In exchange, the employer is released from all liability based on negligence and, therefore, no longer runs the risk of being burdened with a verdict for damages in a large amount.
If, however, some person other than the employer is liable for damages on account of the disability or death, then the employee, or his personal representatives may elect either to receive compensation under the Workmen's Compensation Act, or to proceed to recover damages from such third person, 33 U.S.C.A. 933(a). In the case at bar, the employee has chosen the second option and seeks to recover damages against the third person, who happens to be the general contractor. The question is whether he is entitled to do so in the light of a provision contained in Section 904, that,
'In the case of an employer who is a subcontractor, the contractor shall be liable for and shall secure the payment of such compensation to employees of the subcontractor unless the subcontractor has secured such payment.'
In this case the contractor carried insurance which covered the subcontractor's employees and it is, therefore, argued in his behalf that under Section 905, his obligation to pay workmen's compensation is exclusive and takes the place of all other liability on his part. On the other hand, it is urged that since the subcontractor, who was the actual employer of the plaintiff, carried compensation insurance, the case is within the exception contained in the last clause of Section 904 and the general contractor had no duty to do so, but was in effect a volunteer in taking out insurance that he was not obligated to carry. It is contended, therefore, that he is not released from common law liability for negligence.
The Court agrees with the last mentioned argument. The law does not accord to the general contractor the choice of either carrying workmen's compensation insurance, or subjecting himself to liability for negligence. The law requires him to carry insurance only if the subcontractor fails to do so. In such a contingency, the general contractor may well be free of all other liability if he in fact carried such insurance. He may not, however, voluntarily take out insurance that the law does not require and thereby secure freedom from liability for negligence. In this instance the subcontractor carried compensation insurance and hence the defendant was not obligated to do so. Release from common law liability is a benefit accruing from carrying compensation insurance only in case the law imposes a duty to do so. One may not escape from such liability by taking out insurance that the law does not require.
It is argued in behalf of the defendant that the Workmen's Compensation Act contemplates a quid pro quo, namely, in exchange for being guaranteed some compensation by way of insurance carried by the employer, the employee gives up his right to recover damages for his employer's negligence. This argument is sound, but it is not applicable to the facts here presented. There is no quid pro quo in this instance insofar as the general contractor is concerned. The employee is not benefited by the fact that two persons carry workmen's compensation for his benefit. He would not receive double compensation. The general contractor, therefore, has given no quid pro quo. No reason appears why he should be released from liability for negligence merely because he volunteered to carry insurance that the law did not obligate him to take out.
In view of these considerations, the Court concludes that the defendant is not freed from liability for negligence. Consequently this action may be maintained as a so-called 'third-party' action.
The defendant's motion for summary judgment is denied.
© 1992-2004 VersusLaw Inc.