Case ID: ohio-st_157/html/0526-01.html
Source: Caselaw Access Project
Author: {"author": "Weygandt, C. J. Taet, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Midvale Coal Co. (Pittsburgh Plate Glass Co., Substituted Plaintiff), Appellee, v. Cardox Corp., Appellant.
    (No. 32742
    Decided May 21, 1952.)
    
      
      Messrs. Fisher, Smith & Renner, for appellee.
    
      Messrs. Black, McCuskey, Souers Arbaugh, for appellant.
   Weygandt, C. J.

This is the second time this cause has been in this court.

The first decision is reported in 152 Ohio St., 437, 89 N. E. (2d), 673. This court held that the plaintiff’s petition is not demurrable on the alleged ground that the facts stated do not show a cause of action.

According to the plaintiff’s petition and evidence, the basic facts are simple. One of the plaintiff’s employees was injured while in the course of his employment. His injury was caused by the explosion of a blasting cartridge which was defective by reason of the defendant’s failure to inspect and service it as required by the terms of its contract with the plaintiff. The injured employee was awarded compensation by the Industrial Commission of Ohio. The plaintiff employer was a contributor to the insurance fund under the Workmen’s Compensation Act of Ohio. As a result of the injuries suffered by this employee, the Industrial Commission, under its five-year merit rating system for accident experience, increased the amount of the premiums the plaintiff was required to pay into the fund.

In this action the plaintiff seeks to recover from the defendant the total sum of the additional premiums required to be paid solely by reason of the injuries to this employee resulting directly from the defendant’s breach of the contract.

The defendant interposes several assignments of error. However, there is but one requiring discussion.

As the defendant did in support of its demurrer to the plaintiff’s petition, it now contends that under the evidence the damages claimed by the plaintiff are shown to be so uncertain and remote as not to he recoverable. This contention is answered in the opinion of the Court of Appeals in the following excellent analysis of the evidence:

“The second issue involved herein is as to whether the damages proven are too remote and uncertain for recovery. The appellee herein insists that the law of this case has been heretofore decided by the Supreme Court of Ohio in the case of Coal Company v. Cardox, 152 Ohio St., 437, when it stated at page 447:

“ ‘The petition alleges that defendant was licensed to transact business in Ohio as a foreign corporation. Defendant must have known that the only compensation insurance it could carry was under the 'Workmen’s Compensation Act. Defendant, therefore, is charged with knowledge that the Ohio act is based upon the merit system, and if by breach of its contract with plaintiff it injured one of plaintiff’s employees, such breach would affect the rating and premiums to he paid by plaintiff to the Ohio compensation fund if an award were made to plaintiff’s injured employee from the fund. Therefore, it may he fairly and reasonably considered that damages which arose from a breach of contract by defendant, under circumstances which were known to both plaintiff and defendant, were such as may fairly and reasonably he considered to have arisen, according to the usual course of things, from such breach of contract. The petition alleges, without reservation, that the damages did arise to plaintiff, and the amount of them, and we can not say upon deciding a demurrer that the damages alleged were so remote as to bar their recovery. ’

“Appellant insists that since that case was decided upon a demurrer to the petition that the remoteness and uncertainty of the damages are still an open question under the evidence and base their argument upon the following language, inter alia, of the opinion at page 446:

“ 'If a petition prays for damages for loss of profits resulting directly from a breach of contract, such a petition is good upon demurrer even though it might turn out upon trial that the profits were so speculative and uncertain as not to be recoverable.’

“In our judgment the Supreme Court did announce the law of this case as set forth above at page 447 of their opinion. Consequently, it becomes a question of fact under the evidence as to whether the damages alleged were proven. Likewise, the fair inference from this pronouncement is that the measure of damages to the plaintiff is not the amount of money which was paid to the injured employee out of the state fund heretofore or might be paid in the future; nor the reserve set up by the commission to take care of the claim; but is the additional premiums the plaintiff Midvale was compelled to pay under the merit rating system on account of the accident in question. On this point plaintiff produced two expert witnesses, Mr. Sauer and Mr. Taylor, both actuaries and former employees of the Industrial Commission. The defendant produced one expert witness, Mr. Evans, also an actuary and a former employee of the commission. (In fact, Mr. Evans was the only witness on any issue produced by the defendant.) Both Mr. Sauer and Mr. Taylor testified positively that the additional premium paid by plaintiff Midvale to the state compensation fund solely by reason of the Perkins accident was $14,475.72. That these additional premiums would not have been paid if the accident to the employee, Perkins, had' not occurred. The defendant’s witness, Mr. Evans, did not deny but admitted that Midvale had to pay extra premiums into the fund by reason of the Perkins accident. However, he contended that the amount arrived at by Mr. Sauer and Mr. Taylor was wrong. Mr. Evans claimed that the amount should have been 90 per cent of $7,500 or $6,750. (Record Page 219). This difference Mr. Evans explained was due to an alleged mistake of $525 and also principally to the use of the expanded pay roll of Midvale which the uncontradicted evidence showed increased over 300 per cent from the date of the contract to the date of the payments made by Midvale to the commission. It also involved the use of a $7,500 maximum liability for one accident which was in force only for a part of the time herein involved. The pay roll feature is the principal bone of contention. It is our judgment that in view of the pronouncement of the Supreme Court, supra, that the defendant, Cardox, is chargeable with knowledge of this feature of the rating system used by the commission, as well as all of their rules and regulations and the modification thereto as authorized by the statutes of this state. In the usual course of events pay rolls and employment are not static over the years but subject to fluctuations depending on changing economic conditions. Consequently, the result attained in the facts of this situation complied not only with the condition No. 1 as quoted by the Supreme Court at page 447 of the opinion, supra, in the Hadley case as ‘arising naturally, that is, according to the usual course of things, from such breach of contract itself;’ but also from the second feature of that quotation which is worthy of mention to-wit: ‘were such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach of it.’ Now article 5e of the contract in question provides for the sale of additional equipment. Presumably the initial order of 400 cartridges took care of Midvale’s immediate requirements and the insertion of article 5e can only be interpreted to mean that the parties to this contract contemplated expanded operations on the part of plaintiff: Midvale.

“The evidence being uncontradicted that the plaintiff was required to pay into the state fund additional premiums, solely by reason of the Perkins accident in a sum between $6,750 and $14,475.72, depending upon conflicting testimony as to the amount, we can not say from analysis of this evidence that the jury was wrong in accepting the figure testified to by Mr. Sauer and Mr. Taylor and rejecting the figure testified to by Mr .Evans.”

This court unanimously concurs in the foregoing view except as to the maximum amount of damages recoverable by the plaintiff because they “were such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach of it.” Hadley v. Baxendale, 9 Exch., 341, 156 English Rep., 145. A majority of the members of the court are of the opinion that the maximum should be measured by the total amount awarded and paid as a result of the employee’s injuries. It is the majority view that the parties did not contemplate premiums in excess thereof due to accident experience and increased pay rolls. At the time of the trial the total amount that had been awarded to the employee was $9,315.87. However, the cause is remanded to the trial court for the inelusion of the amount of any additional awards to the employee.

Hence, the judgment of the Court of Appeals is modified, and the cause is remanded accordingly.

Judgment modified and, as modified, affirmed and cause remanded.

Zimmerman, Stewart, Middleton, Taet, Matthias and Hart, JJ., concur.

Taet, J.,

concurring. Under the decision in Dayton Power & Light Co. v. Westinghouse Electric & Mfg. Co., 287 F., 439, which was relied upon to support the decision of this court in Midvale Coal Co. v. Cardox Corp., 152 Ohio St., 437, 89 N. E. (2d), 673, the loss by reason of payments from the State Insurance Fund on account of the injuries to Perkins might be considered a loss caused directly by the breach of warranty of the defendant Cardox Corporation. Any additional loss to the plaintiff mining company is at least one step removed from such direct loss. Such additional loss is at least a less direct loss. See Sanford-Brown Co. v. Patent Scaffolding Co. (1945), 199 Ga., 41, 33 S. E. (2d), 422.

Such additional loss cannot, to use the words quoted in the opinion by Stewart, J., in Midvale Coal Co. v. Cardox Corp., supra, from the opinion of Hadley v. Baxendale, 9 Exch., 341, “fairly and reasonably be considered * * * arising naturally, that is, according to the usual course of things, from such breach of contract itself. ’ ’ It arises because of the particular method of fixing rates adopted by the Industrial Commission pursuant to paragraph four of Section 1465-54, General Code, providing that the commission “shall have the power to apply that form of rating system which, in its judgment, is best calculated to merit or individually rate the risk more equitably, predicated upon the basis of its individual industrial accident experience, and to encourage and stimulate accident prevention; [and] shall develop fixed and equitable rules controlling the same, which rules, however, shall conserve to each risk the basic principles of workmen’s compensation insurance.” It is certainly not natural and according to the usual course of things to have payments by an insurer on a single insurance claim increase the insurance premiums of the insured by substantially more than the amount of such payments. On the contrary, such a result is rather startling. Even if the parties contemplated that the plaintiff mining company would carry insurance with the Ohio State Insurance Fund, such additional loss can hardly, to further use the words quoted from Hadley v. Baxendale, supra, “fully and reasonably be considered * * * such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach of it. ’ ’

The language of Section 1465-69, General Code, providing for self-insurance by employers “who do not desire to insure the payment thereof [compensation and other benefits under the Workmen’s Compensation Act] or indemnify themselves against loss sustained by the direct payment thereof,” and the language of Section 35 of Article II of the Constitution, providing for payment by an employer of “the premium or compensation provided by” the workmen’s compensation laws, recognize that the state fund is merely an insurer of the employer’s obligation to pay the compensation provided for by the workmen’s compensation laws. The mere fact, that an employee can assert his claim directly against and be paid by the state fund, does not alter the substance of the relationship of insurer and insured between the state fund and the contributing employer. Cf. Verducci v. Casualty Co. of America, 96 Ohio St., 260, 117 N. E., 235.

Ordinarily, an insurer, upon discharging an obligation insured against, is subrogated to any rights the insured may have against others who are liable to the insured for causing such obligation to arise. Cleveland Paint & Color Co. v. Bauer Mfg. Co., 155 Ohio St., 17, 97 N. E. (2d), 545; London Guarantee & Accident Co., Ltd., v. Strait Scale Co., 322 Mo., 502, 15 S. W. (2d), 766, 64 A. L. R., 936.

However, instead of seeking to enforce the claim of the plaintiff mining company against the defendant Cardox Corporation, the Industrial Commission has, pursuant to statutory authority, taken other steps to repair the loss to the State Insurance Fund caused by the Perkins claim.

If the merit rating plan of the Industrial Commission had enabled the plaintiff to repay to the state fund all amounts which the state fund paid on account of the Perkins claim and to thereby avoid any effect which the Perkins claim might have in increasing the plaintiff’s premiums, then it is apparent that there would have been no loss to the state fund by reason of the Perkins claim and that there would have been no loss to the plaintiff mining company in addition to the amounts paid from the state fund by reason of the injuries to Perkins. A plan providing for such a result would appear to be equitable. Likewise, since plaintiff was not at fault in causing the injuries to Perkins, it.would not do otherwise than “encourage and stimulate accident prevention.” The words of the statute (Section 1465-54, General Code), which have hereinbefore been quoted, give the Industrial Commission wide discretion with respect to merit rating and would, therefore, apparently authorize such a plan. See State, ex rel. Powhatan Mining Co., v. Industrial Commission, 125 Ohio St., 272, 181 N. E., 99; State, ex rel. River Mining Co., v. Industrial Commission, 136 Ohio St., 221, 24 N. E. (2d), 947; State, ex rel. Zone Cab Corp., v. Industrial Commission, 132 Ohio St., 156, 5 N. E. (2d), 477.

It is apparent, therefore, that the plan used by the commission to repair the loss caused to the state fund is responsible for any loss to the plaintiff mining company, to the extent that there is an excess in the amount of additional premiums paid as a result of the Perkins claim over the amount paid from the state fund on account of that claim. The cause of that excess must necessarily be factors other than the injury to Perkins caused by the defendant’s breach of its contract. Cf. State, ex rel. Crystal Tissue Co., v. Industrial Commission, 129 Ohio St., 320, 195 N. E., 546; State, ex rel. River Mining Co., v. Industrial Commission, supra; State, ex rel. McHugh, v. Industrial Commission, 140 Ohio St., 143, 42 N. E. (2d), 774; State, ex rel. Reaugh Construction Co., v. Industrial Commission, 119 Ohio St., 205, 162 N. E., 800.

The commission may be authorized by law to give effect to such factors in determining the rate of premiums to be charged to an employer such as plaintiff. But Cf. State, ex rel. Zone Cab Corp., v. Industrial Commission, 132 Ohio St., 437, 8 N. E. (2d), 438. However, I see no justification for charging to the defendant, on account of the injuries to Perkins, any more than the amount which plaintiff’s insurer against loss on account of such injuries was required to pay by reason of those injuries.

Whether there could be recovery by plaintiff or by the Industrial Commission or by both joining’ together for more than the additional premiums paid by the plaintiff, in the event that those additional premiums were less than the amount paid on account of the injuries to Perkins, is not presented by the record in the instant ease.