Workers’ Comp Cases and Third Party Liability

It is rare when you read a new appellate opinion in the Daily Journal and think, “Wow, that court really reached to find in favor of the plaintiff.” Yet that is exactly the response engendered by Hopkins v. Jurek Kedzierski (issued 4/16/14) 225 Cal.App.4th 736. The holding in Hopkins, if it escapes reversal or depublication by the Supreme Court, will potentially open the door for many injured workers to file civil lawsuits after the normal two-year limitations period has expired.

In Hopkins, the plaintiff worked for a company called Perfect Smile Dental Ceramics. In May 2008, the plaintiff fell from a balcony at the premises of Perfect Smile, and, soon thereafter, began receiving workers’ comp benefits. Under California law (the so-called “exclusive remedy rule”), the plaintiff could not sue Perfect Smile in a civil lawsuit for personal injuries (even if the company had negligently caused the accident); he was limited to the workers’ comp remedy against his employer.

The plaintiff’s attorney in Hopkins apparently assumed, without really investigating the issue, that Perfect Smile owned the building where it had its offices. However, the husband and wife who owned the company actually owned the building in their individual capacities, separate from the corporate entity. They could therefore be sued, in their role as the building owners, if a dangerous condition on the property caused injuries.The company and the individual owners are treated as separate entitles for purposes of applying the exclusive remedy rule, provided that the individuals are performing some function separate and apart from their role as owners of the company. See Miller v. King (1993) 19 Cal.App.4th 1732.

By the time the plaintiff’s attorney in Hopkins recognized his error and filed a civil lawsuit against the individual building owners, it was September 2010, and the two-year limitations period had expired. The trial court dismissed the lawsuit. On appeal, the Fourth Appellate District, Division One reversed and remanded the case so that the trial court could make factual findings as to whether the two-year limitations period was extended by the doctrine of equitable tolling.

The Hopkins court explained that when a plaintiff has two different legal remedies available to her (e.g., a workers’ comp claim against her employer and a civil lawsuit against a third party) and chooses to wait beyond the limitations period to pursue the second remedy, equitable tolling will apply if:

  1. The party against whom the second claim is asserted had timely notice of the first claim and therefore an opportunity to investigate the underlying facts before evidence disappeared;
  2. The defendant is not prejudiced by the delay; and
  3. The plaintiff has acted reasonably and in good faith.

Although the Court of Appeal did not resolve these factual issues, it rejected the trial court’s reasoning that equitable tolling did not apply, as a matter of law, because the plaintiff had no legitimate reason not to have filed the civil lawsuit sooner (plaintiffs often pursue workers’ comp claims and third party lawsuits simultaneously) and because the party against whom the workers’ comp claim was filed (Perfect Smile) was a different entity than the defendants in the third party lawsuit (the individual company/building owners). This discussion revolved around the court’s interpretation of the California Supreme Court’s opinion in Elkins v. Derby (1974) 12 Cal.3d 410.

In Elkins, the plaintiff filed a workers’ comp claim, which was ultimately dismissed because the plaintiff was deemed not to have been an employee of the defendants. Soon thereafter, he filed a civil lawsuit against the very same parties, four months after the limitations period had expired. The Supreme Court held that the statute of limitations was tolled during the period when the plaintiff pursued his unsuccessful workers’ comp claim.

In Elkins, the defendants were clearly on notice of the plaintiff’s claims because they were directly involved in the workers’ comp claim. Moreover, the plaintiff had a good reason for not filing a lawsuit sooner – he believed in good faith that he was an employee of the defendants and thus precluded from bringing a civil lawsuit against them (until the workers’ comp judge ruled otherwise). Hopkins on the other hand did not seem to fit so neatly into the equitable tolling framework because of the distinction between the corporate employer and the individual defendants and the fact that the plaintiff’s delay in filing the civil lawsuit seemed to arise from her lawyer’s failure to investigate, rather than an unresolved legal issue.

A Hoskins-like scenario can also arise when a number of affiliated companies are involved in a particular operation. In a case that our firm handled, various related entities operated garment businesses in a large warehouse. The plaintiff was rendered a paraplegic when a large, unstable cart of fabric rolls fell on top of him, and we argued that fault for the accident rested not with plaintiff’s employer, but with the parent company of the employer, which was in charge of maintaining the carts. That third party case settled for $2,625,000, and the plaintiff was able to receive the full measure of his workers’ comp benefits as well. For more information, click here.

Clearly, it has always been a good idea for attorneys investigating on-the-job accidents to look for third party liability not just against distinct third parties, but also against individuals and companies that are related to the plaintiff’s employer. Hoskins, if it remains good law, extends the time period during which such claims can (and should) be investigated. For the workers’ comp applicant’s attorney, Hoskins underscores the fact that third party liability is always something to be mindful of, particularly as new facts arise during the pendency of the workers’ comp claim.

You can read more about our work with third party liability cases such as these here.