ROCKY L. WEBB, PLAINTIFF, v. MONTANA MASONRY CONSTRUCTION COMPANY, A MONTANA CORPORATION, AND ALDINGER CONSTRUCTION COMPANY, INC., A MONTANA CORPORATION, DEFENDANTS.
No. 87-344.
Supreme Court of Montana
Submitted March 31, 1988. Decided Aug. 11, 1988.
761 P.2d 343 | 233 Mont. 198
Jardine, Stephenson, Blewett & Weaver, Steven Potts argued, Great Falls, for defendants.
THE HONORABLE GORDON R. BENNETT, District Judge, sit-
Honorable Paul G. Hatfield, United States District Judge for the District of Montana, has certified to this Court under Rule 44 of the Montana Rules of Appellate Procedure the following question:
“Where a general contractor is compelled, pursuant to Section 39-71-405(1), Montana Code Annotated, to pay workers’ compensation benefits to an employee of an uninsured subcontractor, is that general contractor‘s liability limited, by Section 39-71-411, Montana Code Annotated, to compensation under the Workers’ Compensation Act?”
The statutes referred to provide:
“39-71-405. Liability of employer who contracts work out. (1) An employer who contracts with an independent contractor to have work performed of a kind which is a regular or a recurrent part of the work of the trade, business, occupation, or profession of such employer is liable for the payment of benefits under this chapter to the employees of the contractor if the contractor has not properly complied with the coverage requirements of the Workers’ Compensation Act. Any insurer who becomes liable for payment of benefits may recover the amount of benefits paid and to be paid and necessary expenses from the contractor primarily liable therein.
“39-71-411. Provisions of chapter exclusive remedy - nonliability of insured employer. For all employments covered under the Workers’ Compensation Act or for which an election has been made for coverage under this chapter, the provisions of this chapter are exclusive. Except as provided in part 5 of this chapter for uninsured employers and except as otherwise provided in the Workers’ Compensation Act, an employer is not subject to any liability whatever for the death of or personal injury to an employee covered by the Workers’ Compensation Act or for any claims for contribution or indemnity asserted by a third person from whom damages are sought on account of such injuries or death. The Workers’ Compensation Act binds the employee himself, and in case of death binds his personal representative and all persons having any right or claim to compensation for his injury or death, as well as the employer and the servants and employees of such employer and those conducting his business during liquidation, bankruptcy, or insolvency.”
The following facts are stipulated:
“1. In 1985, Aldinger Construction, Inc. (hereinafter referred to as
‘Aldinger‘), was the general contractor hired by the Bainville School District to remove an existing building and construct a new school building. Montana Masonry Construction Company (hereinafter referred to as ‘Montana Masonry‘) was a subcontractor on the project. Rocky L. Webb (hereinafter referred to as ‘Webb‘) was an employee of Montana Masonry. “2. On or about September 11, 1985, Webb was injured in an accident which arose out of and in the course of his employment with Montana Masonry.
“3. By reason of the employer-employee relationship between Webb and Montana Masonry, Montana Masonry was required by Montana law to provide workers’ compensation insurance coverage for Webb. Montana Masonry failed to provide said coverage for the accident which occurred on or about September 11, 1985.
“4. On the date of the accident, Aldinger did carry workers’ compensation coverage through the State Compensation Insurance Fund.
“5. Since Montana Masonry had not properly complied with the coverage requirements of the Workers’ Compensation Act, the State Compensation Insurance Fund became liable for payment of benefits by reason of the provisions of Section 39-71-405(1), MCA.
“6. On or about December 22, 1986, Webb initiated the present action. Webb is seeking compensation for his injuries from Montana Masonry and Aldinger on the grounds that they failed to comply with the requirements of the Montana Scaffold Act and also failed to provide a safe place to work as provided by Section 50-71-201 et seq., MCA.
“7. As of the date of the Joint Motion, Montana Masonry has not been served with the lawsuit. However, Aldinger has been served and has filed an Answer denying liability. In addition, Aldinger has asserted in its Third Affirmative Defense that since it was required to and did pay compensation and medical benefits to Webb, an employee of Montana Masonry, pursuant to the provisions of the Workers’ Compensation Act, Aldinger is entitled to the insulation provided employers under the Workers’ Compensation Act, including those provisions of Section 39-71-411, MCA.”
“The right to compensation . . . is not affected by the fact that the injury . . . is caused by the negligence of a third party other than the employer . . . . Whenever such event . . . is caused by the act or omission of some persons or corporations other than his employer
. . ., the employee, . . . in addition to the right to receive compensation under this chapter, [has] a right to prosecute any cause of action he may have for damages against such persons or corporations.”
The question here is whether Webb may maintain an action for negligence against Aldinger under the above statute and circumstances. We hold that he can, and that the answer to the question certified is, therefore, “no.”
The question upon which this answer turns is whether Aldinger becomes clothed with immunity under
The Act, originally passed in 1909 (Chapter 67, Laws of 1909), was found unconstitutional because it did not protect an employer who furnished compensation under it from being sued by the injured worker. Because no provision was made for reimbursement, in whole or in part, the Court found that the employer against whom an action was successfully prosecuted would be compelled to pay twice. The Court saw this as a violation of the employer‘s right to equal protection of the laws. See, Cunningham v. Northwestern Improvement Co. (1911), 44 Mont. 180, 119 P. 554. The legislature tried again in 1915, providing specifically for immunity for any employer who elected to pay compensation under the Act (Section 3, Chapter 96, Laws of 1915). The new Act passed constitutional muster in Shea v. North-Butte Mining Co. (1919), 55 Mont. 523, 179 P. 499, wherein it was held the Act did not offend the Constitution by closing the courts to injured workmen who had chosen to become subject to the Act. Shea, 55 Mont. at 533-534, 179 P. at 503.
The question of an owner‘s or general contractor‘s reciprocal immunity arising from liability for a noncomplying subcontractor did not arise until after the 1965 legislature amended the definition of an independent contractor by adding:
“But the legal defense of independent contractor shall not bar otherwise compensable industrial accident claims against employers except when such defense is interposed on behalf of a party who has previously required the claimant‘s immediate employer to come within the workman‘s compensation act.”
Chapter 49, Laws of 1965, amending Section 92-438, R.C.M. 1947. In Ashcraft v. Montana Power Co. (1971), 156 Mont. 368, 480 P.2d 812, this Court extended the legal defense to an industrial accident
The term “statutory employer” was not mentioned in the Ashcraft majority opinion. But Justice Daly, dissenting, asserted the majority had created a statutory employer on the authority of Professor Arthur Larson‘s Workmen‘s Compensation Law, Vol. 2A, Section 72.31. Subsection 72-31(a) of that work states:
“When subcontractor is not insured.
“Forty-four states now have ‘statutory-employer’ or ‘contractor-under’ statutes - i.e., statutes which provide that the general contractor shall be liable for compensation to the employee of a subcontractor under him, usually when the subcontractor is uninsured but sometimes without reference to the insured status of the subcontractor, doing work which is part of the business, trade or occupation of the principal contractor. Since the general contractor is thereby, in effect, made the employer for the purposes of the compensation statute, it is obvious that he should enjoy the regular immunity of an employer from third-party suit when the facts are such that he could be made liable for compensation; and the great majority of cases have so held. This result is not affected by the fact that no compensation claim has been brought against the general contractor by the employee, or that compensation benefits were voluntarily paid by the general contractor. [Citations omitted.]”
In Buerkle v. Montana Power Company (1971), 157 Mont. 57, 59, 482 P.2d 564, 568, a case characterized by the Court as a “sequel” to Ashcraft, the plaintiff urged that the exception in Section 92-438, R.C.M. 1947, should be limited in effect to the Workmen‘s Compensation Act and should not be a bar to third party liability suits
This quid pro quo concept was affirmed in First National Bank v. District Court (1973), 161 Mont. 127, 505 P.2d 408, a case in which immunity was clearly and specifically extended, under Section 92-438, R.C.M. 1947, to owners who required their independent contractors to provide workmen‘s compensation coverage against claims of employees of their subcontractors. 161 Mont. at 133, 505 P.2d at 411. But the immunity did not stop there. The Court went on to accord the statutory employer immunity to the owner, even though it did not contractually require the injured employee‘s immediate employer to carry workmen‘s compensation, thus at least eroding one of the two requirements for application of the rule laid down in Ashcraft - i.e., that the employer require the independent contractor to be covered.
The accident in First National Bank, supra, occurred February 5, 1971, the case was submitted to this Court November 28, 1972, and decided January 9, 1973. On March 22, 1972, the 1972 Montana Constitutional Convention adopted the declaration of rights article (II) of our present Constitution, to be effective, prospectively, on July 1, 1973. Mont. Const. Conv., Vol. II, pp. 1104 and 1108. The Constitution was approved by the electorate on June 6, 1972.
“Section 16. The administration of justice. Courts of justice shall be open to every person, and speedy remedy afforded for every injury of person, property, or character. No person shall be deprived of this full legal redress for injury incurred in employment for which another person may be liable except as to fellow employees and his immediate employer who hired him if such immediate employer provides coverage under the Workmen‘s Compensation Laws of this state. Rights and justice shall be administered without sale, denial, or delay.”
The president of the convention was Leo Graybill, Jr., of the law
The second sentence of
“. . . The committee felt, in light of a recent interpretation of the Workmen‘s Compensation law, that this remedy needed to be explicitly guaranteed to persons who may be employed by one covered by Workmen‘s Compensation to work on the facilities of another. Under Montana law, as announced in the recent decision of Ashcraft versus Montana Power Company, the employee has no redress against third parties for injuries caused by them if his immediate employer is covered under the Workmen‘s Compensation law. The committee feels that this violates the spirit of the guarantee of a speedy remedy for all injuries of person, property or character. It is this specific denial, and this one only, that the committee intends to alter with the following additional wording: ‘No person shall be deprived of his full legal redress for injury incurred in employment for which another person may be liable except as to fellow employees and his immediate employer who hired him if such immediate employer provides coverage under the Workmen‘s Compensation laws of this state.’ In other words, the committee wants to insure that the Workmen‘s Compensation laws of the state will be used for their original purpose - to provide compensation to injured workmen - rather than to deprive an injured worker of redress against negligent third parties, beyond his employer and fellow employees, because his immediate employer is covered by Workmen‘s Compensation. The committee believes that clarifying this remedy would have a salutary effect on the conscientiousness of persons who may contract out work to be done on their premises. To permit no remedy against third parties in cases where the employer is covered by Workmen‘s Compensation is to encourage persons with rundown premises to contract out work without improving the quality of the premises.
The committee urges that this is an abuse of the Workmen‘s Compensation law and constitutes a misapplication of that law to protect persons who are negligent. The committee commends this provision to the Convention with the belief that it is an important, if technical, aspect of the administration of justice. Those are the remarks which are contained in the booklet. Let me amplify them by saying basically this: we felt that the right to third party action is a right which we should establish in our Constitution. It is a right which working men and women who are unfortunate enough to be injured have had for nearly 80 years in this state. We feel that it was wrongly taken away from these people by the Supreme Court decision which was mentioned. We feel that we perhaps are legislating in asking that this be written into our Constitution, but we of the committee really believe that we are acting in a judicial manner in asking that it be written in the Constitution for we feel that this Convention, perhaps, is the court of last resort for injured working men and women in Montana with respect to the third party lawsuit, and we recommend that the section be adopted.”
Mont. Const. Conv., Vol. V, pp. 1753-1754.
Delegate Otto Habedank, a Sidney attorney, moved for deletion of the provision and argued against it on the ground the same result could be obtained by legislation. The motion failed on a vote of 76 to 14, and the section was approved without a dissenting vote. Mont. Const. Conv., Vol. V, pp. 1754-1760. On this record, it must be concluded without equivocation that our 1972 Constitutional Convention determined that Professor Larson‘s grant of immunity to statutory employers was to be excised from Montana law, root and branch, forever.
The legislative session immediately following the Constitutional Convention responded to the command of
“Any employer who contracts to have work performed of a kind which is a regular or a recurrent part of the work of the trade, business, occupation or profession of such employer shall be liable for the payment of compensation to the employees of any subcontractor unless the subcontractor primarily liable for the payment of such
compensation has coverage under this act. Any employers who shall become liable for such compensation may recover the amount of benefits paid and necessary expenses from the subcontractor primarily liable therein. [Emphasis added.]”
Section 1, Chapter 154, Laws of 1973 (second paragraph).
It is of particular interest to note that the legislature used, for the first time, the term “primarily liable“; that the “primarily liable” subcontractor was ultimately responsible for payment of benefits; and that an employer paying benefits on behalf of a noncovered subcontractor was entitled to look to the subcontractor for indemnification. In this way, it would seem, the legislature intended to avoid the double payment problems first encountered in Cunningham, supra, and to provide the employer with a means of avoiding loss because of a noncomplying contractor, but not to immunize a negligent employer from a third party action. The language of this subsection was altered by the 1979 legislature to accommodate specific reference to independent contractors, and to make it clear insurers, including, we suppose, self-insured employers, were entitled to recover benefits paid on behalf of primarily liable contractors, leaving unaltered the basic thrust of the section: the liability for payment of benefits stayed with the immediate employer, as did the immunity.
Clayton R. Fiscus was injured May 27, 1971, while working for a subcontractor of Beartooth Electric Co-operative, which had not required the subcontractor to carry workmen‘s compensation. The proceedings, in Fiscus v. Beartooth Electric (1974), 164 Mont. 319, 522 P.2d 87, were therefore not affected by the 1972 Constitution or the 1973 enactments pursuant thereto, even though the case was submitted and decided after the effective date of both. See, Poulson v. Walsh-Groves (1975), 166 Mont. 163, 531 P.2d 1335. Characterizing it as a “step-out” from Ashcraft and Buerkle, this Court held the employer enjoyed immunity even though it had not required the subcontractor to carry workmen‘s compensation insurance and even though the subcontractor had not only had insurance but had paid the claimant from it. The latter feature was the new one in the case because the Court had already decided in the First National Bank extension of the Ashcraft case that the employer enjoyed immunity even though it had not contractually required its subcontractor to insure. As to this new feature, it was concluded that immunity was justified in the case where the owner or employer did not require the subcontractor to be insured because the owner or contractor was subject to liability as the statutory employer in the event the sub-
With this history in mind, we consider the arguments presented.
Aldinger‘s initial and central argument is that it is entitled to immunity as Webb‘s statutory employer. Its principal reliance is on the 1972 case of Kelleher v. State (1972), 160 Mont. 365, 503 P.2d 29, in which Justice Daly, writing for the majority, adopted Professor Larson‘s statutory employer concept and concluded: “... the rationale of the statutory employer-employee extension by the legislature is for the benefit of the employee and that such a benefit conferring a liability on the employer is co-existent with immunity from common law liability.” 160 Mont. at 369-370, 503 P.2d at 31. Kelleher, of course, followed Ashcraft in both time and legal principle. Reliance on it in this case is defective for at least three reasons, as heretofore noted. First, the statute upon which the statutory employer concept was enacted for Montana (Section 92-438, R.C.M. 1947) has been repealed. Second, the Ashcraft holding was expressly and specifically overruled by the people of the state with their approval of
Aldinger‘s other arguments are, for the most part, variations on the statutory employer theme. It contends the Workers’ Compensation Act provides an exclusive remedy for the employee as well as the employer. That undoubtedly is what
The argument is made that granting immunity to Aldinger is in conformity with the first sentence of
Aldinger summons Washington Metropolitan Area Transportation Authority v. Johnson (1984), 467 U.S. 925, 104 S.Ct. 2827, 81 L.Ed.2d 768, in aid of its cause. In this case, the United States Supreme Court concluded the Authority was entitled to immunity from tort actions brought by employees of its contractors because under the operative statute (Longshoremen‘s and Harbor Workers’ Compensation Act,
On the other hand, Loffon v. Bell and Zoller Coal Co. (1977), 65 Ill.2d 437, 3 Ill.Dec. 715, 359 N.E.2d 125, deals with a statute which, like Montana‘s, permitted recovery by the paying contractor from the noncomplying subcontractor. The Court met the fundamental argument made here in the following discussion:
“The defendants argue that a construction of Section 5(a) adverse
to their position would result in a violation of their rights to due process and equal protection. They premise this contention on the basis that they are liable to pay compensation benefits without fault under Section 1(a)(3) and still remain subject to a subsequent common law or statutory action for damages. We find this argument to be without merit, for under this construction of Section 5(a) defendants are placed in no worse position than they are in regard to suits by employees of insured subcontractors. The only difference between the two situations is that in one case the general contractor has paid compensation. He, however, has the right of indemnification against the uninsured subcontractor. If the subcontractor is insolvent, the general contractor who is found liable based upon a common law or statutory cause of action may set off from that award the amount of compensation benefits he has previously paid to the employee. The employee receives no windfall or double recovery. In some cases, where the subcontractor is insolvent and the general contractor prevails in the common law or statutory action, the general contractor must bear the burden of the compensation payments. It must be noted, however, that the general contractor had it within his power to protect himself from this loss by hiring insured subcontractors.”
Loffon, 3 Ill.Dec. at 720, 359 N.E.2d at 130.
The declaration made in the second sentence of
Aldinger invites this Court to overrule its holdings in White v. State (1983), 203 Mont. 363, 661 P.2d 1272, and Pfost v. State (Mont. 1985), [219 Mont. 206,] 713 P.2d 495, 42 St.Rep. 1957, to
If we by judicial fiat defy the clearly stated intention of both the 1972 Constitutional Convention and the 1973 legislature and once more raise the ghost of Ashcraft by immunizing owners and contractors from liability for their negligence because they had paid or are subject to paying compensation for their noncomplying contractors or subcontractors, we will be rewarding them for not requiring the immediate employers of injured working men to comply with the spirit as well as the letter of the Act, and we will be ignoring the fact that they may recover the payments made from the offending employers, thus acquiring the immunity free. This would be a patent perversion of a law that was conceived, enacted and is supposed to be implemented primarily to provide aid and relief to injured working men and women.
For all of the above reasons, we hold the answer to the question certified must be “No,” and the United States District Court is so advised.
MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES HARRISON, SHEEHY, McDONOUGH and HUNT concur.
MR. JUSTICE WEBER, specially concurring:
In Ashcraft, the Court extended to Montana Power Company immunity from tort liability in the workers’ compensation setting. The framers of the 1972 Constitution expressly overruled Ashcraft by providing immunity only to immediate employers who provide workers’ compensation coverage. Unlike the majority, I do not be-
In Ashcraft, the employee received workers’ compensation from Swain & Morris, the subcontractor of Montana Power. Under the quid pro quo theory which underlies the workers’ compensation law, Swain & Morris had immunity from tort liability as the employer which furnished workers compensation. Ashcraft held that Montana Power, the employer of Swain & Morris, also had immunity from tort liability. At that point Montana Power had furnished nothing in return for the freedom from tort liability.
In contrast, Montana Masonry, as Webb‘s immediate employer, failed to carry workers’ compensation insurance. As a result of that failure, Aldinger, the employer which had hired Montana Masonry as a subcontractor, was required to furnish and did furnish workers’ compensation coverage to Mr. Webb. Following the quid pro quo theory, Montana Masonry under our statutes will not be granted immunity from tort liability because of its failure to furnish workers’ compensation coverage. Under the theory of the majority, Aldinger is also denied immunity from tort liability even though Aldinger actually furnished the workers’ compensation coverage which protected and paid the employee.
The majority states that the 1973 Legislature implemented the new Constitution by enacting
I agree that the clear wording of
“It is sufficient . . . to call to mind that the object sought was to substitute for the imperfect and economically wasteful common-law system by private action by the injured employee for damages for negligent fault . . . which, while attended with great delay and waste, compensated those employees only who were able to establish the proximate connection between the fault and the injury, a system by which every employee in a hazardous industry might receive compensation for any injury suffered by him . . . whether the employer should be at fault or not . . .”
Shea, 179 P. at 501. In that case this Court concluded that there were appropriate benefits to both the employer and employee to uphold the Act as constitutional, applying a quid pro quo theory. Under that theory, it may be that the Montana Legislature could enact legislation granting an equivalent benefit to Aldinger as the employer which furnished compensation.
Without taking a position as to whether the legislature has the power to do so under the Constitution, I do invite the legislature to carefully consider this question. It certainly may be argued that as a matter of fairness, Aldinger is entitled to immunity from tort liability in exchange for providing workers’ compensation. Consideration of that question will require careful analysis of the provisions of
I concur in the result of the majority opinion.
FOOTNOTE
1. The question in the case cited (Potter v. City of Kenosha (1955), 268 Wis. 361, 68 N.W.2d 4) was whether the city, as owner of the streets, was liable under Wisconsin‘s “safe place statute” for the injury of an independent contractor‘s employee because it permitted the contractor to work in a trench in the street without shoring it as was required by the safety code. The court concluded the contractor was liable because he was independent and that the city was not liable because it had contracted for a