Hagemann v. NJS Engineering, Inc.

¶1(concurring in result).

¶2[¶ 13.] The subject we are faced with was first addressed by the South Dakota Legislature in chapter 376, section 5 of the 1917 Session laws. It provided:

The rights and remedies herein granted to an employee subject to this act on account of personal injury or death by accident arising out of and in the course of employment, shall exclude all other rights and remedies of such employee, his personal representatives, dependents or next of kin, on account of such injury or death.

¶3Thus, at that time, an employee who was injured or killed on the job was precluded from suing anybody and everybody. The ban was all-inclusive in exchange for workers’ compensation benefits.

¶4[¶ 14.] Through chapter 422 of the 1977 Session Laws and chapter 370, section 2 of the 1978 Session Laws, the Legislature limited the scope of this ban. SDCL 62-3-2 now states:

The rights and remedies herein granted to an employee subject to this title, on account of personal injury or death arising out of and in the course of employment, shall exclude all other rights and remedies of such employee, his personal representatives, dependents, or next of kin on account of such injury or death against his employer or any employee, partner, officer or director of such employer, except rights and remedies arising from intentional tort, (emphasis added).

¶5Thus, the amendments limited the scope of the prohibition against suit by the employee to claims against “his employer or any employee, partner, officer of director of such employer-” Clearly this prohibition does not apply to suits initiated by party defendants such as Lawrence County, and I disagree with the majority opinion’s conclusion to the contrary.

¶6[¶ 15.] Disposition of this issue instead rests upon an examination of the individual claims. County claims a right contribution under the Uniform Contribution Among Tortfeasors Act, arguing Simms is a “joint tortfeasor” under the Act. As the majority opinion points out, Simms cannot be a joint tortfeasor because he is not liable in tort for the injury to Hagemann. This conclusion is in line with the vast majority of jurisdictions, and is based on a plain reading of the clear language of SDCL 15-8-11. In addition, a claim for contribution is intimately tied to, and “on account of personal injury or death.” SDCL 62-3-2. For those reasons, County’s claim for contribu*847tion falls within the exclusivity provision of SDCL 62-3-2, and cannot stand.

¶7[¶ 16.] A claim for indemnity, however, is not “on account of personal injury or death.” Id. Indemnity is a separate cause of action that arises “independent of the underlying liability.” Weiszhaar Farms, Inc. v. Tobin, 522 N.W.2d 484, 492 (S.D.1994). Indemnity is an equitable remedy by which the burden of loss is entirely shifted from one party onto another. Mark, Inc. v. Maguire Insurance Agency, Inc., 518 N.W.2d 227, 230 (S.D.1994). South Dakota law allows a claim for indemnity to proceed in the following circumstances: (1) derivative or vicarious liability; (2) action at direction of, and for, another; (3) breach of duty to indemnify; (4) failure to discover negligence of another; and (5) express contract. Id.Indemnity can arise through contractual agreement or based on a legal relationship, such as that between bailee and bailor or between a principal and her agent. Professor Larson notes in his treatise that as a general rule, “[t]he third party may recover-over against the employer [or employee] whenever it can be said that the employer [or employee] breached an independent duty toward the third party and thus acquired an obligation to indemnify the third party.” Larson’s Workers’ Compensation Law, § 121.04 at 121-47. Because a claim for indemnity is an independent cause of action, which does not arise “on account of personal injury or death,” it should not be dismissed out of hand based on the exclusivity provision of SDCL 62-3-2. See id. Rather, it should be allowed to proceed, but only if the employer or employee owes an independent duty to the third party.

¶8[¶ 17.] The question for this Court then becomes whether Simms owed an independent duty to County. Simms owes no contractual duty to indemnify County. Nor does the relationship between Simms and County create such a legal duty. Therefore, because Simms owes no duty to indemnify County, the circuit court was correct in dismissing County’s third party complaint against Simms.

¶9[¶ 18.] For the above reasons, I concur in result.

¶10(dissenting).

¶11[¶ 19.] The majority opinion fails to read SDCL 62-3-2 in its proper light. The position taken by other courts in addressing this issue and allowing contribution and indemnity best demonstrates the error:

The phrase most frequently heard in arguments against recovery over by the third party against the employer is this: the allowance of such recovery ever accomplishes indirectly what cannot be done directly and, therefore, evades the spirit of the legislation. This is not entirely accurate, for it does not tell the whole story. True, the end result is that a common-law size recovery proceeds from the employer to the employee. In the process, however, two things are accomplished, one of which is relevant to the purposes of the compensation provision and the other of which is independent of it. The relevant accomplishment is that of preserving the employee’s common-law rights against negligent outsiders. This having been done, there still remains the job of adjusting rights fairly between the outsider and the negligent employer. The question here becomes very precise: did the compensation acts, in conferring immunity on the employer from common-law suits, mean to do so only at the expense of the injured employee, or also at the expense of outsiders? One answer is that whereas the injured employee got quid pro quo in receiving assured compensation payments as a substitute for tort recoveries, the third party has received absolutely nothing and, hence, should not be impliedly held to have given up rights which he had before.

¶12*848[¶ 20.] Lambertson v. Cincinnati Welding Corp., 312 Minn. 114, 257 N.W.2d 679, 688-89 (1977) (quoting Larson, Workmen’s Compensation: Third Party’s Action Over Against Employer, 65 NWU.L.Rev. 351, 419).10 As Larson recognizes in his treatise on worker’s compensation, “[e]ach side to the controversy has an argument in its favor which, considered alone, sounds irresistible.” Larson, Worker’s Compensation: Third Party Actions, § 121.01 at-121-4. The employer asserts the exclusivity provision, whereas the third party may be “subject to a staggering liability it would not have had to bear but for the sheer chance that the other parties involved happened to be under a -compensation act.” Id. Yet, other courts have found a way to balance the interests and achieve a fair allocation, unfortunately the majority opinion has not.

¶13[¶ 21.] The majority opinion uses SDCL 62-3-2 to define the rights of a third party in a context in which it was never meant to apply. As recognized by the court in Lam-bertson, “[a] situation like this ought to be dealt with legislatively. It is rather inconsiderate to force courts to speculate about legislative intention on the strength of statutory language, in the framing of which the draftsmen had not the remotest trace of the present question in their minds.” Lambertson, 257 N.W.2d at 689. Despite the majority opinion’s stated declaration that “[w]e decline the invitation to legislate in this case,” that is exactly what it is doing.

¶14[¶ 22.] Interpreting South Dakota law on claims for indemnity, the United States District Court for South Dakota held that “an indemnity claim may properly be raised by a third party against an employer discharged from direct liability to his injured employee.” Harn v. Standard Engr. Co., 416 F.Supp. 1168, 1169 (D.S.D.1976). In so holding, the court recognized that:

The reasoning behind the foregoing cases is that an indemnity claim is not derivative of the employee’s claim. Rather, indemnity is based on a set of facts warranting a conclusion that the indem-nitor owes a distinct obligation or duty to the indemnitee. This obligation exists separate and apart from any liability which the employer as indemnitor might have had to his injured employee.

¶15Id. at 1170. As SDCL 62-3-2 treats employers and employees equally, the foregoing reasoning is equally applicable- to a third party recovery against Simms as a co-employee, even if recovery is ultimately obtained or offset against Alpha Omega as the employer.

¶16[¶ 23.] The majority opinion attempts to utilize the definition of “liability” to defeat any attempt at contribution or indemnity. In so doing, the majority opinion relies on Burmeister v. Youngstrom, a guest statute case which indicated that when there is no joint liability there is no contribution. 81 S.D. 578, 139 N.W.2d 226, 231. The Minnesota court in Lambertsonrejected this reasoning and overruled their prior cases indicating there was no recovery because there was no “common liability.” Lambertson, 257 N.W.2d at 688. We should do the same. The definition of liability or joint liability has many connotations, of which one certainly has to be responsibility for wrongs. SDCL 20-9-1.

While there is no common liability to the employee in tort, both the employer and the third party are nonetheless liable to the employee for his injuries; the employer through the fixed no-fault workers’ compensation system and the third party through the variable recovery available in common law tort action. *849Contribution is a flexible, equitable remedy designed to accomplish a fair allocation of loss among parties. Such a remedy should be utilized to achieve fairness on particular facts, unfettered by outworn technical concepts like common liability.

¶17Lambertson, 257 N.W.2d at 688.

¶18[¶ 24.] In recognizing the need to create a “fair allocation of loss” the Lambertsoncourt limited the right of contribution and indemnity by a third party against the employer/employee to the total worker’s compensation exposure. Id. at 689. Other courts have done the same, the effect of which is to preserve the compensation act, yet not to force third party’s to bear the brunt of a loss for which they are not responsible. “No doubt, if open-ended contribution over against employer was permitted the social and economic policies underlying the compensation scheme would be subverted.” Larson, Worfcer’s Compensation: Third Party Actions, § 121.03 at 121-27. In effect, the limitation of exposure, espoused by the Lambertsoncourt and embraced in other jurisdictions, would require at most that the employer pay the maximum under worker’s compensation and the third party pay the amount over and above the worker’s compensation maximum for which it is liable, after taking into account any contributory negligence. Through this apportionment, the third party avoids overexposure and the employer is limited to its rightful exposure. Id. at 121-30, 31 (discussing the Minnesota rule and the reduction of compensation from third party recovery).11

¶19[¶ 25.] The majority opinion result is inequitable and totally unfair both now and for the indefinite future. For example, Simms was allowed to intervene in this action as a plaintiff against County. Certainly, his own negligence will be used to offset any recovery he may seek from County. Yet, remarkably, the majority opinion expects the taxpayers of the County to absorb his negligence as it relates to the death of Hagemann. This would be totally inconsistent and unfair. A commonsense interpretation would correctly place the worker’s compensation statutes in the worker’s compensation context and place the joint tortfeaser statutes in the joint tortfeaser context. I vote for a commonsense interpretation of these separate, independent chapters.

¶20[¶ 26.] Therefore, I dissent.

¶21[¶ 26.] Miller, C.J., joins this dissent.