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BROWN v. TRAVELERS INSURANCE COMPANY (05/28/69)

decided: May 28, 1969.

BROWN, APPELLANT,
v.
TRAVELERS INSURANCE COMPANY



Appeal from order of Court of Common Pleas No. 4 of Philadelphia County, March T., 1965, No. 5562, in case of Kenneth C. Brown v. The Travelers Insurance Company et al.

COUNSEL

James P. McHugh, for appellant.

Edward W. Madeira, Jr., with him Gerard J. Carpency, and Pepper, Hamilton & Scheetz, for appellee.

Bell, C. J., Jones, Cohen, Eagen, O'Brien and Roberts, JJ. Opinion by Mr. Justice Jones. Mr. Justice Cohen concurs in the result. Dissenting Opinion by Mr. Justice O'Brien. Mr. Justice Roberts joins in this dissent.

Author: Jones

[ 434 Pa. Page 510]

On May 15, 1963, Kenneth C. Brown (appellant) was injured in the course of his employment with the Reynolds Metals Company. Reynolds' workmen's compensation insurance carrier, The Travelers Insurance Company (Travelers), accepted appellant's claim for compensation under the provisions of The Pennsylvania Workmen's Compensation Act (Act of June 2, 1915, P. L. 736, as amended, 77 P.S. § 1 et seq.) and made payments to appellant pursuant to the schedule established by the Act.

Appellant then brought an action in trespass against Travelers, alleging that Travelers' negligence in inspecting or failing to inspect Reynolds' work places and equipment caused his injuries. After appellant had filed an amended complaint, Travelers filed preliminary objections in the nature of a demurrer to the amended complaint. The Court of Common Pleas No. 4 of Philadelphia County (per Spaeth, J.) sustained Travelers' preliminary objections and dismissed the complaint. This appeal followed.

Appellant raises two issues: first, whether, as a matter of law, Travelers had a duty to see that the area where appellant worked and the manner in which the work was done were safe; second, if the answer to the first question is affirmative, whether an employer's insurance carrier is subject to suit under The Pennsylvania Workmen's Compensation Act. We need not consider the first issue, for we hold that an employer's insurance carrier enjoys the same immunity from liability under the Act as does the employer.

Travelers' position is that, under § 303 of the Act (77 P.S. § 481), the insurance carrier is entitled to the

[ 434 Pa. Page 511]

    same freedom from common law liability as is the employer. Section 303 provides: "Such agreement shall constitute an acceptance of all the provisions of article three of this act, and shall operate as a surrender by the parties thereto of their rights to any form or amount of compensation or damages. . . . Such agreement shall bind the employer and his personal representatives, and the employe . . . ." (Emphasis added) Travelers claims that the insurance carrier is included within the term "employer," relying on the definition of "employer" found in § 401 of the Act (77 P.S. § 701): "The term 'Employer,' when used in this article, shall mean the employer as defined in article one of this act . . . or his insurer if such insurer has assumed the employer's liability . . . ."

Appellant counters by arguing that this definition applies only to Article IV of the Act, that the employer's immunity from liability is established in Article III and that, therefore, the general definition of "employer" set forth in Article I is controlling. Section 103 defines "employer" as "synonymous with master, and to include natural persons, partnerships, jointstock companies, corporations for profit, corporations not for profit, municipal corporations, the Commonwealth, and all governmental agencies created by it." (77 P.S. § 21). No reference is made to the employer's insurance carrier.

The courts in this Commonwealth which have considered this question have disagreed as to which definition should apply. The leading case in support of the appellant's position is Mays v. Liberty Mut. Ins. Co., 323 F. 2d 174 (3d Cir. 1963), in which the court (per Staley, J.) held that the Article I definition was to be applied to the immunity section in Article III. We are not persuaded by this opinion. The Mays opinion was carefully analyzed and criticized in an exhaustive

[ 434 Pa. Page 512]

    and able opinion written by Judges Barbieri and Ullman -- both of whom had extensive experience in workmen's compensation prior to their elevation to the bench. Brown v. Travelers Ins. Cos., 37 Pa. D. & C. 2d 111 (Phila. C. P. 1965). Since we feel that Judges Barbieri and Ullman more than adequately set forth the reasons why the more restricted definition of "employer" should not apply to the immunity section, we quote at length from their opinion: "As is observed, Judge Staley's conclusion is arrived at by his view that the language of section 103 is to be given superior force to that of section 401, for he refers to the former as the 'principal definition'. One may ask, why so? We have noted previously herein that article I (including section 103) and article IV (including section 401), are neither of them substantive. We have termed them 'external' articles, as compared with the legislatively designated substantive articles II and III. In short, the first and fourth articles are ancillary, descriptive, unsubstantive and are both basically procedural in significance. It would have been inappropriate for the legislature to have included the workmen's compensation insurance carrier as synonymous with employer in section 103 of article I of the act, because that section was delineating the status of employer and employe for the limited purposes of their status as parties to the statutory agreement to accept the compensation system which was set up in article III . . . . Chronologically speaking, it would be pointless and fruitless to discuss the insurance carrier in article I of the act, because the need for insuring could not arise until article III had become operative. It is the 'master' alone (who, before he accepts the act, has no need for a compensation insurance carrier), who is concerned with the substantive provisions of articles II and III. The employer not only has the

[ 434 Pa. Page 513]

    right to reject the act, but frequently has done so. See Rich Hill Coal Company v. Bashore, 334 Pa. 449 (1939). Article IV sets up all of the provisions for every form of process and remedy available to a claimant and the manner in which liability of the employer to him is to be met, satisfied, settled, concluded and released; so that even under Judge Staley's conception of article IV, and section 401, the insurance carrier shares every one of the obligations, prerequisites, benefits and release rights of the employer. Thus, we find the legislature stating in section 401 that the employer, who had to be defined in section 103 solely as the 'master' for articles II and III purposes, would, for all remedial or procedural purposes, be taken to be a complex entity, including within its scope the compensation insurer (be it a private company or the State Workmen's Insurance Fund), and the agent of such 'master'." (37 Pa. D. & C. 2d at 119, 120)

If we were to accept the appellant's argument that the Article I definition applies to Article III, then we would have difficulty interpreting § 319, which states, "Where the compensable injury is caused in whole or in part by the act or omission of a third party, the employer shall be subrogated to the right of the employe . . . ." (Emphasis added) (77 P.S. § 671). The appellant could hardly argue that if the employer has an insurance carrier, that carrier has no subrogation rights because the word "employer" as used in the subrogation section does not include the insurance carrier. Travelers argues quite convincingly that the legislature clearly intended the word "employer" as used in § 319 to include the insurance carrier. Therefore, since § 319 is part of Article III, this destroys the appellant's argument that the Article I definition of "employer" applies throughout Article III. Instead, we are convinced that the legislature intended that the

[ 434 Pa. Page 514]

    broader definition which clearly applies in § 319 should also apply in § 303 establishing the employer's immunity.

While we conclude that Judges Barbieri and Ullman correctly interpreted the Act, we must admit in all candor that the question is not free from doubt on the face of the statute. However, the relevant policy considerations reinforce our conclusion that the legislature intended that the insurance carrier would share in the employer's immunity.

First, if the appellant's position were adopted, then a regrettable discrimination would result between employers who are insured by the State Workmen's Insurance Fund or are self-insuring employers and those employers who carry private insurance. The statute setting up the State Workmen's Insurance Fund specifically gives the Fund the same defenses which are available to the employer,*fn1 and, therefore, it is impossible to bring a suit such as the instant action against the Fund or a self-insuring employer. Such discrimination would be inequitable and unjust both to the employers who utilize private insurance and to their employees: first, these employers would be placed at a competitive disadvantage since private insurance carriers would necessarily have to raise their rates to offset the increased liability placed upon them by the result urged by the appellant; second, the employees would be disadvantaged because, in the wake of such a result, private insurance carriers would probably abandon all safety ...


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