Opinion
Rehearing Granted Sept. 29, 1930.
In Bank.
Certiorari to Industrial Accident Commission.
Proceeding uner the Workmen’s Compensation Act by the Postal Telegraph Cable Company, employer, requesting that a judgment theretofore recovered by Frank Jacobsen, a minor, claimant by Anna Jacobsen, his general guardian, against a third party tortfeasor, be offset against any award to be made against the employer. The Industrial Accident Commission granted an award, subject to a deduction amounting to the entire amount of claimant’s judgment against the tort-feasor, and claimant petitions for writ of review.
Award annulled. COUNSEL
P. O. Solon, of Oakland, for petitioner.
Edward O. Allen, of San Francisco, for respondent Industrial Accident Commission.
Willard P. Smith and William L. Southwell, both of San Francisco, for respondent Postal Telegraph Cable Co.
OPINION
LANGDON, J.
Petition for review of award of Industrial Accident Commission.
On September 5, 1928, petitioner, aged 17, was employed as a messenger boy by the respondent corporation. On that day, while in the course of his employment, he was run down by a truck of Ariss Knapp Company. Hs sustained sevore injuries, including a compound fracture of the right ankle and a broken arm. Respondent employer, which was self-insured, furnished medical attention and paid a certain amount of compensation for disability, expending a total of $2,930.39.
On November 8, 1928, petitioner, through his duly appointed guardian, commenced an action against the Ariss-Knapp Company in the superior court of Alameda county. Pursuant to the requirements of section 26 of the Workmen’s Compensation Act (Deering’s General Laws, Consol. Supp. 1925-1927, Act 4749, p. 1476), notice of the suit was given to the respondent employer. On February 2, 1929, the employer, acting under said section 26 of the act, filed its claim of lien on the employee’s judgment, for the above-mentioned expenditures.
On June 10, 1929, the court granted a petition to compromise the action for $8,500. Judgment was accordingly entered in that sum. In accordance with the stipulation of plaintiff, defendant, and employer, the court directed that $2,930.39 be paid to the employer, in satisfaction of his lien, and approved an attorney’s fee of $1,569.61 for plaintiff’s counsel. The money was thereafter paid to the employer as directed, and a satisfaction of judgment was entered in the action.
On June 17, 1929, and without any claim for compensation having been filled by petitioner, respondent employer filed an application with respondent commission for adjustment of claim, asking that the $8,500 judgment be offset against any award to be made against it in favor of the injured employee. On October 3, 1929, the commission made its finding that petitioner was entitled to $11.12 per week for temporary total disability continuing from September 5, 1928, the date of injury, to July 16, 1929, and indefinitely thereafter. Jurisdiction was reserved to consider a supplemental petition by the employee for a permanent disability rating. It was also found that respondent employer ‘is entitled to credit said sum of $8,500 against said compensation benefits now due and/or becoming due at any future time by said Postal Telegraph Cable Company to defendant Frank Jacobsen by reason of the injuries for which award herein is made.’ Award was therefore made in favor of petitioner of all compensation benefits to which he was entitled or might become entitled in excess of $8,500.
Rehearing was denied by the commission on December 3, 1929, and petitioner thereupon sought this writ of review.
The petition not only criticises the extent of the credit, and the propriety of granting it under the particular circumstances of this case, but declares that the granting of credits is beyond the powers of the commission. It is necessary, therefore, first to determine whether the Industrial Accident Commission has power to grant to an employer credit upon his liability for compensation, for the whole or part of any sum recovered by the employee in an action against a third party tort-feasor.
The theory upon which the commission acts in the giving of such a credit it made clear by an examination of certain provisions of the Workmen’s Compensation Act. Where the employee receives injuries which are not due to the act of a third party, he may apply for compensation from his employer. This application is directed to the Industrial Accident Commission and is the exclusive remedy in all cases where the employer and employee are subject to the compensation provisions of the act. Workmen’s Compensation Act, § 6 (Deering’s Gen. Laws 1923, Act 4749); Treat v. Los Angeles G. & E. Corp., 82 Cal.App. 610, 256 P. 447; Sarber v. AEtna Life Ins. Co. (C. C. A.) 23 F.2d 434. When, however, an employee while in the course of his employment receives injuries as a result of the wrongful act of a third party, the statute contemplates three distinct types of recovery: (1) An award of compensation to the employee, payable by the employer, upon application to the Industrial Accident Commission; (2) an action for damages by the employee against the third party tort-feasor; (3) an action for reimbursement by the employer against the third party tortfeasor. Either the employee or the employer may sue the third party. If one brings the action, he must give notice to the other, and the latter then has the privilege of joining in the action as a party plaintiff; or, if independent actions have been brought by each of them, the actions must be consolidated. If the employer alone sues, he may recover any sum which he has paid or become obligated to pay by reason of the injury. If the employee sues, whether the employer joins or not, evidence of the amount or disability indemnity paid by the employer is not admissible, but all other expenditures may be proved and recovered. An employer who has already paid money for expenses or compensation may, upon application to the court, secure a first lien for the amount so expended upon any judgment recovered by the employee. Workmen’s Compensation Act, § 26.
It will be seen from the foregoing that the employer ordinarily has the opportunity, where he alone sues the third party, to recoup any present or future losses resulting from his liability under the statute. If he does not sue, he may obtain only a partial recoupment. The lien which the statute gives him is only for past expenditures, and does not extend to sums which he is obligated to pay, such as future medical expenses and compensation for disability. It follows, therefore, that unless the employer brings the action alone, he does not obtain a full reimbursement from the tortfeasor; that is to say, he recovers less than he will ultimately be required to pay to the employee by virtue of the provisions of the Workmen’s Compensation Act.
Because of this circumstance, the employer who fails to sue might be forced at times to pay compensation to the employee though sufficient has been recovered from the third party to meet all the employee’s legitimate claim. In such case the employee would enjoy a double recovery for his injuries. The commission aims to prevent such doulbe recovery, and, where possible, to place the burden of the entire loss upon the tortfeasor, as the party primarily liable therefor. The satute partially achieves this result by giving the employer a lien on the employee’s judgment. The commission goes further and completely eliminates double recovery by means of the credit, which relieves the employer of the obligation to pay compensation to the extent of the entire third party recovery. It should be observed that the commission deems its power to exist regardless of whether the employer pursues either of his statutory remedies of suit and claim of lien. Its position is that, so for as the right to its awards is concerned, the employee shall not receive from any source a total sum in excess of that which the commission finds him to be entitled under the act . In other words, if the employee can recover a greater sum in an action against the third party, he may do so; but in such event he is not entitled to any further award against his employer.
In denying the power of the commission to grant such a credit, petitioner attacks the statute itself, contending that section 26, in so far as it gives to the employer a right of action against the third party for injuries to the employee, is unconstitutional. Several alleged discriminatory features of the section are discussed, and the point is also made that the constitutional enabling provision of the act (Cal. Const. art. 20, § 21) deals with compensation for employees and does not authorize this type of action by an employer. It is unnecessary to consider the highly technical argument on discrimination, for it does not appear that petitioner is adversely affected, and he cannot therefore raise the point. See Estabrook v. Industrial Accident Commission, 177 Cal. 767, 177 P. 848. The other constitutional objection has already been before this court. In Western States, G. & E. Co. v. Bayside Lumber Co., 182 Cal. 140, 187 P. 735, it was held that section 26 is merely a recognition of the equitable doctrine of subrogation, and clearly within the legislative authority. It does not depend for its validity on the constitutional enabling provision, and need not have been made a part of the Workmen’s Compensation Act, but could have been enacted as a general statute. This being so, the mere fact of its presence in the act is of no consequence. Indeed, it has been suggested that a statutory declaration is unnecessary, and that the employer would have the right to subrogation without it. Fidelity & Casualty Co. of New York v. St. Paul Gas Light Co., 152 Minn. 197, 188 N.W. 265; see, also, Milosevich v. Pacific Electric Ry. Co., 68 Cal.App. 662, 230 P. 15.
The problem is not solved, however, by the conclusion that section 26 is constitutional. That section makes no express provision for credits; it provides merely that the employer may sue the third party, or claim a lien in the employee’s suit. Petitioner asserts that the commission, in granting the credit, usurps the functions of the court, in that the only relevant provision of the act (section 26) gives the court, and not commission, power to grant a lien for past expenditures, and not a credit for damages recovered .
The answer of the commission is, first, that section 26 was intended to express the general right of subrogation, and that such right is not diminished nor limited by the procedural provisions of the section. It is said to be the legislative intention that the employer shall recoup all of his losses from the tort-feasor, and that to construe the specific provision for suit by the employer and lien on the employee’s judgment as exclusive means of such recoupment would be to place an arbitrary limit to the subrogation right. The commission also points to other sections in support of its position. Section 11, subd. g (Deering’s Gen. Laws, 1923, Act 4749) provides as follows: ‘Any payment, allowance or benefit received by the injured employee during the period of his incapacity, or by his dependents in the event of his death, which by the terms of this act was not then due and payable or when there is any dispute or question concerning the right to compensation, shall not, in the absence of any agreement, be construed to be an admission of liability for compensation on the part of the employer, or the acceptance thereof as a waiver of any right or claim which the employee or his dependents may have against the employer, but any such payment, allowance or benefit may be taken into account by the commission in fixing the amount of the compensation to be paid.’ Section 63, subd. a, provides: ‘The commission is hereby vested with full power, authority and jurisdiction to do and perform any and all things whether herein specifically designated, or in addition thereto, which are necessary or convenient in the exercise of any power, authority or jurisdiction conferred upon it under this act.’ This last section confers broad powers upon the commission to effectuate the purposes of the act; and, if we accept the proposition that the act is designed to secure compensation for the employee and to prevent double recovery, the granting of credits seems amply supported. Furthermore, the act gives the Commission authority to adopt rules of practice and procedure. Section 57. In Ives v. Industrial Accident Commission, 71 Cal.App. 262, 235 P. 53, the court approved the granting of a credit by the commission to the employer’s insurance carrier, after settlement by the employee of his action against the third party. The language of the opinion (page 265 of 71 Cal.App., 235 P. 53, 54) is in point here: ‘The manner in which the commission handled the compromise seems to have been in every respect according to approved forms and procedure. No statutory provision has been cited to us prescribing the particular form of procedure for the purpose of disposing of such a question, but it is provided: ‘The commission shall have full power and authority: (1) To adopt reasonable and proper rules of proactive and procedure. * * *’ Section 57, Workmen’s Compensation Act. To us it seems clear that the rule of practice and procedure followed in this instance was reasonable.’
The power to grant credits was considered and approved in the case of Rosenbaum v. Hartford News Co., 92 Conn. 398, 103 A. 120, L. R. A. 1918F, 521; and we are in accord with the holding of the court, subject, however, to the limitations expressed in Ansbach v. Dept. of Industrial Relations, 99 Cal.App. 677, 279 P. 224, to which fuller reference will hereinafter be made.
We think the charge of usurpation of the functions of the court is unfounded, and that the power of the commission to prevent double recovery in this manner cannot be seriously questioned. To compel it to ignore a recovery by the employee against a third party would result in unreasonable and arbitrary differences in compensation, and the imposition of liability upon an employer in excess of the loss suffered by the employee. The act, properly construed, gives the commission full power to determine the loss suffered by the employee and the sum necessary to compensate therefor; and it does not require that the commission award a greater sum. With the commission lies the duty of ascertainment of the amount of future compensation payments to which the employee is entitled because of his injuries. The determination that a credit is due the employer, by reason of the employee’s recovery from the tortfeasor, is incidental to this duty, and consequently is a necessary part of its jurisdiction.
Petitioner raises several minor objections of which we may briefly dispose. The credit was granted, in this case, upon application by the employer without any claim for compensation having been filed by the employee, whereas ordinarily it is granted when the employee applies for compensation. We see no injury to the employee in such procedure if the credit is properly determined. Nor is there any substantial difference between a judgment recovered by the employee and a settlement made by him with the third party and ratified by the employer, so far as the power to grant the credit is concerned. Ives v. Industrial Accident Commission, 71 Cal.App. 262, 235 P. 53; Rosenbaum v. Hartford News Co., 92 Conn. 398, 103 A. 120, L. R. A. 1918F, 521. Petitioner further contends that the respondent employer waived any right it might have to a credit when it received payment in the amount of its claim of lien, and consented to the compromise of the suit. The case of Morris v. Standard Oil Co., 77 Cal.App. 720, 247 P. 583, relied upon in this connection, is in no way similar to the instant case. We are unable to see how the pursuit of the statutory remedy of lien upon the employee’s judgment is a relinquishment of other rights which the employer may have. Nor is there anything in the employer’s conduct upon which an estoppel could be grounded.
The real defect in the award is not, as we view the case, a lack of power to grant the credit, but rather an improper ascertainment thereof. We are satisfied that the granting of credits is necessary to prevent double recovery. We are not, however, prepared to sanction a credit which deprives the employee of any part of his proper damages or compensation. The manner employed by the commission in this case was quite simple; the whole of the employee’s recovery from the third party was credited to the employer. This was done, notwithstanding the fact that the employee did not himself receive the whole of that recovery. The amount recovered was $8,500, of which $2,930.39 was paid to the employer in satisfaction of its lien, and $1,569.61 was paid to petitioner’s attorney. The balance received by the employee was therefore $4,000, for which the employer received a credit of $8,500.
Respondent commission concedes that the credit was too large. With respect to the amount already received by the employer under its claim of lien, it is said that the award obviously includes that sum as part of the credit; that is, the credit is to be deemed reduced in that sum. We find nothing in the order granting the credit to support this interpretation. As far as can be determined, it ignores the fact of prior payment to the employer. The commission makes the further concession, in which respondent employer does not join, that the attorney’s fee was improperly included, in that it constituted part of the cost of collection, was not received by the employee, and benefited the employer as well as the employee. With this concession we are thoroughly in accord, but we are less concerned with the particular concession than with its implications for, carried to its logical conclusion, it demonstrates the invalidity of the entire credit as granted in this case.
Upon what theory does the commission conclude that credit for the attorney’s fee was improper? Plainly on the theory that, if the employee did not receive it himself, it was in no sense part of his compensation, and furnished no basis for a reduction of the employer’s liability to compensate him. This is unquestionably sound. Clearly, not all of the third party recovery may be credited to the employer. It becomes necessary therefore, in each case to determine what part of such recovery may be so credited. And it may be laid down as a guiding rule that the commission has no power to credit to the employer any part of the recovery from the tortfeasor which is not actually received by the employee in lieu of similar compensation under the Workmen’s Compensation Act .
Much confusion has been engendered by the loose use of such terms as ‘double recovery’ and ‘exclusive remedy.’ That act, it is true, does not contemplate that an employee shall be twice compensated for the same injury; in this sense it is opposed to ‘double recovery.’ But, as the court says in Texas Emp. Ins. Ass’n v. Price (Tex.Civ.App.) 300 S.W. 667, 670, although a double recovery is obnoxious to the law, ‘a full recovery * * * is one of its special concerns.’ The act not only does not prevent, but it expressly permits, recovery from two parties, the employer and the third party tortfeasor. Similarly, the act makes the application to the commission for compensation, as defined by the act the exclusive remedy of the employee against the employer; but it certainly imposes no restriction upon his remedy against the third party. When the employee sues the third party, he is unaffected by the provisions of the act with respect to the nature and extent of compensation . Artificial Ice & Cold Storage Co. v. Walta, 86 Ind.App. 534, 146 N.E. 826; Southern Surety Co. v. Chicago, etc., Ry. Co., 187 Iowa, 357, 174 N.W. 329; Smale v. Wrought Washer Mfg. Co., 160 Wis. 331, 151 N.W. 803.
In order fully to appreciate the significance of this point, it is necessary to analyze and compare the elements of an award of compensation under the act and a recovery of damages in an action at law. In an action at law the employee may prove and recover for the following elements: (1) medical and other expenses necessitated by the injury; (2) disability, that is, loss of ability to work and earn money; (3) physical pain and mental suffering resulting from the injury. In an application to the commission, only the first two elements may properly be proved; the commission may make an award for expenses and occupational disability, and for nothing else. Hence the employee may sometimes, by bringing suit against the third party, recover some money as damages which could never be obtained from the commission in any form. This is plainly the law. The mere fact that an injured person is an employee does not limit his right to bring an ordinary action for his injuries, except against his employer. And it does not restrict the elements of his recovery, except as against his employer. Much depends upon this point and we have labored it somewhat to avoid misunderstanding. An injured employee is as much entitled to damages for pain and suffering as any other injured person.
In the instant case, petitioner, an injured employee, brought an action against the third party for expenses, disability, and pain and suffering. Upon a compromise of the action, a certain sum was paid to him. The commission has credited that sum to the employer against his liability for compensation under the act; that is, it has credited a recovery for expenses, disability, and pain and suffering, against a liability for expenses and disability. The recovery for pain and suffering has therefore been wiped out. Yet it is something to which the employee has the same right as to his compensation under the act. The action of the commission, taken by virtue of a rule and not an express statute, deprives the employee of money lawfully recovered by his own efforts, as a condition to an award of compensation to which he is likewise entitled. A rule which leads to such a result is plainly invalid.
This was, in fact, the conclusion reached by the District Court of Appeal in the case of Ansbach v. Dept. of Industrial Relations, 99 Cal.App. 677, 279 P. 224, wherein a hearing in this court was denied. Because this decision deals with the exact issue confronting us here, and unless disapproved, compels the annulment of the commission’s award, it will be of value to examine it in some detail. There the employee was injured, and received medical attention at the instance of the employer and insurance carrier. Some time later an operation was performed by a surgeon, pursuant to the direction of the employer and insurance carrier. Additional injuries, pain, and suffering resulted therefrom. The employee obtained an adjustment from the commission as to his disability rating, and also sued the surgeon for malpractice. The suit was settled for $1,750. Thereafter, on application of the insurance carrier, the commission made an order reducing the award in the amount received as settlement from the third party. The court annulled the award. The opinion reads, in part, as follows (page 680, of 99 Cal.App., 279 P. 224, 225): ‘The question therefore arises as to whether an award of compensation by the respondent tribunal for ‘permanent disability’ of the employee did include, or could have included, the item of ‘physical pain and mental suffering’ theretofore endured by the employee. Although, as argued by respondents, the respondent tribunal has authority to determine the percentage of disability of an applicant for compensation, and as one of the several items which may be taken into account in reaching a conclusion thereon may include therein ‘pain, grief, suffering,’ which are present and which affect the employee’s then ‘ability to work,’ nowhere in the express terms of the statute, or in the judicial decisions of this state to which our attention has been directed, may be found any indication that past ‘physical pain and mental anguish’ endured by the employee may be compensated. In other words, so far as is discoverable, the jurisdiction of the respondent tribunal in the premises in limited to a determination of the percentage of disability existent in the employee at the date of hearing of his application for compensation. It must be assumed that, in making its award of compensation to the employee for ‘permanent disability,’ the respondent tribunal included therein such items only as were either expressly authorized by statute or which were impliedly authorized thereby; and, consequently, that the past ‘physical pain and mental anguish’ suffered by the employee were not included within the ‘permanent disability’ of the employee for which the award of compensation was made. * * * It is manifest that, had the employer been a party litigant, no settlement thereof could have been effected without his consent thereto, and that, in the event of a settlement, if the employer wished to protect his interests, it would be come his duty to segregate the items going to make up the total thereof, so as to show at least how much thereof was allowed for ‘physical pain and mental suffering’ and what amount, if any, was allowed for ‘permanent disability,’ as contemplated by the provisions of the Workmen’s Compensation, Insurance, and Safety Act. For aught that now appears or may be ascertained the total amount received by the employee represented the damages which he suffered by reason of his past ‘physical pain and mental suffering.’ If so, as hereinbefore intimated, the respondent tribunal was without jurisdiction to deduct such amount from the award for ‘permanent disability’ theretofore made to the employee.’
The opinion thus lays down the rule that the employer, if he desires to obtain credit for the employee’s recovery from the third party, must segregate the items of the recovery so as to exclude from his claim for credit the sum recovered for physical pain and mental suffering. It is apparent that this conclusion is decisive of the point involved herein, and, conceding this, respondent commission asserts that the case is wrongly decided and should be disapproved. To the criticisms of the decision we may now address ourselves, with the observation, however, that substantially the same points were presented to this court in the application for hearing in the Ansbach Case.
The commission suggests, first, that the Ansbach Case proceeds upon the erroneous assumption that it acted in excess of its jurisdiction, when the proper presumption would be that it acted within such jurisdiction. The court’s view was that the settlement included a certain amount for pain and suffering, and that, until segregation of the items was made, there could not be determined what part of the settlement was for pain and suffering, and that it might have all been for pain and suffering. Since the commission is without jurisdiction to make an award for pain and suffering, it follows that its credit was a deprivation of that part of the recovery. The commission urges that the presumption should be that the commission acted within its jurisdiction, and that when it made the credit it is to be presumed, in the absence of a showing by the employee, that the whole settlement in the action was based upon disability, and that no part of the sum paid was for pain and suffering. We are unable to agree with the commission that the decision is, or should be, based upon any presumption. It seems to us that the right to a credit should be established by proof of a certain fact by the employer; namely, that the employee has already recovered from a third party certain damages in lieu of compensation to which he is entitled under the act— that is to say, damages for expenses and occupational disability. Failure on the part of the employer to prove this fact leaves the commission without the jurisdictional basis for the granting of the credit.
Still less convincing is the statement that the commission can and does compensate for pain and suffering in so far as they affect ability to work. This is true, but wholly irrelevant. The law gives the plaintiff, in an action for damages, the right to recover for pain and suffering irrespective of their effect on his ability to work, and it is this important additional right which the commission cannot recognize in an award of compensation. See Walker v. Von Wedel, 108 Okl. 292, 237 P. 86.
The final argument is directed to the question of the difficulty of applying the rule of segregation, as laid down in the Ansbach Case. It is said that the employer who does not participate in the judgment of the court or the verdict of the jury cannot know what are the items of damage into which the judgment may be segregated; and that, in the event of settlement, where the tort-feasor pays by way of compromise, it is still less possible to make any such segregation. This would, if true, be a serious objection to the decision, though hardly a fatal one, in our opinion. Mere difficulty of proof by the employer does not justify a plain deprivation of the employee’s property, or of his right to compensation under the law. But the respondents have failed to show wherein segregation is impossible or even impracticable; at the most, their argument is that it is difficult and requires an effort upon the part of the employer. He would, it appears, have to join in the employee’s suit, and request that the court in the rendition of the judgment, or the jury in bringing in its verdict, make such segregation. In the event of a settlement, he would have to require such segregation before consenting thereto. Perhaps, by stipulation among the parties, the same result could be reached without joinder in the action. We do not undertake to suggest the procedure to be followed in protecting the employer’s rights without violating those of the employee. Doubtless a variety of methods are possible, and, if any uniformity is desired, this is a matter for the Legislature to consider.
It should be particularly borne in mind that the commission’s plan of credits rests upon a rule and not an express statute. Some such system appears to be necessary to avoid double recovery, and a careful study of the act has led us to conclude that the commission has the power to establish the system by rule. But the rule must operate in subordination to positive legal rights of the employee. Here, as in the Ansbach Case, the credit ignores those rights. The fruits of litigation in which the employee invested his time, energy, and money, without aid from the employer, are taken from him and given to the employer. It is true that the act contemplates the reimbursement of the employer out of the recovery from the third party. But we find nothing in the act to suggest that the reimbursement should be for any element of the recovery which is not a part of the employer’s obligation to the employee. A rule which thus goes beyond the intent of the act and invades the rights of the employee as an individual is plainly invalid. The award must therefore be annulled.
We concur: RICHARDS, J.; SEAWELL, J.; PRESTON, J.; CURTIS, J.