Liberty Mutual Insurance Co. v. Borsari Tank Corp.
| Decision Date | 20 September 1957 |
| Docket Number | Docket 24117.,No. 117,117 |
| Citation | 248 F.2d 277 |
| Parties | LIBERTY MUTUAL INSURANCE COMPANY, Plaintiff-Appellee, v. BORSARI TANK CORPORATION of America and Anheuser-Busch, Inc., Defendants-Appellants, and Employers Mutual Liability Insurance Company of Wisconsin, Defendant. |
| Court | U.S. Court of Appeals — Second Circuit |
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Albert P. Thill, Brooklyn, N. Y., for plaintiff-appellee.
William F. McNulty, New York City, for defendants-appellants.
Before MEDINA and HINCKS, Circuit Judges, and LEIBELL, District Judge.
This is an appeal from a judgment of the United States District Court, Southern District of New York, Dawson, J., in favor of the plaintiff insurance carrier, in the sum of $5,000 (plus costs) against two defendants, Borsari Tank Corporation, and Anheuser-Busch, Inc., after a trial without a jury.1 The claim against the third defendant, Employers Mutual Liability Insurance Company of Wisconsin, was dismissed on consent at the end of the trial.
In 1950 and subsequent thereto, the Borsari Corporation was engaged in the business of installing brewing vats, and did work in many states. It maintained plants and hired employees in three states, New York, New Jersey and Missouri. Liberty Mutual issued a master Workmen's Compensation Policy covering those three states in 1950. When Borsari performed a job in any other state, key men would be sent from its plants to direct and assist in the work.
About May 6, 1952 Liberty issued to Borsari a policy of Workmen's Compensation Insurance (No. WC XX-XXXXXX-XX N.Y. effective April 1, 1952 for one year) which covered compensation liability of Borsari on work being done in the State of New Jersey for the Anheuser-Busch Corporation.
On July 23, 1952, Borsari and Anheuser entered into a contract, whereby Borsari agreed to perform certain additional work for Anheuser at Newark, New Jersey. The contract for the additional work was known as Anheuser's Project 654, and Borsari's Job No. 5207. It was the second job Borsari had undertaken for Anheuser at Newark; the earlier job was known as Borsari Job No. 4910 under a contract containing similar provisions for workmen's compensation insurance. Under the terms of the contract, Anheuser agreed to furnish Borsari (at the expense of Anheuser) liability insurance protecting Borsari "under any Workmen's Compensation Act or other statute or law inposing liability for injuries sustained by Borsari employees in connection with work covered by the contract." The trial court properly construed this contract provision to be all inclusive, that it included any compensation liability of Borsari under the laws of Missouri, as well as those of New Jersey.
Anheuser obtained from Employers Mutual workmen's compensation insurance insuring Borsari, and Employers Mutual issued and delivered to Borsari a certificate of insurance dated February 2, 1953. The date of the policy itself does not appear. The certificate was silent as to the states included in the coverage, but the master policy, which was issued to and retained by Anheuser, specifically provided that it covered Borsari only for the workmen's compensation liability imposed by the laws of the State of New Jersey.
It is alleged by Liberty, that Borsari, acting in good faith, and in order to save a premium charge, and believing it was fully covered by the Employers Mutual policy for its workmen's compensation liability in every state where required, requested Liberty to eliminate from its existing workmen's compensation policy all coverage for injuries to or death of Borsari's employees in connection with the Anheuser job in Newark, New Jersey. Accordingly on December 8, 1952, Liberty issued an endorsement (No. 17) to Borsari's policy reading as follows:
Borsari had made a similar request in 1950 as to Liberty's coverage on Job #4910, and the same course had been followed.
On March 11, 1953, a fire occurred at the Anheuser job site in Newark, New Jersey, and as a result three of Borsari's employees, Grainger, Hageman and Manthey, lost their lives. Later Borsari learned that the Employers Mutual policy did not provide coverage for Borsari's liability under the Workmen's Compensation Law of Missouri. V.A. M.S. § 287.010 et seq.
The widows of the deceased employees, who were residents of Missouri, filed claims for compensation death benefits against Borsari and Liberty, as insurance carrier, with the Division of Workmen's Compensation, Department of Labor and Industrial Relations for the State of Missouri. The Missouri statute provided more liberal compensation than the New Jersey statute. The claimants had a choice of compensation under either the New Jersey or the Missouri statutes.
The contracts of employment of the deceased employees had been made in the State of Missouri and their widows were eligible to recover from Borsari and from Liberty Mutual, its insurance carrier in Missouri, the compensation benefits under the Missouri Workmen's Compensation Law. Under § 287.280 of the Act and under the authority of Allen v. Raftery, 237 Mo.App. 542, 174 S.W.2d 345, Liberty was precluded from denying liability, despite its endorsement of December 8, 1952, issued to Borsari, which excluded coverage with respect to Borsari's employees in connection with the Anheuser job in Newark, New Jersey. Liberty had covered some of Borsari's employees in Missouri and under the statute (§ 287.110, subd. 2) the widows of the Borsari workmen hired in Missouri were similarly protected, although working in another state. On May 19, 1954, each surviving widow received from the Missouri Workmen's Compensation Division a final compensation award of $12,400.00 against Borsari and Liberty, a total of $37,200. The $400.00 of each award was for funeral expenses.
The estates of the three deceased employees had instituted common law actions in the State of New Jersey to recover damages from certain contractors for having negligently caused the deaths of these men. While the third party actions were pending, Liberty and Borsari, pursuant to the laws of New Jersey, "asserted liens by statutory notice against any recovery by the states,"2 in the common law actions.
The actions in New Jersey were settled for a total sum of $82,500. In the Grainger estate the settlement figure was $30,000; in the Hageman estate $27,500; and in the Manthey estate $25,000. Under the terms of the settlement Liberty was to receive about $15,000 as reimbursement for compensation payments theretofore paid to the surviving widows, and also the right to be released from making further payments under the Missouri awards of May 19, 1954.3 Liberty alleges that as a condition of receiving its share of the settlement recovery, it was required by the statutes, of Missouri and New Jersey, to pay an attorney's fee of $5,000.00 to the attorneys who represented the estates of the deceased workmen in the third party actions; and that at the time Liberty received its part of the recoveries Liberty paid the $5,000.00 fee by three checks (Ex. 11), dated January 9, 1956, totalling the $5,000. Liberty accordingly has claimed reimbursement of that amount from the defendants, Borsari and Anheuser, in the present action.
Liberty's claim against Borsari is that since the latter induced Liberty "to eliminate three state coverage from its compensation policy," on Borsari's representation that it was obtaining similar coverage through another insurance carrier under Borsari's contract with Anheuser, Borsari is liable to Liberty for the loss it sustained by Borsari's failure to do so; and that the $5,000.00 attorneys' fee represents that loss.
Liberty claims that it is subrogated to any rights of recovery vested by law in Borsari against Anheuser, and that Anheuser breached its contract with Borsari, by failing to provide proper insurance for Borsari "under any Workmen's Compensation Act," including the State of Missouri. Liberty bases its claim against Anheuser on the subrogation clause of Liberty's insurance policy issued to Borsari and on the general principles of subrogation.
Judge Dawson found in favor of Liberty, holding Borsari and Anheuser jointly and severally liable for the $5,000.00 Liberty paid as its proportionate share of the attorneys' fees in the New Jersey third party actions.
The most important question presented on his appeal is whether the payment of the $5,000.00 by Liberty Mutual was a "voluntary" payment, or a payment that Liberty was obliged to make by statute. If the payment was voluntary, Liberty Mutual would have no basis for a claim of recoupment. The nature of the payment, voluntary or otherwise, is governed by the provisions of the statute, applicable as of the date the recoveries in the third party actions were effected.
Although Liberty Mutual and Borsari filed their statutory notice in the third party actions instituted in the New Jersey State Court, pursuant to New Jersey law, their right to recover on their lien, the amount of their recovery and the conditions attached thereto, are governed by the law of the State whose Compensation Act was invoked by the claimants in obtaining their compensation awards.4 In this case it would be the law of Missouri. However, the trial of this case and its decision proceeded on the assumption that the Compensation Law of New Jersey applied. The New Jersey statute required contribution by the compensation carrier towards the expenses and attorney's fee of the plaintiff in a third party action. It was in effect on all pertinent dates.
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