Santiago v. Employee Benefits Services

• Decision Date: 30 May 1985
• Citation: 214 Cal.Rptr. 679,168 Cal.App.3d 898
• Court: California Court of Appeals Court of Appeals
• Parties: Gale SANTIAGO et al., Plaintiffs and Appellants, v. EMPLOYEE BENEFITS SERVICES et al., Defendants and Respondents. AO25674.

Page 679

214 Cal.Rptr. 679

168 Cal.App.3d 898

Gale SANTIAGO et al., Plaintiffs and Appellants, v. EMPLOYEE BENEFITS SERVICES et al., Defendants and Respondents.

AO25674.

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

May 30, 1985.

M.P. Dailey, Mark Tanner, Law Offices of Dailey & Hyman, Inc., Soquel, for plaintiffs and appellants.

Clark W. Patten, Sedgwick, Detert, Moran & Arnold, San Francisco, Mark G. Bonino, Ropers, Majeski, Kohn, Bentley & Wagner, Redwood City, for defendants and respondents.

MERRILL, Associate Justice.

Appellant Gale Santiago received an award from the Workers' Compensation Appeals Board (Appeals Board) in September 1982 for an injury which occurred during the course and scope of his employment. On July 15, 1983, appellants Gale Santiago (Gale) and Lynda Santiago (Lynda) filed a complaint based on respondents' alleged refusal to pay the award. Respondents EBI Services, Inc., ¹ and Elaine Barker, and respondents Thomas, Hall & Kirby, Richard J. Lyding and Douglas R. Kirby, filed demurrers to the complaint. Respondents based their separate demurrers on the ground that appellants' exclusive remedies are prescribed by the Workers' Compensation Act and that the superior court lacked jurisdiction to decide the action. The trial court sustained the general demurrers and entered a judgment of dismissal. This appeal followed.

I

Appellant Gale's industrial injury occurred while he was employed at Salinas Valley Memorial Hospital (Hospital), which was self-insured for worker's compensation purposes. The Appeals Board awarded him the payment of benefits for his injuries. In April 1983, the Appeals Board granted Gale a 10 percent penalty on his award for the Hospital's delay in payment of the original award. His complaint alleges that these benefits were not paid or were not paid in a timely fashion. As a result, appellants allege damages for wrongful refusal to pay insurance benefits, violation of Insurance Code section 790.03, subdivision (h), intentional infliction of emotional distress, loss of consortium, and abuse of process. Appellants named as defendants EBI Services, Inc., the corporation which administers the self-insured workers' compensation program for the Hospital, Elaine Barker, an adjustor for EBI Services, Inc., and Thomas, Hall & Kirby, Richard J. Lyding and Douglas R. Kirby, attorneys representing the Hospital in the workers' compensation proceeding.

II

Appellants argue that their action may be maintained, as an employer's independent adjusting agency and its representatives do not come within the exclusive jurisdiction of the Appeals Board. Instead, appellants assert that an independent adjusting agency and its representatives are regulated by the Insurance Code and thus are not immune from civil liability. (See Ins.Code, §§ 790.03, subd. (h), 14000 et seq.) According to appellants' line of reasoning, as adjusting agencies are not specifically included in the Workers' Compensation Act as an "employer" or "insurer," the provisions of the Insurance Code applying to "all persons engaged in the business of insurance" prevail. (See Lab.Code, § 3211; Ins.Code, § 14000 et seq.) Such a contention is not persuasive. Appellants' remedy is with the Appeals Board, not in superior court.

The California Workers' Compensation Act (Act) provides an elaborate and complete scheme for the adjudication of claims by employees against employers for injuries "arising out of and in the course of" their employment. (Lab.Code, § 3600.) There are but a few limited circumstances which allow an employee to ignore the exclusive remedies of the Act and bring an action in superior court. The underlying purpose of the Act is to provide a quick, simple and readily accessible method of claiming and receiving compensation. (Everfield v. State Comp. Ins. Fund (1981) 115 Cal.App.3d 15, 20, 171 Cal.Rptr. 164.)

Proceedings which in any manner concern the recovery of compensation, or any right or liability "arising out of or incidental thereto" are to be instituted solely before the Appeals Board. (Lab.Code, § 5300, subd. (a).) Moreover, the Act allows for a specific remedy of a 10 percent penalty in the event payment of a compensation award is unreasonably delayed or refused. (Lab.Code, § 5814.) In addition, the Appeals Board has the authority to impose successive penalties for successive delays in payment. (Gallamore v. Workers' Comp. Appeals Bd. (1979) 23 Cal.3d 815, 823, 153 Cal.Rptr. 590, 591 P.2d 1242.) The mere delay or failure to pay a workers' compensation award is not a basis for an independent lawsuit. (Ricard v. Pacific Indemnity Co. (1982) 132 Cal.App.3d 886, 894, 183 Cal.Rptr. 502, citing Noe v. Travelers Ins. Co. (1959) 172 Cal.App.2d 731, 737, 342 P.2d 976.)

The Court of Appeal on numerous occasions has considered questions similar to the one presented by the instant appeal. Consistently, we have held that when the gravamen of the complaint is the delay of or refusal to make payment of a compensation award, the exclusive jurisdiction is with the Appeals Board, and the remedy of Labor Code section 5814. (See Cervantes v. Great American Ins. Co. (1983) 140 Cal.App.3d 763, 189 Cal.Rptr. 761; Denning v. Esis Corp. (1983) 139 Cal.App.3d 946, 189 Cal.Rptr. 118; Droz v. Pacific National Ins. Co. (1982) 138 Cal.App.3d 181, 188 Cal.Rptr. 10; Depew v. Hartford Acc. & Indem. Co. (1982) 135 Cal.App.3d 574, 185 Cal.Rptr. 472; Fremont Indemnity Co. v. Superior Court (1982) 133 Cal.App.3d 879, 184 Cal.Rptr. 184; Everfield v. State Comp. Ins. Fund, supra, 115 Cal.App.3d 15, 171 Cal.Rptr. 164.) However, in Unruh v. Truck Insurance Exchange (1972) 7 Cal.3d 616, 102 Cal.Rptr. 815, 498 P.2d 1063, our Supreme Court created a narrow exception to the Appeals Board's exclusive jurisdiction in workers' compensation claims in those instances when the employer's insurance carrier intentionally commits outrageous and extreme conduct totally unnecessary to the normal investigation and defense of a claim. (Id., at p. 630, 102 Cal.Rptr. 815, 498 P.2d 1063.) ² The court held that these affirmative acts outside the scope of a customary insurance investigation caused the carrier to step out of its proper role and be liable in an action at law. (Ibid.)

In Fremont Indemnity Co. v. Superior Court, supra, 133 Cal.App.3d 879, 184 Cal.Rptr. 184, the complaint against an insurance carrier consisted of causes of action for the breach of duty of fair dealing in good faith, breach of statutory duties under Insurance Code section 790.03, subdivision (h), and the intentional infliction of emotional distress. The insurance carrier in Fremont Indemnity allegedly delayed and arbitrarily reduced compensation payments. Relying on Everfield v. State Comp. Ins. Fund, supra, 115 Cal.App.3d at page 15, 171 Cal.Rptr. 164, the court held that the plaintiff had failed to allege facts sufficient to remove the case from the exclusive jurisdiction of the Appeals Board. (Fremont Indemnity Co. v. Superior Court, supra, 133 Cal.App.3d at pp. 881-882, 184 Cal.Rptr. 184.) Allegations of severe emotional distress because of failure to pay workers' compensation benefits are not sufficiently outrageous acts to give rise to an exception to the Appeals Board's jurisdiction. (Ibid., citing Unruh v. Truck Insurance Exchange, supra, 7 Cal.3d at p. 616, 102 Cal.Rptr. 815, 498 P.2d 1063.) Further, the court held that allegations of violations of statutory duties pursuant to Insurance Code section 790.03 "adds nothing to the complaint." Simply because conduct appears to violate provisions of the Insurance Code in addition to the Labor Code does not remove the case from the exclusive jurisdiction of the Appeals Board. (Fremont Indemnity Co. v. Superior Court, supra, 133 Cal.App.3d at p. 882, 184 Cal.Rptr. 184.)

In Everfield v. State Comp. Ins. Fund, supra, 115 Cal.App.3d at page 19, 171 Cal.Rptr. 164, the court held that a complaint based on allegations of intentional, negligent, or "fraudulent" or "outrageous" delay in payment of an award, does not state a cause of action in superior court. The proper forum is the Appeals Board which is empowered by statute to investigate the reason for delayed payment and enforce discipline. (Ibid.) Where "[t]he gravamen of the cause of action is simply the delay in payment ... [i]t follows that ... the exclusive jurisdiction over such matters correctly reposes in the Workers' Compensation Appeals Board and irrespective of what suspected evil motives plaintiff wishes to ascribe to such delay, he simply cannot allege a cause of action based upon the delay and the change in the amount of payment." (Id., at p. 21, 171 Cal.Rptr. 164.)

Finally, like the instant action, Denning v. Esis Corp., supra, 139 Cal.App.3d 946, 189 Cal.Rptr. 118, involved a complaint against a self-insured employer and the company that administered workers' compensation benefits on behalf of said employer. The complaint alleged causes of action for bad faith failure to pay compensation benefits, intentional infliction of emotional distress and violation of statutory duties under Insurance Code section 790.03, subdivision (h), because of the defendant's failure to pay compensation benefits. Relying on Fremont Indemnity Co. v. Superior Court, supra, 133 Cal.App.3d at page 879, 184 Cal.Rptr. 184, Everfield v. State Comp. Ins. Fund, supra, 115 Cal.App.3d at page 15, 171 Cal.Rptr. 164, and Labor Code section 5814, the Court of Appeal affirmed the judgment of dismissal. The court approved the ruling of the trial court that " '[t]he gravamen of this complaint is the failure of plaintiff's employer to pay to him ... worker's compensation benefits.... Such a failure is squarely cognizable by the WCAB.' " (Denning v. Esis Corp., supra, 139 Cal.App.3d at p. 948, 189 Cal.Rptr. 118.)

Keeping these principles in mind, we turn first to appellants' cause of action for statutory violations of the Insurance Code section 790.03, subdivision (h), which lists...