Opinion
A101256.
11-24-2003
WILLIAM EARLS, Plaintiff and Appellant, v. MICHAEL McPHERSON AND KAREN McPHERSON, Defendants and Respondents.
Introduction
Plaintiff William Earls appeals from a judgment of the Contra Costa County Superior Court dismissing his complaint against defendants Michael and Karen McPherson (defendants) following the courts sustaining defendants demurrer and plaintiffs failure to amend the complaint thereafter. Plaintiff was seriously injured on the job while working for general contractor John Zappia, who had been hired by defendants to remodel their home. Plaintiff sued defendants under the "peculiar risk" doctrine. He contends that he is not barred from pursuing a claim against them because the general contractor had not obtained workers compensation insurance. We disagree and affirm.
Facts and Procedural Background
Because this is an appeal from a dismissal following an order sustaining a demurrer, we summarize and accept as true all material allegations of the complaint. (Hensler v. City of Glendale (1994) 8 Cal.4th 1, 8-9, fn. 3; Shoemaker v. Myers (1990) 52 Cal .3d 1, 7.)
Plaintiff alleged in the second amendment to his complaint that defendants had engaged Zappia as a general contactor to perform construction work in connection with remodeling of their home. The work involved a peculiar risk of harm, requiring the provision of special safety precautions to protect persons performing such work. Zappia did not maintain or carry workers compensation insurance. Plaintiff was seriously injured when the scaffold on which he was working collapsed under him, causing him to fall to the marble floor, breaking his back.
Following entry of judgment dismissing the complaint on December 10, 2002, plaintiff filed this timely appeal.
Discussion
At common law it is generally held that the hirer of an independent contractor is not liable to third parties for physical injuries caused by the contractors negligence in performing the work. (Rest.2d Torts, § 409; Privette, supra, 5 Cal.4th at p. 693.) "Over time, the courts have, for policy reasons, created so many exceptions to this general rule of nonliability that ` "the rule is now primarily important as a preamble to the catalogue of its exceptions." [Citations.]" (Privette, supra , at p. 693.)
"[T]he person employing the independent contractor may be referred to as the `employer, `principal, `hirer or, depending on the circumstances of the case, as the `owner, `developer or `general contractor." (Toland v. Sunland Housing Group, Inc. (1998) 18 Cal.4th 253, 271 (conc. & dis. opn. of Werdegar, J.) (Toland).)
Our Supreme Court in Privette discussed the exception that allows liability to be extended to a hirer when the contracted work poses a "peculiar risk" of injury to others. That exception evolved as a way "to ensure that innocent third parties injured by the negligence of an independent contractor hired by a landowner to do inherently dangerous work on the land would not have to depend on the contractors solvency in order to receive compensation for the injuries. [Citations.]" (Privette, supra, 5 Cal.4th at p. 694.) California was one of the minority of jurisdictions that expanded this doctrine beyond third parties and allowed the contractors employees to seek recovery from the hirer for injuries caused by the contractors negligence. (Id. at p. 696 [discussing Woolen v. Aerojet General Corp. (1962) 57 Cal.2d 407].) In Privette, the Supreme Court held this extension of peculiar risk liability to hirers did not "withstand scrutiny" when considered in light of the workers compensation scheme. (Privette, supra, at pp. 701-702.) Although an innocent bystander might have no other source of compensation for injuries resulting from a contractors negligence, the workers compensation system guarantees the contractors employee a recovery for workplace injuries, regardless of the solvency of the contractor. (Id . at p. 701; Toland, supra, 18 Cal.4th at p. 261.) Moreover, while extension of liability to the hirer is generally justified by the hirers right to equitable indemnity from the contractor, such indemnity is not available for compensation paid to a contractors employees. "[T]he exclusivity provisions of the workers compensation scheme shield the negligent contractor from an action seeking equitable indemnity. ([Lab. Code,] § 3864.)" (Privette, supra, at p. 701.) "When, as here, the injuries resulting from an independent contractors performance of inherently dangerous work are to an employee of the contractor, and thus subject to workers compensation coverage, the doctrine of peculiar risk affords no basis for the employee to seek recovery of tort damages from the person who hired the contractor but did not cause the injuries." (Id. at p. 702.)
Privette recognized that the "expansive view" of the peculiar risk doctrine had been "widely criticized" because it "produces the anomalous result that a nonnegligent persons liability for an injury is greater than that of the person whose negligence actually caused the injury . . . ." (Id. at p. 698.) Finally, rejecting earlier decisions applying the peculiar risk doctrine, the court stated: "[I]n the case of on-the-job injury to an employee of an independent contractor, the workers compensation system of recovery regardless of fault achieves the identical purposes that underlie recovery under the doctrine of peculiar risk: It ensures compensation for injury by providing swift and sure compensation to employees for any workplace injury; it spreads the risk created by the performance of dangerous work to those who contract for and thus benefit from such work, by including the cost of workers compensation insurance in the price for the contracted work; and it encourages industrial safety." (Id. at p. 701.)
In Toland, supra, 18 Cal.4th 253, 269- 270, the court reaffirmed its view that the workers compensation system provides a sufficient remedy for an injured worker. The injured worker was the employee of a subcontractor. He sought benefits under the workers compensation system and also filed a civil suit against the general contractor. The Supreme Court concluded the general contractor was not liable, refusing to limit its Privette ruling to claims of "vicarious" liability under section 416 of the Restatement Second of Torts (hereafter Restatement) and holding that Privette applies even to "direct" liability under Restatement section 413 where the hirer fails to provide in the contract with the independent contractor or otherwise that special precautions be taken to avert the peculiar risks of the work. (Id. at pp. 259-260.)
In Camargo v. Tjaarda Dairy (2001) 25 Cal.4th 1235, 1238, the court refused to apply the peculiar risk doctrine to hold a hirer liable for negligent hiring of the subcontractor. In Hooker v. Department of Transportation (2002) 27 Cal.4th 198, 202, the court held that the hirer could not be held liable to an injured employee for retaining control of the worksite but could be held liable if the exercise of that control affirmatively contributed to the injury. Finally, in McKown v. Wal-Mart Stores, Inc. (2002) 27 Cal.4th 219, 222, the court held Wal-Mart liable where it affirmatively exercised control by requesting that an independent contractor hired to install a sound system use Wal-Marts forklifts and the forklifts were not properly equipped for the job.
Plaintiff contends Privette and its progeny do not apply where, as here, the independent contractor carries no workers compensation insurance. Plaintiff argues the rationale of the Privette line of cases is that an exception to the peculiar risk doctrine is necessary to avoid the anomaly of the non-negligent hirers liability being greater than that of the negligent contractor. Where the contractor is uninsured, there is no such anomaly, because the injured worker can sue the contractor outside of workers compensation. (See Lab. Code, § 3706 .) Plaintiff further argues that in the absence of workers compensation insurance, equitable indemnity is available to permit the hirer to recover from the negligent contractor. Finally, plaintiffs argue the hirer of an uninsured contractor should not be permitted to benefit from both lower contract costs (where the cost of insurance is not passed through) and immunity from liability and that the burden on the owner of determining that the contractor has workers compensation is no more onerous than checking a website or making a phone call to check a statewide database.
At oral argument, plaintiffs counsel for the first time cited Labor Code section 3852, arguing that Privette had left this section intact where the employer-contractor was not insured. Plaintiff has waived the argument by failing to cite the statute in his briefs. (Tiernan v. Trustees of Cal. State University & Colleges (1982) 33 Cal.3d 211, 216, fn. 4.) In any event, citation of this section adds nothing to plaintiffs basic contention that Privette and the exclusivity provisions of the workers compensation scheme did not foreclose liability here—an argument we reject.
Plaintiff acknowledges that these arguments were addressed and rejected by the Court of Appeal in the recent case of Lopez v. C.G.M. Development, Inc. (2002) 101 Cal.App.4th 430 (Lopez). In Lopez, the employee of a subcontractor (L & E) on a construction project was injured on the job and sued the property owner (CGM). L & E was licensed, but did not have workers compensation insurance. Because we find it persuasive, we quote Lopez at length.
"Privette recognized that `the "principal" who hires an independent contractor should be subject to no greater liability "than its [independent contractor] agent," . . . . (Privette, supra, 5 Cal.4th at p. 699, italics added.) Thus, Privette did not foreclose the possibility that the principal could be subject to the same, less, or no liability compared to the independent contractor.
"Privette made clear that the doctrine of peculiar risk is founded on principles of equity and public policy. (Privette, supra , 5 Cal.4th at pp. 695, 701; seeCulligan v. State Comp. Ins. Fund (2000) 81 Cal.App.4th 429, 439.) Equity and public policy would not be served by penalizing CGM for L & Es wrongdoing. L & Es failure to obtain workers compensation coverage—a misdemeanor ([Lab. Code]§§ 3700, 3700.5)—should not expose CGM to civil liability. As the court stated in Privette, `To encourage employers to obtain workers compensation insurance for their employees, the Acts "exclusive remedy" clause does not apply in favor of employers that fail to obtain such insurance, and consequently they are not immune from tort liability for such injuries. (Privette, supra , 5 Cal.4th at p. 698.) Consistent with that incentive, L & E—Lopezs employer—not CGM, the property owner, should be subject to suit.
"Nor did CGM have a duty to ascertain whether L & E was properly insured. `The fundamental policy underlying the workers compensation laws is that those hiring others to perform services should bear the risk of injuries incurred in the undertakings. When the person seeks to hire the services through a licensed independent contractor, it is reasonable to anticipate that the independent contractor will insure against the risk and that the cost of the insurance will be passed on as part of the price of the contract. Thus it is reasonable to exonerate the hirer of the independent contractor. (State Compensation Ins. Fund v. Workers Comp. Appeals Bd. (1985) 40 Cal.3d 5, 13.)
At no point has plaintiff ever alleged that Zappia was not licensed.
"Finally, Lopez is incorrect in asserting that he is not covered by workers compensation. `The [Uninsured Employers] Fund was created to ensure that workers employed by illegally uninsured employers are not deprived of workers compensation benefits. (Lab. Code, § 3716, subd. (b).) Although the Funds obligation is, to a large extent, coextensive with that of the uninsured employer (Lab. Code, §§ 3715, 3716), once the Fund pays the entire award, the Fund becomes subrogated to the employees claim and may proceed directly against the uninsured employer to recover the entire amount of the award from him. (Lab. Code, §§ 3717, 3719 . . . .) . . . . (Rinaldi v. Workers Comp. Appeals Bd. (1988) 199 Cal.App.3d 217, 224-225 . . . .) Of significance, the court in Privette noted the existence of the Fund in stating that `[u]nder the Workers Compensation Act . . . , all employees are automatically entitled to recover benefits for injuries "arising out of and in the course of the employment." (Privette, supra, 5 Cal.4th at pp. 696-697, citing § 3716.)
"In sum, the peculiar risk doctrine, as applied in Privette and Toland, does not permit Lopez to maintain this action against CGM." (Lopez, supra, 101 Cal.App.4th at pp. 443-445.)
Plaintiff argues that Lopez is distinguishable as it arose from summary judgment and that the general contractor in Lopez was insured whereas the subcontractor was not. The first proffered distinction does not help plaintiff as the standard of review on demurrer is even more favorable to plaintiff than that for review following the grant of summary judgment. Plaintiff need not present evidence supporting his factual allegations, he need only make the allegations of material fact for us to deem them true. As for his assertion that the general contractor in Lopez was insured, the reasoning of Lopez does not indicate that such fact was in any way relevant to its analysis.
Plaintiff also urges that Lopez was wrongly decided. We believe the Lopez analysis of the issue is sound. Plaintiff is not left without remedy. He may recover from the Unemployment Insurance Fund (Lab. Code, § 3716, et seq.) or through a direct action against his employer, because the exclusivity provisions do not pertain where the employer carries no workers compensation insurance. (Lab. Code, § 3706.) Plaintiff would doubtless prefer to sue the property owner-hirers who are less likely to be insolvent, uninsured and judgment proof. However, if such is the case, it undermines plaintiffs balance of the equities argument that the innocent hirers will not be left "holding the bag" because they can seek equitable indemnity against the negligent and uninsured contractor, passing through any damages recovered by plaintiff.
Moreover, Privette itself refused to give undue weight to the hirers indemnity rights against the contractor as a rationale for extending peculiar risk to the hirer for injuries to the contractors employees. (Id. at p. 730 ["The availability of equitable indemnity, as mentioned earlier, is but one of several policy reasons that generally support the imposition of peculiar risk liability. . . . [I]in the case of on-the-job injury to an employee of an independent contractor, the workers compensation system of recovery regardless of fault achieves the identical purposes that underlie recovery under the doctrine of peculiar risk . . . ."]
Although it may be that an employee can pursue an uninsured employer for an additional civil recovery (see Lab. Code, § 3715, subd. (a)), such fact does not diminish the unfairness of imposing liability on a landowner for the contractors negligent acts. Even if the contractor lacks insurance, a contractors employee has a guaranteed source of recovery for workplace injury. That the law allows the employee to seek an additional recovery from his employer under some circumstances does not justify expanding liability to the landowner for the contractors failure to insure.
Plaintiff has alleged no facts suggesting that defendants retained control over the manner or means of work or exercised control in a manner contributing to the injury. Following Lopez, we conclude that the peculiar risk doctrine, as applied in Privette and Toland, does not permit plaintiff to maintain this action against these defendants.
Disposition
The judgment is affirmed. Defendant-respondents are awarded their costs on appeal.
We concur, Haerle, J., Lambden, J.