Opinion ID: 1671205
Heading Depth: 1
Heading Rank: 3

Heading: the claim of fireman's fund insurance company against sherman & fletcher

Text: Fireman's Fund Insurance Company was the worker's compensation carrier for Elder, Inc. As such it paid benefits on account of the injury and death of David George. It seeks indemnity from Sherman & Fletcher on the ground that the negligence of Sherman & Fletcher caused it to become liable for the compensation benefits. It claims that (1) the exclusive remedy provisions of K.R.S. 342.690(1) were never intended to abolish the common law rights of indemnity and contribution, (2) the 1972 amendments to the Act do not abolish those rights, and (3) the attempt of the General Assembly to limit liability in K.R.S. 342.690(1) violates Kentucky Constitution Sections 14, 54, and 241. Whether or not K.R.S. 342.690(1) attempted to abolish actions for indemnity and contribution, there can be no doubt but that it sought to limit liability of an employer in claims for indemnity and contribution. K.R.S. 342.690(1) specifically provides that the liability of an employer to another person who may be liable for or who has paid damages on account of an injury or death of an employee of such employer arising out of the scope and course of employment and caused by a breach of duty or obligation owed by such employer to such other shall be limited to the amount of compensation and other benefits for which the employer is liable under this chapter on account of such injury or death.... As we have noted earlier in this opinion, Sherman & Fletcher was a contractor pursuant to the provisions of K.R.S. 342.610 and the term employer includes such a contractor. K.R.S. 342.690(1). Sherman & Fletcher would have been liable for worker's compensation benefits to David George if his employer, Elder, Inc., had not secured those benefits. The cost of the benefits provided for David George by his immediate employer, Elder, Inc., were no doubt reflected in the cost of the services provided by Elder, Inc. to Sherman & Fletcher. Because Elder, Inc. secured the worker's compensation benefits, the actual dollar amount which Sherman & Fletcher became obligated to pay as compensation benefits to David George was zero. The statute thus limits the liability of Sherman & Fletcher to zero dollars. On the question of whether the purported limitation on the right to indemnity contained in K.R.S. 342.690(1) is unconstitutional when applied to a compensation carrier such as Fireman's Fund in this case, we consider our decision in Fireman's Fund Insurance v. Government Employees Insurance Company, Ky., 635 S.W.2d 475 (1982) controlling. With respect to an insurance carrier required by its contract to pay losses caused by the neglect of a third party, we held that the Kentucky Constitution does not prohibit legislative limitation upon the right of indemnity. We said: It was not until Kentucky Util. Co. v. Jackson County R.E. Corp., Ky., 438 S.W.2d 788 (1969), that the court gave any consideration to the notion that this type of indemnity claim might fall under the protection of Const. Sec. 54. The question there was whether KRS 342.015(1), which provides that an employer liable for workmen's compensation `shall... be released from all other liability,' protected an employer whose primary negligence was alleged to have caused its employe's death from liability to a secondarily-negligent party which had settled the wrongful-death claim. Without deciding the constitutional question unequivocally, the court construed KRS 432.015(1) as being inapplicable, but in reaching that conclusion stated that `the common-law right of indemnity is a jural right which existed prior to the adoption of our Constitution and may not be abolished by the General Assembly.' Assuming, however, but without so deciding, that the general theory of indemnity as grounds for a cause of action cannot be legislated away, still the specific issue in any case is whether the facts of the case would have established a cause of action under that theory at that time. Today, for example, we behold the theory of negligence having burgeoned into liability without fault in products liability cases, but it would be absurd to contend that such liability would have been countenanced in 1891. The right of indemnity asserted in the Kentucky Utilities Company case was founded on facts that were strictly analogous to the situation in the Brown Hotel case. Absent the element of workmen's compensation, two parties were liable for the wrongful death, but it was the primary or active negligence of the one which had exposed the other to that liability. Whether the right of indemnity under those circumstances had developed by case-law to the point of recognition in 1891 is extremely doubtful, but we need not pursue the point here, because it is quite beyond cavil that in 1891 neither workmen's compensation nor no-fault automobile or vehicular insurance law existed. It is not possible that the kind of indemnification sought in this case could have been established as common law at the time the Constitution of this state was adopted. There is still another ground upon which Const. Secs. 14 and 54 cannot be applicable. Aside from the mention of defamation in Sec. 14, these constitutional provisions expressly apply only to actions for death, personal injuries, and property damage. Cf. Kentucky Hotel v. Cinotti, 298 Ky. 88, 182 S.W.2d 27, 29 (1944), and Zurich Fire Ins. Co. of New York v. Weil, Ky., 259 S.W.2d 54, 57 (1953), in both of which it is recognized that Sec. 54 refers to actions in tort. In a subrogation suit, of course, the plaintiff asserts the rights of his subrogor, but in an action for indemnity he sues in his own right, and upon a basis even more tenuous than an implied contract. Id. at 477, 478. We hold that K.R.S. 342.690(1) limits the liability of Sherman & Fletcher to another who has paid benefits on account of injury or death of an employee to the amount of compensation for which Sherman & Fletcher is liable (in this case zero), and we further hold that the statute is not unconstitutional.