Warning To Defendants

A three commissioner panel of the WCAB has issued an opinion that should send shivers down the spine of all defendants in the State of California.  In Barajas v. F&H Cold Storage (ADJ6559945) the panel concluded that a provision to hold applicant harmless from all industrial liens was enough to require the defendant to pay for non-MPN treatment, even though they were not otherwise liable.

Barajas treated outside the employer’s MPN for almost two months, then returned to it.  The defendant objected to the treatment and did not pay for it.  Subsequently the parties signed a compromise and release agreement which provided:  "Defendant will pay, adjust or litigate all liens filed on or before the date of the order approving compromise which are subject to the WCAB's jurisdiction."  However, the Workers’ Compensation Judge inserted additional language into the Order Approving.  Specifically the Order provided:  "Defendants are ordered to pay, adjust or litigate and hold applicant harmless from all industrial liens of record not otherwise specified. The board retains jurisdiction on these liens."

The Panel did observe the Judge acted improperly by changing the agreement without the consent of the parties in violation of Burbank Studios v. Workers’ Comp. Appeals Bd. (Yount) 134 Cal.App.3d 929 [47 Cal. Comp. Cases 832].  However, since neither party had sought Reconsideration of the Order Approving, it was final and therefore binding on the parties.  It is unclear whether the parties even noticed the change in language at the time the Order Approving was issued.  It does not appear that defendant ever sought to reopen the Order for good cause under Labor Code section 5803 either. 

The Panel then explained that a “hold harmless” agreement creates liability on behalf of the party that agrees to hold the other harmless towards a third party.  In other words, in this matter, the Panel conceded the defendant was not liable on its own to the non-MPN lien claimant.  The injured worker was.  However the hold harmless created an obligation on behalf of the defendant to pay the lien claim whatever the injured worker would have otherwise had to pay them.

Put another way, anything the injured worker might have pay the lien claimant, the defendant now has to pay.  As the Panel noted the original language in the Compromise and Release would have allowed the defendant try the lien and avoid liability.  The injured worker would then have been potentially personally liable.

Fortunately for the defendant in Barajas, the matter was tried before the WCAB.  If the lien claimant had proceeded in Superior Court the defendant might have been obligated to pay the applicant’s attorney’s fees and litigation costs as well as any judgment as part of the hold harmless agreement.

This decision is not binding precedent under WCAB rules.  However, it should serve as a warning to all practitioners. 

First, read every order and agreement.  If it does not state what is should, seek to have it corrected before it becomes final.

Second, never hold an applicant harmless for lien claims. 

 

Opinion Filed September 7, 2010.

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