Horne v. Security Mutual Casualty Company

• Decision Date: 20 March 1967
• Docket Number: No. LR-66-C-92.,LR-66-C-92.
• Citation: 265 F. Supp. 379
• Parties: Lee Amos HORNE and Viola Horne, his wife, Plaintiffs, v. SECURITY MUTUAL CASUALTY COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Arkansas

265 F. Supp. 379

Lee Amos HORNE and Viola Horne, his wife, Plaintiffs, v. SECURITY MUTUAL CASUALTY COMPANY, Defendant.

No. LR-66-C-92.

United States District Court E. D. Arkansas, W. D.

March 20, 1967.

Alonzo D. Camp, Little Rock, Ark., for plaintiffs.

Winslow Drummond, Wright, Lindsey & Jennings, Little Rock, Ark., for defendant.

MEMORANDUM OPINION

GORDON E. YOUNG, District Judge.

This opinion deals with the defendant's motion to dismiss for failure to state a claim on which relief can be granted. Rule 12(b) (6) Fed.R.Civ.P. The motion will be granted.

Lee Amos Horne, plaintiff, was injured on December 5, 1965, in the plant of his employer, Swift & Company, while he and other employees were attempting to remove a broken frame from the top of a Sperry Filter Press. While assisting in this removal plaintiff slipped and fell from the press, his left foot plunging through an opening in the floor into a large helical auger, which resulted in severe injuries to plaintiff's leg and foot. The defendant, Security Mutual Casualty Company, had issued a policy of workmen's compensation insurance whereby defendant agreed to provide the following coverage for its insured, Swift & Company:

"I. COVERAGE A—WORKMEN'S COMPENSATION. To pay promptly when due all compensations and other benefits required of the insured by the Workmen's Compensation law.

"COVERAGE B—EMPLOYERS' LIABILITY. To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury by accident or disease, * * *."

II. DEFENSE, SETTLEMENT, SUPPLEMENTARY PAYMENTS. (The customary undertaking by the defendant to provide a legal defense for the insured.)

As required by law, Security filed with the Arkansas Insurance Commissioner certain premium rating data necessary for it to write workmen's compensation insurance in this State, this data reflecting that 2.14% of each premium dollar was to provide "Accident Prevention and Safety Engineering Service for the Employer," and that this particular portion of the premium dollar was included in a total of 73.12% of each premium dollar projected "for the direct benefit of the employer and his employees." The remainder of the 73.12% was made up of two items—8.72% for adjusting and paying claims, representing employees at hearings, etc., and 62.26% for indemnity and medical payments to injured workmen.

The complaint indicates that the policy became effective September 2, approximately three months before the injury. No inspections were made by defendant of Swift's plant or equipment prior to the date plaintiff was injured.

Plaintiff filed claim against Swift and defendant under the provisions of the Workmen's Compensation Act of Arkansas, and as of June 1966 had received compensation benefits of $912.50 and medical benefits of $1,253.00. Plaintiff is continuing to receive such benefits from the defendant.

On April 21, 1966, plaintiff brought suit against defendant in the Circuit Court of Pulaski County, Arkansas, and defendant removed the cause to this Court under its diversity jurisdiction. In his complaint plaintiff alleges that defendant was guilty of negligence in failing to inspect Swift's plant and make recommendations for the elimination of hazards, and in particular in failing to recommend that certain safety precautions be taken around the Sperry press and the power driven auger, and that by reason of such negligence, the plaintiff suffered his injuries.

The defendant filed this motion to dismiss in which it contends that the plaintiff has failed to state a claim on which relief can be granted. In support of this contention defendant argues that its sole liability to plaintiff arises under the Workmen's Compensation Act of Arkansas; that defendant has discharged and will continue to discharge that liability; and that defendant, as the workmen's compensation carrier for plaintiff's employer, cannot be subjected to a suit for damages as a third-party tortfeasor within the meaning of the Workmen's Compensation Act of Arkansas.

On the other hand, plaintiff argues that we are not concerned with an interpretation of the Arkansas Workmen's Compensation Act. He contends the real issue is whether tort liability may arise from and out of the violation of a contractual undertaking.

More specifically, plaintiff says that prior to the date of the accident the defendant had entered into a premium rate contract with the State of Arkansas, by the terms of which defendant agreed to provide "Accident Prevention and Safety Engineering Services" for employees of Swift, and that it is admitted that no such services were provided by the defendant. The so-called "contract" referred to by plaintiff is the "Breakdown of Net Premium Rate" filed with the Arkansas Insurance Commissioner, which has been referred to above.

Defendant contends that the complaint should be dismissed because:

1. The pertinent sections of the Arkansas Workmen's Act clearly extend the employer's immunity to suit by an employee to the compensation insurance carrier;

2. The third party liability section of the Act (Ark.Stats. § 81-1340) clearly negates any interpretation permitting the imposition of liability on the workmen's compensation carrier as a third party tortfeasor; and

3. Policy considerations underlying workmen's compensation legislation, in general—and the Arkansas Act, in particular—require immunity for the carrier for the ultimate benefit of employees and their dependents.

At the outset of this discussion, we observe:

1. The Arkansas Workmen's Compensation Act makes no provision for safety engineering or inspection services by an insurance carrier.

2. As has already been shown, defendant did not agree in its policy to provide any safety engineering or inspection services.

3. Defendant did not, in fact, furnish any such services.

Plaintiff is incorrect in characterizing "Breakdown of Net Premium Rate" filed with the State Insurance Commissioner as a "Contract with the State of Arkansas by the terms of which, inter alia, defendant agreed to provide `Accident Prevention and Safety Engineering Services' for employees of defendant."

The document in question appears to be a general form and it would appear that it was for general use by insurance companies, not for the defendant alone. At the top appears "National Council on Compensation Insurance"—underneath then appears "Stock Companies"—beneath that appears "Breakdown of Net Premium Rate" (incidentally, defendant is not a stock company, but a mutual company, as is reflected by the back of the specimen policy).

Beneath this appears a "pie" chart, purporting to show the breakdown of the premium dollar. This chart is the sole basis for plaintiff's contention.

The percentages shown on this chart do not relate to this particular policy, but appear to relate to the overall experience with policies of this type, and it appears probable from the headings on the chart that these percentage figures are not for defendant alone, but are for a group of insurance companies.

In filing this chart, defendant did not agree to expend 2.14% of the premium dollar for safety engineering and inspection services as plaintiff contends. This is an average figure derived from the experience of a great many policy risks of this nature.

For example, this chart did not mean that defendant would expend 62.26% of the premium in payments to workmen or 8.72% for adjusting and paying claims; its obligations are measured by its insurance policy, where it agreed to pay all of such expenses. In any given year defendant might make no payments under these items, or it might pay several times the percentages reflected by the chart. And, for whatever it may be worth, the safety services reflected by the chart were shown as for the employer and not for "the express benefit of Swift's employees" as alleged by plaintiff.

This may be enough to dispose of the case, but the Court is of the opinion that in any event the Arkansas Workmen's Compensation Act insulates the defendant from liability here.

(1) Paragraph 1, Section 4 of the Act (Ark.Stats. § 81-1304, 1960 Repl.) provides remedies for workmen's injuries arising out of the course of their employment which are exclusive of all other rights and remedies as against the workmen's employer. Also see, Huffstetter v. Lion Oil Company, 208 F.2d 549 (8 Cir. 1953).

Judge Miller had occasion to construe this section and the Arkansas decisions in Ragsdale v. Watson, 201 F.Supp. 495 (W.D.Ark.1962). In that case the injured workman had brought an action against certain doctors, his employer's carrier, and the carrier's adjuster for damages for alleged civil conspiracy to defraud the employee by intentional submission of false and misleading medical reports to the Arkansas Workmen's Compensation Commission.

The defendant filed a motion to dismiss the complaint pursuant to Rule 12 (b) (6) Fed.R.Civ.P. (failure to state a claim upon which relief can be granted). The motion was granted, and in his opinion Judge Miller said, at page 499:

"Thus, any claim that the plaintiff has against his employer or its workmen's compensation insurance carrier or the agent of the carrier must be determined by a proceeding before the Workmen's Compensation Commission." (Emphasis added.)

(2) Section 37 (Ark.Stats. § 81-1337) of the Arkansas Act is entitled "Substitution of Carrier for Employer." This particular section provides that in the event an employer secures workmen's compensation insurance from a carrier, then the carrier must discharge the obligations and duties of the employer and stands in the shoes of the employer with respect to any proceedings brought by an employee before the Workmen's Compensation Commission or in a court. Section 37 should be construed in connection with Section 5 (Ark.Stats. § 81-1305) of the Act, which provides in part that an employer, having secured compensation benefits through insurance, is not...