Phoenix Indemnity Co. v. Staten Island Rapid Transit Railway Co.

In 1927 Joseph Perroth was an employee of one Anderson, who had insured himself with the plaintiff insurance company against liability in compliance with the provisions of the Workmen’s Compensation Law (Cons. Laws, ch. 67, as amended). Perroth, while acting within the scope of his employment, was killed through the negligence of the defendant, without any negligence on his part. He left him surviving a dependent, his widow. The administratrix of Perroth commenced an action against the defendant to recover damages because of the negligence of the defendant in causing Perroth’s death. That action was settled by the defendant paying to the administratrix the sum of fifteen thousand dollars and receiving a general release. The amount paid by the defendant was in excess of the amount which said dependent widow, Perroth, would have been entitled to receive as compensation under the provisions of the Workmen’s Compensation Law.

Thereafter, and prior to the commencement of this action, two awards of five hundred dollars each were made in favor of the State Treasurer against Anderson and the plaintiff, his insurer, jointly, under subdivisions 8 and 9 of section 15 of the Workmen’s Compensation Law. The awards were paid to the State Treasurer by the insurer, the plaintiff herein.

This action is brought pursuant to section 29 of the Workmen’s Compensation Law, as amended by chapter 615 of the Laws of 1922, to recover from the defendant the sum so paid by the plaintiff to the State Treasurer. In an agreed statement of facts two questions were submitted to the Appellate Division for decision:

First. Was the State Treasurer entitled to the awards made in his favor and paid by the plaintiff?

Second. If the first question is answered in the affirmative, is the plaintiff entitled to recover the amount of said awards from the defendant by reason of section 29 of the Workmen’s Compensation Law?

At the time of said employee’s death, the sections of the Workmen’s Compensation Law in question read as follows:

“ § 15. Schedule in case of disability. The following schedule of compensation is hereby established: * * *

“ 8. Permanent total disability after permanent partial disability. If an employee who has previously incurred permanent partial disability through the loss of one hand, one arm, one foot, one leg, or one eye, incurs permanent total disability through the loss of another member or organ, he shall be paid, in addition to the compensation for permanent partial disability provided in this section and after the cessation of the payments for the prescribed period of weeks special additional compensation for the remainder of his life to the amount of sixty-six and two-thirds per centum of the average weekly wage earned by him at the time the total permanent disability was incurred. Such additional compensation shall be paid out of a special fund created for such purpose in the following manner: The insurance carrier shall pay to the state treasurer for every case of injury causing death in which there are no persons entitled to compensation the sum of five hundred dollars. The state treasurer shall be the custodian of this special fund, and the commissioner shall direct the distribution thereof.”

9. (Provides for the expenses of rehabilitating injured employees and requires the insurance carrier to pay to the State Treasurer the sum of five hundred dollars under the same terms as contained in subdivision 8 above.)

“ § 29. Subrogation to remedies of employees. * * * In case of the payment of an award to the state treasurer in accordance with subdivisions eight and nine of section fifteen such payment shall operate to give to the employer or insurance carrier liable for the award a cause of action for the amount of such payment together with the reason

able funeral expenses and the expense of medical treatment which shall be in addition to any cause of action by the legal representatives of the deceased.”

The contention of the appellant that the deceased left a dependent widow surviving him who would have been entitled to compensation under the statute if she had so elected and that, therefore, no awards should have been made to the State Treasurer under subdivisions 8 and 9 of section 15 has been conclusively decided by this court contrary to the contention of the appellant. (Matter of State Treasurer v. West Side Trucking Co., 233 N. Y. 202 ; Matter of State Treasurer v. Niagara Falls Power Co., 241 N. Y. 521 ; Matter of Chrystal v. United States Trucking Corp., 250 N. Y. 566 .)

It is urged by the appellant that the Legislature did not have the power to create, by the amendment of section 29 in 1922, a cause of action against a third person through whose negligence an employee covered by the Workmen’s Compensation Law met his death, because said amendment is in contravention of the due process clause of the State and Federal Constitutions and also denies to the appellant the equal protection of the law.

The reasons for the enactment of the Workmen’s Compensation Law and the humanitarian purpose which it was enacted to further have been stated by this court and the United States Supreme Court. It has been treated as an enlightened forward movement, based upon social experience, enacted to do away with the harsh and often unjust rule of the common law that there could be no liability for injury without fault and to substitute in its place the more just and equitable rule making injuries received by employees without fault on the part of the employer a liability of the industry and adding the expenses,, which are first sustained by the employer, to the cost of production to be ultimately borne by the public at large. (New York Central R. R. Co. v. White, 243 U. S. 188 ; Matter of Jensen v. Southern Pacific Co.,

At the time they were decided the amendment of 1922 to section 29, which provides for an action by the employer or insurance carrier against one who has negligently caused the death of an employee to recover the sums paid to the State Treasurer, had not been enacted.

The constitutionality of subdivisions 8 and 9 of section 15 was passed upon in an action by the State Treasurer against the employer and the carrier in State Treasurer v. Sheehan Co. ( 236 N. Y. 579 ; affd., sub nom. Sheehan Co. v. Shuler, 265 U. S. 371 ) and in New York State Railways v. Shuler ( 265 U. S. 379 ) before the amendment of 1922 to section 29, in question here.

In those cases it was urged, as it is in this, that subdivisions 8 and 9 of section 15, or the provisions of the statute to like effect in existence at the time of the decisions in those cases, were in conflict with the due process and equal protection clauses of the Fourteenth Amendment to the Federal Constitution. In the case of Sheehan Company v. Shuler (supra) the United States Supreme Court, referring to subdivisions 8 and 9 of section 15, said: “ The substance of these two provisions is that when an injury causes the death of an employee leaving no beneficiaries, the employer or other insurance carrier shall pay the state treasurer the sum of $500 for each of two special funds: one to be used in paying additional compensation to employees incurring permanent total disability after permanent partial disabilities; and the other, in the vocational education of employees so injured as .to need rehabilitation. The use of such special funds for such purposes is an additional compensation to the employees thus injured, over and above that prescribed as the payments to be made by their immediate employers. Such additional compensation is neither unjust nor unreasonable. Thus, an employee who, having lost one hand in a previous accident, thereafter loses the second hand, is,

The Legislature, in carrying out the benevolent purpose of the statute, by its amendment adding subdivisions 8 and 9 of section 15, furnished additional protection to the class of employees specified therein engaged in hazardous occupations and provided that the fund for furnishing such additional protection should be contributed by employers coming under the act, or their insurance carriers, in cases where they were not hable to pay directly to dependent survivors of the deceased employees. The same principles which inspired the enactment of the Workmen’s Compensation Law, and have animated the courts in construing it, were cogent reasons for holding the amendments embodied in subdivisions 8 and 9 of section 15 to be constitutional.

The State has adopted a policy which provides that the unfortunate employees who have suffered the injuries described are entitled to the compensation provided, in order that they may become rehabilitated and not become dependent, or wards of the State. In the first instance, the burden of furnishing funds to carry out the purposes of the statute was placed upon the employers engaged in hazardous occupations, without regard to fault on their

Thereafter the Legislature, in 1922, amended section 29, to provide, in substance, that where an employer or his insurance carrier has been obliged to contribute to such funds, he may recover from the wrongdoer who, by his wrongful act, has made such contribution necessary, the amount so contributed. It is an attempt to remove the burden from one who has not committed a wrong and to place it upon one who, by his wrongful act, has made the payment into the funds necessary.

If it be conceded that the State, in establishing the funds for the benefit of the class of employees referred to in order that they may not become dependent and a burden on the State, has acted within its constitutional jurisdiction, then it seems to us that it must follow that placing the burden of supplying such funds upon the wrongdoers who make the contribution to the funds necessary is clearly within the constitutional power of the Legislature.

The Supreme Court, in the case of New York Central R. R. Co. v. White (supra) said: “ One of the grounds of its (the public’s) concern with the continued life and earning power of the individual is its interest in the prevention of pauperism, with its concomitants of vice and crime.” And in Mountain Timber Co. v. Washington ( 243 U. S. 219 ) the same court said: “ It hardly would be questioned that the State might expend public moneys to provide hospital treatment, artificial limbs, or other like aid to persons injured in industry, and homes or support for the widows and orphans of those killed.” The argument that the State cannot lawfully place that burden upon those who are directly and wrongfully responsible for it is not convincing. Where the death of an employee covered by the Workmen’s Compensation Law is wrongfully caused by a third person, and the deceased leaves

Section 130 of the Decedent Estate Law (Cons. Laws, ch. 13), and the statutes which it superseded conferring the right to recover damages for wrongful death, created a right of action unknown to the common law. (Whitford v. Panama R. R. Co., 23 N. Y. 465 .) States having similar statutes “ differ as to who may sue, for whose benefit, and the measure of damages.” (New York Central R. R. Co. v. White, supra.)

In Travelers Insurance Co. v. Padula Co. (supra) this court said: “A civil liability and the right to recover damages for a wrongful act or neglect causing death are created solely by statute. At common law no civil action would he for causing the death of a human being. Legislative enactment is the exclusive source and boundary of the liability and the remedy. It may create the cause of action, define the period of its existence, and the party by whom and the method in which it shall be enforced and prescribe the measure of damages and the beneficiaries.” All persons are under an obligation to the State not to wrongfully cause the death of one of its citizens, and the State may lawfully enact that if that obligation is violated the one so violating it shall pay to

The manner of collecting penalties and the disposition of the sums collected are matters which rest in the discretion of the Legislature, and it may lawfully make such disposition thereof as it determines may best carry out the purpose of a particular statute. (Missouri Pacific Ry. Co. v. Humes, 115 U. S. 512 ; Miami Copper Co. v. State, 7 Ariz. 179 ; Boyd v. Missouri Pacific Ry. Co., 249 Mo. 110 .) The State of Alabama enacted a statute allowing punitive damages to be assessed against an employer for the mere negligence of an employee, resulting in death. In Pizitz Dry Goods Co. v. Yeldell ( 274 U. S. 112 ) the statute was held to be constitutional and the court said: “ Lord Campbell’s Act and its successors, establishing liability for wrongful death where none existed before, the various Workmen’s Compensation Acts, imposing new types of liability, are familiar examples of the legislative creation of new rights and duties for the prevention of wrong or for satisfying social and economic needs. Their constitutionality may not be successfully challenged merely because a change in the common law is effected. As interpreted by the state court, the aim of the present statute is to strike at the evil of the negligent destruction of human life by imposing liability, regardless of fault, upon those who are in some substantial measure in a position to prevent it. We cannot say that it is beyond the power of a legislature, in effecting such a change in common law rules, to attempt to preserve human life by making homicide expensive. It may impose an extraordinary liability such as the

It is urged by the appellant that the desirability of estabhshing the funds under subdivisions 8 and 9 of section 15 does not justify a statute which compels it to pay one thousand dollars into the funds, because neither it nor the one it injured will benefit from such funds. It is a sufficient answer that the State will be benefited by such payment and that the defendant’s wrongful act placed upon the employer or his carrier the burden, in the first instance, of making the payment into the funds. (Sheehan Co. v. Shuler, supra.)

The statute does not contemplate the taking of property without due process of law. The defendant may avail itself of any defense which it has or ever had. It has a right to establish, if it can, that there could have been no recovery in the negligence action which it settled, and

Subdivisions 8 and 9 of section 15 and section 29, construed together, and in connection with the other provisions of the Workmen’s Compensation Law, are “ component parts of a single scheme ” and constitute a valid constitutional statute. The wrongdoer is made responsible for his wrongful act, the statute promotes the public welfare, and lawfully imposes a penalty upon the wrongdoer. It is uniform, in that it gives a right of action against all who wrongfully cause the death of an employee specified in the statute.

The judgment of the Appellate Division should be affirmed, with costs.

(dissenting). The Workmen’s Compensation Law was enacted by the Legislature, pursuant to authority expressly conferred by the Constitution of the State, article 1, section 19. Every employer subject to its terms must secure compensation to his employees and pay or provide compensation for their disability or death arising out of and in the course of the employment. The industrial relations created by the employment justified the Legislature in substituting a more complete and equitable system of compensation for the inadequate remedy afforded at common law or by earlier statute for injury or death caused by an employer. Because of these industrial relations a new form of liability, though constituting a new burden, might be imposed_ upon the employer, perhaps to be borne ultimately by_the public at large as an expense of the industry. (N. Y. Central R. R. Co. v. White, 243 U. S. 188 ; Matter of Jensen v. Southern Pacific Co., 215 N. Y. 514 .)

The Legislature, instead of imposing upon each employer the entire responsibility for losses occurring in

Where the employee’s disability or death resulted from the wrongful act of a party not in the same employ the liability of such party remained substantially unchanged. The injured employee or, in case of his death, his dependents, might elect to pursue any remedy afforded by law against such party. If the employee, or his dependents, elect to take compensation under the Workmen’s Compensation Law, then it is provided that the awarding of

It is true that, as we have construed the section, it provides “ that a party who negligently kills an employee under the act shall be liable to the dependents of the employee, * * * and not to his next of kin,” and to that extent creates a new action in substitution for the action for causing death by negligence as defined by section 1902 of the Code of Civil Procedure. Since, however, the Legislature might have originally created a cause of action for the death of an employee in favor of the dependents rather than the next of kin of the deceased, the wrongdoer has no substantial ground for complaint. (Travelers Insurance Co. v. Padula Co., 224 N. Y. 397 .) There the Legislature exercised its undoubted power to create and define the liability and the remedy for causing the death of a human being. That power is not based upon its right to provide compensation for the disability or death of an employee as a liability on the part of his employer or a burden upon the industry. The considerations which have led the courts to sustain the legislation creating such a right to compensation have no application to legislation creating a liability against a wrongdoer, not in the same employ as the employee who has been injured or killed.

In 1922 the Legislature amended section 29 of the Workmen’s Compensation Law by providing that “ In

. That statement seems, as a matter of first impression, persuasive that the Legislature must have power to place ultimate liability upon the person but for whose wrongful act no payment would have been required of the employer. Analysis, however, demonstrates, I think, that its persuasive force is. illusory. The defendant has already paid to the dependent of the deceased more than the compensation provided by the Workmen’s Compensation Law. If recovery or settlement had been less the dependent would have been entitled to receive payment of the deficiency from the employer or insurance carrier. In such case the employer or insurance carrier would not have been entitled to any repayment of the deficiency from the wrongdoer nor would such employer or insurance carrier have been compelled to make any payment to the State insurance fund. The wrongful act of the defendant has not caused any depletion of the insurance fund.

The employer or insurance carrier is compelled to make a payment to such a fund only because the Legislature has so decreed as part of its scheme of making payment of compensation to employees a burden on the industry as a whole. The defendant is not in the same employ as the deceased or as the persons who may subsequently be entitled to receive compensation from the fund for other injuries. The liability of the employer to make pay

Since the defendant stands in no industrial relation to the deceased or to the employee or to those who may receive compensation from the insurance fund, it seems to me quite clear that the liability which the Legislature has attempted to impose may not be sustained upon analogy to an industrial tax. The additional cause of action in favor of an employer who has been compelled to make a payment into the insurance fund may be sustained, if at all, only as the result of the exercise of a legislative power to create a new cause of action for a penalty or damages • for causing death by negligence. These powers are undoubtedly broad, yet they are not, I think, unlimited. Some reasonable basis must be found, I think, for the imposition of the penalty, or for the creation of a cause of action for damages and there must be some reasonable basis for the classification upon

The cause of action for a penalty or damages which the Legislature has attempted to create, arises not in every case where death is caused by wrongful act, nor even in ■ every case where death is so caused and the deceased left no dependents or next of kin entitled to damages. Indeed in this case a dependent survived but the surviving dependent is not entitled to compensation under the Workmen’s Compensation Act because she has already received adequate payment from the defendant. In other words, here a cause of action for a penalty or damages has been created by the Legislature because the defendant has paid to the surviving dependent full compensation for the injury caused by its wrong. If the defendant had failed to pay such damages and consequently the dependent had been entitled to the compensation from the employer, the defendant would not have been liable for any penalty or damages beyond those which the dependent or next of kin might have recovered in an action against the defendant.

It is true that in such case the employer also would have been compelled only to pay compensation to the surviving dependent and would not have been compelled to pay an additional sum into the State insurance fund. If this factor were absent I assume that no one would seriously contend that the Legislature ever would or could have created an additional liability against a wrongdoer causing death in the contingency that the wrongdoer had already made full payment in damages to the dependents or next of kin of the person killed.

As I. have already pointed out, the provision of the statute for payment by the employer into the insurance fund has been sustained on the ground that it is in the nature of an industrial tax imposed on all employers in the contingency of the death of an employee where the

For these reasons the judgment should be reversed and the complaint dismissed.

Cardozo, Ch. J., Pound, Crane and O’Brien, JJ., concur with Hubbs, J.; Lehman, J., dissents in opinion in which Kellogg, J., concurs.

Judgment affirmed.