Tag: 2024 News

Neeble-Diamond’s lawsuit against Hotel California stated both statutory and nonstatutory causes of action arising out of her alleged status as an employee of Hotel California. The trial court entered judgment in favor of Hotel California after a jury concluded Neeble-Diamond was an independent contractor, rather than an employee. The judgment provided “[c]osts to be determined pursuant to any timely-filed memorandum and/or motions.”

Hotel California then filed a cost memorandum as well as a separate motion seeking an award of attorney fees. Neeble-Diamond opposed the motion for attorney fees, but filed no motion to tax costs until after she was served with a proposed amended judgment which included the costs.

The trial court denied the motion for attorney fees, explaining that as a prevailing defendant in a case seeking recovery under FEHA, Hotel California was entitled to attorney fees only if Neeble-Diamond’s FEHA claims were objectively frivolous, and it had made no such showing in its moving papers. In its ruling, the court noted the same rule applied to both attorney fee and cost awards in a FEHA case, citing Williams v. Chino Valley Independent Fire Dist. (2015) 61 Cal.4th, 97, 115 (Williams) [“[a] prevailing defendant . . . should not be awarded fees and costs unless the court finds the action was objectively without foundation when brought, or the plaintiff continued to litigate after it clearly became so”].

Neeble-Diamond attempted to file an untimely motion to tax costs, claiming her failure to have done so earlier was the result of excusable attorney error. The trial court denied relief from the late filing, concluding the attorney neglect was not excusable, and denied the motion to tax costs as untimely. The court then signed an “amended judgment” that included an award of $180,369.41 in costs to Hotel California.

Neeble-Diamond appealed from an order awarding costs in excess of $180,000 to prevailing defendant Hotel California By the Sea (Hotel California). She argues the award must be reversed because her complaint alleged causes of action based on the California Fair Employment and Housing Act (FEHA) (Gov. Code, § 12900 et. seq.), and the court cannot award costs to a defendant unless it makes a finding that the FEHA claims were objectively frivolous.

The Court of Appeals agreed, and reversed in the published case of Neeble-Diamond v Hotel California By the Sea – G061425 (February 2024).

As a general rule, the prevailing party in a lawsuit is entitled to recover allowable costs. (Code Civ. Proc., § 1032, subd. (b) [“[e]xcept as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding”].) Section 1033.5 specifies the items that are “allowable as costs under Section 1032.” (§ 1033.5, subd. (a).)

A different rule, however, applies in FEHA cases. In Williams v. Chino Valley Independent Fire Dist., 347 P. 3d 976, 61 Cal.4th 97, our Supreme Court held that Government Code section 12965, subdivision (b), “governs cost awards in FEHA actions, allowing trial courts discretion in awards of both attorney fees and costs to prevailing FEHA parties.” (Williams, supra, 61 Cal.4th at p. 99.)

Government Code section 12965, subdivision (c)(6), codifies the Williams rule: “In civil actions brought under this section, the court, in its discretion, may award to the prevailing party, including the department, reasonable attorney’s fees and costs, including expert witness fees, except that, notwithstanding Section 998 of the Code of Civil Procedure, a prevailing defendant shall not be awarded fees and costs unless the court finds the action was frivolous, unreasonable, or groundless when brought, or the plaintiff continued to litigate after it clearly became so.”

Thus, when the defense prevails in a FEHA action, it has no automatic right to recover costs under section 1032; instead, it must move the court to make a discretionary award of such costs, based in part on a specific finding that the action was frivolous.

Hotel California made no motion for an award of discretionary costs. Instead, it filed a cost memorandum that amounts to a request for the clerk to award the costs a prevailing party would be entitled to as a matter of right under section 1032. Because Hotel California failed to file the necessary motion for costs, as it had for attorney fees, it forfeited any such claim and Neeble-Diamond had no obligation to respond to its ineffective cost memorandum.

We consequently conclude the court erred by signing an “amended judgment” that included an award of $180,369.41 in costs to Hotel California.

Justin Tharpe was employed by Arcata Forest Products. He alleged injury occurred to his right ankle on January 30, 2023 during his uncompensated lunch break while he was visiting his friend, Joe Zavala, on a nearby, but non-adjacent, property known as the Figas Construction property.

Applicant contended that the location of the alleged injury, i.e., the Figas Construction property, is controlled by Arcata Forest Products, where: 1) applicant’s boss, Robert Figas, owns both properties, and 2) Arcata Forest Products occasionally uses or stores a piece of equipment at the Figas Construction property.

However, unrebutted evidence showed that Mr. Figas and his wife owned the Figas Construction property as a corporate entity separate from Arcata Forest Products. Robert Figas made this very clear during trial, stating that “Figas Construction[] is a separate business owned by [him] and his wife ¶…as a limited liability company….That property is not owned by Arcata Forest Products.”

The WCJ ordered that applicant take nothing by way of his claim. Reconsideration of this order was denied in the panel decision of Tharp v Arcata Forest Products -ADJ17462575 (January 2024).

Applicant’s argument raises the widely recognized workers’ compensation rule known as the “going and coming rule,” which precludes compensation for injuries suffered during the course of a local commute to a fixed place of business at fixed hours in the absence of certain exceptional circumstances. However, injuries sustained by an employee while going to or coming from the place of work upon premises “owned or controlled” by the employer are generally deemed to have arisen out of and in the course of the employment. (California Casualty Indem. Exchange v. IndustrialAcci. Com. (1943) 21 Cal.2d 751, 757-758 [8 Cal.Comp.Cases 55]; see also Gonzalez v. Dept. of Indus. Rels. (February 8, 2019, ADJ11121478) [2019 Cal. Wrk. Comp. P.D. LEXIS 52, *9].)

Here, applicant contends that the place of injury, namely, the Figas Construction property, was owned or controlled by his employer such that his injury occurred on employment premises and would therefore be deemed AOE/COE.

The fact that Arcata Forest Products may have brought (or stored) a piece of equipment at the Figas location does not satisfy the premises line rule.

At trial, applicant testified that Mr. Figas stored machines near Mr. Zavala’s trailer on the Figas Construction property. However, Mr. Zavala testified that he did “not think Arcata Forest Products stores anything on the lot where he lives except for perhaps a water truck.” Mr. Figas and Ms. Moug testified that Arcata Forest Products did not use that property for equipment storage.

After considering the discrepancies in the testimony, the WCJ ultimately concluded: “Even if Arcata Forest Products occasionally stored a piece of equipment on Figas Construction property or loaned a forklift to Figas Construction that is not a sufficient nexus between the two…properties to warrant calling the Figas location the premises of Arcata Forest Products.”

The WCAB panel agreed “with the WCJ that the occasional presence of a piece of equipment does not establish that Arcata Forest Products ‘controlled’ the Figas property for the purposes of the premises line rule.“

“In summary, applicant asks us to extend the premises line rule to circumstances where he has offered no evidence that he suffered an injury at a time that the employer-employee relationship existed. Applicant simply did not present sufficient evidence that he injured himself on premises controlled or owned by his employer, and we decline to extend the premises line rule to the facts of this case.”

Pomona Valley Hospital Medical Center has agreed to pay nearly $2.1 million to resolve allegations that it overbilled Medi-Cal for prescription medication purchased and reimbursed under a federal drug pricing program, the Justice Department announced today.

The settlement agreement finalized on Wednesday is the result of voluntary disclosures Pomona Valley made in 2021 and 2023. After an internal audit,

Pomona Valley determined that it overbilled the United States and California, which jointly fund Medi-Cal, a government-funded program that provides health coverage for low-income individuals in California.

According to the settlement agreement, from December 2016 through September 2021, Pomona Valley improperly charged higher “usual and customary” costs, rather than lower “actual acquisition costs,” as required under the 340B Drug Pricing Program, which requires drug manufacturers to provide outpatient medication to eligible health care organizations at significantly reduced prices.

The overbilling allegedly resulted from Pomona Valley billing for its usual costs following a federal court’s temporary stay of the implementation of the California law requiring 340B providers to bill Medi-Cal at actual acquisition cost rates. But once the court lifted the temporary ban, Pomona Valley failed to implement actual acquisition cost pricing. Pomona Valley ultimately overbilled the United States and California approximately $1.4 million.

Pomona Valley has agreed to pay the United States $873,730 and California $1,225,954 to resolve the allegations, bringing the total settlement amount to nearly $2.1 million.

After making its voluntary disclosure, Pomona Valley cooperated with the investigation by federal and state authorities.

The settlement was negotiated by Assistant United States Attorney Jack D. Ross and auditor Gabriel Lam of the Civil Fraud Section, along with the U.S. Department of Health and Human Service’s Office of Inspector General and the California Department of Justice.

The settled claims are allegations only, and Pomona Valley has not admitted any wrongdoing.

The number of inpatient hospitalizations in the California workers’ compensation system declined 51.1% between 2012 and 2022, spurred by declining claim volume, technological advances and changes in Medicare rules that allow more outpatient procedures, the elimination of redundant payments for spinal surgery hardware, and the expansion of evidence-based guidelines for spinal fusions and other surgeries.  

A new analysis by the California Workers’ Compensation Institute (CWCI) uses data on 28.7 million inpatient hospital stays with 2012 through 2022 discharge dates compiled by the California Department of Health Care Access and Information (HCAI) to measure and compare the use of inpatient services and procedures covered by workers’ compensation, Medicare, Medi-Cal and private coverage.  Workers’ comp is by far the smallest of those payer systems, and excluding hospital stays related to pregnancy, childbirth, and newborns, which are not part of the system, the study found that the number of workers’ comp inpatient stays has declined from 21,505 (0.9% of the total for all four payer groups) in 2012 to 10,516 (0.4%) in 2022.  Between 2021 and 2022, the number of workers’ comp hospitalizations declined by 5.6%, bringing the total decline over the past 11 years to 51.1%.  In comparison, the number of hospital stays paid under private coverage fell 23.5% over that same period, while Medicare hospital stays were only down 1.4%, and those paid by Medi-Cal increased by 45.7% due to surging Medi-Cal enrollments following passage of the Affordable Care Act in 2014.

The CWCI analysis notes that the decline in the number of workers’ comp inpatient stays dates back more than a decade, fueled by fluctuations in the number and types of work injury claims, the adoption of utilization review and independent medical review programs requiring that treatment meet evidence-based medicine standards, and a sharp reduction in the number of spinal fusions.  The most recent data suggest that many of those factors continue to help contain the volume of workers’ comp inpatient stays, as unlike the other systems where inpatient hospitalizations have rebounded after falling sharply in 2020 (the first year of the pandemic), workers’ comp inpatient stays have continued to drop.  The one exception is inpatient spinal fusions, which were up 5.0% between 2020 to 2022, driving spinal fusion hospital stays back up to 18.7% of all workers’ comp inpatient discharges in 2022, the highest proportion since 2016.  

The historical data also show that in the 8 years prior to the pandemic, diseases and disorders of the respiratory system (MDC 04) accounted for 2.5% to 3.0% of all workers’ comp inpatient stays, but with the introduction of COVID claims into the system, that percentage jumped to 7.4% in 2020 and 7.0% in 2021 before falling back to 3.7% in 2022.  With the recent decline in COVID-related hospitalizations, the distribution of workers’ comp inpatient stays by diagnosis shifted back toward pre-pandemic levels.  In 2022, diseases and disorders of the musculoskeletal system and connective tissue were the predominant diagnostic category, representing 60.3% of injured worker inpatient stays, followed by diseases and disorders of the nervous system, accounting for 6.2%.

The breakdown of Surgical vs. Medical (non-surgical) stays across the different payer systems shows that Surgical stays remain far more prevalent in workers’ comp, accounting for 68.4% of inpatient discharges in 2022, compared to 24.1% for Medicare, 20.9% for Medi-Cal, and 31.6% for private coverage.  Among the workers’ comp Surgical hospitalizations, those associated with various types of spinal fusions declined 58.8% between 2012 and 2022, but they still ranked first among Surgical stays and continued to account for a much higher proportion of the Surgical procedures in workers’ comp than in other systems, representing 18.7% of the workers’ comp inpatient surgeries in 2022 compared to 1.3% of the Medicare surgeries, 0.6% of the Medi-Cal surgeries, and 1.8% of the surgeries paid by private coverage.  Joint replacements (major hip and knee joint replacements or reattachment of a lower extremity) represented 8.8% of injured worker inpatient surgeries in 2022, compared to 0.5% in Medi-Cal, 1.0% in private coverage, and 1.5% in Medicare.

Notably, the study found that the decline in workers’ comp inpatient surgeries has been moderated somewhat by the growing number of injured worker spinal fusions and total joint replacements performed on an outpatient basis.  Data from HCAI and CWCI’s Industry Research Information System database  showed that the percentage of spinal fusions provided on an outpatient basis jumped from 0.8% in 2014 to 13.3% in 2022, while the percentage of major joint replacement or revision surgeries performed on an outpatient basis increased from 0.8% in 2014 to 25.9% in 2022, with the biggest increases occurring after Medicare removed these procedures from its “Inpatient Only” list, which is used to determine the appropriate setting for workers’ comp procedures.  

CWCI has issued a Research Update Report on its study, “Utilization of Inpatient Care in California Workers’ Compensation, 2012-2022.”  CWCI members and subscribers can access the report and a summary Bulletin at www.cwci.org.  Others can purchase a copy for $18 at www.cwci.org/store.html.

Residential property insurance policies commonly require an insured to submit to an examination under oath (EUO) if requested by the insurer in connection with the resolution of a claim. (Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2023) ¶ 6:289.) Insurance Code section 2071.1, subdivision (a)(4), provides that an insured subject to an EUO “may record the examination proceedings in their entirety.”

Following water damage to his home, Vladimir Myasnyankin filed a claim under his property insurance policy with Nationwide Mutual Insurance Company.

Pursuant to the policy terms, Nationwide required Myasnyankin to submit to an EUO, which was scheduled to be in person. Relying on section 2071.1, subdivision (a)(4), Myasnyankin sought to video record the entire proceeding, including Nationwide’s attorneys and claims adjusters.

Nationwide refused to proceed with the EUO, asserting section 2071.1(a)(4) only permitted Myasnyankin to video record himself. Further, Nationwide threatened to deny his claim unless he agreed to proceed with the EUO. Myasnyankin then sued Nationwide seeking a declaration of his rights under section 2071.1.

Nationwide filed a demurrer to the complaint on the grounds that neither the policy nor section 2071.1 vested Myasnyankin with the right to video record all participants at his EUO. Looking at the plain language of section 2071.1 and the legislative history, and examining the distinction between section 2071.1 and the rules of civil procedure regarding depositions (Code Civ. Proc., § 2025.330, subd. (c)), the trial court overruled Nationwide’s demurrer.

The trial court interpreted the phrase “record the examination proceedings in their entirety” as including “video recording of the persons asking the questions, the person answering the questions, and any other aspect of the proceedings.” At the trial court’s suggestion, the parties entered a stipulated judgment in favor of Myasnyankin. Nationwide appealed the judgment (No. A166946). The trial court denied plaintiff’s subsequent motion for attorney fees, and plaintiff appealed that order (No. A167445).

The Court of Appeal was presented with an issue of first impression: whether Insurance Code section 2071.1, subdivision (a)(4) entitles an insured to make a video recording of the insurer’s participants in an EUO. After considering the statute’s plain language, statutory framework, and legislative history, it concluded that the provision does confer such a right in the partially published case of Myasnyankin v. Nationwide Mutual Ins. Co. -A166946 (January 2024).

” ‘An insured’s compliance with a policy requirement to submit to an examination under oath is a prerequisite to the right to receive benefits under the policy’’ ” (Abdelhamid v. Fire Ins. Exchange (2010) 182 Cal.App.4th 990, 1001 (Abdelhamid).) “Examinations under oath are frequently conducted under circumstances where the loss is undocumented or suspect.” (Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2023) ¶ 6:289.3.) “The purpose of the examination under oath is to enable the insurer to obtain the information necessary to process the claim: ‘ “As the facts with respect to the amount and circumstances of a loss are almost entirely within the sole knowledge of the insured, … it is necessary that it [the insurer] have some means of cross-examining, as it were, upon the written statement and proofs of the insured, for the purpose of getting at the exact facts before paying the sum claimed of it.” ‘ ” (Brizuela v. CalFarm Ins. Co. (2004) 116 Cal.App.4th 578, 591–592 (Brizuela).) “The examination is normally conducted orally before a court reporter who administers the oath and transcribes the proceeding.” (Croskey at al., supra, ¶ 6:289.).

Section 2071.1, subdivision (a), applies to “any policy that insures property and contains a provision for examining an insured under oath,” and enumerates a nonexclusive list of “rights of each insured who is requested to submit to an examination under oath.” One such right is to “record the examination proceedings in their entirety.” (§ 2071.1(a)(4).)

The parties agree the provision grants insureds the right to make an audio or video recording, but dispute who can be recorded on video. Myasnyankin argues the statute entitles an insured to video record the insurance company’s representatives, while Nationwide contends the provision only confers on insureds the right to video record themselves.

The history of section 2071.1, added in 2001 (Stats. 2001, ch. 583, § 5), is unequivocal that the motivating purpose was to provide protections for insurance consumers during the claims process. Section 1 of the enacted bill expressly so provides: “Existing legal protections for insurance policyholders proved to be inadequate after the Northridge earthquake. The public requires additional safeguards against unfair claim settlement practices by insurance companies.”

“To be sure, the legislative history does not explicitly address whether section 2071.1(a)(4) encompasses the right to video record the insurer’s representatives. However, it demonstrates an express and unequivocal intent to protect insureds from harassment in EUO proceedings, and this purpose is served by granting insureds such a right. Significantly, video records nonverbal conduct, such as eye-rolls or glares, which would not be captured by audio recordings or reporter’s transcripts.  (See Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2023) ¶8:659.)  In addition, the knowledge that a person is being video recorded may prompt that person to modify their behavior in a positive manner.  

“The plain language, statutory framework, and legislative history all support a construction of section 2071.1(a)(4) granting insureds the right to make a video recording of the insurer’s representatives at an EUO, and such a construction is not unreasonable.”