Grahn v. Tosco Corp. (58 Cal. App. 4th 1373, 1997)

Opinion

RUVOLO, J.

I.

Introduction

This is an appeal from a jury award of $1,074,420 in favor of respondents Gerald Grahn and his wife, Bonnie Grahn, for personal injury and loss of consortium resulting from his occupational exposure to asbestos. Grahn was the employee of an independent contractor, J. L. Thorpe & Sons (Thorpe), which performed insulation work at various locations throughout the Bay Area, including appellant Tosco Corporation’s oil refinery (Tosco). The jury found Grahn’s injuries partially resulted from Tosco’s negligence and allocated 3 percent fault to Tosco, 60 percent fault to Grahn’s employers, including Thorpe, and 37 percent fault to all others.

Tosco appeals, principally questioning whether, under the Supreme Court’s decision in Privette v. Superior Court (1993) 5 Cal.4th 689 [21 Cal.Rptr.2d 72, 854 P.2d 721] (Privette), a hirer of an independent contractor can be held liable in negligence for its own acts or omissions when an independent contractor’s employee sustains work-related injuries that are also compensable by workers’ compensation. As we explain in this opinion, we find Privette did not abrogate the law in California that a hirer of an independent contractor may be liable to the independent contractor’s employee for the hirer’s own independent fault. However, we conclude a number of significant instructional errors occurred during trial, particularly with regard to defining the standards applicable in determining when a hirer who is also in control of the premises where the work takes place can be found liable to the employee of an independent contractor. These instructions were critical to a proper consideration by the jury of the liability issues, and the errors were accordingly prejudicial. We therefore reverse.

II.

Factual Background

At the time of trial respondent Gerald Grahn was a 51-year-old brick mason, who was employed from approximately 1963 to 1989 by Thorpe, one of the leading refractory installers in Northern California. Thorpe is an independent contractor specializing in installation and repair of refractory and insulation materials in high-temperature units such as furnaces, boilers, large industrial plants and shipyards, including all of the Bay Area’s major refineries. Grahn worked for Thorpe at hundreds of different jobsites, principally tearing out and installing brick and insulation.

After Grahn was diagnosed with asbestos-related lung disease, he and his wife Bonnie brought an action for damages against approximately 200 defendants. Grahn alleged that he suffered from “a condition related to exposure to asbestos and asbestos-containing products.” In addition to manufacturers and suppliers of various asbestos-containing insulation products, Grahn also sued a number of property owners, including Tosco, alleging that these defendants owned or controlled the premises at which Grahn worked on behalf of his employer and that during such work, he was exposed to airborne asbestos. He further alleged that these property owners, who had hired his employer as an independent contractor, either knew or should have known that he would be exposed to a dangerous condition while working for his employer at their premises.

The case proceeded to trial solely against Tosco after all other defendants either settled or were dismissed from the action. Grahn asserted three theories of negligence against Tosco. First, Grahn contended Tosco was negligent in hiring Thorpe to remove asbestos-containing materials without any indication Thorpe was licensed or qualified to engage in such work. Second, it was alleged that Tosco retained control over the details of the work performed by Thorpe, which created a separate legal duty based on the negligent failure to exercise control or supervision. Third, Grahn claimed Tosco was negligent in the use and maintenance of its premises thereby exposing others to an unreasonable risk of harm.

The evidence at trial showed Tosco purchased the premises at issue from Phillips Petroleum on April 1, 1976. Tosco refined gasoline and made other petroleum products at the refinery and regularly hired independent contractors with specialized skills to repair, overhaul, and maintain refinery equipment.

Grahn worked at Tosco’s refinery throughout his employment at Thorpe and remembered participating in a number of projects there after Tosco acquired the refinery in 1976. At trial, Grahn claimed he was exposed to airborne asbestos during these various work assignments on Tosco’s premises. Obviously, none of the ripped-out materials from Grahn’s jobs at Tosco were available for laboratory analysis; however, at trial Grahn attempted to prove these materials contained asbestos based primarily on the age and general appearance of the material being handled. For example, he recalled an extensive “rip-out” occurring at the refinery’s Selas furnace in approximately 1986, at which time he removed not only insulation brick, but also block lining as far back as the furnace’s breachings. As the ripped-out insulation material was dropped from heights as great as 60 feet, considerable dust was dispersed into the air. Grahn testified, “You would have a hard time seeing the person next to you for maybe two or three minutes until it starts clearing out, the air blowers moving it." He recalled wearing only a paper mask as respiratory protection on this job.

Grahn also remembered assisting in removing the lining from the refinery’s No. 16 furnace, as well as replacing its transite roof and fireproofing the outside of the coker after a fire. Again, he recalled wearing paper respirators for safety protection on these jobs. In 1991, Grahn helped take the roof off the No. 3 boilerhouse, which was lined with block insulation. Also, in the 1990’s, Grahn removed original brick and block insulation from the No. 27 boiler walls. Tosco never warned Grahn of the hazards associated with the asbestos present on its premises.

The jury returned its verdict on May 14, 1996, finding Grahn suffered from an asbestos-related disease and that Tosco’s negligence was a cause of Grahn’s asbestos exposure. The jury awarded compensatory damages to Grahn as follows: $12,420 for past medical expenses; $80,000 for future medical expenses; $6,000 for past loss of earnings; $650,000 for future loss of earnings; $216,000 of noneconomic damages; and $10,000 for future medical monitoring costs. The jury awarded Bonnie Grahn $100,000 for loss of consortium. The jury found Tosco had not acted with malice or oppression and declined to award punitive damages. Apportioning fault for Grahn’s injuries, the jury allocated 3 percent to Tosco. The jury attributed 60 percent of the fault to Grahn’s employers and 37 percent to all others. After the trial court denied Tosco’s motion for a new trial, motion for judgment notwithstanding the verdict, and motion to vacate the judgment, this appeal followed.

III.

Discussion

A. The Precedential Legacy of Privette

The key to resolution of the parties’ dispute is the correct interpretation of the impact of Privette, supra, 5 Cal.4th 689 on preexisting California tort law. Of course, no one questions Privette's negative impact on the continued vitality of the peculiar risk doctrine in California. Several intermediate appellate courts have written expansively on the effect of our Supreme Court’s rationale in Privette on other theories of tort-based liability asserted against the hirers of independent contractors. However, they have not survived the 90-day “shelf life” of opinions chosen for review by our high court. In the face of such daunting odds, we nevertheless add our voice to those who have been required to divine the scope of Privette pending further definitive word on the matters under review.

In Privette, supra, 5 Cal.4th 689, the Supreme Court held that a nonnegligent property owner who hires an independent contractor to perform inherently dangerous work should not be held vicariously liable under the peculiar risk doctrine for injuries to the independent contractor’s employee occasioned solely by the independent contractor’s negligence for which there exists workers’ compensation. (Id. at p. 702.) The peculiar risk doctrine was created as one of several exceptions to the common law rule of nonliability of principals for the negligence of independent contractors. The doctrine permits civil recovery against the hirer of an independent contractor for injuries sustained as a result of the negligence of the contractor where the work involves a peculiar risk of harm in the absence of special precautions needed to eliminate that risk. (See Rest.2d Torts, §§ 413, 416.) In these instances, a nondelegable duty is imposed on the hirer to ensure that reasonable safety precautions are implemented to reduce or eliminate the risk of injury. (Privette, supra, 5 Cal.4th at p. 694.) The Privette court unanimously concluded that “. . . when the person injured by negligently performed contracted work is one of the contractor’s own employees, the injury is already compensable under the workers’ compensation scheme and therefore the doctrine of peculiar risk should provide no tort remedy, for those same injuries, against the person who hired the independent contractor.” (Id. at p. 696.)

The Supreme Court grounded its decision primarily on the policy consideration that there is no longer justification for retaining vicarious liability in this context because of the availability of guaranteed compensation under workers’ compensation. (Privette, supra, 5 Cal.4th at p. 701.) The court noted that, unlike other employees, the employees of independent contractors had essentially been receiving an unwarranted windfall since they were able to recover both workers’ compensation from their employers and tort damages from the hirer. This, in turn, resulted in the anomalous situation where hirers were better off, in terms of potential liability, having their own untrained workers perform dangerous tasks that could and should be performed by trained contractors. (Id. at p. 700.) Thus, the peculiar risk doctrine promoted a greater opportunity for injury to workers engaged in unusually dangerous work. The court concluded further that when a hirer is held liable under the peculiar risk doctrine for injuries to innocent bystanders or to an owner of neighboring property, the hirer may obtain equitable indemnity from the independent contractor responsible for the injuries. Yet when the person injured is an employee of the independent contractor, Labor Code section 3864 shields the negligent contractor from an action seeking equitable indemnity. Therefore, an additional significant policy justification for imposing peculiar risk liability on a nonnegligent party is missing, i.e., the ability of a nonnegligent party to be made whole by the party responsible for the injury. (5 Cal.4th at p. 701.)

On the basis of Privette, supra, 5 Cal.4th 689, the trial court quite easily ruled that Grahn could not proceed against Tosco under any theory of vicarious liability. However, the more taxing issue was whether, in the aftermath of the Privette decision, a hirer who was also the owner of premises where the work was to be performed had any independent duty of care to an independent contractor’s employee. Grahn argued that Privette was both factually and legally distinguishable from his case. He pointed out that the hirer in Privette was a teacher who hired an independent contractor to install a new roof on his duplex—there was no evidence that anything the hirer in Privette did or did not do proximately caused the worker’s injuries. Liability was imposed solely because special precautions had not been taken by the independent contractor to reduce or eliminate the risk of harm arising from performance of the work. Grahn emphasized that the instant case, on the other hand, involved allegations that Grahn’s injuries were the result of Tosco’s “direct” negligence, not simply the result of negligence imputed to Tosco under the peculiar risk doctrine.

Thus, the trial court had to decide whether Privette's reasoning was limited to situations where vicarious liability was imposed on a nonnegligent hirer, or whether its reasoning was broad enough to encompass bases of liability premised on common law tort theories other than peculiar risk. After considering both written and oral argument and revisiting the question numerous times, the trial court ruled that Privette abrogated a hirer’s liability under theories grounded in principles of vicarious liability, but that a hirer continued to remain potentially liable under theories based on the hirer’s own injury-producing negligence. On appeal, Tosco claims this ruling was error.

Relying on Privette, supra, 5 Cal.4th 689, Tosco seeks to have this court adopt a rule that any work-related injuries suffered by the employee of an independent contractor while working at another’s premises are solely compensable through workers’ compensation and that the hirer is immune from liability regardless of its independent fault. We do not believe this far-reaching effect is compelled by the rationale of Privette. In Privette, the court had before it only the issue of whether a peculiar risk theory could be used to hold a nonnegligent hirer liable under vicarious liability for the negligence of the independent contractor. Other theories of negligence liability based on the hirer’s own conduct were not raised or addressed in Privette. As our Supreme Court counseled in Ginns v. Savage (1964) 61 Cal.2d 520 [39 Cal.Rptr. 377, 393 P.2d 689]: “Language used in any opinion is of course to be understood in the light of the facts and the issue then before the court, and an opinion is not authority for a proposition not therein considered. [Citation.]” (Id. at p. 524, fn. 2.) Another court has cautioned: “An extract from an opinion must be read in the light of the subject there under discussion and with reference to the facts in that case, and rules applicable to the decision in which they appear cannot be repeated in exemplification of a theory different from that to which they were applied in the case wherein the opinion was rendered.” (Southern Cal. Enterprises v. Walter & Co. (1947) 78 Cal.App.2d 750, 757 [178 P.2d 785].)

These admonitions have particular relevance to the instant case. While some of the underlying policy analysis in Privette applies to cases where injured workers seek to impose direct as opposed to vicarious liability upon the hirer, the claims in these actions are dissimilar in important ways from the singular claim advanced in Privette.

For example, Privette's concern about the fundamental unfairness of imposing vicarious liability on a nonnegligent hirer is entirely inapplicable where the hirer’s own negligent conduct has caused or contributed to the worker’s injury. As Professor Prosser explained, there is nothing at all “vicarious” about the liability that attaches to a hirer who itself is negligent: “ ‘In the first place, quite apart from any question of vicarious responsibility, the employer may be liable for any negligence of his own in connection with the work to be done. When there is a foreseeable risk of harm to others unless precautions are taken, it is his duty to exercise reasonable care to select a competent contractor, and to provide, in the contract or otherwise, for such precautions. So far as he gives directions for the work, furnishes equipment for it, or retains control over any part of it, he is required to exercise reasonable care for the protection of others; and he must likewise interfere to put a stop to any unnecessarily dangerous practices, and make a reasonable inspection of the work after it is completed, to be sure that it is safe. In all of these cases, he is liable for his personal negligence, rather than that of the contractor.’ ” (Risley v. Lenwell (1954) 129 Cal.App.2d 608, 622 [277 P.2d 897], italics added, quoting Prosser on Torts at p. 483 (see Prosser & Keeton, Torts (5th ed. 1984) § 71, pp. 510-511, fns. omitted).)

The principle that everyone is responsible for one’s own negligent acts is firmly entrenched in California law. Civil Code section 1714 reads, in pertinent part, “Everyone is responsible, not only for the result of his willful acts, but also for an injury occasioned to another by his want of ordinary care or skill in the management of his property or person, . . .” Therefore, holding Tosco directly liable for its negligent acts does not place “an onerous burden” on a fault-free party. (Privette, supra, 5 Cal.4th at p. 701.) Unlike vicarious liability, which passes on the legal responsibility arising from the independent contractor’s negligence to an otherwise fault-free party, in direct negligence cases the hirer is being held liable for its own conduct.

In attempting to extend Privette’s reasoning, Tosco complains that holding a negligent hirer liable to an independent contractor’s injured employee would produce the same anomalous result under California workers’ compensation law as holding a nonnegligent property owner liable. It emphasizes the Privette court’s reasoning: “"When an independent contractor causes injury to the contractor’s own employee, the [Workers’ Compensation] Act’s ‘exclusive remedy’ provision shields the contractor from further liability for the injury. Yet, under the expansive view of the peculiar risk doctrine that has been adopted in California and a minority of other jurisdictions, the person who hired the independent contractor can, for the same injury-causing conduct of the contractor, be held liable in a tort action for the injuries to the contractor’s employee. Because this expansive view produces the anomalous result that a nonnegligent person’s liability for an injury is greater than that of the person whose negligence actually caused the injury, it has been widely criticized. [Citations.]” (Privette, supra, 5 Cal.4th at p. 698.)

However, the workers’ compensation system clearly recognizes and accommodates the availability of civil remedies for the injured worker as against negligent third parties. Labor Code section 3852 et seq. establish the procedures for an injured employee to pursue a third party civil suit for the same injury for which the worker has collected workers’ compensation.

Thus, while in most cases the workers’ compensation system is the employee’s exclusive remedy against the employer, it was never designed to constitute the employee’s exclusive remedy against the universe. This was recognized recently by our Supreme Court in DaFonte v. Up-Right, Inc. (1992) 2 Cal.4th 593 [7 Cal.Rptr.2d 238, 828 P.2d 140]: “Of course, an employer cannot be sued in tort for the work-related injury of an employee. The employer’s sole liability is for benefits payable, regardless of fault, under the workers’ compensation law. [Citation.] On the other hand, the employee may sue any other responsible person for ‘all damages proximately resulting’ from the injury ([Lab. Code,] § 3852.)” (Id. at p. 598.) In Privette itself, the court recognized that the exclusivity clause, “does not preclude the employee from suing anyone else whose conduct was a proximate cause of the injury. [Citations.]” (Privette, supra, 5 Cal.4th at p. 697, italics added.)

The workers’ compensation statutory scheme recognizes the independence of third party liability from that of the employer. The employer who has already paid workers’ compensation benefits for the injury then has a right to recoup his workers’ compensation payments vis-á-vis the negligent third party. (See Lab. Code, §§ 3852, 3856; DaFonte v. Up-Right, Inc., supra, 2 Cal.4th at p. 598.) The judicial abolition of all hirer liability, based on Privette, would leave the injured party’s employer, who has paid workers’ compensation benefits, without recourse against the hirer whose negligence might have caused or contributed to the worker’s injuries, thereby rendering Labor Code sections 3852 and 3856 ineffectual.

Furthermore, this expansive reasoning is also at odds with the well-recognized theory of liability for independent fault under the “dual capacity” doctrine. Under this rule, an employer who commits certain torts against an employee while occupying a legal status in addition to that of an employer may not assert the payment of compensation benefits to the injured worker as a defense to the employee’s tort action.

An early case embodying this doctrine was Bell v. Industrial Vangas, Inc. (1981) 30 Cal.3d 268 [179 Cal.Rptr. 30, 637 P.2d 266]. In Bell, an employee delivering his employer’s propane gas product was not limited to workers’ compensation benefits for injuries received when the gas exploded. The employee was allowed to maintain a tort action against the employer based on the independent duties which flowed from the employer’s “‘extra’” status as a manufacturer. (Id. at p. 277.)

The doctrine was codified in 1982, with language modifying the principle as expounded by the Supreme Court in Bell. Labor Code section 3602 now provides in relevant part: “(b) An employee, or his or her dependents in the event of his or her death, may bring an action at law for damages against the employer, as if this division did not apply, in the following instances: [^Q . . . ['ll. . . (3) Where the employee’s injury or death is proximately caused by a defective product manufactured by the employer and sold, leased, or otherwise transferred for valuable consideration to an independent third person, and that product is thereafter provided for the employee’s use by a third person.” The argument made by Tosco for the extension of Privette to eradicate independent bases of liability for all employment-related injuries runs counter to the legislative objective set out by Labor Code section 3602, subdivision (b)(3).

Another illustration of the practical ramifications of broadly reading Privette is the case of Rogness v. English Moss Joint Venturers (1987) 194 Cal.App.3d 190 [239 Cal.Rptr. 387], where Division Four of this appellate district reversed a summary judgment for English Moss. English Moss was a joint venture of several entities, including plaintiff’s employer, Monticello Homes. All were engaged in the construction of a single residence, and plaintiff allegedly received personal injuries when a wall collapsed while he was on site working as a carpenter. The court concluded that an employee of one member of a joint venture is not barred from suing another joint venture partner in tort because the employee received compensation benefits from the employer joint venturer. If, as Tosco asserts, there exists a broad public policy against third party suits where the plaintiff receives compensation benefits, the joint venturer in Rogness would have avoided liability.

This critical distinction was duly noted by the court in the recent case of Orosco v. Sun-Diamond Corp. (1997) 51 Cal.App.4th 1659 [60 Cal.Rptr.2d 179]. In Orosco, plaintiff suffered personal injuries while an employee of Sun-Maid Growers, Inc. Summary judgment was entered in favor of Sun-Diamond, which was a joint venture partner of Sun-Maid. Plaintiff attempted to rely on Rogness v. English Moss Joint Venturers, supra, 194 Cal.App.3d 190 to support of its claim against Sun-Diamond, which was not independently at fault for causing plaintiff’s injury, but which plaintiff claimed was responsible for the fault attributed to Sun-Maid. In discussing the ambiguity of the factual record in Rogness as to whether the negligence was the employer’s or was the negligence of the joint venture itself, the Orosco court stated: “We have no disagreement with Rogness if the negligence in question was the negligence of the joint venture. Rogness would simply stand for the proposition that a joint venture is in the same position as any other third party tortfeasor who injures another’s employee. [Citation.] [