Petition for Writ of Certiorari — Peterson Brothers Brothers Construction Construction Construction, Inc. v. Lexington Insurance Insurance Insurance Co Co (No. 07-522)

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Supreme (Cort U.S.

(i) 07-522 00T19 2007

IN THE

Supreme Court of the United States

PETERSON BROTHERS CONSTRUCTION, INC., A

CALIFORNIA CORPORATION; PBC PAVERS, INC., A

CALIFORNIA CORPORATION; PRECISION LEASING, INC., A

CALIFORNIA CORPORATION, PETITIONERS

VU.

LEXINGTON INSURANCE COMPANY, A DELAWARE

CORPORATION

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

JEFFREY M. EPSTEIN

Counsel of Record

RICHARD E. BLASCO

Hunt Ortmann Blasco

Palffy & Rossell, Inc.

301 N. Lake Avenue, 7" Floor

Pasadena, CA 91101-1807

(626) 440-5200

Attorneys for Petitioners 2

nT SS NAS AA tt PAROLE PEE

CURRY & TAYLOR @ WASH O.C. @¢ (202) 393-4141 ¢ USBSCINFO.COM

QUESTIONS PRESENTED

The questions presented are:

1. Does an employer's compliance with the Americans

with Disabilities Act of 1990, and Department of

Transportation Regulations, which compliance results in

death, bodily injury and property damage, constitute:

a. As a matter of public policy, an

"independent" cause of an accident for which an employer

is entitled to coverage under its commercial general

liability policy; and/or

b. As a matter of contract interpretation,

whether employer conduct which is found to be

"independent" under state law, thereby causing the

employer to have direct liability (not vicarious liability) to

an injured party, is an "independent" cause of an accident

for which an employer is entitled to coverage under its

commercial general liability policy?

2 Can the Ninth Circuit Court of Appeals ignore

state law involving the interpretation of a contract of

insurance, when such law has been established by the

highest court in the state?

RULE 29.6

The Petitioners, Peterson Brothers Construction, Inc.,

PBC Pavers, Inc., and Precision Leading, Inc.,

(collectively "Petitioners"), state that they are California

corporations, with a brother/sister or parent/subsidiary

relationship, and that they are not publicly held, and that

no publicly held company owns any of the stock of any of

the Petitioners.

TABLE OF CONTENTS

Page

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APPENDIX

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TABLE OF AUTHORITIES

Page

CASES

BANVILLE V. SCHMIDT (1974) 37 CAL.APP. 4TH 92,

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BROWN V. LUCKY STORES (2001) 246 F3D 1182, 1188............ 12

BURNETT V. U.S. AIR, INC. (2000) 228 F3D 1105, 1110-

ER BA sissitensnistincinseiceoncennaeanddeieciabnesadalibsiicebaiabntakekabilesintcieesiek 12

EASTERN ASSOCIATED COAL CORPORATION V.

UNITED MINE WORKERS OF AMERICA (2000) 531

Te CHIE GUE ids. ssuscsuidassiiiok cinbedvnnaeidatsinsidansbibicdedieiiaadasadiinioaditidecacasiioss 6

FEDERICO V. SUPERIOR COURT (JENRY G.) 59

CAL.APP. 4TH 1207, 1213 (RD DIST. 1997).................... 14, 15

HERNANDEZ V. HUGHES MISSLE SYSTEMS Co. (2004)

ee is et icissscdinscnedierevinsoesaniccconicsetninassaaisibininabietiisashis 12

J.C. PENNEY CAS. INS. Co. V. M. K. (1991) 5 CAL. 3RD

| RAEN PLE paNERI CITT ON TESTE TBC ET NG MOEN 20

JOHNSON V. FANKELL, 520 U.S. 911, 916 (1997)........... iuabaaens 26

MENDOZA V. CITY OF LOS ANGELES, 66 CAL.APP.

4TH 1333, 1339-1340 (2D. DIST. 1998) ..... cee ceeeeee eens 14, 15

ROMAN CATHOLIC BISHOP V. SUPERIOR COURT, 42

CAL.APP. 4TH 1556, 1564-1565 (4TH DIST. 1996)......14, 16, 17

SAFECO INSURANCE COMPANY V. GILSTRAP (1983)

141 CAL APP SD GO6, GEG noi ccnccsccccesiscssoccncosnsecsosenssstsveases 25

STATUTES

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OPINIONS BELOW

The Opinion Memorandum of the United States

Court of Appeals for the Ninth Circuit affirming the

decision of the District Court, Unpublished Opinion, filed

June 7, 2007, and is set forth in the Appendix, Exhibit La,

1 pp. la to 2a.

The Judgment of the United States District Court,

Central District of California, filed April 11, 2005, was not

reported and is set forth in Appendix, Exhibit 2a, p. 3a.

The Order Granting Lexington Insurance

Company's Motion for'Summary Judgment, filed April

11, 2005, was not reported, and is set forth in the

Appendix, Exhibit 3a, pp. 4a to 1la.

JURISDICTION

The Opinion Memorandum of the United States

Court of Appeals for the Ninth Circuit was filed on July

23, 2007. This Petition for certiorari was timely filed, and

this Court has jurisdiction under 28 U.S.C. §1254(1).

RELEVANT PROVISIONS INVOLVED

(See appendix)

STATEMENT

I. Introduction.

This case involves an employer's attempts,

beginning in the fall of 1999, through March 8, 2001, to

comply with the Americans with Disabilities Act of 1990,

42 U.S.C. § 12101 et seq. ("ADA"). An employee of the

Petitioner, was involved in an accident on a public road

while operating a commercial truck and trailer. The

accident occurred on March 8, 2001, and resulted in

multiple people being injured and damage to multiple

vehicles. All claims related to the accident were resolved

by various settlements that occurred prior to this

commencement of the insurance coverage action which is

the subject of this Petition. The amount of the settlement

payments exceeded the coverage provided by the auto

and umbrella policies maintained by Petitioner, by

$400,000.

It is undisputed that multiple risks contributed to

cause the accident. The issue presented in this Petition, is

whether compliance by an employer with the ADA, is an

"Independent" cause of the accident which is not

“dependent” on the use of an “auto,” thereby giving rise to

coverage under the employer's commercial general

liability policy (the "CGL Policy").

The Honorable Cormac J. Carney, United States

District Judge, found that no coverage existed for PBC

under the CGL Policy issued by Lexington Insurance

Company ("Lexington").' However, during oral

argument, Judge Carney stated that:

I don't like the argument if you are trying to

comply with the law, that you should be penalized

for that. But I also am a big believer in the public

policy of freedom of contract.

* * *K *

It's an interesting issue, but I do think the freedom

of contract policy prevails here.

’ Ex. 2a, p. 3a, and Ex. 3a, pp. 4a to Ila.

Report's Transcript of Proceedings, Case No. SACV 04-

676-CJC, Monday, March 21, 2005.

Subsequently, the Ninth Circuit Court of Appeals

("Ninth Circuit"), affirmed Judge Carney's judgment. The

Ninth Circuit concluded that public policy considerations

do not justify overriding the unambiguous auto exclusion

in the plaintiff-appellant's policy.’

The Petitioner is requesting this Court to find that,

either as a matter of public policy, or based upon contract

interpretation, that an employer's actual compliance, or

even a good faith attempt at compliance, with the ADA, is

always an "independent" cause of an accident resulting in

damage, when but for compliance with the ADA, the

employer would have been required by state law to

terminate the employee or assume the risk that an

accident might occur resulting in injury to persons or

damage to property, or, as tragically occurred in this case,

a fatality.

Il. Factual Background of Accident.

The auto accident occurred on March 8, 2001 (the

"Accident"). At the time of the Accident, Petitioner's

employee, Anthony Saiz ("Saiz") was operating a dump

truck, which was filled with "base" material (i.e., sand),

and was towing a trailer which was carrying a tractor.

Saiz was operating the vehicle in the course and scope of

his employment for the Petitioner at the time of the

Accident. As a result of the Accident, multiple

individuals were injured, multiple vehicles were damaged,

and Dr. Kenneth Larkin was killed. Litigation was

commenced by the deceased's wife, the deceased's

2 Ex. la, pp. la to 2a.

parents, and the estate of the deceased (collectively the

"Larkin Actions"), as well as by the other injured

individuals (the "Other Actions"), against multiple

defendants, including Saiz and Petitioner.

The litigation with the Petitioner and Saiz

culminated in the execution of various settlement

agreements, requiring payments to all injured parties

totaling $4,400,000.00. The amount of the settlement

payments exceeded the Petitioner's auto and umbrella

policy coverage by $400,000.

The pre-printed form of the main policy selected by

Lexington was an Insurance Services Office, Inc. form

entitled Commercial General Liability Coverage Form;

CG 00 01 01 96, Policy No. 0150 899, (the "CGL Policy").

The coverage issue was decided by the District

Court, upon the filing of cross-motions for Summary

Judgment and Summary Adjudication by Petitioner (also

referred to as "PBC")? and Lexington. In their cross-

motions the parties primarily relied upon a "Stipulated

Statement of Uncontroverted Facts and Disputed

Conclusions of Law."

The police reports prepared by the California

Highway Patrol and the City of Anaheim indicated that

Saiz was under the influence of methamphetamine,

amphetamine and opiates at the time of the Accident.

These facts were based upon blood tests of Saiz that were

taken at the hospital where he was being treated for

injuries he suffered in the Accident. As a result of these

facts, in approximately September, 2002, Saiz pled guilty

3 Though not relevant for purpose of this Petition, PBC is a

group of companies with common ownership, all of which were

insured's under the CGL Policy.

to involuntary manslaughter while intoxicated, and was

sentenced to one year in jail.

The Larkin Actions alleged that PBC

"inadequately drug tested Defendant Saiz despite the

requirements of federal regulations." The Larkin Actions

further alleged that PBC negligently allowed Saiz to

return to his position as a driver, "based upon his

background driving record and other qualifications." The

Larkin Actions further alleged that the negligent acts of

PBC "evidenced a conscious disregard for the safety for

the traveling public’, and’ were therefore so egregious

that they warranted the imposition of "an award of

punitive damages ...".

III. Factual Background of ADA Compliance.

As acommercial driver, Saiz was randomly tested

on a regular basis for drug use, as required by the United

States Department of Transportation regulations

("DOT").* In the fall of 1999, Saiz was given random drug

tests on two occasions. The results of both of these tests

were positive for drug use.

Following the first random drug test, when

confronted with the results by Petitioner, Saiz indicated

that he had only taken illegal drugs once at a party, which

is what caused the first positive test result. Saiz

indicated to Petitioner, that he had never consumed

illegal drugs before the party, and would never again

consume illegal drugs.

As a result of this explanation, the Petitioner

allowed Saiz to continue in his position as a commercial

* Prior to the fall of 1999, Saiz had been randomly tested for

drug use. The results of such random drug testing were all negative.

driver. After allowing the residual affect of any such

drugs consumed at the party to be eliminated from his

system, within thirty days the Petitioner randomly tested

Saiz, which test results were again positive, showing

continuing drug use. When Saiz was confronted with the

test results, Saiz stated that he was addicted to illegal

drugs, that he was going to commence attending a drug

rehabilitation program in the evening, and he requested

that PBC provide reasonable accommodations to him,

since he had a wife and children that needed his support.

Based upon these statements by Saiz, and, based

upon Petitioner's belief that the ADA imposed a legal

duty on it to accommodate Saiz if he admitted his

addiction, and would seek rehabilitation, he was not fired.®

° Petitioner believed that the ADA, when read in conjunction

with the DOT regulations dealing with first time offenders, required

that Saiz be returned to his commercial driver position after a one-

year suspension. Pursuant to the ADA, and, in compliance with the

Department of Transportation ("DOT") implementing regulations

dealing with "the use of illegal drugs, whether on or off duty, by those

individuals who are involved in [certain safety-sensitive positions,

including] the operation of .. .trucks," PBC returned Saiz to his prior

position, which involved driving a truck. Eastern Associated Coal

Corporation v. United Mine Workers of America (2000) 531 U.S. 57,

63. The regulations promulgated by the Secretary of Transportation

to deal with workers who have tested positive for the use of illegal

drugs, requires a suspension of at lease one year for a first offense.

49 U.S.C. § 31310(b)(1)(A). It also requires a suspension of at least

ten years for a second offense. 49 U.S.C. § 31310(c)(2). If the

Plaintiffs failed to follow the DOT regulations in reinstating Saiz to

his driving position after a first offense, then the legal issue would be

whether PBC discriminated against Saiz by failing to reinstate him to

his driving. If PBC complied with the DOT regulations in reinstating

Saiz to his driving position, then the issue is whether its compliance

with federal law constitutes a concurrent independent cause of the

Accident.

Petitioner however removed Saiz from his commercial

driver position, and reassigned Saiz to work as an

assistant to the mechanics who serviced PBC's equipment

at its terminal, which was located at its headquarters.*°

This allowed PBC to provide reasonable accommodation

to Saiz, while at the same time allowing management to

more closely monitor Saiz’s behavior for signs of

continued drug use, while Saiz completed his drug

rehabilitation program.’

Saiz subsequently completed the drug

rehabilitation program, and after numerous random drug

tests were administered by a licensed physician, both

during his attendance at the drug rehabilitation program,

as well as after he had completed the program, after a

one-year suspension Saiz was returned to his commercial

driver position.

On the day of the Accident, it was discovered that

Saiz had in his personal knapsack that was being

inventoried by a California Highway Patrol officer, with

another employee of PBC as an observer, a vial of his

son's "clean" urine.’ It was obvious to the officer, who

® It should be noted that the compensation paid to a

commercial driver was greater than that paid to Saiz asa mechanic's

assistant.

7 It should be noted that Saiz is also the member of a

"protected class" under federal and state law, as a result of his

Hispanic heritage. However, any protection provided to Saiz as a

member of this protected class, did not in any way contribute to, or

cause, the Accident.

® It should be noted that Saiz is also the member of a

"protected class" under federal and state law, as a result of his

Hispanic heritage. However, any protection provided to Saiz as a

member of this protected class, did not in any way contribute to, or

cause, the Accident.

explained to the PBC observer, that when notified of a

random drug test, Saiz had been attaching the vial to his

leg with a leather strap that was attached, and then

proceeding to the testing facility. He would then go to

the rest room, fill the test cup with the "clean" sample,

which was near body temperature, and then leave.

As a result of Saiz successfully implementing this

elaborate procedure, he was able to circumvent the

random drug tests.’ It is unknown how long Saiz had

been using this procedure to circumvent the drug tests.

However, since he was caught by his employer,

speculation is that he learned the procedure from fellow

participants who attended the drug rehabilitation

program.

REASONS FOR GRANTING THE PETITION

I. The ADA

The purpose of the adoption of the ADA was to

avoid discrimination against individuals with disabilities.

The public decided that they wanted to include in the list

of disabilities to be protected, addiction to drugs.

However, as discussed above, in creating this new duty

on the part of employers to actively participate in the

rehabilitation process, the public was requiring employers

to engage in actions which another body of law has

recognized a reasonably prudent employer would not

% It should be noted that new “clean” samples had to be

obtained by Saiz on almost a daily basis, since the amount of bacteria

that would grow in Saiz's vial within a short period of time would

indicate that Saiz was either deathly ill, or that he was not the person

providing the sample.

engage in. In the case of Saiz, a reasonably prudent

employer would not continue the employment of a known

admitted drug addict. This is particularly true in the

situation where the employee, in this case Saiz, is a

commercial driver who operates, unsupervised,

equipment both on public roads as well as at the work

site.

The ADA, when viewed in light of the DOT

regulations regarding a one-year suspension requirement

for commercial drivers who are first-time drug offenders

who have allegedly been rehabilitated, establishes a

standard to be followed by employers. In this case,

having allegedly satisfied the three requirements of

rehabilitation, random testing both during the

rehabilitation period and throughout the one-year

suspension, and having been suspended from driving for

one year, the Petitioner was required by law to return

Saiz to his commercial driving position, or face a

discrimination claim under the ADA.

Since the ADA was adopted in 1990, numerous

Courts throughout the nation have been dealing with

cases of actual or alleged ADA discrimination, involving

various disabilities, including drug addiction. These

Courts have attempted to implement the ADA, while at

the same time balancing the strong public policy to have

employers accommodate and not discriminate against the

disabled, while realizing that such accommodation can put

an employer, as well as co-workers and the public, at

greater risk of injury or, as occurred in this case, the

tragic death of a productive member of society.

This is not an ADA discrimination case, but as far

as the Petitioner can tell, is the first case to get to the

higher courts that deals with the issue of who, other than

the direct victims of an accident caused by the actual

disability that qualified the unfit employee to keep his job,

bears the cost of the statutory risk that is required to be

taken by the employer. Obviously, the direct victims are

usually, a occurred in this case, compensated by the

employer for the damage caused by the disabled

employee. However, how does the public assist the

employer, when the public has required the employer to

assist the disabled employee, when a catastrophe occurs?

No fund has been set up by the public as part of the

ADA, to reimburse employer's such as the Petitioner,

who incur not just direct monetary losses as a result of

the acts of the disabled employee, but also the loss of

resources expended by the employer in dealing with all of

the aftermath of the catastrophe. In addition, there is the

intangible damage to the employer's name and reputation

when all the public hears from the injured parties’ counsel

and the press, is the question: why would any employer

allow an admitted drug addict ‘o operate a commercial

vehicle?

Businesses assume many risks, including those

associated with employees, in making our economy

successful, which at the end of the day, is what gives all of

us jobs, including the disabled. However, a clear injustice

occurs, when the public requires an employer to assume a

risk under one body of law (i.e. to protect a segment of the

public, i.e. disabled individuals from discrimination) when

the public has condemned for years in another body of law

the very risk (i.e. employing unfit employee) that was

created to protect the entire public, including the

disabled.

The spreading of the unique risk that has been

created by the adoption of the ADA, among all of the

public through providing coverage for such risk under all

commercial liability policies issued in the United States, is

one means of allocating this risk to everyone, and not just

the unlucky employer who is required by law to

unknowingly continue to employ an unfit employee.

Justice requires that the body of law represented

by the ADA be completed by this Court to justly address

the issue of the imposition of this risk on individual

employers, without the public adopting some mechanism

that provides some financial assistance to the individual

employer. If this does not occur, employers throughout

the nation will be put out of business, not because of poor

business decisions, but because they were required by

law to employ a potentially unfit person.

Il. Insurance and Compliance with the ADA.

The reason companies maintain insurance is so that

they will be indemnified against business risks such as

accidents that their employees may cause in the course of

their employment. The use of insurance spreads the risk

of loss among those companies who maintain insurance, so

that a catastrophic accident, such as what occurred in this

case, will hopefully not put a company out of business.

This is of particular concern to businesses, when the

conduct giving rise to a catastrophic event, involves an

employee who is going to great lengths to intentionally

circumvent his employer's attempts to prevent accidents

from occurring.

It is particularly troublesome in cases such as this,

where the employer is required by law to continue to

retain an employee who is a member of a protected class

(i.e., a rehabilitating or rehabilitated drug addict). Under

the ADA, the employer is required by law to continue to

employ a known and admitted drug addict falls into one of

three classes. The protected employee who is either (i) in

the process of being rehabilitated, (ii) is actually

rehabilitated, or, (iii) goes to the great lengths to feign

rehabilitation. No matter which of the three classes the

employee falls into, the employer is liable to third parties

who suffer damages as a result of subsequent drug use

following admission to the protected class. In addition,

when an accident does occur involving an employee who is

under the influence of drugs, the employer faces the

allegation, and through the press, public condemnation

that the employer "evidenced a conscious disregard for

the safety of the traveling public," that was so egregious

that punitive damages should be imposed. This is what

happened in this case.

With the myriad of drug and alcohol statutes

intended to safeguard the public from injury or death, as

well as the myriad of statutes that have been enacted by

both federal and state governments during the past three

decades aimed at safeguarding the rights of employees to

maintain their jobs, employers can find themselves

damned if they do, and damned if they don't, in

dealing with the issues associated with an employee's

drug addiction.’° This is the "interactive process" that

employers must follow in the Ninth Circuit."

” In hindsight, the Petitioner should have elected to take the

disability discrimination lawsuit like PacBell did in the Josephs case.

'! See 42 USC §12114 (b) (2), (ce) (4), (e) (5) (c) and (e) (2)

[addresses removal, not termination, of employee using drugs “from

safety-sensitive duties in implementing subsection (c)]; 42 USC

§12112 (b) (5) (A) [which defines “qualified individual with a

disability"]; Burnett v. U.S. Air, Inc. (2000) 228 F3d 1105, 1110-1111,

1114 [the interactive process is mandatory rather than permissive

obligation on the part of employers; if the employer knows of the

existence of the employee's disability, the employer must assert in

initiating the interactive process]; Hernandez v. Hughes Missle

Systems Co. (2004) 362 F3d 564, 568 [dealing with rehiring a drug

addict after rehabilitation]; and Brown v. Lucky Stores (2001) 246 F3d

1182, 1188 [participation in a rehabilitation program and reasonable

(footnote continued)

The complexity of the laws which employers must

deal with in making decisions that affect employees

generally, as well as those additional laws that affect

employees who are members of one or more protected

classes, coupled with the intentional acts of employees to

circumvent the safeguards which the employer

implements in an attempt to protect the employee, the

public, his co-workers, and creates situations where

accidents, such as the one that occurred in this case, will

continue to occur, no matter what steps are taken by a

reasonably prudent employer.

In this case, based upon the public policy

expressed by the legislature in its adoption of the ADA,

Saiz was able to use the rights provided to him by the

ADA to protect his job, while successfully covering up his

continuing disability (i.e., addiction to drugs). He was

obviously successful at circumventing the system, until

the Accident occurred. After having navigated through

the, this left the Petitioner with the next challenge of

resolving the catastrophe that occurred on March 8, 2001.

In adopting the ADA, Congress created a body of

law to accomplish one goal, in this case the laudable goal

of preventing unreasonable discrimination against the

disabled. However, congress often times fail to take into

consideration all of the consequences that the subsystem

adopted to solve one problem, may have on other

subsystems that are already in place, and in some cases,

have been in place for centuries. These older legal system

are not removed because the public goals which prompted

their adoption continue to benefit the public. The courts

are called upon to complete the gaps and deal with the

assurances by an employee that no future illegal drugs will occur is

sufficient for a first time offender].

conflicts between the subsystems and che existing

subsystems. The gaps and/or conflicts which this case

presents are (i) the ADA and the required retention of

risky employees, (ii) the long established duty of care not

to retain risky employees, and finally, (iii) spreading this

risk to be shared by all of society.

Ill. The Retention of an Employee with a

Propensity to Cause Harm to Others is Direct

Negligence, Which is Independent of the

Employees Wrongful Conduct Under State

Law.

In California, as well as most other states, an

employer can be liable to a third person for negligently

hiring, supervising, or retaining an unfit employee, if

the employer had reason to know that the employee,

because of his or her quality, is likely to harm others in

view of the work or instrumentality entrusted to him or

her. Federico v. Superior Court (Jenry G.) 59 Cal. App. 4"

1207, 1213 (8 Dist. 1997); Roman Catholic Bishop v.

Superior Court, 42 Cal.App. 4" 1556, 1564-1565 (4" Dist.

1996). The underlying theory of these decisions is that

such negligence on the part of an employer is a wrong to

third persons, entirely independent of the employer's

liability under the doctrine of respondia superior. 48

A.L.R. 3d. 359 (2007).

Liability for negligent retention and/or supervision

is based on the reasoning that if an enterprise hires

individuals with characteristics which might pose a

danger to customers or other employees, the enterprise

should bear the loss caused by the wrongdoing of its unfit

employees. Mendoza v. City of Los Angeles, 66 Cal.App.

4" 1333, 1339-1340 (2d. Dist. 1998). If the dangerous

quality of the employee causes harm, the employer may

be liable under the rule that one initiating conduct”

having an undue tendency to cause harm is liable for

that harm. Federico, supra. One who employs another to

act for him or her is not liable merely because the

employee is unfit; if liability results, it is because, under

the circumstances, the employer has not taken the

care that a prudent person would take in selecting

the person for the business at hand. Federico, supra.

Anemployer's duty to avoid retaining an employee whois

unfit is breached only when the employer knows, or

should know, facts which would warn a reasonable

person that the employee presents an undue risk of

harm to third persons in light of the particular to be

performed. /d.

With the adoption of the ADA in 1990, is duty

imposed on employers by society to "accommodate" the

disabled. In the situation where the disability that must

be "accommodated" by the employer is drug addiction,

which is an area where the recidivism rate is very high,

the employer is not only being asked to expend its

resources on accommodating the employee, but is also

being asked to assume the risk of injury to the

public and co-workers.

The rule of direct employer liability under the

Restatement 2d of Agency, section 213, provides:

A person conducting an activity through servants

or other agents is subject to liability for harm

resulting from his conduct if he is negligent or

reckless. ..[P]...{P] (b) in the employment of

2 Isn't the public, in adopting the ADA, the "initiating" party,

not the employer?

improper persons or instrumentalities in work

involving risk or harm to others... ."

As explained in comment (d), to section 213 :

The principal may be negligent because he has

reason to know that the .. . agent, because of

his qualities, is likely to harm others in view

of the work or instrumentalities entrusted to

him. If the dangerous quality of the agent causes

harm, the principal may be liable under the rule

that one initiating conduct having an undue

tendency to cause harm is liable....(P]... If

liability results, it is because, under the

circumstances, the employer has not taken the

care which a prudent man would take in selecting

the person for the business in hand.... [P]

Liability results ... not because of the relation of

the parties but because the employer antecedently

had reason to believe that an undue risk of harm

would exist because of the employment. .. .

[Emphasis added]

As reiterated by the Court in Federico, at p. 1214:

As the court in Roman Catholic Bishop v.

Superior Court, supra 42 Cal.App. 4'" 1556,

explained, an employer's duty, as defined by

California authority and the Restatement, is

breached only when the employer knows, or should

know, facts which would warn a reasonable person

that the employee presents an undue risk of harm

to third persons in light of the particular work to

be performed."

In this case, each of the requirements under both

California authority and the Restatement, have been

satisfied. PBC knew of facts (i.e. Saiz's propensity to use

illegal drugs), which would warn a reasonable person

[PBC] that the employee [Saiz] presents an undue risk of

harm to third persons in light of the employee's job

involving the operation of a commercial truck. Both the

California courts and the Restatement, would support a

finding that "the employer has not taken the care which a

prudent man would take in selecting the person for the

business at hand." Federico, Id.; Restatement, /d.

Unfortunately for Dr. Larkin, his family, and the other

victims of this catastrophe, including the Petitioner, the

public who adopted the ADA does not share the burden

but shifts it to the employer without legislating an

equitable solution to the no-win risk that it has assigned.

This is similar to the dilemma that PacBell faced in

the recent Joseph case. In order to protect the public,

PacBell believed that a reasonably prudent business

would not retain a service technician to perform

unsupervised, in-home telephone installation and

repairs, who had previously been found guilty of

misdemeanor battery on a police officer, and, not guilty of

murder by reason of insanity, and, who thereafter spent

two and one-half years in a California mental health

facility, and an additional six months in a board-and-care

mental health facility. After discovering these facts,

PacBell refused to reinstate Josephs, and assume the

risks associated with allowing Josephs to perform

unsupervised, in-home telephone installation and repairs.

As a result of its refusal to reinstate Josephs to his prior

service technician job, a jury awarded Josephs

compensatory damages against PacBell.

The only material differences between this case

and the Josephs case, is that (i) Petitioner elected to

reinstate Saiz to his position to avoid a lawsuit, and (ii)

the risk to the public that Saiz posed in being reinstated

to his prior position, resulted in a catastrophe for

everyone involved.

The ADA requires employees to engage in conduct

for which they may not just be vicariously liability, but

also directly liable. In this case, the Petitioner is not just

placed in the position of being required by law to engage

in the retention of an employee, which risk a reasonably

prudent employer would never assume, but, very few

companies, the Petitioner not being one of them, has

insurance coverage that protects it against the liability to

retain a high-risk employee like Saiz.

IV. Public Policy Requires an Exception to the

Auto Exclusion When an Employer is

Required to Engage in Conduct Prohibited by

State Law, that Leads to the Direct Liability

of the Employer.

PBC believes that the following exception to the

Auto Exclusion should be implied by law in all general

liability policies of insurance’ issued in the United States:

"No exclusion shall apply to liability imposed upon

an Insured where the occurrence giving rise to the

'S The Court should note, that this proposed implied exclusion

does not, and is not, intended to provide coverage for claims by

employees against employers. Its only purpose is to provide

general liability coverage of claims by third parties against an

employer, by treating an employer's compliance with the ADA, and

other similar laws whereon employer is required to assume a risk for

which the employer might be directly liable to a third party, and not

solely viciously liable.

‘bodily injury' or 'property damage' is caused by an

agent of the Insured, when the Insured is required

by law, to employ the particular agent”.

The rationale supporting this exception, is based

upon the Restatement 2d of Agency, § 217(a)(1), which

recognizes the immunity of a principal, and California

Civil Code §2338, which codifies the specific immunity

from vicarious liability for the acts of agents, which is

provided for in the common law, when the principal is

required by law to employ a particular agent. Section

2338 provides as follows:

"Unless required by or under the authority

of law to employ that particular agent, a

principal is responsible to third parties for the

negligence of its agent in the transaction of the

business of the agency, including wrongful acts

committed by such agent in and as a part of the

transaction of such business, and for his willful

omission to fulfill the obligations of the principal.

(Enacted 1872) [Emphasis added]

This statute sets forth the general rule of vicarious

liability, and reflects the California's concerns regarding

just this situation. That is, where a principal is required

by law to employ a particular agent, which particular

agent a prudent principal would not retain in his employ

because of the higher risk of harm to others.

There are generally two types of implied

contractual provisions. Those implied by statute, as in

the case of the Cal. Ins. Code § 522, which implies a

provision that willful torts are excluded from coverage,

whether or not such exclusion is expressly stated in the

insurance p« “cy. J.C. Penney Cas. Ins. Co. v. M. K.

(1991) 5 Cal. 3™ 1009, 1020-1021. Other provisions are

implied by case law, such as the recovery of attorney's

fees by the insured when successful in obtaining policy

benefits that were wrongfully denied, notwithstanding

the fact that generally there are no express "attorneys

fee" provisions in insurance policies. Communale, supra

at 658.

In situations where the law requires an employer

to engage in conduct which the law (i.e. public) has

recognized as risky enough to impose direct liability on

the employer, a reasonable insured would expect to have

coverage when it assumes such risk for the benefit of the

public. This would include coverage for "those sums that

the insured becomes legally obligated to pay as damages

because of 'bodily injury’ or ‘property damage' ", for an

act (i.e., the retention of the employee) required by law,

which act the common law has recognized would not be

performed by a prudent insured, but for the fact that the

insured is obligated by law to perform the act, which act

results in harm to others.

The Petitioner believes this Court should find, as a

matter of national public policy, that there is a judicially

implied exception in all commercial general liability

policies arising out of the adoption of the ADA, , which

would provide coverage to insured employers for their

acts in complying, or attempting in good faith to comply,

with the ADA".

'* Though not an issue based upon the facts presented in this

case, the Petitioner believes that the judicially implied exception to

the Auto Exclusion, should apply in all situations where the law

requires an employer, to employ a particular person.

The Rules of Contract Interpretation Require

Coverage Where State Law Imposes Direct

Liability on an Employer Because of the

Employer's "Independent" Acts.

4 Concurrent Proximate Causation.

As recognized by the California Court of Appeals

in Banville v. Schmidt (1974) 37 Cal.App. 4th 92, 107:

It is an established principle that proximate cause,

to be actionable, need not be the sole factor

contributing to the damages sustained, but need

only be a proximate cause of injury. As it is put by

eminent authority (‘nothing occurs in a vacuum’,

and the event without multiple causes is

inconceivable. Existing conditions, the forces of

nature, the prior acts and omissions of others, and

all other surrounding circumstances invariably

play their important part. From time to time, the

California courts have gone seeking ‘the sole

proximate cause' of an accident. There is, as the

same courts have been forced to recognize that

often enough, no such thing. Neither is there any

such thing as 'the proximate cause' of an event,

distinguished as a cause from ail other causes. In

particular, the defendant can never be absolved

from liability for the mere reason that the

negligence of another has contributed to the result.

...'(38 Cal.L.Rev., pp. 379-380, William L. Prosser.

As Prosser notes, '[a] considerable part of the law

of joint tortfeasors has been built upon the

principle. that responsibility may be attached to

each of two or more such ‘concurring’ causes. (Id.,

pp. 380-381.) In the law of joint tortfeasors, it is

irrelevant whose negligence was first in time, who

was the more negligent, or whether one was

ordinarily and the other wantonly negligent.

[Citations omitted ]"

Proximate Cause in California. [Fns. omitted ].)"

This dissertation by the Appellate Court in

Banville, which was not an insurance case, regarding

multiple causes of injury and joint tortfeasors, is relevant

to this case. The California Supreme Court relied upon

these "traditional joint tortfeasor principles," in

concluding that coverage existed under both on insured's

auto policy, as well as his homeowner's policy.

II. Specific Acts That Caused the Loss.

The following is a list of some of the more relevant

acts of both PBC and Saiz, which in hindsight, constituted

"simply a concurrent proximate cause of the injuries."

The first act that caused the Accident was Saiz's

recreational use of drugs.

The second act was the failure of PBC to

immediately terminate Saiz, after he tested positive for

drug use, (notwithstanding the ADA's requirement of

reasonable accommodation).

The third act of PBC that contributed to cause the

Accident, was that following receipt of the positive

results of the second test, PBC failed to immediately

terminate Saiz. This time not only for being addicted to

drugs, but for lying to his employer about his alleged one-

time recreational use of drugs.

The fourth act that contributed to cause the

Accident occurred when PBC , after having been lied to

by Saiz about his illegal use of drugs, and in an attempt to

comply with the subsystem of privacy laws, failed to

inform the testing facility that Saiz had previously lied

about his drug use, and therefore, could not be trusted to

provide an unobserved urine sample for testing. This

failure to invade his right to privacy, allowed Saiz to

substitute the "clean" sample for testing.

The fifth act that contributed to cause the Accident

was Saiz's use of illegal drugs during the non-working

hours that preceded the Accident. The consumption of

illegal drugs caused Saiz to be under the influence of their

residual effects when he came to work on the morning of

the Accident. It is the drug addiction (i.e., the disability),

and, not the drugs impairment of Saiz on the day of the

accident, that was the predominate cause of the Accident.

This is not a case where, unbeknownst to his employer, an

employee is a drug addict, which employee then has an

accident during working hours. This case involves an

employee who admitted he was addicted to drugs, who

claimed he was rehabilitated, and after rehabilitation, is

returned by his employer to his previous position as a

commercial driver, in an attempt to comply with the ADA

and the DOT regulations.

The sixth act that contributed to the Accident, was

by Saiz entering the PBC truck terminal on March 8,

2001, the morning of the Accident, under the influence of

illegal drugs. Normally, going to work would not

constitute a negligent act. However, when an employee

goes to work while under the influence of illegal drugs,

whether or not the employee is a commercial driver, this

constitutes negligence on the part of the employee, as a

matter of law. See 41 USC §§ 701-707 and Cal.Gov.C.

§8350-8357. This act of negligence occurred before Saiz

ever got into the cab of his truck at the terminal.

The seventh act that contributed to the Accident,

was Saiz's overloading of the truck with "base" material at

Hanson Aggregate, which overloading caused the truck to

exceed the allowed gross vehicle weight. The failure of

Saiz to recognize the overloading of the truck was, as a

matter of law, negligence that was caused by his being

under the influence of drugs.

The eighth act that contributed to the Accident,

was Saiz continuing to operate the truck, while under the

influence of illegal drugs, in his travel on the day of the

Accident from the Hanson Aggregate facility, to the

scene of the Accident. During this portion of the trip,

Saiz passed the residential street on which the job was

located, and proceeded to the scene the Accident. Again,

his failure to read and follow the map that he had been

given by his employer, which map showed him how to get

to the job site, was, as a matter of law, the result of his

being under the influence of illegal drugs.'°

Of just these eight concurrent causes of the

Accident, a number were excluded from coverage under

the CGL Policy. However, a number were not expressly

excluded from coverage. If you remove the drug related

acts that contributed to case the Accident, there is no

dispute that operation of an "Auto" caused the Accident.

The entrustment, operation, use, loading and unloading of

the "Auto," were multiple concurrent acts that

contributed to causing the Accident, and would have

precluded any coverage under the CGL Policy.

In the CGL Policy, the act of entrusting the truc!:

to Saiz was expressly excluded from coverage. However,

even if the act of entrusting the truck to Saiz had not been

expressly excluded in the policy, in California, as in most

' The act that didn't happen, was Saiz arriving safely to the

jobsite, unloading the tractor, and in the course of work while

operating the tractor, driving over a co-worker, the homeowner, or a

neighbor.

states, it would be excluded, as a matter of law, because

the general act of entrustment of the truck to Saiz was

"solely and indivisibly related to" the "use" of the "Auto."

Without the drug related causes of the Accident, the act

of negligent entrustment is not treated as a separate

cause, because such act is not treated as "independent" of

the "use" of the truck, but is an act that is "dependent"

upon the use of the truck. See Safeco Insurance

Company v. Gilstrap (1983) 141 Cal App 3d 524, 530-531.

Adding an employee's use of drugs to the analysis,

but excluding the acts of the employer's compliance with

the ADA, there would still be no coverage under the CGL

Policy. This is because an employee's use of drugs was

negligent conduct which in this case, would be

"dependent" upon the use of the "Auto," to cause this

accident.

Absent the causes related to the employer's

compliance with the ADA or other similar state laws, the

addition of the drug related cause would not be an

"independent" cause of the Accident, but would be

"dependent" upon the "use" of the "Auto." However, even

though the use of drugs and the operation of the "Auto,"

were both excluded causes, either expressly or because

they are dependent upon the use an "Auto," PBC's

compliance, or attempted compliance, with the ADA and

related state statutes, are acts "independent" of the acts

of the use, operation, maintenance, entrustment, loading

or unloading of the "Auto."

This is the same "independent" act, which the

courts have found gives rise to "direct" liability on

the part of a principal to an injured party, which

both the Restatement and California law recognize.

How can an act (i.e. the retention of an unfit employee)

which is treated as an "independent" cause giving rise to

"direct" (not vicarious) liability of an employer to an

injured party, at the same time be so related to the use of

an "Auto," that for commercial liability insurance

purposes, it is "dependent" upon the use of an "Auto,"

thereby excluding coverage under the CGL Policy."

There obviously is a conflict between the ADA, which

requires the employer to retain employees with

questionable qualities in the hope that the employee will

be rehabilitated, while at the same time excluding this

risk from coverage under general liability policies of

insurance.

VI. The Ninth Circuit Ignored California Law

When it Held the Auto Exclusion was

Unambiguous.

In interpreting state law, the Ninth Circuit must

follow the decisions of the state's highest court. Johnson

v. Fankell, 520 U.S. 911, 916 (1997). As this Court

recognized in Fankell: "neither this Court nor any other

federal tribunal has any authority to place a construction

on a state statute different from the one rendered by the

highest court of the state." Jd.

In its Memorandum, on page 2, the Ninth Circuit

held that:

The auto exclusion in this general commercial

liability policy is unambiguous and applies in this

case."

The California Supreme Court in Partridge, at pp.

101-102, held that the "auto exclusion" in Partridge's

homeowners policy was ambiguous, as a matter of law.

The "auto exclusion" in the CGL Policy, contains almost

the exact same language as the "auto exclusion" in

Partridge, yet the Ninth Circuit came to the contrary

conclusion, that the "auto exclusion" was unambiguous.

The California Supreme Court in Partridge at p.

102, concluded that:

VII.

| T |he fact that an accident has been found to ‘arise

out of the use’ of a vehicle for purposes of an

automobile policy is not necessarily determinative

of the question of whether that same accident falls

within a similarly worded exclusionary clause of a

homeowner's policy [general liability coverage].

(citations. omitted.} As one commentator has

recently observed: ‘It is clear that the expression

‘use of an automobile’ has different meanings

under different circumstances and that, whenever

possible, the courts will apply an interpretation

which give, but never takes away, coverage for the

‘use' of an automobile, hereby causing automobile

and non-automobile liability policies to overlap,

notwithstanding the exclusion against the 'use' of

an automobile in most non-automobile liability

policies."

The Ninth Circuit Ignored California Law

When it Held that Compliance With the ADA

was not a Concurrent Cause.

In its Memorandum, at page 2, the Ninth Circuit

held that: "We find unpersuasive Plaintiff-Appellants'

argument that their compliance with the Americans with

Disabilities Act ... was an independent concurrent cause

of the accident under . . . [Partridge], and its progeny."

Again, the Ninth Circuit failed to follow California law in

recognizing that in interpreting third party liability

policies, where there are multiply concurrent causes of an

accident, if just one of the concurrent causes is covered by

the policy, then coverage exists."

The issue that the Ninth Circuit was presented

with was whether or not compliance with the ADA, was

"dependent" on the use ofa vehicle, or was "independent."

As discussed above, in California the retention of an

employee by an employer, when the employee may pose a

risk to the health and safety of others, is an "independent"

cause of action, whereby "direct" liability, rather than

vicarious liability, can be imposed upon an employer who

does not act in a reasonably prudent manner.

CONCLUSION

For reasons discussed above, this Court should

issue a Writ of Certiorari granting the Petition, seeking a

review of the decision of the Ninth Circuit in Peterson

Brothers Construction, Inc., etal. v. Lexington Insurance

Company.

Respectfully submitted,

Jeffrey M. Epstein

Counsel of Record

Richard E. Blasco

HUNT, ORTMANN, BLASCO,

PALFFY & ROSSELL, INC.

301 N. Lake Avenue, 7" Floor

Pasadena, CA 91101-1807

(626) 440-5200

'® What is also of significance, is that the Partridge decision

was filed on September 25, 1973, yet the insurance industry has not

taken any steps since then to eliminate the recognized ambiguity in

the standard auto exclusion.

No. 05-55719

UNITED STATES COURT OF APPEALS FOR THE

NINTH CIRCUIT

PETERSON BROTHERS CONSTRUCTION, INC., a

California corporation; PBC PAVERS, INC., a

California corporation; PRECISION LEASING, INC.,

a California corporation,

Plaintiffs - Appellants,

LEXINGTON INSURANCE COMPANY, a Delaware

corporation,

Defendant - Appellee.

June 7, 2007, Argued and Submitted, Pasadena,

California

July 23, 2007, Filed

NOTICE: PLEASE REFER TO FEDERAL RULES

OF APPELLATE PROCEDURE RULE 32.1

GOVERNING THE CITATION TO UNPUBLISHED

OPINIONS.

JUDGES: Before: FISHER and CALLAHAN, Circuit

Judges, and STROM, District Judge. **

OPINION

MEMORANDUM *

Before: FISHER and CALLAHAN, Circuit Judges,

and STROM, District Judge.**

This matter is on appeal from the district court’s entry

of summary judgment in favor of Lexington Insurance

Company on an insurance policy coverage dispute. We

review a grant of summary judgment de novo, viewing

the evidence in the light most favorable to the non-

moving parties. Burlington Ins. Co. v. Oceanic Design

& Constr., Inc., 383 F.3d 940, 944 (9th Cir. 2004). After

careful review of the record and consideration of the

oral arguments presented, we affirm.

The auto exclusion in this general commercial liability

policy is unambiguous and applies in this case. The

injuries and damages in this case were caused by the

use of an auto. We find unpersuasive plaintiffs-

appellants’ argument that their compliance with the

Americans with Disabilities Act or any negligence

associated with an employee’s drug use was an

independent concurrent cause of the accident under

State Farm Mutual Auto Ins. Co. v. Partridge, 10 Cal.

3d 94, 109 Cal. Rptr. 811, 514 P.2d 123 (Cal. 1973), and

its progeny. We further conclude that public policy

considerations do not justify overriding the

unambiguous auto exclusion in the plaintiffs-appellants’

policy. The district court’s order is, therefore, affirmed.

AFFIRMED.

Footnotes

**The Honorable Lyle E. Strom, Senior United States

District Judge for the District of Nebraska, sitting by

designation

*This disposition is not appropriate for publication and

is not precedent except as provided by 9th Cir. R. 36-3.

Filed 4/11/05

CASE NO. SACV 04-676 CJC (MLGx)

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

SOUTHERN DIVISION

PETERSON BROTHERS CONSTRUCTION, INC.,

PBC PAVERS INC., and PRECISION LEASING,

INC.,

Plaintiffs,

LEXINGTON INSURANCE COMPANY and AIG

CLAIM SERVICES, INC.,

Defendants.

JUDGMENT

This action came on for hearing before the Court on

March 21, 2005, on Defendant Lexington Insurance

Company's Motion for Summary Judgment, and the

evidence presented having been fully considered, the

issues having been duly heard and decision having

been duly rendered,

IT IS ORDERED AND ADJUDGED that Plaintiffs

Peterson Brothers Construction, Inc., PBC Pavers, Inc.

and Precision Leasing, Inc. take nothing by way of their

Complaint herein, that the Complaint herein against

Defendant be dismissed with prejudice on the merits,

and that judgment shall and hereby is entered in favor

of Defendants.

CASE NO. SACV 04-676 CJC (MLGx)

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

SOUTHERN DIVISION

PETERSON BROTHERS CONSTRUCTION, INC.,

PBC PAVERS INC., and PRECISION LEASING,

INC.,

Plaintiffs,

Vv.

LEXINGTON INSURANCE COMPANY and AIG

CLAIM SERVICES, INC.,

Defendants.

ORDER GRANTING LEXINGTON INSURANCE

COMPANY’S MOTION FOR SUMMARY

JUDGMENT

:. INTRODUCTION

This matter arises out of an insurance coverage

dispute following a motor vehicle accident that

occurred on March 8, 2001. Lexington Insurance

Company (“Lexington”) issued a Commercial General

Liability (CGL) policy to Peterson Brothers

Construction, PBC Pavers and Precision Leasing

(collectively “PBC”) that included an exclusion for

liability arising out of the operation of a motor vehicle.

Lexington denied coverage for the accident based on

that exclusion, and PBC filed the instant lawsuit for

breach of contract and breach of the implied covenant

of good faith and fair dealing. The parties filed cross

motions on the issue of coverage based on a joint

statement of stipulated undisputed facts.

On March 21, 2005, Lexington’s motion for summary

judgment and PBC’s motion for partial summary

judgment came on regularly for hearing before the

Honorable Cormac J. Carney. Far the following

reasons, the Court hereby grants Lexington’s motion

for summary judgment and denies PBC’s motion for

partial summary judgment.

II. FACTS’

Anthony Saiz was an employee of PBC. On March 8,

2001, he was operating a truck and trailer in the course

and scope of his employment with PBC when he caused

an accident that resulted in substantial injuries and

damages, including the death of Dr. Kenneth Michael

Larkin. At the time of the accident, Saiz was under the

influence of methamphetamine, amphetamine and

opiates.

At the time of the accident, PBC was insured with a

Business Auto policy from Fireman’s Fund with

liability limits of $1,000,000 (the “Fireman’s Fund Auto

Policy”}. PBC was also insured under an Umbrella

Liability Insurance policy from Lexington with liability

limits of $3,000,000 (the “Lexington Umbrella Policy”).’

The statement of facts is based on the parties’ joint

Stipulated Statement of Uncontroverted Facts

submitted with their cross motions.

Whether there was coverage under the Fireman’s Fund

Auto Policy and the Lexington Umbrella Policy is not

at issue in this motion. As discussed in more detail

below, Fireman’s Fund paid its policy limits under the

Auto Policy and Lexington paid the policy limits of the

Lexington Umbrella Policy toward settlement of claims

that arose out of the Accident.

Additionally, PBC was insured under a Lexington

Commercial General Liability policy at the time of the

accident with a per occurrence limit of $1,000,000 {the

“Lexington CGL Policy”). The “Insuring Agreement”

of the Lexington CGL Policy provided coverage for

“bodily injury” and “property damage” caused by an

“occurrence,” defined in the policy in relevant part as

an accident. The Lexington CGL Policy excluded

coverage for accidents involving the use of a motor

vehicle, which included within its scope the tuck and

trailer operated by Saiz at the time of the accident (the

“Auto Exclusion”). The Auto Exclusion stated:

This insurance does not apply to:

G. Aircraft, Auto or Watercraft

‘Bodily injury’ or ‘property damage’

arising out of the ownership,

maintenance, use or entrustment to

others of any ... ‘auto’ .. . owned or

operated by or rented or loaned to any...

insured. Use includes operation and

‘loading or unloading.’

Fireman’s Fund settled all claims against PBC for

bodily injury and property damage arising out of the

accident, other than the claims made by the Estate of

Larkin, the wife of Larkin, and the parents of Larkin

(collectively the “Larkin Actions”), for payments by

Fireman’s Fund totaling $660,963.81. In July 2003, the

Larkin Actions were settled for payments totaling

$3,739,036.19. The settlement of the Larkin Actions

was funded in part by payment of the remaining policy

limits under the Fireman’s Fund Auto Policy in the

amount of $339,036.19, and the policy limits under the

Lexington Umbrella Policy in the amount of

$3,000,000.40, which payments by the insurance carriers

totaled $3,339,036.19. The remainder of the settlement

amount was funded by PBC in the total amount of

$400,000, for a total settlement of the Larkin Actions of

$3,739,036.19. PBC tendered its claim for the Larkin

Actions to Lexington, and Lexington denied coverage

based on the Auto Exclusion.

Il. STANDARD GOVERNING SUMMARY

JUDGMENT

Summary judgment is appropriate when the moving

party has shown that there is “no genuine issue as to any

material fact and that [it] is entitled to a judgment as a

matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322

(1986); FED. R. Civ. P. 56(c). A dispute as to a material

fact is ‘genuine’ if there is sufficient evidence for a

reasonable jury to return a verdict for the nonmoving

party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

248 (1976). A defendant moving for summary judgment

may defeat a claim either by negating an essential

element of the plaintiffs claim or by demonstrating the

absence of evidence for an essential element of the

plaintiff's claim. See Adickes v. S.H. Kress & Co., 398

U.S. 144, 158-60 (1970); Celotex Corp. v. Catrett, 477 U.S.

317, 325 (19$6). In ruling on a summary judgment motion,

a court must view all facts and draw all inferences in the

light most favorable to the nonmoving party. Eastman

Kodak Co. v. Image Technical Services, Inc., 504 U.S.

451, 456 (1992).

If the moving party meets the initial burden of

establishing the nonexistence of a genuine issue, the

burden then shifts to the nonmoving party to produce

evidence of the existence of a genuine issue for trial. The

party opposing summary judgment “may not rest upon

the mere allegations or denials of the adverse party’s

pleading, but... must set forth specific facts showing that

there is a genuine issue for trial.” FED. R. Civ. P. 56(e);

see Matsushita Electric Industrial Co., Ltd. v. Zenith

Radio Corp., 475 U.S. 574, 586-87 (1986).

III. DISCUSSION

As the parties have stipulated to the undisputed facts

in this case, all that remains to be decided is whether

under California law the Auto Exclusion bars coverage

for Plaintiffs liability arising out of the March 8, 2001

motor vehicle accident.

Interpretation of an insurance policy and whether it

provides coverage is a question of law to be decided by

the court. Waller v. Truck Ins. Exchange, 11

Cal.4th 1, 18 (1995). Although the Auto Exclusion

unambiguously bars coverage for “|bJodily injury’ or

‘property damage’ arising our of the ownership,

maintenance, use or entrustment to others of any. . .

‘auto’... owned or operated by or rented or loaned to

any insured,” PBC argues that the concurrent

independent cause principles set forth in State Farm

Mutual Auto. Ins. Co. v. Partridge, 10 Cal.3rd 94

(1973), create an exception to the Auto Exclusion in

this case. Partridge holds that in the context of third-

party claims, an auto exclusion does not preclude

coverage when an accident results from the

concurrence of an independent non-auto-related cause

and an auto-related cause. Partridge, 10 CAM at 97.

In Partridge, the California Supreme Court held that

Plaintiffs negligent modification of the trigger on a

gun and his negligent driving were independent acts

that concurrently contributed to the accidental shooting

of a passenger in his vehicle.

In short, “although the accident occurred in a vehicle,

the insured’s negligent modification of the trigger

suffices, in itself, to render him fully liable for the

resulting injuries.” Id. 103. Both causes of the resulting

injury were independent of each other.. “the filing of

the trigger did not ‘cause’ the careless driving, nor vice

versa.” Id. at 105 fn. 10, The Partridge court

determined that the auto exclusion did not bar

coverage under a homeowner's policy because the

injuries that arose out of the “non-auto related act” (i.e.,

the filing of the gun trigger - a covered risk) had

“nothing to do with the use or operation of a vehicle.”

See Safeco Ins. Co. v. Gilstrap, 141 Cal.App.3d 524, 526

(19$3) (emphasis added.).

PBC argues that (1) Mr. Saiz’s use of illegal drugs during

non-working hours and (2) Plaintiffs retention of Mr.

Saiz as a driver after he tested positive for drugs were

independent non-excluded concurrent causes of the

accident, rendering the Auto Exclusion inapplicable

under the CGL policy. PBC’s retention of Mr. Saiz and

Mr. Saiz’s drug use, however, were not independent

concurrent causes of the accident. In fact, it is clear that

neither the retention of Mr. Saiz nor his drug use could

have caused the accident independently of Mr. Saiz’s use

10a

of the auto. It is fruitless to speculate about other

injuries Mr. Saiz might have caused as a result of his

drug use, as the occurrence which gave rise to the

damages here was an auto accident, not drug use or

negligent retention. Mr. Saiz’s drug use and retention

cannot be separated from his operation of the vehicle as

the cause of the accident. See Hartford Fire Ins. Co. v.

Superior Court, 142 Cal. App.3d 406, 415 (1983) (“Any

damages caused while operating the aircraft under the

influence of alcohol were wholly dependent on the

aircraft operation.); Century Transit Systems, Inc. v.

Am. Empire Surplus Lines Ins. Co., 42 Cal.App.4th 121,

128 fn. 6 (1996) (a negligent retention theory is not an

independent cause of the injury, but rather a theory for

imposing liability on a third party). In other words, Mr.

Saiz’s drug use alone could not have caused the accident

without the operation of the vehicle. Since the accident

and resulting damages arose from Mr. Saiz’s operation of

the truck, the Auto Exclusion bars coverage.

PBC also contends that considerations of public policy

require coverage to be extended under the Lexington

CGL policy. PBC explains that under applicable state

and federal employment law principles, they were

required to retain Mr. Saiz as an employee; despite his

drug use, Mr. Saiz had completed a mandated

rehabilitation program. PBC acknowledges they did not

have to return Mr. Saiz to a driving position, but at oral

argument PBC asserted that the State of California,

Department of Transportation encourages an employer

doing so. These considerations of public policy do not

warrant the disregard of an unambiguous exclusion in

PBC’s Lexington CGL policy, at least in part due to a

countervailing public policy favoring freedom of

contract.

lla

PBC also contends the Auto Exclusion should not be

applied to preclude coverage because the terms of the

Lexington CGL policy show that Lexington (1)

contemplated overlapping coverage; (2) contemplated

concurrent causes of an accident and (3) contemplated

excess coverage. There is no legal basis to exclude

coverage on these grounds since the Auto Exclusion

unambiguously precluded coverage for the accident. For

the reasons discussed above, Lexington’s motion for

summary judgment is GRANTED and PBC’s motion for

summary adjudication is DENIED. Judgment shall be

entered in Defendants’ favor consistent herewith.

12a

Cal Gov Code § 8357 (2007) Construction of chapter

This chapter shall not be construed to require any

contractor or grantee to ensure that other businesses

with which it subcontracts also provide drug-free

workplaces.

Cal Gov Code § 8356 (2007) Effect of false

certification, violation of certification, or failure to

comply with chapter

(a) Each contract or grant awarded by a state

agency may be subject to suspension of payments

under the contract or grant or termination of the

contract or grant, or both, and the contractor or

grantee thereunder may be subject to debarment, in

accordance with the requirements of this article, if the

contracting or granting agency determines that any of

the following has occurred:

(1) The contractor or grantee has made a false

certification under Section 8355.

(2) The contractor or grantee violates the

certification by failing to carry out the requirements of

subdivisions (a) to (c), inclusive, of Section 8355.

(b) The Department of General Services shall

establish and maintain a list of individuals and

organizations whose contracts or grants have been

canceled due to failure to comply with this chapter. This

list shall be updated monthly and published each month.

No state agency shall award a contract or grant to a

person or organization on the published list until that

person or organization has complied with this chapter.

13a

without review by the Department of General Services

shall immediately notify the department of any

individual or organization that has an award canceled

on the basis of violation of this chapter.

Cal Gov Code § 8355 (2007) Certification as to drug-

free workplace

(a) Every person or organization awarded a contract

or a grant for the procurement of any property or

services from any state agency shall certify to the

contracting or granting agency that it will provide a

drug-free workplace by doing all of the following:

(1) Publishing a statement notifying employees that

the unlawful manufacture, distribution, dispensation,

possession, or use of a controlled substance is

prohibited in the person's or organization's workpiace

and specifying the actions that will be taken against

employees for violations of the prohibition.

(2) Establishing a drug-free awareness program to

inform employees about all of the following:

(A) The dangers of drug abuse in the workplace.

(B) The person's or organization's policy of

maintaining a drug-free workplace.

and employee assistance programs.

(D) The penalties that may be imposed upon

employees for drug abuse violations.

(3) Requiring that each employee engaged in the

performance of the contract or grant be given a copy of

l4a

the statement required by subdivision (a) and that, as a

condition of employment on the contract or grant, the

employee agrees to abide by the terms of the

statement.

(b)

(1) The certification requirement set forth in

subdivision (a) does not apply to a credit card purchase

of goods of two thousand five hundred dollars ($2,500)

or less.

(2) The total amount of exemption authorized

herein shall not exceed seven thousand five hundred

dollars ($7,500) per year for each company from which a

state agency is purchasing goods by credit card. It shall

be the responsibility of each state agency to monitor

the use of this exemption and adhere to these

restrictions on these purchases.

Cal Gov Code § 8351 (2007) Definitions

As used in this chapter:

(a) "Drug-free workplace" means a site for the

performance of work done in connection with a specific

grant or contract described in Article 2 (commencing

with Section 8355) of an entity at which employees of

the entity are prohibited from engaging in the unlawful

manufacture, distribution, dispensation, possession, or

use of a controlled substance in accordance with the

requirements of this chapter.

(b) "Employee" means the employee of a grantee or

contractor directly engaged in the performance of work

pursuant to the grant or contract described in Article 2

(commencing with Section 8355)

15a

substance in schedules I through V of Section 202 of the

Controlled Substances Act (21 U.S.C. Sec. 812).

(d) "Grantee" means the department, division, or

other unit of a person or organization responsible for

the performance under the grant.

(e) "Contractor" means the department, division, or

other unit of a person or organization responsible for

the performance under the contract.

Cal Gov Code § 8350 (2007) Citation of chapter

This chapter shall be known, and may be cited, as

the Drug-Free Workplace Act of 1990.

Cal Ins Cede § 532 (2007) Specially excepted peril

If a peril is specially excepted in a contract of

insurance and there is a loss which would not have

occurred but for such peril, such loss is thereby

excepted even though the immediate cause of the loss

was a peril which was not excepted.

Cal Civ Code § 2338 (2007) Principal's responsibility

for agent's negligence or omission

Unless required by or under the authority of law to

employ that particular agent, a principal is responsible

to third persons for the negligence of his agent in the

transaction of the business of the agency, including

wrongful acts committed by such agent in and as a part

of the transaction of such business, and for his willful

omission to fulfill the obligations of the principal.

41 USC §701 Drug-free workplace requirements for

Federal contractors

16a

(a) Drug-free workplace requirement

(1) Requirement for persons other than individuals

No person, other than an individual, shall be considered

a responsible source, under the meaning of such term as

defined in section 403 (8) of this title, for the purposes of

being awarded a contract for the procurement of any

property or services of a value greater than the

simplified acquisition threshold (as defined in section

403 (11) of this title) by any Federal agency, other than

a contract for the procurement of commercial items (as

defined in section 403 (12) of this title), unless such

person agrees to provide a drug-free workplace by—

(A) publishing a statement notifying employees that

the unlawful manufacture, distribution, dispensation,

possession, or use of a controlled substance is

prohibited in the person’s workplace and specifying the

actions that will be taken against employees for

violations of such prohibition;

(B) establishing a drug-free awareness program to

inform employees about—

(i) the dangers of drug abuse in the workplace;

(ii) the person’s policy of maintaining a drug-free

workplace;

(iii) any available drug counseling, rehabilitation, and

employee assistance programs; and

(iv) the penalties that may be imposed upon employees

for drug abuse violations;

engaged in the performance of such contract be given a

copy of the statement required by subparagraph (A);

(D) notifying the employee in the statement required

by subparagraph (A), that as a condition of employment

on such contract, the employee will—

(i) abide by the terms of the statement; and

(ii) notify the employer of any criminal drug statute

17a

conviction for a violation occurring in the workplace no

later than 5 days after such conviction;

(E) notifying the contracting agency within 10 days

after receiving notice under subparagraph (D)(ii) from

an employee or otherwise receiving actual notice of

such conviction;

(F) imposing a sanction on, or requiring the satisfactory

participation in a drug abuse assistance or

rehabilitation program by, any employee who is so

convicted, as required by section 703 of this title; and

(G) making a good faith effort to continue to maintain a

drug-free workplace through implementation of

subparagraphs (A), (B), (C), (D), (E), and (F).

(2) Requirement for individuals

No Federal agency shall enter into a contract with an

individual unless such individual agrees that the

individual will not engage in the unlawful manufacture,

distribution, dispensation, possession, or use of a

controlled substance in the performance of the contract.

(b) Suspension, termination, or debarment of

contractor

(1) Grounds for suspension, termination, or

debarment

Each contract awarded by a Federal agency shall be

subject to suspension of payments under the contract or

termination of the contract, or both, and the contractor

thereunder or the individual who entered the contract

with the Federal agency, as applicable, shall be subject

to suspension or debarment in accordance with the

requirements of this section if the head of the agency

determines that—

(A) the contractor violates the requirements of

subparagraph (A), (B), (C), (D), (E), or (F) of subsection

(a)(1) of this section; or

(B) such a number of employees of such contractor have

18a

been convicted of violations of criminal drug statutes

for violations occurring in the workplace as to indicate

that the contractor has failed to make a good faith effort

to provide a drug-free workplace as required by

subsection (a) of this section.

(2) Conduct of suspension, termination, and

debarment proceedings

(A) If a contracting officer determines, in writing, that

cause for suspension of payments, termination, or

suspension or debarment exists, an appropriate action

shall be initiated by a contracting officer of the agency,

to be conducted by the agency concerned in accordance

with the Federal Acquisition Regulation and applicable

agency procedures.

(B) The Federal Acquisition Regulation shall be

revised to include rules for conducting suspension and

debarment proceedings under this subsection, including

rules providing notice, opportunity to respond in

writing or in person, and such other procedures as may

be necessary to provide a full and fair proceeding to a

contractor or individual in such proceeding.

(3) Effect of debarment

Upon issuance of any final decision under this

subsection requiring debarment of a contractor or

individual, such contractor or individual shall be

ineligible for award of any contract by any Federal

agency, and for participation in any future procurement

by any Federal agency, for a period specified in the

decision, not to exceed 5 years.

41 USC § 702. Drug-free workplace requirements for

Federal grant recipients

(a) Drug-free workplace requirement

(1) Persons other than individuals

19a

No person, other than an individual, shall receive a

grant from any Federal agency unless such person

agrees to provide a drug-free workplace by—

(A) publishing a statement notifying employees that

the unlawful manufacture, distribution, dispensation,

possession, or use of a controlled substance is

prohibited in the grantee’s workplace and specifying

the actions that will be taken against employees for

violations of such prohibition;

(B) establishing a drug-free awareness program to

inform employees about—

(i) the dangers of drug abuse in the workplace;

(ii) the grantee’s policy of maintaining a drug-free

workplace;

(iii) any available drug counseling, rehabilitation, and

employee assistance programs; and

(iv) the penalties that may be imposed upon employees

for drug abuse violations;

engaged in the performance of such grant be given a

copy of the statement required by subparagraph (A);

(D) notifying the employee in the statement required

by subparagraph (A), that as a condition of employment

in such grant, the employee will—

(i) abide by the terms of the statement; and

(ii) notify the employer of any criminal drug statute

conviction for a violation occurring in the workplace no

later than 5 days after such conviction;

(E) notifying the granting agency within 10 days after

receiving notice of a conviction under subparagraph

(D)(ii) from an employee or otherwise receiving actual

notice of such conviction;

(F) imposing a sanction on, or requiring the satisfactory

participation in a drug abuse assistance or

rehabilitation program by, any employee who is so

20a

convicted, as required by section 703 of this title; and

(G) making a good faith effort to continue to maintain a

drug-free workplace through implementation of

subparagraphs (A), (B), (C), (D), (E), and (F).

(2) Individuals

No Federal agency shall make a grant to any individual

unless such individual agrees as a condivion of such

grant that the individual will not engage in the unlawful

manufacture, distribution, dispensation, possession, or

use of a controlled substance in conducting any activity

with such grant.

(b) Suspension, termination, or debarment of

grantee

(1) Grounds for suspension, termination, or

debarment

Each grant awarded by a Federal agency shall be

subject to suspension of payments under the grant or

termination of the grant, or both, and the grantee

thereunder shall be subject to suspension or

debarment, in accordance with the requirements of this

section if the agency head of the granting agency or his

official designee determines, in writing, that—

(A) the grantee violates the requirements of

subparagraph (A), (B), (C), (D), (E), (F), or (G) of

subsection (a)(1) of this section; or

(B) such a number of employees of such grantee have

been convicted of violations of criminal drug statutes

for violations occurring in the workplace as to indicate

that the grantee has failed to make a good faith effort to

provide a drug-free workplace as required by

subsection (a)(1) of this section.

(2) Conduct of suspension, termination, and

debarment proceedings

A suspension of payments, termination, or suspension

or debarment proceeding subject to this subsection

2la

shall be conducted in accordance with applicable law,

including Executive Order 12549 or any superseding

Executive order and any regulations promulgated to

implement such law or Executive order.

(3) Effect of debarment

Upon issuance of any final decision under this

subsection requiring debarment of a grantee, such

grantee shall be ineligible for award of any grant from

any Federal agency and for participation in any future

grant from any Federal agency for a period specified in

the decision, not to exceed 5 years.

41 USC§ 703. Employee sanctions and remedies

A grantee or contractor shall, within 30 days after

receiving notice from an employee of a conviction

pursuant to section 701 (a)(1)(D)(ii) or 702 (a)(1)(D)Gi) of

this title—

(1) take appropriate personnei action against such

employee up to and including termination; or

(2) require such employee to satisfactorily participate

in a drug abuse assistance or rehabilitation program

approved for such purposes by a Federal, State, or local

health, law enforcement, or other appropriate agency.

71 USC§ 704. Waiver

(a) In general

A termination, suspension of payments, or suspension

or debarment under this chapter may be waived by the

head of an agency with respect to a particular contract

or grant if—

(1) in the case of a waiver with respect to a contract,

the head of the agency determines under section 701

(b)1) of this title, after the issuance of a final

22a

determination under such section, that suspension of

payments, or termination of the contract, or suspension

or debarment of the contractor, or refusal to permit a

person to be treated as a responsible source for a

contract, as the case may be, would severely disrupt the

operation of such agency to the detriment of the

Federal Government or the general public; or

(2) in the case of a waiver with respect to a grant, the

head of the agency determines that suspension of

payments, termination of the grant, or suspension or

debarment of the grantee would not be in the public

interest.

(b) Exclusive authority

The authority of the head of an agency under this

section to waive a termination, suspension, or

debarment shall not be delegated.

41 USC § 705. Regulations

Not later than 90 days after November 18, 1988, the

governmentwide regulations governing actions under

this chapter shall be issued pursuant to the Office of

Federal Procurement Policy Act (41 U.S.C. 401 et seq.).

41 USC § 706. Definitions

For purposes of this chapter—

(1) the term “drug-free workplace” means a site for the

performance of work done in connection with a specific

grant or contract described in section 701 or 702 of this

title of an entity at which employees of such entity are

prohibited from engaging in the unlawful manufacture,

distribution, dispensation, possession, or use of a

controlled substance in accordance’ with the

requirements of this Act;

23a

(2) the term “employee” means the employee of a

grantee or contractor directly engaged in the

performance of work pursuant to the provisions of the

grant or contract described in section 701 or 702 of this

title;

(3) the term “controlled substance” means a controlled

substance in schedules I through V of section 812 of

title 21;

(4) the term “conviction” means a finding of guilt

(including a plea of nolo contendere) or imposition of

sentence, or both, by any judicial body charged with the

responsibility to determine violations of the Federal or

State criminal drug statutes;

(5) the term “criminal drug statute” means a criminal

statute involving manufacture, distribution,

dispensation, use, or possession of any controlled

substance;

(6) the term “grantee” means the department, division,

or other unit of a person responsible for the

performance under the grant;

(7) the term “contractor” means the department,

division, or other unit of a person responsible for the

performance under the contract; and

(8) the term “Federal agency” means an agency as that

term is defined in section 552 (f) of title 5.

41 USC § 707. Construction of chapter

Nothing in this chapter shall be construed to require

law enforcement agencies, if the head of the agency

determines it would be inappropriate in connection with

the agency’s undercover operations, to comply with the

provisions of this chapter.

42 USC § 12112. Discrimination

24a

(a) General rule

No covered entity shall discriminate against a qualified

individual with a disability because of the disability of

such individual in regard to job application procedures,

the hiring, advancement, or discharge of employees,

employee compensation, job training, and other terms,

conditions, and privileges of employment.

(b) Construction

As used in subsection (a) of this section, the term

“discriminate” includes—

(1) limiting, segregating, or classifying a job applicant

or employee in a way that adversely affects the

opportunities or status of such applicant or employee

because of the disability of such applicant or employee;

(2) participating in a contractual or other arrangement

or relationship that has the effect of subjecting a

covered entity’s qualified applicant or employee with a

disability to the discrimination prohibited by this

subchapter (such relationship includes a relationship

with an employment or referral agency, labor union, an

organization providing fringe benefits to an employee of

the covered entity, or an organization providing

training and apprenticeship programs);

(3) utilizing standards, criteria, or methods of

administration—

(A) that have the effect of discrimination on the basis of

disability; or

(B) that perpetuate the discrimination of others who

are subject to common administrative control;

(4) excluding or otherwise denying equal jobs or

benefits to a qualified individual because of the known

disability of an individual with whom the qualified

individual is known to have a relationship or

association;

(5)

25a

(A) not making reasonable accommodations to the

known physical or mental limitations of an otherwise

qualified individual with a disability who is an applicant.

or employee, unless such covered entity can

demonstrate that the accommodation would impose an

undue hardship on the operation of the business of such

covered entity; or

(B) denying employment opportunities to a job

applicant or employee who is an otherwise qualified

individual with a disability, if such denial is based on

the need of such covered entity to make reasonable

accommodation to the physical or mental impairments

of the employee or applicant;

(6) using qualification standards, employment tests or

other selection criteria that screen out or tend to screen

out an individual with a disability or a class of

individuals with disabilities unless the standard, test or

other selection criteria, as used by the covered entity, is

shown to be job-reiated for the position in question and

is consistent with business necessity; and

(7) failing to select and administer tests concerning

employment in the most effective manner to ensure

that, when such test is administered to a job applicant

or employee who has a disability that impairs sensory,

manual, or speaking skills, such test results accurately

reflect the skills, aptitude, or whatever other factor of

such applicant or employee that such test purports to

measure, rather than reflecting the impaired sensory,

manual, or speaking skills of such employee or applicant

(except where such skills are the factors that the test

purports to measure).

(1) In general

It shall not be unlawful under this section for a covered

entity to take any action that constitutes discrimination

26a

under this section with respect to an employee in a

workplace in a foreign country if compliance with this

section would cause such covered entity to violate the

law of the foreign country in which such workplace is

located.

(2) Control of corporation

(A) Presumption

If an employer controls a corporation whose place of

incorporation is a foreign country, any practice that

constitutes discrimination under this section and is

engaged in by such corporation shall be presumed to be

engaged in by such employer.

(B) Exception

This section shall not apply with respect to the foreign

operations of an employer that is a foreign person not

controlled by an American employer.

For purposes of this paragraph, the determination of

whether an employer controls a corporation shall be

based on—

(i) the interrelation of operations;

(ii) the common management;

(iii) the centralized control of labor relations; and

(iv) the common ownership or financial control,

of the employer and the corporation.

(d) Medical examinations and inquiries

(1) In general

The prohibition against discrimination as referred to in

subsection (a) of this section shall include medical

examinations and inquiries.

(2) Preemployment

(A) Prohibited examination or inquiry

Except as provided in paragraph (3), a covered entity

shall not conduct a medical examination or make

inquiries of a job applicant as to whether such applicant

27a

is an individual with a disability or as to the nature or

severity of such disability.

(B) Acceptable inquiry

A covered entity may make preemployment inquiries

into the ability of an applicant to perform job-related

functions.

(3) Employment entrance examination

A covered entity may require a medical examination

after an offer of employment has been made to a job

applicant and prior to the commencement of the

employment duties of such applicant, and may condition

an offer of employment on the results of such

examination, if—

(A) all entering employees are subjected to such an

examination regardless of disability;

(B) information obtained regarding the medical

condition or history of the applicant is collected and

maintained on separate forms and in separate medical

files and is treated as a confidential medical record,

except that—

(i) supervisors and managers may be_ informed

regarding necessary restrictions on the work or duties

of the employee and necessary accommodations;

(ii) first aid and safety personnel may be informed,

when appropriate, if the disability might require

emergency treatment; and

(iii) government officials investigating compliance with

this chapter shall be provided relevant information on

request; and

accordance with this subchapter.

(4) Examination and inquiry

(A) Prohibited examinations and inquiries

A covered entity shall not require a _ medical

examination and shall not make inquiries of an

28a

employee as to whether such employee is an individual

with a disability or as to the nature or severity of the

disability, unless such examination or inquiry is shown

to be job-related and consistent with business

necessity.

(B) Acceptable examinations and inquiries

A covered entity may conduct voluntary medical

examinations, including voluntary medical histories,

which are part of an employee health program available

to employees at that work site. A covered entity may

make inquiries into the ability of an employee to

perform job-related functions.

Information obtained under’ subparagraph (B)

regarding the medical condition or history of any

employee are subject to the requirements of

subparagraphs (B) and (C) of paragraph (8).

42 USC § 12114. Illegal use of drugs and alcohol

(a) Qualified individual with a disability

For purposes of this subchapter, the term “qualified

individual with a disability” shall not include any

employee or applicant who is currently engaging in the

illegal use of drugs, when the covered entity acts on the

basis of such use.

(b) Rules of construction

Nothing in subsection (a) of this section shall be

construed to exclude as a qualified individual with a

disability an individual who—

(1) has successfully completed a supervised drug

rehabilitation program and is no longer engaging in the

illegal use of drugs, or has otherwise been rehabilitated

successfully and is no longer engaging in such use;

(2) is participating in a supervised rehabilitation

29a

program and is no longer engaging in such use; or

(3) is erroneously regarded as engaging in such use, but

is not engaging in such use;

except that it shall not be a violation of this chapter for

a covered entity to adopt or administer reasonable

policies or procedures, including but not limited to drug -

testing, designed to ensure that an individual described

in paragraph (1) or (2) is no longer engaging in the

illegal use of drugs.

A covered entity—

(1) may prohibit the illegal use of drugs and the use of

alcohol at the workplace by all employees;

(2) may require that employees shall not be under the

influence of alcohol or be engaging in the illegal use of

drugs at the workplace;

(3) may require that employees behave in conformance

with the requirements established under the Drug-

Free Workplace Act of 1988 (41 U.S.C. 701 et seq.);

(4) may hold an employee who engages in the illegal use

of drugs or who is an alcoholic to the same qualification

standards for employment or job performance and

behavior that such entity holds other employees, even if

any unsatisfactory performance or behavior is related

to the drug use or alcoholism of such employee; and

(5) may, with respect to Federal regulations regarding

alcohol and the illega! use of drugs, require that—

(A) employees comply with the standards established in

such regulations of the Department of Defense, if the

employees of the covered entity are employed in an

industry subject to such regulations, including

complying with regulations (if any) that apply to

employment in sensitive positions in such an industry,

in the case of employees of the covered entity who are

employed in such positions (as defined in the

30a

regulations of the Department of Defense);

(B) employees comply with the standards established in

such regulations of the Nuclear Regulatory

Commission, if the employees of the covered entity are

employed in an industry subject to such regulations,

including complying with regulations (if any) that apply

to employment in sensitive positions in such an

industry, in the case of employees of the covered entity

who are employed in such positions (as defined in the

regulations of the Nuclear Regulatory Commission);

and

such regulations of the Department of Transportation,

if the employees of the covered entity are employed in a

transportation industry subject to such regulations,

including complying with such regulations (if any) that

apply to employment in sensitive positions in such an

industry, in the case of employees of the covered entity

who are employed in such positions (as defined in the

regulations of the Department of Transportation).

(d) Drug testing

(1) In general

For purposes of this subchapter, a test to determine the

illegal use of drugs shall not be considered a medical

examination.

(2) Construction

Nothing in this subchapter shall be construed to

encourage, prohibit, or authorize the conducting of drug

testing for the illegal use of drugs by job applicants or

employees or making employment decisions based on

such test results.

(e) Transportation employees

Nothing in this subchapter shall be construed to

encourage, prohibit, restrict, or authorize the otherwise

lawful exercise by entities subject to the jurisdiction of

gla

the Department of Transportation of authority to—

(1) test employees of such entities in, and applicants for,

positions involving safety-sensitive duties for the illegal

use of drugs and for on-duty impairment by alcohol; and

(2) remove such persons who test positive for illegal use

of drugs and on-duty impairment by alcohol pursuant to

paragraph (1) from_ safety-sensitive duties in

implementing subsection (c) of this section.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.