CHAPTER VIII.

AN ANALYSIS OF THE PRINCIPLES OF THE LEGAL BASIS OF COMPULSORY INSURANCE AND COMPENSATION LAWS.

Sec.

95. Legislature in its enactments limited only by State Fed

eral constitutions.

96. Nature of administration of compensation acts.

97. Nature of administration of

Sec.

compensation acts whether executive or judicialDue process.

98. Deprivation of right to trial by jury.

99. Whether act may be optional.

§ 65. Introductory.—It is the purpose of this chapter to present and discuss the objections most frequently urged against insurance and compensation laws when their validity is called in question in courts of law.1

§ 66. The nature and remedial provisions of insurance laws.-Workmen's insurance acts greatly resemble each other in their provisions. The Ohio act, which may be taken as a type of these laws, provides:

(1) That all workmen injured shall be compensated at the rate of 66 2-3 per cent of his loss of wages for not longer than 300 weeks, and not more than $12 per week; in case of death where there are dependents, the compensation shall not be less than $1,500 nor exceed $3,400, plus doctor bills not to exceed $200 and funeral expenses to a maximum amount of $150; and in no case shall the compensation for any injury exceed $3,400, except in the case of total disability. (2) That any employer of five or more persons shall pay monthly into the state fund, the premium based upon the pay roll and hazard of his business, sufficient to pay his pro rata share of the compensation awarded to workmen against the fund. (3) That every employer of five or more persons who fails to pay said premiums shall not avail himself of any of

1 The matter for this chapter is largely founded on the brief used by the author in his presentation of the case of the Ohio Industrial Insurance law in behalf of the State before the Ohio Supreme Court. It is thought to cover all questions that have been raised against these laws in all the states where their validity has been litigated.

the so-called common-law defenses in case he is sued by a workman who is injured while in his employ. (4) That every workman must accept the compensation provided by the act, in lieu of all rights and remedies heretofore existing, excepting the case where he may be denied any relief whatever, or where he may be injured through a willful act of the employer, or through the employer's violation of a statute or ordinance, in which case he may elect to sue his employer at law or take under the compensation act. (5) That in case a workman, covered by the act, is totally disabled he shall be compensated at the rate of 66 2-3 per cent of his average weekly wage, in no case at less than $5 per week, nor at more than $12 per week, and the compensation shall be paid as long as total disability lasts.

§ 67. Nature of the obligation imposed. The relation imposed by these laws is purely economic in character as distinguished from the creation of a new. right in the employé sounding in tort. The new obligation of the employer to his employés is rather a wage obligation in the nature of an undertaking thrust upon the employer, as a part of the contract of employment, to become a party to an insurance policy created by law and to be entered into as additional consideration for services rendered by the employé. The obligation falls within the domain of contract and thus involves a sphere of constitutional law pertaining to the subject of the regulation of contracts.

The true theory in all cases is that the compensation is in fact a tax levied by the state, both upon the employer and employés, and accepted by the employé class for the public welfare. This is necessarily so, for were the new obligation of the employer deemed to be created with the sole object of establishing in the employé a new private right and remedy in substitution of

his former right to sue in tort for damages, then an industrial insurance law would be as unfair to the employé as to the employer. This proposition is true, because in lieu of a possible opportunity formerly belonging to the injured employé to be made whole in a sum for damages fully commensurate with his peculiar loss, he would be compelled, under an insurance or compensation act to accept a stipulated amount admittedly having no relation to his injury, but measured on the basis of his relative economic position in the community, viz.:-the amount of his wage. This is not a just basis to compensate the employé for his injury, if his new right is to be classified in the same category in which his old right belongs, viz. :-a means to redress a private wrong. The reason for such a law must be to require the employé to accept, against his former precarious right to adequate damages, the entirety, not only for himself, but also for all members of his class, of receiving in case of injury, a stipulated sum computed not independently as to each party injured on the basis of loss peculiar to his own personal injury but relatively as to all in accordance with their respective earning capacities. Hence its sole justification must be the public welfare, and whatever its form be it must in substance result as to the parties involved in the arbitrary levying and administration of a tax fund.

On the above theory it is argued that the positions of the employer and employé should be so altered that no new statutory privity of relationship be created between them, as was the case under the New York law,2 but rather that each be required independent of the other to perform a new duty toward the state, namely, the employer and employé, each, by paying an adequate

2 Ives v. South Buffalo R. Co., 201 N. Y. 271, 94 N. E. 431, 34 L. R. A. (N. S) 162n.

tax to the state, and the employé by surrendering a chose in action to the state; that these respective duties, however, can be constitutionally required of each only upon some direct compensatory return of an economic character moving to each. Distinction is here made between a law (for instance the New York statute) such as gives in fact a right in A to appropriate directly by new right and remedy the property of B and a law which leaves A and B in respect of their personal relations as they were before, but requires each for the needs of the public welfare, and in exchange for specific benefits respectively received, to surrender to the state certain rights and likewise to look to a state agency alone for the returning benefits.

Another limitation also inheres in this theory of the appropriation of the property rights of the two classes. involved, namely, that since the tax is not levied on all in the state but that certain classes of citizens are alone selected a corresponding benefit or return must be traced to them for their property and rights to be so appropriated. This constitutional limitation requires that any scheme of industrial insurance or workmen's compensation shall be what it purports to be, namely, an actual readjustment of the social relations of the classes involved in it by making such scheme a substitute for and exclusive of all other present methods of protecting personal injuries; for if there exist in any plan of compensation the recognition of the right of the employé to either exercise his option to sue at law for personal injuries, or to take his insurance, by this very token is it declared that the intention of such a law is not to bring about such an economic reform, for still would there exist all the evils now inherent in the present method of redressing personal injuries; in consequence such a plan would disclose, as was suggested by the New York Court of Appeals in the Ives