In California worker’s compensation, defendants are typically held responsible for the negligence of applicants and their attorneys. Trusting them to provide correct information can be costly.
A case that brilliantly illustrates the foregoing is Barrett Business Services, Inc. v. Workers’ Compensation Appeals Board (204 Cal. App. 4th 597).
Applicant, Rafael Rivas, sustained an injury to his back. He filed an Application, claim form, and disclosure statement containing his address. He also executed a power of attorney allowing his attorney to sign legal documents, including any settlements on his behalf. Applicant moved multiple times. His attorney filed several incorrect change of address notices. The employer prepared and forwarded a Compromise and Release to applicant’s counsel. The C&R listed one of applicant’s incorrect addresses. His attorney signed the C&R, returned it to the defense attorney, who signed and returned it to applicant’s attorney for walk-through. The WCAB approved the $20,000 settlement, less $3,000 payable to applicant’s attorney as fees. At no point did he correct the address.
Defendant mailed a $3,000 check to applicant’s attorney and mailed a $17,000 check to applicant to the (incorrect) address on the C&R. It’s not difficult to imagine what happened next: applicant’s check was fraudulently endorsed and cashed. Applicant filed a Declaration of Readiness to Proceed, and the workers’ compensation judge found applicant not at fault and ordered defendant to pay (again!) $17,000—once the current address was confirmed in writing (better late than never, right?).
Defendant filed a Writ. The appellate court upheld the WCJ’s decision. It noted that the California Uniform Commercial Code section 3420 requires a payor to make good on any stolen checks. “The important point,” the court wrote, “is that where the issuer does not deliver the check to the payee, the issuer remains liable to the payee on the underlying obligation. Delivery to [applicant] did not occur; [applicant] never received the check. Consequently [defendant] remains liable to [applicant] on the underlying obligation.”
By now, you’re wondering, “What about applicant’s attorney, who filed multiple incorrect address change notices and then signed off on a C&R with an incorrect address? And what about applicant, who gave his attorney a power of attorney authorizing him to sign? Don’t they bear some responsibility?” The court held that because the defendant drafted the C&R, they—not applicant or his attorney—must bear the loss.
Many lessons can be learned from this case. First, never enter an applicant’s address on any settlement documents. The best practice is to leave the applicant’s name and address blank. Many applicants, including those with limited education and language barriers, may not be aware of the importance of correct information. Therefore, insurers and their counsel should ask applicants to write in their name and address.
Many applicants move frequently and forget to inform their attorney, or their attorney does not promptly file a notice of change of address, and/or the notice is served on the wrong party. Simply put, there are too many possible traps for the unwary. Having applicants enter their own name and address is highly recommended.
It is also wise to have the applicant’s attorney enter his/her own firm name and address. Law firms, like applicants, change their addresses, their firm name and other important information. Asking them enter their own information helps ensure that they are responsible for any incorrect information.
Finally, it is advisable, especially in large settlements, to send the settlement payment return-receipt requested. A telephone call to applicant’s attorney to double-check the correct mailing address is also a good idea, especially when large settlement checks are involved. Trusting applicants and their attorneys to provide correct information is a risk that no insurer should take.
Michael P. Burns is an associate attorney out of Bradford & Barthel’s San Jose office. He can be reached at (408) 392-8202 or via email at firstname.lastname@example.org.
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