Travelers Property v. Tosco Corporation ( 2008 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
TRAVELERS PROPERTY CASUALTY 
COMPANY OF AMERICA, a
Connecticut corporation,
Nos. 06-15664
Plaintiff-Appellant,
06-15814
v.
 D.C. No.
CONOCOPHILLIPS COMPANY, as CV 04-4917 SI
successor-in-interest to TOSCO
OPINION
CORPORATION, a Nevada
corporation,
Defendant-Appellee.

Appeals from the United States District Court
for the Northern District of California
Susan Yvonne Illston, District Judge, Presiding
Argued and Submitted
June 11, 2008—San Francisco, California
Filed October 20, 2008
Before: A. Wallace Tashima and Susan P. Graber,
Circuit Judges, and Robert J. Timlin,* District Judge.
Opinion by Judge Tashima
*The Honorable Robert J. Timlin, United States District Judge for the
Central District of California, sitting by designation.
14567
14570 TRAVELERS PROPERTY CASUALTY v. CONOCOPHILLIPS
COUNSEL
David C. Capell, Gordon & Rees, San Francisco, California,
for the plaintiff-appellant.
James L. Day, Latham & Watkins, San Francisco, California,
for the defendant-appellee.
OPINION
TASHIMA, Circuit Judge:
In these consolidated appeals, Travelers Property Casualty
Company of America (“Travelers”) appeals from the district
court’s judgment in favor of Tosco Corporation (“Tosco”)1
and from the district court’s award of costs. Travelers con-
tends that Tosco breached the unambiguous language of the
workers’ compensation insurance policy (the “Policy”) that
Travelers issued to Tosco. For the reasons discussed below,
we conclude that the Policy is unambiguous, and was not
breached by Tosco. We therefore affirm the district court’s
judgment and award of costs.
I. JURISDICTION
We have jurisdiction of these appeals from the district
court’s judgment and award of costs pursuant to 28 U.S.C.
§ 1291.
II. FACTUAL AND PROCEDURAL BACKGROUND
During a fire at a Tosco refinery, several workers were
killed and many others were injured. One of the surviving
1
ConocoPhillips Company is the successor in interest to Tosco Corpora-
tion, although for continuity, we continue to refer to defendant-appellee as
Tosco.
TRAVELERS PROPERTY CASUALTY v. CONOCOPHILLIPS 14571
workers and the estate of a deceased worker filed three types
of actions: (1) civil lawsuits against Tosco in California state
court; (2) claims for workers’ compensation benefits with the
California Workers’ Compensation Appeals Board
(“WCAB”); and (3) petitions for augmented penalties with
the WCAB.
As part of the settlement of the civil lawsuits, Tosco
agreed, without the express consent of Travelers, to a waiver
of the right to a statutory credit against future workers’ com-
pensation benefits (the “waiver”):
This Release and Settlement Agreement shall have
no effect upon and is not to be construed as a release
of any right of [the workers] to receive Workers
Compensation benefits under California law as a
result of the subject incident . . . . Tosco agrees that
it will not assert any offset in such proceedings for
the amounts paid in settlement under this agreement.2
Tosco paid the agreed upon settlement sums to the workers.
In the meantime, the WCAB awarded death benefits to the
deceased worker, and the injured worker is receiving workers’
compensation benefits. These benefits are covered by the Pol-
icy that Travelers issued to Tosco. Travelers has paid $1.4
million in benefits so far, and estimates that it will pay $2.1
million more in future benefits payments.
Travelers petitioned the WCAB for a credit of the settle-
ment amount against any future benefits that Travelers would
have to pay the workers, based on California Labor Code
§ 3600(b), which provides:
2
The parties agree that Tosco had the legal right to waive the statutory
credit as part of the civil lawsuit settlement. As discussed below, however,
Travelers contends that such waiver breached certain provisions of the
Policy.
14572 TRAVELERS PROPERTY CASUALTY v. CONOCOPHILLIPS
Where an employee . . . receives the compensation
provided by this division and secures a judgment for,
or settlement of, civil damages . . . [,] the employer
shall be relieved from the obligation to pay further
compensation to, or on behalf of, the employee . . .
up to the net amount of the judgment or settlement
....
Cal. Labor Code § 3600(b).
The WCAB denied the petition, finding that Tosco had
waived Travelers’ right to a credit under § 3600(b). The
WCAB further held that Tosco had the authority to waive
Travelers’ right to a credit under § 3600(b).
Travelers filed the instant diversity action alleging that
Tosco breached the Policy by including the waiver in the set-
tlement. Travelers asked for compensatory damages and for a
judicial declaration that Tosco must pay any post-settlement
workers’ compensation benefits payments. On cross-motions
for summary judgment, the district court granted Tosco’s
motion for summary judgment and denied Travelers’ motion.
It also awarded costs against Travelers in the amount of
$7,591.
Travelers timely appealed both the judgment and the award
of costs.
III. STANDARD OF REVIEW
We review de novo a district court’s grant of summary
judgment on cross-motions for summary judgment. Arakaki v.
Hawaii, 314 F.3d 1091, 1094 (9th Cir. 2002). We may affirm
for any reason supported by the record. Atel Fin. Corp. v.
Quaker Coal Co., 321 F.3d 924, 926 (9th Cir. 2003) (per
curiam).
TRAVELERS PROPERTY CASUALTY v. CONOCOPHILLIPS 14573
IV. ANALYSIS
[1] In this diversity action, we apply California law to inter-
pret the Policy. Manzarek v. St. Paul Fire & Marine Ins. Co.,
519 F.3d 1025, 1031 (9th Cir. 2008). Clear, explicit, and
unambiguous contractual language governs. Boghos v. Cer-
tain Underwriters at Lloyd’s, 115 P.3d 68, 71 (Cal. 2005); see
also Cal. Civ. Code § 1638. Two provisions of the Policy are
the focus of this appeal. We address each, in turn.
A. Excess Payments Clause
Part One, Section F, of the Policy provides that “[Tosco is]
responsible for any payments in excess of the benefits regu-
larly provided by the workers compensation law . . . .” Travel-
ers contends that Tosco breached this provision because,
under the clear language of the provision, “the benefits regu-
larly provided by the workers compensation law” include the
right to a credit under § 3600(b). It further contends that,
because the workers’ compensation benefits that Travelers is
currently paying would have been less if Tosco had not
waived the right to a credit under § 3600(b), Tosco forced
Travelers to make “excess” payments when Tosco waived the
credit. Travelers contends that this provision of the Policy
requires Tosco to pay these “excess” payments and that, by
failing to make the “excess” payments itself, Tosco breached
the Policy.
[2] We reject these contentions and conclude that this pro-
vision of the Policy is clear and unambiguous. Here, Travelers
is paying the workers the “regularly provided” workers’ com-
pensation benefits, not “excess” payments. The fact that the
amount of the workers’ compensation benefits might have
been reduced because of other money paid to the workers in
the civil lawsuits does not increase the workers’ compensation
benefits paid to the workers beyond the “regularly provided”
amount required by the workers’ compensation law. Because
the WCAB has held that an employer has the authority to
14574 TRAVELERS PROPERTY CASUALTY v. CONOCOPHILLIPS
waive a compensation carrier’s right to a credit under
§ 3600(b), we are not persuaded by Travelers’ contention that
the credit must always be included when calculating the
amount of “regular” benefits.
[3] We thus conclude that no payments were made by Trav-
elers “in excess of the benefits regularly provided by the
workers compensation law.” Accordingly, Tosco did not
breach the unambiguous language of Part One, Section F, of
the Policy. See Boghos, 115 P.3d at 71.
B. Voluntary Payments Clause
Part Four, Paragraph 6, of the Policy provides: “Do not vol-
untarily make payments, assume obligations or incur
expenses, except at [Tosco’s] own cost.” Travelers contends
that Tosco breached this provision because, under the clear
language of the provision, Tosco’s waiver of the right to a
credit under § 3600(b) was a voluntary act that assumed obli-
gations (the workers’ compensation benefits that Travelers is
currently paying) at Travelers’ cost.
Travelers cites to Low v. Golden Eagle Insurance Co., 2
Cal. Rptr. 3d 761 (Ct. App. 2003), but Low does not directly
support Travelers’ contention. It is distinguishable from the
case at bench because, in Low, the court held that an insured
breached a similar provision by settling claims that were cov-
ered by its insurance without the insurer’s consent, and by
then asking the insurer to pay the settlement amount. The dis-
trict court similarly distinguished Low because “[h]ere, Tosco
settled civil claims not covered by the Travelers policy and
did not ask Travelers to contribute to the civil settlements.”
[4] We conclude that this provision of the Policy is also
clear and unambiguous. It pertains only to the insured volun-
tarily making payments or incurring expenses and not to a
non-monetary requirement simply to refrain from doing
something. We thus conclude that Tosco did not “voluntarily
TRAVELERS PROPERTY CASUALTY v. CONOCOPHILLIPS 14575
make payments, assume obligations or incur expenses” when
it waived the right to a credit under § 3600(b). See Boghos,
115 P.3d at 71.
[5] We conclude that neither Part 4, Paragraph 6, nor any
other provision of the Policy required Tosco to refrain from
waiving the right to a credit under § 3600(b) and Tosco’s
waiver did not constitute a breach of the Policy.3 See Atel Fin.
Corp., 321 F.3d at 926.
C. Benefit of the Agreement
Travelers also contends that the waiver of the § 3600(b)
credit deprived it of the benefits of its agreement with Tosco.
Tosco counters that Travelers is raising a new contention of
a breach of an implied duty of good faith and fair dealing,
which Travelers did not raise before the district court.
There is no “benefit of the bargain” claim in the complaint,
or in Travelers’ motion for summary judgment. The district
court did not address this type of claim. As we have often
stated, we will not review an issue raised for the first time on
appeal, unless necessary to prevent manifest injustice. See,
e.g., Walsh v. Nev. Dep’t of Human Res., 471 F.3d 1033, 1037
(9th Cir. 2006) (“Issues not presented to a district court gener-
ally cannot be heard on appeal.” (citing Whittaker Corp. v.
Execuair Corp., 953 F.2d 510, 515 (9th Cir. 1992))). Thus,
we decline to consider this contention because Travelers did
not raise it in the district court.
D. Award of Costs
[6] The only argument by Travelers in opposition to the
award of costs is that it was error because summary judgment
should have been granted to Travelers. Because we affirm the
3
Because we conclude that the Policy is not ambiguous, we need not
reach the issue of the admissibility of the Jeffrey McKinley declaration.
14576 TRAVELERS PROPERTY CASUALTY v. CONOCOPHILLIPS
district court’s grant of summary judgment in favor of Tosco,
we also affirm its award of costs.
V. CONCLUSION
We conclude that the subject provisions of the Policy are
unambiguous and, properly construed, support Tosco’s posi-
tion that its waiver of the statutory credit in § 3600(b) did not
breach them or the Policy as a whole. Accordingly, we affirm
the judgment of the district court, as well as its award of costs.
AFFIRMED.