Source: https://law.justia.com/cases/california/supreme-court/3d/22/829.html
Timestamp: 2019-06-16 23:33:51
Document Index: 160158443

Matched Legal Cases: ['§ 3517', '§ 3852', '§ 3852', '§ 3853', '§ 3856', '§ 3861', '§ 3858', '§ 4', '§ 3850']

Associated Construction & Engineering Co. v. Workers' Comp. Appeals Bd. :: :: Supreme Court of California Decisions :: California Case Law :: California Law :: US Law :: Justia
Justia › US Law › Case Law › California Case Law › Cal. 3d › Volume 22 › Associated Construction & Engineering Co. v. Workers' Comp. Appeals Bd.
(Opinion by Mosk, J., with Clark, Richardson and Manuel, JJ., concurring. Separate concurring opinion by Clark, J. Separate dissenting opinion by Jefferson, J. with Bird, C. J., and Tobriner, J., concurring.) [22 Cal. 3d 830]
We must determine whether the principles of comparative negligence prescribed in Li v. Yellow Cab Co. (1975) 13 Cal. 3d 804 [119 Cal. Rptr. 858, 532 P.2d 1226, 78 A.L.R.3d 393], are to be applied to the adjudication of employers' subrogation rights within the workers' compensation system. In particular, we consider whether Witt v. Jackson (1961) 57 Cal. 2d 57 [17 Cal. Rptr. 369, 366 P.2d 641], and Roe v. Workmen's Comp. Appeals Bd. (1974) 12 Cal. 3d 884 [117 Cal. Rptr. 683, 528 P.2d 771] -- which prevent a negligent employer from obtaining any credit toward future workers' compensation liability when an injured employee recovers from a third party -- should be modified to allow a partial credit to the employer.
We conclude that the principles of Li should indeed modify the Roe doctrine, but only to allow the concurrently negligent employer a credit against workers' compensation obligations which exceed the proportionate liability he would incur for indemnification of the third party under a comparative system of allocating tort responsibility among multiple [22 Cal. 3d 833] wrongdoers. Only this result carries out the central objective of Witt to allocate responsibility equitably between a negligent employer and a third party tortfeasor, and thereby prevent the employer from taking "advantage of his own wrong." (Civ. Code, § 3517.)
Under section 3601 of the Labor Code, the recovery of workers' compensation benefits is, except in certain limited circumstances, the exclusive remedy of the injured employee against his employer. fn. 1 The claim of those benefits, however, does not affect the employee's right of recovery "for all damages proximately resulting from such injury or death against any person other than the employer." (§ 3852; see De Cruz v. Reid (1968) 69 Cal. 2d 217, 222 [70 Cal. Rptr. 550, 444 P.2d 342].) In the event a third party is liable in whole or in part for the employee's injuries, the Labor Code provides the employer with three basic techniques for obtaining reimbursement from the third party for workers' compensation benefits the employer has paid or become obligated to pay: the employer "may bring an action directly against the third party (§ 3852), join as a party plaintiff or intervene in an action brought by the employee (§ 3853), or allow the employee to prosecute the action himself and subsequently apply for a first lien against the amount of the employee's judgment, less an allowance for litigation expenses and attorney's fees (§ 3856, subd. (b))." (Witt v. Jackson (1961) supra, 57 Cal. 2d 57, 69.) The code also allows an employer to receive credit before the Workers' Compensation Appeals Board towards future workers' compensation liability for the amount of an employee's third party judgment "as has not theretofore been applied to the payment of expenses or attorneys' fees, pursuant to the provisions of Sections 3856, 3858, and 3860 of this code, or has not been applied to reimburse the employer." (§ 3861; see also § 3858.) fn. 2
Prior to 1971, these credit and reimbursement remedies also gave to the employer the advantage of any recovery the employee obtained by way of settlement with the third party. Section 3860, subdivision (b), then provided that "the entire amount of such settlement, with or without suit, is subject to the employer's full claim for reimbursement for compensation he has paid or become obligated to pay ...." Section 3861 required the board to allow, as a credit to the employer, amounts from "any [22 Cal. 3d 834] recovery by the employee for his injury, either by settlement or after judgment ...." (Italics added.)
In Roe v. Workmen's Comp. Appeals Bd. (1974) supra, 12 Cal. 3d 884, we encountered the negligent employer in a somewhat different setting -- claiming a credit under section 3861 after the injured employee had settled his cause of action against the third party without determination of the issue of employer negligence. Two substantial arguments were advanced against extending Witt to bar recovery by a negligent employer in this situation: first, denial of the employer's credit would inure to the benefit of the employee rather than the third party, thereby giving the employee a "double recovery" of both workers' compensation benefits and third party settlement; and second, an adjudication of the employers' negligence by the board would be unconstitutional. fn. 3
Roe held that neither of these problems justified allowing negligent employers to claim a credit. We expressed doubt as to whether the recovery of workers' compensation benefits by an employee following a settlement constituted a double recovery, given the likelihood that any settlement took into account the possibility of such a recovery (12 Cal.3d at p. 889), and pointed out that in any event "The policy against double recovery primarily protects the third party tortfeasor, not the employer" -- the party seeking to assert that policy in Roe. Similarly, we found [22 Cal. 3d 835] nothing in the Constitution to prevent the board from determining the employer's fault for the purpose of adjudicating his claim of credit. (Id., at p. 891.) We concluded "(1) that the concurrent negligence of the employer bars his right to a credit against his liability for compensation for the amount of any recovery for his injury obtained by the employee by settlement of his cause of action against third parties; and (2) that where the employer's negligence has not been adjudicated in such third party action, the applicant is entitled to have it adjudicated before the Board." (Gregory v. Workmen's Comp. Appeals Bd. (1974) 12 Cal. 3d 899, 902 [117 Cal. Rptr. 694, 528 P.2d 782].)
Employer claimed a credit against its workers' compensation liability under Labor Code section 3861 in the amount of employee's $40,000 net recovery in the third party action, which credit would have effectively eliminated employer's further workers' compensation obligations. Employee pleaded the employer's concurrent negligence as a bar to the [22 Cal. 3d 836] credit, relying on Roe. Employer in response maintained that the "all-or-nothing" rule of Roe had been modified by Li, and requested that the judge reduce its credit only in accordance with its comparative fault. The judge, however, concluded that Roe remained applicable, and refused to apply comparative principles or make a determination of employer's relative negligence. He did determine that employer was negligent, and on this basis denied employer's claim of credit. The board affirmed this decision, adopting the opinion of the judge as its own. Faced with an award of permanent disability benefits, undiminished by the employee's substantial third party recovery, employer petitioned this court for a writ of review of the board's decision.
The Legislature's action in 1971 followed a decade of judicial activity which had substantially altered the structure of third party litigation in workers' compensation cases. From at least the codification of workers' compensation laws in 1937 until 1971, the consent of both employer and employee was necessary for either to effect a settlement with a third party defendant. fn. 5 This consent requirement encouraged employers and employees to settle simultaneously their claims against the third party. It also served to "protect the rights and interests of employee and employer and to prevent or discourage either of them from obtaining a recovery from the third party at the expense or the disadvantage of the other." (Brown v. Superior Court (1970) 3 Cal. 3d 427, 431-432 [90 Cal. Rptr. 737, 476 P.2d 105].) The employer and employee could efficiently be required to share each other's litigational burden in part because each had an interest in establishing the liability of the third party for the employee's injuries and in obtaining the maximum possible recovery. Moreover, there were no dramatic differences in the proof required for either to succeed in his claim. [22 Cal. 3d 837]
The year following Brown the consent provision of the Labor Code was amended. The following subdivision was added to section 3859: "(b) Notwithstanding anything to the contrary contained in this chapter, an employee may settle and release any claim he may have against a third party without the consent of the employer. Such settlement or release shall be subject to the employer's right to proceed to recover compensation he has paid in accordance with section 3852." In addition, section 3860, subdivision (b), which subjects the employee's settlement to the [22 Cal. 3d 838] "employer's full claim for reimbursement," was prefaced with the qualifying phrase "except as provided in Section 3859." fn. 6
These amendments clearly deny the employer his former right to veto any settlement between the employee and third party; however, the breadth and imprecision of the amendatory language has generated some uncertainty as to an employer's remedies following such an independent settlement. Much of the controversy centers on the effect of the amendments on the employer's lien and the rule of Brown. (See Van Nuis v. Los Angeles Soap Co. (1973) 36 Cal. App. 3d 222 [111 Cal. Rptr. 398]; but see Marrujo v. Hunt (1977) 71 Cal. App. 3d 972 [138 Cal. Rptr. 220]; Harvey v. Boysen (1975) 50 Cal. App. 3d 756, 760 [123 Cal. Rptr. 740]; Lasky, Subrogation Under the California Workmen's Compensation Laws -- Rules, Remedies and Side Effects (1972) 12 Santa Clara Law. 1, 8-27; Cal. Workmen's Compensation Practice (Cont.Ed.Bar 1973) p. 648; id., (Cont.Ed.Bar Supp. 1976) pp. 149-150.) [1] We restrict our discussion to the issue presented herein -- the effect of the amendments on the employer's credit rights -- and conclude that neither the language nor the purpose of the 1971 amendments reflect a legislative intent to abolish the employer's credit with respect to an independent employee-third party settlement.
It is significant that the Legislature modified the lien provisions of sections 3859 and 3860, but did not change the language of either section 3858 or section 3861, which together authorize the employer's credit remedy. This omission raises at least an inference that the Legislature did not have the employer's credit in mind when it amended section 3859. (See People v. Valentine (1946) 28 Cal. 2d 121, 142 [169 P.2d 1].)
The Legislature's ambiguous expressions of intent in section 3859, subdivision (b), do not justify an abridgement of the policy, expressed forcefully elsewhere in the statute, that a nonnegligent employer should have the advantage of an employee's settlement with a third party so long as he can prove his liability for future workers' compensation payments and defeat an assertion of his culpability. Section 3861 still provides that "The appeals board is empowered to and shall allow, as a credit to the employer to be applied against his liability for compensation, such [22 Cal. 3d 839] amount of any recovery by the employee for his injury, either by settlement or after judgment, as has not theretofore been applied to the payment of expenses or attorneys' fees, pursuant to the provisions of Sections 3856, 3858, and 3860 of this code, or has not been applied to reimburse the employer." (Italics added.) Yet, unless the Brown prerequisites happen to be met, denial of an employer's credit would restrict him to a cause of action against the third party in which he would be compelled to litigate the issue of the defendant's liability as well as his own lack of negligence. fn. 7
Finally, even were we, in the manner of Brown, to condition the abolition of an employer's credit on the determination of the common issue against the third party, denial of the credit would in practice substantially deprive many nonnegligent employers of the possibility of recouping a substantial portion of their workers' compensation benefits. In a series of Court of Appeal decisions, it has been held that the employer, in an independent action against the third party, cannot recover for workers' compensation benefits not yet determined by the board. (Conner v. Utah Constr. & Mining Co. (1964) 231 Cal. App. 2d 263, 275 [41 Cal. Rptr. 728]; Castro v. Fowler Equipment Co. (1965) 233 Cal. App. 2d 416, 421-423 [43 Cal. Rptr. 589]; Slayton v. Wright (1969) 271 Cal. App. 2d 219, 229-232 [76 Cal. Rptr. 494]; but see Comment, Roe v. Workman's Compensation Appeals Board: Something Fishy in California Workers' Compensation Law (1976) 27 Hastings L.J. 637, 643-646.) Thus, in order fully to recover his workers' compensation obligations, the employer would be required to postpone adjudication of his third party claim until permanent benefits were fixed by the board. Yet obvious legal and practical considerations might prevent the employer from so delaying trial of his claim. Section 3853 requires that employer and employee actions be consolidated, and nothing in the statute prevents an employee from postponing his independent settlement under section 3859 until the eve of trial, or even the middle of trial. We should not easily attribute to the Legislature an intent to make an employer's recovery fluctuate dramatically with his ability to prolong litigation. [22 Cal. 3d 840]
In Li v. Yellow Cab Co. (1975) supra, 13 Cal. 3d 804, 828-829, we held that "the 'all-or-nothing' rule of contributory negligence ... should be and is herewith superseded by a system of 'pure' comparative negligence, the fundamental purpose of which shall be to assign responsibility and liability for damage in direct proportion to the amount of negligence of each of the parties." We also noted, however, that our decision in Li should "be viewed as a first step in what we deem to be a proper and just direction, not as a compendium containing the answers to all questions that may be expected to arise." (Id., at p. 826.) This caveat mandates that we proceed with caution when considering the application of comparative negligence principles to a system of workers' compensation which has as its central feature a principle of employer liability without fault. Nevertheless, to the extent Witt and Roe depend on the vitality of contributory negligence, the same considerations of "logic, practical experience, and fundamental justice" that motivated our decision in Li (id., at p. 808) require an accommodation of the Witt-Roe doctrines to a comparative system.
[2a] The employer herein contends that the "all-or-nothing" rule of Roe must fall to the logic of Li, and urges that we replace Roe with a system in which the board determines the employer's comparative negligence, and denies only that percentage of employer's credit which corresponds to his degree of negligence. fn. 8 Both employee and the board argue that modification of Witt and Roe in light of Li would violate the [22 Cal. 3d 841] purposes of all three cases, and unnecessarily -- even unconstitutionally -- inject questions of fault into proceedings before the board.
Witt thus established the principle that, to the extent allowed by the employer's statutory liability, the employer and third party should share liability as would ordinary concurrent tortfeasors. To the extent the [22 Cal. 3d 842] reimbursement provisions of the Labor Code allowed an employer to avoid this duty of contribution, we reasoned, they allowed him to "profit from his own wrong." We applied the same logic in Roe with respect to the credit provisions of the Labor Code.
The development and application of comparative negligence principles, however, has undermined the conceptual basis for the rule of Witt and Roe by altering the liability of ordinary joint tortfeasors. To achieve Li's objective of a "system under which liability for damage will be borne ... in direct proportion to ... respective fault" (Li, 13 Cal.3d at p. 813), in American Motorcycle Assn. v. Superior Court (1978) 20 Cal. 3d 578, 591-599 [146 Cal. Rptr. 182, 578 P.2d 899], we modified California's common law equitable indemnity doctrine to permit "comparative indemnity" between multiple tortfeasors. As Witt and Roe interpreted the reimbursement and credit provisions of the Labor Code in light of the advent of contribution, so we must now interpret them to reflect the advent of comparative responsibility among joint tortfeasors. Applying the principle that the employer and third party should, to the extent consistent with the employer's statutory immunity from tort liability, share the burden of the employee's recovery as joint tortfeasors, we conclude that the concurrently negligent employer should receive either credit or reimbursement for the amount by which his compensation liability exceeds his proportional share of the injured employee's recovery. (See Arbaugh v. Procter & Gamble Mfg. Co. (1978) 80 Cal. App. 3d 500, 508-509 [145 Cal. Rptr. 608].)
[3] When the issue of an employer's concurrent negligence arises in a judicial forum, application of comparative negligence principles is relatively straightforward. The third party tortfeasor should be allowed to plead the employer's negligence as a partial defense, in the manner of Witt. Once this issue is injected into the trial, the trier of fact should determine the employer's degree of fault according to the principles of American Motorcycle. The court should then deduct the employer's percentage share of the employee's total recovery from the third party's liability -- up to the amount of the workers' compensation benefits assessed against the employer. fn. 9 [4] Correspondingly, the employer should be denied any claim of reimbursement -- or any lien under section 3856, subdivision (b) -- to the extent that his contribution would then fall short of his percentage share of responsibility for the employee's total recovery. [22 Cal. 3d 843]
A system so structured will effect an allocation of responsibility between negligent employers and third party tortfeasors far more equitably than the rule urged by employer. Employer proposes that the board determine the employer's relative fault and reduce the amount of its credit by the percentage of negligence so determined. The employer could then take this reduced credit immediately, without regard to the magnitude of its prior contribution to the employee's recovery. Under this mechanistic application of Li, a negligent employer that had made an insignificant contribution would have its already deficient contribution [22 Cal. 3d 844] further reduced -- a result clearly at odds with the premise that an employer should not be able to profit from its own wrong. fn. 11
The theory thus advanced in Roe concerning the board's determination of whether the employer was negligent is equally applicable to determination of the degree the employer was negligent: in either case, the board does not condition benefits upon "the fault of any party," but rather seeks only to characterize the employee's prior recovery from the third party. As we explained in Roe, the Constitution does not prevent adjudications of fault to resolve such ancillary issues as credit as long as workers' compensation benefits are not thereby diminished; and under the rule announced herein such benefits are not diminished whether or not the employer's negligence is determined. The rule has been structured in such a manner that the employee fully recovers his tort damages -- but from the proper parties. Apportionment of liability between the concurrently negligent employer and third party may depend on the relative [22 Cal. 3d 845] fault of the two, but workers' compensation benefits are not so dependent. Compensation thus remains irrespective of fault.
The rule announced herein contemplates two factual determinations: (1) the degree of fault attributable to the employer, and (2) the total damages suffered by the employee. When a settlement between the employee and a third party tortfeasor fails to resolve these issues, the task devolves upon the board. The burden thus imposed, however, may often be discharged without being appreciably more difficult than under the current requirements of Roe. For instance, the employer, as the party asserting a claim of credit after a determination of workers' compensation liability, must defeat any claim that its percentage share of total damages equals or exceeds its workers' compensation liability. Because the board need only decide to deny credit that the damages for which the employer [22 Cal. 3d 846] is responsible equal the employer's actual workers' compensation contribution, a precise determination of damages will not always be necessary. Elaborate evidentiary presentations may be avoided when the benefits assessed against the employer are clearly insufficient to merit a credit.
[2c] We conclude that the doctrines of Roe and Witt must be modified to reflect the principles of comparative negligence developed in [22 Cal. 3d 847] Li and American Motorcycle. Thus, an employer may be allowed credit or reimbursement under the Labor Code, based on an employee's recovery from a third party, but only to the extent the employer's liability in workers' compensation exceeds its share of responsibility for the employee's full tort damages. fn. 12 When an employer claims a credit before the board after an employee's independent third party settlement, section 3861 operates as a delegation of authority to the board to make the necessary determinations to apply this rule. Any complication of board proceedings that may unavoidably result is justified by the same considerations of logic and justice that led us to apply comparative negligence in the first instance.
Li v. Yellow Cab Co. (1975) 13 Cal. 3d 804 [119 Cal. Rptr. 858, 532 P.2d 1226, 78 A.L.R.3d 393], American Motorcycle Assn. v. Superior Court (1978) 20 Cal. 3d 578 [146 Cal. Rptr. 182, 578 P.2d 899], Daly v. General Motors Corp. (1978) 20 Cal. 3d 725 [144 Cal. Rptr. 380, 575 P.2d 1162], and Safeway Stores, Inc. v. Nest-Kart (1978) 21 Cal. 3d 322 [146 Cal. Rptr. 550, 579 P.2d 441], compel concurrence in the judgment and in the majority opinion.
I am unable to agree with the majority's holding that the Workers' [22 Cal. 3d 848] Compensation Appeals Board (hereinafter the Board) is required to apply the principles of comparative negligence, developed in Li v. Yellow Cab Co. (1975) 13 Cal. 3d 804 [119 Cal. Rptr. 858, 532 P.2d 1226, 78 A.L.R.3d 393], when an employer claims a credit after an employee has made an independent settlement with a third party and then seeks before the Board disability compensation benefits from the employer. The majority interprets Labor Code section 3861 as a delegation of authority to the Board to make the necessary determinations to apply the rule established by the majority -- that an employer shall be allowed a credit under the Labor Code against his liability for disability compensation in the amount of an employee's recovery from a third party, but only to the extent the employer's liability for worker's compensation exceeds his share of responsibility for the employee's full tort damages. This rule, according to the majority, requires the Board to determine first, whether the employer was negligent, and, if so, then to determine (1) the degree of fault of the employer, (2) the total damages to which the employee is entitled, and then to deny the employer credit until the ratio of his contribution to the employee's damages corresponds to his proportional share of fault. But once the employer's workers' compensation contribution reaches this level, the employer must then be granted a credit for his further workers' compensation liability in the full amount of the employee's third-party recovery available under Labor Code section 3861.
The majority considers first whether the 1971 amendments to Labor Code sections 3859 and 3860 had any effect on an employer's credit rights under Labor Code sections 3858 and 3861 -- the two sections which provide for an employer's credit remedy before the Board when the injured employee seeks permanent disability compensation after having effectuated a tort recovery against a third party tortfeasor by way of settlement or judgment. It is conceded that the Legislature modified the provisions of Labor Code sections 3859 and 3860 but did not make any changes in the provisions of Labor Code sections 3858 and 3861. [22 Cal. 3d 849]
It is to be noted that Labor Code section 3860, subdivision (b), makes the amount of the employee's third party settlement subject to the employer's claim for reimbursement for compensation the employer has [22 Cal. 3d 850] paid or "become obligated to pay," but such right of reimbursement is made subject to Labor Code section 3859 by virtue of the beginning phrase of subdivision (b) of section 3860 which reads as follows: "Except as provided in Section 3859." Thus, even though section 3860, subdivision (b), makes the employee's settlement subject to reimbursement for compensation which the employer has "become obligated to pay" as well as for compensation which he "has paid," these provisions are made subject to section 3859, subdivision (b), the provisions of which make the employee's third party settlement amount subject to one remedy by the employer and one remedy only -- "to recover compensation he has paid in accordance with Section 3852." (Italics added.) This limitation of remedy for the employer is made by Labor Code section 3859, subdivision (b), although Labor Code section 3852 authorizes an action against the third party by "[a]ny employer who pays, or becomes obligated to pay compensation." (Italics added.)
Although Labor Code section 3860 speaks in terms of compensation which an employer has become obligated to pay, the shifting to the third party tortfeasor of this liability was simply not provided for by Labor Code section 3859, subdivision (b). In similar fashion, Labor Code section 3861 speaks in terms of the employer obtaining before the Board a credit "to be applied against his liability for compensation." (Italics added.) In amending section 3859, subdivision (b), the Legislature's failure to use language to provide that an employee's recovery from a third party by way of settlement shall be subject to the employer's right to proceed before the Board to obtain a credit in the amount of this settlement recovery to be applied against his liability to the employee for compensation, indicates in a fairly decisive way that the provisions of Labor Code section 3861 were intended to be affected by the limiting language specifically used in Labor Code section 3859, subdivision (b). [22 Cal. 3d 851]
It is my view, therefore, that the 1971 amendments to Labor Code sections 3859 and 3860 can logically and rationally be interpreted in only one way. These amendments permit an injured employee and a third party, alleged to be responsible for the injury, without the consent of the employer, to enter into a settlement after an action has been filed against the third party, with the intentional result that the employer must obtain reimbursement or credit, if at all, solely from the third party in an action against such third party pursuant to the provisions of Labor Code section 3852. The employee's recovery from a third party by way of settlement, rather than by way of judgment, is intended to be free from any claim of reimbursement or credit by the employer irrespective of whether the employer was negligent or not. Whether this difference between the legislative treatment of an employee's recovery from a third party by way [22 Cal. 3d 852] of settlement and an employee's recovery from a third party by way of judgment is logically or rationally sound is not for this court to decide.
Furthermore, it is certainly not for this court to rectify what it deems to be omissions of sound public policy provisions from legislative enactments. This principle was stated many years ago in Dodds v. Stellar (1947) 30 Cal. 2d 496, 506 [183 P.2d 658], in the following cogent language: "These several statutory provisions clearly define the rights of the parties and completely cover the field. They emphasize the separate and distinct interest of the employer or its insurance carrier in the avails of the damage recovery for its full protection and leave no room for the evaluation of the rights of the parties in a manner inconsistent with the legislative plan. If there is to be any change in these statutory provisions defining the rights of the parties, the suggestion for such change should be addressed to the Legislature rather than to the courts." (Italics added.)
The majority's holding modifies the rule of law established in Roe v. Workmen's Comp. Appeals Bd. (1974) 12 Cal. 3d 884 [117 Cal. Rptr. 683, 528 P.2d 771]. By way of dicta, the majority also announces a modification of the rule of law established by Witt v. Jackson (1961) 57 Cal. 2d 57 [17 Cal. Rptr. 369, 366 P.2d 641]. The Roe case deals with an employer's credit rights when an injured employee has obtained a recovery for his injury against a third party. The Witt case deals with an employer's reimbursement rights when an injured employee has obtained a recovery for his injury against a third party. The difference between the two situations makes a substantial difference in any justification for modifying the principles of law involved in the two cases. Thus, an employer's right to credit is distinguished from his right to reimbursement by reference to both the time and the forum in which the employer seeks to shift his liability for workers' compensation to the employee's recovery against the third party tortfeasor. [22 Cal. 3d 853]
In the Roe case, this court held that where an injured employee has secured a recovery for his injury from a third party, any concurrent negligence of the employer bars his right to a credit under Labor Code section 3861 against his workers' compensation liability in a Board proceeding, and that if the employer's negligence has not been adjudicated in the third party action, the employee is entitled to have it adjudicated before the Board. (See Gregory v. Workmen's Comp. Appeals Bd. (1974) 12 Cal. 3d 899 [117 Cal. Rptr. 694, 528 P.2d 782].)
It is my view that the rule of law announced in Roe should not be modified to require the Board to allow a negligent employer some credit against his liability for further workers' compensation benefits for the amount of the recovery by the employee of tort damages against a third party. Although I would interpret Labor Code section 3861 as not authorizing a credit to the employer at all against his liability for permanent disability benefits when the injured employee has made a third party settlement recovery because of the 1971 amendments to Labor Code sections 3859 and 3860, I certainly can see no justification for changing the rule of Roe which precludes any credit to a negligent employer, regardless of the comparative degree of his negligence or fault, because of the decisions in Li and in American Motorcycle Assn. v. Superior Court (1978) 20 Cal. 3d 578 [146 Cal. Rptr. 182, 578 P.2d 899]. There has been no legislative change in Labor Code section 3861 since the decision in Roe in 1974 to justify a judicial change in interpretation based on legislative action. Nor has there been, since the Roe decision in 1974, any legislative changes in other sections of the Labor Code such as [22 Cal. 3d 854] sections 3858, 3859 and 3860 to justify a finding of any different legislative intent with respect to section 3861.
The Witt court held that the Labor Code provisions which provided reimbursement remedies to employers were to be construed to prohibit access to such remedies by negligent employers. The court stated: "In the absence of express terms to the contrary, these provisions must be deemed to be qualified by Civil Code section 3517 which provides that 'No one can take advantage of his own wrong.'" (Witt, supra, 57 Cal. 2d 57, 72.)
In analyzing the legal principles set forth in Witt and Roe for purposes of determining whether they are appropriate for application of comparative negligence or comparative fault rules of law, we cannot overlook the fact that the legal principles decided by Witt deal with the reimbursement rights of a negligent employer and are applied in court proceedings while the Roe doctrine that a negligent employer, regardless of his relative degree of negligence, is not entitled to credit comes into play only in an administrative proceeding before the Board. Today's majority decision determines, albeit by dicta, that the Witt rule of law is [22 Cal. 3d 855] to be modified because of Li and American Motorcycle so that the negligent employer is no longer to be denied any reimbursement from the proceeds of the employee's recovery against the third party but is to receive partial reimbursement in the amount by which his compensation liability exceeds his proportional share of the injured employee's recovery based on comparative negligence principles.
The majority seeks to justify its holding on a theory that the same considerations of "logic, practical experience, and fundamental justice" that constituted the basis for Li (Li, supra, 13 Cal. 3d 804, 808) requires a modification of the Roe principle to accommodate a comparative negligence system. I find this asserted justification unpersuasive and untenable. In my view, the majority's modification of Roe, by inserting principles of comparative negligence into the workers' compensation system, is substantially, if not totally, lacking in logic, practical experience, or fundamental justice -- the same principles which motivated the Li court to adopt a system of comparative negligence for tort cases administered by courts.
In reaching its decision, the majority purports to apply a caveat of Li which mandates that this court proceed with caution when considering the application of comparative negligence principles to a system of workers' compensation law which emphasizes the principle of employer liability without fault. But, on the contrary, the majority decision indicates that the majority has completely disregarded the caveat of Li, has thrown caution to the winds, and has proceeded boldly, recklessly and without caution to apply comparative negligence principles to the workers' compensation system in complete disregard of one element of [22 Cal. 3d 856] the heart of this system, mandated by the California Constitution, that the compensation for workers who sustain injury in the course of their employment, must be predicated on employers' liability "irrespective of the fault of any party." (Cal. Const., Art. XIV, § 4.)
The majority rejects the arguments advanced by the injured employee and the Board in the case at bench that a modification of the legal principle established by Roe to make applicable comparative negligence principles set forth in Li would unjustifiably violate the purposes of both cases and, by requiring the Board to apply Li principles in a proceeding in which the injured employee seeks permanent disability benefits and the employer seeks a credit because of the employee's tort recovery of damages from a third party by way of settlement, would violate the provisions of article XIV, section 4 of the California Constitution, as set forth above. I find these arguments tenable and persuasive, and, contrary to the views of the majority, supported significantly by principles of "logic, practical experience, and fundamental justice." (Li, supra 13 Cal. 3d 804, 808.) In my view the majority's holding in modifying Roe to permit a negligent employer to obtain a partial credit before the Board against his liability for permanent disability benefits by reason of the injured employee's recovery from a third party by way of settlement constitutes a clear case of violation of the provisions of section 4 of article XIV of the California Constitution, which I have set forth above.
I have previously pointed out that, in holding that the reimbursement remedies provided by the Labor Code for employers are not available to negligent employers, the Witt court placed the result on the ground that the Labor Code sections providing for such reimbursement remedies are to be deemed qualified by Civil Code section 3517 which provides that "[n]o one can take advantage of his own wrong." Does it not follow that, in precluding a negligent employer from obtaining a credit under Labor Code section 3861 by applying the Witt rationale, the same justification is applicable in Roe to preclude a negligent employer from profiting from his own wrong? If this is the logical basis for Roe, then the adoption of a rule of partial credit under comparative negligence principles rather than denying any credit at all constitutes a repudiation of this rationale. Even though it operates to a limited degree, the majority's holding unquestionably permits a negligent employer to profit from his own wrong, while the Roe court refused to permit a negligent employer to profit at all from his own wrong. Since the Witt and Roe rules are justified by the no-profit-from-one's-own-wrong principle set forth in Civil Code section 3517, the rule advanced by the majority today constitutes, without [22 Cal. 3d 857] adequate justification, a renunciation and repudiation of that same principle. In my view, Civil Code section 3517 proscribes the majority's approach in the case at bench for the same compelling reason that that section sustained the holdings in Witt and Roe -- to prevent a negligent employer, irrespective of the degree of his negligence, from taking advantage of his own wrong -- whether by way of a total reimbursement or total credit or by way of a partial reimbursement or a partial credit.
In order for the Board to determine the partial credit to be allowed the employer, the Board must adjudicate the following issues under the majority's holding, and determine (1) the total damages of the employee, [22 Cal. 3d 858] including damage items solely recoverable as compensation from the employer and also other damage items recoverable from a third party such as pain and suffering; (2) whether the third party was negligent; (3) whether the employer was negligent; (4) whether the injured employee was negligent, and (5) the relative degree of fault of the employer out of the 100 percent fault made up of the employer's, employee's and the third party's negligence. In the event the employee has made a settlement with two or more third parties, with one being sued on a negligence theory and another on strict liability in tort, the determination of comparative fault of the employer is further complicated.
But under the majority's holding, the Board would be required to determine Cole's total damages, made up of an allowance for pain and suffering, the reasonable value of medical and hospital care, the reasonable value of time lost from work, the present cash value of earning capacity certain to be lost in the future, and to determine what portion of those total damages would constitute a permanent disability award Cole would be entitled to obtain from his employer. The total damages determined might be far in excess of the $60,000 gross settlement Cole obtained from the third party or far less than that sum. Certainly, the settlement figure may have no reasonable relationship to Cole's total damages. The Board would then be required to determine the comparative negligence of Cole's employer and the third party in order to arrive at the partial credit to which the employer would be entitled. After all of these determinations, Cole's award of $5,815, or some other amount for permanent disability benefits due from the employer, could very well end [22 Cal. 3d 859] up being wiped out completely or diminished because of the partial credit to be allowed to the employer.
The Board's responsibility will be further intensified and aggravated if we have an injured employee's settlement recovery obtained from a third party alleged to be responsible for the injury on the basis of a defective product manufactured by the third party. A further complication will be encountered if the injured employee obtains a separate settlement recovery from two third parties -- one being sued on a negligence theory and the other on a strict-liability-in-tort theory for a defectively manufactured product. In the event of these possibilities, I assume that the majority would apply the holding of Safeway Stores, Inc. v. Nest-Kart (1978) 21 Cal. 3d 322 [146 Cal. Rptr. 550, 579 P.2d 441], and require the Board to apply comparative fault principles between the negligent employer and the strictly liable third party tortfeasor.
It is manifestly apparent that any decrease in the award of permanent disability benefits to the injured employee by operation of the majority's modification of Roe to compel application of comparative-fault determinations cannot be justified on any theory that it is necessary to prevent double recovery by the employee. The Roe court recognized that denying any credit to a negligent employee did not have this result. The grant of a partial credit, therefore, provides even less justification for any theory of necessity to prevent double discovery by the injured employee. [22 Cal. 3d 860]
The determination of these issues generally requires extensive examination and cross-examination of a number of witnesses, both lay and expert, including expert witnesses such as engineers and accident reconstruction experts. If the determination of comparative fault involves [22 Cal. 3d 861] a negligent employer and a third party whose liability is predicated on the manufacture of a defective product, the percentage of fault assessed against each of these parties can only be based upon pure speculation, conjecture and guess work by the trier of fact.
I am convinced that substantial injustice in many cases will necessarily result to the injured employee from the majority's modification of the Roe doctrine of no credit allowance to a negligent employer. As Justice Clark remarked in his concurring opinion in Safeway Stores: "Blind inquiry into relative fault is no better than the flip of a coin, and disputes over degree of fault must greatly increase the time and cost of litigation. [¶] While the comparative fault doctrine continues irresistible in the abstract, implementing the new doctrine requires both great administrative expense and analytical and mathematical determination for which the judicial system is not equipped." (Safeway Stores, supra, 21 Cal. 3d 322, 335.) (Italics added.) These consequences stated by Justice Clark apply with even greater certainty and inevitability to the injection of comparative principles of fault into the administrative system of workers' compensation.
The principles underlying the workers' compensation system and those underlying the tort negligence or fault system are so completely different and dissimilar from both a qualitative and a quantitative standpoint that any attempt, such as that made by the majority in the case at bench, to fuse the two into an integrated whole can only do violence, inequity and injustice to the special considerations of the workers' compensation system. As between employee and employer in proceedings before the Board, questions involving issues of comparative negligence or fault and issues of the extent and monetary value of pain and emotional trauma [22 Cal. 3d 862] suffered by the injured employee are obviously repugnant and antithetical to the undergirding principles of workers' compensation law.
It is of significance that, in the case at bench, we are not really talking about the rights and obligations between an employer and third party directly. On the contrary, we are deciding the rights and obligations between an employer's insurance carrier and a third party's insurance carrier. Each insurance company has been paid premiums for undertaking the risks involved. It is neither the employer nor the third party who suffers by virtue of any shifting between the insurance carriers of the responsibility for specified percentages of the damages suffered by the injured employee. Most employers are business entities. The cost of insurance premiums is a cost of doing business which is passed on to the [22 Cal. 3d 863] customers of the business. Most third party tortfeasors are also business entities in which the cost of insurance premiums represent part of the cost of doing business that is paid for by the customers of these entities. Thus, the amount of damages to the injured employee that is paid by the insurance carriers for the employee and the third party is in reality financed by the customers of the employer and the third party. The costs of the awards to injured workers are spread, therefore, among a substantial segment of society.
The principle here involved is similar to that expressed by this court in Greenman v. Yuba Power Products, Inc. (1963) 59 Cal. 2d 57, 63 [27 Cal. Rptr. 697, 377 P.2d 897, 13 A.L.R.3d 1049], in imposing upon a manufacturer liability without negligence for injuries resulting from a defective product: "The purpose of such liability is to insure that the costs of injuries resulting from defective products are borne by the manufacturers that put such products on the market rather than by the injured persons who are powerless to protect themselves." The fact that Daly v. General Motors Corp. (1978) 20 Cal. 3d 725 [144 Cal. Rptr. 380, 575 P.2d 1162]; American Motorcycle Assn. v. Superior Court (1978) 20 Cal. 3d 578 [146 Cal. Rptr. 182, 578 P.2d 899], and Safeway Stores, Inc. v. Nest-Kart (1978) 21 Cal. 3d 322 [146 Cal. Rptr. 550, 579 P.2d 441], have been deemed by a majority of this court as a logical extension of the Li principles of comparative negligence does not at all lead reasonably to the conclusion that the case before us also represents such a logical extension.
In Roe, this court expressed the principle that "[t]he injured workman is the prime object of constitutional solicitude" (Roe, supra, 12 Cal. 3d 884, 891), in criticizing the concept expressed in a literal adherence to Labor Code section 3861 which would grant a negligent employer an automatic credit for the full damage recovery secured by an employee against a third party. To carry out this principle of constitutional solicitude for the injured workman, the Roe court precluded a negligent employer from obtaining against his liability for future permanent [22 Cal. 3d 864] disability benefits to the injured employee, any credit in the amount recovered by the employee against a third party. But, in modifying Roe to grant a negligent employer a partial credit in the employee's third party recovery, the majority in the case at bench has unfortunately forsaken and repudiated this principle, so nobly expressed in Roe.
FN 1. Except where noted, all statutory references are to the Labor Code.
FN 2. The Workers' Compensation Appeals Board will hereafter be referred to as the board.
FN 3. This constitutional argument was based on provisions in article XIV, section 4, requiring compensation "irrespective of the fault of any party," and contemplating such legislation as "shall accomplish substantial justice in all cases expeditiously, inexpensively, and without incumbrance of any character. ..." (See discussion infra.)
FN 4. In keeping with the statutory usage (§ 3850, subd. (b)), all references to "employer" hereafter include employer's workers' compensation carrier, unless otherwise indicated.
FN 5. Prior to its amendment in 1971, section 3859 provided: "No release or settlement of any claim under this chapter as to either the employee or the employer is valid without the written consent of both. The consent of both the employer and employee filed in court in writing together with the approval of the court, is sufficient in any action or proceeding where such approval is required by law."
FN 6. Subdivision (b) of section 3860 now reads in full: "(b) Except as provided in Section 3859, the entire amount of such settlement, with or without suit, is subject to the employer's full claim for reimbursement for compensation he has paid or become obligated to pay and any special damages to which he may be entitled under Section 3852, together with expenses and attorney fees, if any, subject to the limitations in this section set forth."
FN 7. The survival of both a credit and reimbursement remedy under the holding of this case gives the employer the choice of two courses of action, one against the third party and one which penalizes the employee. Most employers can be expected to choose the forum presenting the least onerous proof requirements. The risk that an employer will seek recovery from the third party may be effectively allocated by an agreement under which the employee agrees to assume the defense of such an action and pay any resulting judgment. This type of agreement has been successfully consummated. (See Levels v. Growers Ammonia Supply Co. (1975) 48 Cal. App. 3d 443 [121 Cal. Rptr. 779].) Similar arrangements might shift the risk of a successful credit claim to the third party.
FN 8. The Los Angeles Superior Court has proposed jury instructions for reimbursement cases which substantially embody employer's proposed system. (BAJI Nos. 15.14-15.19 (6th ed. 1977) pp. 668-691.)
FN 9. Under the rule of American Motorcycle, the joint and several liability of joint tortfeasors is retained. (20 Cal.3d at pp. 586-591.) Thus, except for his Witt-type deduction, the third party remains liable for all of employee's damages, including the portion which represents the extent to which section 3864 insulates the negligent employer from the comparative responsibility he would otherwise incur.
FN 10. Application of this rule is simple and may be illustrated by the following example. Assume an employee receives $20,000 in workers' compensation benefits. He later sues a third party to recover for the same injury, which suit is settled without the consent of the employer. Out of the settlement, the employee actually receives, after the payment of "expenses or attorneys' fees" within the meaning of section 3861, the sum of $25,000. The employee then seeks further benefits from the board and his employer claims a credit in the amount of the $25,000 settlement recovery. Under the principles announced herein, the board would then determine the employer's degree of fault and the employee's total damages. Should the board find the employer free of negligence, of course, the employer would receive the benefit of the entire $25,000 settlement as a credit against future payments. Were the board, however, to determine that the employer was 50 percent negligent, and that the employee is entitled to $100,000 in damages, then the employer could not claim a credit until he contributed an additional $30,000 in benefits. The employer would then have contributed a total of $50,000 to the employee's recovery, or 50 percent of the employee's total damages of $100,000, and the ratio of his contribution to the employee's damages would correspond to his degree of fault.
FN 11. Thus, under its proposed rule the employer herein would be relieved of all further contribution even if it is determined that employer was 85 percent at fault; credit for only 15 percent of the employee's $40,000 net settlement would effectively wipe out employer's further workers' compensation liability of approximately $5,800.
FN 12. BAJI Nos. 15.14-15.19 (6th ed. 1977) pages 668-691, to the extent they are inconsistent with this opinion, should not be used by trial courts.