Case Name: Frank C. Sparks Company, a Delaware corporation, Appellant, v. Huber Baking Company, a Delaware corporation, West T. Lamborn, Robert W. Lamborn and McCormick Construction Co., Inc., a Delaware corporation, Appellees
Court: Delaware Supreme Court
Jurisdiction: Delaware
Decision Date: 1953-04-28
Citations: 48 Del. 9
Docket Number: No. 30
Parties: Frank C. Sparks Company, a Delaware corporation, Appellant, v. Huber Baking Company, a Delaware corporation, West T. Lamborn, Robert W. Lamborn and McCormick Construction Co., Inc., a Delaware corporation, Appellees.
Judges: 
Reporter: Delaware Reports
Volume: 48
Pages: 9–34

Head Matter:
Frank C. Sparks Company, a Delaware corporation, Appellant, v. Huber Baking Company, a Delaware corporation, West T. Lamborn, Robert W. Lamborn and McCormick Construction Co., Inc., a Delaware corporation, Appellees.
(April 28, 1953)
Wolcott and Tunnell, Justices, and Carey, J., sitting.
Stewart Lynch for the appellant.
William. Prickett for Huber Baking Company; Thomas J. Healy, Jr., for West T. Lamborn and Robert W. Lamborn; William Poole (of Berl, Potter and Anderson) and Howard L. Williams (of Hering, Morris, James and Hitchens) for McCormick Construction Co., Inc., appellees.
Supreme Court of the State of Delaware,
No. 30, 1952.

Opinion:
Wolcott, J.,
delivering the opinion of the Court:
The principal question for decision is whether an employer, or the employer's insurance carrier which has paid compensation under the Workmen's Compensation Law is subrogated to the rights of an injured employee who has elected to take compensation under the Workmen's Compensation Law, 19 Del. C. § 2101 et seq.
The facts are briefly as follows:
In the fall of 1948, Frank C. Sparks Company (hereafter referred to as "Sparks") contracted with Huber Baking Company (hereafter referred to as "Huber") to construct a cement second floor in a proposed addition to Huber's premises.
At about the same time, Huber contracted with West T. Lamborn and Robert W. Lamborn (hereafter referred to as "the Lamborns") for the preparation of plans and furnishing of structural steel, and contracted with McCormick Construction Co., Inc. (hereafter referred to as "McCormick") for the erection of the structural steel.
All the parties with whom Huber contracted proceeded with the fulfillment of their respective contracts. While the employees of Sparks were engaged in laying the cement second floor of the addition, the center steel beam furnished by the Lamborns and erected by McCormick collapsed, injuring five of Sparks' employees.
Liberty Mutual Insurance Company (hereafter referred to as "Liberty"), not a named party to this action, was the workmen's compensation insurance carrier of Sparks. Liberty was also the public liability insurance carrier of Huber.
After the injuries, the employees of Sparks elected, under 1935 Code, § 6108, to take workmen's compensation benefits. As a result of that election, Liberty paid compensation benefits in the amount of $1,029.00 and medical expenses in the amount of $2,294.60. In addition, Sparks paid as wages to its injured employees the sum of $3,258.00 and additional medical expenses in the amount of $223.75.
Liberty claiming to be subrogated to the rights of the injured employees with respect to their cause of action for personal injuries against third parties other than their employer, brought suit in the names of the injured employees against the Lamborns and McCormick. Liberty did not join Huber, for which it was public liability insurer, as a party defendant.
Thereafter, Sparks in its own name instituted the cause now before us, also claiming to be subrogated to the rights of its injured employees. Sparks named as defendants Huber, the Lam- horns and McCormick. In its complaint Sparks sets out various particulars of negligence — several, joint and concurrent — alleged to have been committed by each of the defendants severally and in concert. The complaint sets forth two separate causes of action.
The first cause of action seeks to recover from the defendants the amounts paid by Sparks as wages and for medical expenses. The second cause of action seeks to recover on behalf of its injured employees damages for the personal injuries suffered as a result of the alleged negligence of the defendants.
Counsel stipulated that the question of whether Sparks or Liberty was subrogated under 1935 Code, § 6108, to the employees' rights of action for personal injuries should be decided first by the trial court. After argument, it was held, 84 A. 2d 413, that Liberty, as the compensating insurance carrier, was subrogated to the right of the injured employees to sue for their personal injuries and, therefore, alone was entitled to bring suit. Judgment was entered in the second cause of action in favor of the defendants. From this judgment, Sparks has appealed.
The defendants' then moved for summary judgment in Sparks' first cause of action on the ground that the payments made by Sparks to and for its injured employees were made voluntarily and without any legal liability to its employees. Without opinion, the court entered summary judgment in favor of the defendants. From this judgment, Sparks has appealed.
We will first take up the appeal of Sparks from the summary judgment for the defendants entered in the first cause of action. In this cause of action, Sparks seeks to recover as damages the payments made by Sparks as wages during incapacity and for medical expenses. It appears that a dispute arose between Liberty and Sparks as to the amount of medical benefits that Liberty was required to pay for the injured employees of Sparks. Liberty took the position that under 1935 Code, § 6078, it was required to pay only "reasonable" medical expenses amounting to ward hospital care, while Sparks took the position that an implied condition of its contracts with its injured employees required the payment of greater medical expenses. Sparks did not submit pursuant to 1935 Code, § 6078 the dispute over medical payments to the Industrial Accident Board for settlement, nor did it obtain approval pursuant to 1935 Code, § 6100 for the wage payments made by it.
Presumably, therefore, the amounts paid as benefits by Liberty were the benefits required to be paid by the Workmen's Compensation Law and, accordingly, if Sparks is entitled to maintain its first cause of action, it must be upon some theory other than that its payments were required by the Workmen's Compensation Law.
Sparks argues that impliedly incorporated in every work contract it has with its employees is its custom to pay for the highest type of medical care and to pay the wages of its employees during incapacity caused by injuries received in the course of their employment. It argues that an employer required by contract to pay such amounts may recover them as damages from a person tortiously injuring the employee and thus directly causing the employer's liability. Sparks, in reality, is seeking indemnity for sums of money it allegedly paid by reason of contracts with its employees.- We think that this must be Sparks' theory of its first cause of action because of its reliance upon Jones v. Waterman S. S. Corp., 3 Cir., 155 F. 2d 992.
We think it doubtful that Jones v. Waterman S. S. Corp., supra, relied upon by Sparks, was correctly decided if it held that the right of indemnification under such circumstances was a common-law right. Cf. The Federal No. 2, 2 Cir., 21 F. 2d 313, and Crab Orchard Imp. Co. v. Chesapeake & Ohio Railway Co., 4 Cir., 115 F. 2d 277.
However, we do not have to decide the question. The defendants, in support of their motion for summary judgment, took the deposition of an officer of Sparks. This evidence permits only the conclusion that the payments made by Sparks for the benefit of its employees were gratuities, and were not made because of any contractual obligation. The evidence adduced by the defendants refutes the allegation in the complaint that Sparks was required to pay the amounts it now seeks to recover. In such a situation, a duty is cast upon the plaintiff to disclose evidence which will demonstrate the existence of a genuine issue of fact for submission to the jury, if summary judgment for the defendants is to be denied. Murphy v. T. B. O'Toole, Inc., 8 Terry 99, 87 A. 2d 637. The mere assertion in the complaint to the contrary will not suffice to show a plausible ground for the claim asserted. The plaintiff elected not to controvert the evidence offered in support of the motion for summary judgment. It must, therefore, be taken as true. Of necessity, in this state of the record, summary judgment properly was entered for the defendants hecause there was no basis in fact for the first cause of action. 3 Barron and Holtzoff, § 1235, p. 85; Gifford v. Travelers Protective Ass'n, 9 Cir., 153 F. 2d 209; Engl v. Aetna Life Insurance Co., 2 Cir., 139 F. 2d 469; Seward v. Nissen, D. C., 2 F. R. D. 545.
We turn now to Sparks' second cause of action. In this cause of action, Sparks seeks to maintain by right of subrogation under the Workmen's Compensation Law an action for personal injuries to its employees. Two section of that law, 1935 Code, § 6108, 6112, are pertinent. These two sections are as follows:
"6108. Sec. 38. Injury, Liability Of Third Person For; Employer May Elect; Subrogation Of Employer: — Whenever an injury for which compensation is payable under this chapter shall have been sustained under circumstances creating in some other person than the employer, a legal liability to pay damages in respect thereto, the injured employee may, at his option, either claim compensation under this chapter or obtain damages from, or proceed at law against such other person to recover damages, but he shall not proceed against both; and if compensation is awarded under this chapter, the employer having paid the compensation or having become liable therefor, shall he subrogated to the rights of the injured employee, or of his dependents to recover damages against such third person, and may recover in his own name or that of the injured employee from the other person in whom legal liability for damages exists, the indemnity paid or payable to the injured employee. Any recovery against such third person in excess of the compensation theretofore paid and thereafter payable by the employer (less the cost of securing and collecting same) shall be paid forthwith when collected, to the employee or the dependents."
"6112. Sec. 42. Employers, Who Are: — The following shall constitute employers subject to the provisions of this chapter: The State of Delaware, the County of New Castle, every corporation (private, public, municipal or public quasi), every association, every firm and every person (excepting the employers mentioned in Section 48 and Section 49 hereof) having in his, her, or its service any employee defined in Section 43 of this chapter. If the employer is insured, it shall include his, her or its insurer as far as practicable."
. Sparks contends that under § 6108, it, as the employer of the injured persons who elected to take workmen's compensation benefits, is the only party who can assert a claim for the personal injuries suffered by its employees. It argues that § 6108, in giving subrogation to an "employer" precludes a claim of subrogation by the insurer who has actually paid the compensation benefits.
Sparks urges that its construction of § 6108 is the only construction fair to the employee and must, therefore, have been intended by the Legislature. Basically, the argument seems to narrow itself to a contention that the Legislature intended to limit subrogation to the actual employer in all instances, on the theory that the employer is the natural protector of the employee's right to receive such sum as might be recovered in excess of the total of compensation benefits paid.
As we view the question, it is one of statutory construction and is to be answered by determining whether or not the definition of "employer" found in § 6112 is applicable to the subrogation provision in § 6108.
In Silvia v. Scotten, 2 W. W. Harr. 295, 122 A. 513, 515 the Supreme Court construed the provision allowing subrogation to the rights of an employee. In that case, a widow brought suit against a third party for damages for wrongful death. Prior to the institution of suit she had received compensation benefits under the Workmen's Compensation Law. The precise question before the court was whether the widow, or the employer of the deceased, had the right to maintain such an action. It was held that § 6108 required a person owning a cause of action for personal injuries or death against someone other than the employer to elect whether to pursue that remedy or to apply for compensation benefits under the Workmen's Compensation Law, and if the election was the latter, that thereafter the person so electing was prohibited from asserting the former. The cause of action by reason of such election became assigned by operation of law to the employer who had paid, or who had become liable to pay, the compensation benefits. The subrogated employer thereafter could prosecute, settle or elect to let lapse the claim thus assigned, subject always to the right of the employee in the event of recovery to receive from the employer such excess above the total of compensation benefits paid as might be recovered. However, the injured person's rights in his cause of action are terminated upon his election to take workmen's compensation benefits. This is made abundantly clear by the following language in the court's opinion:
" 'the employer by succession — ipso facto et eo instanti —becomes the owner of the right against the wrongdoer.' He may assert it or not as he sees fit. If perchance the claim for damages against the third person is far in excess of the amount of compensation allowed under the Compensation Act, the employee, or his dependents to whom such excess belongs in the event that the employer collects it, have no way of collecting it except as the interest or grace of the employer may prompt him to act. In this respect they are at his mercy. The risk that he will not act to collect full damages from the person liable is a hazard they take in electing to proceed under the Compensation Act. This may not be fair and just to the employee and his dependents. Indeed it would appear to us not to be. But it is the result which the language of the act clearly indicates as the legislative intent, and we have no choice but to observe it."
It seems clear, therefore, from Silvia v. Scotten that the primary purpose of the subrogation provisions of § 6108 is to give a compensating employer a means of recouping his loss. The safeguarding of the employee's hope of further recovery is of secondary interest. The philosophy of the Workmen's Compensation Law is to give an injured employee, irrespective of the merits of his cause of action, a prompt and sure means of receiving compensation and medical care without subjecting himself to the hazards and delays of a law suit. The employee retains no legal rights because of the provision allowing him to receive from the employer any excess recovered above the total compensation. This provision might almost be described as an afterthought to prevent unjust enrichment of the employer. Certainly, under the rule of Silvia v. Scotten, the employee has no right to complain that settlement was made at an amount which would yield him nothing, nor, indeed, has he the right to complain that the claim was allowed to become barred by passage of time.
This being the fact, we can see nothing in Sparks' argument that the Legislature intended subrogation only of the actual employer as the natural protector of his employees' rights. The employee having no legal rights under the statute, there is nothing to protect. This may seem unfair and, indeed, in Silvia v. Scotten, it was specifically recognized as unfair, but the fairness or unfairness of a statutory policy is the concern of the Legislative Branch.
The rule of Silvia v. Scotten is not a precise answer to the question before us, but it does establish the primary policy of the subrogation provision, viz., to give a means of recoupment to the out-of-pocket employer.
Sparks admittedly is not out of pocket as a result of the payment of compensation benefits. Such payments as it made were, as we have pointed out in our discussion of its first cause of action, not made as required compensation benefits. If Sparks is permitted to maintain the action, upon recovery it would first reimburse Liberty for the amounts it had paid as benefits and then pay over any excess, less costs of suit, to its employees. It, itself, would retain nothing. Since the purpose of the subrogation provision of the Workmen's Compensation Law is to give a means of recoupment to persons out of pocket by reason of that law, obviously Sparks has no claim to be possessed of the subrogation right.
Sparks attempts to limit the application of the definition of "employer" in § 6112 to those sections of the Workmen's Compensation Law imposing some duty or liability on the employer and to deny its application to those sections conferring rights upon the employer. We think this approach too rigid and superficial. The only limitation on the application of the definition in the act, itself, is one of practicality. Bearing in mind the primary purpose of the subrogation provision, we think it more practical to permit the party which is to be reimbursed to have the right of subrogation.
The Workmen's Compensation Law as a practical matter does not differentiate between the "employer" and "insurer" for the most part. It requires all employers except those classified as self-insurers, of which, we understand, there are few, to carry Workmen's Compensation Insurance, 1935 Code, § 6096, and requires that the insurance carrier shall agree to be bound by and be subject to all awards and decisions of the Industrial Accident Board, 1935 Code, § 6101. The insurance carrier is further required to be bound to a direct promise to the person entitled to compensation to pay all awards made by the Board, 1935 Code, § 6102, and penalties imposed for delay in making payments of compensation may be assessed only against insurance carriers and self-insured employers, 1935 Code, § 6080. The insured employer is free from imposition of penalties in the event of a delay in the making of payments.
The effect of the above mentioned provisions of the Workmen's Compensation Law is to make the insurance carrier the primary source of payment of compensation benefits. It is forced to assume, when qualifying as an insurance carrier, all the liabilities of the employer with respect to the payment of compensation. The insurance carrier is made the surety of the employer in this respect. Since the liability of a surety was imposed upon the insurance carrier, the Legislature could not have intended to deny it the surety's usual right of subrogation as a means of recoupment of the payments made by it. If such a result was intended it should have been clearly spelled out in the law.
As. a matter of general insurance law, an insurer who pays a loss suffered by the insured is entitled to be subrogated pro tanto to any right of action which the insured may have against a third person whose tort caused the loss. 29 Am. Jur., Insurance, § 1335. If, however, an insurer pays the loss of the insured in full, so that the insured has no pecuniary interest in an action against the wrongdoer, the insured is subrogated completely to the insured's right of action against the wrongdoer. 8 Couch on Insurance, § 1997; 11 Appleman's Insurance Law and Practice, § 6505; Restatement of Security, § 141.
The Legislature in providing that an "employer" who pays or becomes liable to pay compensation shall be "subrogated" to the rights of the injured employee must have had in mind the general nature of the doctrine of legal subrogation, which is based upon equitable concepts of reimbursement of one who pays for another. The use of the legal tag for this doctrine precludes any other conclusion.
We think, therefore, that the Legislature in defining the word "employer" in § 6112 as including the employer's insurer intended that definition to be applied to the provisions of § 6108, when the insurer had paid the compensation benefits to the injured employees. If such is not the case, then the "subrogation" of the "employer" was a misuse of language because, as we have pointed out, the insured employer will have discharged no obligation, nor paid anything. The very basis for "subrogation" would be absent.
It is suggested, however, that in the ordinary case the insurer will not have paid in full the compensation award at the time suit is instituted against the tort-feasor by reason of 1935 Code, § 6104 which requires that all compensation shall be paid in periodic installments as were the wages of the injured employee, and that, therefore, it oftentimes may be the fact that the compensation benefits have not been paid in full by the insurance carrier at the time the suit for personal injuries is required to be brought in order to avoid the bar of the statute of limitations. We think this makes no material difference. Despite this fact, the' insurance carrier is liable for such payment and under the provisions of 1935 Code, § 6096 may be made to deposit security for the payment of all awards for which it becomes liable. We take judicial notice of the policy of the Industrial Accident Board to require of all insurance carriers seeking to qualify as compensation insurers the deposit with the State Insurance Commissioner to secure the payment of compensation liability as it is incurred of the sum of $25,000 in cash, or liquid securities. This policy, for all practical purposes, insures that compensation awarded an employee of an insured employer will be paid by the insurance carrier. Thus, it is apparent that at the time of bringing suit for personal injuries an insurance carrier will have paid the compensation award in full, or will have paid it in part and will have given security for the payment of the balance. Under these circumstances, it would be unreasonable to deny the insurance carrier the benefit of the subrogation provision of the statute since it is the only party in a position to claim the benefit of the doctrine of subrogation.
Any other result would be impracticable. For example, if Sparks is held to be the owner of these causes of action, under the holding in Silvia v. Scotten it would have complete control of the causes of action, and could sue or not sue as it saw fit. It could, if it so desired, settle for an amount smaller than the amount of compensation benefits paid, not by Sparks, but by Liberty. In such event, the whole purpose of affording a means of recouping for out-of-pocket expenses would have been defeated.
One reported Delaware case relied upon by Sparks should be noticed. This is the case of Edwin Bell Co. v. Rogers, 3 W. W. Harr. 445, 138 A. 903, a decision of the Superior Court dismissing an appeal from an award made by the Industrial Accident Board. The appeal was taken by the compensation insurance carrier although it was not a pro forma party to the proceeding before the Board. The appeal was dismissed because of the provision in the act that "either party" may appeal. The correctness of the precise decision in the Bell case is not before us, but if its holding is adverse to the result we have reached in this appeal, we disapprove it.
In conclusion, we note that in other states having Workmen's Compensation Laws with similar provisions to those of the Delaware Law, results similar to the one reached in this appeal on the "subrogation question have been reached. Cf. Western Surety Co. v. Addy, S. D., 42 N. W. 2d 660; Employers' Liability Assurance Co. v. Indianapolis & Cincinnati Traction Co., 195 Ind. 91, 144 N. E. 615; Travelers' Insurance Co. v. Evans, 101 Vt. 250, 143 A. 290; Donahue v. Thorndike & Hix, Inc., 119 Me. 20, 109 A. 187.
For the foregoing reasons, the judgment of the court below on both the first and second causes of action is affirmed.
References to the statutory law will be made in terms of the Code of 1935 since it was in effect at the time this cause arose. This code section has, by act of the current General Assembly, been recodified as 19 Del. C. § 2363.
Re-codified as 19 Del. C. § 2322.
Re-codified as 19 Del. C. § 2377.
Re-eodified as 19 Del. C. § 2363,2301.
Silvia v. Scotten has heen followed without question by the courts of this state and of the 'Federal District Court for the District of Delaware. Cf. Travelers Ins. Co. v. E. I. du Pont de Nemours Co., 1 Terry 285, 9 A. 2d 88, 89 and Melella v. Savage, D. C., 59 F. Supp. 258. The correctness of the holding in Silvia v. Scotten is not attacked before us.
Re-codified as 19 Del. C. § 2372.
Re-codified as 19 Del. C. § 2378(a).
Re-codified as 19 Del. C. § 2378(b).
Re-codified as 19 Del. C. § 2362.
Re-codified as 19 Del. C. § 2360.
Re-codified as 19 Del. C. § 2372(b).