Case Name: Thornton v. Duffy et al.
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1918-12-31
Citations: 99 Ohio St. 120
Docket Number: No. 15999
Parties: Thornton v. Duffy et al.
Judges: Nichols, C. J., Wanamaker, Newman, Jones, Matthias and Johnson, JJ., concur.
Reporter: Ohio State Reports, New Service
Volume: 99
Pages: 120–132

Head Matter:
Thornton v. Duffy et al.
Workmen’s compensation — Power of legislature wider Section 35, Article II, Constitution, igia — Direct compensation and employers’ liability insurance — Section 1465-69 (107 O. L., 159) — Authority of industrial commission to change or modify former findings — Constitutional law.
1. The enactment of the Workmen’s Compensation Law (103 O. L., 72-92), did not exhaust the authority conferred upon the general assembly of Ohio by Section 35 of Article II of the Constitution. On the contrary, it has the power to amend or repeal all or any portion thereof at any time it deems proper.
2. Contracts of indemnity entered into between an employer of labor and an insurance company since the adoption of Section 35 of Article II of the Constitution are subject to the exercise by the general assembly of the power so conferred upon it to compel all employers of labor to contribute to the state insurance fund, or to impose further conditions or restrictions upon the privilege of electing to pay compensation direct.
3. The act of March 20, 1917 (107 O. L„ 157, 159), amending Section 1465-69, General Code, is a valid and constitutional exercise of the authority conferred upon the general assembly of Ohio by Section 35 of Article II of the Constitution of Ohio, and applies to all employers of labor mentioned in Section 1465-60, General Code.
(No. 15999
Decided December 31, 1918.)
Error to the Court of Appeals of Franklin county.
The petition of Frank C. Thornton avers that he has in his employ more than forty workmen and operatives regularly employed in the same business in and about his manufacturing establishment under contracts of hire.
That the defendants, Thomas J. Duffy and Herbert L. Eliot, are the duly appointed and qualified members of the industrial commission of Ohio; that there is a vacancy in the commission, and that the two persons named are the only members of the commission at the time of the filing of the petition.
That in January, 1914, upon evidence duly submitted,-the industrial commission of Ohio made its finding of facts, certifying that plaintiff was of sufficient financial ability and credit to render certain payments in compensation to injured employes and dependents of killed employes, and the furnishing of medical, surgical, nursing and hospital attention, services and medicine and funeral expenses, equal to or greater than is provided in the act of the general assembly passed February 26, 1913.
That thereupon he gave bond with security approved by the commission, and paid the amount required iñto the state insurance fund, to be credited to the surplus provided for in paragraph 2 of Section 1465-69 of the General Code of Ohio, and thereupon elected to pay individually such compensation and furnish such medical, surgical, nursing and hospital services and attention and funeral expenses directly to the injured and dependents of the killed employes of plaintiff, as provided in Section 1465-69, General Code, and has since that time continually abided by the rules of the industrial commission of Ohio, maintained the required bond, and paid the required amount at its maturity credited to such surplus.
That since January, 1914, he has been and is now of sufficient financial ability and credit to ren der certain the payment of such compensation, and that the commission has not at any time changed, modified or revoked its. finding of fact, and the same is in full force and effect.
That in January, 1914, he made and entered into a written contract with the Aetna Life Insurance Company of Hartford, Conn., wherein the said company agreed to pay to the injured employes of plaintiff such amounts for medical, nursing and hospital services and medicine and such compensation as were and should be provided by Section 1465-41a to Section 1465-106, General Code, and amendments thereof, to indemnify this plaintiff against liability for the payment of any of such amounts to injured employes or dependents of killed employes.
That the plaintiff agreed to pay the Aetna Life Insurance Company an estimated premium computed at an agreed date upon the pay rolls of wages to be paid by plaintiff to his employes from April 29, 1914, to April 29, 1915, and a like amount annually thereafter until the contract of insurance should be canceled in accordance with the terms written therein.
That by the terms of this contract either party thereto might cancel the same on and after thirty daysT written notice to the other party of its intention to do so, but that otherwise the contract of insurance should continue in force indefinitely.
The petition also avers further facts in reference to additional premiums or rebates thereon, based upon the actual pay roll during the time the contract of insurance should be in force.
It avers that on the 1st day of December, 1917, the defendants, Thomas J. Duffy and Herbert L. Eliot, then composing the industrial commission of Ohio, adopted a resolution reciting the act of the general assembly passed February 16, 1917, amending Section 1465-101, General Code, and the act of the general assembly passed March 20, 1917, among other things amending Section 1465-69, General Code, and the act of the general assembly of the state of Ohio passed March 21, 1917, amending Section 9607-2, paragraph 2, General Code, and declaring that no employers shall be permitted to pay or furnish directly to injured employes, or the dependents of killed employes, the compensation and benefits provided in Sections 1465-41 a to 1465-106, General Code, if such employers shall by contract or otherwise provide for the insurance of the payment by them of such compensation and benefits, or shall indemnify themselves against loss sustained by the direct payment thereof, and that all authorization on findings of fact theretofore issued by the commission authorizing and permitting such employers to pay or furnish such compensation and benefits direct shall be and stand revoked as of January 10, 1918, as to all employers receiving such authorization who on the date January 10, 1918, carry any such insurance.
That the industrial commission threatened to and will, unless restrained by the order of this court, send such notices and revoke and hold for naught the findings of fact so made and certified to this plaintiff and upon which plaintiff made his election to pay and furnish such compensation direct.
The petition further avers that the contract of plaintiff with the Aetna Life Insurance Company is a valid and subsisting contract; that plaintiff has the right to maintain the same until it shall be canceled, as provided by its terms; and that the revocation of the finding of facts so certified by the commission to plaintiff, and the refusal of the commission to make and certify to plaintiff its findings of fact, as provided in Section 1465-69, will cause plaintiff irreparable injury and damage, for which he has no adequate remedy at law.
The petition further avers that there are more than six hundred and seventy-five employers of labor similarly situated, and many other employers who claim the right to make such contracts of indemnity; that it is impracticable to bring them all before the court, and that plaintiff sues for the benefit of all such employers.
That the several acts mentioned in the resolution adopted by the industrial commission of Ohio on December 1, 1917, have no application to contracts of insurance or indemnity existing when these acts took effect, and were not intended, and do not authorize the commission to refuse, revoke or cancel the authorization of employers to pay direct the compensation and benefits provided by law for employes and their dependents, and that if said acts do apply to such contracts they are in contravention of Section 1, Article XIV, and Section 10, Article I, of the Constitution of the United States, and Section 28, Article II of the Constitution of Ohio.
Plaintiff prays that the industrial commission of Ohio be perpetually enjoined from sending such notices, and from revoking, changing, or modifying such findings of fact made and certified by the commission to plaintiff, and from carrying out and perpetuating the resolution of December 1, 1917, and from revoking, changing or modifying its finding of fact for and on behalf of any employer who is of sufficient financial ability and credit to render certain the payment of compensation and the furnishing of services to employes and their dependents as provided in Section 1465-69, General Code, and who maintains the bond required by the commission and abides by its rulings and pays the. required amount into the surplus of the state insurance fund. Plaintiff prays for such other and further relief to which he may be entitled.
The answer and cross-petition of The Cleveland Stamping & Tool Company avers similar facts, and prays for the same relief.
To the petition of plaintiff and to the answer and cross-petition of The Cleveland Stamping & Tool Company the defendants filed general demurrers, which were sustained by the common pleas court. The cause was appealed to the court of appeals of Franklin county, Ohio, which court held that the plaintiff was entitled to a temporary restraining order enjoining the defendants as prayed for in his petition until the 29th day of April, 1918, and upon the facts stated in the petition not entitled to-a perpetual injunction, and sustained the demurrer to the answer and cross-petition of The Cleveland Stamping & Tool Company,
This proceeding in error is. brought In this, court to reverse the judgment of the court of appeals.
Mr. Judson Harmon and Messrs. Vorys, Safer, Seymour & Pease, for plaintiff in error.
Mr. Joseph McGhee, attorney general; Mr. William J. Ford; Mr. Frank Davis, Jr.; Mr. Timothy S. Hogan and Mr. George B. Okey, for defendants in error.

Opinion:
Donahue, J.
Section 35, Article II of the Constitution of Ohio, as adopted September 3, 1912, authorizes the general assembly of Ohio to pass laws establishing a state fund to be created by compulsory contribution thereto by employers, and administered by the state, for the purpose of providing compensation to workmen and their dependents, for death, injury, or occupational diseases occasioned in the course of such workmen's employment.
In pursuance of this authority the general assembly enacted a Workmen's Compensation Law (103 O. L., 72-92). Section 22 of this act (Section 1465-69, General Code) provided among other things that certain employers under certain conditions might elect to pay individually, or from a benefit fund, department or association, compensation to workmen and their dependents for death or injuries received in the course of employment.
Under the provisions of Section 35, Article II of the Constitution, the general assembly was not required to make any such exception in favor of any employer, but could have required every employer) mentioned in subdivision 2 of Section 13 of that act to pay into the state insurance fund the amount of premium determined and fixed by the state liability board of awards; and, if it could have done this, then undoubtedly it can at any time amend Section 22 of that act by striking out such exceptions in favor of employers of sufficient financial ability to render certain the payment of compensation to injured employes, dr to the dependents of killed employes, and the furnishing of medical, surgical, nursing and hospital attention and services, medicines and funeral expenses equal to or greater than provided in the original act.
It necessarily follows that if the general assembly has the power at any time to withdraw from these employers this privilege to elect to pay such compensation and furnish such services and attention and funeral expenses directly, it can from time to time impose such conditions as in its. judgment seem wise and necessary to safeguard the main purpose and intent, not only of the act itself, but of the constitutional provision under authority of which this law was passed.
It also follows that whoever seeks to avail himself of the benefits of this exception in his favor must comply with the conditions imposed. Verducci v. Casualty Company of America, 96 Ohio St., 260.
While the contract of insurance described in the petition does not provide for any definite term, nevertheless, at the time it was made, it must have been within the contemplation of the parties thereto that they could not by contract limit the power of the general assembly conferred upon it by Section 35, Article II of the Constitution, to withdraw this privilege or to limit it by other and further conditions that would render such contract of indemnity wholly useless to the employer.
The question is in every way analogous to the one arising in the case of Louisville & Nashville Rd. Co. v. Mottley, 219 U. S., 467, in which it was held by the supreme court of the United States that "The power of Congress to act in regard to matters delegated to it is not hampered by contracts made, in regard to such matters by individuals; but contracts of that nature are made subject to the possibility that even if valid when made Congress may by exercising its power render them invalid." To the same effect is the decision of the supreme court of Vermont in the case of Fitzgerald & Co. v. Grand Trunk Rd. Co., 63 Vt., 169. See also Boyd v. Alabama, 94 U. S., 645; Beer Co. v. Massachusetts, 97 U. S., 25; Stone v. Mississippi, 101 U. S., 814; Butchers' Union Co. v. Crescent City Co., 111 U. S., 746, and C., B. & Q. Rd. Co. v. Nebraska, 170 U. S., 58.
But the question in this case does not depend merely upon the general authority of the legislature to exercise police powers, but rather directly upon the constitutional grant of power and the further consideration that the privilege granted to certain employers by Section 22 of The Workmen's Compensation Act, to pay compensation direct, is an exception to the general provisions of that act, in their favor,
There is therefore no reasonable hypothesis upon which to base the theory that a private contract, to continue for an indefinite number of years, could in any way prevent the legislature from withdrawing this privilege or adding other and further conditions.
There is, however, a further provision in Section 22 of the original act that seems to have been overlooked in the argument of this case. That provision (as amended, 107 O. L., 160) reads as follows.: "The industrial commission of Ohio may at any time change or modify its findings of fact herein provided for, if in its. judgment such action is necessary or desirable to secure or assure a strict compliance with all of the provisions of the law in reference to the payment of compensation and the furnishing of medical, nurse, and hospital services and medicines and funeral expenses to injured and the dependents of killed employes."
The experience of four or more years under this Workmen's Compensation Law may have demonstrated to the entire satisfaction of this commission that it is necessary or desirable to change or modify its former findings of fact in order to secure or assure a strict compliance with the law, where employers have elected to pay this compensation direct and have later entered into a contract with an indemnity company, by the terms of which, as averred in this petition, "The insurance company agreed to pay to the injured employes of plaintiff such amounts for medical, nurse and hospital services and medicines, and such compensation as were and should be provided by said Act of the General Assembly comprised in Section 1465-41 a to Section 1465-106 General Code of Ohio and amendments thereof, and in the event of death of any of plaintiff's employes, such amounts as were and should be provided in said Act and amendments thereof for funeral expenses and for compensation to the dependents or those partially dependent upon such employes."
While Section 54 of the Workmen's Compensation Law (Section 1465-101, General Code), as it read prior to the amendment of February 16, 1917, undoubtedly permitted the writing of such a contract, nevertheless that section must be construed in connection with Section 22 of the same act, which authorizes the industrial commission to change or modify its findings of fact provided for in that section, whenever in its judgment such action is necessary or desirable to secure or assure a strict compliance with all the provisions of that act.
It therefore follows that the industrial commission would have the power under this provision o£ Section 22 to change or modify its former findings of fact in reference to employers who had elected to pay individually from a benefit fund, department or association, such compensation direct, if it should find that such contracts furnish an opportunity for unfair or fraudulent settlement — and had resulted or might result not only in avoiding a strict compliance with the provisions of the act, but also in some instances defeat its intent and purpose, especially where the injured employe or the dependents of an employe killed in the cours.e of his employment are not fully advised of their rights under Section 27 of this act and Rule 18 adopted by the industrial commission under authority of the act creating that commission.
But the right of the industrial commission of Ohio to change or modify its former findings of fact does not now depend upon this construction of this paragraph of Section 22. The amendment of March 20, 1917, of Section 1465-69, General Code (107 O. L., 159), specifically limits the privilege of electing to pay compensation individually or from a benefit fund, department or association, to those employers "who do not desire to insure the payment thereof or indemnify themselves against loss sustained by the direct payment thereof," and therefore it becomes the duty of the industrial commission to change or modify its former findings of fact in reference to such employers, and make the same conform to the provisions of the amended section.
This added condition precedent to the exemption of certain employers from the general provisions of the act is not only clearly within the power of the general assembly, but it is in furtherance of the purpose and intent of the constitution and the law, to create and maintain one insurance fund, to be administered by the state, out of which fund compensation shall be paid to workmen and their dependents for death, injuries, or occupational diseases occasioned in the course of employment.
If insurance is desired, the state will furnish it out of the fund created and maintained for that purpose; for it would not only be arbitrary, unfair, and without purpose, to permit some employers, of labor to enter into contracts of insurance with private companies and compel all other employers to contribute to the state insurance fund, but it would also hinder and perhaps utterly demoralize the method and defeat the object and purpose of the creation of such a fund.
This is an action to enjoin the industrial commission of Ohio from revoking, changing or modifying its findings of fact heretofore made by it in reference to the right of this plaintiff and the cross-petitioner to elect to pay compensation direct. Therefore, the question of the constitutionality of Section 1465-101, General Code, as amended February 16, 1917 (107 O. L., 6) or the constitutionality of paragraph 2 of Section 9607-2, General Code, as amended March 21, 1917 (107 O. L., 647), is in no wise important in the disposition of this case. If Section 1465-69, General Code, as amended March 20, 1917, is a valid and constitutional act of the general assembly of Ohio, and applies to all employers of labor mentioned in subdivision 2 of Section 13 of the Workmen's Compensation Act, then the industrial commission not only has authority, but it becomes its duty to require all employers of labor to bring themselves within the terms and conditions before permitting them to exercise the privilege of election, regardless of the constitutionality of the acts above mentioned.
Judgment affirmed.
Nichols, C. J., Wanamaker, Newman, Jones, Matthias and Johnson, JJ., concur.