MEMORANDUM DECISION GRANTING IN PART AND DENYING IN PART LEE INVESTMENTS LLC’S MOTION TO VACATE PARTIAL JUDGMENT ON JURY VERDICT UPON MULTIPLE CLAIMS INVOLVING MULTIPLE PARTIES OR TO ALTER OR AMEND PARTIAL JUDGMENT PURSUANT TO RULES 59(e) and 60(a) & (b), FEDERAL RULES OF CIVIL PROCEDURE (Doc. 704)

Lee Investments LLC (hereafter Lee) moves for an Order vacating the “Partial Judgment on Jury’s Verdicts Upon Multiple Claims Involving Multiple Parties” (hereafter Partial Judgment), (Doc. 681), entered on March 1, 2007 in favor of United States Fidelity & Guaranty Company (hereafter USF & G), American Specialty Insurance Services, Inc. (hereafter American Specialty or ASI), and Aon Risk Services Inc. of Central California Risk Services (hereafter Aon).

The Partial Judgment states:

Lee moves pursuant to Rules 59(e) and 60(a) and (b), Federal Rules of Civil Procedure, asserting as grounds:

A. Governing Standards.

With regard to a motion to alter or amend judgment pursuant to Rule 59(e), Federal Rules of Civil Procedure, 11 Wright, Miller & Kane, Federal Practice and Procedure: Civil 2nd § 2810.1, explains:

Rule 60(a), Federal Rules of Civil Procedure, provides that “[clerical mistakes in judgments, orders or other parts of the records and errors therein arising from oversight or omission may be corrected by the court ... on the motion of any party

Rule 60(b), Federal Rules of Civil Procedure, provides in pertinent part:

Other than reciting these standards, Lee does not otherwise refer to them in its memorandum of points and authorities. While some of the claims are easily relata-ble to these standards, others are not. For instance, what is the mistake, inadvertence or excusable neglect of Lee, and what is the misrepresentation or other misconduct of an adverse party? In addition, Lee does not set forth the standards governing resolution of a Rule 60(b) motion on these two grounds. The Ninth Circuit in Lafarge Conseils et Etudes, S.A. v. Kaiser Cement & Gypsum Co., 791 F.2d 1334, 1338 (9th Cir.1986), explains:

B. WCAB Exclusive Jurisdiction.

Lee asserts that the Partial Judgment is void because the WCAB had and has exclusive jurisdiction over USF & G’s claim for rescission of the workers’ compensation insurance policy.

By Order filed on October 23,1999 (Doc. 21), the Honorable Robert E. Coyle denied the motion to dismiss filed by then Defendant Diana Conley and joined by Lee. Conley and Lee moved to dismiss this action pursuant to Rule 12(b)(6), Federal Rules of Civil Procedure, for failure to state a claim upon which relief can be granted, on the ground that the WCAB has exclusive jurisdiction over the controversy. Judge Coyle ruled in pertinent part:

Thus, defendants refer the court to General Acc. Etc. Corp. v. Indus. Acc. Com., 196 Cal. 179 , 237 P. 33 (1925). General Acc., Fire & Life Assur. Corp. involved a review by the California Supreme Court of an award made by the Industrial Accident Commission in favor of the dependents of a deceased employee, the sole [issue] presented to the Commission being whether the petitioner insurance company was, on the day of the fatal accident, the insurance carrier of the employer. The employer had applied for a workers’ compensation insurance policy but had not paid the premium for it. On the day the employee was killed, the employer presented the premium check to his insurance agent, not advising the agent of the accident until two days later. The insurance company petitioned the Commission to rescind the policy because of fraud in the procurement of the policy. The California Supreme Court reversed the award of the Commission on the ground that the Commission’s finding was not supported by any evidence. On appeal, the Supreme Court stated in pertinent part:

196 Cal. at 190-191 , 237 P. 33 .

Defendants also rely on Bankers Indem. Ins. Co. v. Indus. Acc. Com., 4 Cal.2d 89, 94-98 , 47 P.2d 719 (1935), wherein the Supreme Court held that Industrial Accidents Commission “has been invested with the power and authority to hear and determine equitable issues, including those arising in a controversy involving the reformation of a written instrument” and that the Supreme Court “was ... in accord with the policy of the law which invests in one tribunal the power to dispose of the whole controversy involving the right of the injured employee to secure just compensation for the injury sustained by him.” 4 Cal.2d at 98 , 47 P.2d 719 .

Conley argues that the critical fact that brings this case within the exclusive jurisdiction of WGAB is that the outcome of this controversy will determine her rights to recovery of workers’ compensation benefits.

Conley refers the court to United States Fidelity and Guaranty Company v. Superior Court, 214 Cal. 468 , 6 P.2d 243 (1931). In USF & G, in a proceeding before the Commission in which the employer and the insurance company were defendants, the employee procured a compensation award against the defendants. In the proceeding before the Commission, the employer and the insurance company filed answers presenting the issue whether the insurance company was the compensation carrier for the employer at the time of the accident. The Commission found that the insurance company was not then the insurance carrier for the employer and ordered the insurance company released and discharged. No appeal was taken and the Commission’s award became final. Some months later, the employer sued the insurance company for breach of the insurance contract, seeking damages for termination of the insurance policy without notice as required by the policy. The insurance company unsuccessfully demurred on the ground of lack of jurisdiction. The insurance company petitioned for a writ of prohibition. The California Supreme Court held that issues relating to the existence, at the time of the injury, of an insurance policy affording coverage and issues relating to the enforcement against the insurance company of any liability for compensation or for the payment of the work-mans’ compensation award had reached a final determination in the proceedings before the Commission. However, the Supreme Court held, to the extent the action is one for damages for breach of contract to issue and keep in effect the insurance, the complaint stated a cause of action within the jurisdiction of the Superior Court. In so holding, the Supreme Court explained:

214 Cal. at 471-472 , 6 P.2d 243 .

Defendants further refer the court to Hartford Acc. & Indem. Co. v. Indus. Acc. Com., 216 Cal. 40 , 13 P.2d 699 (1932). In Hartford Acc. Etc. Co., the Commission ordered the employer to obtain a surety bond as a prerequisite to the issuance to the employer of a certificate of self-insurance to secure the payment to its employees of workers’ compensation benefits. The employer obtained a surety bond from Hartford. During the time the bond was in force, claims were made by the employees which awards were covered by the bond. Thereafter, in the district court, a receiver was appointed for all of the property and assets of the employer. The receiver stopped payment of the workers’ compensation awards. At the time the receiver did so, the total amount of the awards exceeded the amount of the bond. The employees then petitioned the Commission for an order requiring Hartford, as surety on the bond, to pay or provide payment of the compensation remaining unpaid on account of the workers’ compensation awards. Hartford appeared in the Commission proceedings. The Commission ordered Hartford to pay the amount of the bond. On appeal, Hartford argued that the Commission had no jurisdiction to render an award against the surety on a self-insurer’s bond. The Supreme Court rejected this argument, holding that the provisions of the workers’ compensation act regulating a self-insurer employer and providing for the giving of a bond are one method of securing the payment of compensation and, therefore, within the grant of power to the Commission. Id. at 45-46 , 13 P.2d 699 . The Supreme Court further held that the employees’ petition was a “proceeding for the recovery of compensation, or concerning any right or liability arising out of or incidental thereto” and that, therefore, “[t]here can be no question of the jurisdiction of the Commission to entertain such a proceeding and to determine all issues arising therein and to render an award in accordance with the facts presented to it.” Id. at 46, 13 P.2d 699 . The Supreme Court further stated in pertinent part:

Id. at 47, 13 P.2d 699 .

Fidelity argues that Section 5300(a) does not cover a claim for rescission of an insurance policy because a claim for rescission does not involve “the recovery of compensation, or concerning any right or liability arising out of or incidental thereto.” Fidelity asserts that it does not contend that Conley cannot proceed before the WCAB for the recovery of workers’ compensation benefits against Lee Investments but, rather, that the WCAB does not have jurisdiction of the claim for rescission of the Policy. Fidelity argues that the Supreme Court’s decision in General Acc. Etc. Corp. is not controlling on this issue. In so arguing, Fidelity notes that no issue concerning the Commission’s jurisdiction was raised by the insurance company in the appeal because the insurance company was the petitioner. In addition, Fidelity notes that the insurance company in General Acc. Etc. Corp. did not seek rescission of the policy in proceedings before the Commission but rather a determination that the insurance company was not liable.

Fidelity notes that the type of relief that can be granted by the court and by the WCAB differs. Thus, the trial court cannot award workers’ compensation benefits, and the WCAB cannot award damages for injuries. La Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity Co., 9 Cal.4th 27, 35 , 36 Cal.Rptr.2d 100 , 884 P.2d 1048 (1994); Scott v. Industrial Acc. Com., 46 Cal.2d 76, 82-83 , 293 P.2d 18 (1956). In State Comp. Ins. Fund v. Ind. Acc. Com., 20 Cal.2d 264 , 125 P.2d 42 (1942), the California Supreme Court held that the Commission was “without jurisdiction to adjudicate a supplemental controversy involving rights of contribution and reimbursement between two insurance carriers jointly and severally responsible for the payment of a compensation award.” Id. at 266 , 125 P.2d 42 . In so holding, the Supreme Court distinguished General Acc. Etc. Corp. v. Indus. Acc. Com., and Bankers Indem. Ins. Co. v. Indus. Acc. Com., explaining in pertinent part:

Id. at 267-268, 125 P.2d 42 .

Here, as noted, the Complaint alleges that Fidelity has paid benefits to Conley under the Policy because her claims, but for the rescission of the Policy, would be covered by the Policy.

Judge Coyle’s denial of the motion to dismiss for lack of jurisdiction is contended by Lee to have required Lee to file a counterclaim against USF & G or risk loss of the counterclaim under Rule 13(a), Federal Rules of Civil Procedure. See discussion infra. Lee filed its counterclaim on February 7, 2000. (Doc. 40). A decision by a Workers’ Compensation WCJ issued on October 20, 1999, found that the WCAB has subject matter jurisdiction over the issue of rescission of the USF & G policy issued to Lee. On December 24, 1999, the WCAB denied USF & G’s petition for reconsideration of the decision of the WCJ and ruled that the matter be held in abeyance by the WCJ pending disposition of Conley’s motion for reconsideration by Judge Coyle. After USF & G’s petitions for review were denied by the California Court of Appeal, Fifth Appellate District and the California Supreme Court, Conley moved for reconsideration by Judge Coyle of his ruling denying the motion to dismiss. Lee did not join in Conley’s motion for reconsideration. Conley’s motion for reconsideration was denied by Order filed on August 17, 2000 (Doc. 57). Judge Coyle ruled in pertinent part:

Lee’s contention that the Partial Judgment is void because of the exclusive jurisdiction of the WCAB is without merit. As explained in 11 Wright, Miller & Kane, Federal Practice and Procedure: Civil 2nd § 2862, pp. 326-329:

Lee’s argument about “exclusive jurisdiction” confuses the issue. “The jurisdiction of the federal courts — their power to adjudicate — is a grant of authority to them by Congress and thus beyond the scope of litigants to confer.” Neirbo Co. v. Bethlehem Shipbuilding Corporation, 308 U.S. 165, 167 , 60 S.Ct. 153 , 84 L.Ed. 167 (1939). This Court had subject matter jurisdiction over this action by virtue of diversity of citizenship, which subject matter jurisdiction may not be enlarged or contracted by state law. See Begay v. Kerr-McGee Corp., 682 F.2d 1311, 1315 (9th Cir.1982) (“Although the states have the power to prevent the federal court from granting relief in a diversity case by denying the substantive right of action asserted, they ‘have no power to enlarge or contract the federal jurisdiction.”); Beach v. Owens-Corning Fiberglas Corp., 728 F.2d 407, 409 (7th Cir.), cert. denied, 469 U.S. 825 , 105 S.Ct. 104 , 83 L.Ed.2d 48 (1984) (“Even though Indiana law vests exclusive jurisdiction over cases such as this one in its Industrial Disputes Board, a federal court properly may exercise jurisdiction over them. State law cannot be construed to enlarge or contract federal jurisdiction.”). Lee’s contention that the Partial Judgment must be vacated because of the exclusive jurisdiction of the WCAB is an issue relating to failure to state a claim upon which relief can be granted. See discussion infra. Its argument that the federal court lacks diversity subject matter jurisdiction over this case is misplaced and is no basis for setting aside judgment.

Lee’s motion on this ground is DENIED.

C. Claims of Clear Error and Manifest Injustice By Not Granting Lee Judgment as a Matter of Law on the Original and Amended Complaints of USF & G.

1. WCAB Had and Has Exclusive Jurisdiction.

Lee asserts that USF & G’s Complaint and Amended Complaint fail to state a claim upon which relief can be granted because the WCAB had and has exclusive jurisdiction.

Lee relies on a state case, Gilford v. State Compensation Ins. Fund, 41 Cal.App.3d 828, 834 (1974) (“ ‘ “Where there is any reasonable doubt as to the jurisdiction, the courts must resolve such doubts in favor of jurisdiction of the commission.” ’ ”), and argues that Judge Coyle’s rulings were clearly in error and manifestly unjust:

USF & G and Aon oppose this motion, contending that Judge Coyle’s rulings were correct as a matter of law. As a matter of practicality, Connelly has received and continues to receive full workers’ compensation benefits which have been fully paid by USF & G under a reservation of rights.

Rule 59(e) may not be used to relitigate old matters, or to 21 raise arguments or present evidence that could have been raised prior to the entry of judgment. That is what Lee is doing here. Lee’s motion to amend or alter the partial judgment pursuant to Rule 59(e) on the ground that the WCAB had and has exclusive jurisdiction is DENIED.

USF & G argues that Judge Coyle’s decision that the district court had jurisdiction over USF & G’s complaint for rescission was binding on the WCAB because the district court first obtained jurisdiction over the complaint. USF & G acknowledges that Ms. Conley’s initial application for workers’ compensation benefits was filed before USF & G filed the complaint for rescission in the district court. However, USF & G contends, Ms. Conley’s initial application named only The Island and GAB Business Services and only sought liability for temporary disability indemnity and did not seek adjudication of any claim for rescission by USF & G against Lee. USF & G filed its complaint for rescission in the district court on April 26, 1999. USF & G contends that the declaration of readiness to proceed seeking arbitration by the WCAB of the rescission complaint was not filed by Conley until two months later. USF & G cites Scott v. Industrial Accident Commission, 46 Cal.2d 76 , 293 P.2d 18 (1956).

In Scott , the California Supreme Court issued a writ of prohibition to halt proceedings in a matter before the Industrial Accident Commission until a final judgment was reached in a superior court action in which damages were sought for the same injuries as were involved in the Industrial Accident Commission matter. The California Supreme Court ruled:

Id. at 81 , 293 P.2d 18 . The Supreme Court noted that

Id. The Supreme Court concluded that “the general rule long recognized as governing tribunals whose jurisdiction is generally concurrent should be applied here where jurisdiction to determine jurisdiction is concurrent.” Id. at 89 , 293 P.2d 18 .

Lee replies that California Insurance Code § 11653 defines “employer” to include the employer’s workers’ compensation insurer. USF & G was a party to Ms. Conley’s initial application for workers’ compensation benefits as a matter of law and, therefore, the WCAB had jurisdiction over USF & G more than one month before this action for rescission was commenced. Further, Lee replies that USF & G’s reliance on Scott is misplaced because the jurisdiction of the WCAB was exclusive even of this court’s jurisdiction to determine jurisdiction. Lee argues:

Aon argues that, even if, arguendo, it is concluded that the WCAB had exclusive jurisdiction over USF & G’s rescission claim and the Partial Judgment for USF & G on rescission were vacated for failure to state a claim, such a ruling should not affect the rest of the Partial Judgment:

Lee replies that had the motion to dismiss been granted, Lee would have never filed a counterclaim:

Lee further argues that, even if it is proper at this time to examine supplemental jurisdiction over Lee’s counterclaim and third party complaint, supplemental jurisdiction should not be retained:

Lee’s position concerning the exercise of supplemental jurisdiction is categorically meritless. The district court has discretion to retain pendent claims and may consider the resources invested in a case. See Schneider v. TRW, Inc., 938 F.2d 986, 993-995 (9th Cir.1991).

Lee assumes, arguendo, if there were “concurrent precedential jurisdiction for both the WCAB and this court”, i.e., that the district court had jurisdiction to determine whether or not the jurisdiction of the WCAB was exclusive under the circumstances, the Scott rule required this court to honor the final decision of the WCAB in favor of the WCAB’s exclusive jurisdiction. Lee cites a state case, Aetna Casualty & Surety Co. v. Aceves, 233 Cal.App.3d 544 , 284 Cal.Rptr. 477 (1991).

In Aceves , Aetna filed an action in the Superior Court before Aceves began proceedings before the WCAB. On appeal, Aetna argued that the Superior Court had jurisdiction to determine its own jurisdiction, and because Aetna filed the Superior Court action first, the Superior Court’s determination took priority. Relying on Scott v. Industrial Accident Commission, supra, the Court of Appeals agreed. 233 Cal.App.3d at 551-554 , 284 Cal.Rptr. 477 .

Lee also argues that it is immaterial that the WCAB would not afford the same remedy to USF & G that it might otherwise have in the district court. Lee refers to Goetz v. Aetna Casualty and Surety Company, 710 F.2d 561 (9th Cir.1983). In Goetz , the Goetzes filed an action with the Industrial Accident Commission when Aet-na failed to pay accrued benefits. The Board issued an award against Aetna, which paid part of the award and failed to pay the balance. The Goetzes filed a complaint in the district court alleging that Aetna’s conduct in delaying and refusing to pay workers’ compensation benefits due them violated California Insurance Code § 790.03(h). The district court granted Aetna’s motion to dismiss on the ground that the court lacked jurisdiction over the subject matter of the action because California law vested exclusive jurisdiction of the dispute in the Appeals Board. 710 F.2d at 563 . On appeal, the Goetzes argued that the California workers’ compensation scheme violates the equal protection clause of the Fourteenth Amendment. In rejecting this argument, the Ninth Circuit ruled:

Id. at 564 . It is “completely irrelevant in this case”, Lee contends, that the “district court cannot award workers’ compensation benefits and the WCAB cannot award damages for injuries.”

USF & G argues that, because Conley abandoned any effort to challenge the jurisdiction of this Court, Lee cannot now do so. USF & G notes that Lee did not join in Conley’s Application for Reconsideration but, instead, filed on December 17, 1999, a motion to file a counterclaim in this action against USF & G, ASI, and Aon. (Doc. 27). The motion was granted by Magistrate Judge Snyder on January 26, 2000. (Doc. 37) Lee’s counterclaim was filed on February 7, 2000. (Doc. 40). Lee was ordered to file an amended counterclaim by Order filed on August 17, 2000, (Doc. 58), which Lee did on August 31, 2000. (Doc. 59). On January 24, 2001, a Stipulation Dismissing Diana Conley from Action Without Prejudice was ordered, (Doc. 73), wherein USF & G, ASI, and Diana Conley stipulated in pertinent part:

According to the Declaration of Bruce T. Smyth filed in opposition to Lee’s motion, (Docs.738-740):

USF & G and Aon argue that Lee’s assertion that Judge Coyle’s denial of Conley’s initial motion to dismiss compelled Lee to file a compulsory counterclaim and to otherwise protect its rights in this action and that it was manifestly unjust and clear error to use that counterclaim as a basis to say the motion to dismiss was properly granted in the first place is without merit and does not justify granting Lee’s motion. First, Lee argues that it had to assert its counterclaims in this court or lose them, because they would have been barred by the statute of limitations and such claims could not be pursued before the WCAB, which did not have jurisdiction over the claims for fraud, negligent misrepresentation, breach of oral contract and negligence alleged by an alleged policyholder against the insurer and did not have jurisdiction of claims against the managing general agent, ASI. Further, it is argued:

Lee replies that USF & G and Aon cite no authority that the filing of the counterclaim rendered Lee’s objections to jurisdiction moot:

USF & G argues that Lee has waived any right and is estopped to seek adjudication of USF & G’s complaint by the WCAB by failing to proceed in that forum for seven years. USF & G notes that Lee did not assert that the WCAB had jurisdiction in its Answer, as an affirmative defense or otherwise. Lee did not join in Ms. Conley’s application for reconsideration of the motion to dismiss but, rather, filed a counterclaim and expressly sought to have the District Court adjudicate the issues in USF & G’s Complaint by moving for summary judgment. USF & G contends that Lee waited until after its motion for summary judgment had been denied, “after its phony threat of bankruptcy had been rejected by USF & G,” and until trial was imminent before filing a “declaration of readiness” for arbitration before the WCAB. (Citing Sea World Corp. v. Superior Court, 34 Cal.App.3d 494 , 110 Cal.Rptr. 232 (1973)) and Magliulo v. Superior Court, 47 Cal.App.3d 760 , 121 Cal.Rptr. 621 (1975), USF & G contends that Lee has waived any right to seek and is es-topped from obtaining adjudication before the WCAB.

Lee replies that it has not waived and is not estopped to have the WCAB adjudicate the rescission issue. Lee asserts that Sea World is inapposite:

In its reply brief, Lee contends that USF & G’s failure to join the Uninsured Employers’ Fund (UEF) as a party to this action requires that the judgment be vacated. This contention has never been raised in this action. To advance it in a reply is improper. It should not be considered, but is treated to the extent of USF & G’s response.

Lee contends that, “[biased on the un-contradicted evidence of the inadequacy of the UEF,” the only way that the UEF could provide adequate compensation for Conley is by establishing “that there is coverage under the USF & G workers’ compensation policy.” Under California Labor Code § 5600, Lee asserts, “it is evident that the UEF’s claim for coverage under the USF & G policy falls within the exclusive jurisdiction of the WCAB”, citing Rinaldi v. Workers’ Compensation Appeals Bd., 196 Cal.App.3d 571 , 242 Cal.Rptr. 895 (1987). Lee refers to Aetna Casualty & Surety Co. v. Aceves, supra, 233 Cal.App.3d at 554-555 , 284 Cal.Rptr. 477 :

Relying on Aceves , Lee argues that USF & G likewise failed to join the UEF and the UEF is not bound by the Partial Judgment:

Judge Coyle’s Order denying the motion to dismiss also denied Lee’s request for abstention under Buford and Colorado River. Lee’s reference in the reply brief is the first contention by Lee that the abstention rulings were in error.

In its sur-reply brief, USF & G contends that it “is simply outrageous and in bad faith that Lee would wait eight years after the case had been filed and after trial and in a Reply brief to its own motion to vacate to raise the completely new allegation that UEF was somehow a necessary party.” USF & G notes that Lee never asserted this contention in its Answer to the Complaint or to USF & G’s amended counterclaim. Lee has never raised the issue of UEF’s alleged indispensability. It may not do so now, after the trial is over.

USF & G further contends that Lee is estopped from asserting that the UEF was a necessary party. Lee’s Motion in Li-mine No. 19 (Doc. 449) and the Order granting Motion in Limine No. 19 (Doc. 596) (“There shall be no mention of and no documentary evidence or testimony before the jury or prospective jurors relating to any collateral source of funds for the payment of benefits or damages to Ms. Conley, including, without limitation, the Uninsured Employer’s Trust Fund .... ”). USF & G notes that at the same time Lee moves to vacate the Partial Judgment because the UEF is a necessary party, Lee moves for a new trial on the grounds of counsel’s misconduct in mentioning the UEF during questioning of Hugh Awtrey.

USF & G raises Rule 12 to rebut Lee’s contention that the UEF is a necessary party on that ground is made too late. Fed. R. Civ. Proc. Rule 12(b)(7) is the means by which the defense of failure to join a party under Fed. R. Civ. Proc. Rule 19 is raised by motion. Rule 12(g) provides in pertinent part:

Rule 12(h)(2) provides in pertinent part:

Lee did none of these. USF & G further argues that Aceves does not establish that the Partial Judgment should be vacated pursuant to Rule 19, Federal Rules of Civil Procedure, because of the failure to join the UEF as a party. USF & G notes that in Aceves , the issue of inconsistent judgments was raised in the trial court, while Lee did not do so. USF & G contends that, in Rinaldi , the UEF had been named as a defendant by the applicant in proceedings before the WCAB. That the case noted in passing that the UEF was an interested party, but did not hold or discuss whether the UEF was a necessary or indispensable party.

Finally, USF & G argues, the UEF was neither a necessary nor an indispensable party to USF & G’s complaint for rescission, as California Labor Code § 3715(a) vests the right to name the UEF exclusively in the employee:

USF & G contends: “More importantly, the claim against the employee [sic] may only be made upon an award of the WCAB against the employer, an event which has not taken place.” Only if the employer fails to pay the compensation awarded by the WCAB does the UEF pay the award. Labor Code § 3716(a) and Symmar, Inc. v. Workers’ Comp. Appeals Bd., 135 Cal.App.3d 65, 70-71 , 185 Cal.Rptr. 67 (1982).

Lee’s motion to vacate the partial judgment pursuant to Rule 60(b) on the ground that the WCAB had and has exclusive jurisdiction is DENIED. Lee’s volumi nous briefs on this issue have been fully considered. Lee’s essential arguments were unsuccessfully argued to Judge Coyle. Based on Judge Coyle’s analysis and the arguments of USF & G and Aon in opposition to this motion, Judge Coyle’s rulings were not contrary to law. Lee’s failure to join in Conley’s motion for reconsideration, the filing of Lee’s counterclaim, and the failure to argue that UEF is a necessary party until the reply brief in support of this motion are persuasive factors that Lee has not established grounds to vacate the partial judgment pursuant to Rule 60(b).

2. California Law Re an Insurer’s Imposition of a Condition or Exception on a Workers’ Compensation Policy Except by Means of an Approved Endorsement and Insurer’s Termination Rights.

Lee asserts that California law clearly requires that any limitation on a workers’ compensation policy be by an approved form of endorsement to the policy, citing California Insurance Code §§ 11657, 11659,11660 and 10 C.C.R. 2268.

Insurance Code § 11657 provides:

Insurance Code § 11659 provides:

Insurance Code § 11660 provides:

10 C.C.R. § 2268 provides:

Lee refers to the trial testimony of Cathy Hacker, contending that Ms. Hacker testified that the requirement for Lee to assure underwriting that Lee would not do construction was a “condition” for the issuance of the policy:

(Trial testimony of Hacker, Feb. 2, 2007, 52:8-19, 55:16-21). Lee asserts that USF & G argued that Lee’s August 12, 1998 letter to ASI clearly stated that certain activities would not be performed and thus constituted an exception to the policy coverage and a limitation thereon. Lee contends that, as such, the limitation was required to be set forth in the policy and to comply with the above cited California Insurance Code provisions.

USF & G asserts that Lee continues to disregard the issues that were tried and applicable California law by arguing that the August 12, 1998 letter to ASI constituted an “endorsement or exclusion” to its policy of insurance. USF & G has consistently maintained its workers’ compensation policy was complete, fully integrated and unrestricted and has never asserted that the August 11 and 12, 1998 letters modified the coverage in the policies. USF & G asserts that Lee’s contention that USF & G argued that Lee’s August 12, 1998 letter to ASI clearly stated that certain activities would not be performed and thus constituted an exception to the policy coverage and a limitation thereon is “simply not true:”

USF & G also argues that Lee’s reliance on the testimony of Cathy Hacker that Lee’s false representations in its August 12, 1998 letter constituted a restriction or condition on the policy is totally unfounded:

Lee replies that Cathy Hacker’s testimony established that Mr. Sackett’s August 11, 1998 letter stated a condition or exception to coverage under the policy. In addition to the testimony quoted above, Lee refers to other testimony by Cathy Hacker:

(Trial testimony of Hacker, Feb. 2, 2007, 73:22-25; Feb. 6, 2007, 132:4-10). Lee argues:

Lee contends that, contrary to USF & G’s contention, there was ample evidence that the latter interpretation was the actual agreement of the parties, referring to Dr. Levine’s testimony that insurance industry personnel would be expected to understand “construction” in the latter sense (Trial testimony of Levine, Feb. 14, 2007, pp. 41-49) and Christy Platt’s deposition testimony read at trial that “at the time I wrote this letter, as is the same as is my current understanding as it relates to water parks, is my perception of construction laborers are crews brought in to build the water park from the ground up.” (Trial testimony of Platt, Feb. 14, 2007, 21:5-9).

Lee further argues that, given the requirements of Insurance Code §§ 11657, 11659 and 11660 and the express statutory requirements for cancellation of a workers’ compensation policy set forth in Insurance Code § 676.8, as a matter of California public policy, a workers’ compensation policy cannot be rescinded and can only be terminated in accordance with Section 676.8.

USF & G responds that Lee’s contention that a workers’ compensation policy cannot be rescinded as a matter of California public policy is wrong. USF & G cites Mitchell v. United National Ins. Co., 127 Cal.App.4th 457, 468 , 25 Cal.Rptr.3d 627 (2005) and Insurance Code §§ 331 (“Concealment, whether intentional or unintentional, entitles the injured party to rescind insurance”) and 359 (“If a representation is false in a material point, whether affirmative or promissory, the injured party is entitled to rescind the contract from the time the representation becomes false”). USF & G contends that there is no limitation in those provisions or under California law barring a claim for rescission of a workers’ compensation insurance policy.

In reply, Lee notes that USF & G does not specifically discuss Section 676.8 and contends that “it is axiomatic that the more specific sections of the Insurance Code on Workers’ Compensation should control over these general sections”, i.e., Sections 331 and 359. Lee also asserts that no ease is cited by USF & G that addresses whether a workers’ compensation policy can be rescinded or may only be canceled prospectively.

Lee has not previously asserted Section 676.8 and cites no case authority to support its position. California law does not bar the remedy of rescission of a workers’ comp policy as between the insurer (USF & G) and policyholder (Lee).

Lee’s motion to vacate the partial judgment or to alter or amend the partial judgment on this ground is DENIED.

3. As a Condition or Exception Limiting Coverage, Mr. Sackett’s August 11, 1998 Letter Was Not Clear, Plain and Conspicuous.

Lee asserts that the August 11, 1998 letter “stated what USF & G claims was a condition on coverage that Lee’s employees (a) stay within their designated classification as water park employees and (b) that claims arising from ‘construction’ not be reported under the workers’ compensation policy:”

Lee asserts that, because USF & G and ASI were not clear, plain and conspicuous in their statement of condition or exception to the policy, that condition or exception cannot be enforced. Lee cites Thompson v. Occidental Life Insurance Co., 9 Cal.3d 904, 912 , 109 Cal.Rptr. 473 , 513 P.2d 353 (1973):

Lee also cites E.M.M.I., Inc. v. Zurich American Ins. Co., 32 Cal.4th 465, 471 , 9 Cal.Rptr.3d 701 , 84 P.3d 385 (2004):

Lee’s contention assumes that the August 11, 1998 letter imposed a condition or restriction on coverage. This presented, in part, a question of fact as to the parties’ intent which was decided against Lee.

As USF & G responds, Lee’s contention that the August 11, 1998 letter constituted a condition modifying the terms of an integrated policy is “completely unfounded as a matter of law”. The August 11, 1998 letter was not part of the insurance policy and did not constitute a condition or exclusion. The cases upon which Lee relies discuss rules for the interpretation of an insurance policy and, not, as here, statements made by the applicant prior to the written and fully integrated policy contract being formed. As USF & G contends:

Furthermore, Lee, over the objections of USF & G, requested and Jury Instruction No. 29 was given:

(Doc. 661, p. 30). Therefore, the jury considered Lee’s argument that USF & G was imposing a condition in the workers’ compensation policy, that such condition should be interpreted in its narrowest sense, and the jury rejected Lee’s position.

Lee’s assertion that Jury Instruction No. 29, given at trial, is of “no moment” because the issue of whether the condition was clear, plain and conspicuous is a question of law, is without merit. The case upon which Lee relies, 20th Century Ins. Co. v. Liberty Mut. Ins. Co., 965 F.2d 747, 753 (9th Cir.1992), does not so hold. Further, because Lee requested and obtained Jury Instruction No. 29, the doctrine of invited error precludes Lee’s motion on this ground. See Deland v. Old Republic Life Insurance Company, 758 F.2d 1331, 1336-1337 (9th Cir.1985).

Lee’s motion on this ground is DENIED.

4. Admissibility of Christy Platt’s August 12, 1998 Letter to Mr. Sackett and Related Communications.

Lee asserts that, in addition to the requirement of California law that all limitations on a workers’ compensation policy be in the policy, Lee’s August 12, 1998 letter and related communications should have been excluded from evidence under the parol evidence rule. Lee argues:

Lee asserts that, without these letters and communications, there would be no basis for a claim of any alleged misrepresentation or concealment.

Lee has twice before argued this issue unsuccessfully. By Order filed on July 30, 2004 (Doc. 194, pp. 55 — 58), Judge Coyle denied Lee’s motion for summary judgment on this ground, ruling in pertinent part:

See also Bank of America v. Lamb Finance Co., 179 Cal.App.2d 498, 502 , 8 Cal.Rptr. 877 (1960):

See also Continental Airlines, Inc. v. McDonnell Douglas Corp., 216 Cal.App.3d 388, 419 , 264 Cal.Rptr. 779 (1989):

Relying on these legal principals, Lee argues in pertinent part as follows:

In addition, Lee’s motion in limine no. 16 (Doc. 446) was “denied without prejudice to Lee submitting a jury instruction that the August 1998 letters may not be considered or used to contradict or vary the integrated insurance policy insofar as that policy insured water park classification codes.” (Doc. 596, p. 7).

As USF & G asserts, Lee’s contention that the letters modified or varied the terms of the policy was not urged or argued by any party in the case:

As USF & G further asserts, Lee’s contention that the August 1998 letters should be excluded under the parol evidence rule “requires an extreme miseharacterization of USF & G’s position”:

Lee replies that these letters and communications are subject to the parol evidence rule:

These issues were thoroughly exhausted before trial through motions in limine and at trial, by rulings on jury instructions. The jury was correctly instructed that they could consider Lee’s words and conduct as bearing on its fraudulent intent and inducement to obtain the policy. The jury was further instructed they could not consider the words and conduct to vary the terms of the insurance policy. The motion on this ground is DENIED.

5. Whether An Application for the Subject Insurance Was Required.

Lee argues that, as a matter of law, an application for the workers’ compensation policy was required in this case as an element of the claim for rescission.

Lee relies on the testimony during its cross-examination of Stanley Sheehan, an underwriter for ASI:

(Testimony of Sheehan, Feb. 7, 2007, 16:20-17:4).

Lee argues that this testimony establishes that an application for insurance by USF & G is an element of a claim for rescission. Citing CACI Instruction 2808, “Rescission for Misrepresentation or Concealment in Insurance Application — Essential Factual Elements”, includes in the elements of the claim the following:

Lee contends that Lee never submitted an application for insurance with USF & G. Rather, Lee asserts:

Lee contends:

USF & G responds that Lee’s position is incorrect as a matter of California law, contending that the provisions of California law governing the right to rescission under the California Insurance Code and case law impose no “requirement” of a formal application.

USF & G cites Mitchell v. United National Ins. Co., 127 Cal.App.4th 457, 467-469 , 25 Cal.Rptr.3d 627 (2005):

USF & G contends that none of these Insurance Code provisions require an “application” before a contract of insurance may be rescinded because of an insured’s misrepresentation or concealment.

USF & G further argues that Sheehan’s testimony that a signed application may be requested by American Specialty during the underwriting process is irrelevant. USF & G refers to Sheehan’s testimony that an unsigned application is often accepted from an existing insured-customer. USF & G also refers to Hugh Awtrey’s trial testimony that signed applications are usually not required as part of the underwriting process:

(Testimony of Awtrey, Feb. 8, 2007, 170:7-20). USF & G also refers to the trial testimony of expert, Bennett Bibel, that an underwriter can use any form of documentation in making an underwriting decision:

(Testimony of Bibel, Feb. 17, 2007, 38:4-21).

USF & G further asserts as without merit Lee’s contention that it was prejudiced because the “formality” of the application would have placed Lee on notice that the information provided would be used to determine whether to issue the policy:

In its reply brief, Lee asserts that USF & G previously cited Cohen v. Penn Mut. Life Ins. Co., 48 Cal.2d 720, 726 , 312 P.2d 241 (1957), for the proposition that the fact the insurer asked specific questions on the application makes the answers material as a matter of law. Lee asserts that it previously argued that, without a corresponding request for certain information on the application, the information is presumed immaterial, citing Reserve Ins. Co. v. Apps, 85 Cal.App.3d 228, 231 , 149 Cal.Rptr. 223 (1978) and Ashley v. American Mut. Liab. Ins. Co., 167 F.Supp. 125, 132 (N.D.Cal. 1958). Therefore, Lee argues, the application itself is such an important and necessary document that it may be used to prove or disprove the element of materiality. Lee argues that the issue of an application and the presence of it was key to show the absence of fraud and the lack of a misrepresentation:

Lee contends that the Partial Judgment must be vacated, altered and/or amended for failure to decide this allegedly essential issue.

Lee’s position is without merit, spurious, and ignores the reality of the transaction. A contract of insurance was issued to Lee by USF & G based on USF & G’s specific request for Lee’s truthful assurances that Lee would not perform construction activities or utilize construction workers. It was known to all parties that Lee’s prior policy was cancelled because its workers were performing construction activities. The evidence was undisputed that ASI was Lee’s insurance agent of record for the workers’ compensation policy, not DiBu-duo & DeFendis. ASI had obtained the prior policy from II for Lee. Lee instructed ASI to find and obtain new coverage after Lee’s II workers’ compensation policy was cancelled. Lee’s position would sanction fraud and misconduct by Lee and bar USF & G from rescinding that policy no matter what the circumstances, merely because an application was not completed and signed by Lee. The established course of dealing between Lee and Aon explains fully how the USF & G insurance policy came into force after the Industrial Indemnity policy was cancelled, without a fully completed formal written application. Lee purposefully ignores the well-established practice of brokers binding insurance coverage for existing clients without a new written application.

Lee’s arguments concerning the importance of the application pertain to materiality, were made to and rejected by the jury on the issue of liability. There was no failure of proof on an essential issue. Lee’s arguments concerning the importance of the application pertain to materiality and weight of evidence, rather than failure of proof on an essential issue. Lee’s arguments were all presented to the jury on the issue of liability. The jury overwhelmingly found Lee’s actions to be permeated with deceit and decided accordingly.

Lee’s motion to alter or amend or to vacate the partial judgment on this ground is DENIED.

6. Whether USF & G Failed to Show Lee’s Employees Engaged in Activities Outside of a Water Park Classification.

Lee asserts that USF & G reported Ms. Conley’s accident to the Workers’ Compensation Insurance Rating Bureau (WCIRB) as occurring under classification code 9016, as was made clear by Master Stat Report Facsimile (Ex. 675). Lee asserts that there was no evidence that Ms. Conley’s injury was ever classified by USF & G or the WCIRB as occurring under any other classification code. Lee contends:

USF & G argues that Ms. Conley’s classification in the Master Stat Report Facsimile is not an admission by USF & G. First, there was no evidence at trial as to who made the report to the WCIRB or whether the source of the information for the report was anything other than the report of injury filed by Lee.

Second, USF & G maintains the insurer was required to report injuries to the WCIRB using only the classification codes set forth in the policy. USF & G refers to the trial testimony of Lee’s workers’ compensation expert, Dr. Arthur J. Levine:

(Testimony of Levine, Feb. 14, 2007, 56:11-20, 57:24-58:8).

From this, USF & G contends that when Ms. Conley was injured, her injury was reported to the WCIRB under the classifications actually contained in the USF & G policy, as an amusement park maintenance worker, classification 9016:

Second, USF & G contends, by the time the classification was reported, USF & G had filed its lawsuit for rescission. In this lawsuit USF & G unequivocally contended that the work Ms. Conley performed was a construction activity. Therefore, even if, arguendo, the Master Stat Report Facsimile could be viewed an “admission,” there was contrary evidence which the jury could and did consider by expressly finding that there was no waiver or estoppel by USF & G based on all the evidence.

Lee replies that USF & G misleads the Court concerning its admission because “USF & G fails to remind the Court that the only expert testimony concerning the Master Unit Stat Report was that the purpose was to accurately report injuries.” Lee contends that further testimony by Dr. Levine established that although the reporting party must initially report under an existing classification, the reporting party has a continuing duty to revise the classifications and amend the Master Unit Stat Report so that it accurately reported the classification under which the injury occurred:

(Testimony of Levine, Feb. 14, 2007, 35:8-37:10)

Relying on this testimony, Lee asserts that “this” was ultimately USF & G’s responsibility and that the reporting occurred after the rescission action was filed “only makes the admission more egregious [and] does not ... excuse USF & G from its admission.”

Third, USF & G contends, whether Ms. Conley’s work could be covered by a construction code is irrelevant:

Lee contends that the testimony of Lee’s workers’ compensation expert, Arthur Levine, confirms that Ms. Conley was performing park operations when she was injured. Lee asserts that Dr. Levine “is one of the preeminent experts on California Workers’ Compensation Insurance, arguably one of the most knowledgeable outside the actual workers’ compensation administration”, that he has authored a book and taught classes on workers’ compensation and liability insurance, and has served as the attorney for the Public Members of the Governing Committee on the Workers’ Compensation Insurance Rating Bureau. Lee asserts:

Both USF & G and Aon assert that Lee’s contention ignores all of the evidence at trial and all of the relevant legal issues. USF & G rejoins:

This is a reasonable interpretation of the trial testimony of Dr. Levine. His opinions on what constituted “construction” work were so unrealistic as to support a finding of bias in favor of his unorthodox view of the meaning of “construction” for the purpose of classification codes as opposed to use of the term to determine whether USF & G was willing to undertake insurance business with Lee, to justify the jury rejecting his opinions. No testimony was adduced that the conversations between Lee’s and AIS’s representatives ever identified or considered classification codes rather than the commonly understood meaning of construction activities or construction workers.

Lee’s motion on this ground is DENIED.

Aon argues that Lee’s contention that Ms. Conley was performing work within the scope of water park operations is irrelevant:

Aon refers to the trial testimony of Lee’s Christy Platt:

(Testimony of Platt, Feb. 14, 2007, 16:3— 21). Aon also refers to the trial testimony of Cathy Hacker:

(Testimony of Hacker, Feb. 2, 2007, 55:16-21) Aon contends that since the jury reasonably could conclude that Ms. Conley was performing construction work, the jury’s verdict was not against the clear weight of the evidence.

Lee replies that the August 11 and August 12, 1998 letters make clear that USF & G intended to cover any work done by Lee employees if properly classified within water park classification and that Lee clearly informed ASI that it intended its workers to perform normal water park operations. Lee refers to the August 11, 1998 letter (Ex. 833):

Lee again contends that neither Kent Le-Masters’ testimony or Dr. Levine’s testimony has been rebutted. Lee refers to Dr. Levine’s trial testimony:

(Testimony of Levine, Feb. 14, 2007, 45:9-49:80). Lee contends that because Dr. Levine’s testimony establishes that, in the context of Workers’ Compensation insurance, the terms “construction” and “construction laborer” do not refer to incidental repair or maintenance that is construction-like work, that may be performed by a water park maintenance employee, Ms. Conley’s work on the red wave slide in February 1999 was normal park operations and was covered and expected within water park classifications 9180 or 9016. This entire argument assumes the validity of Dr. Levine’s opinions about and definition of construction. The jury could easily have found unintelligible, the above-quoted testimony of Dr. Levine, and rejected it as incredible.

All Lee’s arguments are centered on factual disputes, most especially Lee’s credibility. The jury was free to reject Dr. Levine’s testimony which, in places, was nonsensical, biased and sufficiently arbitrary as to be of no help to the trier of fact.

Lee’s motion on this ground is DENIED.

D. Whether Lee Made a Misrepresentation to Aon, Intended to Induce the Reliance of Aon, Aon’s Reliance and Causation.

Lee argues that there was no legally sufficient evidence for a reasonable jury to find Lee liable to Aon under the “tort of another” doctrine. In addition, Lee asserts, Christy Platt’s August 12, 1998 letter and all of Lisa Ehrlich’s statements to Hugh Awtrey in response to his questions on August 12, 1998 were intended to be transmitted to ASI. Lee argues:

The exception referred to by Lee is Lee’s acknowledgment that Aon, on August 12, 1998, took upon itself to draft for Lee the language that was to be sent to ASI. However, Lee contends, this was at Aon’s initiative. In addition, Lee contends, Aon, in Mr. Awtrey’s and Ms. Moore’s August 27, 1998 letter (Ex. 841), of its own volition and for its own purposes, took it upon itself to advise Lee that the policy had been issued on the premise that no construction laborers would be employed by Lee. Lee asserts that Aon’s own conduct, and not any breach of duty by Lee to Aon, resulted in Aon being sued by USF & G and ASI for indemnity and resulted in Aon’s counterclaim against USF & G and ASI for indemnity. Lee argues that Aon cannot recover for the “tort of another” where Lee breached no duty as to Aon or Aon’s own conduct necessitated its involvement in litigation, citing Burger v. Kuimelis, 325 F.Supp.2d 1026, 1041-1043 (N.D.Cal.2004).

Aon responds that Lee presents a wholly partisan, one-sided view of the evidence and ignores substantial trial testimony to the contrary. Aon asserts that the jury reasonably concluded that Lee intentionally made misrepresentations to Aon during the effort to replace Lee’s workers’ comp insurance policy through USF & G, and that those misrepresentations harmed Aon. Aon contends there was substantial evidence that Lee knew Aon was relying on the truth of Lee’s statements in preparing the letter to ASI and that Lee intended Aon to so rely. Aon refers to Aon’s cross-examination of Lisa Ehrlich:

(Trial testimony of L. Ehrlich, Feb. 9, 2007, 7:10-18; 7:22-8:4; 8:14-9:1). Aon also refers to Aon’s cross-examination of Christy Platt:

(Trial testimony of Platt, Feb. 14, 2007, 5:17-25; 6:17-23).

Aon further responds that Aon did not “take it on itself’ to write the letter to ASI. Instead, Aon was acting prudently in responding to ASI’s requirement that it receive a letter from Lee before issuing the policy. Lee had full knowledge of this requirement, referring to the testimony set forth above, and to the trial testimony of Cathy Hacker:

(Trial testimony of Hacker, Feb. 2, 2007, 55:16-21, 71:17-21,108:5-21).

Aon asserts that Lee’s rebanee on Burger v. Kuimelis, supra, to negate any breach of duty by Lee to Aon is misplaced because the Northern District ruled that “[t]he duty not to mislead is a duty that runs from counterdefendants [insureds] to Kumeilis [broker].” Burger, supra, 325 F.Supp.2d at 1044 . Aon responds that Lee’s argument that Aon’s own conduct in drafting the letter necessitated its involvement in this litigation ignores the fact that Lee provided misinformation to Aon:

In its reply brief, Lee completely changes its position. Lee now argues:

All these contentions have been discussed. They represent Lee’s view of the evidence, ignoring the alternative decisions the jury reached. Once Lee sought replacement coverage, the insurer willing to write new coverage, USF & G, would not do so unless Lee agreed in writing not to engage in further construction activities and to have third party contractors perform any construction work. The insurer USF & G, through American Specialty, required such written representation, undertaking and commitment from Lee. Once it made such representations, Lee had a duty to speak truthfully. Its failure to be honest and forthright caused its insurance broker, Aon, to be sued. Absent Lee’s wrongful conduct in misrepresenting material facts (fraud), Aon would not have been sued by USF & G, requiring Aon to expend attorneys’ fees in its defense.

Lee’s motion on Aon’s tort of another claim is DENIED, subject to allocation of recoverable fees for tort of another where the direct claims and defenses between the Lee parties and Aon do not implicate USF & G’s indemnity case.

E.Amendment of Partial Judgment to Require USF & G To Return All Premiums Paid by Lee.

Lee, citing California Civil Code § 1691(b), contends that, before rescission can be effected, USF & G is required to restore all premiums, plus interest, paid by Lee for the policy. Lee, refers to Exhibit Nos. 411, JX84, JX84.003-008, and asserts that the amount of the principal is $38,554. Lee argues that the Partial Judgment should be amended to read that USF & G shall pay Lee $38,554 plus interest. USF & G does not argue this is not the law.

This is an issue that will be resolved in the Findings of Fact and Conclusions of Law that will be issued in connection with the Hearing re Remaining Damages conducted on April 4-5, 2007. Because those Findings of Fact and Conclusions of Law have not yet been issued, Lee’s motion to amend the Partial Judgment in this regard is premature.

F. Partial Judgment’s References to FRCP 55(b).

This reference to Fed. R. Civ. Proc. 55(b) was a typographical error. Lee’s motion to amend the Partial Judgment to reflect that it was entered pursuant to Rule 54(b), Federal Rules of Civil Procedure, is well-taken and is GRANTED nunc pro tunc.

G. Whether The Partial Judgment Erroneously States Lee Has Stipulated to Certain Matters.

The Partial Judgment (Doc. 681) states in pertinent part:

Lee contends that it has not stipulated to the inclusion of the alter ego claims against Richard Ehrlich, but acknowledges that USF & G was allowed to amend its Complaint to add alter ego allegations and trial of these claims were severed by Or der filed on July 18, 2006, (Doc. 256, pp. 12-16), and by Order filed on December 12, 2006. (Doc. 395, p. 3). Lee contends that the Partial Judgment should be amended to reflect this background.

USF & G responds that whether Lee stipulated to this or not is irrelevant.

The Partial Judgment should reflect correctly the positions of the parties. Therefore, this aspect of Lee’s motion is GRANTED.

With regard to Diana Conley, Lee asserts that it has not stipulated to any determination of claims as to Diana Conley, noting that the Stipulation by which Ms. Conley was dismissed from this action was signed only by Ms. Conley’s counsel and counsel for USF & G. Therefore, Lee moves for amendment of the Partial Judgment to reflect this.

USF & G responds that Lee’s position is irrelevant because Lee never asserted a claim against Ms. Conley.

The Partial Judgment should correctly reflect all parties’ positions. Lee’s motion to amend the Partial Judgment in these respects is GRANTED.

H. Partial Judgment’s Failure to Include as Issues Remaining for Further Trial (a) Whether USF & G is Entitled to Any Restitution, and (b) USF & G’s Duty to Defend Lee in the WCAB Proceedings and In This Action.

a. Restitution Award is Premature.

Lee contends that entry of Partial Judgment in favor of USF & G and against Lee for restitutionary damages of $875,034.99 is premature. Lee contends that the Partial Judgment fails to list as reserved issues all of those issues. Lee refers to the Stipulation and Order Regarding Issues to Be Determined by the Court, (Doc. 682) filed by the Court on either February 27, 2007 or March 1, 2007 (both dates are listed), wherein the parties stipulated, in pertinent part, that the Court will hear and decide the following issues:

Lee also refers to the Stipulation re Handling of Claims for Attorneys Fees and Litigation Expenses, (Doc. 654), filed on either February 21, 2007 or February 23, 2007 (both dates are listed):

Lee contends that these stipulations and orders make the award of restitution to USF & G premature:

Lee therefore contends that the Partial Judgment should be vacated pending the Court’s determination of the amount of restitution, if any, to which USF & G is entitled.

As USF & G asserts, the Court has already determined by summary judgment that USF & G is entitled to restitution of $623,320.09. The Pretrial Order (Final Form), (Doc. 700), sets forth as Undisputed Fact No. 37 that USF & G paid $623,320.09 to or on behalf of Ms. Conley. The jury found that USF & G is entitled to an additional among of $251,714.19 paid to or on behalf of Diana Conley for the period May 2002 to the present.

In reply, Lee acknowledges the hearing on April 4-5, 2007 and contends that the Partial Judgment will need to be amended to conform to the judgment yet to be made by the court.

Lee’s motion on this ground is DENIED.

b. Whether USF & G Breached the Duty to Defend Remains for Separate Trial.

Whether or not the Court awards restitution to USF & G for the attorney fees and expenses paid to Lee, Lee contends that the issue of whether USF & G breached the duty to defend in the WCAB proceedings and in this action remains to be tried before a separate jury.

USF & G responds that Lee’s contention is frivolous because Lee can claim no breach of any duty to defend under the policy because, as a matter of law following rescission, and under the Partial Judgment, no contract ever existed between Lee and USF & G.

Lee responds that this issue is not properly before the court, except to correct any possible suggestion in the Partial Judgment as written that this issue is not among those remaining to be tried in a separate trial.

Because any issue of USF & G’s breach of a duty to defend Lee is not presently at issue and was reserved for trial in a later proceeding, Lee’s motion to amend the Partial Judgment on this ground is GRANTED.

CONCLUSION

For all the reasons stated above, the following orders are entered:

1. Lee’s motion that the Partial Judgment is void and/or that Lee is entitled to judgment as a matter of law because the WCAB had and has exclusive jurisdiction is DENIED;

2. Lee’s motion that it is entitled to judgment as a matter of law because California law requires any limitation on a worker’s compensation policy be by an approved form of endorsement is DENIED;

3. Lee’s motion that Mr. Sackett’s August 11, 1998 letter imposed a condition or restriction on coverage is DENIED;

4. Lee’s motion that Christy Platt’s August 12, 1998 letter to Mr. Sackett and related communications should have been excluded from evidence under the parol evidence rule is DENIED;

5. Lee’s Motion that an application for the subject insurance was required is DENIED;

6. Lee’s motion that USF & G failed to show Lee’s employees engaged in activities outside of a water park classification is DENIED;

7. Lee’s motion that there was-no legally sufficient evidence for a reasonable jury to find Lee liable to Aon for the “tort of another” is DENIED;

8. Lee’s motion to amend the Partial Judgment to require USF & G to return all premiums paid by Lee is DENIED as premature;

9. Lee’s motion to amend the Partial Judgment to refer to Rule 54(b), Federal Rules of Civil Procedure, rather than Rule 55(b), Federal Rules of Civil Procedure, is GRANTED nunc pro tunc;

10. Lee’s motion to amend the Partial Judgment to reflect that Lee did not stipulate to certain matters is GRANTED nunc pro tunc;

11. Lee’s motion to amend the Partial Judgment because it fails to include as issues remaining for further trial (a) whether USF & G is entitled to any restitution and (b) USF & G’s duty to defend Lee in the WCAB proceedings and in this action is DENIED IN PART AND GRANTED IN PART.

12. Counsel for USF & G and Aon shall prepare and lodge a form of order that reflects the specific rulings on each issue addressed by this decision within five (5) days following the date of service of this decision by the Court’s Clerk.

IT IS SO ORDERED.