Truck Insurance Exchange v. Workers' Compensation Appeals Board

Filed 8/11/16
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
TRUCK INSURANCE EXCHANGE, B268231
Petitioner, (W.C.A.B. No. ADJ8464986)
v.
WORKERS’ COMPENSATION
APPEALS BOARD and NG FUNG
KWOK,
Respondents.
PROCEEDINGS to review a decision of the Workers’ Compensation Appeals
Board. Order affirmed.
Horvitz & Levy, David M. Axelrad, Bradley S. Pauley, Julie L. Woods; Williams-
Abrego Los Angeles, Kevin D. Miller, Vanessa Y. Cavanna, Dana L. Sandoval and
David S. Ettinger for Petitioner.
Anne Schmitz and Allison J. Fairchild for Respondent Workers’ Compensation
Appeals Board.
Law Offices of Williams O. Owuor, Williams O. Owuor, Steven C. Louie and
Charles R. Rondeau for Respondent Ng Fung Kwok.
*******
Petitioner Truck Insurance Exchange of Farmers Insurance Group (Farmers)
contends the defense of laches bars the workers compensation claim of the employee.
The employer received notification of the injury the day after it happened but a workers
compensation claim was not submitted to Farmers until more than seven years later.
However, notice to or knowledge of a workplace injury on the part of the employer is
deemed to be notice to or knowledge of the insurer.1 Since Farmers is deemed to have
known of the injury the day after it occurred, Farmers cannot show delay in receiving
notice of the claim, which is an essential element of laches (Magic Kitchen LLC v. Good
Things Intern. Ltd. (2007) 153 Cal.App.4th 1144, 1157). We hold laches does not apply.
We therefore affirm the order excluding laches as an affirmative defense and remand the
case to the Workers’ Compensation Appeals Board (appeals board) for further
proceedings.
FACTUAL BACKGROUND
A. The Employee and the Accident
It is undisputed that the employee, Ng Kwok (Kwok), was employed as a
restaurant manager and waiter by Nu Square Corporation, doing business as Har Lam
Kee Restaurant (restaurant). The owner of the restaurant was King Tak Cheung
(Mr. Cheung). Mr. Cheung is the older brother of Kwok’s wife, Yuk Lin Cheung
(Ms. Cheung).
On the morning of January 10, 2005, rain was coming into the restaurant dining
area. Kwok went out to the backyard area with a ladder to inspect the leak. A few
minutes later, Kwok was found lying on the ground unconscious with the ladder next to
him.
Kwok sustained a brain hemorrhage and was and continues to be paralyzed from
the shoulders down. Since the accident, Kwok receives 24-hour medical care.
1 “Every such contract or policy shall contain a clause to the effect that, as between
the employee and the insurer, notice to or knowledge of the occurrence of the injury on
the part of the employer will be deemed notice or knowledge, as the case may be, on the
part of the insurer.” (Ins. Code, § 11652.)
2
B. Notification
Ms. Cheung notified Mr. Cheung of Kwok’s accident by way of a phone call the
day after it occurred. Mr. Cheung was then in Hong Kong for treatment of an illness.
While Farmers contended that Mr. Cheung did not know of the injury, the workers’
compensation administrative law judge (WCJ) rejected as not believable that Mr. Cheung
never received information about his brother-in-law’s injury. The WCJ found
Ms. Cheung’s testimony “far more believable” that she called Mr. Cheung in Hong Kong
and told him what had happened. The appeals board expressly supported the WCJ’s
credibility determination. Mr. Cheung did not testify nor was he ever deposed. No
evidence was presented that contradicted Ms. Cheung’s testimony on this issue.
Within one working day of receiving notice or knowledge of injury, the employer
is required to provide to the employee a claim form and a notice of potential eligibility
for workers’ compensation benefits. (Lab. Code, § 5401, subd. (a).)2 The WCJ
concluded that in this case this “was apparently never done.” If an employer breaches
this statutory duty, the limitations period is tolled for the period of time that the employee
remains unaware of his rights. (Kaiser Foundation Hospitals v. Workers’ Comp. Appeals
Bd. (1985) 39 Cal.3d 57, 60.)
C. Kwok’s Workers’ Compensation Claim
Ms. Cheung, Kwok’s wife, filed a workers’ compensation claim for Kwok in
July 2012, more than seven years after the accident. This came about because
Ms. Cheung heard a radio program about workers’ compensation cases and began
inquiring with attorneys. Although she had procured workers’ compensation insurance
for the restaurant after the accident, she did not understand what workers’ compensation
meant. She understood that without liability and workers’ compensation insurance, the
business could not operate. She bought the insurance based on what the insurance agent
told her was necessary.
2 Statutory references are to the Labor Code, unless otherwise noted.
3
Given Ms. Cheung’s lack of familiarity with the workers’ compensation system,
this was exactly the kind of case where notice of workers’ compensation rights under
section 5401 was particularly important.
D. Coverage
It was stipulated that the restaurant was insured for workers’ compensation by
Farmers.
E. Testimony About Laches
Farmers called Elizabeth Wojcik (Wojcik) as a witness to support its laches
defense.
Wojcik began handling Kwok’s claim in March 2013. Kwok’s claim first came to
the attention of Farmers in July 2012. Farmers tried to verify coverage but it was
difficult to verify the dates of coverage because it was a number of years since the date of
injury. Coverage was ultimately confirmed through the Workers’ Compensation
Insurance Rating Bureau (WCIRB).3
Wojcik investigated the claim to determine the owner of the business and the
owner of the building. However, only limited information was obtained through the
business owner, Mr. Cheung, and the owner of the building, Sharon Feng.
Wojcik found indications that the owners of the restaurant might be Kwok, an
older brother, or Ms. Cheung. She attempted to investigate by interviewing people
working in the restaurant but no one remembered anything. Wojcik subpoenaed records
from the Secretary of State, the Department of Health, and the Department of Alcoholic
Beverages, which included a statement that the restaurant was transferred to Ms. Cheung
from the prior owner. Wojcik could not come to a conclusion about whether Kwok
owned the restaurant.
3 The WCIRB is the bureau to which employers must provide information
pertaining to workers’ compensation, including employer information, insurer
information, employee information and payroll, and workers’ compensation claims filed
for previous calendar year. (Cal. Code Regs., tit. 8, § 10203.)
4
The cause of the fall was unknown because no one actually witnessed the fall.
The roof was flat so it would have been difficult to fall off the actual roof. Wojcik was
unable to determine if there was a defect in the ladder because it could not be located.
Wojcik testified that Farmers was unable to determine if the fall was intentional, if there
was horseplay involved, if there was criminal activity, or if there was intoxication. There
was one witness mentioned in the police report but he could not be located.
Wojcik confirmed that a copy of the application and a DWC-1 Employee’s Claim
Form was served on Farmers on July 27, 2012. Wojcik also confirmed that she signed a
Notice Regarding Denial of Workers’ Compensation Benefits on behalf of Farmers dated
March 21, 2013. Wojcik acknowledged that Kwok’s claim was not denied within the 90-
day period mandated in section 5402.4 Accordingly, Wojcik agreed that section 5402
triggered the rebuttable presumption that the claim was compensable. However, Farmers
did not treat Kwok’s claim as compensable.
RULINGS OF THE WCJ AND THE APPEALS BOARD
The WCJ concluded that Kwok sustained injury arising out of and occurring in the
course of employment. The WCJ also concluded that the statute of limitations did not bar
Kwok’s claim. The medical record was ordered developed.
On the issue of injury arising out of and occurring in the course of employment,
the WCJ noted the parties’ stipulation that Kwok was employed by the restaurant as a
manager. The WCJ noted the unrebutted testimony of a witness that there was a leak in
the roof due to rain and that Kwok went outside carrying a ladder. Several minutes later,
Kwok was found lying on the ground outside the restaurant, next to the ladder.
On Farmers’ assertion of the statute of limitations, the WCJ found that the
employer, Mr. Cheung, was given notice of Kwok’s injury the day after the accident but
4 “If liability is not rejected within 90 days after the date the claim form is filed
under Section 5401, the injury shall be presumed compensable under this division. The
presumption of this subdivision is rebuttable only by evidence discovered subsequent to
the 90-day period.” (§ 5402, subd. (b).)
5
Kwok was not advised of his right to file a workers’ compensation claim. Accordingly,
the statute of limitations had not expired.
At this point, the WCJ did not address the issue of laches.
Farmers petitioned for reconsideration. One of the grounds upon which
reconsideration was sought was the doctrine of laches, which was raised as an issue in the
pre-trial conference statement but was not addressed by the WCJ. Farmers’ contention
with respect to laches was that the “carrier was greatly prejudiced by the lengthy delay in
filing an Application for Adjudication.” The petition for reconsideration also contended
that the statute of limitations barred the action, that employment had not been shown, and
that the injury did not arise and was not sustained in the course and scope of employment.
The WCJ recommended the petition be denied. Noting that the employer was
Mr. Cheung, and not the insurance company, the WCJ found that the undisputed and
credible testimony at trial was that Mr. Cheung was notified of the injury the day after the
accident. The employer failed to provide Kwok a claim form or to process the injury
claim.
On the issue of laches, the WCJ concluded in the report on the petition for
reconsideration as follows:
“The same facts form the basis of [Farmers’] arguments that
this claim should be barred on the grounds of laches, or
expiration of the statute of limitations. As set forth above, the
undersigned found the testimony of [Ms.] Cheung that she
reported the injury to the boss, [Mr.] Cheung, to be credible
and as a result, believes that the employer had notice of this
accident the day after it occurred. As a result the issue of
laches or the statute of limitations are not applicable.”
It is clear that the WCJ expressly found that laches did not apply to preclude
Kwok’s claim.
The appeals board adopted and incorporated the WCJ’s report and denied
reconsideration. Other than noting that it gave great weight to the WCJ’s credibility
determination and that there was no evidence to contradict that determination, the appeals
board did not issue an opinion of its own.
6
THE PETITION FOR A WRIT OF REVIEW
Farmers filed a petition for a writ of review in this court on November 16, 2015.
Abandoning all other issues, the petition’s sole contention was that laches applied to
preclude Farmers’ liability. The basis of Farmers’ laches defense in the petition for writ
of review was that Ms. Cheung, like the working population, had to have a “general
knowledge . . . concerning the availability of workers’ compensation benefits,” and that
she had “specific knowledge of Kwok’s workers’ compensation rights” because “she
purchased workers’ compensation insurance for the restaurant.” Ms. Cheung was “on
notice (or at least on inquiry notice) of Kwok’s rights” and the delay in filing a claim was
unreasonable.
The petition did not seek review of the finding that notice had been provided to the
employer, Mr. Cheung, the day after the injury by telephone. The petition also did not
seek review of the finding that Kwok’s injuries had been sustained in the course and
scope of employment.
Kwok filed an answer and Farmers submitted a reply .
ISSUANCE OF THE WRIT AND ADDITIONAL BRIEFING
We issued a writ of review on February 5, 2016. As noted, the petition for a writ
of review was limited to the laches defense. Given that the appeals board had adopted
the WCJ’s rulings, including the ruling rejecting the laches defense, on the authority of
Rymer v. Hager (1989) 211 Cal.App.3d 1171, 1180 we deemed the order rejecting the
affirmative defense of laches to be a reviewable order.
Simultaneously with the issuance of the writ, we requested briefing on whether the
defense of laches should be remanded to arbitration pursuant to Labor Code section 5275,
subdivision (a), as a question of insurance coverage. As evident in the request, this court
assumed laches was raised as a coverage defense to the employer’s insurance claim rather
than as a defense to Kwok’s injury claim.
Each of the parties unequivocally responded that arbitration was no longer
appropriate. Both the appeals board and Kwok asserted that there was no coverage
dispute raised in the underlying proceedings by Farmers. In addition, the appeals board
7
and Kwok advised that Farmers had stipulated that it provided workers’ compensation
coverage to the restaurant on January 10, 2005, when Kwok had sustained the injury and
that Kwok was an employee of the restaurant at the time of his injury.
On March 15, 2016, this court directed Farmers to explain the impact of the
stipulation regarding coverage, if any, on its defense of laches. The appeals board and
Kwok were provided an opportunity to reply to Farmers’ response.
Farmers’ position is that the stipulation is irrelevant to the defense of laches
because laches has nothing to do with the merits of the cause against which it is asserted.
Questions of coverage and employment status related to the merits of Kwok’s claim
while Farmers’ defense of laches relates to the prejudice caused by the unreasonable
delay in bringing the claim.
The appeals board noted Farmers’ concession of its stipulations regarding
insurance coverage and employment status. Because timely notice was provided to the
employer, Mr. Cheung, who failed to give notice of workers’ compensation rights, the
appeals board asserted that laches could not apply. The breach of the employer’s duty
outweighed the delay because it was the breach that caused the delay.
Kwok underscored Farmers’ failure to challenge the WCJ’s findings of
employment status, timely notice of the injury to the employer, and the employer’s
failure to provide statutory notice of workers’ compensation rights.
DISCUSSION
The appeals board has broad equitable powers with respect to matters within its
jurisdiction. (Dyer v. Workers’ Comp. Appeals Bd. (1994) 22 Cal.App.4th 1376, 1382.)
Thus, equitable doctrines such as laches are applicable in workers’ compensation
litigation. (State Farm General Ins. Co. v. Workers’ Comp. Appeals Bd. (2013) 218
Cal.App.4th 258, 268; 2 Hanna, Cal. Law of Employee Injuries and Workers’
Compensation (rev. 2d ed. 2016) § 24.03[1], p. 24-14 (rel. 81-3/2015).) Given these
principles, the first inquiry is what standard of review applies to the appeals board’s
ruling that laches does not apply to bar the claim in this case.
8
“Generally speaking, the existence of laches is a question of fact to be determined
by the trial court in light of all of the applicable circumstances, and in the absence of
manifest injustice or a lack of substantial support in the evidence its determination will be
sustained.” (Miller v. Eisenhower Medical Center (1980) 27 Cal.3d 614, 624.) When
coupled with the fact that we are empowered to determine if the appeals board’s decision
or award is supported by substantial evidence (§ 5952, subd. (d)), it appears that we must
decide whether the appeals board’s decision regarding laches is supported by substantial
evidence.
Ms. Cheung’s testimony that she called Mr. Cheung the day after the accident and
informed him of the accident and of Kwok’s injuries is the only evidence on the question
of notification. The WCJ and the appeals board found her testimony to be credible, and it
is uncontradicted by any evidence.
“Except as provided by sections 5402 and 5403[5], no claim to recover
compensation under this division shall be maintained unless within thirty days after the
occurrence of the injury which is claimed to have caused the disability or death, there is
served upon the employer notice in writing, signed by the person injured or someone in
his behalf . . . .” (§ 5400.) “Knowledge of an injury, obtained from any source, on the
part of an employer, his or her managing agent, superintendent, foreman, or other person
in authority, or knowledge of the assertion of a claim of injury sufficient to afford
opportunity to the employer to make an investigation into the facts, is equivalent to
service under Section 5400.” (§ 5402, subd. (a).) Notice to or knowledge of the employer
is deemed to be notice to or knowledge of the insurer. (Ins. Code, § 11652.)
Under the foregoing statutes, Farmers was on notice about the accident and the
claim of injury, or had knowledge thereof, as of January 11, 2005, the day after Kwok’s
5 “The failure to give notice under section 5400, or any defect or inaccuracy in a
notice is not a bar to recovery under this division if it is found as a fact in the proceedings
for the collection of the claim that the employer was not in fact misled or prejudiced by
such failure.” (§ 5403.)
9
accident. Not only is this substantial evidence, the statutes do not allow for any other
conclusion. The frustrations reflected in Wojcik’s testimony are, of course,
understandable and not surprising.6 Yet the fact is that under the law Farmers is deemed
to have known of the claim of injury as of January 11, 2005, which means that there was
no delay at all. Without at least some delay, the doctrine of laches simply has no
application. This was the basis of the WCJ’s ruling in the report after the petition for
reconsideration. Farmers is therefore in error when it contends that the doctrine of laches
was misapplied because prejudice was not taken into account. The WCJ did not analyze
the issue of prejudice because laches could not be applicable, given that there was no
delay.
Farmers is correct when it contends that laches does not implicate the merits of the
claim against which it is asserted. But it is not because of the merits of the claim that
laches cannot be applied to this case. It is the absence of delay that precludes laches.
In Farmers’ most recent filing, Farmers asserts that Mr. Cheung had no interest in
limiting his brother-in-law’s time to obtain workers’ compensation benefits, thus
extending the time to file indefinitely. According to Farmers, laches should be applied to
prevent this type of open-ended time limitation. Even though there is no evidence that
there was collusion among the family members, that is exactly what Farmers is
contending. However, the basis for the laches defense in Farmers’ petition for
reconsideration was that the “carrier was greatly prejudiced by the lengthy delay in filing
an Application for Adjudication.” No claim was raised with respect to collusion between
6 These difficulties, which comprise the prejudice Farmers claims it has suffered,
were directly caused by the failure to comply with subdivision (a) of section 5401. If
Kwok had been furnished with the claim form and notified of his potential eligibility for
workers’ compensation within one day of receiving notice of the injury, Farmers would
not have encountered the troubles Wojcik described.
10
the employer and employee to leave the workers’ compensation claim open. The
argument therefore is deemed waived pursuant to section 5904.7
The appeals board’s decision precluding the defense of laches is affirmed.
DISPOSITION
The decision of the appeals board, entered on October 2, 2015, denying Farmers’
petition for reconsideration is affirmed.
GRIMES, J.
WE CONCUR:
RUBIN, Acting P. J.
FLIER, J.
7 “The petitioner for reconsideration shall be deemed to have finally waived all
objections, irregularities, and illegalities concerning the matter upon which the
reconsideration is sought other than those set forth in the petition for reconsideration.”
(§ 5904.)
11