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In 2017, A-Brite Blind and Drapery Cleaning initiated an action with the Department’s administrative hearing bureau against State Compensation Insurance Fund regarding State Fund’s policy premiums.

Following an evidentiary hearing, an administrative law judge issued a proposed decision to the Commissioner, who declined to adopt it.

Instead, the Commissioner issued his own decision and order on November 16, 2018 , finding that State Fund violated the Insurance Code by, among other things, including an unlawful rating tier modifier during the 2015 and 2016 policy periods. The Commissioner further designated the A-Brite order as precedential under Government Code section 11425.60, subdivision (b).

State Fund filed a motion for reconsideration, which was deemed denied when the Commissioner failed to respond.

On January 28, 2019, more than a month before the deadline for State Fund to challenge the A-Brite order in the trial court by petition for writ of mandate (Cal. Code Regs., tit. 10, § 2509.76, subd. (a)), State Fund’s general counsel sent a letter to the Department, asking the Commissioner to “rescind the designation of the [A-Brite] Decision as precedential,” as the decision contained “clear errors of facts and law.”

In response to the letter, the Department’s attorney, Bryant Henley, contacted State Fund to discuss settlement. State Fund and the Department ultimately signed a settlement agreement which said “State Fund agrees, further, not to file a Writ Petition challenging, in whole or in part, the A-Brite Order. The Department agrees to remove the precedential designation from the A-Brite Order, rendering the decision non-precedential.”

On March 15, 2019, State Fund’s deadline for filing a writ petition challenging the A-Brite order expired.

Ten days later, after noting “several legal and factual issues in common” between the A-Brite matter and another administrative action brought against State Fund, an ALJ for the Department took official notice of the A-Brite order, the A-Brite settlement agreement, and various other A-Brite documents in In the Matter of the Appeal of Sessions Payroll Management, Inc. (File: AHB-WCA-18-47, July 18, 2019) (the Sessions matter).

The ALJ also ordered the parties to brief whether the “doctrines of exhaustion of judicial remedies and collateral estoppel preclude relitigation of factual and/or legal issues decided by the Commissioner in A-Brite.” After reviewing the briefs, the ALJ disagreed with State Fund, instead adopting Sessions’s position that both doctrines applied and issuing an order finding that State Fund was precluded from relitigating the factual and legal issues decided in A-Brite.

On June 10, 2019, State Fund filed a petition for a peremptory writ of administrative mandate challenging the merits of the 2018 A-Brite order. Aware that the petition was filed after the limitations period had run, State Fund alleged that equitable estoppel and equitable tolling applied to render the petition timely. Among other things SCIF alleged “that the Commissioner intentionally misled State Fund by representing that the settlement agreement would preclude any use of the A-Brite order in subsequent proceedings.”

On November 19, 2020, in response to State Fund’s effort to reopen the A-Brite matter by filing this writ, the ALJ in Sessions issued an order vacating its ruling finding the A-Brite order preclusive in that case, as the A-Brite order was no longer final for purposes of collateral estoppel and judicial exhaustion.

The same day, the Department filed a motion for summary judgment in the trial court, arguing that State Fund’s petition was time-barred as a matter of law. The court granted the motion, finding that neither equitable estoppel nor equitable tolling applied to extend the period of limitations.

In doing so, it found that the settlement agreement only required the Department to “de-designate” the A-Brite order as precedent under the applicable Government Code section, and it did not preclude the Department from binding State Fund to the A-Brite order through other means, such as nonmutual offensive collateral estoppel.

The Court of Appeal affirmed the trial court dismissal in the unpublished decision of State Compensation Ins. Fund v. Dept. of Insurance -C093897 (September 2023).

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.).

The “Department’s interpretation suggests that State Fund agreed not to pursue the writ, while also agreeing to be bound by the A-Brite order with respect to every company raising the same issues in all future administrative actions against State Fund.This reading of the agreement would render the contract largely illusory, granting no benefit to State Fund.”

“Here, the plain language of the contract controls, and does not support the narrow reading advanced by the Department. … State Fund agreed to be bound by the order with respect to A-Brite. It did not agree to be bound by the A-Brite order with respect to any other party. ” … “The contractual language supports State Fund’s interpretation.

However the Court went on to say “While we agree with State Fund’s interpretation of the settlement agreement, we conclude that State Fund fails to raise a question of material fact as to whether equitable estoppel or equitable tolling applies in this case.

A defendant may be estopped from asserting the statute of limitations as a defense if four elements are present:: (1) the party to be estopped must be apprised of the facts; (2) he [or she] must intend that his [or her] conduct shall be acted upon, or must so act that the party asserting the estoppel had a right to believe it was so intended; (3) the other party must be ignorant of the true state of facts; and (4) he [or she] must rely upon the conduct to his [or her] injury. (Honeywell v. Workers’ Comp. Appeals Bd. (2005) 35 Cal.4th 24, 37, quoting City of Long Beach v. Mansell (1970) 3 Cal.3d 462, 489.).

“Here, the doctrine is inapplicable to the facts before us. There is no misrepresentation, or nondisclosure of facts, which caused State Fund to refrain from filing the writ.” The dispute was over interpretation of the agreement.

However, State Fund is not necessarily without further remedy. It still may challenge the ALJ’s application of collateral estoppel in Sessions if that order is reinstated.