Carolyn CLAXTON, Plaintiff and Appellant,
v.
Ray WATERS et al., Defendants and Respondents.
Supreme Court of California.
*248 Law Offices of Joseph R. Zamora and Joseph R. Zamora, Santa Monica, for Plaintiff and Appellant.
Gibson, Dunn & Crutcher, David A. Cathcart, Paul DeCamp, Washington, DC, Michele L. Maryottt, Irvine and Jeffrey F. Webb, Los Angeles, for Defendants and Respondents.
*247 KENNARD, J.
In executing the standard preprinted form used to settle workers' compensation claims, does an injured worker also release causes of action that are not exclusively subject to the workers' compensation law or are not within the scope of that law? The answer is "no." Those causes of action, however, may be the subject of a separate settlement and release.
I
From February 1995 until her resignation in September 1997, Carolyn Claxton worked as an office assistant for defendant Pacific Maritime Association (PMA). Claxton's supervisor was Ray Waters.
On December 16, 1997, Claxton filed a claim with the Workers' Compensation Appeals Board (WCAB) against PMA for an injury to her "left lower extremity and psyche" from a slip and fall on May 7, 1997. On January 16, 1998, Claxton filed a second and separate workers' compensation claim against PMA for injury to "psyche due to sexual harassment."
On September 15, 1998, Claxton filed this civil action against PMA and Waters alleging, as relevant here, sexual harassment in violation of the Fair Employment and Housing Act (Gov.Code, § 12900 et seq.). On November 6, 1998, defendants filed their answer to the complaint.
On February 25, 1999, Claxton and PMA settled the workers' compensation claims for $25,000. As part of the settlement, Claxton executed a preprinted compromise and release form (WCAB form 15). The use of this form is mandatory. (Cal.Code Regs., tit. 8, § 10874.) The form had only the case numbers for Claxton's two claims for workers' compensation; it made no reference to the pending civil action against PMA and Waters.
In preprinted paragraph 3, WCAB form 15 states: "Upon approval of this compromise agreement by the Workers' Compensation Appeals Board or a workers' compensation judge and payment in accordance with the provisions hereof, said employee releases and forever discharges said employer and insurance carrier from all claims and causes of action, whether now known or ascertained, or which may hereafter arise or develop as a result of said injury, including any and all liability of said employer and said insurance carrier and each of them to the dependents, heirs, executors, representatives, administrators or assigns of said employee."
On March 16, 1999, a workers' compensation judge approved the compromise and release. The order approving the settlement contained the case numbers for both of Claxton's workers' compensation claims, but not the case number for the civil action.
Thereafter, in the civil lawsuit alleging sexual harassment, defendants PMA and Waters moved in the superior court for leave to file an amended answer adding, among other things, an affirmative defense that the execution of the workers' compensation compromise and release also extinguished Claxton's claims in her civil action against PMA and Waters. The court granted the motion. Claxton then moved for summary adjudication of, *249 among other things, the affirmative defense.
In support of that motion, Claxton submitted declarations by herself and by the attorney who had represented her in the workers' compensation proceedings. Claxton's declaration stated that she thought the workers' compensation release related only to her knee injury "and did not include" her claim for damages in the civil action alleging sexual harassment by her "employer," that the preprinted workers' compensation release form said nothing about the settlement of her civil action alleging sexual harassment, and that she had not authorized her workers' compensation attorney to settle her civil action.
The declaration of Claxton's workers' compensation attorney stated that the workers' compensation settlement was intended to cover only plaintiff's knee injury claim "and did not include the applicant's claim for civil damages for injuries as a result of the sexual harassment which is the subject of her civil action against her employer. . . ." The declaration pointed out that the preprinted release form had no reference to the pending civil action for sexual harassment, and said Claxton had not authorized settlement of the civil lawsuit by means of the workers' compensation compromise and release.
While Claxton's motion was pending in the superior court, defendants moved for summary judgment, asserting that in executing the workers' compensation compromise and release form Claxton extinguished any recovery for emotional distress damages in her civil lawsuit against defendants.
The trial court granted defendants' motion for summary judgment, took plaintiff's motion for summary adjudication off calendar as moot, and awarded defendants $92,459.75 in attorney fees.
After a reversal by the Court of Appeal, we granted defendants' petition for review.
II
California's workers' compensation scheme was developed early in the 20th century as a result of the inadequacy of the common law that often denied injured workers any recovery for work-related injuries. (Western Indemnity Co. v. Pillsbury (1915)
The workers' compensation law applies to employee injuries "arising out of and in the course of the employment" when the statutorily specified "conditions of compensation concur." (Lab.Code, § 3600.) Generally, it is the exclusive remedy for such injuries. (Id., §§ 3600, subd. (a), 3601.) But some claims, including those based on sexual or racial discrimination or other conduct contrary to fundamental public policy, are not subject to the exclusivity provisions of the workers' compensation law. (City of Moorpark v. Superior Court (1998)
Liability under the workers' compensation law is founded in neither tort nor contract law. (2 Witkin, Summary of Cal. Law (9th ed. 1987) Workers' Compensation, § 7, p. 565.) Instead, it is liability without fault (Cal. Const., art. XIV, § 4; Lab.Code, § 3600; Charles J. *250 Vacanti, M.D., Inc. v. State Comp. Ins. Fund (2001)
To safeguard the injured worker from entering into unfortunate or improvident releases as a result of, for instance, economic pressure or bad advice, the worker's knowledge of and intent to release particular benefits must be established separately from the standard release language of the form. (Sumner v. Workers' Comp. Appeals Bd. (1983)
The concerns just discussed are even stronger when the employer seeks to apply the standard preprinted workers' compensation release language to claims outside the workers' compensation scheme. Of note here is the Court of Appeal's decision in Lopez v. Sikkema (1991)
The Court of Appeal reversed. It noted that there was no evidence that civil claims were discussed in connection with the workers' compensation settlement, and that there was nothing in the record to indicate that the workers' compensation judge was aware of the civil action or had sufficient information to determine the desirability of releasing the civil claims or the adequacy of the compensation for approving such a release. (Lopez, supra, 229 Cal.App.3d at pp. 36-38,
In Asare v. Hartford Fire Ins. Co. (1991)
In yet another decision, Delaney v. Superior Fast Freight (1993)
While this case was pending before us, yet another Court of Appeal decision addressed the issue of an employer's attempt to extend a workers' compensation release form to bar a civil lawsuit. In that case, Mitchell v. Union Central Life Insurance Company (2004)
The Court of Appeal reversed. It relied on the decisions of the Courts of Appeal in Lopez, supra,
Defendants insist, however, that in Jefferson, supra,
In Jefferson, supra,
To summarize, we hold that the standard language of the preprinted form used in settling workers' compensation claims releases only those claims that are within the scope of the workers' compensation system, and does not apply to claims asserted in separate civil actions.[1] We *253 turn now to the question of whether extrinsic evidence is admissible to show that the parties intended the release to also apply to claims outside the workers' compensation system.
III
As discussed below, case law has allowed the use of evidence extrinsic to the language of the preprinted workers' compensation compromise and release form to show whether the parties intended to also release claims outside the workers' compensation system.
In a 1983 decision, Sumner, supra,
We are now convinced that extrinsic evidence should not be admissible to show that the standard preprinted workers' compensation release form also applies to claims outside the workers' compensation system. To allow such evidence would unduly burden our courts. Illustrative of this point are the Court of Appeal decisions discussed earlier: Lopez, supra,
Moreover, allowing such extrinsic evidence would create a trap for the unwary worker. It is highly unlikely that an injured employee's settlement of a workers' compensation claim, by signing the mandatory standard preprinted workers' compensation release form, would alert the worker that the release also applies to claims outside the workers' compensation system. To hold that the standard language of the release would also apply to *254 the injured worker's civil claims outside of the workers' compensation scheme, regardless of whether a civil action has been filed at the time of the execution of the workers' compensation release, would run counter to the public policy of protecting the injured worker against the unintentional loss of workers' rights. (Jefferson, supra,
To disallow such extrinsic evidence would not be unfair to the parties. It would be a simple matter for parties who have agreed to settle not only workers' compensation claims but also claims outside the workers' compensation system to execute another document expressing that agreement. Thus, execution of the mandatory standard preprinted compromise and release form would only establish settlement of the workers' compensation claims; the intended settlement of claims outside the workers' compensation system would have to be reflected in a separate document. (See Jefferson, supra,
Our holding changes existing law on the admissibility of evidence extrinsic to the workers' compensation release to try to show that the release included causes of action outside the workers' compensation system. (Lopez, supra, at p. 39,
IV
"Although as a general rule judicial decisions are to be given retroactive effect [citation], there is a recognized exception when a judicial decision changes a settled rule on which the parties below have relied. [Citations.] `[C]onsiderations of fairness and public policy' may require that a decision be given only prospective application. [Citations.] Particular considerations relevant to the retroactivity determination include the reasonableness of the parties' reliance on the former rule, the nature of the change as substantive or procedural, retroactivity's effect on the administration of justice, and the purposes to be served by the new rule. [Citations.]" (Smith v. Rae-Venter Law Group (2002)
We conclude that our holding should apply only prospectively. The rule we are changing is one that parties in this and other cases may have relied on in settling claims. In particular, employers may have refrained from proposing and executing separate documents expressly releasing claims outside the workers' compensation system because they were confident they could prove by extrinsic evidence *255 a mutual intent to release such claims. Our holding barring the admission of extrinsic evidence for this purpose has a substantive effect because it may, in individual cases, effectively alter the legal consequences of executing the standard compromise and release form. Although barring the use of extrinsic evidence will preserve judicial resources, denying retroactive application will not unduly impact the administration of justice because it will merely permit a gradual and orderly transition.[2] Accordingly, we conclude that considerations of fairness and public policy require prospective application, and that for any preprinted workers' compensation settlement form executed before the finality of this decision (see Sumner, supra,
The judgment of the Court of Appeal is affirmed.
WE CONCUR: GEORGE, C.J., BAXTER, WERDEGAR, CHIN, and MORENO, JJ.
Concurring and Dissenting Opinion by BROWN, J.
I agree with the majority's decision to affirm the judgment of the Court of Appeal. But that is the only portion of the majority opinion with which I am in accord. In reaching the correct result, the majorityunable to resist the bureaucratic propensity for intermeddlingimproperly and unnecessarily creates an exception to our long-standing rules of contract interpretation for a preprinted compromise and release form used in workers' compensation cases. Because I believe that generally applicable rules should govern here, I write separately.
I.
Under Civil Code section 1635, "[a]ll contracts, whether public or private, are to *256 be interpreted by the same rules, except as otherwise provided by this Code." Our courts have consistently applied this maxim to releases and determined the scope of a release using our long-standing rules of contract interpretation. (See, e.g., Hess v. Ford Motor Co. (2002)
These rules provide that a "contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful." (Civ.Code, § 1636.) "When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible. . . ." (Civ.Code, § 1639.) But "[w]hen, through fraud, mistake, or accident, a written contract fails to express the real intention of the parties, such intention is to be regarded, and the erroneous parts of the writing disregarded." (Civ.Code, § 1640.)
"The words of a contract are to be understood in their ordinary and popular sense, rather than according to their strict legal meaning; unless used by the parties in a technical sense, or unless a special meaning is given to them by usage, in which case the latter must be followed." (Civ.Code, § 1644.) "If the terms of a promise are in any respect ambiguous or uncertain, it must be interpreted in the sense in which the promisor believed, at the time of making it, that the promisee understood it." (Civ.Code, § 1649.) Moreover, a "contract may be explained by reference to the circumstances under which it was made, and the matter to which it relates." (Civ.Code, § 1647.) Thus, "[a]n ambiguity can be patent, arising from the face of the writing, or latent, based on extrinsic evidence." (Solis, supra,
Although these rules govern all contracts absent a statutory provision to the contrary (Civ.Code, § 1635), the majority refuses to apply them. First, the majority ignores the language of the release (see Civ.Code, §§ 1639, 1644) and holds that "the standard language of the preprinted form used in settling workers' compensation claims releases only those claims that are within the scope of the workers' compensation system, and does not apply to claims asserted in separate civil actions." (Maj. opn., ante, 18 Cal.Rptr.3d at pp. 252-253,
The majority, however, identifies no Civil Code or workers' compensation statute that creates an exception to our long-standing rules of contract interpretation for preprinted release forms used in workers' compensation cases. Indeed, it provides no statutory basis for its holding, and my review of California law reveals no statutory support for this exception. As such, I see no legitimate ground for creating it. (See Civ.Code, § 1635.)
The majority's stated grounds for creating such an exception are not compelling.
*257 Likewise, the Court of Appeal cases cited by the majorityLopez v. Sikkema (1991)
Moreover, these cases misread our decision in Sumner v. Workers' Comp. Appeals Bd. (1983)
In reaching this conclusion, however, we did not create an exception to our long-standing rules of contract interpretation. Specifically, Sumner did not, as suggested by Lopez, Asare, Delaney and Mitchell, place the burden on employers to enumerate the causes of action covered by the preprinted release form even though the form expressly covered all "claims and causes of action." (See Lopez, supra, 229 Cal.App.3d at pp. 38-39,
In any event, as the majority observes, our Courts of Appeal have uniformly "extended the use of extrinsic evidence to show whether the parties intended the release to include claims outside the workers' compensation system." (Maj. opn., ante,
Finally, the special nature of the workers' compensation system does not dictate a contrary result. As the majority correctly notes, we must construe the preprinted release form in light of "the public policy of protecting the injured worker against the unintentional loss of workers' rights." (Maj. opn., ante, at p. 254,
II.
As described above, our rules of contract interpretation provide, in relevant part, that a "release of `"[a]ll claims"' [citations] covers claims that are not expressly enumerated in the release" absent "fraud, deception or similar abuse." (Jefferson, supra,
In this case, plaintiff Carolyn Claxton did not claim fraud, deception, or similar *259 abuse. Thus, under our rules of contract interpretation, the ordinary and popular meaning of the language of the preprinted release form governs absent an ambiguity. (See Civ.Code, §§ 1639, 1644, 1649.) This language, by its terms, bars claims that are not expressly enumerated in the release including claims that fall outside the workers' compensation system. Indeed, by expressly barring both "claims and causes of action," the release necessarily encompasses more than just "claims" within the scope of the workers' compensation system. Otherwise, the release could have just barred "claims"and not "causes of action."
Nonetheless, the extrinsic evidence establishes an ambiguity as to the scope of the release in this particular context. At the time plaintiff signed the release, both plaintiff and defendants knew of plaintiff's claim of sexual harassment in violation of the Fair Employment and Housing Act (FEHA) (Gov.Code, § 12900 et seq.). Thus, the failure of the release to mention the FEHA claim creates a latent ambiguity (see Solis, supra,
And plaintiff did so. First, the release describes plaintiff's injuries as "Psyche, left Lower Extremity." In doing so, the release apparently refers only to plaintiff's workers' compensation claim predicated on her knee injury and the injury to her psyche caused by that injury, and implicitly excludes the injury to her psyche caused by the alleged sexual harassment. Second, the release contains a waiver of prospective rehabilitation services with the requisite finding by the workers' compensation judge. (See Lab.Code, former § 4646.) The presence of this waiver suggests that the parties contemplated the possibility of additional damages not covered by the workers' compensation scheme and specifically chose to exclude plaintiff's FEHA claim from the scope of the release. Third, the release only covers claims against defendant Pacific Maritime Association, plaintiff's employer, and does not include claims against the alleged harasser Ray Watersa named defendant in the FEHA action. The release's failure to mention one of the named defendants in the FEHA action suggests that the parties did not intend for the release to cover the FEHA claim. Finally, the WCAB order approving the settlement states that it was only "settling this case." By expressly limiting the settlement to "this case," the order suggests that the release covered only plaintiff's workers' compensation cases and no other cases in existence at that timesuch as plaintiff's FEHA action already filed in state court. Viewed in its totality, this evidence establishes a triable issue as to whether the parties intended for the release to encompass plaintiff's FEHA cause of action. Accordingly, I join the majority in affirming the judgment of *260 the Court of Appeal, reversing summary judgment in favor of defendants.
NOTES
[1] The compromise and release here, in addition to the preprinted release language in paragraph 3 quoted on 18 Cal.Rptr.3d page 248, 96 P.3d on page 498, ante, contains a paragraph 10 that says: "The nature, duration, extent and cause of the employee's disability are in dispute. Applicant desires to control his/her future medical expenses. Defendants desire to buy their peace. The parties desire to settle the hazards, risks, and delays of litigation for a lump sum certain. All parties agree that the Compromise and Release is a fair and equitable settlement. The parties require that the consideration for this Compromise and Release includes full compensation for all injuries sustained by the applicant while employed by defendants, including all specific injuries and continuous trauma. The medical record is herein incorporated by reference. The parties waive Labor Code § 5313 [the statute requiring the workers' compensation judge to make factual findings and a decision determining the rights of the parties]." The form's references to disability, medical expenses, injuries sustained during employment, and a waiver of findings and decisions to be made by a workers' compensation judge, suggest that the release does not apply to claims outside the workers' compensation system. (See Sumner, supra,
It would be helpful to all concerned, of course, if this suggestion could be made more explicit. We urge those responsible for drafting the standard worker's compensation compromise and release form to revise that form to include a statement, in the clearest possible terms, that execution of the form has no effect on claims outside the workers' compensation system.
Notes
[2] In cases involving the execution of the preprinted workers' compensation release form after the finality of this decision, the Court of Appeal decisions in Mitchell, supra,
[3] We reject defendants' argument that plaintiff, by filing her workers' compensation claim for sexual harassment, necessarily took the position that her claim was within the workers' compensation scheme, and thus she is estopped from asserting in her civil lawsuit that the sexual harassment is outside of that scheme. The doctrine of judicial estoppel precludes a party from taking inconsistent positions in judicial or quasi-judicial proceedings. (Jackson v. County of Los Angeles (1997)
Our holding that this decision applies prospectively only means that there may be further proceedings in this case addressed to the issue of the intent of the parties in entering into the workers' compensation compromise and release. In the event that such proceedings in this case do occur, we note that the interpretation of the compromise and release requires consideration of "`all credible evidence offered to prove the intention of the parties.'" (Mitchell, supra,
[1] Sumner does not control here because plaintiff knew about the statutory cause of action at issue here and had the benefit of independent counsel at the time she signed the release.