Judge Bruce G. Iwasaki, Case 22STCV37559 2023-03-02 Tentative Ruling

Tentative Ruling: The motion to compel arbitration is granted.

This case arises from a vehicle collision. Konrad Khoddam (Petitioner) was a driver for Uber and was rear ended by a third party. He settled with the third-party’s carrier and now seeks to recover from Uber’s insurance company, Blue Hill Specialty Insurance Company (Respondent or Blue Hill), under the uninsured/underinsured motorist policy (UM/UIM).

Petitioner moves to compel Blue Hill to arbitration pursuant to Insurance Code section 11580.2 and for the appointment of an arbitrator. Respondent opposes the motion to compel and argues that arbitration is premature because Petitioner has not depleted his funds through his Occupational Accident Insurance (OAI) coverage.[1] Respondent further contends that Petitioner’s insurance policy provides that the limits of liability under the Policy shall be reduced by the value of all sums paid to Petitioner under any OAI funds payable for the same injury. Petitioner replied, arguing that the OAI coverage does not fall under workers compensation.

Respondent Blue Hill’s objections to Petitioner’s Declaration are overruled.

At the hearing, the Court ordered Petitioner to provide a supplemental declaration indicating whether he filed an OAI or workers’ compensation claim. Petitioner filed that declaration indicating he was ineligible for workers’ compensation and that the OAI claim was pending. Respondent filed a supplemental response, reiterating its previous arguments.

The Court finds there is a valid arbitration agreement and grants the motion to compel arbitration.

Code of Civil Procedure section 1281.2 authorizes the court to order arbitration of a controversy if it finds the parties have agreed to arbitrate that dispute. Because the obligation to arbitrate arises from contract, the court may compel arbitration only if the dispute in question is one in which the parties have agreed to arbitrate. (Weeks v. Crow (1980) 113 Cal.App.3d 350, 352.) Since arbitration is a favored method of dispute resolution, arbitration agreements should be liberally interpreted, and arbitration should be ordered unless the agreement clearly does not apply to the dispute in question. (Id. at p. 353; Segal v. Silberstein (2007) 156 Cal.App.4th 627, 633.)

The party moving to compel arbitration has the initial burden to (1) affirmatively admit and allege the existence of a written arbitration agreement, and (2) prove the existence of that agreement by a preponderance of the evidence. (Rosenthal v. Great W. Fin. Sec. Corp, 14 Cal. 4th 394, 413.) Once this is met, the burden shifts to the responding party to prove that the agreement is unenforceable by a preponderance of the evidence. (Ibid.)

Insurance Code section 11580.2, subdivision (f) provides that any UM/UIM policy disputes as to liability and damages shall be resolved by arbitration. The provisions of Insurance Code section 11580.2 are deemed to be a part of every uninsured motorist policy. (Quintano v. Mercury Casualty Co. (1995) 11 Cal.4th 1049, 1053.)

There are two “common themes” interpreting the scope of section 11580.2 subdivision (f): “(1) arbitration of issues other than liability and damages is appropriate if the parties have contractually agreed to arbitrate more than is required by section 11580.2, subdivision (f); and, (2) only issues of liability and damages may be decided in an arbitral forum if the parties did not agree to arbitrate more than is required by section 11580.2, subdivision (f).” (Bouton v. USAA Casualty Insurance Co. (2008) 43 Cal.4th 1190, 1197.)

However, section 11580.2, subdivision (f) contains a provision for stay of arbitration: “If the insured has or may have rights to benefits, other than nonoccupational disability benefits, under any workers’ compensation law, the arbitrator shall not proceed with the arbitration until the insured’s physical condition is stationary and ratable. In those cases in which the insured claims a permanent disability, the claims shall, unless good cause be shown, be adjudicated by award or settled by compromise and release before the arbitration may proceed.” This provision is meant to prevent double recovery. (Rangel v. Interinsurance Exchange (1992) 4 Cal.4th 1, 8.)

The parties dispute whether arbitration is stayed due to Petitioner’s failure to initiate a claim of benefits under an OAI policy. Therefore, the issue is whether “the insured has or may have rights to benefits, other than nonoccupational disability benefits, under any workers’ compensation law.” (Ins. Code, § 11580.2, subd. (f), italics added.)

Prior to the enactment of subdivision (f), courts could not authorize the insurer “to obtain a lien on the workers’ compensation award because the availability of such liens was strictly limited by statute, and because such liens fell within the original jurisdiction of the Workers’ Compensation Appeals Board.” (Rangel, supra, 4 Cal.4th at p. 9.) Thus, courts could not prevent an insured from double recovery – “the insured would recover once from the uninsured motorist insurer and, because no lien was available, once again from the workers’ compensation carrier.” (Ibid.) The Legislature responded by enacting subdivision (f). (Id. at pp. 9-10.)

As part of the protection against double recovery, the present statute stays arbitration if the insured has rights to benefits under any worker’s compensation law until the insured’s condition is stationary and ratable. (Ins. Code, § 11580.2, subd. (f).) Moreover, in cases where the insured claims permanent disability, the claims must be adjudicated by award, settled by compromise, and released before arbitration may proceed. (Ins. Code, § 11580.2, subd. (f).) Together with section 11580.2, subdivision (h), which allows uninsured motorist benefits to be reduced by the amount paid under any worker’s compensation law, the statutes were designed to prevent double recovery of uninsured motorist benefits and worker’s compensation benefits.

Here, Petitioner has shown there is an agreement to arbitrate through the provisions of Insurance Code section 11580.2, subdivision (f). Moreover, Respondent provides a copy of the policy with an arbitration provision that states in relevant part:

1. the legal liability of the operator or owner of an uninsured auto or an underinsured auto; or

this will be determined by arbitration. If the accident involves an uninsured auto, any demand for arbitration must be made within two years of the date of the accident. If the accident involves an underinsured auto, the demand must be made within two years after all applicable bodily injury liability bonds or policies have been exhausted by payment of judgments or settlements and prior to the expiration of the bodily injury statute of limitations in the state in which the accident occurred.

The parties do not dispute the existence of an arbitration agreement. Therefore, the burden shifts to Respondent to show why arbitration is not proper. It has not done so.

Respondent’s principal contention is that the OAI policy falls under “workers’ compensation law.” In support, it relies on Business and Professions Code section 7455, which governs OAI insurance generally. Subdivision (e) specifically states:

Any benefits provided to an app-based driver under subdivision (a) or (b) of this section shall be considered amounts payable under a worker’s compensation law or disability benefit for the purpose of determining amounts payable under any insurance provided under Article 2 (commencing with Section 11580) of Chapter 1 of Part 3 of Division 2 of the Insurance Code.

(Italics added.) The reference to workers’ compensation law, Respondent contends, “makes the OAI claim one that is governed under workers’ compensation law.”

Respondent’s interpretation is erroneous. First, it fails to recognize the distinction between Occupational Accident Insurance and Workers’ Compensation Insurance. Business and Professions Code section 7455 arose from Proposition 22. That measure aimed to classify drivers for app-based transportation companies as independent contractors, not employees. (Voter Information Guide, Gen. Elec. (Nov. 3, 2020) (Voter Guide) Official Title and Summary of Prop. 22, p. 56.)[2] Notably, the proposed measure would remove these drivers from “various state employment laws–including minimum wage, overtime, unemployment, insurance, and workers’ compensation.” (Ibid., italics added.) The purpose of the legislation was to provide new benefits to drivers, but to maintain the flexibility of independent contractor status for both the driver and company. (Id., analysis of Prop. 22 by Legs. Analyst, p. 57.)

In contrast, the system of workers’ compensation is a “comprehensive statutory scheme governing compensation given to California employees for injuries incurred in the course and scope of their employment.” (Charles J. Vacanti, M.D., Inc. v. State Compensation Insurance Fund (2001) 24 Cal.4th 800, 810.) The Labor Code specifically carves out independent contractors from its coverage of employees. (Compare Lab. Code, § 3600 [covering injuries sustained by an employee under workers’ compensation law] with Lab. Code, § 3353 [defining independent contractor outside the definition of employee].) Thus, Respondent’s contention that because Petitioner may seek OAI benefits he is “legally able to pursue benefits under California’s workers’ compensation system” is not well-taken.

Second, Blue Hill reads too much into Business and Professions Code section 7455, subdivision (e). The provision’s purpose is limited by the latter half of its sentence, which specifies that any amounts paid under OAI shall be considered “for the purpose of determining amounts payable under and any insurance provided under Article 2” [Ins. Code, § 11580, et seq.]. In other words, the OAI payment operates as an offset. This does not place OAI insurance under the broad statutory scheme of workers’ compensation law.

In addition, arbitration is not inconsistent with the policy between the parties. The Policy states Respondent will “pay under this coverage for damages an insured is entitled to recover from the owner or operator of an underinsured auto only after the limits of liability under all applicable bodily injury liability bonds and policies have been exhausted by payment of judgment or settlements.” (Daboussi Decl., Ex. 1, p. 17, emphasis added.) However, OAI insurance covers “medical expenses and lost income resulting from injuries suffered while the app-based driver is online with a network company’s online-enabled application or platform.” (Bus. & Prof. Code, § 7455, subd. (a).) The OAI policy is not a bodily injury liability policy.

Furthermore, the language in Insurance Code section 11580.2, subdivision (f) applies only to the arbitrator and is irrelevant for purposes of deciding a motion to compel arbitration. The statute states that “[t]he arbitrator shall not proceed with arbitration until the insured’s physical condition is stationary and ratable.” (§ 11580.2, subd. (f).) The parties are free to argue this issue before the arbitrator, and the arbitrator may determine when the proceeding should commence

Because Petitioner’s OAI policy is not a worker’s compensation plan governed by workers’ compensation law and Petitioner is not claiming a permanent disability, the stay of arbitration under Insurance Code section 1150.2, subdivision (f) does not apply.

Petitioner also requests that the Court appoint an arbitrator. The Court orders the parties promptly to meet and confer and seek to agree on an arbitrator by April 14, 2023. If the parties fail to so agree, the parties shall jointly contact the clerk of the Court to set a hearing to discuss appointment of an arbitrator under Code of Civil Procedure section 1281.6.

[1] The OAI insurance is provided through another company, Intact Insurance.

[2] The Official Voter Information Guide is available at: https://vig.cdn.sos.ca.gov/2020/general/pdf/complete-vig.pdf

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