LESSON 7

The Civil Cases that are Often Seen

 

Section 1.   Workers Compensation

 

The Federal and all state governments have laws requiring business employers to purchase workers insurance for their employees. Businesses in the United States, be they big or small, particularly in manufacturing, must hire workers and therefore must pay attention to the labor system, laws and the power of the unions in the particular locality, and purchase workers compensation insurance.

 

In California, the state government requires all employers to purchase workers insurance. The purpose is for insurance company to be responsible for compensating the medical expenses and loss of wages in the event the worker is injured while working. If the worker cannot recover his original physical condition, the insurance company is responsible for providing him with appropriate job training to enable him to change to a different kind of work.

 

However, despite these regulations, many employers unintentionally or intentionally fail to purchase workers insurance because they do not understand the law, or their businesses are too small. This is a dangerous situation. Any carelessness may result in the situation as in the following example. 

 

In 1988, the Chinese Chamber of Commerce put on a celebration event and set off firecrackers in front of the Chamber's building. At that time a cleaning worker named Liang was holding a water hose to prevent fire near by but the dense smoke from the firecrackers caused him suddenly to feel discomfort; he was transported to the hospital for rescue. He died seven days later. The family demanded compensation because he died during employment. Then it was discovered by everyone that the Chinese Chamber of Commerce had not purchased workers insurance for its employees. And it had not applied for a permit from the Fire Department on the day the firecrackers were set off. The Liang family did not receive any workers compensation, so they hired a lawyer and sued the Chamber. The Chinese Chamber defended by claiming that the incident happened during lunch hour, and that the worker was volunteering to help set off firecrackers, which was not within the designated scope of employment and not work related.  The case was decided at the end of January, 1989.  The court ruled that Liang had died due to his work; the Chamber had to pay five hundred thousand dollars to his family.

 

The Chinese Chamber of Commerce is a Chinese business organization with a history of one hundred and twenty five years. It was the most important overseas Chinese community organization in San Francisco before the 1960's. Many disputes and litigations among the Chinese population were resolved by the Chamber. As a result of losing the lawsuit, if the Chamber did not appeal or the appeal failed, even the endowment funds accumulated over a hundred years would not be sufficient to pay the compensation; it was possible that it had to face the fate of selling the Chamber property.

 

Since the 1980's, particularly in California, the workers insurance system was changing gradually. After the arguments of lawyers and the interpretation of the courts, the scope of workers insurance became wider and wider; the damage awards continued to rise.  As of today, the well intentioned system is approaching collapse and influences the job opportunities for employers and workers in California. Several examples here are to explain the evolution of workers compensation law:

 

A worker drove to work. Somewhere not far from his factory an accident occurred and he sustained injury. The worker applied for workers compensation.  The insurance company denied compensation. The reason was that he was not injured in his work place and also not during working hours. It appears that the insurance company argument was reasonable.  But the result of trial was that the California Court of Appeal decided the worker won. The court's reason was as follows: the worker was injured on his way to work so it could be deemed "work" within the broad meaning of the workers compensation law. The insurance company was liable for compensation.

 

Another example is even more shocking. A young person working in a fast food restaurant was driving home and sustained serious injury in an accident. The court found that this young person was working over time for his employer and had worked ten plus hours and was too tired so the accident happened. Tracing back to the source of the accident, the court ruled that the employer and insurance company were both liable.

 

The above is merely about the continuous expansion of the employer's liability. The reason the courts handling workers compensation cases continue to expand the employer's libility is actually based on one philosophy: the worker has no asset; if he does not receive compensation, he cannot afford medical and living expenses. Since the employer has purchased workers compensation insurance, to hold him liable means only that the insurance company pays; there is no loss fort he individual. This philosophy is actually applied to the other compensation cases, except it is more pronounced in workers compensation. 

 

Additionally, the definition of "sustaining injury" by the worker has also been expanded continuously.  For example, formerly the phrase "sustaining injury" referred generally to falling down, hurting the hand or breaking a leg, etc. After revisions by the courts and politicians, the complaints of workers about nervousness, weak nerves, stress and other intangible injuries, they can now be blamed on the job and when worker compensation is applied for, often the worker will prevail. Workers compensation insurance was a system to protect the worker and has been implemented for many years, at least in California, and there has been no problem.  However, the attempts to defraud the insurance company have been rising in America, including traffic accidents, personal injury and other cases; the fraudulent workers insurance cases are also mounting, causing huge losses for employers and insurance companies. In America, there have been seven hundred and fifty insurance companies getting together and they organize an anti-fraud department. A retired general is hired as chief executive. The principal task of this department is to investigate and attack the unlawful elements, including some unethical lawyers and physicians, who are defrauding insurance companies.   

 

The danger caused by the flood of abusive workers compensation claims is only one of the dangers affecting the entire insurance industry. Just as the wool is eventually produced by the lamb, while the insurance companies organize themselves to attack the defrauding groups, they pass on the expenses to the employers and business organizations by asking for higher insurance premiums. In the long run the American economy may be dragged down to a collapse;  this is not an exaggeration.

 

Yet another small example: in the financial district in San Francisco, people used to see the messengers flitting in and out of traffic on their bicycles. Now those bicycle warriors are gradually disappearing because, while their employments are modest and pay is low, the insurance companies believe their jobs are too dangerous and easily cause traffic accidents and serious injuries. Accordingly the insurance companies increase premiums several folds for this particular industry. After the employers struggle with the situation, they decide that they cannot afford to stay in business with the high insurance, and close down. From this little example one can understand the close relation between businesses, jobs and insurance in the United States.

 

Section 2.  Landlord and Tenant Disputes

 

The traditional Chinese idea is that "only with land can one prosper", so the Chinese immigrants in America love to invest in real estate. Their favorite kind of real property investment is generally a small apartment building. Similar to buying a home for oneself, the process and laws for the purchase of an apartment building are not complicated. However, if the apartment building is located in a city which has rent control, the property owner should be very cautious.  In cities that have rent control, the rental laws tend to be more complex, and the renters in America are absolutely not easy to deal with. The apartment building that is intended originally to collect rent can turn into a losing proposition if caution has not been exercised. The landlord may lose his shirt or even all his assets.  Those examples are seen quite frequently.

 

Rent control law in the United States is strictly a local government issue and can be different in each city and also can keep changing (the trend is to be more and more strict); they cannot be generalized. Most American cities are not large. For example, going from San Francisco International Airport to San Francisco, one already passes several cities in between. And the distance between two cities may be just a street away.  On one end of the street there is no rent control; several steps away on the other end there may be rent control. Therefore the investor from the outside needs to pay attention early and not depend on the investment experience of family or friends as the source of data.  Before investment is made there must be a full study of all the laws and restrictions to evaluate and determine if the investment is worth it.

 

Among big cities that are favorite, enthusiastic investments of the Chinese, San Francisco, New York, Berkeley, Santa Monica and so on are famous for the tightness of their rent control laws and their being unfavorable to the property owners.  Attention must be paid to this point. 

 

As the term suggests, the purpose of rent control is to limit rent increases and is negative for the property investors.  Therefore, many people try all kinds of ways to escape the restrictions of the law. However, America is different from Hong Kong. The renters are not easy to deal with.  They pay great attention to protection of themselves and their rights. When they discover the property owner to have avoided rent control, they will definitely sue the property owner according to the law.  Often the property owner's cleverness backfires.  Here is a true example.

 

The rent control law in San Francisco requires the landlord to increase rent no more than 4% per year, and unless there is special reason, he cannot ask at will the tenant to move out. Among the legally approved special reasons to ask a tenant to move is that the property owner is getting the property back for his direct relatives to live. One property owner utilized this special provision and evicted the original tenant on the ground his own parents were moving in. After the tenant moved out, he discovered that the landlord's parents had not moved in; instead the property was rented to another tenant at a higher rent. The former tenant then sued the landlord for fraud under the rent control law.  After more than a year of litigation, the court ruled that the landlord had committed fraud and that not only he needed to compensate the tenant for moving, but pay the tenant over a hundred thousand dollars as "punitive damages". The landlord, by being greedy over a few hundred dollars of rent ended with losing almost everything he owned.

 

Another true example. A property owner has just purchased an apartment building in San Francisco and utilized the reason that he wanted to live there himself to evict the tenant. The tenant also sued. The difference was that the landlord had listened to the advice of the realtor before taking the action to evict. And the realtor actually issued a letter of eviction on his behalf.  After the litigation began, the landlord's lawyer suggested that he sue the realtor for misleading him and demand the realtor to bear all the legal responsibilities.  

 

There are several points a property owner interested in investing in apartments for rent should pay attention to: 

 

First, if illegal evictions are confirmed, the landlord and his realtor cannot escape liability.

 

Second, do not think that because the tenant does not have the same resources as the landlord, he cannot afford to sue. In fact, tenants will find lawyers to represent them, and the government's legal service department has lawyers who would represent low rent tenants for free.  There are also some lawyers who specialize in representing tenants in litigations. They do not get benefit from their clients, and often share in contingency recovery after winning a lawsuit.  For example, in the above referenced two cases, the lawyers made substantial money.  These lawyers specialize in rental cases that have potential to recover damages so the tenant does not worry when he takes legal action, while the landlord pays out of his pocket to his lawyer.

 

Third, in San Francisco, tenants are the majority so their becoming jurors are proportionally more likely. If the litigation is between landlord and tenant, the jurors who are tenants tend to sympathize with the tenant. Perhaps the landlord yells and screams that this is unfair, but the reality is what it is .

 

Once the landlord loses the lawsuit, he not only pays the actual damages sustained by the tenant in moving out, the deadliest problem is that the opposite side has a right to demand "punitive damages". The amount of this kind of damages can be minor or enormous. Many landlords have seen their life time savings evaporate.

 

In cities with rent control, the former tenant receives the protection of cheap rent.  Over time, the old rent may be only half of the market rent, out of proportion to the amount of investment. This situation is indirectly affected by the law and deserves special attention by the property investors.