John’s Grill is “a historic, family-owned, landmark restaurant located in the heart of downtown San Francisco.” Its business, like many others, was heavily impacted by the COVID-19 pandemic and related state and local public health orders.

For example, between March 2020 and September 2020, indoor dining – “the lifeblood of John’s Grill’s business” – was prohibited. After September 2020, indoor dining was limited to 25 percent of restaurant capacity. As a result of these restrictions, “John’s Grill suffered substantial financial losses and had to let 54 workers go.”

Moreover, even absent these restrictions, John’s Grill alleges it “would have had to close and suspend its operations due to the worsening pandemic-level presence of the Coronavirus in, on, and around the Insured Premises.”

John’s Grill sought compensation for its losses from its property insurer, Sentinel Insurance Company, Ltd. Sentinel denied coverage on various grounds, including that the loss or damage claimed by John’s Grill did not fall within the insurance policy’s “Limited Fungi, Bacteria or Virus Coverage” endorsement.

The Limited Fungi, Bacteria or Virus Coverage endorsemdent generally excludes coverage for any virus-related loss or damage that the policy would otherwise provide, but it extends coverage for virus-related loss or damage if the virus was the result of certain specified causes of loss, including windstorms, water damage, vandalism, and explosion. The validity of this specified cause of loss limitation is the focus of the parties’ dispute.

John’s Grill acknowledged it cannot meet this limitation, but it contends the limitation is unenforceable because it renders the policy’s promise of virus-related coverage illusory. John’s Grill alleged in is lawsuit that when “physical droplets containing COVID-19 land on or otherwise attach to surfaces, [the virus] renders those surfaces and the immediate surrounding area unusable because there is substantial risk of people getting sick, transmitting infection to others, and possibly dying as a result of touching those surfaces.”

In the trial court, Sentinel successfully demurred to John’s Grill’s operative complaint for damages and other relief.

The Court of Appeal agreed with John’s Grill. It held that the promise of coverage was illusory because John’s Grill had no realistic prospect of benefiting from the virus-related coverage as written. (John’s Grill, Inc. v. The Hartford Financial Services Group, Inc. (2022) 86 Cal.App.5th 1195, 1224.) It therefore invalidated the specified cause of loss limitation and allowed John’s Grill’s claims for virus-related losses or damage to proceed. (Id. at p. 1212.)

The California Supreme Court reversed in it’s John’s Grill, Inc. v. The Hartford Financial Services Group , Inc., Opinion -S278481 (August 2024).

It concluded the Court of Appeal erred by declining to enforce the specified cause of loss limitation under the circumstances here. “The terms of the Limited Fungi, Bacteria or Virus Coverage endorsement are clear and unambiguous. It provides virus-related coverage, but only if the virus results from certain specified causes of loss. In accordance with long-settled principles of contract interpretation, the plain meaning of the policy governs. Because John’s Grill admits that it cannot satisfy the specified cause of loss limitation, it has no claim for coverage under the policy.”

“John’s Grill cannot escape this conclusion by citing the so-called illusory coverage doctrine. This court has never recognized an illusory coverage doctrine as such. The doctrine as articulated by John’s Grill does not appear in our precedents. But even assuming some version of the doctrine may exist under California law, we conclude that an insured must make a foundational showing that it had a reasonable expectation that the policy would cover the insured’s claimed loss or damage. Such a reasonable expectation of coverage is necessary under any assumed version of the doctrine.”

“Here, however, John’s Grill has not shown it had a reasonable expectation of coverage under the policy for its pandemic-related losses. It has therefore failed to establish that the policy created the illusion of coverage that rendered any contrary policy language unenforceable. Moreover, even setting aside this hurdle, and accepting John’s Grill’s articulation of the doctrine, it still cannot demonstrate that the policy’s promised coverage was illusory.”

“Even with the specified cause of loss limitation, the policy offered John’s Grill a realistic prospect for virus-related coverage. Because the Court of Appeal held otherwise, we reverse and remand for further proceedings.”

The First Set of Cases:

After issuing a notice of intent on April 10, 2024, and having received and reviewed the responses of Susan Garrett and Lance Garrett, on May 16, 2024, the Appeals Board issued an en banc order imposing sanctions and costs in eight cases collectively of $20,000.00 against attorney Susan Garrett (CA BAR #195580) in eight (8) instances where she filed petitions for reconsideration with willful intent to disrupt or delay the proceedings of the Workers’ Compensation Appeals Board or with an improper motive, or where it appeared that such actions were indisputably without merit.

The Appeals Board issued a second order imposing costs and sanctions collectively of $20,000.00 against hearing representative Lance Garrett in eight (8) instances where he filed petitions for reconsideration with willful intent to disrupt or delay the proceedings of the Workers’ Compensation Appeals Board or with an improper motive, or where it appeared that such actions were indisputably without merit.

Prior to these orders the Garretts were provided with a Notice of Intent and were given an opportunity to present their defense to the charges.

The WCAB characterized the response by writing “Susan Garrett and Lance Garrett’s responses trivialize the act of filing multiple frivolous petitions for reconsideration as an ‘inconvenience.’ However, their conduct here goes far beyond inconvenience. The filing of frivolous petitions for reconsideration significantly hampers the work of the Appeals Board. Each petition costs significant time and resources and delays the issuance of other decisions pending at the Appeals Board. More significantly, it delays a determination of applicant’s benefits in each of the cases at bar.”

And that response may have precipitated in the WCAB to seeking even more than the $40,000 total sanction imposed on May 16. The WCAB then announced two new groups of cases where it intends to impose even more sanctions, and has issued it’s Notice of Intent, En Banc, accordingly.

TheSecond (New) Set of Cases:

On August 7, 2024, the Appeals Board issued an en banc decision after removal, Abel Hidalgo, et al vs. Roman Catholic Archbishop, permissibly self-insured, Case Nos. ADJ13332737, ADJ15218980, ADJ12640295, which imposed costs and sanctions of $7,500.00 collectively against attorney Susan Garrett (CA BAR #195580) in three (3) instances where she filed petitions for reconsideration with willful intent to disrupt or delay the proceedings of the Workers’ Compensation Appeals Board or with an improper motive, or where such actions were indisputably without merit.

The notice of intent issued on June 17, 2024 and Susan Garrett did not respond.

The Appeals Board issued a second order imposing costs and sanctions of $7,500.00 against hearing representative Lance Garrett in three (3) instances where he filed petitions for reconsideration with willful intent to disrupt or delay the proceedings of the Workers’ Compensation Appeals Board or with an improper motive, or where such actions were indisputably without merit.

The notice of intent issued on June 17, 2024 and Lance Garrett did not respond.

The Appeals Board found that Susan Garrett and Lance Garrett engaged in sanctionable conduct by filing petitions for reconsideration on or near the day of trial where the petition for reconsideration was from a non-final order setting the matter for trial. The amount of costs was deferred to the parties to adjust with jurisdiction reserved at the trial level in the event of a dispute.

And also on August 7, in a second new case, Guillermo Gonzalez, et al vs. The Bicycle Casino; Arch Indemnity Ins. Co., administered by Gallagher Bassett, et al.Case No. ADJ12226694, ADJ12414651, ADJ12414992, ADJ12414993, two nearly identical Notices of Intent for two instances of alleged sanctionable conduct, and each are subject to an additional $5000.

Similarly, both Susan and Lance Garrett did not respond to the Notice.

In this second case, the Appeals Board also found that Susan Garrett and Lance Garrett engaged in sanctionable conduct by filing petitions for reconsideration on the day of trial where every issue raised on reconsideration was an issue to be decided at trial. The amount of costs was deferred to the parties to adjust with jurisdiction reserved at the trial level in the event of a dispute.

The California Department of Industrial Relations (DIR) contracted with RAND to conduct a comprehensive study of the SIBTF. The goal of the study was to capture as much data as possible to document a wide range of basic facts about the SIBTF program that might provide a foundation for informed deliberation over policy options in response to the SIBTF s recent growth. The study focused on cases that were filed or pending between 2010 and 2022.

RAND built a dataset of SIBTF cases filed and adjudicated between 2010 and 2022. The resulting database offers many important insights into trends in cases filed in SIBTF cases in recent years. The intended audience of this report is primarily DIR officials and other policymakers in the state of California, as well as other interested stakeholders.

According to the 180 page Report which was recently published on the DWC webiste, total annual payments from the SIBTF on the 12 years of cases considered in this report grew from $13.6 million in 2010 to $232 million in 2022. Looking to the future, this analysis estimates $7.9 billion in SIBTF liabilities for cases filed or pending between 2010 and 2022, the midpoint of an estimated range of $6.4 – $10.5 billion.

The recent surge in current and future liabilities can in part be attributed to interpretations of SBITF’s governing statutes, which the Report claims are “vague” on key issues concerning eligibility and compensation, and which are decades old. More recently, the wide parameters of the governing statutes and SIBTF rules have motivated claimants, their representatives, and vendors to make more frequent claims for injuries which in past decades might have yielded smaller benefits or might not have led to any benefits at all.

This report presents data documenting facts and recent trends about the SIBTF program that might provide a foundation for informed deliberation on policy responses to the SIBTF s recent growth. Focusing on cases filed or pending between 2010 and 2022, the authors obtained key findings that support some potential policy responses that might be considered by decisionmakers interested in stabilizing the SIBTF while continuing to promote the broader objectives of the workers compensation system.

The volume of annual applications for SIBTF benefits has nearly tripled since 2015. Roughly steady at about 850 per year from 2010 to 2014, annual volume reached around 2,000 in 2020, and 2,448 in 2022. This trend combines with other factors, including growth in benefit payments, to increase both current and forecasted liabilities for the Fund.

The Report analyzed the effect of Todd v. Subsequent Injuries Benefits Trust Fund (2020) 85 Cal.Comp.Cases 576 (App. Bd. en banc). The Appeals Board issued an en banc decision interpreting Labor Code section 4751, holding as follows: (1) Prior and subsequent permanent disabilities shall be added to the extent they do not overlap in order to determine the “combined permanent disability” specified in section 4751; and (2) SIBTF is liable, under section 4751, for the total amount of the “combined permanent disability,” less the amount due to applicant from the subsequent injury and less credits allowable under section 4753.

According to the Rand Report “This decision made it far more likely that an SIBTF case would reach a combined rating of 100 percent. In the examples above, the combined rating would increase from 75 percent pre-Todd to 100 percent post-Todd.” And that the “sharp changes in case outcomes and PD ratings that immediately followed the Todd decision have implications for benefit payments and SIBTF liabilities.”

And the health characteristics of a portion of claimants who get SIBTF benefits indicate that common, chronic conditions are contributing to the increase in SIBTF liabilities. Permanent partial disabilities that formed the basis for SIBTF benefits frequently included a number of chronic conditions that are rarely seen in the regular workers compensation system and are common attendants to normal aging.

One of the several recommendations was that “the program would benefit from more specific eligibility requirements, and a clear specification of the evidence required to establish that a PPD was actually labor disabling at the time of the SII. Statues could be revised to include only certain types of pre-existing disability, excluding common chronic conditions, and to specify the nature of evidence required to show that a condition was actually labor disabling at the time of the SII.” (Subsequent Industrial Injury)

“Eleven of the 29 states with an active subsequent injury fund (sometimes called second injury fund or multiple injury fund) limit the conditions that may qualify as a PPD to a list specified in the statute, offering precedent for adopting such an approach in California. However, once a list is defined, there will likely be political pressure to expand the list to include additional conditions.”

The Authors warned that in “the absence of policy changes to ensure the SIBTF is implemented in a sustainable and fair way, decisionmakers can reasonably expect that funding demands will exceed the currently available resources and assessments on workers compensation premiums (or on covered payroll for self-insured employers) will have to continue to rise to cover the Fund s growing liabilities.”

Now that injured workers no longer have a formal Workers’ Compensation Rehabilitation Program, the California Department of Rehabilitation may fill some gaps in benefits. The DOR administers a program in cooperation with the Federal Government, aimed at assisting physically and/or mentally handicapped persons in achieving a maximum degree of support. (Welf. & Inst. Code sec. 19000.) This program is funded by 80 percent federal and 20 percent state funds.

The service may be provided only to disabled individuals who are of employable age or who may be expected to be of employable age upon completion of rehabilitation services, and for whom it has been determined vocational rehabilitation may be satisfactorily achieved. (Welf. & Inst. Code sec. 19018.). Although the Department may not be able to provide a living allowance while the person is in training, it may be able to assist the person financially in many other ways. Interested persons should contact the Department of Rehabilitation to determine if they are eligible to receive benefits.

Thus, this appellate case may be of interest to the Workers’ Compensation community, and it concerns the proper interpretation of the term “maintenance” under Title I of the Rehabilitation Act of 1973, as amended (Pub.L. No. 93-112 (Sept. 26, 1973) 87 Stat. 355, 29 U.S.C. § 701 et seq.; the Act), and related California law.

Under the Act, the federal government provides grants to participating states, including California, to help fund vocational rehabilitation services for individuals with disabilities. In California, those services are provided by the Department of Rehabilitation. John Doe is a recipient of such services.

The Department agreed to cover Doe’s law school tuition and other expenses, but it refused to pay his rent while he attended a school that was outside of commuting distance from his home.

Doe argued rent qualified as “maintenance,” a covered expense under the Act and California law. But the Department, while interpreting the same statutes and regulations as Doe, determined the law prohibited it from paying Doe’s rent, which it deemed to be a non-covered “long-term everyday living expense.”

Doe testified that before law school he had been living with his mother and didn’t have to pay rent or utilities. In essence, Doe’s position was that because he had no housing or utility expenses, his rent while in law school was a cost in excess of his normal living expenses. Doe stated he didn’t have the financial ability to pay for rent and would have to drop out of school if the Department didn’t pay it.

An administrative law judge (ALJ) upheld the Department’s decision, and a trial court denied Doe’s petition for writ of mandate. Both the ALJ and the court found that rent was allowable as “maintenance” only for short-term shelter, and not for a term of three years, which was deemed to be long term.

The Court of Appeal reversed in the published case of Doe v Department of Rehabilitation -G062519 (August 2024).

The Department agreed to cover tuition less any scholarships or grants, the security deposit for an apartment, initial setup charges for utilities, monthly internet costs, and travel costs for “one way to school at the start of the semester, and at the end of the semester, one roundtrip mileage.” But the Department denied Doe’s request for rent for the anticipated three years of school attendance.  About a week later, Doe signed a 13-month lease for an apartment near the non-commuter school. The monthly rent was $2,865. At that rate, three years of rent would cost $103,140. His request for reimbursement of this expense was denied, because “the Department doesn’t pay for housing.”

In deciding this dispute, the Court of Appeal noted that twenty specific categories of vocational rehabilitation services are enumerated in the Federal Act. (29 U.S.C. § 723(a).). Under the Federal Act, vocational rehabilitation services include “maintenance for additional costs incurred” while receiving such services. (29 U.S.C. § 723(a)(7).)

One example of maintenance is “[t]he cost of short-term shelter that is required in order for an individual to participate in vocational training at a site that is not within commuting distance of an individual’s home.” (34 C.F.R. § 361.5(b)(34) (2022).) As a catchall provision, the federal implementing regulations include a twenty-first category: “Other goods and services determined necessary for the individual with a disability to achieve an employment outcome.” (34 C.F.R. § 361.48(b)(21) (2022).)

As a participating state, California requires that its vocational rehabilitation program “be consistent with the national policy toward people with disabilities articulated in . . . [the Act].” (Welf. & Inst. Code, § 19000, subd. (c).). California’s statute largely tracks the language of the Act and similarly provides for “[m]aintenance, not exceeding the additional costs incurred while participating in rehabilitation.” (Welf. & Inst. Code, § 19150, subd. (a)(8).)

A participating state need not accept all eligible individuals into its vocational rehabilitation program. (29 U.S.C. § 721(a)(5) [order of selection of eligible individuals for services].) But once an individual is accepted as a client, “the scope of [the state agency’s] discretion narrows considerably. The agency is required to provide the client at least with those services enumerated in the Act which are necessary to assist the [eligible] person to achieve his or her vocational goal.” (Schornstein v. New Jersey Division of Vocational Rehabilitation Services (D.N.J. 1981) 519 F. Supp. 773, 779; 29 U.S.C. § 723(a).)

The Court of Appeal concluded that to “determine if a cost can be covered as “maintenance,” the question is whether the cost is in excess of normal expenses and tied to receiving other vocational rehabilitation services – not whether the cost is short- or long-term.”

Accordingly, the matter was remanded so the Department can reconsider Doe’s request under the proper definition of “maintenance.”

Tina Turrieta, Brandon Olson, and Million Seifu each worked as a driver for Lyft, Inc. (Lyft) and each filed a separate action seeking civil penalties under PAGA for Lyft’s alleged failure to pay minimum wages, overtime premiums, and business expense reimbursements.

In September 2019, Turrieta and Lyft attended a mediation. When they failed to reach agreement, the mediator made a settlement proposal based on his valuation of the case, and the parties accepted the proposal.In early December 2019, Turrieta and Lyft signed an agreement settling Turrieta’s action and scheduled a settlement approval hearing for January 2, 2020.

Before that hearing, Olson and Seifu filed separate motions to intervene in Turrieta’s action and submitted objections to the settlement. The trial court denied the motions, approved the settlement, and later denied the motions of Olson and Seifu to vacate the judgment.

Olson and Seifu appealed, challenging both the settlement and the denials of their various motions. The Court of Appeal affirmed, finding that the trial court had properly denied the intervention motions and that Olson and Seifu lacked standing to move in the trial court to vacate the judgment or to challenge the judgment on appeal. Olson petitioned for our review of the appellate court’s decision, asserting that as a deputized agent of the state under PAGA, he has the right, on behalf of the state, to intervene in Turrieta’s action, to move to vacate the judgment in that action, and to have the court consider his objections to the proposed settlement of that action.

The Supreme Court of California affirmed in the case of Turrieta v Lyft Inc., – S271721 (August 2024)

“This case involves what has become a common scenario in PAGA litigation: multiple persons claiming to be an ‘aggrieved employee’ within the meaning of PAGA file separate and independent lawsuits seeking recovery of civil penalties from the same employer for the same alleged Labor Code violations.”

The Labor Code Private Attorneys General Act of 2004 (PAGA) provides that an aggrieved employee, after complying with specified procedural prerequisites, may “commence a civil action” to recover civil penalties that the the California Labor and Workforce Development Agency (LWDA) has statutory authority to collect civil penalties from employers that violate certain provisions of the Labor Code.LWDA may assess and collect. (§ 2699.3, subd. (a)(2)(A).)

The Court of Appeal ruled that Olson and Seifu could not “meet the threshold” requirement under Code of Civil Procedure section 387 for either mandatory or permissive intervention: “[A] direct and immediate interest in the settlement.” (Turrieta v. Lyft, Inc. (2021) 69 Cal.App.5th 955, at pp. 971-972.) For reasons similar to those related to their lack of standing, the court explained, their “position as PAGA plaintiffs in different PAGA actions does not create a direct interest in [Turrieta’s action], in which they are not real parties in interest. [Their] interest in pursuing enforcement of PAGA claims on behalf of the state cannot supersede the same interest held by Turrieta in her own PAGA case. . . . [They] have no personal interest in the PAGA claims and any individual rights they have would not be precluded under the PAGA settlement.” (Id. at p. 977.)

On appeal, the Supreme Court commenced its review of the Court of Appeal decision by saying “In recent years, we have addressed several issues related to PAGA litigation. We begin with a review of the basic principles set forth in our prior PAGA decisions because they provide context for deciding the issues now before us.” Thus this 96 page Opinion is a must read by practitioners in this area of law.

“Although a PAGA plaintiff may use the ordinary tools of civil litigation that are consistent with the statutory authorization to commence an action, such as taking discovery, filing motions, and attending trial, the Supreme Court concluded – for reasons explained in the opinion – that the authority Olson seeks in this case – to intervene in the ongoing PAGA action of another plaintiff asserting overlapping claims, to require a court to consider objections to a proposed settlement in that overlapping action, and to move to vacate the judgment in that action – would be inconsistent with the scheme the Legislature enacted.”

This conclusion best comports with the relevant provisions of PAGA as read in their statutory context, in light of PAGA’s legislative history, and in consideration of the consequences that would follow from adopting Olson’s contrary interpretation.