Glens Falls Indemnity Co. v. Liberty Mutual Insurance

1. The petitioner, a compensation-insurance carrier, voluntarily entered into an agreement with the employer and the injured employee, by which the petitioner agreed that the injury was covered by its insurance policy and it assumed full responsibility for payment in terms of the agreement. By filing the agreement with the Industrial Board the insurance carrier procured the approval of the agreement by the board which constituted an award. The denial by the board of a later application of the insurance carrier, to reopen the award and modify the same by making the defendant insurance carrier, from whom it sought subrogation, liable for the compensation payments thereunder instead of the applicant, was affirmed by the courts, and the time for appeal from the original award having expired, that award precludes the petitioner from now contending that it was not liable under its insurance policy for the compensation paid in conformity with the award.

2. The failure of the petitioner to know the content defining the coverage of its insurance contract or to compare the facts and circumstances surrounding the injury to ascertain if it was covered thereby, and its failure to inquire of the employer or the Industrial Board as to the existence of an insurance contract with another insurance carrier that covered the injury, amounted to negligence on the part of the petitioner, and would not constitute such a mistake of fact as would render the agreement and the payments thereunder involuntary and, therefore, a basis for subrogation.

3. Aside from the award approving the voluntary agreement, the insurer had no interest to protect, no obligation to meet, and no reason for making the compensation payments. It would not, therefore, be entitled to legal subrogation to the extent of such payments.

4. The subrogation agreement contained in the insurance policy did not entitle the insurer to conventional subrogation to any right or claim of the employer or the employee against the other insurance carrier in virtue of a compensation-insurance policy which the employer had with that company. The subrogation referred to in the agreement is subrogation to the rights under the law to recover from the tort-feasor on account of the injury to the employee.

No. 15907. SEPTEMBER 5, 1947. REHEARING DENIED OCTOBER 17, 1947. Liberty Mutual Insurance Company, by a petition in equity against Glens Falls Indemnity Company and R. A. Bowen, alleged that the petitioner issued to Bowen a standard workmen's compensation insurance policy for the period of April 10, 1942, to April 10, 1943, and that Glens Falls Indemnity Company issued to the defendant Bowen a similar policy for the period of September 1, 1941, to September 1, 1942; that each policy contained the following provisions: "One (a): To pay promptly to any person entitled thereto, under the Workmen's Compensation Law and in the manner therein provided, the entire amount of any sum due, and all instalments thereof as they become due. It is agreed that all the provisions of each Workmen's Compensation Law covered hereby shall be and remain a part of this contract as fully and completely as if written herein, so far as they apply to compensation or other benefits for any personal injury or death covered by this policy, while this policy shall remain in force. Nothing herein contained shall operate to so extend this policy as to include within its terms any Workmen's Compensation Law, scheme or plan not cited in an endorsement hereto attached. . . Six: This agreement shall apply to such injuries so sustained by reason of the business operations described in said declaration which, for the purpose of this insurance, shall include all operations necessary, incident or appurtenant thereto, or connected therewith, whether such operations are conducted at the work places defined and described in said declarations or elsewhere in connection with, or in relation to, such work places. Seven: This agreement shall apply only to such injuries so sustained by reason of accidents occurring during the policy period limited and defined as such in Item 2 of said declarations."

The provisions of each policy as to the location of the work covered thereby and the occupation of the employee covered were set forth, showing that the policy of the defendant, Glens Falls Indemnity Company, covered the occupation of carpentering, while the petitioner's policy did not cover it. The petition alleged the location of the work at which the injured employee, E. M. Morgan, was engaged on August 28, 1942, when he suffered the injury, it appearing from the allegations and exhibits to the petition that the injured employee was at the time of the injury covered by the terms of the defendant Glens Falls Indemnity Company's policy and not by the terms of the petitioner's policy, it also appearing that the employee was engaged in work covered by the petitioner's policy until August 21, 1942, when he was transferred to a job where he continued to work until his injury. The defendant, R. A. Bowen, employer, reported the injury to the petitioner. The payroll of the Payne Mill Road Job, which employment was covered by the petitioner's policy, included Morgan's wages and was turned over to the petitioner. It was alleged that the petitioner did not know until early in May, 1943, of the existence of the policy issued by Glens Falls Indemnity Company. The petition alleged: that on September 16, 1942, the petitioner entered into an agreement with the employer Bowen and the injured employee Morgan, by the terms of which the petitioner was obligated to pay compensation for the injury of Morgan; that on October 12, 1942, this agreement was approved by and made the award of the Industrial Board, now the State Board of Workmen's Compensation; that the petitioner paid the medical expenses and paid the compensation agreed on and fixed by the award until May, 1943, when it discovered that the policy of Glens Falls Indemnity Company covered the accident and the injury of the employee Morgan, whereupon the compensation payments as provided by the award were stopped.

It was alleged that an application was made to the Industrial Board for a hearing and determination by that board as to whether the policy of the petitioner or the policy of Glens Falls Indemnity Company covered the accident and injury. On January 11, 1944 the director of the board held that the board was without jurisdiction to modify its previous award. The director's decision was affirmed by the full board, and on appeal to the superior court the judgment of the full board was affirmed. On review by the Court of Appeals (Liberty Mutual Insurance Co. v.Morgan, 72 Ga. App. 376, 33 S.E.2d 745), in conformity with an answer of the Supreme Court (Liberty Mutual InsuranceCo. v. Morgan, 199 Ga. 179, 33 S.E.2d 336) to a certified question, the judgment of the superior court was affirmed. Thereafter the petitioner paid the balance of the compensation as fixed by the agreement and the original award.

The petition further alleged that it was the contractual obligation of the defendant, Glens Falls Indemnity Company, to pay the compensation which the petitioner had paid, such payments by the petitioner having been made under a mistake of fact as to the coverage until May, 1943, and the balance paid under compulsion of the judgment of the court; and that for these reasons the petitioner was entitled to be subrogated to the rights of the employer and the employee; and the petition prayed for reimbursement from Glens Falls Indemnity Company in the amount of the total payments made by the petitioner, and any additional compensation that the petitioner might thereafter be legally compelled to pay. The petition further set forth the provisions for subrogation alleged to have constituted a part of each compensation-insurance policy, which are as follows: "Subrogation. The company shall be subrogated in case of any payment under this policy, to the extent of such payment, to all rights of recovery therefor vested by law either in this employer or in any employee or his dependents claiming hereunder, against persons, corporations, associations or estates." The petition also alleged: That, before the petitioner executed the agreement to pay compensation, dated September 16, 1942, it had agreed to carry for the defendant Bowen general coverage for "State of Georgia," to commence on September 30, 1942. When this agreement was executed and when this agreement was made the award of the Industrial Board, the petitioner had no knowledge of the existence of the insurance policy of the defendant, Glens Falls Indemnity Company. Having no knowledge of the existence of such a policy, and having itself agreed to carry as of a future date the coverage for "State of Georgia" which had been carried by Glens Falls Indemnity Company up to September 1, 1942, the petitioner mistakenly assumed that it did have the coverage of the injury sustained by Morgan, and for this reason executed the agreement and allowed it to be approved by the Industrial Board. It was alleged: That the accident resulting in the injury to the employee Morgan occurred at a location which was not covered by the petitioner's policy, but was covered by Glens Falls Indemnity Company's policy, and that Morgan's occupational classification at the time, "a carpenter," was covered by Glens Falls Indemnity Company's policy, and was not covered by the petitioner's policy. Each policy contained provisions in conformity with the Workmen's Compensation Law, expressly making liability of the insurer subject to the compensation allowed under the existing or amended law, and making the jurisdiction of the employer the jurisdiction of the insurance carrier, and binding the insurance carrier by any award or judgment made against the employer.

Glens Falls Indemnity Company demurred to the petition upon many grounds, among which were: no cause of action and no equity shown in the petition; res judicata; the petitioner was a volunteer; negligence; guilt of laches barring any right to recovery; no right of subrogation alleged, and no allegations which in justice or equity would require Glens Falls Indemnity Company to reimburse the petitioner. The exception here is to the judgment overruling the demurrer to the petition. If more than one compensation-insurance carrier is liable for compensation in the case of a single injury to an employee, the State Board of Workmen's Compensation has jurisdiction to prorate such compensation in the award when originally made.American Mutual Liability Ins. Co. v. Smith, 67 Ga. App. 581 (21 S.E.2d 343); Code, § 114-419. The original award in the instant case, holding the petitioner alone liable for the compensation payments, is conclusive as against the petitioner on that subject. If that award was erroneous, an appeal therefrom would have been the procedure to correct the error, and the petitioner will not be allowed to refuse to pursue the procedure prescribed by the law for the correction of any error, and after the award has become final resort to equity to avoid the effect of that award.

But the petitioner, obviously recognizing this sound rule, seeks to avoid its binding effect by alleging that the petitioner was laboring under a misapprehension of fact, and that because of this mistake of fact the remedy prescribed by the law for a review by an appeal was not pursued. The allegations of the petition show that under the petitioner's contract there was no liability resting upon it for compensation on account of the injury here involved. The voluntary agreement of the petitioner to become liable and to make such payments would bar subrogation (Citizens' Mercantile Co. v. Easom, 158 Ga. 604,123 S.E. 883, 37 A.L.R. 378; Cornelia Bank v. First National Bank,170 Ga. 747, 154 S.E. 234), unless the petitioner's claim of mistake of fact or its claim of conventional subrogation is sustained. A mere statement of the relevant facts as disclosed by the petition shows that there was no mistake of fact which equity can recognize as justification for the action of the petitioner. The content of the petitioner's policy was known or could with required diligence have been known at the time of the agreement. The facts and circumstances of the injury and the employment at the time of the injury, so far as disclosed by the petition, were truthfully and correctly reported and were known by the petitioner at that time. Consequently, any mistake as to any of these material facts was due to inexcusable negligence of the petitioner. Equity requires diligence, and will not do for one that which he could have done for himself but for his own negligence. Code, §§ 37-211, 37-217, 37-116. We do not overlook § 37-212, codified from the decision in Werner v. Rawson,89 Ga. 619 (2), 629 (15 S.E. 813), and reading as follows: "The negligence of the complaining party, preventing relief in equity, is that want of reasonable prudence, the absence of which would be a violation of legal duty. Relief may be granted even in cases of negligence by the complainant, if it appears that the other party has not been prejudiced thereby." This provision does not save the petition here, for the reason that the allegations, construed on demurrer most strongly against the petitioner, show affirmatively that the petitioner was guilty of negligence amounting to a violation of legal duty. Nor does it appear that the other party was not prejudiced thereby. In this view it is unnecessary to determine whether the latter provision is applicable only to actions for reformation on the ground of mutual mistake as in theWerner case, supra. As pointed out above, subrogation for voluntary payments is not allowed. Subrogation will be allowed, (1) where there are existing circumstances which in equity amount to an implied agreement for subrogation; or (2) where there is an agreement with either the debtor or the creditor whereby one making the payment will be subrogated to the rights and remedies of the original creditor. Wilkins, Neely Jones v. Gibson,113 Ga. 31 (38 S.E. 374, 84 Am. St. R. 204); McCollum v.Lark, 187 Ga. 292 (200 S.E. 276). For the reasons above pointed out, the petition here shows no basis for legal subrogation.

The remaining basis upon which the petitioner claims the right to subrogation is the agreement, set forth in the compensation insurance policy, as quoted in the foregoing statement of facts. The plain language of this agreement shows unmistakably that it was not intended as a basis for subrogation in the present case. The payments for which the agreement authorizes subrogation are payments made under the insurance policy. That means payments which the insurance policy expressly obligates the insurer to make in conformity with the provisions of the policy. As applied in the present case, it would entitle the petitioner to subrogation only when the payments made by the petitioner were in discharge of the obligations imposed by the insurance policy. If the policy of the petitioner required it to discharge the full claim for compensation, then neither the employer nor the employee could under the law demand of or require Glens Falls Indemnity Company or any other compensation-insurance carrier to pay again compensation which they had already received from the petitioner. The only legal demand that could at any time have been made upon another compensation-insurance carrier, while conceding the liability of the petitioner under its policy, would be for a pro rata liability, as pointed out above, in the original award to cover the compensation to which the injured employee was entitled. That is water already passed over the legal dam, in virtue of the award which imposed full liability upon the petitioner and has become final. The subrogation clause, being a part of the policy issued in conformity with the Workmen's Compensation Law, was obviously intended to apply in favor of the compensation-insurance carrier making the payment as against a tort-feasor who inflicted the injury for which compensation was made as provided by law. Code, § 114-403 as amended. It was not intended and does not by its terms apply in this or any other case as against another compensation-insurance carrier. It follows that the petition alleged no cause of action, and the trial court erred in the judgment overruling the general demurrer thereto.

Judgment reversed. All the Justices concur, except Atkinsonand Head, JJ., who dissent, and Wyatt, J., who took no part inthe consideration or decision of this case.