Toenberg v. Harvey

• Decision Date: 19 October 1951
• Docket Number: No. 35579,35579
• Parties: TOENBERG v. HARVEY et al.
• Court: Minnesota Supreme Court

Page 578

49 N.W.2d 578

235 Minn. 61

TOENBERG v. HARVEY et al.

No. 35579.

Supreme Court of Minnesota.

Oct. 19, 1951.

Syllabus by the Court.

1. As to compensation benefits due its employe, a partnership is to be treated as a separate employing entity, and it and its insurer should bear the whole burden of compensation benefits due to an employe of the partnership.

2. Under the facts of this case, the separate-risk statute, M.S.A. § 176.03, has no application here.

3. Where a workmen's compensation insurer, through a mistake of facts, paid benefits and expenses to an injured workman, which benefits and expenses should have been paid by another workmen's compensation insurer under its contract of insurance, there was, under the facts of the case, no basis for estoppel or the shifting of liability.

4. Ordinarily, in the absence of prejudice to the employe, a workmen's compensation insurer is not estopped by the voluntary payment of compensation or the furnishing of hospital or medical care to urge the defense that the policy did not cover the employment.

5. The industrial commission has authority to order a workmen's compensation insurer which, under its contract of insurance, was liable to make payments of benefits and expenses to an injured employe, to reimburse another compensation insurer for the payment of benefits and expenses which it had made to the injured employe under a mistake of facts.

Shepley, Severson & Johnson, Minneapolis, Hunt, Palmer & Hood, Duluth, for relators John Harvey, individually, and Employers Mut. Liability Ins. Co.

Reynolds & McLeod, Minneapolis, for respondent Preferred Acc. Ins. Co. of N.Y.

James Pomush, Minneapolis, for respondent Rolf Taenberg. equally liable for payments of compensation

Certiorari to review a determination of the industrial commission holding two workmen's compensation insurance carriers equally liable for payments for compensation to an injured employe and medical, hospital, surgical, and other expenses incurred.

On December 10, 1947, John Harvey, as an individual, was engaged in timber operations at or near Ash Lake, Orr, St. Louis county, Minnesota. In this enterprise, he was insured for workmen's compensation liability with the Employers Mutual Liability Insurance Company of Wisconsin, hereinafter referred to as Employers Mutual. On the above date, the same John Harvey and Ella Harvey, his wife, as copartners, operated a business at Ash Lake under the name of Hillcrest Inn. Its nature is indicated by its name. The copartnership in the conduct of this business was insured for workmen's compensation liability with the Preferred Accident Insurance Company of New York, hereinafter referred to as Preferred.

On December 10, 1947, Rolf Toenberg, an employe of the copartnership, sustained personal injuries in the course of his employment while working at the Inn. He was employed by the copartnership, and knew that he was working for John and Ella Harvey. He was paid out of partnership funds, the checks being signed by Ella Harvey. His only employment was at the Inn, and he had never up to that time worked for John Harvey, individually, in the timber operations.

After the accident, in the first report of injury, John Harvey reported to Employers Mutual, the workmen's compensation insurer on his timber operations, that Harvey was the employer of Rolf Toenberg, that the nature of the business of Harvey was 'Logging Contractor & Resort-Store,' and that Toenberg was a 'store employee' carried on the regular payroll of Harvey. After the receipt of the accident report, an audit was made by Employers Mutual, at which time the auditor ascertained that John Harvey and Ella Harvey were operating a business known as the Hillcrest Inn. The auditor included in the audit the wages paid to Toenberg by Hillcrest Inn, and the premium was collected by Employers Mutual on such wage. At the time the premium was collected and the audit made, Employers Mutual had no knowledge that any other workmen's compensation liability policy had been issued or was in effect to cover a partnership operating Hillcrest Inn. And at that time the auditor had no knowledge that John Harvey and Ella Harvey were operating a business known as Hillcrest Inn as a partnership. Subsequent to the audit, Employers Mutual paid $873.73 in compensation to Toenberg and $579.11 in medical, hospital, surgical, and other benefits. After the payment of the above sums, Employers Mutual learned for the first time that John and Ella Harvey, doing business as Hillcrest Inn, carried a standard workmen's compensation liability policy with Preferred, and discontinued making payments, contending that, inasmuch as Toenberg was in the employ of the partnership at the time of the accident, the insurer of the partnership, Preferred, should reimburse Employers Mutual for moneys paid out by it, and that Preferred should assume any and all liability for compensation and expenses to which the employe might be entitled as a result of his accidental injury of December 10, 1947. Employers Mutual refused to make further payments, and proceedings were instituted by Toenberg. The referee found that on December 10, 1947, Toenberg was not an employe of John Harvey, but of John Harvey and Ella Harvey, doing business as Hillcrest Inn, and that Employers Mutual, the workmen's compensation liability carrier of John Harvey, as an individual, first learned of the operations of John Harvey and Ella Harvey about November 3, 1948. He made an award against Preferred, the insurance carrier of the partnership, ordering payments to commence December 10, 1947, and dismissed the claim for compensation against John Harvey as an individual and his insurance carrier. No finding was made as to the claim of Employers Mutual for reimbursement. Both companies appealed to the industrial commission. The commission awarded compensation against John Harvey and Ella Harvey, doing business as Hillcrest Inn, and against John Harvey as an individual and their respective insurers, directing each insurer to pay one- half the amount awarded Toenberg. The commission made no finding that John Harvey and Ella Harvey operated the Hillcrest Inn as a copartnership. As stated, the commission imposed liability upon John Harvey as an individual and his insurer. It gave as its basis for this determination that the question was one of equity rather than one of law, and that, 'While Harvey insured his woodsmen under the Employers Mutual * * * policy, nevertheless, liability under the policy also extended to any of his other employes by failure to obtain a separate risk permit from the Industrial Commission.' It quoted M.S.A. § 176.03, which provides the manner in which split coverage may be permitted, as follows: '* * * Nothing herein contained shall prevent any Employer, with the approval of the industrial commission, from excluding medical and hospital benefits as required in section 176.15. An employer conducting distinct operations at different locations may either insure or self-insure such other portion of His operations which may be determined by the industrial commission to be a distinct and separate risk.' (Italics supplied.)

The commission stated: 'There is no indication here that there was any attempt on the part of John Harvey to separate his risk.' As authority it relied on Skuey v. Bjerkan, 173 Minn. 354, 217 N.W. 358. It reasoned that 'it seems only fair that the company assuming the liability' on the partnership 'should answer in payment of compensation benefits along with the coverage provided under the policy written for' the individual partner.

1. As is well stated by counsel for Employers Mutual, the first question for our determination is: 'When an employe sustains personal injuries caused by accident arising out of and in the course of his employment by a partnership, duly insured against workmen's compensation liability, should the compensation insurer of one of the partners who individually carries on separate business activities, be required to share the burden of compensation benefits with the compensation insurer of the partnership?'

On June 23, 1947, a workmen's compensation liability policy was issued by Preferred to 'Ella T. Holloway,' as an individual, 'd/b/a Hillcrest Inn.' Subsequent to that date, the policy was amended by an endorsement so as to have the name of the insured read: 'John C. Harvey and Ella T. Harvey d/b/a Hillcrest Inn,' and the status of the employer was changed to read 'co-partnership' instead of 'individual.' The endorsement was 'effective from June 23, 1947.'

By the terms of the policy of Employers Mutual, it is--'K. * * * subrogated, in case of any payment under this Policy, to the extent of such payment, to all rights of recovery therefor vested by law either in this Employer, or in any employee or his dependents claiming hereunder, against persons, corporations, associations or estates.'

Employers Mutual contends that, as to compensation benefits due its employe, a partnership is to be treated as a separate employing entity, and that it and its insurer should bear the whole burden of compensation benefits due to an employe of the partnership.

Section 176.01, subd. 5, which defines 'employer' under our workmen's compensation act, reads: 'The term 'employer' means every person who employs another to perform a service for hire and to whom the 'employer' directly pays wages, and includes any person, corporation, Copartnership, or association, or group thereof, * * *.' (Italics supplied.)

By statute, therefore, a copartnership is a legal entity for purposes of determining liability under the...