Tag Archives: california court of appeal

New Questions on Uber and Lyft

One of the more interesting and challenging issues to surface is the status of drivers at transportation network companies (TNCs) such as Uber and Lyft. Are some or all of them employees? A federal court in California just ruled that this issue may be resolved in a class action (although this is subject to appeal).

That, alone, is a difficult call. Here are two web sites discussing the issue.

http://www.newyorker.com/magazine/2015/07/06/gigs-with-benefits

http://www.thelegalintelligencer.com/latest-news/id=1202730474534/Avoiding-Penalties-When-Classifying-Independent-Contractors?slreturn=20150602053546

Commentary addressing this issue has focused primarily on the added expense created by employee status. “For an employer, the main difference between contractors and W-2 employees is that employers have to ‘withhold income taxes, withhold and pay Social Security and Medicare taxes and pay unemployment tax on wages paid to an employee,'” according to the Internal Revenue Service.

Apart from these added expenses, status as an employee creates some difficult insurance challenges. Here a few:

–If you write a workers’ compensation policy for the TNC’s employees, how many employees are you insuring? Only those who work in the office, or the hundreds or thousands of drivers on the road?

–Most statutes or regulations covering TNCs such as Uber and Lyft require them to carry insurance on their drivers in various amounts — e.g., $1 million from from the time of agreeing on a ride to after the dropoff. Usually, there is a lower amount required for the time the driver is cruising with the app on looking to connect with a fare ($50,000 primary and $200,000 “excess” in California).

If the driver is an employee, these limits become largely irrelevant because the TNC, as the employer, is liable without limit for any injuries caused by an employee driving within the scope of employment. Put another way, the injuries are backed by all of the TNC’s assets, including any insurance it may carry.

–But the issue is more complex than that. What if the driver has a collision on the way to the city, but before turning on the app? Usually, when one is going to or coming from work, the commute is not considered to be in the scope of employment – i.e., no liability on the part of the employer. This “going and coming” rule changes, however, when the employee must use her car in the work. Obviously, TNC drivers must use their cars.

Take the case of Judy Bamberger. She used her car during work to visit clients and carry out other work-related chores. On her way home, she decided to stop for yoga and yogurt. As she made a left turn, she collided with a motorcyclist. Is the employer responsible? “Yes,” said the California Court of Appeal. In Moradi v. Marsh USA, Inc., 210 Cal. App.4th 886 (2013), the court held that her driving fell within the scope of her employment because, since she used her car in her work, going to and from work conferred an “incidental benefit” on the employer.

Thus, the TNCs’ liability may extend well beyond the “app on-app off” brackets.

–If this is not complex enough, consider this. Many drivers keep several apps on as they cruise. If a driver keeps three apps on and has a collision, is the driver an employee of all three TNCs? Does that change once the driver accepts a fare? What about the going and coming rule? If the app is not yet turned on, is the driver an employee of each company for whom the driver has an arrangement to drive?

One may imagine other “shared economy” scenarios where status as an employee will affect not only expenses line benefits, but also liability and related insurance issues.

Florida Work Comp Comes Full Circle

The recent Florida 11th Judicial Circuit Court decision in Florida Workers Advocates v. State of Florida, No. 11-13661-CA25 (2014) written by Circuit Court Judge Jorge Cueto, represents, in essence, a constitutional challenge to workers’ compensation that has come full circle. While during the early part of the 20th century there were a host of challenges to state workers’ compensation systems by employers, it has taken almost a century for workers to raise their own constitutional claims.

The interest in this case that has been triggered across the country should be tempered by the fact that this is a trial court level opinion and that the Florida Supreme Court already has a constitutional challenge to the workers’ compensation system on its docket. This latest case, undoubtedly, will be added to the appellate mix. (See: Westphal v. City of St. Petersburg, Case No. 1D12-3563)

As part of the reform process, stakeholders in every state workers’ compensation system have to come to grips with issues that require revisiting the original bargain. The inciting incident is inevitably the high cost to employers and the perceived abuses in the system by lawyers, medical providers and others. Seldom is the issue whether injured workers are being paid too much per se in terms of impairment or temporary or permanent indemnity benefits.

The challenge to the courts, whether in Florida or anywhere else, is to not sit in judgment over what is fundamentally a legislative decision. As stated by the California Court of Appeal more than a decade ago, “…policy concerns, expressed in a parade of horribles—delay or denial of benefits, delay in employees’ return to work, litigation explosion, increased claims costs, increased strain on government benefit programs, defense solicitation of ‘bought’ medical opinions—are better addressed to the legislature.” Lockheed Martin Corp. v. Workers’ Comp. Appeals Bd. (2002) 96 Cal.App.4th 1237, 1249, 117 Cal.Rptr.2d 865. When the legislature enacts changes to the workers’ compensation system, it is not up to the courts to overturn such actions based on whether they comport with the courts’ version of what a good workers’ compensation system ought to be. As the California Court of Appeals also stated:

“The judiciary, in reviewing statutes enacted by the legislature, may not undertake to evaluate the wisdom of the policies embodied in such legislation; absent a constitutional prohibition, the choice among competing policy considerations in enacting laws is a legislative function.” Bautista v. State of California (2011)201 Cal.App.4th 716, 733.

Even though Judge Cueto cited New York Central R. Co. v. White 243 U.S. 188 (1917), a decision arising from when New York’s system came under immediate scrutiny almost a century ago, to support his finding that exclusive remedy was now unconstitutional, the U.S. Supreme Court in that case also found:

“If the employee is no longer able to recover as much as before in case of being injured through the employer’s negligence, he is entitled to moderate compensation in all cases of injury, and has a certain and speedy remedy without the difficulty and expense of establishing negligence or proving the amount of the damages. Instead of assuming the entire consequences of all ordinary risks of the occupation, he assumes the consequences, in excess of the scheduled compensation, of risks ordinary and extraordinary. On the other hand, if the employer is left without defense respecting the question of fault, he at the same time is assured that the recovery is limited, and that it goes directly to the relief of the designated beneficiary.”  White 243 U.S. at 201 (1917)

The Court in White set out the boundaries for any constitutional analysis of a state workers’ compensation system when it said, in dicta, “This, of course, is not to say that any scale of compensation, however insignificant on the one hand or onerous on the other, would be supportable.”

That language underscores the wide range of actions a state legislature may take when creating and changing benefits in a workers’ compensation system and how best they are to be delivered. Such discretion – and deference – is at the heart of the concept of separation of powers.

Judge Cueto held that the Florida legislature has crossed this constitutional Rubicon. It will be up to the Florida Supreme Court, ultimately, to decide on which side of the bank its workers’ compensation is now docked.

Mandatory Skilled Nursing Hours Claims: Are You Covered?

As coverage counsel for policyholders, we see a variety of cases, claims, and complaints. In recent years we have observed a growing trend in health care litigation. Specifically, claims alleging violations of California Health and Safety Code Section 1276.5, which requires skilled nursing facilities (SNFs) to provide at least 3.2 nursing hours per day for each facility resident (3.2 Requirement). In the past, the 3.2 Requirement was mainly enforced by the California Department of Public Health, not private individuals. However, skilled nursing facility residents have the right to bring a private cause of action alleging violations of the 3.2 Requirement (3.2 Claims). The Lavender, et al. v. Skilled Healthcare Group, Inc., et al. matter,1 which resulted in a 2010 jury verdict of more than $670 million for plaintiff skilled nursing facility residents asserting, among other things, 3.2 Claims, demonstrates how disastrous such claims can be for skilled nursing facilities that litigate such claims through trial.

This private right of action was recently addressed by the California Court of Appeal in Shuts, et al. v. Covenant Holdco LLC, et al., where the plaintiff skilled nursing facility residents asserted 3.2 Claims under Health and Safety Code Section 1430(b).2 The Court in Shuts held that Section 1430(b) permits current or former skilled nursing facility residents to bring a lawsuit against the facility for violating any of their rights under the “Skilled Nursing and Intermediate Care Facility Patient's Bill of Rights.”3 The Patient's Bill of Rights includes the entitlement to live at a skilled nursing facility that employs an “adequate number of qualified personnel.”4 Thus, Section 1276.5's requirement that facilities maintain staffing ratios compliant with the 3.2 Requirement may be enforced by residents through Section 1430(b). Additionally, Section 1430(b) allows plaintiffs to recover monetary damages, up to a maximum of $500 per violation, as well as attorneys' fees and costs. By law, these damages may be multiplied by a factor of three if such violations caused a senior citizen or disabled person to suffer.5

Very recently, the California Court of Appeal held in Nevarrez v. San Marino Skilled Nursing and Wellness Centre that Section 1430(b) permits a maximum recovery of $500 total in a civil action for violation of the Patient's Bill of Rights.6 The Court opined that $500 is the maximum recovery available “regardless of how many rights are violated or whether such rights are violated repeatedly.”7 The trial court's award of $7,000 (based on a $500 award for each of the 14 violations alleged) was therefore reversed.8 This is an important ruling for skilled nursing facilities, and may significantly curtail litigation based on alleged violations of the Patient's Bill of Rights given the potential for very limited monetary recovery.

The Nevarrez decision is not yet final and may be reversed. Indeed, the Court of Appeal granted a petition for rehearing on the issue of the maximum recovery allowable under Section 1430(b). As a result, the decision in Nevarrez is now vacated pending rehearing.9 Thus, given the potentially significant exposure facilities still face opposing 3.2 Claims, insurance coverage is critical. Such coverage turns on the policy language at issue. Generally speaking, there are two types of liability policies: those that require physical harm and those that do not. The policies that do not require physical harm are more likely to result in coverage for 3.2 Claims, as patient-plaintiffs tend to disclaim any intent to “'seek damages for personal injuries, wrongful death or other resident-specific harm that may have been caused by inadequate staff.'”10 Such disclaimers are likely included to facilitate class certification in putative class actions; if there is any indication that individual claims of injury or death could predominate the lawsuit, the facility-defendants could possibly defeat class certification.

Despite policy language indicating coverage, insurers attempt to avoid their coverage obligations by asserting various arguments, including that 3.2 Claims amount to uncovered fines and penalties (liability policies commonly contain provisions excluding coverage for “fines and penalties”). Such arguments are unpersuasive. For example, nowhere in the statute through which patient-plaintiffs assert 3.2 Claims — Section 1430(b) — are fines or penalties mentioned. To the contrary, Section 1430(b) is entitled “Actions for injunction or civil damages.”11 Additionally, in the Shuts matter, the California Court of Appeal explained that “Section 1430, subdivision (b) authorizes statutory damages, attorney fees, and injunctive relief.”12 Further, the California Supreme Court has drawn a distinction between penalties that may be assessed by the State Department of Health Services (now the Department of Public Health) for violations, and the damages that may be recovered by a private party under the Long-Term Care, Health, Safety, and Security Act of 1973 (which includes Section 1430).13 Thus, the relief available to private party plaintiffs under Section 1430(b) constitutes covered damages, not uncovered fines or penalties.

Notwithstanding the title of Section 1430(b) — “Actions for injunction or civil damages” — and the California Supreme Court's distinction between penalties and damages, the Court of Appeal in Nevarrez referred to the amount recoverable under Section 1430(b) as a “penalty.”14 Because the Nevarrez court's reference to Section 1430(b)'s imposition of supposed “penalties” (as opposed to damages) was not an issue pending before the Court, its characterization of the relief available under Section 1430(b) is non-binding dicta.

Further, it is well established in California that insurance coverage is interpreted broadly so as to afford the greatest possible protection to the insured.15 Courts will not read words into a statute to facilitate a declination of coverage.16 Additionally, an insurer bears the burden of bringing itself within a policy's exclusionary clauses and exclusions are narrowly construed against insurers.17 Policy exclusions are strictly construed and an insurer cannot escape its basic duty to insure by means of an exclusionary clause that is unclear.18

Because Section 1430(b) is properly construed to provide for damages, not fines or penalties, and insurers must meet a high burden to avoid coverage based upon exclusionary policy language, a standard “fines or penalties” coverage limitation should not preclude coverage for 3.2 Claims.

Understanding insurance coverage issues can be key for skilled nursing facilities facing 3.2 Claims. Not only can insurance funds provide a defense against such claims, they may also assist in resolving those claims so as to avoid potentially devastating results at trial.

Authors
Miles Holden collaborated with Samantha Wolff in writing this article. Ms. Wolff is an attorney at Hanson Bridgett LLP. She represents both public and private sector clients in a variety of matters, including insurance coverage disputes and putative and certified class actions, through all phases of litigation in federal and state court.

1Lavender, et al. v. Skilled Healthcare Group, Inc., et al.; California Superior Court, Humboldt County; Case No. DR060264.

2Shuts, et al. v. Covenant Holdco LLC, et al. (2012) 208 Cal.App.4th 609.

3Health & Saf. Code, § 1430, subd. (b); Shuts, 208 Cal.App.4th at p. 614.

4Health & Saf. Code, § 1599.1, subd. (a); Cal. Code Regs., tit. 22, § 72527, subd. (a)(25).

5Civ. Code, § 3345.

6Nevarrez v. San Marino Skilled Nursing and Wellness Centre (June 5, 2013, B235372) __ Cal.App.4th __ [2013 Cal.App. LEXIS 444].)

7Nevarrez, supra, __ Cal.App.4th __ [2013 Cal.App. LEXIS 444, at p. *46].

8Id. at p. *47.

9Cal. Rules of Court, rule 8.268(d).

10See, e.g., Shuts, 208 Cal.App.4th at p. 615.

11Health & Saf. Code, § 1430 (emphasis added).

12Shuts, 208 Cal.App.4th at p. 614 (emphasis added).

13Kizer v. County of San Mateo (1991) 53 Cal.3d 139, 142-43.

14Nevarrez, supra, __ Cal.App.4th __ [2013 Cal.App. LEXIS 444, at pp. *45-47].

15See, e.g., MacKinnon v. Truck Ins. Exch. (2003) 31 Cal.4th 635, 648; see also State of Cal. v. Allstate Ins. Co. (2009) 45 Cal.4th 1008, 1018 (where insurance policy terms are ambiguous, they must be interpreted to protect the objectively reasonable expectations of the insured).

16Code Civ. Proc., § 1858; see also Silicon Valley Taxpayers' Assoc., Inc. v. Santa Clara County Open Space Authority (2008) 44 Cal.4th 431, 444-45 (statutes are to be given their plain meaning and courts are not permitted to read into the meaning of a statute if the language is clear and unambiguous); People v. Guzman (2005) 35 Cal.4th 577, 587-88 (courts may not add provisions to a statute by inserting words).

17N. Am. Bldg. Maint., Inc. v. Fireman's Fund Ins. Co. (2006) 137 Cal.App.4th 627, 642; Charles E. Thomas Co. v. Transamerica Ins. Grp. (1998) 62 Cal.App.4th 379, 382.

18E.M.M.I. Inc. v. Zurich Am. Ins. Co. (2004) 32 Cal.4th 465, 471.

Tenured Teacher Prevails On Claim that District Cannot Unilaterally Dismiss Charges

On June 25, 2012, in Boliou v. Stockton Unified School District, an appeals court ruled that once a school district schedules a termination hearing against a tenured teacher, it cannot unilaterally rescind the dismissal charges and thereby avoid paying the teacher’s attorneys’ fees and costs. The district is required to conclude the proceedings only as provided by statute, with the Commission on Professional Competence rendering a decision.

Stockton Unified filed an accusation against tenured teacher Mr. Boliou, specifying conduct it claimed merited his dismissal. He denied the conduct and demanded a hearing, which the district scheduled. After 18 months of vigorous litigation and some unfavorable rulings, the district moved to dismiss the charges. Boliou objected and demanded a ruling from the Commission that he should not be dismissed from his employment. This would entitle him to reasonable attorney fees and costs under Education Code §44944(e)(2). The Commission granted the district’s motion to dismiss the charges.

Boliou then went to court, and a judge granted his Petition for Writ of Administrative Mandamus, ordering the Commission to modify its dismissal order to include an express determination that Boliou should not be dismissed. The court also ordered the district to pay Boliou’s reasonable attorneys’ fees and costs.

The district appealed, and the appellate court upheld the writ. Even though no evidence was taken, the Commission was bound to conduct the hearing, once scheduled. Given the district’s dismissal of all charges against Boliou, the court found the only appropriate disposition was a finding that Boliou “should not be dismissed or suspended.” Once the Commission entered that finding, Boliou was also entitled to his reasonable attorney fees and costs.

California Education Code §44941, §44943, and §44944(a) provide that if a teacher demands a hearing on disciplinary charges and the governing board of the school district exercises its option to schedule a hearing instead of rescinding the charges, “the hearing shall be commenced …” Further, pursuant to §44944(b) and (c)(1), the hearing must be conducted, and “the commission shall prepare a written decision containing … a disposition that shall be, solely, one of the following: (A) That the employee should be dismissed; (B) That the employee should be suspended for a specific period of time without pay; (C) That the employee should not be dismissed or suspended.”

Accordingly, a district’s sole opportunity to rescind the charges is when it notifies the teacher of the charges and s/he demands a hearing. The Education Code’s comprehensive statutory scheme does not permit the district to stop the proceeding simply by dismissing the charges. The court concluded: “Regardless of whether the hearing proceeds with or without taking evidence on the merits of the charges, the statutory scheme makes clear what the commission is required to do.”