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Boylan v. American Motorists Ins. Co.

Supreme Court of Iowa
Oct 23, 1992
489 N.W.2d 742 (Iowa 1992)

Summary

holding the act provides an inadequate remedy where an employee makes a bad-faith tort claim against his employer's workers' compensation carrier, alleging it had delayed and then terminated his benefits “arbitrarily and capriciously, without notice and in bad faith” because statutory benefits under the act cover only a negligent delay in payment of weekly benefits, not a willful or reckless failure to pay medical benefits

Summary of this case from Estate of Brehm v. Dubuque Cmty. Sch. Dist.

Opinion

No. 91-1520.

September 23, 1992. Rehearing Denied October 23, 1992.

APPEAL FROM DISTRICT COURT, POTTAWATTAMIE COUNTY, J.C. IRWIN, J.

Lyle A. Rodenburg, Council Bluffs, for appellant.

Craig A. Levien and Vicki L. Seeck of Betty, Neuman McMahon, Davenport, for appellee.

Considered by HARRIS, P.J., and LARSON, CARTER, LAVORATO, and SNELL, JJ.


Plaintiff, Robert Boylan, appeals from an order granting a motion to dismiss his bad-faith tort claim against his employer's workers' compensation insurance carrier, defendant, American Motorist Insurance Company (American). After considering the arguments presented, we reverse the district court's order.

Plaintiff's petition claimed that he was entitled to continuing workers' compensation benefits as a result of industrial injuries sustained in the course of his employment with Cresline Plastic Pipe Company. He alleged that the defendant "delayed and then terminated [his] workers' compensation weekly benefits and medical benefits, arbitrarily and capriciously, without notice and in bad faith." He further claimed that as a consequence of the acts and omissions of Cresline's insurance carrier, American, his original injuries were aggravated. He sought recovery of compensatory damages, including consequential damages for aggravated injuries, punitive damages, and attorney fees.

The district court granted American's motion to dismiss for failure to state a claim upon which relief can be granted. It concluded that the relationship between an injured employee and the employer's workers' compensation carrier is not analogous to those first-party insurance claims for which this court in Dolan v. AID Insurance Co., 431 N.W.2d 790 (Iowa 1988), recognized tort liability for bad faith. The court determined that the relationship between a workers' compensation claimant and the employer's insurer is more analogous to the relationship between a tort victim and the tortfeasor's liability insurer. This court has refused to recognize bad-faith tort liability on the part of the liability insurer in the latter situation. See Long v. McAllister, 319 N.W.2d 256, 262 (Iowa 1982).

The district court also concluded that the presence of a statutory remedy for unreasonably delayed or terminated workers' compensation benefits in Iowa Code section 86.13 (1991) militates against recognition of a common-law tort remedy. As might be expected, American urges on appeal that the reasons given by the district court for dismissing the petition provide an adequate basis on which to sustain that ruling. Plaintiff, on the other hand, urges that none of those reasons were sufficient to warrant dismissal of his claim on the pleadings.

In Long, we refused to recognize a victim's bad-faith tort claim against the tortfeasor's insurer even though we acknowledge that tort victims are technically third-party beneficiaries of the tortfeasor's insurance. We based our holding in Long on the fact that

[t]he insurer has a fiduciary duty to the insured but an adversary relationship with the victim. The effect of the policy is to align the insurer's interests with those of the insured. In meeting its duty to the insured, the insurer must give as much consideration to the insured's interests as it does to its own.

Id. at 262. In seeking to apply Long, the district court determined that an employer or workers' compensation insurance carrier is not required to pay weekly benefits or to pay medical service providers prior to the time the industrial commissioner has determined the employee's entitlement to benefits. We do not believe that characterization is entirely accurate.

As a result of 1982 amendments to the workers' compensation act, Iowa Code section 86.13 (1991) now provides in part:

If a delay in commencement or termination of benefits occurs without reasonable or probable cause or excuse, the industrial commissioner shall award benefits in addition to those benefits payable under this chapter or chapter 85, 85A, or 85B, up to fifty percent of the amount of benefits that were unreasonably delayed or denied.

1982 Iowa Acts ch. 1161, § 23. Section 86.13 does not require that the unreasonable delay or termination of benefits for which a penalty may be ordered occur after a determination of benefit eligibility by the industrial commissioner. It recognizes, at least with respect to temporary disability or healing period benefits, an affirmative obligation on the part of the employer and insurance carrier to act reasonably in regard to benefit payments in the absence of specific direction by the commissioner.

The act also imposes an affirmative obligation to furnish medical and hospital supplies to an injured employee. See Iowa Code § 85.27 (1991) ("The treatment must be offered promptly and be reasonably suited to treat the injury without undue inconvenience to the employee."). Although the latter statute speaks only of the obligation of the employer, the commissioner's regulations consign these obligations to the employer's insurance carrier. 343 Iowa Admin. Code 2.3, 4.10. As a result of the obligations that these statutes and administrative regulations place on the insurer, this case is more similar to Dolan than it is to Long.

A number of well-reasoned decisions from other jurisdictions have recognized the potential tort liability of workers' compensation insurers for willful or reckless disregard of their obligation to pay benefits to injured employees. Hollman v. Liberty Mut. Ins. Co., 712 F.2d 1259, 1261-62 (8th Cir. 1983) (applying South Dakota law); Stafford v. Westchester Fire Ins. Co., 526 P.2d 37, 43-44 (Alaska 1974), overruled on other grounds, 556 P.2d 525 (Alaska 1976); Gibson v. National Ben Franklin Ins. Co., 387 A.2d 220, 222 (Me. 1978); Kaluza v. Home Ins. Co., 403 N.W.2d 230, 236 (Minn. 1987); Southern Farm Bureau Casualty Ins. Co. v. Holland, 469 So.2d 55, 58-59 (Miss. 1984); Hayes v. Aetna Fire Underwriters, 187 Mont. 148, 155, 609 P.2d 257, 261 (1980); Aranda v. Insurance Co. of N. Am., 748 S.W.2d 210, 213-14 (Tex. 1988); Coleman v. American Universal Ins. Co., 86 Wis.2d 615, 620, 273 N.W.2d 220, 223 (1979).

Most of the courts that have refused to recognize the bad-faith tort have based such rejection on the exclusive remedy provisions of the workers' compensation statutes in those jurisdictions. E.g., Connolly v. Maryland. Casualty Co., 849 F.2d 525, 527 (11th Cir. 1988) (applying Florida law); Whitten v. American Mut. Liab. Ins. Co., 468 F. Supp. 470, 474-75 (D.S.C. 1977), aff'd, 594 F.2d 860 (4th Cir. 1979) (applying South Carolina law); DePew v. Hartford Accident Indem. Co., 135 Cal.App.3d 574, 578, 185 Cal.Rptr. 472, 474 (1982); State ex rel. Am. Motorists Ins. Co. v. Ryan, 755 S.W.2d 399, 400 (Mo.App. 1988); Dickson v. Mountain States Mut. Casualty Co., 98 N.M. 479, 481, 650 P.2d 1, 3 (1982). This court in Tallman v. Hanssen, 427 N.W.2d 868, 870 (Iowa 1988), recognized that the exclusive remedy provision of our workers' compensation act is applicable only to claims against the employer and does not extend to the employer's compensation insurer.

We conclude that it is unlikely that the legislature intended the penalty provision in section 86.13 to be the sole remedy for all types of wrongful conduct by carriers with respect to administration of workers' compensation benefits. By its terms, it applies only to delay in commencement or termination of benefits. It contemplates negligent conduct rather than the willful or reckless acts that are required to establish a cause of action under Dolan. In addition, no remedy is provided under section 86.13 for delay or failure to pay medical benefits. See Klein v. Furnas Elec. Co., 384 N.W.2d 370, 375 (Iowa 1986). Penalty provisions for mere delay in payment or improper termination of benefits have been held in several cases not to preclude a common-law action for bad faith. See Gibson, 387 A.2d at 223; Kaluza, 403 N.W.2d at 235; Holland, 469 So.2d at 58; Hayes, 609 P.2d at 262; Aranda, 748 S.W.2d at 215; Coleman, 86 Wis.2d at 625, 273 N.W.2d at 224.

The matters herein discussed convince us that recognition of tort liability on the part of workers' compensation insurance carriers guilty of the type of bad-faith conduct for which tort liability was recognized in Dolan is a logical extension of that decision. The order of the district court dismissing plaintiff's petition is reversed. The case is remanded to that court for further proceedings not inconsistent with this opinion.

REVERSED AND REMANDED.


Summaries of

Boylan v. American Motorists Ins. Co.

Supreme Court of Iowa
Oct 23, 1992
489 N.W.2d 742 (Iowa 1992)

holding the act provides an inadequate remedy where an employee makes a bad-faith tort claim against his employer's workers' compensation carrier, alleging it had delayed and then terminated his benefits “arbitrarily and capriciously, without notice and in bad faith” because statutory benefits under the act cover only a negligent delay in payment of weekly benefits, not a willful or reckless failure to pay medical benefits

Summary of this case from Estate of Brehm v. Dubuque Cmty. Sch. Dist.

finding bad faith claims in workers' compensation cases are not precluded by the exclusive remedy provision

Summary of this case from Cincinnati Ins. Companies v. Kirk

recognizing "an affirmative obligation [in Iowa] on the part of the employer and insurance carrier to act reasonably in regard to benefit payments"

Summary of this case from Lewis v. Carolina Cas., Ins. Co.

recognizing the tort liability of workers' compensation insurers for willful or reckless disregard of their obligation to pay benefits to injured employees

Summary of this case from Scott v. General Cas. Insurance. Co.

In Boylan the court adopted the principles and standard of liability for first-party insurance bad faith which the Supreme Court had several years before applied in Dolan v. Aid Insurance Co., 431 N.W.2d 790, 794 (Iowa 1988).

Summary of this case from Gilbert v. Constitution State Service Co.

In Boylan the Court explained that it recognized the first-party bad faith tort claim against compensation insurers because neither the exclusivity provision nor the penalty provision of the Workers' Compensation Act applied to compensation insurers.

Summary of this case from Jackson v. Travelers Insurance Company

stating that penalty provisions of § 86.13 of Iowa Workers' Compensation Act not intended as sole remedy for all wrongful conduct

Summary of this case from Jackson v. Travelers Insurance Company

In Boylan v. American Motorist Ins. Co., 489 N.W.2d 742 (Iowa 1992), the Iowa Supreme Court held the exclusive-remedy defense to an action for bad-faith refusal to pay workers' compensation benefits applies only to an employer and not to an employer's workers' compensation insurer.

Summary of this case from Davis v. Liberty Mut. Ins. Co.

In Boylan, the court cited affirmative duties under the statute of employers and insurers to provide medical benefits. 489 N.W.2d at 743.

Summary of this case from De Dios v. Indem. Ins. Co. of N. Am.

In Boylan, we held an injured worker could sue the employer's workers' compensation insurer for a bad-faith failure to pay or for a bad-faith delay in paying workers' compensation benefits.

Summary of this case from Bremer v. Wallace

establishing independent bad faith tort liability for insurers because workers' compensation act does not provide an adequate remedy

Summary of this case from Wilson v. IBP, Inc.

In Boylan v. American Motorists Insurance Co., 489 N.W.2d 742 (Iowa 1992), we extended this common law tort theory to the workers' compensation situation.

Summary of this case from Christensen v. Snap-On Tools Corp.

In Boylan, the employee sued his employer's workers' compensation insurance carrier under a theory of common law bad faith.

Summary of this case from Christensen v. Snap-On Tools Corp.

In Boylan, the supreme court found there was no adequate remedy for an injured employee who was wrongfully denied benefits despite the existence of statutory penalty benefits under the Workers' Compensation Act. 489 N.W.2d at 744.

Summary of this case from Cincinnati Ins. Companies v. Kirk

noting a workers' compensation carrier's duty to "act reasonably in regard to benefit payments [even] in the absence of specific direction by the commissioner"

Summary of this case from Weitz Co. v. Johnson

In Boylan v. American Motorists Insurance Company, 489 N.W.2d 742, 744 (Iowa 1992), the court said, "We conclude that it is unlikely that the legislature intended the penalty provision in section 86.13 to be the sole remedy for all types of wrongful conduct by carriers with respect to administration of workers' compensation benefits."

Summary of this case from Bremer v. Wallace

In Boylan v. American Motorists Ins. Co., 489 N.W.2d 742 (Iowa 1992), a plaintiff sued his employer's workers' compensation carrier alleging bad faith termination of his weekly benefits and medical benefits.

Summary of this case from Thielen v. Aetna Cas. and Surety Co.

noting a workers' compensation carrier's duty to "act reasonably in regard to benefit payments [even] in the absence of specific direction by the commissioner"

Summary of this case from Simonson v. Snap-On Tools Corp. Royal Ins.
Case details for

Boylan v. American Motorists Ins. Co.

Case Details

Full title:Robert BOYLAN, Appellant, v. AMERICAN MOTORISTS INSURANCE COMPANY, Appellee

Court:Supreme Court of Iowa

Date published: Oct 23, 1992

Citations

489 N.W.2d 742 (Iowa 1992)

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