Shaw's Supermarkets, Inc. v. Delgiacco

• Decision Date: 08 August 1991
• Parties: , 12 A.L.R.5th 1093 SHAW'S SUPERMARKETS, INC., et al. 1 v. Anthony DELGIACCO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 1115

575 N.E.2d 1115

410 Mass. 840, 12 A.L.R.5th 1093

SHAW'S SUPERMARKETS, INC., et al. ¹ v. Anthony DELGIACCO.

Supreme Judicial Court of Massachusetts,

Suffolk.

Argued May 6, 1991.

Decided Aug. 8, 1991.

Gregory F. Galvin (Robert N. Gross, with him), for defendant.

Patrick T. Jones for Shaw's Supermarkets, Inc.

Paul F. Beckwith, for Liberty Mut. Ins. Co., was present but did not argue.

Before LIACOS, C.J., and WILKINS, ABRAMS, O'CONNOR and GREANEY, JJ.

ABRAMS, Justice.

At issue is whether an employee who misrepresented information about prior injuries in his employment application is entitled to workers' compensation under G.L. c. 152 (1990 ed.) for a subsequent injury. We hold that he may not receive compensation if the employer substantially relied on the knowing misrepresentation in hiring the employee and if there is a causal connection between the misrepresentation and the injury.

After a bench trial, the Superior Court judge found the following facts. On March 31, 1988, Anthony Delgiacco, the defendant, applied for a position as a warehouseman with Shaw's Supermarkets, Inc. (Shaw's). Shaw's informed him that the job required a strong, healthy back and involved repetitive heavy lifting of from five to 100 pounds during an eight-hour shift. Delgiacco underwent a physical examination and completed a medical history questionnaire in connection with the application. Question three in the questionnaire asked, "Are you troubled by pains in the back or shoulder?" Question four asked, "Have you ever had a back problem?" Delgiacco answered "no" to both questions. The examining physician relied on those answers and certified to Shaw's that Delgiacco was physically able to perform the job of warehouseman.

Shaw's hired Delgiacco for the job. The judge found that, in so doing, Shaw's relied on Delgiacco's answers in the questionnaire. In fact, Delgiacco had filed six claims against prior employers for work-related back injuries occurring between May 5, 1982, and February 7, 1986. On July 13, 1987, another doctor had opined that Delgiacco "has a permanent disability in his back ... he will never be able to perform heavy work again." The six claims were resolved by lump sum settlement on April 14, 1988. Delgiacco never informed Shaw's or Shaw's examining physician about this history. The judge found that Delgiacco knew that the answers he gave in the questionnaire were false and was aware that, if Shaw's knew about the prior injuries, it would not have hired him.

On Delgiacco's fifth day of work, he fell over a pallet and injured his back. He did not report the injury until six days later. He collected workers' compensation benefits from Liberty Mutual Insurance Company (Liberty Mutual), Shaw's workers' compensation carrier, in the amount of $11,115. In August, 1988, Shaw's and Liberty Mutual discovered the prior injuries for which Delgiacco had received compensation. Shaw's terminated his employment and Liberty Mutual terminated his benefits.

Shaw's and Liberty Mutual filed a complaint in the Superior Court pursuant to G.L. c. 152, § 14, seeking declarations that Delgiacco fraudulently misrepresented his physical condition to Shaw's, that the termination of employment was warranted, that the termination of his compensation payments was warranted, and that Shaw's and Liberty Mutual are entitled to receive reimbursement for fraudulent compensation claims, costs of the proceedings, attorneys' fees, and a penalty in an amount not less than three times the average weekly wage in the Commonwealth. See G.L. c. 152, § 14.

The judge ruled that Delgiacco procured his position with Shaw's by fraud, that his contract of employment therefore was void ab initio, and that the benefits were obtained fraudulently. The judge ordered Delgiacco to reimburse $11,115, the amount of benefits received, to Liberty Mutual, with interest and costs. The judge also awarded the plaintiffs attorneys' fees. Delgiacco appealed to the Appeals Court and we transferred the case to this court on our own motion.

A contract induced by fraudulent misrepresentations is voidable, not void. See Berenson v. French, 262 Mass. 247, 260-261, 159 N.E. 909 (1928); Joseph Martinelli & Co. v. Simon Siegel Co., 176 F.2d 98, 100 (1st Cir.1949); Restatement (Second) of Contracts § 164 (1981). The rule applies in the employment context as well. See Still v. Norfolk & W. Ry., 368 U.S. 35, 45, 82 S.Ct. 148, 154, 7 L.Ed.2d 103 (1961); Long v. Big Horn Constr. Co., 75 Wyo. 276, 282, 295 P.2d 750 (1956); 1C A. Larson, Workmen's Compensation § 47.53 (1986). Cf. Garnhum's Case, 348 Mass. 87, 88-90, 202 N.E.2d 255 (1964) (rejecting contention that compensation must be denied because employee's status as minor rendered employment contract void). Delgiacco was Shaw's employee at the time of the injury, although his misrepresentation would have justified a rescission of the employment contract. See Cherry v. Crispin, 346 Mass. 89, 92, 190 N.E.2d 93 (1963). Generally, this issue is not analyzed on the ground that the contract was void ab initio. See note 2, infra. We thus consider whether, despite that misrepresentation, Delgiacco is entitled to receive benefits.

In his treatise on workers' compensation law, Professor Larson notes the emergence of a three-part "common-sense rule" governing claims by employees who obtained employment by misrepresentation. In order for such a misrepresentation to bar benefits, the following factors must be found: "(1) The employee must have knowingly and wilfully made a false representation as to his physical condition. (2) The employer must have relied upon the false representation and this reliance must have been a substantial factor in the hiring. (3) There must have been a causal connection between the false representation and the injury." 1C A. Larson, Workmen's Compensation Law § 47.53 (1986).

A large number of jurisdictions have adopted the so-called "Larson rule," or some form of it. ² Those courts which have rejected the rule ³ usually do so because they can find no provision in their workers' compensation laws which authorizes the denial of compensation on misrepresentation in securing employment. We therefore turn to G.L. c. 152 to determine whether the Legislature intended to provide compensation to workers who obtain employment through fraud.

General Laws c. 152, § 27 (1990 ed.), provides: "If the employee is injured by reason of his serious and wilful misconduct, he shall not receive compensation...." In our view, this provision extends to the kind of misconduct encompassed by the Larson rule. The first prong of the Larson test--that the employee must have knowingly and wilfully made a false representation about his or her physical condition--ensures that the misrepresentation meets § 27's "serious and wilful misconduct" standard. The second and third prongs--that the employer substantially relied on the misrepresentation in hiring the employee and that there be a causal connection between the misrepresentation and the injury--serve to determine whether the injury is "by reason of" the misconduct. Therefore, when the three Larson criteria are met, the employee's misrepresentation amounts to serious and wilful misconduct causing injury, and the Legislature has precluded compensation under § 27.

Moreover, the strong antifraud policy evident elsewhere in c. 152 further convinces us that the Legislature did not intend to provide compensation in the face of such a misrepresentation. Section 14(1) assesses the entire cost of workers' compensation proceedings on a party who brings, prosecutes, or defends a claim without reasonable cause. When the claim is brought, prosecuted, or defended with the intent to defraud, § 14(2) assesses the party with costs, attorneys' fees, and a penalty of not less than three times the average weekly wage in the Commonwealth. Given this clear indication that the compensation procedure is not to be abused, we believe that the Legislature intended to preclude workers' compensation in cases in which an employee's deliberate misrepresentation leads to injury. Therefore, we conclude that, with respect to fraud in the procurement of employment, the Larson rule's three-part test determines when § 27 bars compensation.

The judge made specific findings with regard to the first two parts of the test. The judge found that Delgiacco intentionally misrepresented his health condition to Shaw's, and that Shaw's relied on the misrepresentation as a substantial and material factor in the hiring. The judge did not, however, determine whether there was a causal connection between the misrepresentation and the injury. The plaintiffs have the burden of proving each of the three prongs of the Larson test. See Sanchez v. Memorial Gen. Hosp., 110 N.M. 683, 686, 798 P.2d 1069 (Ct.App.), cert. denied, 110 N.M. 653, 798 P.2d 1039 (1990); Emerson Elec. Co. v. McLarty, 487 So.2d 228, 230 (Miss.1986); Ledbetter v. Pine Knoll Nursing Home, 180 Ga.App. 654, 655, 350 S.E.2d 299 (1986). ⁴ Therefore, despite the expert medical testimony in evidence that the causal connection between the misrepresentation and the injury existed, we must remand the case for a determination of this issue.

If the judge concludes that the third prong of the test (causal relationship) is satisfied, then the question of damages arises. The judge ordered Delgiacco to reimburse Liberty Mutual the amount of the award, plus interest and costs. The judge also awarded attorneys' fees to the plaintiffs. The judge did not refer to the penalty authorized under § 14(2). Under § 27, if the judge finds that Delgiacco's misrepresentation was causally connected to his...