Lusitania Disaster—Part VII

A Workers Compensation Controversy

Michael Sean Quinn

(See below.)

Systems of compensation for worker/employee death or injuries are ancient.  In some cases, as old as insurance itself—or older even.

In the modern age, however, sophisticated and complex versions of them became ever more accepted beginning in the fourth quarter of the 19th century. Such systems were usually created by central governments, and in the United States this was by state governments. For various reasons, the United States ran a bit behind Europe in creating these systems.

None of the U.S. systems involved the government systematically providing compensation for the employees of private companies, and private companies could purchase special insurance or pay for it themselves. (Or they could be what is called, “self-insured” up to a point, and then an insurance policy[1] and its issuer would take over.  That is more or less how things are today.  Case law based on statutory interpretation began developing immediately. Still, by the time the Lusitania was torpedoed on May 7, 1915, the law was not an old body of law.

This is the context in which the case of Foley v. Home Rubber Company., 40 N.J.L. 80, 99 A. 624 (N.J. 1917) arose. (The “A” stands for “Atlantic Reporter,” while “N.J.L.” refers to the state’s official reporter.) Arthur F. Foley was employed by Home as a salesman who traveled and a supervisor or manager of other salesmen.  He was on the Lusitania going to England on company business. He was killed, and his wife Thirza Ann Foley sued to recover. The trial court, the Court of Common Pleas for Montgomery County, handed victory to Home Rubber, based upon agreed stipulations as to relevant facts the employer, and Ms. Foley appealed. The New Jersey Supreme Court reversed and remanded.

The trial court explicitly based its decision on the fact that the employer could not be found to have been negligent with respect to Mr. Foley’s death.  The Supreme Court virtually opens its opinion by stating that no such thing is required by the statute. 

How a competent court could have made this mistake is beyond me, and—no doubt—it was beyond the Supreme Court as well.  A central purpose of workers compensation insurance and the public policy behind it is to transfer risk-costs of work-related injuries from the worker to the employer (and its insurance provider). Requiring that employers be held negligence as a necessary condition for workers being compensated would defeat the whole purpose of the system.  This fact was widely known to the public and lawyers before 1915.

The question of the case, as the Supreme Court put it, was “whether the destruction of the Lusitania in consequence was an accident arising out of the employment [of Mr. Foley].” The Court divides this question into two. First, was the sinking of the Lusitania something that a reasonable employer would have expected? And second, was what happened related to Mr. Foley’s job. The court answers the first of these “No,” even though it knew there were extra risks while answering the second one “Yes.”

Said the Court:

It may be well said that those whose employments require them to travel by land or sea are known by their employers to be subject to the common perils that such traveling incurs. The risk is inherent in the employment itself. The manner in which the accident is brought about is not at all of the essence of the matter; the vital question always being: Was the accident connected with the employment? If it was, then it arose out of the employment, provided it occurred in the course of the employment. [2]

Obviously, the death arose out of the decedent’s employment.  He was on his way to London to tend to the company’s business. The trip was authorized by the company.  The fact that the German sub was violating international law and custom is irrelevant. The fact that what sunk the ship was not one of the usual perils of the sea is also irrelevant.

Perhaps the most important thing to notice is that there was no war risk exclusion contract of insurance, if there was one, or in the applicable  New Jersey law—or, for that matter—in the state’s public policy regarding insurance.

Michael Sean Quinn, Ph.D., J.D., c.p.c.u. . . .

The Law Firm of Michael Sean Quinn et

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[1] The word “policy” in this context has two different meanings. An “insurance policy” may refer to a contract of insurance.  In addition, an “insurance policy” may refer to governmental public policy regarding the regulation of the insurance industry.
[2]If employees are horsing around, this may not be employment related. If a worker is killed by an outsider because the worker is known to be sleeping with the outsider’s wife, that event is not employment related. The relevant New Jersey cases indicated that the courts already understand this principle, though my concrete examples are their theirs. 

Originally posted on 05/21/2015 @ 8:44 pm

Michael Sean Quinn, PhD, JD, CPCU, Etc

Michael Sean Quinn, PhD, JD, CPCU, Etc. (530)

One of Texas's leading insurance scholars, Michael Sean Quinn is a past chair of the Insurance Section of the State Bar of Texas and has a broad legal practice.

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