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Berger Kahn's quarterly e-publication 
The most important court decisions of the Summer

Fall 2018

Appearing As Survivor Contestant May Contradict Workers’ Comp. Claim


California ex rel. TIG Ins. Co. v. Culpepper
(U.S. Ct. App. 9th Cir.) filed April 30, 2018

Brad Culpepper was a defensive tackle in the NFL who filed a $180,000 workers’ compensation claim in California due to the six games he played in state. Fairmont settled for $175,000 and later merged with TIG Insurance, who began to suspect the claim was fraudulent after Culpepper appeared as a contestant on the reality show Survivor and also performed other physically demanding fitness activities that would be inconsistent with his disability. TIG filed a qui tam action claiming Culpepper committed illegal insurance fraud. The lower Court threw out the case saying that the settlement was a final order and that TIG had not consulted with the Workers’ Compensation Appeals Board before filing. TIG appealed and the Ninth Circuit reversed, saying while TIG did not have a claim as the entity that paid the settlement, they did have standing under the qui tam that TIG filed which claimed, as a private party, with the Court saying “any interested persons, including an insurer, may bring a civil action for a [insurance fraud] violation…in the name of the state” and can be subject to the California Penal Code under IFPA Section 1871.7(b). Unpublished.



 
 

Policy Does Not Exclude Train Crash Insurer From Coverage

 
Certain Underwriters at Lloyd’s, London v. Connex Railroad LLC
(Ct. App. 2nd Dist., Div. 5), filed April 19, 2018

Is texting while driving a train an intentional act baring coverage for accidents? In this case the insurers showed that the executives for the train owner knew that their engineers were taking cell phones on the job and intermittently using them during driving. Was a train wreck an accident or the result of intentional conduct? A fatal Chatsworth collision between a freight and commuter train in 2008 killed 25 people including the engineer who was texting and running a red light at the time of the crash. Connex, who operated the Metrolink trains, settled for $200 million, the maximum allowable for such a crash. Later, the insurers interpleaded down to $146 million, and then entered into a “policy release and agreement” with the insured, Connex. The agreement claimed to “forever discharge insurers from all liability.” Insurers were paying $146 million towards the total cost of $200 million but reserved their rights to seek reimbursement from the insured under the intentional acts exclusion. The insurers then initiated action against Connex for the intentional acts exclusion in the policy. In an unpublished decision applying New York law, the trial Court granted summary judgment to Connex, agreeing that the exclusion did not apply or bar coverage. The appeal followed and the Ninth Circuit held: “Our de novo review of the policy language and New York authorities leads us to the same result as the trial court. The ‘reasonably could have expected’ exclusion does not apply unless a reasonable person would conclude the injury and damage ‘flow[ed] directly and immediately from an insured’s alleged intentional act.’This is a reasonable interpretation of the policy’s exclusionary language, and Insurers failed to demonstrate otherwise.” The Ninth Circuit cited the California appellate decision of California Physicians' Service v. Superior Court, in holding that the insurer’s initiation of a coverage determination lawsuit could not support a “bad faith” or fraud finding. Unpublished.



 

Quarter-Hour Rounding in Employee Timekeeping Permissible If Even-Handed

 
AHMC Healthcare, Inc. v. Superior Court
(Ct. App. 2nd Dist., Div. 4), filed June 25, 2018

AHMC Healthcare used a timekeeping system that automatically rounded employee’s on-the-clock time either up or down to the nearest quarter hour. Two healthcare technicians filed suit against AHMC for alleged labor code violations claiming that the rounded time due to resulted in underpayment. The parties moved for summary adjudication, but both motions were denied. AHMC filed a writ, arguing that its rounding policy was neutral and ultimately, provided a net benefit to employees. The court of appeal agreed. Applying the Code of Federal Regulations (and not considering the de minimus doctrine), the court of appeal held that the rounding system was neutral because it rounded all employee time entries to the nearest quarter-hour “without an eye towards whether the employer or the employee is benefitting from the rounding.”



 

De Minimis Doctrine Not Applicable to Required Off-The-Clock Time

 
Troester v. Starbucks
(Cal. Sup. Ct.), filed July 26, 2018, modified August 29, 2018

Douglas Troester was a nonmanagerial team member at a Starbucks retail location, who was tasked with performing daily duties after clocking out during each of his shifts. Troester filed a class action lawsuit, claiming that the Starbucks software required him to clock out before initiating the “store closing procedures” which he was required to perform. After clocking out, Troester was also required to walk employees to their cars, bring in any furniture mistakenly left outside by other employees, and unlock the store for any items other employees mistakenly left inside, all after he had clocked out. The district court granted Starbuck’s motion for summary judgment and found that Troester’s uncompensated time was de minimis as it only equated to about $100 over his 17-month employment period despite the regularity of his overtime activities. But the California Supreme Court disagreed. It found that employers were in a "better position than employees to devise alternatives that would permit the tracking of small amounts of regularly occurring worktime. The Court acknowledged that "although California has a de minimis rule that is a background principle of state law, the rule is not applicable to the regularly reoccurring activities that are principally at issue here.” And while California law does make some allowances “based on practicality and reasonableness”, the Court emphasized that "relevant statutes and wage order do not allow employers to require employees to routinely work for minutes off the clock without compensation."

 

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