United States Fidelity & Guaranty Co. v. New York, N.H. & H.R. Co.

• Decision Date: 11 July 1924
• Citation: 101 Conn. 200,125 A. 875
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. NEW YORK, N.H. & H. R. CO.
• Court: Connecticut Supreme Court

125 A. 875

101 Conn. 200

UNITED STATES FIDELITY & GUARANTY CO. v. NEW YORK, N.H. & H. R. CO.

Supreme Court of Errors of Connecticut.

July 11, 1924

Appeal from Superior Court, Hartford County; William M. Maltbie Judge.

Action by the United States Fidelity & Guaranty Company against the New York, New Haven & Hartford Railroad Company. Judgment for plaintiff, and defendant appeals. Error, judgment set aside and cause remanded, with directions.

James W. Carpenter, of New Haven, and Harry L. Filer, of New York City, for appellant.

A Storrs Campbell, of Hartford, for appellee.

WHEELER, C.J.

The plaintiff, legally authorized, issued to A. W. Byrne & Son of Hartford, a compensation policy insuring them against claims made by employees for injuries or death caused under circumstances arising out of and in the course of their employment. On August 2, 1922, one Tromba, in the employ of A. W. Byrne & Son, suffered injuries arising out of and in the course of his employment in a collision between a truck he was riding on and a train of defendant railroad. Tromba made a claim for compensation against his employer, A. W. Byrne & Son, and pursuant to its policy of insurance, and with the approval of the Compensation Commissioner, the plaintiff paid Tromba $1,192.15, being compensation up to April 26, 1923. On April 2, 1923, Tromba and the defendant entered into an agreement to compromise his claim against the defendant for his injuries received in the collision, and defendant paid Tromba $2,200 in settlement thereof. At the time of this settlement defendant knew that Tromba was an employee within the terms of the Compensation Act so that compensation was due or being paid to him. On April 16, 1923, defendant notified plaintiff that Tromba's claim against it had been settled on April 2, 1923.

The trial court reached the conclusion that " upon the defendant's payment to Tromba of the fund provided in the aforesaid agreement defendant became liable to reimburse the plaintiff under the Compensation Act, as amended, for any and all sums of money which plaintiff had paid Tromba before its notice of the defendant's payment."

Whether the trial court was correct in this conclusion is the decisive point of this appeal. The solution of this problem is dependent upon the construction to be given to section 2 of chapter 306 of the Public Acts of 1921. This statute, then section 2 of chapter 288 of the Public Acts of 1915, and unchanged except by the addition, " no compromise with such third person by either employer or employee shall be binding upon or affect the rights of the other, unless assented to by him," was before us for construction in Rosenbaum v. Hartford News Co., 92 Conn. 398, 103 A. 120, L.R.A. 1918F, 521. We quote the essential parts of the section in the footnote.^[1]

We then held it gives to the employee or the employer who has paid, or by award become obligated to pay, compensation a right of action against the tort-feasor in his own name, with the right to each to notice and an opportunity to join in the action. It provides that in an action by the employer, or one in which the employer is joined with the employee, the damages recovered shall be apportioned, first, to pay the employer the award for compensation he has paid, or become obligated to pay, with a reasonable allowance for an attorney fee and for costs; the excess, if any, to be assessed in favor of the injured employee. The statute does not require the injured employee to claim compensation before he sues the third party, nor does it prevent the employer from joining in such an action before he has by award become obligated to pay compensation. Whether the employee recovers judgment against the third party or releases him by a settlement made during the action, in either case the judgment or settlement operates to discharge the employer, if it equals, or pro tanto if it does not, the award paid or obligated to be paid by the employer. If before suit the employee effect a settlement, the employer may ratify it and be thereupon discharged pro tanto. In the Rosenbaum Case the employee had released by a settlement a third party primarily liable to pay damages to the injured employee, and sought in his action to recover compensation of the employer. We held that the employee's right to compensation was satisfied by the payment made by the third party pro tanto. Our holding was based upon our construction of the statute as imposing upon the tort-feasor primary liability for the injury. The contract of release assumed, as we held, so far as the claimant employee was concerned, the existence of a legal liability on the part of the third party, and his legal relation to the sum paid was that it was received in partial satisfaction of a valid claim for damages. The case before us is one where, after receipt of compensation, the employee effected a settlement of his claim without the knowledge of his employer for the legal liability of the defendant railroad for the injury for which compensation was obtained, and the employer is seeking to be reimbursed by the third party for the compensation paid by him to the injured employee.

Action by the employer against the defendant railroad by express provision of this statute will only lie in a case " when any injury for which compensation is payable * * * shall have been sustained under circumstances creating in some other person than the employer a legal liability to pay the damages in respect thereto." By necessary implication this statute gives a right of action to employee and to employer against defendant railroad for injuries legally caused by it, and denies such action when the defendant did not legally cause the injuries.

The section not only accords to the employer an action against such third person, but it gives to him a preferential right of reimbursement of compensation paid by him in the recovery by suit or settlement by the injured employee. The " compromise" addition to this section made in 1921, which we have already quoted, does not affect the question of liability and damage. The compromise must be assented to in order to bind the employer. His right to adjudicate the questions of liability and damage remain despite the compromise by the express terms of this addition to the statute. Defendant's settlement with the employee cannot be taken as an acknowledgment by it of its legal liability. The law favors a settlement of disputes; a defendant might be ready to pay a substantial sum rather than to litigate its liability. The mere fact that the defendant has secured a release by the employee from liability for injuries to him or paid him damages is not an adjudication of the legal liability of the defendant, nor even evidence of legal liability.

The statute itself makes the legal liability of this defendant a condition precedent to his obligation to pay damages. An expression in the Rosenbaum Case indicates that we had this view, for we say:

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