Cincinnati Bell Telephone Co. v. Straley , 40 Ohio St. 3d 372 ( 1988 )

Locher, J.

The primary issue presented in these actions is whether a self-insured employer under the workers’ compensation laws which has paid medical expenses and other related workers’ compensation benefits to an injured employee may recover damages against a third party who negligently caused the injury to the employee in the absence of any legal relationship based on contract or warranty between the employer and the third party. For the following reasons we hold in the negative and, accordingly, enter the appropriate judgments.

I

This issue has been before this court in one form or another on several occasions and produced mixed results. Today we seek to clarify our position on this issue under various circumstances.

Our most recent pronouncement in this area of the law was made in Ledex, Inc. v. Heatbath Corp., supra. In Ledex, an employee of Ledex, Inc. sustained acid burns when he slipped and fell into a chemical that had leaked from its container onto the floor of the work premises. Ledex, Inc. had purchased the chemical from Heatbath Corporation. The employee filed for and was awarded workers’ compensation benefits. Ledex, Inc. was a state fund employer under the workers’ compensation laws and, as a result of the above accident, experienced an increase in workers’ compensation premiums. Ledex, Inc. filed an action against Heatbath Corporation, seeking damages which included $18,025 as attributable to increased workers’ compensation premiums. The lower courts rejected the claim by Ledex, Inc. that it could recover those damages attributable to increased workers’ compensation premiums.

This court reversed and held in the syllabus that:

“R.C. 4123.82 does not bar an employer whose employee suffers injuries and recovers workers’ compensation therefor from recovering damages for increased workers’ compensation premiums from a third party whose conduct caused the employee’s injuries. (Fischer Constr. Co. v. Stroud, 175 Ohio St. 31 [23 O.O. 2d 309], overruled; Midvale Coal Co. v. Cardox Corp., 152 Ohio St. 437 [40 O.O. 428], reinstated.)”

The Ledex holding was reached as a result of this court’s review of its prior decisions in Truscon Steel Co. v. Trumbull Cliffs Furnace Co. (1929), 120 Ohio St. 394, 166 N.E. 368; Midvale Coal Co. v. Cardox Corp. (1949), 152 Ohio St. 437, 40 O.O. 428, 89 N.E. 2d 673; and Fischer Constr. Co. v. Stroud (1963), 175 Ohio St. 31, 23 O.O. 2d 309, 191 N.E. 2d 164.

In Truscon, a self-insured employer sought to recover workers’ compensation benefits paid to its injured employee from the independent contractor whose employees’ negligence caused the injuries to the employer’s employee. The claim was based solely on the negligence of the independent contractor’s employees. This court concluded that the employer had no cause of action against the independent contractor and stated in the first paragraph of the syllabus that “[a]n employer, whether self-insurer or otherwise, cannot recover from any source any sum to reimburse an amount paid under the Workmen’s Compensation Law to injured employees, whether the injury results from the negligence of some third party or otherwise.” The Truscon court placed great emphasis on the fact that “[n]o statute is cited in support of the claim that the cause of action exists.” Id. at 397, 166 N.E. at 368. The court also reasoned that G.C. 1465-101, the predecessor of R.C. 4123.82, indicated the legislature’s intent “to prevent the reimbursement of the employer for any amount paid pursuant to the provisions of the Workmen’s Compensation Act to an injured employee.” Id. at 397-398, 166 N.E. at 369.

Midvale Coal Co., supra, involved an action filed by an employer whose employee was injured in a coal mining accident by a defective explosive cartridge supplied by a third party. The employee filed an application for workers’ compensation and the claim was allowed. As a result, the employer’s workers’ compensation premiums increased. The employer subsequently sought to recover the amount of the increased premiums from the third-party supplier. The lower courts ruled against the employer, but this court reversed, holding in a four-paragraph syllabus that:

“1. Section 1465-101, General Code, was enacted to prevent competition with the state insurance fund and is not applicable to a contract which does not constitute an agreement which undertakes to indemnify or insure an employer against loss or liability for the payment of compensation to workmen or their dependents.

“2. Damages which are incidentally suffered by an employer because of the negligent act of a third party tortfeasor toward such employer’s employee are ordinarily considered too remote to be recoverable against such third party by the employer.

“3. Where a third party negligently injures an employer’s employee and such injury is a direct result of a breach of contract which the third party had with employee’s employer, and as a direct result of such breach the employer suffers damages, such damages are recoverable by the employer against the third party in an action for breach of contract.

“4. Ordinarily a double recovery against a single wrongdoer for the same injury is not permitted, but the double recovery doctrine is not applicable where a single act caused a breach of two duties, one in contract and one in tort.”

The Midvale court distinguished its holding from Truscon based on the differing facts in the two cases:

“In the Truscon case, the injury to the employee was caused by the negligence of a third party. The injury was to the employee and not the employer. The third parfy had a duty to the employee not to negligently injure him but that duty was not owed to the employer. In the instant case, while the act of defendant was a negligent act with reference to plaintiff’s employee, and, therefore, such employee could have an action against defendant for negligence, defendant also breached a duty it owed to plaintiff in that the injury to plaintiff’s employee was not only an act of negligence toward plaintiff’s employee but was a breach of contract with reference to plaintiff.” Id. at 444-445, 40 O.O. at 432, 89 N.E. 2d at 677.

In Fischer, supra, an employer sought to recover the amount of increased workers’ compensation benefits from a third parfy whose agent’s negligence had caused the death of an employee of the employer. The lower courts denied recovery and this court affirmed. The Fischer syllabus stated:

“An employer cannot recover from any source any sum to reimburse him for an increased amount paid as a premium under the Workmen’s Compensation Act due to the death of an employee, although such death was caused by the act of a third party. (Truscon Steel Co. v. Trumbull Cliffs Furnace Co. * * *, approved and followed; Midvale Coal Co. v. Cardox Corp. * * *, overruled.)”

The Fischer court relied upon the determination of the Truscon court at 397-398, 166 N.E. at 369, that R.C. 4123.82 (formerly G.C. 1465-101) indicated the legislature’s intent “to prevent the reimbursement of the employer for any amount paid pursuant to the provisions of the Workmen’s Compensation Act to an injured employee.” Fischer also determined that Midvale should be overruled because the differing results in Truscon and Midvale were “without basis in reason.” Fischer at 33, 23 O.O. 2d at 310, 191 N.E. 2d at 166.

A review of these three prior determinations leads us back to this court’s holding in Ledex, supra. The instant cases are before us today because the courts of appeals of this state have issued conflicting opinions in interpreting Ledex.

Some of the parties in the actions before us argue that whatever the proper interpretation of Ledex may be, it applies only to state fund employers which are seeking damages from a third party for the increased premiums they incur when an employee is injured in the course of his employment by a negligent third party. While Ledex did involve a state fund employer seeking damages for increased premiums, it is our intention that today’s holding will apply to self-insured employers seeking reimbursement of workers’ compensation-related payments as well as to state fund employers seeking damages for increased premiums.

There is no doubt that a difference in the employer’s status may be significant in determining damages in such a case. However, we fail to find how such a difference is significant in determining whether or not an employer has a cause of action in these types of cases. No statute or case law exists which compels us to logically reach a different conclusion.

In Ledex, as in Truscon, Midvale, and Fischer, this court considered R.C. 4123.82, and its effect on causes of action similar to those currently before us. Truscon and Fischer found that R.C. 4123.82 barred such a cause of action. Midvale and Ledex found that R.C. 4123.82 did not bar such a cause of action. That section provides in relevant part:

“(A) All contracts and agreements are void which undertake to indemnify or insure an employer against loss or liability for the payment of compensation to workmen or their dependents for death, injury or occupational disease occasioned in the course of such workmen’s employment, or which provide that the insurer shall pay such compensation, or which indemnify the employer against damages when the injury, disease, or death arises from the failure to comply with any lawful requirement for the protection of the lives, health, and safety of employees, or when the same is occasioned by the willful act of the employer or any of his officers or agents, or by which it is agreed that the insurer shall pay any such damages. * * *”

We agree with the Midvale court’s determination as to the intent of the legislature in enacting R.C. 4123.82 (G.C. 1465-101): “* * * [T]he enactment of Section 1465-101 was to prevent competition with the state insurance fund by those who are in the business of furnishing private insurance to indemnify or insure employers against loss or liability for the payment of workmen’s compensation * * *.” Id. at 445, 40 O.O. at 432, 89 N.E. 2d at 677. The Midvale court also stated: “From the reading of the statute it would seem that Section 1465-101 means that there shall be no agreements of insurance or indemnity in' this state to insure or indemnify any employer for any sums he may have to pay an injured employee or his dependents under the Workmen’s Compensation Act.” Id. at 444, 40 O.O. at 431-432, 89 N.E. 2d at 677.

In our view, R.C. 4123.82 relates only to contracts and agreements insuring or indemnifying employers against liability for payment of compensation or damages to workers or their dependents. In cases where no such agreement is made or involved the statute has no application. Not one of the actions being considered today involves such an agreement.

Thus, we find that R.C. 4123.82, standing alone, does not bar the employers involved in the cases at bar from recovering damages from the respective defendants. To the extent that Truscon, supra, can be interpreted to hold that R.C. 4123.82 does apply in these instances, it is hereby overruled.

We now turn to the question of whether a state fund employer which has incurred increased workers’ compensation premiums or a self-insured employer which directly paid medical expenses and other related workers’ compensation benefits because of an injury suffered by an employee, may recover damages against the third party who negligently caused the injury to the employee in the absence of any legal relationship based on contract or warranty between the employer and the third party.

It is argued by the employers in the instant cases that the damages they have suffered are clearly foreseeable, and therefore a cause of action based solely on negligence should be recognized. We disagree. Before the issue of damages can be reached, a legal duty owed by the negligent third party to the employer must have existed. It is hornbook law that actionable negligence exists only where the one whose act causes the injury owes to the injured person a duty which he failed to observe.

In Midvale, supra, this court based the employer’s ability to recover damages on the fact that the third-party supplier had breached its contract with the employer. The contract provided the legal duty owed by the third-party supplier to the injured employee’s employer. We emphasized that Truscon, supra, was different because there was no contractual relationship between the employer and the negligent third party in that case. The focus was on legal duty. We now reiterate that portion of Midvale cited above: “In the Truscon case, the injury to the employee was caused by the negligence of a third party. The injury was to the employee and not the employer. The third party had a duty to the employee not to negligently injure him but that duty was not owed to the employer. In the instant case, while the act of defendant was a negligent act with reference to plaintiff’s employee, and, therefore, such employee could have an action against defendant for negligence, defendant also breached a duty it owed to plaintiff in that the injury to plaintiff’s employee was not only an act of negligence toward plaintiffs employee but was a breach of contract with reference to plaintiff.” (Emphasis added.) Id. at 444-445, 40 O.O. at 432, 89 N.E. 2d at 677.

The Midvale court proceeded to state:

“K * * * piaintiff>s employee had been injured through the negligence of a third party, which party owed no duty to plaintiff, it could well be argued that any damages which plaintiff suffered as a result of the injury to his employee would be too remote for plaintiff to recover. In such a situation the breach of duty by the third party would be toward only the person of plaintiff’s employee by one who owed no duty to plaintiff. Such was the situation in the Truscon case.

“The situation is entirely different where defendant not only had a duty to plaintiff’s employee not to negligently injure him, but had a contractual duty to plaintiff not to cause plaintiff injury.

“The damages which plaintiff is claiming are not alleged to have grown out of simply the tortious act of defendant toward plaintiffs employee, but to have arisen from defendant’s breach of contract with plaintiff.” Id. at 449, 40 O.O. at 434, 80 N.E. 2d at 679. Accord Dayton Power & Light Co. v. Westinghouse Elec. & Mfg. Co. (C.A. 6, 1923), 287 F. 439.

We do not find that a duty to an injured employee’s employer exists by virtue of the pronouncements of common law, by legislative enactment, or by operation of law. It would appear that such a duty could only exist based on contract or warranty. See Midvale, supra.

Although Midvale was overruled in Fischer, supra, it was expressly reinstated in Ledex. It is highly significant to note that the entire Midvale decision was reinstated in Ledex, not simply a portion of it. Moreover, Ledex relied heavily uponMidvale. “In the instant case, as in Midvale, we are confronted with a third party who allegedly was ‘guilty of a breach of two duties.’ ” Ledex, supra, at 129, 10 OBR at 452, 461 N.E. 2d at 1302.

The employers in the instant actions maintain that Ledex recognizes an employer’s cause of action against a third party based solely on negligence. If we assume the truth of this assertion, then the Ledex opinion contains a conflict within itself. Midvale and an opinion which recognizes an employer’s cause of action against a third party based solely on negligence cannot co-exist. Midvale held that in these types of cases the duty not to negligently injure an employee is not owed to the employer. As stated above, we agree with that holding.

In order to recognize a cause of action based on negligence only, we would have to overrule Midvale. We realize that Ledex may contain some language that could be interpreted as being at odds with Midvale. Nevertheless, Ledex expressly reinstated Mid-vale and placed a great deal of reliance on its logic. In reading both cases together, we are convinced that Mid-vale was the cornerstone of the Ledex decision and that its reasoning should be followed today. We refuse to abandon Midvale for a second time.¹ See Fischer, supra.

Therefore, we hold that a self-insured employer which has paid medical expenses and other related workers’ compensation benefits, or a state fund employer which has incurred increased workers’ compensation premiums due to an injury suffered by an employee, may not recover damages against the third party who negligently caused the injury to the employee in the absence of any legal relationship based upon contract or warranty between the employer and the third party.

We also reiterate the view espoused in the third paragraph of the syllabus of Midvale which was buttressed by the judgment in Ledex:

“Where a third party negligently injures an employer’s employee and such injury is a direct result of a breach of contract which the third party had with employee’s employer, and as a direct result of such breach the employer suffers damages, such damages are recoverable by the employer against the third party in an action for breach of contract.” See, also, Midvale Coal Co. v. Cardox Corp. (1952), 157 Ohio St. 526, 47 O.O. 380, 106 N.E. 2d 556. With these principles in mind, we must now determine whether the courts below correctly disposed of the five instant causes.

II

Case No. 88-95

The court of appeals in this cause recognized the appellee employer’s cause of action was based solely on the negligence of the third party. As a result, it reversed the summary judgment granted in favor of the appellants. The record shows no evidence that a legal relationship existed between the employer and the third party based upon contract or warranty. Under our analysis above, we find that the appellee employer has no cause of action to recover damages from the third party.

Accordingly, we reverse the judgment of the court of appeals and reinstate the judgment of the trial court.

Case No. 88-114

In this case, the court of appeals ruled that the partial summary judgment granted in favor of the negligent third parties Ayas proper. The appellant employer sought reimbursement of the workers’ compensation benefits paid to its injured employee based solely on the negligence of the third parties. Nothing in the record reveals a breach of duty owed to the employer based on contract or warranty. The court of appeals ruled against the appellant employer on the authority of Automatic Vendors, Inc. v. Lawrence, supra. That decision is in accord with our holding above.

Accordingly, the judgment of the court of appeals is affirmed.

Case No. 88-169

In this cause, the trial court granted summary judgment in favor of all defendants on the authority of Automatic Vendors, supra. On appeal, the court of appeals held that an employer cannot recover damages against a third-party tortfeasor whose negligence caused injury to the employer’s employee, resulting in increased workers’ compensation costs, absent some contractual relationship between the employer and the tortfeasor. A review of the record indicates no allegations made by the appellant employer that the negligent third party breached a contract or warranty. The decision of the court of appeals is consistent Avith our analysis above.

Accordingly, we affirm the judgment of the court of appeals.

Case No. 88-217

This case involves two separate actions consolidated for review by the court of appeals. No breach of contract or warranty was alleged by the appellant employer in either action. The court of appeals held that the appellant employer could not state a claim against Cousino or the Rowes for recovery of workers’ compensation benefits directly paid to the injured employees “in the absence of a breach of a legal duty, e.g., a contractual duty,” owed to the appellant employer by Cousino or Rowe’s physician.

We find the judgments in both actions to be consistent Avith our holding today. Therefore, we affirm the judgment of the court of appeals.

Case No. 88-268

The court of appeals in this cause affirmed the decision of the trial court to dismiss the appellant employer’s action because, the appellant employer’s action was based solely on the negligence of the third party. The record fails to suggest that' the third party owed a legal duty to the appellant employer based on contract or warranty.

Based on the foregoing and our analysis above, we affirm the judgment of the court of appeals.

Judgments accordingly.

Moyer, C.J., Sweeney, Douglas and H. Brown, JJ., concur. Holmes and Wright, JJ., dissent.

1 We recognize that the Midvale decision has been criticized. 2A Larson, The Law of Workmen’s Compensation (1988) 14-903 to 14-907, Section 77.13. However, we note that this criticism is attributable to the absence of a statute which would subrogate the employer to the employee’s claim against the third party to the extent of workers’ compensation received by the employee. See Ledex, supra, at 129, 10 OBR at 451-452, 461 N.E. 2d at 1302. Ohio, Georgia, and West Virginia remain the only states lacking such a statute. Larson, supra, at 14-904, Section 77.13.