AETNA CASUALTY SURETY CO v. BECHTEL CORP

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District Court of Appeal, First District, Division 2, California.

AETNA CASUALTY & SURETY CO. v. BECHTEL CORP.*

Civ. 15087.

Decided: January 02, 1953

Belli, Ashe & Pinney, San Francisco, for appellant. Partridge & O'Connell, San Francisco, for respondent.

This is an action by a compensation insurance carrier. The third and fourth cause of action of its amended complaint are directed against the third party whose negligence allegedly caused compensable injury to an employee of plaintiff's insured. The third cause of action claims compensation benefits and expenses for medical and hospital care paid by plaintiff for the injured employee, the fourth, general damages suffered by said employee. The action was brought more than one and less than three years after the accident which caused the injury occurred. To the fourth cause of action a demurrer was sustained without leave to amend and plaintiff appeals from the judgment entered accordingly.

The only question presented is whether to said fourth cause of action the one year statute of limitations as to personal injury actions, § 340, sub. 3, Code Civ.Proc., or the three year statute as to liabilities created by statute, § 338, sub. 1, Code Civ.Proc., is applicable. Respondent, although conceding that the three year statute applies to the third cause of action, Limited Mutual, Etc., Ins. Co. v. Billings, 74 Cal.App.2d 881, 169 P.2d 673; Morris v. Standard Oil Co., 200 Cal. 210, 252 P. 605 and that appellant, apart from the statute of limitations, was entitled to sue for the injured employee's general damages, State Comp. Ins. Fund v. Matulich, 55 Cal.App.2d 528, 131 P.2d 21; State Compensation Ins. Fund v. Allen, 104 Cal.App. 400, 285 P. 1053, maintains that in so far as plaintiff sues for the employee's general damages it is pursuing the tort action of the general law in behalf of the employee as his statutory trustee and not a new statutory action of its own, whereas appellant urges that the fourth cause of action and the third are equally statutory in origin as created by sections 3850–3862, Labor Code, so that the three year statute equally applies. We have concluded that the position of appellant must be sustained

Sections 3850–3862, Labor Code, form an integrated system of coordination of the tort liability of the wrongdoer and the compensation liability of the employer or his insurance carrier so as to avoid double recovery by the injury employee and have the indemnification due from the tort-feasor serve in the first place to relieve the duty of the employer or insurance carrier. According to section 3850(b) ‘Employer’ when used in the chapter in question includes insurance carrier and we also shall further use employer in this extended meaning. The action against the third party can be brought either by the employer who has to pay compensation, §§ 3852, 3854, or by the employee alone or jointly with the employer, § 3855. The one who brings the action must give notice to the other; the other may then join as party plaintiff or if he has brought action independently the actions shall be consolidated, § 3853. If the employer brings the action he shall reimburse himself for the amounts he has paid or has become obligated to pay (plus attorney's fees) and pay any excess to the injured employee. § 3854. If the employee has brought the action the court shall, if the employer has become a party to the action, reimburse him for his expenditures for compensation out of the entire recovery or if the employer has applied for a lien said expenditures shall be allowed as a first lien against the entire recovery. § 3856. Also to the amount of the balance of the judgment, received by the employee, the employer shall be relieved from the obligation to pay further compensation, § 3858. The entire amount of any settlement is subject to the employer's full claim for reimbursement for his compensation expenditures and liability, § 3860. Finally the employer is entitled to be allowed by the commission as a credit against his compensation liability any recovery by the employee for his injury not applied to reimbursement under the preceding provisions, § 3861. The above excerpt from the statutory provisions shows clearly that in bringing action against the third party tort-feasor the employer does not act only as a trustee for the employee but in the first place for the protection of his own interest in the entire indemnity due from the wrongdoer which interest the statute gives him to reimburse his compensation expenditures and to relieve him from further liability.

The legal history leaves no doubt that when the employer brings action he is entitled to bring it not only for the amount of compensation he paid or became obligated to pay but also for the damages suffered by the employee. Such was stated in so many words in section 26 of the ‘Workmen's compensation, insurance and safety act of 1917’ as amended by statutes 1931, Chap. 1119, pp. 2370–2371. When this provision was transferred to section 3852, Labor Code, its formulation became somewhat confused but this court held that no change was intended and that the employer's action was still as wide as under the prior statute, State Comp. Ins. Fund v. Matulich, supra, 55 Cal.App.2d 528, 530, 131 P.2d 21, a decision which seems in line with the system and purpose of sections 3850–3862 as stated hereinbefore. However, we can not find in the legal history a solution for the question now before us, the statute of limitations applicable when the employer brings action for the general damages suffered by the employee.

When the District Court of Appeal for the Fourth District in Limited Mutual, Etc., Ins. Co. v. Billings, 74 Cal.App.2d 881, at pages 884–885, 169 P.2d 673, at page 676, supra, decided that to the action of the employer against the tort-feasor for reimbursement of compensation paid the three year statute was applicable it gave the following reasoning:

‘The new and separate cause of action thus created is based upon a liability expressly created by statute. While a third party was formerly liable to the employee he was not liable to the employer prior to the adoption of these statutory provisions. Although the new liability covers elements which were included in the old it runs in favor of a different party who, by operation of law, has been put in a position where he has also been injured, and it includes elements which the employee is no longer entitled to retain if he recovers them. A new and different liability has therefore been created in favor of another interested party, with provisions designed to prevent a double recovery. The statutes creating the new cause of action and the new liability make no provision limiting the time within which the new action must be commenced, and the general statutes in that regard must prevail.

‘There are sound reasons for providing a different time limitation for the bringing of such an action by an employer than that governing an action by an employee against the same third party. The employee knows at once that he has been injured but, as a practical matter, the employer does not know whether or not he has been injured by the act of the third party until his liability for compensation to the employee has been determined. He has a right to contest that matter and, in contested cases, more than a year will usually elapse before it is finally settled by the commission and the courts. In the meantime, the employer should not be compelled to file an action claiming he has become liable for compensation while at the same time, in other forums, he is earnestly maintaining that he has not become so liable.’ The Supreme Court cited this case in Dodds v. Stellar, 30 Cal.2d 496, 503, 183 P.2d 658, 663, for the proposition ‘that the rights of the parties are wholly governed by statute.’

Although the position that the liability to the employer is one created by statute had already been indicated by the Supreme Court in Morris v. Standard Oil Co., 200 Cal. 210, 214, 252 P. 605, and has since been considered the principle accepted in California, California Casualty Indemnity Exchange v. United States, D.C., 74 F.Supp. 401, 404; City of Los Angeles v. Howard, 80 Cal.App.2d 728, 729, 182 P.2d 278, it cannot be supported by absolutely compelling reasoning and does not seem to be in accord with the weight of authority. 58 Am.Jur. 823; Annotation, 95 A.L.R. 1431, 1432. The duty of the third party responsible for the injury is in origin still the ordinary tort liability, whereas the right of the employer is purely a part of the statutory compensation law. The relation between these two parties is therefore not clearly either wholly statutory or wholly based on tort. Compare Finnegan v. Royal Realty Co., 35 Cal.2d 409, 435, 218 P.2d 17. The inclusion in the one or the other category must necessarily be somewhat arbitrary. In deciding the same doubtful question with respect to a related but different part of the relation of the parties, the purpose and policy of the statute must have great weight. It is our opinion, as stated before, that the statute aims at offering the employer the means of having the whole indemnification due from the wrongdoer serve to relieve him from compensation liability present and future. As explained in the quoted part of the Billings case, supra, a one year statute may force him to bring action to enforce reimbursement of possible compensation liability before the existence of any compensation liability would have been finally decided. A three year statute as to the action for reimbursement of compensation alone would not effectively solve this difficulty, because, if the employer wishes to avail himself of the right to have the whole liability of the tortfeasor allowed on his compensation liability he would still have to bring the action for general damages to the employee within one year, even if he had denied compensation liability and that liability had not finally been adjudicated.

This policy argument together with the position taken by the Supreme Court on a closely related point and the unity we find in the whole statutory regulation of the subject convinces us that on the whole action of the employer in both its aspects the three year statute as to liability created by statute must be applicable. Contrary arguments of respondent based on a different choice made in other fields of the law or other states can carry no weight where the choice must be governed not by general logical or systematic rules but by the special aspects of the specific question before the court.

Respondent's contention that the application of the three year statute to the liability of the tort-feasor if the injury happens to be compensable and therefore to involve the employer violates the equal protection clauses of the federal and state Constitutions is without merit. The equal protection clause does not prevent reasonable classification in matters of the statute of limitations. 16 C.J.S., Constitutional Law, § 560, p. 1124. What is said above shows that there is a good reason for granting the employer a longer limitation period than the one year period otherwise barring personal injury actions so that the classification is not arbitrary or unreasonable.

The judgment is reversed with direction to the trial court to overrule the demurrer to the fourth count of the amended complaint.

NOURSE, Presiding Justice.

DOOLING, J., concurs.