Shelby Mutual Insurance Co. v. Girard Steel Supply Co.

• Citation: 224 F. Supp. 690
• Decision Date: 20 December 1963
• Docket Number: No. 3-63-Civ-234.,3-63-Civ-234.
• Parties: The SHELBY MUTUAL INSURANCE COMPANY of Shelby, Ohio, a corporation, Plaintiff, v. GIRARD STEEL SUPPLY CO., a corporation, Defendant.
• Court: U.S. District Court — District of Minnesota

224 F. Supp. 690

The SHELBY MUTUAL INSURANCE COMPANY of Shelby, Ohio, a corporation, Plaintiff, v. GIRARD STEEL SUPPLY CO., a corporation, Defendant.

No. 3-63-Civ-234.

United States District Court D. Minnesota, Third Division.

December 20, 1963.

COPYRIGHT MATERIAL OMITTED

William J. Baudler, Baudler & Baudler, Austin, Minn., for plaintiff.

Ray G. Moonan, Moonan & Moonan, Minneapolis, Minn., for defendant.

DEVITT, Chief Judge.

This expression is occasioned by defendant's motion for summary judgment or for dismissal on the several grounds set out in the footnote.¹

Jurisdiction is based on allegations of diversity and the requisite amount in controversy. The plaintiff is an Ohio corporation with its principal place of business at Shelby, Ohio, and the defendant is a Minnesota corporation with its principal place of business at St. Paul, Minnesota.

It appears from the pleadings that on the 6th day of April, 1961, one Harold N. Stoffel, while riding as a passenger in an automobile being operated by his son, David Stoffel, was killed, allegedly as a result of an accident with a car being driven by John W. Coolidge, defendant's employee. The accident occurred in Minnesota, near Minnesota City. It is admitted that at the time of the accident Coolidge was in the course of his employment with the defendant, and that Harold N. Stoffel was in the course of his employment as a minister of the English Luthern Church of the Holy Trinity, LaCrosse, Wisconsin. It is further admitted that at the time of the accident, plaintiff was the Workmen's Compensation insurance carrier for said church, and that under Section 102.49 of the Workmen's Compensation Act of the State of Wisconsin the plaintiff was obliged to and did pay into the state treasury of the State of Wisconsin a sum of money specified by the statute.

Plaintiff brings this action under subdivision (2) of Section 102.29 of the Wisconsin Workmen's Compensation Act,² alleging that the accident was the proximate result of the negligence of defendant's employee, and demands judgment in the amount plaintiff was required to pay into the state fund, with interest. Section 102.29(2) W.S.A., gives the employer or insurer who is required to make payment into the State treasury an independent cause of action, Employers Mutual Liability Ins. Co. of Wisconsin v. Mueller, 273 Wis. 616, 79 N.W.2d 246, 248 (1956), against a third party for reimbursement for any sums so paid if the injury or death of the employee was due to the actionable act, neglect or default of the third party. It creates a cause of action for reimbursement and not for damages, Wisconsin Power and Light Co. v. Dean, 275 Wis. 236, 81 N.W.2d 486, 488 (1957), and the right to maintain the action is based on the statute and is not dependent on any contractual theory of subrogation or assignment. Employers Mut. Liability Ins. Co. v. Icke, 225 Wis. 304, 274 N.W. 283, 285 (1937).

Under Wisconsin law, where an employee has been killed and an employer or insurer is compelled to pay a statutory amount into the state treasury, a cause of action for reimbursement is not dependent upon the existence of a survivor who could be a beneficiary of a wrongful death action. See Murray v. Dewar, 6 Wis.2d 411, 94 N.W.2d 635, 647 (1959). Likewise, the right to reimbursement from a third-party tort feasor of all of the amount so paid, is independent of any amount recoverable by beneficiaries under the wrongful death statute. Mueller case, supra, at 79 N.W.2d 249.

Plaintiff argues in substance: First, that since the Wisconsin statute gives rise to an independent action for reimbursement in favor of the employer or insurer against the tort feasor, and as this action is separate and distinct from the wrongful death action of the next of kin, the action is founded upon a Wisconsin contract, and the substantive law of Wisconsin is the applicable law. Second, that Wisconsin Workmen's Compensation Statutes are entitled to extraterritorial application, and that the cause of action is a transitory one which is entitled to enforcement where the defendant can be found.

CONTRACT vs. TORT LIABILITY

The contention that this action is one in contract and therefore governed by the laws of Wisconsin is without merit. Plaintiff bases this argument on a statement made by the Wisconsin Supreme Court in Western Casualty & Surety Co. v. Shafton, 231 Wis. 1, 285 N.W. 408 (1939) that the insurer's recovery is for a specific sum of money made recoverable by statute, and hence an action on contract or quasi-contract. This reasoning appears to have been abandoned by the Wisconsin Supreme Court as a more recent decision construes the nature of an insurer's cause of action under the act in the following language:

"(The third party's) obligation to reimburse the (insurer) arises from his alleged tort, * * *. The cause of action is one at common law; the fact that it is recognized in a section of the workmen's compensation law does not change the fact that (the third party's) liability is based upon his wrongful acts. See Severin v. Luchinske, 271 Wis. 378 73 N.W. 2d 477. Sec. 102.29(2) applies where an employer or his insurer has sustained loss by reason of the negligence of a third party. Obligations under the compensation act arise without regard to wrongdoing; the liability under sec. 102.29(2) is grounded in fault." Employers Mutual Liability Ins. Co. v. De Bruin, 271 Wis. 412, 73 N.W.2d 479, 481 (1955) (Emphasis added).

Thus the Supreme Court of Wisconsin recognizes that the third party's liability is grounded in tort and not contract. The fact that the insurer's cause of action is created by statute and is not derivative in the sense that it is based on a contractual theory of assignment or subrogation, does not afford the insurer a more advantageous position than that enjoyed by the injured employee under tort law or his representatives under a wrongful death statute. While the cause of action created under this section is independent of and in addition to a cause of action under tort law or one created by a wrongful death statute, the action is derivative in the sense that these actions are predicated upon the common negligent conduct of a third party, and, in the absence of any wrongdoing, there can be no recovery.

In the instant case the employee was killed in Minnesota by the alleged negligent acts of defendant's employee. The obligation of the defendant is in no sense contractual, but arises solely from the commission of the alleged tort in Minnesota. In the vast majority of the states, including Minnesota, the existence of a cause of action for negligence and the extent of the damage recoverable is determined by reference to the substantive laws of the lex loci delicti. Richards v. United States, 369 U.S. 1, 11 (n. 24), 82 S.Ct. 585, 7 L.Ed.2d 492 (1962); Gentry v. Jett, 273 F.2d 388 (8th Cir. 1960); Olson v. Hiel, 177 F.2d 552 (8th Cir. 1949); Bond v. Pennsylvania R. Co., 124 Minn. 195, 144 N.W. 942 (1931); Negaubauer v. Great Northern Ry. Co., 92 Minn. 184, 99 N.W. 620 (1904). It is not contended that a cause of action of the nature asserted by the plaintiff exists under the laws of the State of Minnesota. So that unless the Wisconsin statute is entitled to extraterritorial application the complaint fails to state a cause of action against the defendant.³

EXTRATERRITORIAL OPERATION

The vital question at issue is whether a cause of action for reimbursement, created by a foreign workmen's compensation law in favor of an employer or compensation insurer who is required to make a payment under such statute, is entitled to extraterritorial effect in an action in the locus delicti against the alleged third party tort feasor.

In support of this theory the plaintiff contends that most workmen's compensation acts have been held to have extraterritorial application, and cites McKesson-Fuller-Morrison Co. v. Industrial Commission, 212 Wis. 507, 250 N.W. 396 (1933), and Brameld v. Albert Dickinson Co., 186 Minn. 89, 242 N.W. 465 (1932) as so holding with respect to the Wisconsin and Minnesota Workmen's Compensation Acts. These cases, of course, do not hold that the workmen's compensation acts are entitled to extraterritorial effect, but decided in accordance with the weight of American authority that an employee may recover compensation under the statute in force in the state of employment though the injury occurred elsewhere.⁴ These cases are based on the premise that the obligation to pay compensation is a statutory regulation of the relation of employer and employee, and, as industry should bear the burden of accidents incident to its operation, the attainment of this policy requires that the statute of the place of employment applies whether the injury occurs within or without this state. It is misleading to construe these cases as holding that a cause of action for reimbursement created by a workmen's compensation statute in favor of an employer or insurer is entitled to enforcement as a transitory cause of action in a foreign forum where the accident occurred and where the third party is amenable to suit.

The Wisconsin Supreme Court would even reject this imaginative concept. As was stated in Anderson v. Miller Scrap Iron Co., 169 Wis. 106, 170 N.W. 275, 278 (1919), "It is obvious that the Workmen's Compensation Act ex propria vigore can have no extraterritorial effect."

This position was further emphasized in Bernard v. Jennings, 209 Wis. 116, 244 N.W. 589, 591 (1932):

"The liability of the (third party) for the wrongful act * * * committed by him in the state of Indiana, arises under the law of the state of Indiana and the law of that state determines not only the source of the obligation but its extent. That liability cannot be affected by a law of the state of Wisconsin. All legislation is prima facie territorial and it does not operate beyond the limits of the jurisdiction in which it is enacted. New York Central Railroad v.

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