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Harper v. New Jersey Manufacturers Casualty Insurance Co.

Decided: November 15, 1948.


On appeal from the Mercer County Circuit Court.

For affirmance: Chief Justice Vanderbilt and Justices Case, Oliphant, Wachenfeld, Burling, and Ackerson. For reversal: Justice Heher. The opinion of the court was delivered by Case, J. Heher, J. (dissenting).


The question is whether the term "total compensation" as used in R.S. 34:15-94 includes medical expenses and funeral expenses. The Commissioner of Labor brought suit in the Mercer County Circuit Court to recover the sum of $7,229.54 assessed against the defendant on its 1945 expenditures for those items. Circuit Court Judge Smalley, sitting by consent in the trial without a jury, answered the question in the negative and accordingly rendered judgment for the defendant. The Commissioner appeals.

The cited section sets up what is known as the "one per cent fund". It was first passed as section 1 of Chapter 81, Pamphlet Laws of 1923. The pertinent language was the same then as now. Each company writing compensation or employers' liability insurance in this state and every self-insurer is required to pay annually "to the Commissioner of Labor a sum equal to one per centum of the total compensation paid out" by the insurer during the preceding calendar year. The moneys so collected constitute a fund out of which, under R.S. 34:15-95, the Commissioner of Labor annually sets aside a sum from which compensation payments are made to persons totally disabled under conditions which do not require payment of compensation by the employer and which, therefore, do not require payment of compensation by an insurance company under its contract of indemnification.

The first demand for payment under the statute was in 1924 when the Commissioner of Labor caused to be circulated

an official form of return captioned "Tax Statement". It contained a space for the insertion by the respective insurer of the sum paid out as compensation under the statute to injured employees or dependents and in terms excluded the items now in dispute. The words were: -- "This sum is exclusive of amounts expended for medical, hospital or other like service". That form of official return and the collection of one percentum calculated on payments which specifically did not include disbursements for medical, hospital or like service continued in uninterrupted use without material change until 1945, when the form for the 1944 return was altered to omit the statement of exclusion and to contain no allusion to medical or like services. Notwithstanding the deletion of the mentioned matter from the 1945 forms, no demand was made for information related to or for the payment of a percentage on medical or like disbursements. In 1946 the form, for the first time, called for the inclusion of medical expenses as part of the compensation paid out and in so doing used this language: "* * * this company paid out as total compensation (including medical expenses) * * *", leaving a space for the datum to be inserted and with this addendum: --

"Amount of compensation paid $Amount of medical expenses paid $"

Thus, for the first time, after twenty two years of official interpretation contra by a succession of public officers, was the statutory phrase "total compensation paid out" construed to include payments for medical services; and notwithstanding the change in the net result the form conspicuously contrasted "compensation paid" with "medical expenses paid". The defendant company and other companies refused to pay the charge on medical payments. Thereupon the Commissioner of Labor instituted this suit, in the nature of a test case, and not only makes claim for the percentage on medical payments but also -- and this question was not raised until presented in the filed complaint -- on moneys paid for funeral expenses.

By R.S. 34:15-89/90/91 the Bureau of Compensation Rating and Inspection was created under the supervision of the Commissioner

of Banking and Insurance. The bureau is burdened with the duty inter alia of establishing premium rates for workmen's compensation and employer's liability insurance and of establishing and maintaining rules and regulations affecting such insurance; and the Commissioner of Banking and Insurance is directed to appoint a special deputy to be ex-officio chairman of the bureau; also to appoint an actuary and necessary assistants to determine the pure cost of workmen's compensation and employer's liability insurance and to make the information available to the bureau in the fixing of rates. The meaning of the expression "total compensation" as used in the statute with respect to medical expenses was questioned some months after the original passage of the one per cent act by the National Council on Compensation Insurance in correspondence with the Special Deputy Commissioner of Banking and Insurance, the statutory chairman of the bureau, who considered that there was an adequate answer in the tax notice, supra, issued by the Department of Labor. Thus the accepted usage came not haphazardly or by driftage but with concurrent inquiry and decision.

The testimony discloses that there are 52 companies authorized to write workmen's compensation insurance in this state and that, in addition, there are about 200 self-insurers. The task of adjusting business, whether self insured or company insured, to the compensation of workmen under the statute, with the complications in the company insured risks of policy provisions and premium rates, has been worked out and operated under state supervision and direction for more than twenty years upon the conception that the present disputed items were not factors therein. Two state agencies, the Commissioner of Banking and Insurance and the Commissioner of Labor, have consistently and harmoniously functioned to that end. The distinction between "total ...

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