Orth v. Shiely Petter Crushed Stone Co.

91 N.W.2d 463, 253 Minn. 142, 1958 Minn. LEXIS 662

Opinions

Thomas Gallagher, Justice.

Certiorari to review an order of the Industrial Commission which denied relator an award of $5,000 from the special compensation fund over and above compensation previously paid him in the sum of $10,000; and which ordered that the special compensation fund be credited with payment of $5,000 to relator out of the proceeds of $20,000 received by him in settlement of a third-party action which arose out of the accident.

Relator’s injuries were sustained on July 18, 1949, in the course and arising out of his employment by Shiely Petter Crushed Stone Company. They resulted in the loss of both of his legs and of his right arm. The employer and its insurer admitted liability therefor and paid compensation to relator to the extent of $10,000, final payment being made in July of 1956. As a result of such injuries, relator instituted a common-law action against a third party based upon negligence. As indicated above, a settlement was made therein, whereby relator was paid the net sum of $20,000. The employer and insurer waived their subrogation rights to any part of this sum and continued to pay relator compensation until they had paid him the full amount of $10,000.

On August 29, 1956, after the full $10,000 compensation had been paid, relator filed with the Industrial Commission a petition requesting payment of an additional $5,000 from the special compensation fund, pursuant to M. S. A. 1949, § 176.13, which provides in part:

“All employees who are now receiving, or who may hereafter become entitled to receive, compensation for permanent total disability, whether from the employer or from the special fund, after receiving the full amount of $10,000 for such disability, shall be paid from the fund an additional sum of not to exceed $5,000, in the same manner and with the same limitations, except as to amounts, at the rate of two-thirds of the wages they were receiving at the time of the injury which rendered them permanently totally disabled * *

The special compensation fund was created and is maintained by payments from employers to the Industrial Commission of certain specified sums in cases of death where there are no dependents entitled to compensation; and in cases of compensable injuries resulting in permanent partial disability which entitle an employee to compensation under M. S. A. 176.101.

In its opinion the commission stated:

“* * * it is clear that payment from the special fund was nothing more than and could only be considered as payment of compensation to the totally disabled employe. If by virtue of a situation giving rise to a third-party suit, and money recovered in such a suit is available, then it seems elementary that the right of subrogation lies for those who have paid compensation because of the liability imposed.

“The payments of compensation provided by the act * * * all follow from the basic compensation act * * *. To say that subrogation lies under one section and is denied under another section would be contrary to the broad and general acceptance of the act.

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“* * * We cannot * * * see any distinction in compensation paid, whether from the fund or by an insurance carrier; therefore, we conclude that the fund be credited with the payment of $5,000 from the money in the hands of the employe resulting from the third-party recovery.”

On appeal relator asserts that subrogation rights under the compensation act are fixed by M. S. A. 1949, § 176.06, subd. 2,¹ which authorizes subrogation of an employer in third-party negligence actions instituted by an employee, but which does not extend subrogation rights to the custodian of the special compensation fund, and that therefore he should be required to pay relator the additional $5,000 as provided in § 176.13.

Respondent contends that, even though § 176.06, subd. 2, makes no reference to the custodian of the special compensation fund, under common-law principles of equity, the latter may be subrogated in third-party negligence actions arising out of industrial accidents wherein an employee recovers all or part of compensation previously paid him; and that, since relator here has received payments in excess of the $10,000 compensation paid him and the $5,000 provided for in § 176.13 no further liability rests upon the custodian thereunder.

The question has not previously been presented here, and since the provisions of § 176.13 are not common to the workmen’s compensation acts of other states, there are no decisions of other jurisdictions to guide us in our determination thereof.

In determining whether respondent custodian of the special compensation fund may be subrogated to employee’s third-party negligence action, we are governed by the general principle that, in the absence of unmistakable language, the Workmen’s Compensation Act should not be interpreted to cut off or limit a workman’s common-law or statutory remedies not eliminated or otherwise restricted by the provisions thereof. Cook v. Minneapolis Bridge Const. Co. 231 Minn. 433, 43 N. W. (2d) 792; 21 Dunnell, Dig. (3 ed.) § 10385(9).

One such remedy expressly reserved to an injured workman is his right of action against a third party not within the provisions of the act whose negligence proximately caused the injuries. § 176.06, subd. 2. The only limitation imposed upon this right is that the employer may deduct from compensation funds due the workman the amount which the latter shall have received in the third-party action and may be subrogated to the right of the workman for such purpose. There is nothing in § 176.06, subd. 2, which authorizes such subrogation to anyone except the employer.

The right of subrogation to an injured employee’s third-party action appears strictly dependent upon statutory authorization rather than upon common-law principles. The workmen’s compensation acts of the various states grant authority for such subrogation to either (1) the employer alone; or (2) to the employer, or, in the alternative, to his compensation insurer, or to the state compensation fund.² Where such legislation fails to authorize subrogation by specific designation, or limits its extent, or specifies the kind of action in which it is authorized, the courts will not enlarge upon or extend the specific language or provisions thereof.³ Metropolitan Cas. Ins. Co. v. Sloss-Sheffield Steel & Iron Co. 241 Ala. 545, 3 So. (2d) 306; Merino v. Pacific Coast Borax Co. 124 Cal. App. 336, 12 P. (2d) 458; New Amsterdam Cas. Co. v. Griner, 176 Ga. 69, 166 S. E. 864; Pittsburgh, C. C. & St. L. R. Co. v. Keith, 89 Ind. App. 233, 146 N. E. 872; Henderson T. & T. Co. v. Owensboro H. T. & T. Co. 192 Ky. 322, 233 S. W. 743; Fidelity & Cas. Co. v. Huse & Carleton, Inc. 272 Mass. 448, 172 N. E. 590, 72 A. L. R. 1143; United States Cas. Co. v. Hercules Powder Co. 4 N. J. 157, 72 A. (2d) 190; Truscon Steel Co. v. Trumbull Cliffs Furnace Co. 120 Ohio St. 394, 166 N. E. 368; Fox v, Dunning, 124 Okl. 228, 255 P. 582; Aetna Life Ins. Co. v. Otis Elev. Co. (Tex. Civ. App.) 204 S. W. 376; Marshall-Jackson Co. v. Jeffery, 167 Wis. 63, 166 N. W. 647.

Thus, it has been said that a compensation insurer’s “right of subrogation depends entirely upon the [workmen’s compensation] statute” (Metropolitan Cas. Ins. Co. v. Sloss-Sheffield Steel & Iron Co. 241 Ala. 545, 3 So. [2d] 308); that “The right of recovery is statutory and is to be distinguished from cases involving subrogation” (Merino v. Pacific Coast Borax Co. 124 Cal. App. 344, 12 P. [2d] 461); that an insurer’s suit against a third party causing employee’s injuries “can be maintained only if authorized by statute” (Lloyd Adams Inc. v. Liberty Mutual Ins. Co. 190 Ga. 633, 639, 10 S. E. [2d] 46, 50); that “the question [of subrogation] * * * involved is that of a statutory right * * *” (Wabash Water & Light Co. v. Home Tel. Co. 79 Ind. App. 395, 399, 138 N. E. 692, 693); that “The statute gives no right of action in such [third-party] case to the insurance company either in its own name or that of the employe * * *” (Henderson T. & T. Co. v. Owensboro H. T. & T. Co. 192 Ky. 326, 233 S. W. 744); that the compensation insurer’s right of subrogation “does not rest on the principle of subrogation * * * [or] upon reimbursement [but] * * * is wholly the creature of the statute” (Fidelity & Cas. Co. v. Huse & Carleton, Inc. 272 Mass. 452, 172 N. E. 591, 72 A. L. R. 1143); that “The statute * * * extends no relief to the insurance company, either by way of subrogation or reimbursement” (Erie R. Co. v. Michelson, 111 N. J. Eq. 541, 545, 162 A. 764, 766).

In Truscon Steel Co. v. Trumbull Cliffs Furnace Co. 120 Ohio St. 394, 398, 166 N. E. 368, 369, the court said:

“In some * * * states, the Workmen’s Compensation Act recognizes this right of reimbusement where there has been * * * suit against a third party * * * but nothing of that kind appears in the Workmen’s Compensation Act of Ohio.” (Italics supplied.)

In Aetna Life Ins. Co. v. Otis Elev. Co. (Tex. Civ. App.) 204 S. W. 376, 378, it was said:

“* * * appellant contends that, independent of the statute, it had the right of subrogation in equity. * * *

“* * * insurance provided under the workmen’s compensation statute

* * * should not have the effect of giving an equitable right of subrogation to the insurance company * *

In Marshall-Jackson Co. v. Jeffery, 167 Wis. 63, 68, 166 N. W. 647, 649, in construing an Illinois compensation act, the Wisconsin court stated:

“* * * the [Illinois] legislature intended that the legal rights of the employee [against third-party tortfeasors] * * * should not be affected by * * * the compensation act, except that the employer is subrogated to the right * * *. This right does not vest in the employer any such right of action which can pass by subrogation to an insurer of the employer * * (Italics supplied.)

As indicated above, § 176.06, subd. 2, authorizes subrogation in employee’s third-party actions only for employers. While this section has been involved in prior cases in this court, it has never been determined here that the term employer as used therein was intended to include the latter’s compensation insurer, although that was assumed in a number of cases in which the precise issue was not raised. See, Hartford Acc. & Ind. Co. v. Schutt Realty Co. 210 Minn. 235, 297 N. W. 718; Standard Acc. Ins. Co. v. Minnesota Utilities Co. 207 Minn. 24, 289 N. W. 782; Nyquist v. Batcher, 235 Minn. 491, 51 N. W. (2d) 566; 24 Minn. L. Rev. 303.

In Fidelity & Cas. Co. v. St. Paul Gas Light Co. 152 Minn. 197, 200, 188 N. W. 265, 266, by way of dictum, it was said that the subrogation features of § 176.06, subd. 2, were “no doubt merely declaratory of the common law rule of subrogation, available to the employer without act of the legislature.” Subsequently, in City of Red Wing v. Eichinger, 163 Minn. 54, 57, 203 N. W. 622, 624, again in dictum, it was stated that “Such right of subrogation as the law gave the city [the employer], it, by contract, assumed to pass to the insurance company.” Finally, in McGuigan v. Allen, 165 Minn. 390, 394, 206 N. W. 714, 715, this court’s doubts upon the question were disclosed when it was stated that “For the purpose of argument only we will assume that, if compensation is paid by the insurer * * *, the same [employer’s] right of subrogation exists.” (Italics supplied.)

From the foregoing, it must be concluded that this issue has not been determined prior hereto. Under applicable principles above set. forth, § 176.06, subd. 2, in so far as it limits an employee’s common-law right of action against a third-party tortfeasor, must be strictly construed. By its terms, subrogation is expressly authorized for employers only. Even if it be conceded, as implied in City of Red Wing v. Eichinger, supra, that, by virtue of privity of contract, the term employer as used therein should cover the latter’s compensation insurer, this would not be authority for further extending its meaning to also include the custodian of the special compensation fund. The latter does not stand in the employer’s position either by virtue of privity of contract or otherwise. He is not the employer’s indemnitor for compensation paid, nor does he insure employer against compensation claims. He affords no protection to any individual employer. He represents all employers within the act as a general class. See, Senske v. Fairmont & Waseca Canning Co. 232 Minn. 350, 45 N. W. (2d) 640.

Had the legislature intended that the custodian was to be subrogated to an individual employer’s rights in his employee’s third-party action, it should have so provided. Not having done so, we are not authorized to construe § 176.06, subd. 2, to make up for the omission. The issue is governed by the terms of this section, and since thereunder the custodian of the special compensation fund is not granted subrogation rights, we must hold that he is without authority to be subrogated to the employee’s third-party action here. Accordingly, the employee is entitled to recover the $5,000 provided for under § 176.13.

The order of the commission is reversed and the case remanded for further proceedings consistent with this opinion. Relator is allowed $250 attorney’s fees in this court.

1

'‘Where an injury or death for which compensation is payable is caused under circumstances also creating a legal liability for damages on the part of any party other than the employer, * * * legal proceedings may be taken by the employee or dependents against such other party or parties to recover damages, notwithstanding the payment by the employer or his liability to pay compensation hereunder, but in such case, if the action against such other party or parties is brought by the injured employee * * * and a judgment is obtained and paid or settlement is made with such other party, either with or without suit, the employer shall be entitled to deduct from the compensation payable by him the amount actually received by such employee or dependents after deducting costs, reasonable attorney’s fees * * * such employer shall be subrogated to all of the rights of such employee or dependents * * (Italics supplied.)

2

Metropolitan Cas. Ins. Co. v. Sloss-Sheffield Steel & Iron Co. 241 Ala. 545, 3 So. (2d) 306; Merino v. Pacific Coast Borax Co. 124 Cal. App. 336, 12 P. (2d) 458; Frank C. Sparks Co. v. Huber Baking Co. 48 Del. 9, 96 A. (2d) 456; New Amsterdam Cas. Co. v. Griner, 176 Ga. 69, 166 S. E. 864; Lloyd Adams Inc. v. Liberty Mutual Ins. Co. 190 Ga. 633, 10 S. E. (2d) 46; Pittsburgh, C. C. & St. L. R. Co. v. Keith, 89 Ind. App. 233, 146 N. E. 872; Southern Surety Co. v. Chicago, R. I. & P. Ry. Co. 215 Iowa 525, 245 N. W. 864; Henderson T. & T. Co. v. Owensboro H. T. & T. Co. 192 Ky. 322, 233 S. W. 743; Fidelity & Cas. Co. v. Huse & Carleton, Inc. 272 Mass. 448, 172 N. E. 590, 72 A. L. R. 1143; State ex rel. Missouri Pac. R. Co. v. Haid, 332 Mo. 616, 59 S. W. (2d) 690; Tandsetter v. Oscarson, 56 N. D. 392, 217 N. W. 660; United States Cas. Co. v. Hercules Powder Co. 4 N. J. 157, 72 A. (2d) 190; Newark Paving Co. v. Klotz, 85 N. J. L. 432, 91 A. 91; Matter of Beekman v. W. A. Brodie, Inc. 249 N. Y. 175, 163 N. E. 298; Truscon Steel Co. v. Trumbull Cliffs Furnace Co. 120 Ohio St. 394, 166 N. E. 368; Fox v. Dunning, 124 Okl. 228, 255 P. 582; American Mutual Lia. Ins. Co. v. Otis Elev. Co. 160 Tenn. 248, 23 S. W. (2d) 245; Southern Surety Co. v. Houston Lighting & Power Co. (Tex. Civ. App.) 203 , affirmed, 240 S. W. 523; Williamson v. Wellman, 156 Va. 417, 158 S. E. 777; Marshall-Jackson Co. v. Jeffery, 167 Wis. 63, 166 N. W. 647.

3

The original compensation acts of Kentucky, New Jersey, and Texas limited subrogation rights in third-party actions to employers only. They were amended to extend such rights to the employers’ compensation insurers after the courts had refused to construe such compensation acts to include such compensation insurers. See, Stiglitz Furnace Co. v. Stith’s Admr. 234 Ky. 12, 27 S. W. (2d) 402; Scheno Trucking Co. Inc. v. Bickford, 116 N. J. Eq. 586, 174 A. 548; Brandon v. Texas Employers’ Ins. Assn. (Tex. Civ. App.) 58 S. W. (2d) 894.