Unreported / Non-Citable
Background
Guadalupe Reyes-Cano was driving his employer's truck when he was struck and injured by a vehicle driven by a Pacific Gas and Electric employee. Reyes-Cano received workers' compensation benefits through his employer's insurer, Federal Insurance Company (FIC). He filed a negligence claim against PG&E and its driver, and FIC filed a lien for reimbursement of benefits paid. Reyes-Cano also pursued a negligence claim against his employer before the Workers' Compensation Appeals Board (WCAB). When his suit against PG&E settled, Reyes-Cano agreed to set aside $125,000 from the settlement to satisfy FIC's lien but refused to release the money because the issue of his employer's negligence remained unresolved in the WCAB action.
FIC sued Reyes-Cano alleging conversion, imposition of a constructive trust, money had and received, and money paid, and sought punitive damages. The trial court granted summary adjudication and judgment for Reyes-Cano, reasoning that because employer negligence had not been adjudicated, the amount owed was not yet a 'specific, identifiable sum' required for conversion. FIC appealed, arguing the trial court erred in failing to rule properly on evidentiary objections, considering employer negligence, treating the $125,000 as not identifiable, and finding no triable issues of fact.
The Court of Appeal filed its opinion on September 30, 2026, and on October 21, 2026 modified only a statutory citation and two references from 'FIC' to 'the employer,' denied rehearing and publication, and stated there was no change in judgment.
The Court’s Holding
The Court of Appeal affirmed. It first held the trial court acted within its discretion in overruling FIC's evidentiary objections because they failed to comply with rule 3.1354's separate-filing and specificity requirements, and FIC forfeited any substantive challenge by failing to renew specific objections with argument on appeal.
The court rejected FIC's argument that the third-party defendants' failure to plead employer negligence as an affirmative defense insulated the lien from reduction. Where employer negligence has not been adjudicated in the third-party action, the employee may still have it adjudicated before the WCAB, and that determination affects both reimbursement and future credit. Under California's comparative fault system, an employer is accountable for its own negligence and is reimbursed only to the extent its compensation liability exceeds its proportional share of the recovery.
Because the WCAB had not determined the employer's negligence, FIC could not establish a right to a specific, identifiable sum. All of FIC's claims—conversion, constructive trust, and the common counts—required that showing, and the punitive damages claim failed because the mere failure to pay money owed does not constitute conversion and FIC could not show malice while entitlement remained unresolved.
Key Takeaways
- A workers' compensation insurer cannot recover on its lien from a third-party settlement until the WCAB adjudicates the employer's comparative negligence.
- The WCAB has exclusive jurisdiction to determine the validity of an employer's lien where the injured employee seeks to prove employer negligence.
- Evidentiary objections that fail to comply with rule 3.1354's formatting requirements may be overruled without reaching their substance.
- An appellant forfeits evidentiary objections by failing to renew them with specific argument on appeal.
- Conversion and related common-count claims require proof of a specific, identifiable sum, which cannot be established while comparative fault remains undetermined.
Why It Matters
The decision reinforces that California's comparative fault principles apply to workers' compensation reimbursement claims, preventing an insurer from recovering a full lien amount when employer negligence may have contributed to the injury. It clarifies that WCAB adjudication of employer negligence is a practical prerequisite to determining the insurer's actual entitlement, even when the parties agreed to set aside a specific sum from a settlement.
The ruling also underscores strict compliance with summary-judgment objection rules and the consequences of failing to preserve evidentiary objections on appeal. The later modification order confirms the judgment itself was unchanged.