Travelers Indem. Co. v. Lara
| Decision Date | 03 November 2022 |
| Docket Number | B306897 |
| Parties | The TRAVELERS INDEMNITY CO., Plaintiff and Appellant, v. Ricardo LARA, as Insurance Commissioner, etc., Defendant and Respondent; Adir International, LLC, Real Party in Interest. |
| Court | California Court of Appeals Court of Appeals |
Gordon & Reese, Asim K. Desai, Margaret M. Drugan, Los Angeles; Gibson, Dunn & Crutcher, Blane H. Evanson, Irvine, and Samuel Eckman, Los Angeles, for Plaintiff and Appellant.
Rob Bonta, Attorney General, Tamar Pachter, Senior Assistant Attorney General, Lisa W. Chao, Supervising Deputy Attorney General, and John C. Keith, Deputy Attorney General, for Defendant and Respondent.
Klapach & Klapach and Joseph S. Klapach, Beverly Hills, for Real Party in Interest.
The Travelers Indemnity Company appeals the judgment entered after the superior court denied Travelers’ petition for a writ of administrative mandate challenging the Insurance Commissioner's decision that certain agreements relating to workers’ compensation insurance policies issued to Adir International, LLC were unenforceable. Travelers contends Adir's lawsuit in the trial court, which included a request for a declaratory judgment the agreements were void, barred the Commissioner, under the doctrine of exclusive concurrent jurisdiction, from exercising jurisdiction while that lawsuit was pending. Travelers also appeals the postjudgment order granting Adir's motion for attorney fees, contending attorney fees were not authorized.
We affirm the order and judgment denying Travelers's petition. The exclusive concurrent jurisdiction doctrine does not apply in this context to proceedings pending before the trial court and an administrative agency; and, in any event, it was reasonable and consistent with the primary jurisdiction doctrine for the trial court to defer to the Commissioner's determination of the validity of the agreement at issue. In addition, because Adir's administrative claim fell within the agreement's attorney fee provision, we affirm the postjudgment order awarding Adir attorney fees.
Adir operates the Curacao chain of retail department stores. Between 2004 to 2011 Travelers issued Adir annual guaranteed cost workers’ compensation insurance policies. Each policy was filed with the Workers Compensation Rating Bureau (WCRB) pursuant to Insurance Code section 116581 and specified the rates to be charged to Adir. In addition, each policy included a general purpose endorsement, stating "the insured and the insurer have mutually agreed to a large risk alternative rating option retrospective rating plan."
Unlike the policies, which contained a fixed premium for the policy period, the alternative rating option retrospective rating plan provided for an adjustment of the premium after the policy period ended based on losses suffered during the policy period. The endorsement did not set forth the method for premium calculation, definitions, terms, rates or the parties’ obligations under the alternative rating option. Those provisions were contained in a separate side agreement that also included an arbitration provision. Unlike the guaranteed cost policies, the side agreements were not filed with the WCRB for review by the Commissioner.
In 2012 Adir did not renew its workers’ compensation insurance with Travelers and refused to pay Travelers’ post-policy period adjusted premiums as required by the side agreements.
After negotiations to recover premiums Adir owned under the large risk alternative rating plan failed, Travelers in 2014 served Adir with an arbitration demand. In response Adir filed an action in Los Angeles County Superior Court (L.A.S.C. No. BC575513) against Travelers and its insurance broker, Grosslight Insurance, asserting claims for breach of contract, tortious breach of the implied covenant of good faith and fair dealing and fraud, primarily alleging Travelers had engaged in improper claims-handling and settlement practices that increased Travelers’ costs of administering claims and, in turn, the amount of Adir's retrospective premiums. Adir's complaint also included a claim for declaratory relief, seeking a judicial determination the side agreements, in particular the arbitration provision, were void because they had not been filed with the WCRB as required by sections 11658 and 11735.2
Shortly after filing the lawsuit Adir asked the trial court to declare the arbitration agreement unenforceable.3 The court denied the motion, ruling the enforceability of the arbitration provision in the side agreements was a matter for the arbitrator. The court stayed Adir's action and ordered the matter to arbitration.
What happened next in both the arbitration proceeding and the trial court is detailed in our nonpublished opinion Adir International, LLC v. The Travelers Indemnity Co. (Dec. 30, 2020, B293415) 2020 WL 7777878. In brief, the arbitration panel found the arbitration provision was severable from the side agreement, did not constitute an "endorsement" as defined in the Insurance Code and did not need to be filed with the WCRB to be enforceable. Following a hearing the arbitration panel also found the side agreements did not violate sections 11658 or 11735. However, before the arbitration panel could issue its final award, the trial court in June 2018 agreed to hear Adir's renewed motion to declare the arbitration agreement unenforceable. Citing a then-recent court of appeal decision ( Nielsen Contracting, Inc. v. Applied Underwriters, Inc. (2018) 22 Cal.App.5th 1096, 232 Cal.Rptr.3d 282 ) and a precedential ruling from the Commissioner (Matter of Shasta Linen Supply, Inc. (June 20, 2016) Cal. Insurance Commissioner, No. AHB-WCA-14-31) (Matter of Shasta Linen ) that arbitration agreements must be filed with the WCRB to comply with sections 11658 and 11735, the court reconsidered its earlier ruling and found the arbitration agreement void and unenforceable. We affirmed the trial court's order reconsidering its prior ruling and denying arbitration of Adir's lawsuit. ( Adir International, supra, B293415 [pp. 18-20].)
While the arbitration was pending, Adir on February 17, 2016 filed with Travelers a request for action under the policy's dispute resolution provision, which allowed the insured to challenge Travelers’ interpretation and application of specified aspects of the policy and, if dissatisfied with Travelers’ resolution, to seek review before the Department of Insurance. Travelers denied Adir's complaint and request for action.
Adir on April 22, 2016 filed an administrative appeal (and on June 2, 2016 a supplemental appeal) with the Department of Insurance pursuant to section 11737, subdivision (f), which authorizes a person aggrieved by application of a rating system to appeal to the Commissioner.4 Adir contended the side agreements constituted an "unfiled rating plan" in violation of sections 16358 and 11735. According to Adir, by relying on the invalid side agreement to calculate premiums, Travelers had misapplied its rating system to Adir.
In response Travelers petitioned for a writ of prohibition in the pending trial court action requesting the court stay the administrative hearing while the lawsuit was pending. The court denied the petition.
At the administrative hearing Travelers, relying on the doctrine of exclusive concurrent jurisdiction, argued the Commissioner lacked jurisdiction to consider the merits of Adir's administrative complaint under section 11737, subdivision (f), while the action in the trial court was still pending. The Commissioner rejected that argument, concluding the Department of Insurance had "exclusive jurisdiction [pursuant to section 11737, subdivision (f) ], to adjudicate [Adir]’s claim that Travelers’ unfiled Side Agreements misapplied Travelers’ filed rating plan by violating Insurance Code sections 11658 and 11735, as well as California Code of Regulations, title 10, section 2268."5 On the merits the Commissioner ruled Travelers’ side agreements were void because they had not been filed with the WCRB as required and constituted a misapplication of Travelers’ filed rating plan in violation of sections 11658 and 11735.
Travelers filed a petition for a writ of administrative mandate challenging the Commissioner's decision. The superior court denied Travelers’ petition, rejecting Travelers’ contention the Commissioner lacked jurisdiction to consider Adir's administrative complaint while the trial court action, which included a claim for declaratory relief invalidating the side agreements, was still pending. Like the Commissioner, the court also rejected Travelers’ alternative jurisdictional argument that Adir's administrative complaint did not challenge a "rating system" and thus did not fall within the jurisdiction of the Commissioner under section 11737, subdivision (f).
Following entry of judgment denying Travelers’ petition for writ of administrative mandate, Adir moved pursuant to an attorney fee provision in the side agreements and Civil Code section 1717 to recover its attorney fees as the prevailing party in the action. The court awarded Adir $321,338.54 in reasonable attorney fees incurred in the administrative hearing and this administrative mandamus action and rejected Adir's requests for additional attorney fees as the prevailing party on its declaratory relief claim in the trial court action. The court ruled any prevailing party determination in the trial court action was premature and not within the court's jurisdictional purview in any event. (Adir does not contest the propriety of that order.)
Travelers filed notices of appeal from both the judgment and the postjudgment attorney fee order. We ordered the appeals consolidated.
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