 34–14 at 8.) Dr. Cayton was deposed on August 23, 2007 and testified that the average latency period for multiple myeloma is 8 to 10 years. (Dkt. No. 34–15 at 4; see also Dkt. No. 34–37 at 15 ("[T]he average latency is probably eight to ten years. It can extend out, and it can be shorter, but eight to ten years would cover most bases.").) Discovery in Gonsolin's myeloma case closed on October 12, 2007.

Later that month, BART's claims administrator reviewed a study from September and October 2007 that concluded, in relevant part, that there were no detectable levels of benzene present at any BART facilities and that "BART Police Sergeants are not exposed to Benzene in the course of their work." (Dkt. No. 34–18 at 1.) BART thereafter filed a petition for removal to reopen discovery in the Gonsolin myeloma case to further depose Dr. Cayton about that study; specifically, BART argued that Dr. Cayton's analysis was "flawed" insofar as he had relied on inaccurate data about benzene levels in BART facilities to reach the conclusion that Gonsolin's benzene exposure caused his myeloma. (See Dkt. No. 34–19 at 5.) BART further contended that Dr. Cayton was "cajoled" by Gonsolin's attorney to find that Gonsolin had been exposed to "threshold levels" of benzene that caused his disease. (Id. ) On November 19, 2007, the WC Appeals Board judge rejected those arguments and issued a report recommending that the petition be denied. (Dkt. No. 34–21 at 5.)

Also in November of 2007, the California Court of Appeal denied a petition for writ of review of the decision in Ennis v. BART, 72 Cal. Comp. Cases 1694 (2007), in which the WC Appeals Board had held that the Labor Code Section 3212.1cancer presumption applies to BART police officers. In the wake of that decision, BART's attorney noted that it would have "a very difficult time prevailing on a question of" whether Gonsolin's myeloma is a condition arising out of and occurring in the course of his employment. (Dkt. No. 34–22 at 2.)

BART thereafter sought to settle Gonsolin's myeloma claim. The proposed settlement involved, among other things, obtaining Dr. Cayton's opinion on the date of injury. On December 5, 2007, BART provided its excess insurer for injuries occurring in 2002 and later (not defendant General Insurance) a First Notice of Loss that represented the date of injury was October 13, 2006. (Dkt. No. 34–25.) The next day, Dr. Cayton issued a letter to BART and Gonsolin, regarding the date of injury, in which he states that "[t]he latency period for Mr. Gonsolin's myeloma is fifteen years" ... therefore "exposures prior to 1991 were injurious." (Dkt. No. 34–26.)

On December 14, 2007, BART and Gonsolin reached an agreement and presented settlement terms to the WC Appeals Board, which thereafter entered a Partial Order...

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