Ray v. Transamerica Ins. Co.

• Decision Date: 22 March 1968
• Docket Number: Docket No. 2724,No. 1,1
• Citation: 10 Mich.App. 55,158 N.W.2d 786
• Parties: Clarence RAY, Plaintiff-Appellee, v. TRANSAMERICA INSURANCE COMPANY, a California corporation, Defendant-Appellant
• Court: Court of Appeal of Michigan — District of US

Page 786

158 N.W.2d 786

10 Mich.App. 55

Clarence RAY, Plaintiff-Appellee, v. TRANSAMERICA INSURANCE COMPANY, a California corporation Defendant-Appellant.

Docket No. 2724.

Court of Appeals of Michigan, Division No. 1.

March 22, 1968.

Released for Publication June 3, 1968.

Leave to Appeal Denied July 24, 1968.

Leonard B. Schwartz, Sugar & Schwartz, Detroit, for appellant.

George L. Downing, Kelman, Loria, Downing & Schneider, Detroit, for appellee.

Before GILLIS, P.J., and KAVANAGH and WEIPERT,* JJ.

T. G. KAVANAGH, Judge.

Plaintiff lost his hand as he was operating a punch press on the premises of his employer. He has brought this action against defendant, workmen's compensation insurance carrier for the employer, as a third-party tortfeasor, under part 3, § 15 of the workmen's compensation act, ¹ alleging that defendant voluntarily undertook to provide safety inspection services on the employer's premises and that it negligently performed this undertaking. The legal theory upon which plaintiff bases his claim is the recognized principle that one who assumes to act, even though gratuitously, becomes liable if he fails to act with due care. See Hart v. Ludwig (1956), 347 Mich. 559, 79 N.W.2d 895.

Defendant moved for summary judgment on 6 listed grounds. The first was that plaintiff's sole and exclusive remedy was under the workmen's compensation act; another that the complaint failed to state a claim upon which relief can be granted; and the others that there were no genuine issues of material fact, thus entitling defendant to judgment as a matter of law.

In denying the motion the trial court concluded that there were issues of fact raised by the pleadings which could only be resolved by the jury, and that the complaint, if accepted as true, did state a claim upon which relief could be granted. He also concluded that the workmen's compensation act did not bar the action because the employer's compensation insurer is not immune from suit under the third-party tortfeasor provision, supra. It was this latter conclusion that prompted our grant of leave to consider this interlocutory ruling, for we regard the immunity question as an important one which warrants consideration. We address ourselves to it alone, for we are not persuaded that the trial judge erred in his rulings on the other grounds.

Several courts in different jurisdictions have decided this question under the compensation acts obtaining in those jurisdictions. The decisions portray a kaleidoscope of judicial thought and no doubt other courts will come to labor over this decision as we have labored over theirs. The problem before us is the interpretation of the legislative intent expressed in the Michigan workmen's compensation act.

We have concluded that a compensation carrier is not immune from common-law tort liability for its own acts of negligence causing injury to the employee. The compensation insurance carrier may be a third party within the meaning of the Michigan act.

Insofar as is pertinent here, section 15, supra, provides:

'Where the injury for which compensation is payable under this act was caused under circumstances creating a legal liability in some person other than a natural person in the same employ or the employer to pay damages in respect thereof * * * such injured employee or his dependents or their personal representative may also proceed to enforce the liability of such third party.'

In enacting this provision the legislature did not specifically equate 'employer' with 'compensation carrier' so as to render the latter immune from its own independent acts of negligence. Had it so intended, the express words of identity would have been a simple matter. In construing the act this Court is charged, within the context in which the words are used, with giving those words their ordinary and commonly understood meaning. King v. Davidson (1917), 195 Mich. 157, 161 N.W. 841.

Defendant contends, however, that the insurer is equated with the employer under the act and that therefore the immunity of the employer under section 15 extends to the insurer and protects it from suit. Nowhere in the act has the legislature indicated any intention to identify the employer with its compensation carrier. The definition of 'employer' in the act does not include the insurer. See C.L.1948, § 411.5 (Stat.Ann.1960 Rev. § 17.145). Even where identical rights are enjoyed by each, the legislature has granted those rights separately to each. A brief review of some of the provisions of the act will serve to illustrate this point.

The title of the act refers to the 'liability of employers for injuries or death sustained by their employees' and part 1, § 4, provides that compensation benefits shall be the 'exclusive remedy against the employer.' C.L.1948, § 411.4 (Stat.Ann.1960 Rev. § 17.144). It would seem the legislature in using 'employer' in section 4 was referring to the same 'employer' as found in the title of the act, viz.: the one who employed the injured employee. 'Employer' is used to mean the one who employs and although the term has undergone some recent evolution (Goodchild v. Erickson (1965), 375 Mich. 289, 293, 134 N.W.2d 191) the carrier cannot be said to be an employer of its insured's servants.

Part 2, § 15, ² provides that no proceedings for compensation may be maintained 'unless a notice of the injury shall have been given to the Employer.' (Emphasis supplied.) Again, the use of the term 'employer' is used to mean the one who employs. In Dochoff v. Globe Construction Co. (1920), 212 Mich. 166, 180 N.W. 414, the employee claimant alleged that timely notice upon the employer's insurer was a compliance with the statute's notice requirements. Part 2, § 15 of the act as it then stood is identical to that portion of the section as it now reads which we have indicated. The Court rejected claimant's argument, stating (212 Mich. at p. 173, 180 N.W. at p. 416):

'Their only business relations were as insurer and insured. There is nothing in the act either expressly recognizing such relation as creating the insurer an agent of the insured for the purpose of being served with such notice, nor inferentially impressing upon the insurance company in which an employer may hold a policy the representative character and derivative authority which are the distinguishing features of an agent. Under the act the liability of the employer to the employe is direct and positive. The latter is not relegated to seek compensation from an insurance company because it may be holden by contract with the employer to indemnify him or it from loss. The insurance is but added security that the employer will pay the determined compensation to the injured employe . Mackin v Detroit-Timkin Axle Co., 187 Mich. 8, 153 N.W. 49.'

In part 2, § 19, C.L.1948, § 412.19 ³ (Stat.Ann.1960 Rev. § 17.169) the legislature has give the employer of the injured employee the right to request a medical examination. The same right was given to the employer's insurer, but expressly so by the use of the term 'insurance company' disjunctively with the term 'employer.'

Again, in part 3, § 5a, C.L.1948, § 413.5a (Stat.Ann.1960 Rev. § 17.179), the legislature has used 'employer' and 'insurer' in the disjunctive in relation to taking statements from the injured employee. The exact words used are: 'employer, insurer or any agent of either.'

Defendant now asks us to suppose that in part 3, § 15 the legislature has intended to include 'insurer' by its sole use of the word 'employer.' We cannot accept this interpretation. To so hold would be to give greater meaning to the words used than is obvious the legislature itself intended to give, and would be an enlargement of the terms of the act by judicial fiat. This we are loath to do. See Scott v. Alsar Company (1953), 336 Mich. 532, 58 N.W.2d 910.

In the same part 3, § 15 the legislature in following paragraphs, returns to the disjunctive identities of the employer and the insurer.

The right which plaintiff asserts is a common law right as to which the act has provided a statutory defense in favor of plaintiff's employer and his co-workers. See Woods v. Ford Motor Company (1955), 342 Mich. 518, 70 N.W.2d 739. This Court will not read into the act a provision in derogation of the common law right of an injured employee to sue a negligent third-party for damages.

Defendant finds support for its position in the opinion of Judge Kaess in Kotarski v. Aetna Casualty and Surety Company (E.D.Mich. 1965, 244 F.Supp. 547 (aff'd (C.C.A. 6, 1967) 372 F.2d 95). For all intents and purposes, the facts of Kotarski are identical to those now before this Court. Judge Kaess, however, reaches the opposite conclusion.

Of signal importance to Judge Kaess was the provision of part 3, § 15 giving the employer or its insurer the right to proceed directly against the third-party tortfeasor as subrogees to the rights of the injured employee. To this extent the subrogation provision is as much for the benefit of the employer and its insurer as it is for the employee, but the oddity under the act of an insurer being permitted to sue itself (under our construction) does not weigh so heavily in our minds. The distinguished federal bench has been confronted with odder quirks of circumstance under the act without necessity of construing the act to strain the legislative expression. See Judge Levin's opinion in Miller v. J. A. Utley Construction Co. (E.D.Mich. 1957), 154 F.Supp. 138; cited with approval in Schulte v. American Box Board Company (1959), 358 Mich. 21, 28, 99 N.W.2d 367.

The result of a defendant insurer being subrogated to the rights of its own plaintiff for the amount of the insurance paid to him is not overly incongruous. It is at least not so impossible a situation that we can hypothesize, language notwithstanding, that the legislature would never have intended this result to come to pass.

In Mager v. United Hospitals of Newark (1965), 88...