Kotecki v. Cyclops Welding Corp.

585 N.E.2d 1023, 146 Ill. 2d 155, 166 Ill. Dec. 1

• Court: Illinois Supreme Court
• Decided: February 5, 1992
• Docket: 68568
• Status: Published

Opinions

JUSTICE MORAN

delivered the opinion of the court:

Mark A. Kotecki (Kotecki) brought an action in La Salle County for personal injury, allegedly caused by defendant Cyclops Welding Corporation’s (Cyclops) negligence in the design and construction of an agitator, used on the premises of Carus Chemical Company (Carus), Kotecki’s employer. Cyclops then filed a third-party complaint against Carus, seeking contribution. Carus moved to strike the ad damnum clause of the third-party complaint for contribution. The trial court denied the motion, but made the necessary findings for an interlocutory appeal according to Supreme Court Rule 308 (107 Ill. 2d R. 308(a)). The appellate court denied Carus’ petition for leave to appeal. Cams’ petition for leave to appeal to this court was granted (107 Ill. 2d R. 315).

The sole issue on appeal is whether an employer, sued as a third-party defendant in a product liability case, is liable for contribution in an amount greater than its statutory liability under the Workers’ Compensation Act.

As this is an interlocutory appeal, all of the facts are gleaned from the pleadings. Kotecki, in his complaint, alleges that he sustained personal injury when he caught his hand in the motor of an agitator; that the injury occurred while he was acting in the scope of his employment with Carus; and that Cyclops negligently designed, constructed, and installed the agitator on the Carus property without sufficient guarding devices for the motor and drive system.

Cyclops then filed a third-party complaint against Carus, alleging various acts of negligence. Cyclops thus sought contribution from Carus under the Contribution Act (Ill. Rev. Stat. 1987, ch. 70, par. 301 et seq.), in an amount proportionate with the degree of fault attributable to Cams’ culpability, if it is found liable to Kotecki at trial.

The third-party defendant, Carus, then filed a motion to strike the ad damnum clause of the third-party complaint, asserting that section 5 of the Workers’ Compensation Act (Ill. Rev. Stat. 1987, ch. 48, par. 138.5 et seq.), when read in conjunction with the Contribution Act, serves to limit the amount of liability of an employer to an amount no greater than the workers’ compensation exposure of the employer. Cyclops filed a response, the motion was heard, and the trial court then denied the motion.

The trial judge found that the motion, and his subsequent ruling, involved a question of law as to which there was a substantial ground for difference of opinion, and that an immediate appeal from his order would materially advance the ultimate termination of this case. His order stated that the controlling question of law is as follows:

“Whether an employer sued as a third-party defendant in a products liability case is liable in contribution for any amount in excess of the employer’s statutory liability under the Worker’s Compensation Act.”

Carus filed an interlocutory petition for leave to appeal, which the appellate court denied. Carus then filed a petition of leave to appeal to this court, which was allowed. The Illinois Trial Lawyers Association filed a brief, as amicus curiae, in support of Cyclops. The sole issue on review is the trial court’s certified question.

Any discussion of the effect of workers’ compensation on the Contribution Act must begin with Skinner v. Reed-Prentice Division Package Machinery Co. (1977), 70 Ill. 2d 1. In Skinner, the court held that a defendant manufacturer sued in strict tort liability had a right of contribution against the employer (whose conduct may have contributed to the injury) of an injured worker. The plaintiff, Rita Skinner, was injured while she was using an injection molding machine and she sued the machine’s manufacturer under strict product liability. The manufacturer filed a third-party action against her employer for contribution, alleging negligence. This court found that the trial court’s dismissal of the third-party action was error. (Skinner, 70 Ill. 2d at 16.) It additionally found that there is a right of contribution among joint tortfeasors, and that the doctrine would apply prospectively only. Skinner, 70 Ill. 2d at 16.

Following this court’s decision in Skinner, the legislature passed the Contribution Among Joint Tortfeasors Act (Ill. Rev. Stat. 1989, ch. 70, pars. 301 through 305) (Contribution Act). For the purposes of this case, the statute states in pertinent part:

“[W]here 2 or more persons are subject to liability in tort arising out of the same injury to person or property, or the same wrongful death, there is a right of contribution among them, even though judgment has not been entered against any or all of them.” Ill. Rev. Stat. 1989, ch. 70, par. 302(a).

In Doyle v. Rhodes (1984), 101 Ill. 2d 1, the court had before it the issue of whether an employer could be liable to a manufacturer for contribution, in light of the Contribution Act. Doyle, a flagman on a road construction project, sued Rhodes, a motorist, for striking him with her car. Rhodes filed a third-party action seeking contribution from Doyle’s employer. The trial court dismissed the third-party claim, but this court reversed that judgment. (Doyle, 101 Ill. 2d at 19.) Thus in Doyle, the court was required to consider the effect that the Contribution Act had on Skinner. While recognizing that the Workers’ Compensation Act gives an employer immunity from tort actions by its employees, this court, in Doyle, found that there is no bar to a claim for contribution from that employer by a defendant held liable to that employee. Doyle, 101 Ill. 2d at 14.

The court also held that the Contribution Act “was intended to codify the Skinner decision, [and] not to diminish its scope.” (Doyle, 101 Ill. 2d at 8.) The court additionally found that the phrase in the Contribution Act, “subject to liability in tort” (Ill. Rev. Stat. 1989, ch. 70, par. 302(a)), did not exempt employers who pay workers’ compensation benefits to the injured employee from the Act. The court noted, in response to the employer’s charge that the Contribution Act was ambiguous on this point, that:

“The language relied on by the employer is neither unambiguous nor should it be construed in the way the employer seeks to apply it. The Workers’ Compensation Act provides employers with a defense against any action that may be asserted against them in tort, but that defense is an affirmative one whose elements — the employment relationship and the nexus between the employment and the injury — must be established by the employer, and which is waived if not asserted by him in the trial court. [Citations.] Thus, the plaintiff may recover a tort judgment against his employer for a work-related injury if the employer fails to raise the defense the Workers’ Compensation Act gives him (see Rhodes v. Industrial Com. (1982), 92 Ill. 2d 467, 471), and on occasion the employer may choose not to raise it in the hope that the plaintiff will be unable to prove negligence to a jury’s satisfaction. The potential for tort liability exists until the defense is established.” Doyle, 101 Ill. 2d at 10-11.

In Doyle, the court also noted that it was not determining all of the issues concerning the interplay between the Workers’ Compensation Act and the Contribution Act. The court specifically noted that it was not determining what effect its decision would have on the relevance of section 5(b) of the Workers’ Compensation Act (Ill. Rev. Stat. 1987, ch. 48, par. 138.5(b)), which allows the employer to recoup an amount of the compensation paid from the proceeds of any award, judgment or settlement fund, out of which the employee may be compensated by a third party. The court stated:

“The extent to which any right of contribution from the employer under the Contribution Act may impact upon this right of recoupment by the employer has not been raised by the parties in their pleadings and consequently not briefed. At this point, *** we are not prepared to indicate how this aspect of the Compensation Act may affect the operation of the Contribution Act or what adjustments will be necessary because of the recoupment provision. Nevertheless, we caution that some accommodation between these two statutes may be in order.” (Emphasis added.) Doyle, 101 Ill. 2d at 14-15.

Carus essentially argues that although it is clear that an employer can be held liable for contribution to a manufacturer, this court has never stated if that amount is limited by the employer’s workers’ compensation liability. Cyclops (and the amicus, Illinois Trial Lawyers Association) argues that Doyle has clearly held that a manufacturer has a right to contribution from the employer, and the amount that the employer can be required to pay is limited only by the extent of the damages that are attributable to the employer’s negligence. We find that Doyle does not squarely answer the question as to the amount of contribution that an employer may be liable for under the Contribution Act. Rather, Doyle stands for the proposition that a negligent employer is liable for contribution to a third party, regardless of the Workers’ Compensation Act.

Cyclops strenuously argues that any limitation on the amount of contribution that an employer would be required to make under the Contribution Act would require a “change” in the law. However, much of Cyclops’ argument concerning the current state of the law is based on pre-Skinner indemnity cases. (John Griffiths & Son Co. v. National Fireproofing Co. (1923), 310 Ill. 331; Miller v. DeWitt (1967), 37 Ill. 2d 273; Moroni v. Intrusion-Prepakt, Inc. (1960), 24 Ill. App. 2d 534.) These indemnity cases are of no help in resolving the question in the instant case, as this case concerns contribution, not indemnity, and this court has specifically stated:

“Indemnity and contribution are mutually exclusive remedies for allocating a plaintiff’s damages among joint tortfeasors with liability to the plaintiff. Indemnity allows a defendant who satisfies a judgment for which he and another tortfeasor or tortfeasors are jointly and severally liable to recover from the other tortfeasor or tortfeasors the entire amount he was obligated to pay. [Citations.] To have the right to indemnity there must have been a pretort relationship between the guilty parties and a qualitative difference in their conduct in the occurrence.” Frazer v. A.F. Munsterman, Inc. (1988), 123 Ill. 2d 245, 254-55.

Cyclops also argues that this court should not examine any potential limitations on the amount that an employer could be required to contribute because the legislature is currently considering various pending bills in this area of the law. (Cyclops cited potential legislative amendments to the Workers’ Compensation Act or the Contribution Act which would bar a third party from filing a third-party complaint against an employer. However, all of the bills that Cyclops cites either were tabled or left pending at the end of the legislative term.) Nevertheless, as this court has noted:

“We believe that the proper relationship between the legislature and the court is one of cooperation and assistance in examining and changing the common law to conform with the ever-changing demands of the community. There are, however, times when there exists a mutual state of inaction in which the court awaits action by the legislature and the legislature awaits guidance from the court. Such a stalemate is a manifest injustice to the public. When such a stalemate exists and the legislature has, for whatever reason, failed to act to remedy a gap in the common law that results in injustice, it is the imperative duty of the court to repair that injustice and reform the law to be responsive to the demands of society.” (Alvis v. Ribar (1981), 85 Ill. 2d 1, 23-24 (despite the presence of six bills in the legislature, the court abolished the doctrine of contributory negligence).)

The preceding discussion of legislative inaction prior to Alvis concerned a “change” to be made in the common law. That discussion is equally applicable here, where the “change” concerns how this court reconciles two, potentially conflicting, statutes.

As the court noted in Doyle, “some accommodation” between the Contribution Act and the Workers’ Compensation Act will be necessary in the future. (Doyle, 101 Ill. 2d at 15.) Contrary to Cyclops’ suggestion, the question, as to whether or not there is a limit on the amount that an employer may be found liable for, was not answered in Doyle. Thus, even though the legislature may be considering legislation, this court will continue to shape the law as questions remaining from previous decisions are presented to this court for resolution.

The underlying controversy between workers’ compensation and contribution was succinctly stated by the Minnesota Supreme Court:

“If contribution or indemnity is allowed, the employer may be forced to pay his employee — through the conduit of the third-party tortfeasor — an amount in excess of his statutory workers’ compensation liability. This arguably thwarts the central concept behind workers’ compensation, i.e., that the employer and employee receive the benefits of a guaranteed, fixed-schedule, nonfault recovery system, which then constitutes the exclusive liability of the employer to his employee. [Citation.] If contribution or indemnity is not allowed, a third-party stranger to the workers’ compensation system is made to bear the burden of a full common-law judgment despite possibly greater fault on the part of the employer. This obvious inequity is further exacerbated by the right of the employer to recover directly or indirectly from the third party the amount he has paid in compensation regardless of the employer’s own negligence. [Citations.] Thus, the third party is forced to subsidize a workers’ compensation system in a proportion greater than his own fault and at a financial level far in excess of the workers’ compensation schedule.” (Lambertson v. Cincinnati Corp. (1977), 312 Minn. 114, 119-20, 257 N.W.2d 679, 684.)

Under the Contribution Act, as interpreted in Doyle, the second problem discussed by the Minnesota court, whether the third party will pay too much, is not an issue in Illinois, as an employer will clearly be liable for contribution. Rather, the issue is whether the employer will be forced to pay too much, thereby losing the protection that the Workers’ Compensation Act is supposed to provide.

The majority (45) of other jurisdictions do not allow a contribution action against an employer, from a defendant sued in tort, by an injured employee. (See Sherman, Contribution from Employers: Availability, Good Faith Settlements and What the Future May Hold, 75 Ill. B.J. 568, 572 n.52 (June 1987) (collecting cases).) At the other end of the spectrum, only New York allows a defendant to recover unlimited contribution from negligent employers. (See Dole v. Dow Chemical Co. (1972), 30 N.Y.2d 143, 331 N.Y.S.2d 382, 282 N.E.2d 288.) However, in Dole, the New York Court of Appeals abandoned the distinction between implied indemnity and contribution, and found there to be a rule of apportionment of damages based on the respective fault of the parties. (Dole, 30 N.Y.2d at 148-49, 331 N.Y.S.2d at 387, 282 N.E.2d at 292.) As has been previously stated in this opinion, this court has stated that the difference between indemnity and contribution is distinct and meaningful. (See Frazer, 123 Ill. 2d at 254.) Thus, the New York example is not that helpful for the resolution of this case.

The Minnesota Supreme Court adopted a rule finding that, as in Illinois, an employer could be required to contribute, but that the amount of an employer’s contribution would be limited by its workers’ compensation liability. (Lambertson, 312 Minn. at 130, 257 N.W.2d at 689.) The “Minnesota rule” was adopted from a decision of the Pennsylvania Supreme Court. (Maio v. Fahs (1940), 339 Pa. 180, 14 A.2d 105 (overruled by statute, see Tsarnas v. Jones & Laughlin Steel Corp. (1980), 488 Pa. 513, 517-18, 412 A.2d 1094, 1095).) The Minnesota rule arguably strikes a balance between the competing interests of the employer, as a participant in the workers’ compensation system, and the equitable interests of the third-party plaintiff in not being forced to pay more than its established fault. Notably, this approach has been adopted by legislation in Idaho. See Runcorn v. Shearer Lumber Products, Inc. (1984), 107 Idaho 389, 395, 690 P.2d 324, 330.

In Illinois, the competing interests between the Contribution Act and the Workers’ Compensation Act that were discussed by the Minnesota Supreme Court are equally as strong. The Contribution Act was clearly meant to codify Skinner by requiring that tortfeasors contribute in proportion to their fault in causing an injury. (See Doyle, 101 Ill. 2d at 8.) However, there are still portions of the Workers’ Compensation Act which are in apparent conflict with the Contribution Act’s principles: i.e., an employer has a statutory lien on a portion of the proceeds that an employee obtains from a third party (Ill. Rev. Stat. 1989, ch. 48, par. 138.5(b)); and the employee who collects workers’ compensation has no statutory or common law right to recover damages from his employer (Ill. Rev. Stat. 1989, ch. 48, par. 138.5(a)). Furthermore, section 11 of the Workers’ Compensation Act states, in pertinent part: “The compensation herein provided *** shall be the measure of the responsibility of any employer.” Ill. Rev. Stat. 1989, ch. 48, par. 138.11.

We find that the Minnesota rule provides the fairest and most equitable balance between the competing interests of the employer and the third-party plaintiff. The Minnesota rule is also the natural “accommodation” that this court, in Doyle, said would be needed to reconcile the Contribution Act and the Workers’ Compensation Act. Limiting the amount of contribution of an employer to its liability under workers’ compensation:

“allows the third party to obtain limited contribution, but substantially preserves the employer’s interest in not paying more than workers’ compensation liability. While this approach may not allow full contribution recovery to the third party in all cases, it is the solution we consider most consistent with fairness and the various statutory schemes before us.” Lambertson, 312 Minn. at 130, 257 N.W.2d at 689.

The language of the Workers’ Compensation Act clearly shows an intent that the employer only be required to pay an employee the statutory benefits. These limited benefits are paid in exchange for a no-fault system of recovery. The Contribution Act, as this court held in Doyle, requires that the employers contribute to tort judgments if they are partially responsible for an employee’s injuries.

Because this case is before us at the pleading stage, it would be inappropriate to consider whether Carus is liable to Cyclops for contribution, and how much that liability should be. Resolution of these questions will depend upon the facts as developed at trial. However, the ruling of the trial court, denying Cams’ motion to strike the ad damnum clause of Cyclops’ third-party complaint, is reversed. The trial court is directed to strike the ad damnum clause of the third-party complaint, and to permit the defendant/third-party plaintiff, Cyclops, to seek contribution in an amount not greater than the workers’ compensation liability of the third-party defendant, Carus.

Reversed and remanded, with directions.

JUSTICES CALVO and HEIPLE took no part in the consideration or decision of this case.