Motion to Dismiss — City of Torrance v. Workers' Compensation Appeals Board

Office-Supreme Court, U.S.

FILED

APR 16 1983

No. 82-1436

; CLERK $5.5

In the Supreme Coturt-

OF THE

United States

Octosrr Term, 1982

City or TorRANCE,

Appellant,

vB.

Workers’ Compensation ApreaLs Boarp or

THE State OF CALIFORNIA;

State Compensation Insurance F'unp,

Appellees.

On Appeal From the Supreme Court of the

State of California

MOTION TO DISMISS OF AFFIRM

Krimen, Bropiz, Hersnenson &

Da Siva

By Frank Evans

1275 Market Street

San Francisco, CA 94103

Telephone: (415) 565-1244

Attorneys for Appellee

State Compensation

Insurance Fund

QUESTIONS PRESENTED

I

May the Legislature, pursuant to the plenary power

granted it by the California Constitution to enact a com-

plete system of workers’ compensation, limit the period of

liability in a cumulative injury case?

II

Is a workers’ compensation insurance agreement im-

paired by a legislative enactment where the insuring agree-

ment provides that the parties will be bound by the work-

ers’ compensation law of the State of California?

PARTIES TO THE PROCEEDING

The State Compensation Insurance Fund is one of the

parties in the court below.

ii

TABLE OF CONTENTS

QROCEIOMS PEOCOMECE ..0...0secerrcreceseroserscsessseccecceovecesnsnsececeeseses

Parties to the proceeding .............cccccccceceseseeeesesesesesenseneeeee

IS tr ail eaeseaeenamstenaniaoimanuasda

A.

The State statute involved and the nature of the

I ae itsade

B. The California Workers’ Compensation System

1. The Legislature established a competitive

workers’ compensation system 0.0.0.0...

2. The State was not a party to the contracts

I Neate a

C. The industrial injury determined the basis for

awarding benefits and imposing liability ............

D. The historical development of Labor Code See-

Se HII. Sabistcdndininttnsacueiniceetninetastéomenestatninssotesebinin

E. The proceedings below ...............ccccccccceeeesseeeeseeeenes

PIII ‘cistlanhiransdasacidditisadensnshaiscieiapaiicetinntincedgmainnennctiiinaetienite

I

Appellant’s contracts are not impaired ..........0....0c.000-

A. Workers’ Compensation Law is subject to

IIIT sedhanbennscsdsplinniahcaisnseusiasshnustispnlinahbanesuniginibieniuabtniniisitenins

B. The United States Supreme Court has held that

subsequent legislative enactments do not impair

contracts which incorporate changes in the law

II

Labor Code Section 5500.5 is reasonably related to

IN CPTI SID vicesescminnsnsseisnessessnveieialiannvanpentustion

A.

tive

B.

C,

D.

The 1977 Amendments had a legitimate objec-

The State may exercise its police power to

accomplish a legitimate goal oo...

The claimed impairment is insubstantial ............

Appellant’s authorities are distinguishable ........

RENFRO TE SEA (Oe EY bs OR RT NEA

ili

TABLE OF AUTHORITIES CITED

Cases

Page

Allied Structural Steel Co. v. Spannaus, 438 U.S, 234

aT 2 Ee a 25

Argonaut Mining Co, v. LA.C., 104 Cal.App.2d 27, 230

RGR GL ERIE SC Oa 13

Beveridge v. LA.C., 175 Cal. App.2d 592, 346 P.2d 545

ES NEEL Ao aR PR 13

Burum vy. State Compensation Insurance Fund, 30

I IIIS 1 il, risus eiobeebiisiopannentehsnbopncteenatnbinees 4

Colonial Insurance Co, v. LA.C., 29 Cal.2d 79, 179 P.2d

a os ca caenltenlenidnsidtansinesnnesinsies 12

Cordero v. Triple Machine Shop, 580 F.2d 1331, (9th

III MING GIES: Sosccsncssvcnsessvensivoncnscessnveseonsnvebeseseseves 17

East New York Savings Bank v. Hahn, 326 U.S. 230

IIIT a discs da sicatadindesadgeenvehabessibianaeinativasinstvececssessesnent 20

El Paso v. Simmons, 379 U.S, 497 (1965) oo... 20

nergy Reserves Group, Inc. v, Kansas Power and

Light Co., ........ RN decetai , 74 L.Ed.2d 569 (1983) ...... 14

Faitoute Iron and Steel Co. v. City of Asbury Park,

EEE REET: SUPINE B” sascobvciassdcthessesssentececscdsihoseieinseasentonenens 20

Fireman’s Fund Indemnity Co, v. LA.C., 39 Cal.2d

te TE BOD CRB UIED, cociccsscssnccncscocssnscsncsccceiencestonsecasees 13

Flesher v. WCAB, 23 Cal.8d 322, 152 Cal.Rptr. 451

NIT" hli id cscs son Sscieeeicaslsbeebeshanenntemnensedinnnnincetinnns 19, 25, 26

General Dynamies Corp. v. BRB, 265 IF’, 208 (2nd CCA

REC CNM RRC GEST SEER: SCREEN SES SSSR CA RSPEI 17

Gilmore v. State Compensation Insurance Fund, 23

RII TI CROUEE D obssccobinscassinicaniestcerseccnstocsrnsesenasscsse 4

iv

Tapie or Avutuorities Citep

Cases

Page

Harrison v. WCAB, 44 Cal.App.3d 197, 118 Cal.Rptr.

I ails beitiediiniitiemecininniosecece 13, 19, 20,26

Home Building & Loan Association v. Blaisdell, 290

cso cctre ncrsccicblatainicocenenconcscstinseneesonssensiosivane 26

Insurance Co. v. LA.C., 29 Cal.2d 79, 179 P.2d 884

TTT ie iilidcticohapeccacaaninenieaticesgtiouieeb icbnsnmnewstnesioncnbedesnwocies 12

Pacific Employers v. 1.A.C., 219 Cal.App.2d 634, 33

I IE IIIT cccccsassrttincceicnonstensnrvssecessepsscosonenscoores 13

Subsequent Inj. Fund v. 1.A.C. (Koski) 49 Cal.2d 354,

BE ID fasicdatcssstscoevcecnnnesinscncsscavececencsonnsensescoocs 13

Travelers Insurance Co. v. Cardillo, 225 F.2d 137 (2nd

er a Ni aciccdbditesedenpuninoncntesrnseoioevenese 15,17

U.S. Mortgage v. Matthews, 293 U.S. 232 000000 15

Usery v. Turner Elkhorn Mining Co., 428 U.S. 1

ial acl cee cabcaccetedipenrasenapaitnaostneneesbooneneensbeceoees 21, 22

U.S. Trust Co. v. New Jersey, 431 U.S. 1 (1977) ........ 23, 25

Viex v. South Ward Association, 310 U.S. 32 ................ 26

Constitution

California Constitution, Article XIV, Section 4 ............ 2, 16

Statutes

Boynton Act, Section 11770, Stats. 1913, Ch. 176 .......... 3

Insurance Code:

I GIN Ssccttssectecsccrussocestonacoccsvbioveivontscsesscssetees 6

a a, Pe ca 14

a ss sispescosnneniotisoneneunes 8

ESL SE ELE A 8

i ERE SE, ae eR ee 14

I TIE A scasebsiashashacecasndinsesinbisapicooresevescnsiinesenscedpopecte 5

Vv

TasLe or Avutuoritires Crrep

STATUTES

Page

SIPS desttanicntcsdecitscgetsiscdbanittel§-iecahonidesapboncncapebespabddonte 4

SUNINPIITTINTTT..’ iccssdasnicco'cscossocnastioncbvicsesunssabessdvilbcamasaiabossdendadibatas 4

NIN NINE chal locdnassbeedicbntensinnscbsnttntdenonctoeebuneceaenstabchedint 5

PINE IIT UUE snscsersesecsoovenssnsnaseeiisindosrebiatiuapamnets senliondscokeobmmsiacth 4

RUIN IIIT: suassctsnissopsnscssctostaabicgesanisvsbianshestbotincesmniiiinsubedshdscodack 4

IIINE TRIN - sesadisicterkainechedoncsonntaasosneesucbseinaadieabbeocs cin 5

i RE a SE CAEP SR i ae IN RIOD +

SeUINIIIE TINIE” cicieirenbacanasdeosuanadiiashebiobsconeroaicenasetabicomepeneeee 5

SPINIENT MINIIINN ., chctassnassincsvcsicesdeniacuslontassenseranndedasssdsancateetianioos 5

BSA ERE Sires n oie rh noe ees 3

BN III 9 sehisciciecscessadsinshctere pieaetae tat ecdad ate elaaie decides 5

Labor Code:

SEINE ° scosshscciisiscnctssdstcciipstidhngaciadsonsbdintiinglauiesoestenihap 11

RUNNIN SII - Lite sctsessstscinaceccadesdducopeteandetieasaleepibclicouesenconciiemciieas 3

SII UII rect sterceiniteatci ocadese daininsstebadla eebtietaiiion 3

TT A he conilebadelinidieipatammindg 3

aaa reer aT TORE PICT ne aOR: 22

I NI io acess ec Riaceariind iateaiee alti ah nae 22

I I i nin cn accesses dg dan adacd oa papmusinsdomneibaenaiaias 22

IIIT IIIIINIE Ts tslicecncsnnssenteinisastvendgleonbeiaaoonightantemeemsdiaeelns see 11

ERR AEA ie en cana ECORI passim

UNA UIUIIE IIE > ihcibsssiecuhceesdesciesiineesdihdabacnandebhtosdindchaneeninatonamatis 23

BID. SHUI Sicccinshncoscacccnceninipnslusiibanditioddadashsthe nicsconacsubontiones 23

Revenue and Taxation Code Section 12203 20.0000... 5

Stats. 1965, Ch. 1513, Section 214 oo... ceeeeeeeeeeeeee 13

Stats. 1982, Ch. 714, Section 305 .............cccccesscssssssssssseecere 4

ITED "“scavtinciansnsctontstiveensincidsonsmpeiiieinitevesduetiomibensstiaitias 16

vi

TasLe or AuTHorITIES CITED

Other Authorities

Background Notes for Workers’ Compensation Sub-

committee Interim Hearing on the Subject of Re-

forming California Workers’ Compensation Laws,

Assembly Committee on Finance, Insurance and

Commerce, Fall 1977, p. 297 ........0ccscscsressersrssseeesesesersres 6

2 Hanna, California Law of Employee Injuries and

Workmen’s Compensation (2d ed. 1979):

ORR TL CBD. sate keenccdidieccieersecesentstatavnccinnsieeaneeines 13

Section 1.05 (6) (c), fm. 18 ...........cccccesscssssescsssesersessesesees 3, 4

I TR IID cecensieacacamcstbeacitnstsncinraceeniaciasiniacdacideaantl 4,6

owtbem TRE C1) CD. ceccscceiccnsicoscctesnsecciooscsnsvensineesanabiinimante 4

Herlick, California Workers’ Compensation Law

Handbook, Second Edition, Volume 1, (Section 1.20) 4,6

2 Larson, Workmen’s Compensation Law Appendix A,

EEE E chinanenerenins cap avhanecasnieiaeilesacdihecsededemaciaa aaa 3

4 Larson, Sections 95.12, 95.21, 95.25 00... ceececceeeeeeee 15

Proceedings of Assembly Committee on Finance, In-

surance and Commerce into Problems of Insuring

Payments of Compensation for Cumulative Occupa-

pational Injurious Interim Hearings, (January 12

and 19, 1977) Pages 399-401 .0.0.........cccccceceeeeeseeens 17, 19, 24

The Report of the National Commission on State

Workers’ Compensation Laws, (July 1972), Ch. 7

0 FR DO TON piss trrctnsenscersessincassvisidibicestntcdoacial 13, 16

19 ops. Cal. Atty. Gen, 249 (1952) 0 sities 5

No. 82-1436

In the Supreme Court

OF THE

United States

Octoser TERM, 1982

City or ToRRANCE,

Appellant,

Vs.

Workers’ Compensation APPEALS Boarp oF

THE STATE OF CALIFORNIA}

State CompensaTION INSURANCE F'unp,

Appellees.

On Appeal From the Supreme Court of the

State of California

MOTION TO DISMISS OF AFFIRM

a

STATEMENT OF FACTS

A. The State Statute Involved and the Nature of the

Case

This action arises out of a workers’ compensation claim

and involves the issue of liability for an injury that oc-

curred during City of Torrance’s, appellant, period of self-

insurance. The injured workers’ benefits are not involved.

At issue is whether the California Legislature can limit the

period of liability in a cumulative trauma case and hold

only those employers responsible who were on the risk

during the last four years of hazardous exposure. The stat-

ute involved is Labor Code Section 5500.5, which provides

under subsection (a) :*

“(a) Except as otherwise provided in Section 5500.6

which applies to household employees, liability for oc-

cupational disease or cumulative injury claims filed or

asserted on or after January 1, 1978, shall be limited to

those employers who employed the employee during a

period of four years immediately preceding either the

date of injury, as determined pursuant to section 5412,

or the last date on which the employee was employed

in an occupation exposing him to the hazards of such

occupational disease or cumulative injury, whichever

occurs first. Commencing January 1, 1979, and there-

after on the first day of January for each of the next

two years, the liability period for occupational disease

or cumulative injury shall be decreased by one year so

that liability is limited in the following manner:

‘Section 5500.5 is a comprehensive code section that deals with

cumulative trauma and occupational disease injuries. It contains

sub-sections (a) through (i) and provides a detailed format,

including procedures for litigation. The sections identify the

method of joinder of additional parties, subsequent procedures for

contribution, apportionment and the period of accountable liability.

Appellant’s challenge is limited to the latter section, subsection (a).

For claims filed or

asserted on or after: The period shall be:

I By Fe tientccsenntstiiceninincininvennensianintt three years

INIT By TID wise snieectnsscsseevennneneynnssnennssonss two years

January 1, 1981 and thereafter .................. one year

If, based upon all the evidence presented, the appeals

board or referee finds the existence of cumulative

injury or occupational disease, liability for such cumu-

lative injury or occupational disease shall not be

apportioned to prior or subsequent years... .”

B. The California Workers’ Compensation System

1. The Legislature established a competitive workers’

compensation system

Article XIV, Section 4 (formerly Article XX, Section

21) of the California Constitution provides that the Legis-

lature is “vested with plenary power, unlimited by any

provision of this Constitution, to create, and enforce a

complete system of workers’ compensation, by appropriate

legislation .. .” The Article states that the Legislature is

vested with the same power to provide “for full provision

for adequate insurance coverage to pay or furnish com-

pensation ... and for regulating such insurance coverage

in all its aspects, including the establishment and manage-

ment of a State compensation insurance fund.” The Article

also empowers the Legislature to establish an administra-

tive system to litigate workers’ compensation cases to

accomplish “substantial justice in all cases expeditiously,

inexpensively, and without incumbrance of any character.”?

In providing for a complete system of workers’ compen-

sation, the Legislature established a competitive, non-

monopolistic workers’ compensation program, one which

allows employers to seek workers’ compensation coverage

from the State Compensation Insurance Fund or other

Amendment adopted November 5, 1918.

3

carriers.’ There are over 100 workers’ compensation car-

riers competing with one another in California.

Public agencies are slightly restricted. They must pur-

chase workers’ compensation insurance from the State

Compensation Insurance Fund or elect to become self-

insured.‘ If public agencies become self-insured, they may

contract with private carriers to administer and defend

their claims. Public agencies are not bound to purchase

other forms of insurance from the State Compensation

Insurance Fund and may freely contract with other car-

riers for liability, automobile and fire insurance as well as

other coverages. It is clear that appellant’s brief exagger-

ates the role of the State Compensation Insurance Fund

and its relation to public agencies. Furthermore, it is in-

correct to state that California has established a “state

monopoly for selling insurance to public agencies.” App.

Br. 1. There simply is no authority for the proposition

that public agencies must buy all of their insurance from

the State Compensation Insurance Fund or that they even

have to be insured with appellee.

2. The State was not a party to the contracts at issue

It is incorrect to state that “the State of California

(was) a party to the contracts at issue.” App. Br. 13.

Appellee’s operating funds are separate and distinct from

the State of California and its posture in this case is no

different from that of any other insurance carrier.*

’Labor Code Scction 3211; 2 Larson, Workmen’s Compensation

Law Appendix A, Table 7; 2 Hanna, California Law of Employee

Injuries and Workmen’s Compensation (2d ed. 1979) (Section 1.05

[6] [c]).

‘Insurance Code Section 11870, Labor Code Section 3700(c),

3702 et seq.

‘The State Compensation Insurance Fund was established pur-

suant to the Boynton Act, Section 11770, Stats. 1913, Ch. 176 to

provide immediate protection to California employers and em-

ployees, since there were no workers’ compensation insurance

carriers in existence when workers’ compensation was introduced.

Appellee is a self-supporting insurance carrier that is

financially distinct from the State of California and does

not depend on general revenues from the State for any of

its operations.® Appellee functions like a mutual insurance

company, returning profits to its insureds in the form of

dividends.’ “The State Compensation Insurance Fund has

compiled a long and imposing record of substantial divi-

dend payments.’”

In an attempt to show an economic dependence between

the appellee and the State, appellant cites California Insur-

ance Code Section 11773. App. Br. 5, fn. 3. This section

provided the basis for an appropriation of one hundred

thousand dollars “seed-money” to the appellee in 1913. No

part of the appropriation was ever drawn from the State

treasury and the whole sum was repaid with interest in

1921.” IXven more significant is the fact that this section

was repealed in 1979 and now reads, “The fund shall be

organized as a public enterprise fund.”

Appellee is not only mandated to be “fairly competitive”

with other workers’ compensation carriers, but special leg-

islative enactments distinguish appellee from state agencies

and put it on an equal footing with all other compensation

carriers." Appellee is authorized to transact workers’ com-

“Insurance Code Section 11772; Burum v, State Compensation

Insurance Fund, 30 Cal.2d 575 (1947); Gilmore v. State Compen-

sation Insurance Fund, 23 Cal.App.2d 235 (1937); 2 Hanna, op. cit.

supra (Section 20,01 [B]); Herlick, California Workers’ Compensa-

tion Law Handbook, Second Edition, Volue 1, (Section 1.20),

"Insurance Code Section 11776.

*2 Hanna, op. cit. supra, ( Section 1.05 [6] [c], fn. 18).

*2 Hanna, op. cit, supra, (Section 2.04 [2], fn. 4).

Stats, 1982, Ch. 714, Section 305.

“Insurance Code Sections 1175, 11781; 2 Hanna, op. cit. supra,

Section 20.91 [1] [b].

5

pensation insurance “to the same extent as any other in-

surer.’”* Appellee’s assets provide the basis for its opera-

tion, i.e. payment of losses, expenses and dividends,” “The

State is not liable beyond the assets of the State Compen-

sation Insurance Fund for any obligation in connection

therewith.” State taxes are paid through a premium tax,

calculated on the same basis as with all other California

workers’ compensation insurers."” Appellee is allowed to

invest its funds in the same manner as private carriers and

is not bound by rules pertaining to state agencies.”’ Ap-

pellee is expressly exempted from California Government

Code sections that apply to state agencies that deal with

the expenditure of funds."’ Appellee’s real property is sub-

ject to taxation on the same basis as other private insur-

ance carriers, on the rational that its property is not

regarded as State property for purposes of taxation,”

Finally, appellee is not subject to those provisions of the

Government Code applicable to State agencies generally or

collectively, except as to State Personnel Board rules gov-

erning employer-employee relations.”

In brief, appellee’s financial status and insurance opera-

tions are separate and distinct from the State of California.

Even in the event of insolvency, no State funds would be

appropriated; as a member of the California Insurance

Guarantee Association, appellee’s obligations would be sat-

Insurance Code Section 11778.

‘Insurance Code Section 11774.

‘Insurance Code Section 11771.

Revenue and Taxation Code Section 12203,

“Insurance Code Section 11797.

"Insurance Code Section 11793.

"19 ops. Cal. Atty. Gen, 249, 251 (1952).

Insurance Code Section 11873.

6

isfied, like any other bankrupt member, from Association

funds and not from the State coffers.”

There is a distinct advantage derived from such a sys-

tem. Not only does appellee provide a permanent market

for workers’ compensation insurance at no cost to the

public, but it functions as “a ‘yardstick’ for the industry by

maintaining fair premium rates for employers and fair

treatment for their injured employees.”” An early report

of the Industrial Accident Commission (precursor to the

Workers’ Compensation Appeals Board) “noted that the

very purpose of creating the State Fund was to make im-

possible a private insurance monopoly.’

Thus, appellee’s presence prevents a single carrier from

dominating the market and establishing a monopoly.

C. The Industrial Injury Determined the Basis for Award-

ing Benefits and Imposing Liability

On March 12, 1978, Kenneth V. Atkinson, a fireman for

the City of Torrence, appellant, died. His surviving de-

pendent filed a death claim for workers’ compensation

benefits. The claim was based on the theory that the em-

ployee’s death was due to cumulative trauma during the

full time of his employment with appellant, 1956 to 1977.

Section 5500.5 provided that only the last four years of

injurious employment preceeding the date of injury would

be considered in assessing liability. By virtue of this pro-

vision, appellant, which was permissibly uninsured, i.e.

self-insured and had been since 1971, was held liable for the

total death benefit.

*°Insurance Code Section 1067 et seq.

“2 Hanna, op. cit. supra, (Section 2.04 [2]); Herlick, op. cit.

supra, (Section 1,20),

“Background Notes for Workers’ Compensation Subcommittee

Interim Hearing on the Subject of Reforming California Workers’

Compensation Laws, Assembly Committee on Finance, Insurance

and Commerce, Fall 1977, p. 297.

7

Prior to 1971, appellant was insured for workers’ com-

pensation with appellee. Appellant contends that the insur-

ance agreements entered into between it and appellee pro-

vided for contribution and that appellee should pay a

proportionate share of the award, The facts will demon-

strate, however, that appellant is solely liable under the

law that existed at the time of injury and that there was

no impairment of contract.

The terms of the insurance agreements provided that

when an injury occurs, benefits will be provided under the

Workers’ Compensation Laws of the State of California.

Specifically, the charging paragraph, which created the

obligations of the parties, stated that appellee agreed ‘to

pay promptly and directly to any person entitled thereto

under the Workers’ Compensation Laws ..., and as

therein provided, any suns due for compensation ..., to

be directly aid primarily liable... to pay the compensation,

if any, for which the (City) is liable... , and (to) be

bound by and subject to the orders, findings, decisions or

awards rendered against the (City) under the Workers’

Compensation Laws ...” (emphasis stated).

It is pertinent to note that appellant’s Statement of the

Case cites a portion of the above text and egregiously

omits the phrase “under the Workers’ Compensation

Laws.” App. Br. 2, 5, 15. Appellant selectively recites a

segment of the insuring paragraph as evidence of the fact

that it had a right of contribution. Appellee will demon-

strate that the omitted language is essential because it

establishes the rights and obligations of the contracting

parties. Appellant’s failure to include the phrase is com-

pounded by its disinclination to discuss it. As appellee

will later note, this provision, including the deleted phrase,

was the basis for the California Supreme Court's decision.

The import of the contract language is readily apparent.

The agreement clearly indicates it was the intent of the

8

parties to be bound by subsequent changes in the law.

Furthermore, the language merely restates Insurance Code

Sections 11651 and 11654, which establish workers’ com-

pensation law as essential provisions of every workers’

compensation policy.

D. The Historical Development of Labor Code Section

5500.5

A brief comment on the historical development of See-

tion 5500.5 is relevant. First enacted in 1951, Section

500.5 provided a means whereby an injured worker could

litigate a cumulative injury and the Workers’ Compensa-

tion Appeals Board could resolve it expeditiously, It per-

mitted the injured to elect to go to trial against one em-

ployer or carrier and recover the whole award, after which

that employer or carrier could seek contribution from other

responsible parties.

In 1973, the Legislature umended Section 5500.5 to limit

the period of hazardous employment that could be held

accountable in a cumulative injury case. This reform was

deemed necessary for a variety of reasons. It would facili-

tate rate computation because statistics would be easier to

gather. This in turn would be reflected in more accurate

premiums charged California employers. Insurance re-

serves could be reduced, which in the case of appellee

would increase the dividends distributed to its insureds.

The enactment would ease the heavy burden of cases on

the Workers’ Compensation Appeals Board and expedite

litigation. It would also provide a safer work environment

because liability would be more closely tied to the last

employer, who is best able to provide a safe place to work.

After legislative hearings involving testimony from all

parties in the workers’ compensation industry, including

public entities such as appellant, the Legislature chose to

limit liability for continuous trauma injuries to five years

immediately preceding the date of injury or last exposure.

Again in 1977, the legislature modified Section 5500.5 to

provide for a stepped reduction to one year by 1981, Both

the 1973 and the 1977 amendments provided for reduction

in the period of liability, the only difference being that in

1973 the Act provided what is commonly known as “the

single employer exception.” This exception, contained in

subsection (d), provided that the whole period of hazard-

ous employment would be held responsible if an employee

worked for more than five years with one employer. It was

deleted in 1977.

The central theme of appellant’s case is that the legis-

lature should have retained the “single employer exception”

when it amended the Act in 1977. Paradoxically, appellant

concedes that it would be bound by subsequent legislative

enactments increasing the level of benefits to injured

workers and that no impairment of contract would occur

but denies that the legislature could limit the period of

liability in cumulative trauma cases for all employers. App.

Br. 10, Stated differently, appellant contends that the

United States Supreme Court should create an exception

for it or declare the whole provision unconstitutional.

E. The Proceedings Below

Following an unfavorable decision at the administrative

trial level, appellee petitioned to the Workers’ Compensa-

tion Appeals Board, which in a three-panel decision unani-

mously overturned the ruling. The Board reasoned that the

1973 and 1977 amendments had the same objectives and

that appellant’s right of contribution was statutory and not

based on common law.

Appellant appealed to the District Court of Appeal

urging a reversal of the Board’s decision on the ground

that the contract was impaired because appellee was con-

tractually obligated to pay a portion of the award. The

District Court of Appeal unanimously rejected appellant's

10

contention, stating that “The policy, in substance, requires

the insurer to pay what the law requires,” and that “the

possibility of changes in the applicable law has become

party of the risk assumed by the compensation carrier and

the self-insureds.”

Appellant’s appeal to the California Supreme Court was

similarly rejected in a 6 to 1 decision, The Court found that

the contract was not impaired because the parties agreed to

be bound by the workers’ compensation laws of the State of

California,

Appellant’s argument presented to the U.S. Supreme

Court is a substantial departure from that taken in the

lower courts. First, it represented in two oral arguments

that its position did not depend on whether or not the State

was a party to the contracts. Second, it did not make the

claim that California established a State monopoly for

selling insurance to public entities. In seven appellate

briefs and over 170 pages of argument, including various

petitions, appellant never used the word “monopoly” once.

ARGUMENT

I

Appellant’s Contracts Are Not Impaired

The facts clearly demonstrate that the parties agreed to

be bound by the workers’ compensation laws of the State of

California. It is undisputed that the loss manifested itself

during appellant's period of self-insurance and that the law

on the date of injury imposed the full responsibility on ap-

pellant. Appellant asks the court to assume an impairment,

steming from an alleged lost economic advantage. To sub-

stantiate the claim of impairment, appellant refers to a

portion of the insuring agreement, as if the deleted crucial

language was of no significance, Yet, the omitted language

was the very essence of the contract and the grounds on

which the California Supreme Court based its decision. The

11

failure to come to terms with the contract language and the

lower court’s reasoning evidences the weakness and lack of

substance of appellant’s Jurisdictional Statement.

Appellant’s contracts with appellee are still viable and

enforceable for injuries that manifest themselves during

the period of coverage that the contracts provide. Appellee

remains liable for industrial injuries occurring during its

coverage. In the case at bar, the injury occurred during

appellant’s coverage. Section 3208.1 provides that the date

of injury for cumulative injuries shall be determined by

Section 5412. Section 5412 establishes the date of injury in

a cumulative trauma case as the date on which the em-

ployee first suffered disability.” Applying Section 5412 to

the instant case, the date of injury occurred during appel-

lant’s coverage and the law in effect on that date, not the

date the parties executed the agreement, governs. On the

date of injury, Section 5500.5 limited liability to four years

preceding the date of injury, all of which occurred during

appellant’s self-insurance coverage. However, had the date

of injury occurred during appellee’s period of coverage,

appellee would have been responsible and the appropriate

law applied. Thus, it is incorrect to state, as appellant does

repeatedly, that the contracts were abrogated and that ap-

pellant had an unqualified contractual right to seek reim-

bursement. Consistent with its refusal to cite or discuss the

full text of the contract, appellant did not attempt to define

the date of injury or the application of Sections 3208.1 and

5412 to the facts.

*“The date of injury in case of occupational diseases or cumula-

tive injuries is that date upon which the employee first suffered

disability therefrom and either knew, or in the exercise of reason-

able diligence should have known, that such disability was caused

by his present or prior employment.”

12

A. Workers’ Compensation Law Is Subject to Change

Appellant confuses disability with exposure. This confu-

sion is apparent in that appellant speaks of the total abro-

gation of appellee to pay for workers’ compensation inju-

ries on one hand and at the same time concedes that it

“sought contribution” from appellee. App. Br. 12, 8. It is

not the injured’s recovery that is involved. All benefits have

been paid to the applicant. The central issue of appellant’s

liability and its obligation to be bound under the laws of

the State of California.

Appellant had no right to assume that the law would re-

main fixed. Since the Boynton Act, the Legislature has not

hesitated to amend the Workers’ Compensation Law and,

with the exception of 1921, new laws have kept pace with

changing and developing needs in the workers’ compen-

sation field. The dynamic nature of workers’ compensation

law stems directly from the constitutional mandate. One

must ask, how effectively could the Legislature fulfill its

obligation if the law remained static? As industry creates

new manufacturing techniques and processes giving rise to

new risks and injuries, can the Legislature meet its com-

mitment by remaining inert?

The judicial system has, and is, a substantial force in

developing workers’ compensation laws. From its inception

when the California Supreme Court reviewed the Califor-

nia Compensation Act and declared it constitutional, the

courts through statutory interpretation have had an impact

on rights and obligations and at times have found them to

be different from what the contracting parties originally

believed them to be. Yet, these decisions have withstood

constitutional challenges. Section 5500.5 is no exception and

owes its origin to the decisional rule announced in Colonial

Insurance Co, v. I.A.C., which the Legislature adopted in

*#29 Cal.2d 79, 179 P.2d 884 (1946).

13

1951. Subsequent constitutional challenges were raised in

a number of cases involving Section 5500.5 and rejected.”

Argonaut Mining Co. v. 1.A.C., in particular, rejected a con-

stitutional challenge based on impairment of contract.*

Judicial interpretations in Fireman’s Fund Indemnity Co.

v. I.A.C. and Beveridge v. 1.A.C. expanded the original lan-

guage to include injuries due to micro-trauma.” In Harri-

son v. WCAB, the courts upheld the 1973 amendments to

Section 5500.5, concluding that they were consistent with

the constitutional imperative.”

When appellant voluntarily elected to become self-in-

sured in 1971, it did so against a background of legislative

review in the workers’ compensation field.” A significant

number of states enacted reform legislation following in-

tensive investigative hearings. New York, Oregon, Mary-

land, Idaho and Pennsylvania all adopted reform legisla-

tion after studies and hearings in the sixties.*® California,

in particular, invited improvements “directed toward re-

ducing litigation and separating the administrative and

adjudicatory functions,” following a 1965 report of the

Workers’ Compensation Study Commission.” It is appar-

ent that the reform climate that preceded appellant’s deci-

sion to become self-insured in 1971 was a sufficient reason

**Subsequent Inj. Fund v. 1.A.C. (Koski) 49 Cal.2d 354, 317 P.2d

8 (1957); Argonaut Mining Co. v. 1.A.C., 104 Cal.App.2d 27, 230

P.2d 637 (1951); Pacific Employers v. 1.A.C., 219 Cal.App.2d 634,

33 Cal.Rptr. 422 (1963).

**[bid., 104 Cal.App.2d 27, 230 P.2d 637 (1951).

739 Cal.2d 831, 250 P.2d 148 (1952); 175 Cal.App.2d 592, 346

P.2d 545 (1959).

**44 Cal.App.3d 197, 118 Cal.Rptr. 508 (1974).

**The Report of the National Commission on State Workers’

Compensation Laws, (July 1972), Ch. 7 “A Time for Reform.”

*id., p. 121-122.

“id,, p. 121; 2 Hanna, op. cit. supra, Section 101 [3]; Stats, 1965,

Ch. 1513, Section 214,

14

in itself for anticipating changes in workers’ compensation

laws that might follow, particularly in the areas of improv-

ing and expediting the litigation process.

B. The United States Supreme Court Has Held That Sub-

sequent Legislative Enactments Do Not Impair Con-

tracts Which Incorporate Changes in the Law

In Energy Reserves Group, Inc. v. Kansas Power and

Light Co., this Court found that a contract was not im-

paired by a subsequent state act that imposed a restric-

tion on a contract provision dealing with the price of

natural gas."* The Court reasoned that state price restric-

tions were foreseeable because supervision of the industry

was “extensive and intrusive,” and the contract price

clauses “were structured against the background of regu-

lated gas prices.” Furthermore, “the contracts expressly

recognize the existence of extensive regulation by provid-

ing that any contractual terms are subject to relevant

present and future state and federal law.”

The principles discussed in Energy Reserves, supra, are

applicable to the instant case. The insurance agreement

recognized that the parties would be bound by state law

and workers’ compensation is a field where legislative

enactments and judicial decisions are extensive and intrin-

sic in the industry, the constitutional mandate and Insur-

ance Code Sections 11650-11656 serving as the basis for

all authority. Appellant had just as much opportunity to

foresee changes in the law as the energy company did in

Energy Reserves, given the legislative history of Section

5500.5, the long history of statutory and judicial presence

in workers’ compensation and the concern expressed by

state and federal governments regarding expeditious deliv-

ery of benefits to injured workers. In addition, the rule

imposing liability on the employer with the last injurious

US. ...., 74 L.Ed.2d 569, 582-583 (1983).

15

exposure was applied in Longshoremen and Harbor Work-

ers’ cases for 16 years before appellant became self-

insured.” Similar rules achieving the same result as Sec-

tion 5500.5 were already evident in other states.”

In U.S. Mortgage v. Matthews, the U.S. Supreme Court

reversed a finding that a state statute impaired foreclosure

rights on the ground that the contract itself recognized

that these rights might be effected by subsequent legisla-

tion.” The mortgage agreement provided a sale of property

according to certain statutes “or any amendments or addi-

tions thereto.” Subsequent legislation limited the lender’s

rights to foreclose or default. The U.S. Supreme Court

reversed a lower court finding of impairment of contract,

noting that the contract language “embraced the amend-

ments and additions” to the statute stated in the mortgage

agreement. The workers’ compensation agreement between

appellant and appellee indicated an intention of all the

parties to incorporate California law when a claim was

presented and expressly recognized that the parties would

be bound by subsequent changes in the law.

II

Labor Code Section 5500.5 is Reasonably Related to Legiti-

mate State Goals

A. The 1977 Amendments Had a Legitimate Objective

Appellant incorrectly characterizes Section 5500.5 as

having no legitimate state purpose except “the abrogation

of State Fund’s financial obligations to City and similar

employers .. .” App. Br. 19. Appellee will demonstrate

that the section has legitimate state goals that are con-

“Travelers Insurance Co, v. Cardillo, 225 F.2d 137 (2nd Cir.

1955); 4 Larson, op. cit. supra, Sections 95.12, 95.21, 95.25.

Post, fn. 41, page 17 for a discussion of other states applying a

similar rule.

#9993 U.S. 232.

16

sistent with the Legislature’s plenary power under Article

XIV, Section 4 of the California Constitution.

It is evident that the section does not refer to appellee

and applies to the whole workers’ compensation industry

in California. Appellant recites the “single employer excep-

tion” contained in the 1973 amendinents but dismisses the

main provisions as “not pertinent.” App. Br. 7. Yet, both

the 1973 and 1977 amendments limited the period of legal

responsibility for cumulative trauma injuries. A reading

of both sections fails to disclose a legislative intent to con-

fer a benefit on appellee. Appellant’s attack on the 1977

amendments is an attempt to have the courts obliterate the

statute and formulate a plan whose history proved unwork-

able and destructive.

Preceding the statutory amendments to Section 5500.5,

Congress enacted the “Occupational Safety and Health Act

of 1970,” which established a National Commission on State

Workmen’s Compensation Law.** The purpose of this act

was to study workers’ compensation laws to determine “if

such laws provide an adequate, prompt and equitable sys-

tem of compensation.”*’ A report was prepared and sub-

mitted to the President and Congress in 1972. One of the

objectives for a modern workers’ compensation program

was “an effective system for delivery of the benefits and

services,” so that the goals of workers’ compensation laws

could be “met comprehensively and efficiently.”** Excessive

litigation was one aspect interfering with a prompt de-

livery system.” The study indicated the need for certain

minimum reforms, and it was evident to the states that a

°*84 Stat. 1590.

*'The Report of the National Commission on State Workmen’s

Compensation Laws, p. 150.

‘STd., p. 15.

*°Id., pp. 100, 119.

17

uniform federal workers’ compensation law was a pos-

sibility.*°

In 1973, California amended Section 5500.5, bringing

California in line with a substantial number of other states

and the federal courts.** Since the legislation reduced the

“Td. Ch. 7.

“Traveler's Insurance Co. v. Cardillo, op. cit, supra; General

Dynamics Corp. v. BRB, 265 F. 208 (2nd CCA 1977); Cordero v.

Triple A Machine Shop, 580 F.2d 1331, (9th CCA 1979), cert. den.;

Proceedings of Assembly Committee on Finance, Insurance and

Commerce into Problems of Insuring Payments of Compensation

for Cumulative Occupational Injurious Interim Hearings, (January

12 and 19, 1977) (hereafter “1977 Assembly Committee Hearings.” )

Pages 399-401 provided the Committee with the following analysis,

showing imposition of liability on the last employer or carrier in

33 states:

“States which limit liability to the last day of employment:

1. Illinois—Chapter 48, Section 172.36 (d)

2. Indiana—Section 22-3-7-33

3. Wisconsin—-Section 102.01 (f)

II. States which limit liability to the last employer where

the employee was injuriously exposed and, either by statute or

case law, further limit liability to the last carrier on the risk

with said employer:

(A) By statute

Vermont—Section 1008

Arkansas—Section 81-1314 (b)

Colorado—Section 8-51-112

Florida—Section 440.151 (5)

Georgia—Section 114-809

Kansas—Section 44-5a06 (Chapter 203, Laws 1974)

Maine—Title 39, Section 186

Maryland—Article 101, Section 23 (b)

North Carolina—Section 97-57

10. Oklahoma—Title 85, Section 11 (3)

11. Tennessee—Section 50-1106

12. Virginia—Section 65.1-50

(B) By Case Law

1. Arizona—State Comp. Fund v. Joe, 543 R. 2d. 790

OBEN OahLonr

18

period of accountable liability, it also limited the number

of employers and insurers involved in the litigation process.

The benefits flowing from such legislation were consistent

with the constitutional requirements to provide a complete

system of workers’ compensation, including providing for

and regulating adequate insurance coverage. Not only did

the reduced period allow for more accurate underwriting

and premium calculations but it also relieved the litigation

logjam that was effectively denying benefits to injured

2. South Carolina—Glenn v. Columbia Silica, 112 S.E.2d

711

3. Pennsylvania—Gaydosh v. Richmond Radiator, 63

A.2d 502

4. Oregon—Davidson Baking v. Industrial Indemnity,

532 P.2d 810

5. New Jersey—Marko v. Barnett Foundry. 147 A.2d 579

III. States which limit liability to the last employer where

the employee was injuriously exposed. No statutory or deci-

sional clarification as to carriers during the employment:

1. Montana—Section 92-1310

Idaho—Section 72-102 (17)

Texas—Section 8306, Part 1, Section 24

New Mexico—Section 59-11-11

Missouri—Section 287.063 (2)

Alabama—Title 26, Chapter 5, Article 2c., Section 313

Iowa—Title V, Section 85 A, 10

South Dakota—Section 62-8-15

IV. States which limit liability to the last employer where

the employee was injuriously exposed, including all carriers

who insured the risk during the period of employment.

1. Utah—Statute 35-2-14, Case—State Insurance Fund v.

Industrial Commission, 399, P.2d 208

V. States which assess liability on the carrier which is on

the risk at the time the employee actually suffers disability:

1. Delaware—Alloy Surfaces Co. v. Cicamore, 221 A.2d

480

2. Massachusetts—see 100 CJS, Section 373, fn. 87

3. Minnesuta—Bituminous Car. Corp. v. Hartford, 167

N.W.2d 741

4. Alaska—Lloyds v. Alaska Indus. Bd., 160 F.Supp. 248

PAE HAP wp

19

workers. Thus, the amendments were consistent with the

objectives of the National Commission on State Workers’

Compensation Laws, i.e. to provide for an effective delivery

system of benefits and services. “The purpose of these

amendments was to provide greater certainty to insurers

in anticipating costs and necessary reserves, to simplify

the proceedings by reducing number of employers and in-

surers required to be joined as defendants and to reduce

the burden placed on the entire system by the former pro-

cedures.””? The benefits would also inure to self-insureds.“

The amendments provided immediate relief from a “pro-

cedural morass” that was impeding litigation to the degree

that the delay in providing benefits was “in violation of the

constitutional mandate that workers’ compansation be

determined expeditiously.’”* “Forces ordinarily opposed to

one another, in practical effect, joined to encourage passage

of legislation which was obviously designed to ameliorate

the pressing problems that have arisen under the old statu-

tory scheme.’’*”

In 1977, the Legislature further modified Section 5500.5

to accomplish the valid objectives begun in 1973. In view of

the legislative history surrounding the passage of these

amendments and the judicial decisions analyzing the legis-

lative process, the purpose of the statute was to achieve

legitimate goals consistent with the constitutional obliga-

tion to provide a complete workers’ compensation system.

Appellant cannot substantiate its broad, unfounded charge

that the statute had a limited, narrow purpose, to benefit

appellee.

“?Flesher v. WCAB, 23 Cal.3d 322, 328; 152 Cal.Rptr. 451 (1979).

451977 Assembly Committee Hearings, op. cit. supra, p.69.

“Harrison v. WCAB, 44 C.A.3d 197, 205; 118 Cal.Rptr. 508

(1974); 1977 Assembly Committee Hearings, op. cit. supra, p.55,

testimony of Melvin A. Witt, Chairman of California Workers’

Compensation Appeals Board.

“Harrison v. WCAB, Ibid

20

B. The State May Exercise Its Police Power to Accom-

plish a Legitimate Goal

The state may exercise “its essential reserve power to

protect the vital interests of its people.” In El Paso v.

Simmons, the U.S. Supreme Court upheld a state statute

that restricted a former landowner’s right to reinstitute

title and found no impairment of contract.*” Previous to the

imposition of a 5 year limitation from the date of forefei-

ture, Texas had no restriction, and a former landowner

could institute recovery proceedings for as far back as

when title was first acquired, which in the case at bar was

over 40 years. The Court noted that the “massive litigation

to which this gave rise” was expensive and interfered with

land use. In approving the statute, the U.S. Supreme Court

noted that the purpose of the statute was to restore stabil-

ity and integrity to land titles, allowing the State of Texas

to conduct the administration of land titles in a business

like manner.

In the present case, as in El Paso, the Legislature had

a vital interest to protect, the integrity of the workers’

compensation system, and after legislative hearings,

adopted a solution that met with the approval of “forces

ordinarily opposed.” Appellant seeks to resurrect a statu-

tory scheme that these forces opposed, one that gave rise

to a “procedural morass.’”“* Where the legislative pro-

ceedings reflect an empiric process, following legislative

hearings and analysis that involves consideration of future

benefits and burdens and is based on the opinion and views

of a diversity of interests, it cannot be said that the

resultant law should be rejected as an impairment of con-

tract on the ground that the legislature acted arbitrarily.”

““Faitoute Iron and Steel Co. v. City of Asbury Park, 316 U.S.

502 (1941).

‘7379 U.S. 497 (1965).

‘Harrison v. WCAB, op. cit. supra, p.205.

“East New York Savings Bank v. Hahn, 326 U.S. 230 (1945).

21

In a related matter, the U.S. Supreme Court considered

the constitutionality of the Black Lung Benefits Act of 1972

and, in particular, certain statutory presumptions.’

Although the charge of unconstitutionality was based on

due process arguments, the case is appropriate because it

deals with workers’ compensation and the judicial analysis

of a legislative program that attempts to achieve substan-

tial fairness for all employers and at the same time insti-

tute a benefit program for injured workers. The Court

noted that “legislative Acts adjusting the burdens and ben-

efits of economic life come to the Court with a presumption

of constitutionality, and that the burden is on the one

complaining of a due process violation to establish that the

legislature has acted in an arbitrary and irrational way.

(citations) And this Court long ago upheld against due

process attack the competence of Congress to allocate the

interlocking economic rights and duties of employers and

employees upon workmen's compensation principles anal-

ogous to those enacted here, regardless of contravening

arrangements between employer and employee.” Rejecting

a claim that present employers should not be held respon-

sible for former employees’ disabilities because the liability

was unexpected, the Court stated, “But our cases are clear

that legislation readjusting rights and burdens is not

unlawful because it upsets otherwise settled expecta-

tions.”** Responding to the contention that the law was

unfair because present employers suffered the full burden

of compensation while early operators were excluded from

payment, the Court stated, “it is for Congress to choose”

and “We are unwilling to assess the wisdom of Congress’

chosen scheme for examining the degree to which the ‘cost

savings’ employed by operators in the pre-enactment

“Usery v. Turner Elkhorn Mining Co., 428 U.S, 1 (1976).

"Id., p.766.

Jd. p.767.

22

period produced ‘excess’ profits, or the degree to which the

retrospective liability imposed on the early operators can

now be passed on to the consumer.”

Appellant’s argument is substantially the same as the

coal miner operator’s arguments in Usury. In an attempt to

demonstrate unreasonableness, it relies on the unfounded

claim that the sole basis for the legislation was to benefit

the appellee. In order to bolster this contention it claims

the State was a party and that its coffers will be unjustly

enriched. With respect to the latter, the financial relation-

ship and daily operation of appellee’s business is separate

and distinct from the State. Appellant’s extra-record argu-

ments regarding reserves and finances have no bearing on

the case, since these funds do not go to the State but are

returned as dividends to appellee’s policyholders, many of

whom are insured governmental entities. Although appel-

lant seeks to show a windfall profit by citing the premiums

it paid, it does not state that during the period of its insur-

ance coverage With appellee it received the benefit of divi-

dends, coverage and complete insurance services.

Appellant readily concedes that the Legislature can

initiate changes that impose substantial economic burdens

without impairing any agreements between it and appellee.

App. Br. 19. Since 1971 when petitioners elected to be

self-insured, maximum temporary disability indemnity in-

creased from $70 a week to $196. The maximum death

benefit increased from $55,00 to $85,000." All of the in-

creases imposed a substantial economic burden on the

parties, perhaps even greater than the figures that appel-

lant cites, yet it does not claim an impairment, This patent

inconsistency is demonstrated by the fact that the duties

and obligations all stem from the same agreement, one in

“Id., p.768.

‘*Labor Code Sections 4453, 4453.1, 4469.

‘“Labor Code Section 4702.

23

which the parties agreed to be bound by the workers’ com-

pensation law, It also demonstrates the fallacy of assuming

an impairment from a supposed economic disadvantage.

The issue is whether or not the Legislature exercised its

plenary power in a reasonable fashion for a legitimate

public purpose, not whether or not the appellant suffered a

detriment. The contract clause is not impaired by “legisla-

tion adjusting the rights and responsibilities of contracting

parties upon reasonable conditions and of a character

appropriate to the public purpose justifying its adop-

tions,”

Appellant also benefits from the Act by virtue of the fact

that it can calculate reserves and gather statistical data

more easily, On the basis of this information, it can predict

losses and adjust reserves more accurately, just as other

insurance carriers and self-insureds can do, Of course,

appellant is not encapsulated in its present mode of self-

insurance, Appellant can simply elect to become insured

with appellee.

Thus, appellant's plea for relief ignores the present and

potential benefits that it also enjoys from the legislation.

Appellant also disregards the benefits that the injured

worker will derive from a prompt and efficient delivery

system. Imposing liability on the last employer provides

the incentive for that entity or person to provide a safe

place to work; since the last employer is the best position

to provide a safe work environment, it is reasonable that

the risk of loss should rest with that employer, who is

obligated to provide a safe place to work by virtue of

Labor Code §§ 6400 through 6404,

“U.S, Trust Co. v. New Jersey, 431 U.S. 1, 22 (1977).

24

C. The Claimed Impairment Is Insubstantial

Although the facts do not demonstrate an impairment,

it is appropriate to respond to appellant's authorities deal-

ing with the legitimacy of the legislation when an impair-

ment is found.

Before doing so, however, appellee wishes to state that

appellant abandoned the position that appellee and the

State of California were one and the same. Appellant rep-

resented to the lower courts that for purpose of its argu-

ment, appellee was the same as any other insurance carrier

and its legal position did not depend upon appellee's rela-

tionship to the State of California. Appellee points this out

for two reasons: first, this representation made to the lower

court explains why the decisions did not discuss this aspect

to the case; second, it demonstrates the lack of substance

of the Jurisdictional Statement.

Appellant’s claim of impairment must be put in perspec-

tive. The legislation affects a small percentage of workers’

compensation claims. In 1977, the Chairman of the Work-

ers’ Compensation Appeals Board testified that “The per-

centage of cumulative injury claims to all new claims filed

before the Board is approximately 12144%.” The real effect

of the act, however, may be on substantially fewer cumula-

tive injuries than 1214%. For instance, with the passage of

time fewer and fewer workers would have had employment

pre-dating 1971, and appellant would have eventually had

to assume all responsibility, regardless of the amendment.

The elimination of the “single-employer exception” merely

accelerated what would have occurred in any event. In addi-

tion, as longstanding employees leave appellant’s employ-

ment to work elsewhere, that prospective employer assumes

"1977 Assembly Hearings, op. cit. supra, p.58.

25

what ordinarily would have been appellant’s liability,

should those employees initiate cumulative trauma claims.”

D. Appellant’s Authorities Are Distinguishable

Appellee believes that the code sections and the authori-

ties cited in appellee’s Statement of Facts amply demon-

strate that the State of California is not a party and that

appellee is as much a private party to the insurance agree-

ments as any other carrier. The present case is clearly

distinguishable from Allied Structural Steel Co. v. Span-

naus and U.S. Trust Co. of New York v. State of New

Jersey, relied on by appellant.” Both cases deal with the

legislative impairment of common law rights and do not

deal with workers’ compensation or rights arising out of

statute.

In U.S. Trust of New York v. State of New Jersey, the

State sought to undermine the security of its bonds by in-

troducing legislation which would repeal certain specific

covenants between the State and bondholders. In the in-

stant case, the state is not a party, and the legislation does

not attempt to repeal any covenant in any agreement but

merely recites the period of employment that is accountable

in a cumulative trauma case, a significant difference from

U.S. Trust of New York.

In Allied Structural Steel Company v. Spannaus, the

act dealt with pension rights and did not pertain to a

broad general economic or social problem or attempt to

*s“The insurance industry formed these amendments and rea-

soned that the total burdens and benefits upon employers and

insurers would more or less even out, for which they might be

required to assume a longer liability in some cases, they would also

be absolved of liability in other cases.” Flesher v. WCAB, op. cit.

supra, p. 328.

Allied Structural Steel Co. v. Spannaus, 438 U.S. 234 (1978);

U.S. Trust Co. of New York v. State of New Jersey, 431 U.S. 1

(1977).

26

legislate in an area already subject to state regulation at

the time the contract was executed. Appellee contends that

the legislative history of workers’ compensation law in

California, and in particular Labor Code Section 5500.5,

amply refutes the argument that the amendments did not

deal with a broad social purpose in an area where the Leg-

islature previously acted.

Citing Home Building & Loan Association v. Blaisdell,

petitioner decrys the legislation on the ground that there

was no emergency.” However, the presence or absence of

an emergency is not dispositive of whether or not there is

an impairment. Although an emergency may serve as the

occasion for the exercise of the police power, it does not

create it and the absence of one does not ipso facto indi-

cate an impairment. Viex v. South Ward Association so

held.”

Where, as in the instant case, the legislation is seeking to

provide a remedy in a field where the Legislature is vested

with plenary power and is mandated to the act, it cannot

be said that the legislation performed in the absence of an

emergency is invalid as offensive to the contract clause.

However, appellee does not concede that there was no

emergency, only that the presence of one is not essential

to the case at bar.”

9290 U.S. 398 (1934).

"1310 U.S. 32, 38-39.

“*Flesher v. WCAB and Harrison v. WCAB, op. cit. supra, de-

scribe conditions that indicate the need for expeditious legislation.

27

CONCLUSION

The 1977 amendments to Labor Code Section 5500.5

were the result of legislative hearings that considered the

opinions of diverse interests in the workers’ compensation

field. The single most persuasive argument against the

claim that the legislation was solely to confer a benefit on

appellee is that those opposing parties were able to agree

on amendments that restored stability and integrity to an

industry that was floundering. The fact that a similar rule

is followed in other jurisdictions, including the federal

system, reinforces the constitutional legitimacy of the

statute. Appellant’s entire argument ignores the national

trend, the legislative hearings and the state of the industry

when the amendments were considered. Finally, the State

of California derived no economic advantage from the

legislation and the contention that a strict standard of

review is required is inapplicable.

Appellee respectfully submits that the question upon

which this cause depends is so insubstantial as not to need

further argument, and appellee respectfully moves the

Court to dismiss this appeal, or, in the alternative, to

affirm the judgment entered in this case by the California

Supreme Court.

Respectfully submitted,

By Frank Evans

Attorneys for Appellee

State Compensation

Insurance Fund