U.S. Cas. Co. v. Hercules Powder Co.

• Citation: 72 A.2d 190,4 N.J. 157
• Decision Date: 13 March 1950
• Docket Number: No. A--65,A--65
• Parties: UNITED STATES CASUALTY CO. v. HERCULES POWDER CO.
• Court: United States State Supreme Court (New Jersey)

Page 157

4 N.J. 157

72 A.2d 190

UNITED STATES CASUALTY CO. v. HERCULES POWDER CO.

No. A--65.

Supreme Court of New Jersey.

Argued Dec. 19, 1949.

Decided March 13, 1950.

Harold Price, Morristown, argued the cause for the appellant (Schenck, Price, Smith & King, Morristown, attorneys, Edward Le C. Vogt, Morristown, of counsel).

William H. D. Cox, Newark, argued the cause for the respondent. (Cox & Walburg, Newark, attorneys).

The opinion of the court was delivered by

ACKERSON, J.

The complaint herein filed on April 30, 1943, alleges, in effect, that the plaintiff, United States Casualty Company, at the time in question, was the workmen's compensation insurance carrier of the Thomas Iron Company which was engaged in the business of mining ore, and the insurance contract, in addition to the coverage required by the Workmen's Compensation Act, R.S. 34:15--1 et seq., N.J.S.A., provided in clause 'K' of the policy as follows: 'K. The Company (plaintiff herein) shall be 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 (Thomas Iron Company), or in any employee or his dependents claiming hereunder, against persons, corporations, associations or estates.'

It is further alleged that the employer, Thomas Iron Company, on or about September 26, 1940, purchased from the defendant, Hercules Powder Company, a reel of fuse to be attached to percussion caps for the purpose of blasting rocks in the purchaser's mine, which fact was then made known to the defendant and was also generally known by it from previous dealings of a similar nature between the parties and the purchaser relied upon the skill and judgment of the defendant to supply proper fuses for said purpose whereby an implied warranty arose under the Uniform Sale of Goods Act, R.S. 46:30--1, et seq., N.J.S.A., that the reel of fuse so purchased would be reasonably fit for such use.

It is then asserted that one of the fuses last purchased was defective in that it permitted the burining of the powder to jump from one section of the fuse to another, thereby substantially shortening the time between the lighting of the fuse and the normal explosion of the dynamite, so that, on October 4, 1940, by reason of this defect and the premature explosion caused thereby, several employees of the Thomas Iron Company were injured and plaintiff, as its insurance carrier, was required to and did pay them compensation in the sum of $7,411.95. Finally, it is alleged that supplying the defective fuse under the stated circumstances constituted a breach of the implied warranty arising from the sale thereof, and plaintiff, under clause 'K' of its policy, is subrogated to the cause of action for such breach which the Thomas Iron Company has against the defendant, and judgment is demanded for the sum of $7,411.95, being the exact amount of the aforementioned compensation payments. Parenthetically the record discloses that prior to the commencement of the present action Ex contractu, by the insurance carrier of Thomas Iron Company against the Hercules Powder Company, the aforesaid injured employees of the Thomas Iron Company instituted an action in tort by summons, purportedly dated October 3, 1942, against the same defendant, Hercules Power Company, to recover damages for the injuries alleged to have been sustained by them in the accident which occurred on October 4, 1940, as hereinabove related, which action is still pending and undetermined.

On defendant's motion the trial court dismissed the complaint of the United States Casualty Company, plaintiff in the present suit, as failing to state a cause of action. The ground for such dismissal was that section R.S. 34:15--40, N.J.S.A., of the Workmen's Compensation Act, in its present form, only authorizes subrogation by the employer or his insurance carrier to the claim of the Employee or his dependents against a third party responsible for his injury or death to satisfy the compensation payments made therefor by the employer or his insurance carrier. It was considered that reimbursement for such payments is exclusively statutory, and, since the present action is predicated solely upon a breach of warranty in the sale of goods, which right of action, Ex contractu, would normally reside Directly in the employer and not as a matter of subrogation to the rights of his Employees, as provided by the statute, such compensation payments are not properly recoverable as an item of damage in the present action which is not based upon the statute, and, in the language of the trial judge, the damages claimed 'are not within the contemplation of the parties as damages which might be recovered for a breach of warranty'.

On appeal the Appellate Division reversed this judgment of dismissal taking the position that, although no right to maintain the present action accrued to the plaintiff (insurance carrier) under R.S. 34:15--40, N.J.S.A., nevertheless, since the employer did appear to have a right of action against the defendant (seller) for breach of implied warranty, the general doctrine of subrogation came into play quite aside from the Workmen's Compensation Act, thus giving the plaintiff here a right to proceed directly against the defendant in the plaintiff's own name in which action, it is assumed, the damages would include the compensation payments made on the insured's behalf to its injured employees.

The cause is now before us on certification granted on the defendant's motion to review the judgment of the Appellate Division.

We are confronted at the outset by appellant's contention that the Workmen's Compensation Act, R.S. 34:15--40, N.J.S.A., provides the exclusive remedy for securing reimbursement for compensation payments made thereunder by the employer or its insurance carrier, and since the present action is not rested on such provisions, it is not maintainable.

The answer to this contention will be found in the historical development of our workmen's compensation legislation. The act was intended to accomplish an economic reform in the legal rights and responsibilities between employer and employee, and to accomplish its purpose it made the employer responsible to his employee for injuries sustained in an accident arising out of and in the course of his employment even though no negligent act of the employer caused the accident and even though the accident was the result of the negligent act of a third party.

The recovery thus provided for is not determined by the rule for measuring damages in a tort action at common law, but is governed entirely by a statutory schedule of payments based upon a percentage of the weekly wage received by the employee at the time of his injury or death and payable over an allotted period of time for temporary and permanent disability (partial or total) or death, with limited allowances for medical, hospital and legal expenses. In fine the purpose of the act, with respect to the employer-employee relationship, was to supersede the common law redress in tort cases, and statutory rights consequent upon death by wrongful act, and to substitute therefor a strictly statutory formula for making compensation for the injury or death of an employee, irrespective of the fault of the employer or of the contributory negligence and assumption of risk of the employee.

However, as originally enacted in 1911, P.L. 1911, ch. 95 the act made no provision for the reimbursement of the employer or his insurance carrier out of the proceeds of any recovery obtained by judgment against or settlement with the third party responsible for the employee's injury or death, nor did it provide that the compensation payments required of the employer by the act should cease upon collection from the wrong-doer of a sum in excess of the compensation award. Under these circumstances it was held that the injured employee or his dependents could recover and retain the compensation payments required of his employer by the act, and at the same time recover and retain the full damages resulting from his common law right of action in tort against the third party wrongdoer. Newark Paving Co. v. Klotz, 85 N.J.L. 432, 91 A. 91 (Sup.Ct.1914), affirmed 86 N.J.L. 690, 92 A. 1086 (E. & A. 1914); Henry Steers, Inc. v. Turner Const. Co., 104 N.J.L. 189, 192, 139 A. 42 (E. & A. 1927); Erie R. Co. v. Michelson, 111 N.J.Eq. 541, 545, 162 A. 764 (E. & A. 1932).

To remedy this inequitable situation the legislature by successive acts, now incorporated in R.S. 34:15--40, N.J.S.A., amended the original act by first providing: 'Where a third person or corporation is liable to the employee or his dependents for an injury or death, the existence of a right of compensation from the employer or insurance carrier under this statute shall...