Judge John J. Kralik, Case Number: 23BBCV01087, Date: 2023-10-06 Tentative Ruling

Plaintiff Alex Haddad (“Plaintiff”) alleges that he was an employee of and driver for Defendant Federal Express Corporation (“FedEx”). He alleges that on September 19, 2018, while he was working and driving FedEx’s truck in the course and scope of his employment, he was involved in an automobile accident in Burbank. He alleges that he and FedEx were insured under an insurance policy issued by Defendant Protective Insurance Corporation dba Protective Insurance Company (“Protective”).

Plaintiff alleges that the driver of the other vehicle, Allison Norris (“Norris”), filed a lawsuit against Plaintiff and FedEx (LASC Case No. 20STCV23537); and Plaintiff sued Norris and the registered owner of the vehicle that struck the FedEx vehicle (LASC Case No. 20STCV16961), which were related. Plaintiff alleges that the Underinsured Motorist Benefit Insurance (“UMBI”) policy issued by Protective for FedEx had a policy limit of $10 million, which was sufficient to cover Plaintiff’s injuries. He alleges that the parties in the related actions participated in inter-company arbitration, which found Norris at 80% fault and Plaintiff at 20% fault resulting in FedEx and Plaintiff settling with Norris for $80,000. On August 1, 2022, the insurance carrier for Norris offered and paid the policy limits of $1,250,000 to Plaintiff and State Law Firm (his attorneys), and the related actions were dismissed.

Thereafter, Plaintiff sent a Demand for Arbitration to/for the UMBI benefits to FedEx, and FedEx through its insurance claims administrators Broadspire and Crawford and Company in November 2022 sent a declaration of UMBI coverage from 2017. Plaintiff alleges that FedEx is estopped from asserting a declination of UMBI coverage.

The first amended complaint (“FAC”), filed June 16, 2023, alleges causes of action for: (1) declaratory relief; (2) breach of contract; (3) bad faith denial of insurance claim; (4) violation of Business & Professions Code, § 17200 et seq.; and (5) promissory estoppel.

On August 31, 2023, FedEx filed a demurrer to the FAC. Although reserved as a demurrer and motion to strike, the Court notes that only a demurrer was filed.

With the demurrer papers, FedEx requests judicial notice of: (A) Plaintiff’s complaint filed on May 15, 2023; and (B) Plaintiff’s FAC filed on June 16, 2023. The request is granted. (Evid. Code, § 452(d).)

With the opposition papers, Plaintiff requests judicial notice of: (1) the complaint filed by Norris on June 22, 2020 in LASC Case No. 20STCV23537. The request is granted. (Evid. Code, § 452(d).)

FedEx demurs to each of the 5 causes of action alleged in the FAC, arguing that they are barred by the litigation privilege, barred due to Plaintiff’s exclusive remedy in worker’s compensation, and each cause of action fails to allege sufficient facts to constitute a cause of action against FedEx.

The litigation privilege provides in part that a privileged publication or broadcast is one made in any legislative, judicial, or official proceeding authorized by law, or in the initiation or course of any other proceeding authorized by law and reviewable. (Civ. Code, §47(b).) It applies to any communication: “(1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action.” (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1057.) The litigation privilege is interpreted broadly in order to achieve the purpose of curtailing derivative lawsuits. (Olsen v. Harbison (2010) 191 Cal.App.4th 325, 333 [“The breadth of the litigation privilege cannot be understated. It immunizes defendants from virtually any tort liability (including claims for fraud), with the sole exception of causes of action for malicious prosecution.”].)

FedEx argues that Plaintiff’s case relies on statements made by FedEx during discovery in prior litigation such that the litigation privilege applies and bars this action. FedEx argues that each cause of action relies on the documents that FedEx identified and produced in verified discovery responses in prior litigation.

In the FAC, Plaintiff alleges that in November 2022, FedEx through its insurance claims administrator sent Plaintiff’s counsel a declination of UMBI coverage from 2017, which was never disclosed in the consolidated third-party Haddad v. Norris/Norris v. Haddad and FedEx cases. (FAC, ¶6.) (More clearly, in the 5^th cause of action for promissory estoppel, Plaintiff alleges that at no time prior to settlement of the third-party case against Norris, and not until the demand for arbitration was sent to FedEx, did FedEx and Protective for the first time indicate that FedEx in 2017 had declined the UMBI coverage contained in the insurance policy declarations page. [FAC, ¶33.].) He alleges that only the Policy Declaration page showing UMBI coverage (and third-party coverage) was disclosed and verified under penalty of perjury by a FedEx liability claims adjuster, such that FedEx is estopped from asserting the declination of UMBI coverage.[1] (Id.)

Plaintiff argues in opposition that FedEx has not shown that the litigation privilege applies to the facts of the FAC because FedEx has not shown that the elements of the privilege have been met – i.e., that the communications were made to Plaintiff to achieve the objects of litigation and that FedEx’s prior communications to Norris were somehow connected or had a logical relation to the prior action or this present action. Plaintiff argues that it was Norris who served the production requests on FedEx and Plaintiff, seeking copies of the insurance policies and it was counsel who responded to Norris’ discovery request by submitting a declaration page showing UMBI coverage and third-party coverage by Haddad and FedEx. (FedEx RJN, Ex. A.) Plaintiff argues that FedEx has not shown how the declaration page (which omitted the declination of UMBI coverage) was a communication that was connected with or logically related to Norris’ claim for personal injury or property damage when Norris could not avail herself to UMBI benefits for damages caused by FedEx or Plaintiff.

The Court recognizes that Plaintiff is not necessarily alleging a cause of action based on misrepresentations or “communications” (or publication/broadcast) in the literal sense of the word. Instead, Plaintiff is arguing that FedEx and Protective failed to disclose (whether by misrepresentations, omissions, or concealment) that they would be declining UMBI coverage to Plaintiff. Plaintiff argues that these omissions did not achieve the objects of the Norris/Haddad related actions and that they were not connected to nor had a logical relation to these underlying actions. However, had there been no underlying actions, FedEx/Protective would not have produced the discovery to Norris, as well as fail to make statements about whether Plaintiff would be covered with UMBI benefits.

The Court recognizes that causes of action based on an alleged concealment of information, rather than affirmative communications, can be protected by the litigation privilege. For example, in Kupiec v. American International Adjustment Co. (1991) 235 Cal.App.3d 1326, the plaintiff had discovered that her painting was no longer in place at the hotel where the work was commissioned. The hotel was aware that it was severely damaged, but told her that the painting was in storage or transferred to another location. The insurance companies settled plaintiff’s claim against the hotel, but plaintiff sued the hotel for, among other things, intentional concealment of evidence. She alleged that the insurer had purposefully misrepresented and concealed its actual knowledge of the whereabouts of the painting, which delayed resolving her claim against the hotel. The Court of Appeal found that the alleged concealment and misrepresentation of facts and the alleged actions of the insurer to abuse the discovery process were all acts that were, in their essential nature, communicative. (Kupiec, supa, 235 Cal.App.3d at 1333.) “The core of Kupiec's [plaintiff] lawsuit is that American [defendant insurer] made misstatements to her; and in communications with its agents and attorneys, American carried out a plan to delay the prior lawsuit and to avoid liability. Such conduct is communicative and comes within the privilege defined by section 47, subdivision (b)(2). American's general demurrer was properly sustained.” (Id.)

Based on the allegations of the complaint, the Court finds that the litigation privilege applies. FedEx/Protective’s discovery responses were produced in the Norris/Haddad underlying cases (which is a judicial or quasi-judicial proceeding) to achieve the objects of the litigations and that had some connection or logical relation to the actions.

As such, the demurrer on this ground is sustained. The Court will determine at the hearing whether leave to amend is proper.

Even in the absence of application of the privilege, it is very hard to understand how the communications at issue here could have damaged Plaintiff. It is also hard to understand how the disclosure of the allegedly concealed statements could have benefited Plaintiff.

B. Exclusive Remedy – Worker’s Compensation and Failure to State Sufficient Facts

In light of the ruling on the demurrer on the basis of the litigation privilege, the Court need not discuss the remainder of the demurrer arguments.

First, the Court finds merit with FedEx’s argument that workers’ compensation is Plaintiff’s exclusive remedy. FedEx argues that Plaintiff’s exclusive remedy against FedEx is through workers’ compensation because: (1) at the time of the incident, there was an employment relationship between Plaintiff and FedEx; (2) Plaintiff was performing services growing out of and incidental to his employment, and was acting within the course of his employment; and (3) the injury was proximately caused by the employment, with or without negligence. (See Labor Code, § 3600(a)(1)-(3).)

California's Workers' Compensation Act provides an employee's exclusive remedy against his or her employer for injuries arising out of and in the course of employment. (Wright v. State of California (2015) 233 Cal.App.4th 1218, 1229 [citing Labor Code, § 3600 et seq.].) The injury must have: (1) arisen out of the employment, which relates to the origin or cause of the injury; and (2) occurred in the course of the employment, which relates to the time and place of the injury. (Id.) Labor Code, § 3602 states in relevant part:

(a) Where the conditions of compensation set forth in Section 3600 concur, the right to recover compensation is, except as specifically provided in this section and Sections 3706 and 4558, the sole and exclusive remedy of the employee or his or her dependents against the employer. The fact that either the employee or the employer also occupied another or dual capacity prior to, or at the time of, the employee's industrial injury shall not permit the employee or his or her dependents to bring an action at law for damages against the employer.

In opposition, Plaintiff argues that the Legislature “never intended that an employer's fraud be encompassed within the risk of employment” for the purposes of section 3600 et seq. "never intended to cover an employer’s fraud arising out of the employment. (Piscitelli v. Friedenberg (2001) 87 Cal.App.4th 953, 987–988.) He argues that this action is about Plaintiff’s denial of contractual benefits under the policy of insurance by FedEx’s intentional concealment of his UMBI benefits, and that these claims are not within the workers’ compensation framework. However, based on the allegations of the FAC, Plaintiff has not alleged sufficient facts to show that FedEx committed fraud (either by misrepresentations or concealment/omissions, reliance thereto, damages) against Plaintiff that would take this action outside the scope of workers’ compensation.

Further, with respect to the 1^st, 2^nd, and 5^th causes of action for declaratory relief, breach of contract, and promissory estoppel, Plaintiff has not alleged what contract was at issue. While Plaintiff argues that he was the permissive user and third-party beneficiary of the insurance policy between FedEx and Protective, he has not alleged any facts supporting this argument, he has not provided a copy of the insurance policy showing that he (or other FedEx employees) were intended third-party beneficiaries, and he has not alleged an employment contract between Plaintiff and FedEx showing that FedEx agreed to provide him with UMBI insurance coverage on top of workers’ compensation benefits. This would be another ground to sustain the demurrer to the 1^st, 2^nd, and 5^th causes of action. Moreover, in light of these findings, the demurrer to 4^th cause of action for violation of Business & Professions Code, § 17200 et seq. is sustained as the UCL cause of action relies on these other causes of action.

The Court sustains the demurrer to the 3^rd cause of action for bad faith denial of insurance claim against FedEx without leave to amend as Plaintiff concedes that the FAC does not state sufficient facts against FedEx. (Opp. at p.4.)

[1] The Protective Declaration Page names FedEx as the insured. Coverage C is for Uninsured and Underinsured Motorists and states under the “Included” section “SEE ENDORSEMENT NO. 4.” The full language of Endorsement No. 4 and the rest of the insurance policy terms are no provided. Thus, it cannot be ascertained whether FedEx only opted for an Uninsured Motorist policy, Underinsured Motorist policy, or both.

Superior Court of California

County of Los Angeles

Department B