Kifer v. Liberty Mut. Ins. Co., 84-1909

Citation777 F.2d 1325
Decision Date22 January 1986
Docket NumberNo. 84-1909,84-1909
PartiesJerry KIFER and Mrs. Jerry Kifer, Appellees, v. LIBERTY MUTUAL INSURANCE COMPANY, Appellant. John Doe # 1, John Doe # 2, John Doe # 3, and John Doe # 4.
CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)

Alston Jennings, Little Rock, Ark., for appellant.

Mark Ledbetter, Jonesboro, Ark., for appellees.

Before JOHN R. GIBSON and BOWMAN, Circuit Judges, and ROBERTS, * District Judge.

BOWMAN, Circuit Judge.

Defendant-appellant Liberty Mutual Insurance Company (Liberty) appeals from a final judgment entered by the United States District Court for the Eastern District of Arkansas on a jury verdict awarding plaintiffs-appellees $1,025,000 in compensatory and punitive damages. The dispositive issue on appeal is whether the Arkansas Workers' Compensation Act (the Act or the Arkansas Act) bars an injured employee's common law action against his employer's workers' compensation insurance carrier for its alleged negligence in the making of safety inspections of the employer's premises. We hold that the Act does bar this action, and thus we reverse.

I.

Plaintiff Jerry Kifer (Kifer) was employed as a miscellaneous laborer by Riceland Foods, Inc. (Riceland) at its Jonesboro, Arkansas facility. While walking through a narrow and dimly lighted passageway or catwalk in one of the buildings at the Riceland facility, Kifer fell into an unguarded grain auger (also known as a "screw conveyor"). 1 1] Kifer suffered severe leg injuries which resulted in the amputation of his left leg. It was undisputed that Kifer's injuries arose out of and in the course of his employment and that he was therefore entitled to benefits under the Arkansas Workers' Compensation Act, Ark.Stat.Ann. Sec. 81-1301 et seq. Liberty, as the workers' compensation insurance carrier for Riceland, paid (and continues to pay) all amounts to which Kifer was entitled under the Act.

After Kifer's entitlement to benefits under the Act had been established, Kifer and his wife filed suit against Liberty (and other unknown "John Doe" defendants) in the United States District Court for the Eastern District of Arkansas. 2 The gist of Kifer's allegations in his complaint and at trial was that Liberty had gratuitously undertaken to inspect the Riceland facility for unsafe working conditions as part of its "safety engineering" and "accident prevention services"; that Liberty was negligent in making such safety inspections by failing to discover and to remedy the unsafe condition of the screw conveyors at the Riceland facility; and that such negligence proximately caused Kifer's injuries. 3

Liberty filed a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure on the ground that the Act granted immunity to both Riceland, as the employer, and Liberty, as the workers' compensation insurance carrier. Liberty contended that Kifer's exclusive remedy against either Riceland or Liberty was limited to workers' compensation benefits under the Act, and that his common law action for negligence against Liberty was therefore barred. Kifer thereafter moved for summary judgment on this same issue. The District Court denied Liberty's motion to dismiss and granted Kifer's motion for summary judgment on the issue of immunity. The District Court held that the compensation provided under the Act was not the exclusive remedy against a workers' compensation carrier and that Liberty was a "third party" against whom a common law action for damages could be brought.

The case then proceeded to trial. The second trial of the case 4 resulted in a jury verdict for the plaintiffs. The jury awarded Jerry Kifer compensatory damages of $750,000 and punitive damages of $250,000, and awarded Joyce Kifer compensatory damages of $25,000. 5 The District Court thereafter denied Liberty's motion for judgment n.o.v. and entered judgment in accordance with the jury's verdict, but allowed Liberty a set-off in an amount equal to the amount of workers' compensation benefits paid (and to be paid) to Jerry Kifer. It is this final judgment from which Liberty appeals.

On appeal Liberty asserts four grounds for reversal of the District Court's judgment-: (1) the exclusive remedy and third party liability provisions of the Arkansas Workers' Compensation Act, Ark.Stat.Ann. Secs. 81-1304 & 81-1340, bar an employee's common law action for damages against his employer's workers' compensation insurance carrier for its alleged negligence in the making of safety inspections of the employer's premises; (2) Liberty did not owe any legal duty to Kifer to exercise reasonable care by making gratuitous safety inspections of the Riceland facility; (3) there was not sufficient evidence to support the jury's verdict; and (4) the District Court erred in not declaring a mistrial because of prejudicial statements made by plaintiff's attorney in his opening statement to the jury. Because we find merit in Liberty's position on the issue of immunity, and because our resolution of that issue disposes of the case, we limit our discussion solely to that issue and do not reach the other issues raised.

II.
A.

Arkansas law controls the disposition of this diversity action. Specifically, it is the Arkansas Workers' Compensation Act, Ark.Stat.Ann. Sec. 81-1301, et seq., to which we look to resolve the issue presented.

The Arkansas statute generally is typical of those enacted throughout the country. The basic purpose of the Act is to shift the burden of work-related injuries from individual employers and employees to the consuming public by making available to the injured employee a speedy and informal statutory remedy. See Simmons First National Bank v. Thompson, 285 Ark. 275, 277, 686 S.W.2d 415, 417 (1985). To that end the Act provides that "[e]very employer should secure compensation to his employees and pay or provide compensation for their disability or death from injury arising out of and in the course of employment, without regard to fault as a cause of such injury...." Ark.Stat.Ann. Sec. 81-1305. The injured employee is relieved of the burden of proving fault on the part of the employer, and is provided compensation for lost wages and permanent physical impairment and payment of medical expenses.

The quid pro quo for this remedy, however, is that the employer is relieved of any common law liability for damages resulting from accidental work-related injuries to the employee. Section 81-1304 of the Act, commonly referred to as the "exclusive remedy" provision, sets forth this basic principle.

81-1304. Remedies exclusive.

The rights and remedies herein granted to an employee ... on account of injury or death, shall be exclusive of all other rights and remedies of such employee, his legal representative ... or anyone otherwise entitled to recover damages from such employer, or any principal, officer, director, stockholder, or partner acting in their capacity as an employer, on account of such injury or death, and the negligent acts of a co-employee shall not be imputed to the employer....

Ark.Stat.Ann. Sec. 81-1304. The Act retains an employee's common law right of action against "any third party." Section 81-1340, commonly referred to as the "third party liability" provision, provides, in pertinent part, as follows:

81-1340. Third party liability.

(a) Liability unaffected.

(1) The making of a claim for compensation against any employer or carrier for the injury or death of an employee shall not affect the right of the employee ... to make claim or maintain an action in court against any third party for such injury, but the employer or his carrier shall be entitled to reasonable notice and opportunity to join in such action....

(2) The commencement of an action by an employee ... against a third party for damages ... shall not affect the rights of the injured employee ... to recover compensation, but any amount recovered by the injured employee ... from a third party shall be applied as follows: Reasonable costs of collection shall be deducted- then one third [ 1/3] of the remainder shall, in every case, belong to the injured employee ...; the remainder, or so much thereof as is necessary to discharge the actual amount of the liability of the employer and the carrier; and any excess shall belong to the injured employee....

(b) Subrogation. An employer or carrier liable for compensation under this act for the injury or death of an employee shall have the right to maintain an action in tort against any third party responsible for such injury or death. After reasonable notice and opportunity to be represented in such action has been given to the compensation beneficiary, the liability of the third party to the compensation beneficiary shall be determined in such action as well as the third party's liability to the employer and carrier....

Ark.Stat.Ann. Sec. 81-1340.

Workers' compensation insurance carriers figure prominently in this statutory scheme. Section 81-1336, for example, provides that employers must secure the payment of compensation either by purchasing a workers' compensation insurance policy through an authorized carrier or by qualifying as a self-insurer. See Ark.Stat.Ann. Sec. 81-1336(a)(1)-(2). Section 81-1337, in turn, provides the procedural mechanism by which the insurance carrier is substituted for the employer in order to facilitate the administration of the Act and to discharge the employer's liability thereunder. 6 The primary obligation to pay compensation, however, remains upon the employer, notwithstanding the purchase of a workers' compensation insurance policy. See Ark.Stat.Ann. Sec. 81-1305.

The Act does not expressly grant immunity to workers' compensation insurance carriers so as to bar a common law action for negligence. Nor is the carrier expressly equated with the employer for such purposes. 7 Liberty contends, however, that ...

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