LEVIN, J. (to affirm).
The question presented is whether the personal representative of the estate of a worker who died as the result of injuries sustained in the employ of a subcontractor is barred by the "exclusive remedy" provision of the workers' compensation act from maintaining an action in tort against the contractor who, when the subcontractor failed to provide workers' compensation benefits, paid such benefits to the worker's dependents pursuant to the "contracting" provision of the act. We would hold that an action against the contractor is not barred.
(As first enacted in 1921 and subsequently amended and re-enacted, the contracting provision of the workers' compensation act refers to a person for whom work is to be performed as the "principal", and to a person who agrees to perform the work as the "contractor". In this opinion, in an effort to ease and clarify the presentation, we instead adopt the everyday usage, and refer to the person or entity for whom the work is to be performed as the "contractor", rather than as the "principal", and to the person or entity who agrees to perform the work as the "subcontractor", rather than as the "contractor".)
1921 PA 173.
1943 PA 245; 1954 PA 175.
1969 PA 317.
I
The "contracting" provision, added to the workers' compensation act in 1921, states that when a subcontractor fails to obtain workers' compensation insurance or otherwise to secure payment of workers' compensation benefits, an employee of the subcontractor or the employee's dependents can recover benefits from the contractor. The contracting provision further states that when benefits are claimed from the contractor, "in the application of this act, reference to the principal [the contractor] shall be substituted for reference to the employer".
The contracting provision was added in 1921. It provided that when a contractor who had elected to provide coverage under the act contracted with a subcontractor who had not so elected for the performance of work that the contractor otherwise would have performed, the contractor would be subject to liability for the payment of workers' compensation benefits to a worker injured in the employ of the non-electing subcontractor.
The contracting provision as first enacted read:
"Sec. 10. (a) Where any employer subject to the provisions of this act, (in this section referred to as the principal), contracts with any other person (in this section referred to as the contractor), who is not subject to this act and who does not become subject to this act prior to the date of the accidental injury or death for which claim is made for the execution by or under the contractor of the whole or any part of any work undertaken by the principal, the principal shall be liable to pay to any workman employed in the execution of the work any compensation under this act which he would have been liable to pay if that workman had been immediately employed by him; and where compensation is claimed from or proceedings are taken against the principal, then in the application of this act, reference to the principal shall be substituted for reference to the employer, except that the amount of compensation shall be calculated with reference to the earnings of the workman under the employer by whom he is immediately employed: Provided, That the term `contractor' shall be deemed to include subcontractors in all cases where the principal gives permission that the work or any part thereof be performed under subcontract;
"(b) Where the principal is liable to pay compensation under this section, he shall be entitled to be indemnified by the contractor or subcontractor as the case may be, but the employe shall not be entitled to recover at common law against the contractor or any other person for any damages arising from such injury if he takes compensation from such principal. The principal, in case he pays compensation to the employe of such contractor, may recover the amount so paid in an action against such contractor." 1921 PA 173, part I, § 10.
In 1943, when workers' compensation coverage was made mandatory (see fn 35), the contracting provision was amended by the addition of the italicized words:
"Sec. 10. (a) Where any employer subject to the provisions of this act (in this section referred to as the principal), contracts with any other person (in this section referred to as the contractor), who is not subject to this act or who has not complied with the provisions of section 1 of part 4 and who does not become subject to this act or comply with the provisions of section 1 of part 4 prior to the date of the injury or death for which claim is made for the execution by or under the contractor of the whole or any part of any work undertaken by the principal, the principal shall be liable to pay to any workman employed in the execution of the work any compensation under this act which he would have been liable to pay if that workman had been immediately employed by him". (Emphasis added.) 1943 PA 245, part I, § 10.
The contracting provision was amended in 1954 to eliminate the "or any other person" clause in subparagraph (b):
"(b) Where the principal is liable to pay compensation under this section, he shall be entitled to be indemnified by the contractor or subcontractor as the case may be, but the employee shall not be entitled to recover at common law against the contractor for any damages arising from such injury if he takes compensation from such principal. The principal, in case he pays compensation to the employee of such contractor, may recover the amount so paid in an action against such contractor." 1954 PA 175, part 1, § 10(b).
The contracting provision was re-enacted as § 171 of 1969 PA 317 with stylistic changes. There were no substantive changes, however, and the relevant language discussed in this opinion was unchanged.
Id.
Reading the "reference" clause of the contracting provision together with the "exclusive remedy" provision of the act, which states that a proceeding to obtain workers' compensation benefits is the exclusive remedy of the worker and his dependents against the "employer", the contractor contends, and the majority holds, that the personal representative of the worker's estate cannot maintain a tort action against the contractor because the worker's dependents obtained workers' compensation benefits from the contractor, even though such an action could be maintained if either (i) the subcontractor had purchased workers' compensation insurance, or (ii) the worker's dependents had not obtained from the contractor the workers' compensation benefits that the subcontractor failed to provide.
Id.
See fn 25.
The majority opinion adopts the reasoning of the Court of Appeals in Drewes v Grand Valley State Colleges, 106 Mich. App. 776, 784; 308 N.W.2d 642 (1981), where the Court said that because there is "no indication that the Legislature intended" for the "reference" clause to be applied "everywhere [in the act] but in the exclusive remedy provision", an action in tort cannot be maintained against the contractor. The Court of Appeals said that "[w]hile the logic of this situation may be questioned after examination of the entire statutory scheme, we are not allowed to substitute our ideas for the Legislature's".
In the instant case the Court of Appeals held that the contractor was subject to tort liability. Dagenhardt v Special Machine Engineering, Inc, 108 Mich. App. 75; 310 N.W.2d 41 (1981).
We agree that, absent a basis for concluding that the policy expressed in the exclusive remedy provision does not apply, we would be obliged to enforce the language as written. We also agree that where the Legislature has spoken we cannot substitute our ideas of sound public policy for those of the Legislature.
There is, however, reason to believe that
A) the policy of the exclusive remedy provision, relied on in the majority opinion to exculpate the contractor from tort liability, does not extend to a contractor required to pay workers' compensation benefits because his subcontractor is uninsured, and
B) the 1921 Legislature, which added the contracting provision, did not intend to insulate from tort liability under the exclusive remedy provision a contractor required to pay benefits in those circumstances, and
See fn 4.
C) it was not part of the legislative purpose, when the act was subsequently amended in the early 1950's to authorize for the first time a worker who had received workers' compensation benefits to seek a larger award against a third-party tortfeasor, to bar a worker, injured in the employ of an uninsured subcontractor, who obtains benefits from a contractor from maintaining a tort action against the contractor.
See fn 30.
A
The exculpation of an employer from tort liability set forth in the exclusive remedy provision is a trade-off for being subject to tort liability, not for being subjected in a particular case to tort liability. The exclusive remedy provision is thus designed to relieve an employer, unconditionally subject to workers' compensation liability to a worker, from tort liability to him without regard to whether the worker seeks or accepts workers' compensation benefits after injury. The policy expressed in the exclusive remedy provision does not extend to a contractor who is generally subject to tort liability to a worker in the employ of a subcontractor and who is not generally subject to workers' compensation liability to the worker, but who may be subjected to workers' compensation liability to him only if the subcontractor is uninsured and the worker seeks workers' compensation benefits from the contractor after injury.
See fn 34.
B
As originally enacted in 1912 and until 1952, the dual liability provision of the act barred an action in tort against a third-party tortfeasor if the worker sought workers' compensation benefits after injury. That policy was reiterated in a clause in the contracting provision that barred a worker who sought workers' compensation benefits from the contractor from maintaining an action against the subcontractor "or any other person". An action against the contractor was thus barred by both the dual liability provision and the complementary "or any other person" clause.
See fn 30.
See fn 4.
The 1921 Legislature, which enacted the contracting provision, and the 1943 Legislature, which restated this provision when workers' compensation coverage was made mandatory, did not look to the exclusive remedy provision as the operative provision to exculpate from tort liability a contractor called upon to pay workers' compensation benefits that a subcontractor had not provided. They rather looked to the dual liability provision and the complementary "or any other person" clause specifically enacted to assure that result.
See fn 4.
See fn 34.
C
In 1952, the dual liability provision of the act was amended to permit a worker who had received workers' compensation benefits to maintain an action in tort. In 1954, an apparent curative amendment of the contracting provision (last previously amended in 1943) was enacted to eliminate the "or any other person" clause that would have, if literally construed, continued to bar a tort action by a worker employed by an uninsured subcontractor against any person, including the contractor as an "other person". By so striking the "or any other person" clause, the Legislature eliminated the contractor's exculpation from tort liability under the contracting provision and evidenced a purpose and intent that a worker injured in the employ of an uninsured subcontractor, like all other injured workers, could both claim workers' compensation benefits and sue in tort.
See fn 30.
See fn 4.
The purpose of the 1952 and 1954 legislation — to secure to the injured worker the benefit of a recovery obtainable in tort to the extent it may exceed workers' compensation benefits — is not served by a construction of the act that transforms the nature of the exclusive remedy provision, relied on in Drewes and in the majority opinion as the operative provision for exculpating the contractor from tort liability, so that it became for the first time (in 1952 and 1954) in respect to a contractor from whom workers' compensation benefits were claimed, and no other person, a trade-off for being subjected to workers' compensation liability.
II
The question is one of statutory construction, and hence of legislative intent or purpose.
The point involved in this case could not have been in mind in 1912, when the exclusive remedy provision, relied on in the majority opinion, was enacted nine years before the contracting provision was added to the act. Nor could it have been in mind in 1921, when the "reference" clause of the contracting provision was added to the act, for that was 31 years before the 1952 amendment of the dual liability provision permitted, for the first time, a worker who had received workers' compensation benefits to maintain an action against a third-party tortfeasor.
The question is what the Legislature had in mind in 1952 when it amended the dual liability provision to permit a recipient of workers' compensation benefits to sue a third-party tortfeasor, and in 1954 when it amended the contracting provision to eliminate the "or any other person" clause that would have, if literally construed, continued to bar a tort action by a worker employed by an uninsured contractor.
The 1969 Legislature re-enacted ( 1969 PA 317) without language change the exclusive remedy, dual liability, and contracting provisions of the 1912 act as last amended in 1943, 1952, and 1954, respectively; changes were made in other provisions of the act.
We should enforce the sense of what the Legislature had in mind in 1952 when it last amended the dual liability provision and in 1954 when it last amended the contracting provision, rather than a mechanical literalism alloyed by combining provisions and amendments adopted at different times and for different reasons:
— in 1912, to provide for elective workers' compensation coverage and relieving an electing employer of tort liability under the exclusive remedy provision as a trade-off for being subject to liability;
See fns 25, 26, and 27.
— in 1921, to establish the liability of a contractor who had elected coverage under the act to pay workers' compensation benefits to an employee of a subcontractor who had not elected coverage;
See fn 4.
— in 1943, to eliminate elective workers' compensation coverage and make coverage mandatory, with a corresponding amendment of the contracting provision to impose liability on a contractor for the payment of workers' compensation benefits when the subcontractor is uninsured;
See fn 34.
— in 1952, to eliminate the election of remedies under the 1912 dual liability provision, which had required a worker to choose after injury between seeking workers' compensation benefits or a tort recovery, and thus to permit for the first time the recipient of workers' compensation benefits to maintain an action seeking a larger amount from a third-party tortfeasor;
See fn 30.
— in 1954, to assure that the benefit of the 1952 amendment was extended to a worker injured in the employ of an uninsured subcontractor by eliminating the "or any other person" clause of the 1921 contracting provision, which, complementary of the dual liability provision, had exculpated from tort liability all persons, including the contractor, from tort liability if the worker chose after injury to receive workers' compensation benefits from the contractor.
See fn 4.
Language enacted at one time may not be reconsidered when subsequent amendatory legislation is before the Legislature. There is need to look to the purpose of the legislation and the compatibility of the result with the legislative purpose. Where a strict application of a definition enacted in another context would work a result not consonant with the legislative purpose, a court construes the defined term so as to ascribe a meaning consistent with the purpose although a literal application of the defined term would lead to a different result.
Generally, a statutory definition of a word or phrase applies to the word or phrase wherever it occurs in the statute. Such a definition will not, however, be rigidly applied where obvious incongruities in the statute would result, a purpose of the legislation would be defeated, the result reached by strictly applying the statutory definition would be aberrant, or it is evident that the Legislature did not intend the definition to apply to every use of the word or term throughout the statute or ordinance. See Lawson v Suwannee Fruit Steamship Co, 336 U.S. 198; 69 S Ct 503; 93 L Ed 611 (1949); Iowa Beef Processors, Inc v Miller, 312 N.W.2d 530, 533 (Iowa, 1981); Gilbert v Indiana, 411 N.E.2d 155, 157 (Ind App, 1980); Missouri ex rel Housing Authority of St Louis County v Wind, 337 S.W.2d 554, 560-561 (Mo App, 1960). Cf. Habecker v Nationwide Ins Co, 299 Pa. Super. 463, 472; 445 A.2d 1222 (1982) (where the state statute explicitly provided that a statutory definition would not apply where a contrary intention plainly appeared); Stone v Hodges, 435 P.2d 165, 166 (Okla, 1967) (same); South Dakota v Howell, 77 S.D. 518, 523; 95 N.W.2d 36 (1959) (same, but suggesting the principle as a general rule of statutory construction).
In Lawson, supra, p 201, the United States Supreme Court construed a federal workers' compensation act and said:
"Statutory definitions control the meaning of statutory words, of course, in the usual case. But this is an unusual case. If we read the definition[s] * * * in a mechanical fashion, we create obvious incongruities in the language, and we destroy one of the major purposes of the second injury provision: the prevention of employer discrimination against handicapped workers. We have concluded that Congress would not have intended such a result."
In Iowa Beef Processors, Inc, supra, p 533, the Iowa Supreme Court construed the Iowa workers' compensation act and said:
"An isolated, literal reading of the definitional clause would provide coverage based upon domicile alone, if the employer has a business in any state. We have often said that the legislature may be its own lexicographer, and that we are bound to follow its definitions, * * * and may not add words or change terms under the guise of judicial construction. * * * `If, however, the definitions are arbitrary and result in unreasonable classifications or are uncertain, then the court is not bound by the definitions.' 1A C. Sands, Statutes and Statutory Construction, § 20.08, p 59 (4th ed, 1972). Defining employment that `is principally localized in this state' to allow benefits to be based exclusively upon the domicile of the employee, with no part of the employment relationship either originating or performed in Iowa would, in our opinion, be arbitrary."
The Supreme Court of Indiana declared in Gilbert, supra, p 157, that, "in construing statutes, an appellate court is bound by the definitions set forth in the particular act, unless those definitions are inconsistent or repugnant to the legislative intent".
The Missouri Court of Appeals explained this doctrine of statutory construction in Wind, supra, p 560:
"[I]t is the general rule that when a legislative body enacts a statute or ordinance which prescribes the meaning to be given to particular words or terms used by it, such meaning is binding on the courts even though at variance with the common and ordinary understanding of the rules or terms. * * * Like most rules, however, this one is not without its exceptions. * * * [C]ourt[s] [are] not bound to follow the statutory definition where obvious incongruities in the statute would thereby be created, nor where one of the major purposes of the legislation would be defeated or destroyed. Nor is a court required to adhere to the statutory meaning if the result reached would be absurd. * * * And lastly, a court is not bound by the statutory definition if it is evidenced from the enactment that the legislative body did not intend the definition to apply to every use of the word or term throughout the statute or ordinance."
See also Markham v Cabell, 326 U.S. 404; 66 S Ct 193; 90 L Ed 165 (1945), where the Court declared that a statute should be applied in all situations in which the legislature intended that it be applied even though a strict reading of one of the statute's many provisions would have limited the statute's application to a single situation.
We are obliged, bearing in mind that the 1921, 1943, 1952, and 1954 amendments incorporate different policies, and that the language of those amendments was chosen to implement those policies, to seek to enforce the legislative purposes not only of the 1921 and 1943 Legislatures, but also of the 1952 and 1954 Legislatures.
A
We first consider the exclusive remedy provision, relied on in the majority opinion to exculpate the contractor from tort liability.
The exclusive remedy provision as originally enacted in 1912 read:
"Sec. 4. Any employer who has elected, with the approval of the industrial accident board hereinafter created, to pay compensation as hereinafter provided, shall not be subject to the provisions of section one; nor shall such employer be subject to any other liability whatsoever, save as herein provided for the death of or personal injury to any employe, for which death or injury compensation is recoverable under this act, except as to employes who have elected in the manner hereinafter provided not to become subject to the provisions of this act." 1912 (1st Ex Sess) PA 10, part I, § 4.
This provision was amended in 1943, when workers' compensation coverage was made mandatory, to read:
"Sec. 4. Where the conditions of liability under this act exist, the right to the recovery of compensation benefits, as herein provided, shall be the exclusive remedy against the employer." 1943 PA 245, part I, § 4.
This provision was amended in 1969 to read:
"Where the conditions of liability under this act exist, the right to the recovery of compensation benefits as provided in this act shall be the exclusive remedy against the employer." 1969 PA 317, § 131, MCL 418.131; MSA 17.237(131).
This provision was last amended in 1972 to read:
"The right to the recovery of benefits as provided in this act shall be the employee's exclusive remedy against the employer. As used in this section and section 827 `employee' includes the person injured, his personal representatives and any other person to whom a claim accrues by reason of the injury to or death of the employee, and `employer' includes his insurer, a service agent to a self-insured employer, and the accident fund insofar as they furnish, or fail to furnish, safety inspections or safety advisory services incident to providing workmen's compensation insurance or incident to a self-insured employer's liability servicing contract." 1972 PA 285, § 131, MCL 418.131; MSA 17.237(131).
The original 1912 workers' compensation act put both the employer and the employee to an election of remedies before injury whether to provide or accept coverage under the act as a substitute for tort liability. The purpose and intent of the exclusive remedy provision, part of the act from its inception although it did not take its present form until 1943 when workers' compensation coverage was made mandatory, is to relieve an employer, unconditionally subject to the obligation to pay workers' compensation benefits, of tort liability without regard to whether the injured worker claims or accepts workers' compensation benefits after injury. The "exclusive remedy" provision was then, as it is now, a trade-off for the employer being subject to liability under the act, not for being subjected to liability.
When the workers' compensation act was enacted in 1912, coverage was elective. Both the employer (see below) and the employee (fn 27) could choose whether to participate in the reparations program provided by the act. If the employer chose to participate, the employee had the legal right, although he may not have had the economic freedom to exercise that right, to decline coverage when he was hired. If the employee elected out, he could maintain an action in tort against his employer. If the employee did not elect out, his exclusive remedy against his employer who had elected coverage was to seek workers' compensation benefits; he could not after injury elect to sue his employer in tort because the exclusive remedy provision was a trade-off for the employer being subject to liability.
The employer election as originally enacted in 1912 read:
"Sec. 5. The following shall constitute employers subject to the provisions of this act:
"1. The State and each county, city, township, incorporated village and school district therein;
"2. Every person, firm and private corporation, including any public service corporation, who has any person in service under any contract of hire, express or implied, oral or written, and who, at or prior to the time of the accident to the employe for which compensation under this act may be claimed, shall in the manner provided in the next section, have elected to become subject to the provisions of this act, and who shall not, prior to such accident, have effected a withdrawal of such election, in the manner provided in the next section." 1912 (1st Ex Sess) PA 10, part I, § 5.
This election was eliminated in 1943 when coverage was made mandatory. See fn 35.
The employee election as originally enacted in 1912 read:
"Sec. 8. Any employe as defined in subdivision one of the preceding section shall be subject to the provisions of this act and of any act amendatory thereof. Any employe as defined in subdivision two of the preceding section shall be deemed to have accepted and shall be subject to the provisions of this act and of any act amendatory thereof if, at the time of the accident upon which liability is claimed:
"1. The employer charged with such liability is subject to the provisions of this act, whether the employe has actual notice thereof or not; and
"2. Such employe shall not, at the time of entering into his contract of hire, express or implied, with such employer, have given to his employer notice in writing that he elects not to be subject to the provisions of this act; or, in the event that such contract of hire was made before such employer became subject to the provisions of this act, such employe shall have given to his employer notice in writing that he elects not to be subject to such provisions, or without giving either of such notices shall have remained in the service of such employer for thirty days after the employer has filed with said board an election to be subject to the terms of this act. An employe who has given notice to his employer in writing as aforesaid that he elects not to be subject to the provisions of this act, may waive such claim by a notice in writing, which shall take effect five days after it is delivered to the employer or his agent." 1912 (1st Ex Sess) PA 10, part I, § 8.
This election was eliminated in 1943 when coverage was made mandatory. See fn 35.
Under the original 1912 act, for being subject to liability because the employer had elected coverage and the employee had not elected out (see fns 26 and 27); after 1943, for being subject to liability because coverage thereafter was mandatory (see fn 35).
It was thus not part of the legislative purpose or intent — in 1912 in enacting, and in 1943 in reenacting, the exclusive remedy provision — for that provision to become operative as the result of an election of remedies by the injured worker after injury. It follows that the policy of the exclusive remedy provision of providing a trade-off for being subject to workers' compensation liability does not extend to a contractor who is generally subject to tort liability to an employee of a subcontractor and who is not generally subject to workers' compensation liability to such an employee, but who may be subjected to workers' compensation liability to such an employee only if the subcontractor failed to insure or otherwise secure the payment of workers' compensation benefits and the employee seeks benefits from the contractor after injury.
See fn 4.
B
As originally enacted in 1912 and until 1952, the act provided a second election for a worker who, although covered by the act (because his employer and he had both elected coverage), also had a tort claim against a person other than his employer. Under the dual liability provision of the act, the worker could elect, after injury, either to sue the tortfeasor or to claim workers' compensation benefits from his employer. If the worker claimed workers' compensation benefits after injury, he waived his right to sue all third persons in tort. The employer then was subrogated to the worker's tort claim and could sue the tortfeasor to recover workers' compensation benefits paid the worker.
The dual liability provision as originally enacted in 1912 read:
"Sec. 15. Where the injury for which compensation is payable under this act was caused under circumstances creating a legal liability in some person other than the employer to pay damages in respect thereof, the employe may at his option proceed either at law against that person to recover damages, or against the employer for compensation under this act, but not against both, and if compensation be paid under this act the employer may enforce for his benefit or for that of the insurance company carrying such risk, or the Commissioner of Insurance, as the case may be, the liability of such other person." 1912 (1st Ex Sess) PA 10, part III, § 15.
In 1952, the dual liability provision was amended to provide a worker with the best of both alternatives. The worker could maintain a tort action except against his employer, even though he had sought or obtained workers' compensation benefits from his employer. In continuation of the concept of the original (1912) dual liability provision above set forth, the dual liability provision as amended in 1952 continued to subrogate the employer to the injured worker's tort claim. The amended dual liability provision states that a tort recovery shall be used "first [to] reimburse the employer" or his insurer for workers' compensation benefits paid or payable, and that the balance (paid to the worker or his dependents) "shall be treated as an advance payment by the employer on account of any future payment of compensation benefits".
The dual liability provision, as amended in 1952, read:
"Sec. 15. Where the injury for which compensation is payable under this act was caused under circumstances creating a legal liability in some person other than a natural person in the same employ or the employer to pay damages in respect thereof, the acceptance of compensation benefits or the taking of proceedings to enforce compensation payments shall not act as an election of remedies, but such injured employee or his dependents or their personal representative may also proceed to enforce the liability of such third party for damages in accordance with the provisions of this section. If the injured employee or his dependents or personal representative does not commence such action within 1 year after the occurrence of the personal injury, then the employer or its compensation insurance carrier may, within the period of time for the commencement of actions prescribed by statute, enforce the liability of such other person in the name of that person. Not less than 30 days before the commencement of suit by any party under this section, such party shall notify, by registered mail at their last known address, the workmen's compensation commission, the injured employee, or in the event of his death, his known dependents, or personal representative or his known next of kin, his employer and the workmen's compensation insurance carrier. Any party in interest shall have a right to join in said suit.
"Prior to the entry of judgment, either the employer or his insurance carrier or the employee or his personal representative may settle their claims as their interest shall appear and may execute releases therefor.
"Such settlement and release by the employee shall not be a bar to action by the employer or its compensation insurance carrier to proceed against said third party for any interest or claim it might have.
"In the event the injured employee or his dependents or personal representative shall settle their claim for injury or death, or commence proceeding thereon against the third party before the payment of workmen's compensation, such recovery or commencement of proceedings shall not act as an election of remedies and any moneys so recovered shall be applied as herein provided.
"In an action to enforce the liability of a third party, the plaintiff may recover any amount which the employee or his dependents or personal representative would be entitled to recover in an action in tort. Any recovery against the third party for damages resulting from personal injuries or death only, after deducting expenses of recovery, shall first reimburse the employer or its workmen's compensation insurance carrier for any amounts paid or payable under the workmen's compensation act to date of recovery, and the balance shall forthwith be paid to the employee or his dependents or personal representative and shall be treated as an advance payment by the employer on account of any future payment of compensation benefits.
"Expenses of recovery shall be the reasonable expenditures, including attorney fees, incurred in effecting such recovery. Attorney fees, unless otherwise agreed upon, shall be divided among the attorneys for the plaintiff as directed by the court. The expenses of recovery above mentioned shall be apportioned by the court between the parties as their interests appear at the time of said recovery.
"Compensation benefits referred to in this section shall in each instance include but not be limited to all expenses incurred under sections 4 and 8 of part 2 of this act, being sections 412.4 and 412.8 of the Compiled Laws of 1948." 1952 PA 155.
The dual liability provision as amended in 1952 was re-enacted as § 827 of 1969 PA 317, with stylistic changes. There were no substantive changes, however, and the relevant language discussed in this opinion was unchanged. An additional paragraph was added to § 827 by 1972 PA 285 concerning the "furnishing of, or failure to furnish, safety inspections or safety advisory services".
A purpose and intent of the dual liability provision, as originally enacted and until 1952, was thus to put the injured worker to an election of remedies after injury. An injured worker who sought workers' compensation benefits rather than sue a tortfeasor did not thereby immunize the employer from tort liability in return for subjecting the employer to the obligation to pay benefits. The employer was relieved of tort liability to a worker when the employer had elected to become subject to the provisions of the act and the worker had failed, when he was hired, to elect not to be subject to the provisions of the act. By accepting workers' compensation benefits, the worker instead, under the dual liability provision, immunized all persons other than the employer from tort liability.
C
The "reference to the principal [contractor]" clause of the contracting provision enacted in 1921 was not designed or intended, in combination with the exclusive remedy provision relied on in Drewes and in the majority opinion as the operative language, to provide an election of remedies or to exculpate the contractor from tort liability:
(i) the exclusive remedy provision was intended to and operates to insulate an employer generally subject to liability for workers' compensation benefits from tort liability independently of employee election after injury, and
(ii) under the dual liability provision, and the complementary "or any other person" clause enacted by the 1921 Legislature as part of the contracting provision from its inception, no person was subject to tort liability if the worker elected to receive workers' compensation benefits after injury.
A worker injured in the employ of an uninsured subcontractor can maintain an action in tort against the contractor, at least where he has not accepted workers' compensation benefits from the contractor. The contractor is not insulated from such an action by an employee of a subcontractor, insured or uninsured, on the rationale that the contractor may, if the subcontractor fails to secure the payment of workers' compensation benefits, be subjected by the employee to liability to pay workers' compensation benefits.
See fns 4 and 46 and text following fn 47.
When the contracting provision, with the "reference to the principal [contractor]" clause, was added in 1921, that clause could not, in combination with the exclusive remedy provision, have deprived an employee of a subcontractor of the right to maintain an action against a contractor who paid workers' compensation benefits that the subcontractor did not provide, because under the dual liability provision and the complementary "or any other person" clause of the contracting provision an employee of a subcontractor could not have accepted workers' compensation benefits from the contractor and then sued in tort.
See fn 4.
See fn 4.
The 1921 legislation adding the contracting provision could not embody a separate purpose to exculpate, under the exclusive remedy provision, a contractor who pays workers' compensation benefits his subcontractor did not provide, from liability in a tort action that could not then be maintained against the contractor or anyone else where workers' compensation benefits were paid. The 1921 legislative purpose did not become enlarged when, as a result of the 1952 and 1954 amendments, the contractor would no longer be exculpated from tort liability under the dual liability or the "or any other person" clause where the worker after injury claimed workers' compensation benefits from the contractor.
The purpose and intent of the contracting provision, added in 1921, was to define the scope of the contractor's obligations and of an injured worker's rights respecting workers' compensation benefits where the contractor had elected and the subcontractor had not elected to provide workers' compensation benefits. It was not part of the legislative purpose or intent of the 1921 legislation to provide that the exclusive remedy provision — that in 1921 could only become operative if the worker had not elected at the time of hiring not to become subject to the provisions of the act — would become operative upon an election of remedies by the worker after injury. In this connection it is noteworthy that where a subcontractor had not elected to become subject to the provisions of the act — and the 1921 contracting provision only applied in such a case — an employee of a subcontractor never had an opportunity to elect whether to become subject to the provisions of the act, a precondition in 1921 for the exclusive remedy provision to become operative.
An action against the contractor would not have been barred under the exclusive remedy provision as enacted in 1912 because, until workers' compensation coverage became mandatory in 1943, the exclusive remedy provision only became operative when the employer's liability to pay workers' compensation benefits to a worker arose by reason of the employer's election to be subject to the provisions of the act and the employee's failure to elect not to be subject to its provisions. See fns 26 and 27.
D
In 1943, the act was amended to eliminate employer and employee elections whether to be covered by the act, and thus to make workers' compensation coverage mandatory. The contractor's obligation under the contracting provision was restated to include the obligation to pay workers' compensation benefits if the subcontractor failed to insure or otherwise secure their payment. The worker's election under the "dual liability" provision (and the complementary "or any other person" clause of the contracting provision), to sue a third-party tortfeasor or to claim workers' compensation benefits was not changed.
In 1943, workers' compensation coverage became mandatory, and the contracting provision was restated to require the contractor to pay workers' compensation benefits when the subcontractor failed to obtain insurance or otherwise secure payment of benefits. No change was made in the dual liability provision or in the complementary "or any other person" clause of the contracting provision. As before the 1943 amendment, if an injured employee of an insured or uninsured subcontractor had a tort claim, he could sue the contractor or anyone else in tort, but only in lieu of seeking workers' compensation benefits.
The language eliminating elective coverage, added in 1943, reads:
"Sec. 2. On and after the effective date of this section, every employer, public and private, and every employe, unless herein otherwise specifically provided, shall be subject to the provisions of this act and shall be bound thereby. The commission may in its discretion destroy any record, file or paper pertaining to workmen's compensation where, or whenever, 20 or more years have elapsed since the date of the injury to which the record, file or paper refers."
See fn 4.
See fn 30.
Although workers' compensation coverage was now mandatory, a worker in the employ of a subcontractor, insured or uninsured, could (as before the 1943 amendment) after injury sue the contractor in tort — although he could not sue an actual employer — in lieu of claiming workers' compensation benefits. The liability of a contractor to an injured employee of an insured or uninsured subcontractor was not limited to the payment of workers' compensation benefits on the rationale that the contractor was subject to liability as an "employer" if the subcontractor failed to provide security for the payment of benefits and the exclusive remedy against a person subject to liability as an "employer" is the right to seek workers' compensation benefits.
See fn 4.
The exclusive remedy provision was thus not the determinative provision after coverage became mandatory in 1943; the determinative provisions continued to be the dual liability provision and the complementary "or any other person" clause in the contracting provision, which provided all injured workers, including those injured in the employ of an insured or uninsured subcontractor, a choice of seeking workers' compensation benefits or of suing any person other than an actual employer (who alone was already exculpated by the exclusive remedy provision) and which exculpated all persons from tort liability when the worker chose after injury to seek workers' compensation benefits.
E
In 1952, the act was amended to eliminate the election of remedies under the dual liability provision so that an injured worker could accept workers' compensation benefits without giving up any larger amount recoverable in tort from a third-party tortfeasor. For the first time, it became important whether the worker could sue in tort a contractor who had paid the workers' compensation benefits that an uninsured subcontractor had failed to provide.
See fn 30.
In 1954, an apparent curative amendment of the contracting provision (last amended in 1943) was enacted to eliminate the "or any other person" clause, which, complementing the pre-1952 dual liability provision, barred a tort action against "any other person" if the employee claimed workers' compensation benefits and would, if literally construed, have continued to bar after 1952 a tort action against the contractor if the worker had after injury sought from the contractor workers' compensation benefits that an uninsured subcontractor had failed to provide. The Legislature thereby evidenced a purpose and intent that a worker injured in the employ of an uninsured subcontractor, like all other injured workers, could both claim workers' compensation benefits and sue in tort.
See fn 4.
III
The Legislature thus has moved, in 1943, 1952, and 1954, to eliminate the provisions of the original 1912 act providing employers and employees with elections of remedies.
The election of remedies provisions (i) in 1912 and 1921, were the provisions of the act that, until coverage became mandatory in 1943, gave an employer the right to elect coverage (fn 26) and the employee the right to elect out (fn 27), and that made the remedy provided by the act the exclusive remedy if the employer elected coverage and the employee did not elect out (fn 25), (ii) that, until 1952, gave an employee, after injury, an election under the dual liability provision either to accept workers' compensation benefits from his employer (if, until 1943, the employer had elected coverage), or to sue in tort anyone other than the employer (fn 30), and (iii) that, until the curative amendment in 1954, provided that an employee of a subcontractor who sought workers' compensation benefits from the contractor when the subcontractor failed to provide them also waived his right to sue "any other person" in tort (fn 4).
Today's decision that a contractor is relieved of tort liability if he pays workers' compensation benefits that a subcontractor failed to provide reintroduces into the act the concept of election of remedies eliminated by the 1943, 1952, and 1954 amendments. It constitutes for the first time in 1952 or 1954, the exclusive remedy provision, enacted in 1912, a trade-off not for being subject to liability but for being subjected to liability.
See fns 4 and 46 and text following fn 47.
See fn 25.
The construction of the act set forth in the majority opinion is not consonant with the structure of the act or the apparent purpose of the 1943, 1952, and 1954 Legislatures to eliminate provisions of the act putting an employer or an employee to an election of remedies, and is violative of the clear purpose of the 1954 amendment of the contracting provision to extend the benefit of the 1952 amendment of the dual liability provision to a worker injured in the employ of an uninsured subcontractor who obtains workers' compensation benefits from the contractor, by allowing him to maintain an action in tort against an "other person", who then, as in 1921 and 1943, included the contractor.
The purpose of the 1952 amendment of the dual liability provision was to secure to the injured worker the benefit of a recovery obtainable in tort to the extent it may exceed workers' compensation benefits. The only purpose of the 1954 amendment of the contracting provision was to secure the benefit of the 1952 amendment of the dual liability provision to a worker injured in the employ of an uninsured subcontractor.
The construction placed on the act in the majority opinion deprives a worker injured in the employ of an uninsured subcontractor and no other injured worker of the benefit of a greater recovery obtainable in a tort action and is not consistent with the purpose of the 1952 and 1954 amendments.
IV
It appears that in a majority of jurisdictions a contractor is regarded as, or is deemed to be, the employer of an employee of a subcontractor, and on that rationale is not subject to tort liability to such an employee even if the subcontractor or his insurer pays workers' compensation benefits. Where that is the rule it is held, as one would expect, that the contractor, not subject to tort liability if the subcontractor or his insurer pays workers' compensation benefits, does not become subject to tort liability if the subcontractor or his insurer does not pay the benefits and the contractor pays them.
2A Larson, Workmen's Compensation, § 72.31(a), p 14-111 ff.
It appears that of the fifteen states other than Michigan cited in Larson, fn 44 supra, § 72.31(a) and fn 47, eight (Colorado, Georgia, Kansas, Louisiana, Maryland, Missouri, Oklahoma, and Pennsylvania) are also cited as holding the contractor immune from tort liability when the subcontractor is insured or pays the workers' compensation benefits. See id., § 72.31(b) and fns 49 and 50. An analysis of the decisions cited from the remaining seven jurisdictions (Utah, Nevada, Kentucky, Virginia, Alaska, New York, and Mississippi) indicates that either those jurisdictions also have so held, or would so hold, or that the cases cited are not in point.
In Adamson v Okland Construction Co, 29 Utah 2d 286; 508 P.2d 805 (1973), the subcontractor paid workers' compensation benefits, and the contractor was held to be immune from tort liability.
In Ortolano v Las Vegas Convention Service, 96 Nev. 308; 608 P.2d 1103 (1980), where the benefits were paid by the worker's "immediate employer", the convention service was held to be immune.
In Whittenberg Engineering Construction Co v Liberty Mutual Ins Co, 390 S.W.2d 877, 882 (Ky, 1965), the court ruled that the contractor could be required to indemnify the subcontractor's insurer, who had paid the workers' compensation benefits. The court stated that a contractor was immune from a common-law tort action by an injured employee of a subcontractor, even if the subcontractor or his insurer had paid benefits. In United Engineers Constructors, Inc v Branham, 550 S.W.2d 540 (Ky, 1977), the contractor was held immune from tort liability where the insurer of the subcontractor had paid benefits to an injured employee.
In Evans v Newport News Shipbuilding Dry Dock Co, 243 F. Supp. 1017 (ED Va, 1965), aff'd 361 F.2d 364 (CA 4, 1966), the court ruled that the Virginia workers' compensation act barred an action against the owner of a project by an employee of a contractor who had received workers' compensation benefits from the insurer of the contractor.
In Sloan v Atlantic Richfield Co, 552 P.2d 157, 160 (Alas, 1976), the court held that an employee of an independent contractor does not have a cause of action against an owner or possessor of the premises whereon the injury occurred. The case was decided on common-law, not statutory, grounds. But see Miller v Northside Danzi Construction Co, 629 P.2d 1389 (Alas, 1981), fn 48 infra.
It is unclear who paid the benefits in Washington v East 87th 88th Street Contracting Co, 90 Misc.2d 911; 396 N.Y.S.2d 596 (1977). In all events the rule in New York is stated in Sweezey v Arc Electrical Construction Co, Inc, 295 N.Y. 306; 67 N.E.2d 369 (1946), where the New York Court of Appeals held that the contractor was liable in tort although it was obligated to pay the benefits because the subcontractor had failed to secure compensation insurance.
In one jurisdiction, Georgia, the contractor was held, by the state's intermediate appellate court, to be immune from tort liability after it had been required to pay benefits because its subcontractor was not insured, although a contractor would be subject to tort liability if an insured subcontractor paid benefits. See Jackson v J B Rush Construction Co, Inc, 134 Ga. App. 445; 214 S.E.2d 710 (1975). Subsequently, however, the Supreme Court of Georgia held that the contractor was immune from tort liability even when the subcontractor paid the benefits, reasoning that if a contractor was immune when he was required to pay benefits, he also should be immune when the subcontractor was insured and paid benefits. See Wright Associates, Inc v Rieder, 247 Ga. 496; 277 S.E.2d 41 (1981); Cleckley v Batson-Cook Co, 160 Ga. App. 831; 288 S.E.2d 573 (1982). Mississippi employed much the same analysis to reach the same conclusion. See Doubleday v Boyd Construction Co, 418 So.2d 823 (Miss, 1982), discussed in fn 52.
Opinions from other courts may be read as suggesting that a contractor may become immune when he is required to pay benefits. See Thomas v Farnsworth Chambers Co, 286 F.2d 270, 273 (CA 10, 1960), Ryan v New Bedford Cordage Co, 421 F. Supp. 794 (D Vt, 1976), Bence v Pacific Power Light Co, 631 P.2d 13 (Wy, 1981), and Fonseca v Pacific Construction Co, Ltd, 513 P.2d 156 (Hawaii, 1973). See also Young v Environmental Air Products, Inc, 136 Ariz. 158, 162, fns 5, 6; 665 P.2d 40 (1983) (en banc), and Word v Motorola, Inc, 135 Ariz. 517, 518, fn 3; 662 P.2d 1024 (1983) (en banc).
The rule in Michigan, however, is that the contractor is generally subject to tort liability to an employee of a subcontractor, and therefore a tort action may be maintained against the contractor by a person injured in the employ of a subcontractor, at least where the subcontractor has provided for the payment of workers' compensation benefits. It is indeed arguable, as Professor Larson urges, that the corollary of the contractor's contingent liability to pay workers' compensation benefits should be exculpation from tort liability to employees of all subcontractors, insured and uninsured. But, in light of the legislative decision to make the contracting provision operative only when the subcontractor is not insured, and thus not to free a contractor from tort liability to employees of all subcontractors, insured and uninsured, a change in the Michigan rules can appropriately be ordained only by the Legislature.
See Schulte v American Box Board Co, 358 Mich. 21; 99 N.W.2d 367 (1959). See also Funk v General Motors Corp, 392 Mich. 91, 111-112; 220 N.W.2d 641 (1974). See also text following fn 47.
Professor Larson's argument that the contractor should always be immune from tort liability is based on his view of sound public policy rather than a construction of the Michigan statute. He states a defensible point of view. The contractor, and the owner who employs the contractor, ultimately bears the cost of workers' compensation insurance when the subcontractor is insured. The subcontractor presumably adds the cost of such insurance when he submits his bid or otherwise is hired by the contractor. See Griffin v United States, 644 F.2d 846, 848 (CA 10, 1981); Musick v Puerto Rico Telephone Co, 357 F.2d 603, 605 (CA 1, 1966); Watkins v United States, 479 F. Supp. 785, 789 (D SC, 1979); Bence v Pacific Power Light Co, 631 P.2d 13, 15, fn 1 (Wy, 1981). But see DiNicola v George Hyman Construction Co, 407 A.2d 670, 674-675 (DC App, 1979). It thus may be sound public policy to treat the contractor/owner and the subcontractor as a single enterprise for purposes of workers' compensation and third-party tort liability, but that is not the rule in Michigan.
We have found decisions in eight jurisdictions where, as in Michigan, a contractor is generally subject to tort liability to an employee of a subcontractor, that address the question whether a contractor so generally subject to tort liability remains subject to tort liability if he is required to pay workers' compensation benefits when the subcontractor fails to provide benefits. Decisions in six of the eight jurisdictions hold that the contractor continues to be subject to tort liability although he was required to pay workers' compensation benefits.
See Kilgore v C G Canter, Jr Associates, Inc, 396 So 2d 60 (Ala, 1981); Miller v Northside Danzi Construction Co, 629 P.2d 1389 (Alas, 1981); Prive v M W Goodell Construction Co, Inc, 119 N.H. 914; 409 A.2d 1149 (1979); Laffoon v Bell Zoller Coal Co, 65 Ill.2d 437; 359 N.E.2d 125 (1977); Sweezey v Arc Electrical Construction Co, Inc, 295 N.Y. 306; 67 N.E.2d 369 (1946) (The opinion is unclear whether the contractor in fact had paid the benefits; the court declared, however, that a general contractor remains liable in tort although obligated to pay compensation benefits to an injured employee of an uninsured subcontractor.); Culbertson v Kieckhefer Container Co, 197 Wis. 349; 222 N.W. 249 (1928) (dicta).
In two jurisdictions, the District of Columbia and Arkansas, the contractor is subject to tort liability when an insured subcontractor pays the benefits, but is immune from tort liability when the subcontractor is not insured and the contractor is required to pay benefits. See Clanagan v Washington Metropolitan Area Transit Authority, 558 F. Supp. 209 (D DC, 1982); Carter v Fraser Construction Co, 219 F. Supp. 650 (WD Ark, 1963); Baldwin Co v Maner, 224 Ark. 348; 273 S.W.2d 28 (1954). The District of Columbia workers' compensation act construed in Clanagan is the same (see Clanagan, supra, p 210, fn 1; DC Code § 36-501) as the Federal Longshoremen's and Harbor Workers' Compensation Act ( 33 U.S.C. § 904[a]-905[a]). At least one court that has construed that federal act has concluded, however, that a contractor remains liable in tort after having paid the benefits to an injured employee of an uninsured subcontractor. See Fiore v Royal Painting Co, Inc, 398 So.2d 863 (Fla App, 1981).
The extent of a contractor's liability for workers' compensation benefits and exculpation from tort liability are essentially matters of policy to be decided by the Legislature. We are obliged to reach a result that serves the legislative policy.
We are persuaded that if one begins with the established premise that, in this state, the contractor is generally subject to tort liability to an employee of a subcontractor, it better serves the legislative policy embodied in the 1952 and 1954 amendments for the contractor not to be advantaged and the worker disadvantaged because the subcontractor, in violation of the act, is uninsured. A contractor can protect himself from being called upon to pay workers' compensation benefits to an employee of an uninsured subcontractor by requiring the subcontractor, at the time the subcontractor enters into an agreement with the contractor, to provide continuing evidence that the subcontractor is insured for workers' compensation liability.
The policy might be endorsed to show the contractor as an additional insured and to require that notice of cancellation be sent to the contractor as well as the subcontractor.
Holding the contractor to both tort and workers' compensation liability provides a worker injured in the employ of an uninsured subcontractor no more than the opportunity, along with all other injured workers, to pursue a greater tort recovery. The contractor is protected by the subrogation feature of the dual liability provision from being required to pay twice. Whatever verdict might be returned against the contractor in a tort action must be reduced by the amount the contractor has paid as workers' compensation benefits, and the balance of a tort recovery (paid to the worker) is deemed to be an advance payment of any further workers' compensation benefits that the worker otherwise could claim from the contractor. The act further provides that the contractor may seek to recover the amount paid as workers' compensation benefits in an action against the subcontractor.
See fn 30.
See fn 4.
The contracting provision, as enacted in 1921, precluded a contractor who had elected to become subject to the provisions of the act from avoiding the obligation so assumed by subcontracting with a subcontractor who had not elected to subject himself to the provisions of the act work to be performed by the contractor. The contracting provision, as amended in 1943, bars a contractor from avoiding mandatory workers' compensation liability by dealing with an uninsured subcontractor. It would not be consonant with the policy implicit in those legislative decisions to permit a contractor to avoid the tort liability, to which he is otherwise subject under the Michigan rule, by dealing with an uninsured subcontractor.
Georgia and Mississippi have explicitly construed their workers' compensation acts so as to make all contractors equally liable. See Wright Associates, Inc v Rieder, 247 Ga. 496; 277 S.E.2d 41 (1981); Doubleday v Boyd Construction Co, 418 So.2d 823 (Miss, 1982).
The Mississippi Supreme Court first held that a contractor who had hired an uninsured subcontractor should be immune when it was required to pay workers' compensation benefits to the subcontractor's injured employee. See Mosley v Jones, 224 Miss. 725; 80 So.2d 819 (1955). The court then held that a contractor should also be immune when he had required his subcontractor to buy insurance and pay benefits to his own injured employees. The court reasoned that by requiring the subcontractor to buy insurance the contractor had "secured" the payment of benefits to the employee and therefore was immune under the Mississippi act. Doubleday v Boyd Construction Co, supra. The court wrote that
"the obvious purpose of the statute is for the protection of employees of subcontractors who do not carry workmen's compensation insurance. It would be paradoxical however, in our opinion, to hold * * * that a general contractor risk [sic] personal injury judgments in common law suits if he complies with the statute by contractually securing compensation insurance by his subcontractor, but if he lets work to subcontractors who do not comply with the act, then his liability is limited to the sums provided by the act. We do not think the legislature intended such an improbable result." Id., p 826.
See also Nations v Sun Oil Co (Delaware), 695 F.2d 933 (CA 5, 1983) (applying Doubleday to hold the contractor immune after the insured subcontractor paid the benefits).
In Laffoon v Bell Zoller Coal Co, 65 Ill.2d 437; 359 N.E.2d 125 (1977), the court also postulated that it was necessary to treat all contractors equally but, in contrast with Georgia and Mississippi, concluded that the contractor was always subject to tort liability to the employees of a subcontractor, insured or uninsured.
When a contractor hires an insured subcontractor, the contractor presumably pays both for the subcontractor's workers' compensation insurance, through its contract with the subcontractor, and for insurance to cover its liability in tort. In jurisdictions like Michigan, where contractors remain subject to tort liability although the subcontractor is insured, contractors are treated unequally when a contractor is relieved of tort liability if the subcontractor is uninsured.
The contractor's responsibility under the contracting provision arises without regard to whether he purposefully sought to deal with a subcontractor who had not elected coverage or is not insured. Similarly, it is not a question whether the contractor, or how many contractors, would purposefully deal with an uninsured subcontractor and thereby run the risk of paying workers' compensation benefits to employees of the subcontractor. Whether the contractor acted purposefully is not, for purposes of the contracting provisions, relevant. The same policy that requires a contractor to pay workers' compensation benefits to an injured employee of an uninsured subcontractor, without regard to whether the contractor purposefully dealt with an uninsured subcontractor, requires that the contractor continue to be subject to the tort liability it would be subject to if it dealt with an insured subcontractor, without regard to whether it purposefully dealt with an uninsured subcontractor.
We would affirm the Court of Appeals.
WILLIAMS, C.J., and KAVANAGH, J., concurred with LEVIN, J.