Facts
- Harold Coakley negligently drove his car into a vehicle driven by Dr. T. L. Hartridge, injuring Hartridge and reducing his earning capacity.
- Hartridge worked as a member-physician of the Jackson Clinic, whose income came solely from percentage contributions taken from the earnings of its member physicians.
- Because Hartridge’s injuries reduced his ability to practice, his earnings fell, and the clinic alleged it received less revenue from Hartridge’s percentage contribution.
- Hartridge previously sued Coakley for personal injuries; Coakley conceded liability, and a jury awarded damages that included $8,000 for Hartridge’s loss of earnings through retirement.
- After that verdict, the Jackson Clinic assigned to Hartridge any claim the clinic might have against Coakley arising from the accident.
- Hartridge then filed this separate action as the clinic’s assignee against Coakley and Coakley’s liability insurer, State Farm Mutual Automobile Insurance Company, seeking $8,000 for the clinic’s alleged lost income.
- Defendants moved to dismiss the complaint under Wis. Stat. § 802.06(2) for failure to state a claim; the circuit court granted the motion and entered judgment of dismissal.
- Hartridge appealed to the Wisconsin Supreme Court.
Issues
- Whether an employer (or its assignee) has a negligence cause of action to recover lost income or profits that result only from a third party’s negligent injury to the employer’s employee.
- Whether Hartridge’s complaint, based on the clinic’s assigned claim for lost income, stated a claim upon which relief could be granted under Wis. Stat. § 802.06(2).
Decision
- The Wisconsin Supreme Court affirmed the judgment dismissing the complaint for failure to state a claim.
- The court held Wisconsin law does not recognize a negligence claim by an employer for loss of earnings or profits caused solely by negligent injury to an employee in this setting.
- The court rejected the argument that the clinic’s loss was recoverable merely because it was foreseeable that injuring Hartridge would reduce revenue to the clinic.
- The assignment did not help Hartridge because an assignee can recover only what the assignor could have recovered, and the clinic had no valid negligence claim for the alleged loss.
Legal Principles
- A plaintiff generally cannot recover in negligence for purely economic loss that is derivative of physical injury to another person unless the law recognizes a duty running to the plaintiff for that type of harm.
- Foreseeability of economic harm does not, by itself, require recognition of a negligence claim for an employer’s revenue loss tied to an injured worker’s diminished earnings.
- The historic common-law action by a master for loss of a servant’s services does not provide a general, modern rule allowing any employer to recover lost profits whenever an employee is injured by a tortfeasor.
- Where the employment relationship is not secured by a fixed-term right to the employee’s future services, an employer’s claimed loss from the employee’s reduced work is remote and uncertain, supporting denial of recovery.
- Public policy may bar liability for claimed economic loss that would invite many additional claims arising from one accident, create speculative proof problems, and risk duplicating damages already recoverable by the injured person.
- An assignee takes no greater rights than the assignor possessed; an assignment cannot create a cause of action where none exists.
Conclusion
Hartridge v. State Farm Mutual Automobile Insurance Co. holds that Wisconsin does not allow an employer (or its assignee) to recover, in negligence, lost income based only on a third party’s negligent injury to an employee that reduces the employee’s earning capacity and thus the employer’s receipts; because the Jackson Clinic had no such claim, Hartridge’s assigned action was properly dismissed under Wis. Stat. § 802.06(2).