Carmack v. Great American Indem. Co.

• Decision Date: 29 October 1947
• Docket Number: Gen. No. 9548.
• Citation: 332 Ill.App. 354,75 N.E.2d 521
• Parties: CARMACK et al. v. GREAT AMERICAN INDEMNITY CO.
• Court: United States Appellate Court of Illinois

332 Ill.App. 354

75 N.E.2d 521

CARMACK et al.

v.GREAT AMERICAN INDEMNITY CO.

Gen. No. 9548.

Appellate Court of Illinois, Third District.

Oct. 29, 1947.

Appeal from Circuit Court, Fulton County; Riley E. Stevens, Judge.

Action by Fred Carmack and Junior Carmack, partners, doing business as Carmack's Super Market, against Great American Indemnity Company, to recover a portion of a compensation award which plaintiff paid by reason of the death of a minor employee. Judgment for plaintiff, and defendant appeals.

Affirmed.

Clarence W. Heyl, of Peoria, for appellant.

Chiperfield & Chiperfield, Frederick O. Mercer, and James F. Scott, all of Canton, for appellees.

WHEAT, Presiding Justice.

This is an action at law on a Standard Workmen's Compensation and Employer's Liability Insurance Policy, brought by Fred Carmack and Junior Carmack, partners doing business as Carmack's Super Market, the appellees herein, to recover the sum of $600 from the Great American Indemnity Co., the appellant herein. Upon hearing, judgment in the sum of $600 was entered against defendant-appellant, from which this appeal follows.

The case was heard before the trial court on stipulated facts. It appeared that on April 19, 1943, appellees were engaged in the retail grocery and meat business in and about Canton, Illinois, and were operating under the provisions of the Illinois Workmen's Compensation Act. On that date, appellees had in their employ one Glenn E. Jarrett, now deceased, who was then under 15 years of age and who was illegally employed, in that appellees had made no effort to secure a Certificate as required by Statute for employment of a minor of that age. Ch. 48, Par. 31.9, Ill.Rev.Stat.1945. On said date, the said Jarrett sustained an accidental injury which arose out of and in the course of his employment, and in direct consequence thereof, he died on April 30, 1943. Deceased left him surviving his mother, who, because of her partial dependency on the earnings of deceased, became entitled to the sum of $1200, being the minimum compensation payable under Section 7(c) of the Illinois Workmen's Compensation Act, and, because of the age of the deceased and the circumstances of his employment, became entitled to $600 additional compensation under Section 7(i) of the Illinois Workmen's Compensation Act. Ch. 48, Par. 144, Ill.Rev.Stat.1945.

A dispute having arisen concerning defendant's liability to pay the $600 additional compensation, it was agreed between the parties to this action that defendant should pay the sum of $1200 and that plaintiffs should pay the sum of $600 to the mother of the deceased, which payments were made on June 29, 1943, in full satisfaction of a Lump Sum Settlement approved and confirmed by the Illinois Industrial Commission on June 24, 1943.

These payments were made in accordance with and subject to the terms of a Stipulation entered into on June 16, 1943, between the parties to this action, the parts of said Stipulation here pertinent providing that the payment of the sum of $600 by appellees should be made ‘with full reservation of rights to (appellees) and not be considered as a waiver of their right to claim reimbursement for payment of said sum from (appellant)’ and that the making of said Settlement and Stipulation should ‘not be construed as a waiver of any rights of (appellant) with reference to its denial of liability for the additional compensation of 50% as provided by Section 7(i) of the Workmen's Compensation Act, on account of the illegal employment of the (deceased).’

That portion of the Standard Workmen's Compensation and Employer's Liability Policy here in controversy provides as follows:

‘The company does hereby agree with this employer * * * as respects personal injury sustained by employees, including death, at any time resulting therefrom as follows:

‘I. (a) To pay promptly to any person entitled thereto, under the Workmen's Compensation Law and in the manner therein provided, the entire amount of any sum due, and all installments thereof as they become due. * * *

‘It is agreed that all the provisions of each Workmen's Compensation Law covered hereby shall be and remain a part of this contract as fully and completely as if written herein. * * *

‘I. (b) To indemnify this employer against loss by reason of the liability imposed upon him by law for damages on account of such injuries to such of said employees as are legally employed * * *.’

Defendant's first argument relied on for reversal is in substance as follows: Plaintiff must recover, if at all, under Paragraph 1(b) of the insurance contract, by the terms of which the insurer undertakes to indemnify the employer against loss for liability imposed on account of injuries to such employees as are legally employed. Since by plaintiffs' own admission the deceased was illegally employed, it is urged that plaintiffs have no standing to recover.

We have examined with care the following decisions cited by appellant in support of the foregoing proposition: Rudy v. McCloskey & Co., 1914, 348 Pa. 401, 35 A.2d 250;Miller Mfg. Co. v. AEtna Life Ins. Co., 1928, 150 Va. 495, 143 S.E. 747;Goodwillie v. London Guarantee & Accident Co., 1900, 108 Wis. 207, 84 N.W. 164;Ocean Accident & Guarantee Corp. v. Washington Brick & Terra Cotta Co., 148 Va. 829, 139 S.E. 513;Ocean Accident & Guarantee Corp. v. People's Wet Wash Laundry Co., 1942, 92 N.H. 260, 29 A.2d 418.

We find in each of these cases that the action against the insurer was based upon Paragraph I(b) of the Standard Policy, or the equivalent thereof, only. We may assume that the deceased in this case was not ‘legally employed’ within the meaning of those words as used in the insurance contract and that appellee cannot recover under Paragraph I(b) of the Standard Policy for that reason.

However, after careful examination of the record, we do not agree with defendant's contention that plaintiffs' cause of action was based in the trial court upon Paragraph I(b) of the policy, either solely or in part, or that it must be so based. Paragraph 7 of the complaint clearly indicates that the cause of action was a claim for reimbursement, or in other words, an action for damages resulting from defendant's breach of contract to pay to any person entitled thereto, under the Workmen's Compensation Law, the entire amount of any sum due to such person because of the obligation for compensation imposed upon plaintiffs under the Workmen's Compensation Law, as provided by the provisions of Paragraph I(a) of the policy.

In various forms, defendant has argued that there can be no recovery by the employer in an action based on Paragraph I(a) of the Policy because that paragraph is a contract between the insured and the employee solely for the benefit of the employee. In this contention we find no merit whatever.

Patently, the whole of the insurance policy constitutes a contract between the employer and the insurance carrier. To say that Paragraph I(a) is a contract for the benefit of a third person, only, obstructs the issue. While payment of the award runs to the employee and in that sense benefits a third person, it is clearly a benefit to the employer as well. Indeed, it is his vital concern that such payment be made to save him from liability. Williston on Contracts, Section 380. Defendant's failure to perform his obligation under Paragraph I(a) has clearly resulted in damage to the plaintiff.

Counsel for plaintiffs have cited no Illinois cases, and we have found none in which the employer after paying a part of the award has sought recovery thereof from the insurance carrier. As noted above, none of the cases cited for defendant are in point because in each the action was based on Paragraph I(b) of the Standard Policy, or its equivalent. However, it appears that the principles laid down in two cases from other jurisdictions are relevant to the issue here involved. Stuart v. Spencer Coal Co., 307 Mich. 685, 12 N.W.2d 443; and Massachusetts Bonding & Insurance Co. v. Industrial Accident Commission, 19 Cal.App.2d 583, 65 P.2d 1349, both involve actions by insurance carriers to have set aside awards made by Industrial Commissions to employees who were injured while employed in violation of penal statutes regulating conditions of labor.

In the former case, the insurer claimed that it should be liable for ‘single...