Guadalupe Reyes-Cano was driving his employer’s tomato truck in the course of his employment when a vehicle driven by a Pacific Gas and Electric (PG&E) employee struck him. He received workers’ compensation benefits through his employer’s carrier, Federal Insurance Company (FIC). In April 2021, he sued PG&E and its driver for negligence. Their answer asserted, as an affirmative defense, that the negligence of others caused the crash. Separately, Reyes-Cano pursued his workers’ compensation claim before the Workers’ Compensation Appeals Board (WCAB), where he alleged his employer was negligent.

FIC served a notice of lien for $208,778.08 in May 2023. Before mediation of the civil case, the PG&E defendants argued in their mediation brief that the employer was partly to blame, because the truck was 5,000 pounds over the legal weight limit and Reyes-Cano could not stop in time. FIC received that brief, and its attorney attended the mediation. The civil case settled in August 2023, but FIC’s lien was not resolved. At FIC’s request, Reyes-Cano’s attorney set aside $125,000 of the settlement in a client trust account, pending final resolution of the lien. The attorney later told FIC that the employer negligence issue would have to be litigated to determine the lien’s value. The money has stayed in the trust account ever since, and the employer negligence issue is still pending before the WCAB.

FIC then sued Reyes-Cano in Sacramento County Superior Court for conversion, imposition of a constructive trust, money had and received, and money paid. It also sought punitive damages.

The trial court granted summary adjudication on every cause of action and entered judgment for Reyes-Cano. It reasoned that because the WCAB had not yet decided whether the employer’s negligence contributed to the injuries, the amount FIC was owed was not yet a specific, identifiable sum. A specific, identifiable sum is required for a conversion claim, and FIC’s other claims rested on the same premise. The court also overruled FIC’s evidentiary objections because they were not filed in the required format.

In the unpublished case of Federal Insurance Co. v. Reyes-Cano, No. C103530 (September 2026). The Court of Appeal affirmed the summary judgment in full and awarded Reyes-Cano his costs on appeal.

The panel rejected each of FIC’s four arguments. First, the court found no abuse of discretion in overruling FIC’s evidentiary objections. FIC did not dispute that it failed to comply with California Rules of Court, rule 3.1354, which requires objections to be filed separately and to identify and quote the material objected to. On appeal, FIC also failed to identify which objections were at issue or explain why they had merit, so the court treated the argument as forfeited.

Second, and most significant for carriers, the court rejected FIC’s argument that the possibility of employer negligence was irrelevant. FIC’s position was that the PG&E defendants never properly pleaded employer negligence as an affirmative defense, so its lien was protected and the WCAB’s eventual negligence finding would affect only its credit against future benefits. The court agreed that the PG&E defendants had not specifically pleaded employer negligence, citing Difko Admin. (US) Inc. v. Superior Court (1994) 24 Cal.App.4th 126. It noted, however, that FIC had actual knowledge of the issue from the mediation. Because the issue was never resolved in the civil case, the court held, FIC could rely on its lien rather than intervene.

But the defective pleading did not protect the lien from reduction. It simply meant the third-party defendants settled without seeking to offset their own liability against the employer’s share of fault. Under Roe v. Workmen’s Comp. Appeals Bd. (1974) 12 Cal.3d 884, when employer negligence has not been decided in the third-party action, the employee may have it decided by the WCAB. The court rejected FIC’s attempt to confine that determination to future credits. The WCAB’s authority under Labor Code § 3861 reaches the employer’s compensation liability as a whole, including reimbursement. The court also relied on Hone v. Climatrol Industries, Inc. (1976) 59 Cal.App.3d 513, which holds that the WCAB has exclusive jurisdiction to decide the validity of an employer’s lien when it is the employee, not the third party, who seeks to prove employer negligence.

Under Associated Construction & Engineering Co. v. Workers’ Comp. Appeals Bd. (1978) 22 Cal.3d 829, a concurrently negligent employer recovers only to the extent its compensation outlay exceeds its proportionate share of the employee’s total damages. Allowing FIC to collect its full lien without first resolving the employer’s fault, the court said, would let it recover all benefits paid regardless of that fault. That would conflict with the policy that a negligent employer should not profit from its own wrong. The court called the outcome equitable as well. If the employer is found free of fault, FIC can recover what it paid and seek credit against future benefits; if the employer is found negligent, FIC’s recovery will be reduced accordingly.

Third and fourth, the court agreed that FIC could not establish a triable issue on any of its claims. Under Voris v. Lampert (2019) 7 Cal.5th 1141, money can be the subject of a conversion claim only when a specific sum capable of identification is involved. FIC’s constructive trust and common count claims likewise depended on its right to a specific sum. FIC argued that Labor Code § 3860(b) makes a settlement subject to the employer’s full reimbursement claim. It also argued that the agreed $125,000 set-aside was, by definition, identifiable. The court disagreed on both points. Sections 3860 and 3856 give the employer a first lien, but they do not guarantee full reimbursement when the employer may share fault. Until the WCAB rules on employer negligence, the $125,000 does not represent a specific sum that FIC owns or has a right to possess.

The punitive damages claim failed for the same reason. A simple failure to pay money owed is not conversion. And because FIC could not yet show it was entitled to the money, it could not show malice in Reyes-Cano’s position that the funds would be released only after the employer negligence issue was decided.