Anderson v. U.S. Fidelity and Guar. Co.

Decision Date14 October 1997
Docket NumberNo. 86102,86102
Citation948 P.2d 1216,1997 OK 124
PartiesEddie L. ANDERSON, Plaintiff, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Defendant.
CourtOklahoma Supreme Court

W.C. Sellers, Jr., W.C. Sellers, W.C. "Bill" Sellers, Inc., Sapulpa, Mike Jones, Jones Law Office, Bristow, for Plaintiff.

Stephen J. Rodolf, Jeffrey C. Sacra, Barkley & Rodolf, Tulsa, for Defendant.

HODGES, Justice.

¶1 We are presented with a question certified from the United States District Court for the Northern District of Oklahoma, pursuant to the Uniform Certification of Questions of Law Act, Okla.Stat. tit. 20, §§ 1601-11 (1991), to wit:

Does Oklahoma law recognize the tort of bad faith for unjustified denial of workers' compensation insurance coverage or the assertion of a groundless defense, based on alleged damages incurred for the carrier's conduct that predated the claimant's worker's compensation award?

We answer the question in the negative.

I. Facts

¶2 While working for the L.B. Jackson Drilling Company, plaintiff, Eddie L. Anderson, was injured when he was struck in the eye by an object thrown from a lawn mower. United States Fidelity and Guaranty Company (USF & G) was the employer's worker's compensation insurance carrier. On March 18, 1988, Anderson was adjudicated to be 100 percent permanently disabled in his left eye.

¶3 Alleging that he had suffered a worsening of his condition, Anderson filed a motion to reopen 1 his claim on April 1, 1991, seeking payment for additional medical treatment. On April 29, 1991, USF & G contested Anderson's claim and filed an objection to his medical report. Then almost six months later on January 21, 1992, USF & G authorized medical treatment.

¶4 Later the Worker's Compensation Court awarded Anderson temporary total disability benefits for the period from February 26, 1992, through June 1992, and later awarded benefits for the period from June 1991 through February 1992. USF & G promptly paid the Worker's Compensation awards.

¶5 Anderson filed suit for bad faith and intentional infliction of emotional distress in the district court for the State of Oklahoma. Anderson's claims are based solely on USF & G's actions taken before the Worker's Compensation Court's awards issued. The case was removed to the United States District Court for the Northern District of Oklahoma. The Honorable Thomas R. Brett certified the question of whether Anderson had a tort claim under Oklahoma law for USF & G's action taken before the Worker's Compensation Court's award.

II. Analysis

¶6 A review of the cases reveals that the tort liability of a worker's compensation insurer "arises only after there has been an award against the employer." Whitson v. Oklahoma Farmers Union Mut. Ins. Co., 1995 OK 4, 889 P.2d 285. In 1992, in Goodwin v. Old Republic Ins. Co., 1992 OK 34, 828 P.2d 431, the issue was whether the plaintiff had a bad faith claim for actions taken by the insurer after a Worker's Compensation Court's award. Assuming that an insurer could be subject to a bad faith claim for failure to pay benefits under an award, this Court found that the facts did not support such an award. This Court noted: "If an employee is injured by an insurer's bad faith-intentional failure to pay benefits under an award, the employee has a common law action in tort...." Id. at 435.

¶7 Then in January 1995, this Court addressed the issue of whether the plaintiff had a tort claim for his employer's conduct regarding the plaintiff's worker's compensation claim when such conduct occurred before an award was entered. Whitson, 889 P.2d at 285. This Court found that the plaintiff did not have a fraud or bad faith claim for the employer's pre-award conduct. Id. at 287-88.

¶8 Although Whitson involved an employer rather than an insurer, this Court left no doubt that a bad-faith action would not lie against a worker's compensation insurer for pre-award misconduct: "We also held in Goodwin that 'a bad faith claim is separate and apart from the work relationship, and it arises against the insurer only after there has been an award against the employer.' " Id. at 287. This Court reasoned:

There is no reason to allow a tort cause of action for a too aggressive defense of a worker['s] compensation claim--especially where the claimant is no longer in the defendant's employ. A successful plaintiff in a personal injury action certainly has no cause of action against the defendant for the defendant's unsuccessful attempts to defeat [an] action against [it].

Id. at 288.

¶9 The certifying court perceived a potential conflict between these decisions and the July 1995 decision in McGehee v. State Ins. Fund, 1995 OK 85, 904 P.2d 70. McGehee addressed the issue of whether the plaintiff had timely filed a claim. The basis of the potential conflict is the statement:

Assuming that the employee's alleged bad faith claim arose at the latest possible date when he knew or should have known that the Fund was acting in bad faith when it denied his claim, it accrued sometime prior to the Workers' Compensation Court's issuance of its order finding that the Fund was estopped from denying [the employee's] coverage under the [employer's] policy.

Id. at 73.

¶10 McGehee merely made an "even if" assumption. That is even if there was a bad faith cause of action before the compensation award, plaintiff's claim was time barred. The issue was confined to "whether the employee's bad faith denial of a worker's compensation claim against the State Insurance Fund ... was timely brought." Id. at 71. By making an assumption as to the date the claim arose, this Court did not undermine its position in Whitson.

III. Conclusion

¶11 In Whitson, 889 P.2d at 285, this Court definitely resolved the issue of whether a bad-faith claim for pre-award conduct against a worker's compensation insurer was liable. We stated that it was not. We have not varied from this position. Therefore, we answer the certified question that Oklahoma law does not recognize the tort of bad faith for unjustified denial of worker's compensation insurance coverage or the assertion of a groundless defense based on alleged damages incurred for the carrier's conduct that predated the claimant's worker's compensation award. Certified question answered in the negative.

CERTIFIED QUESTION ANSWERED.

¶12 SUMMERS, V.C.J., and HODGES, HARGRAVE and WATT, JJ., concur.

¶13 SIMMS, J., concurs specially.

¶14 LAVENDER, OPALA and ALMA WILSON, JJ., dissent.

¶15 KAUGER, C.J., recused.

SIMMS, Justice, specially concurring:

¶1 I concur with the majority that the tort of bad faith will not lie against a workers' compensation insurer for pre-award conduct. I write separately only to stress that this Court has never explicitly held that such an action would lie for post-award conduct. I fear that today's opinion implies otherwise.

LAVENDER, Justice, with whom OPALA and ALMA WILSON, JJ., join, dissenting.

¶1 I dissent to the majority opinion. In my view, this Court should recognize a common law tort claim for bad faith in favor of a workers' compensation claimant against a workers' compensation insurance carrier for the manner in which the latter handles, litigates or defends a workers' compensation claim. A tort claim should be viable, in my opinion, when a carrier denies or contests a claim for workers' compensation benefits, with knowledge there is no legitimate legal or factual basis for defense to the claim, or it is in some other appropriate manner shown, the carrier unreasonably, and in bad faith, denies or contests the claim. I would not hold, however, a tort suit viable when the insurer's conduct evinces mere negligence in the manner it handles, litigates or defends against a workers' compensation claim.

PART I. A WORKERS' COMPENSATION CLAIMANT IS OWED BY A WORKERS' COMPENSATION CARRIER A DUTY OF GOOD FAITH AND FAIR DEALING WITH RESPECT TO THE PRE-AWARD HANDLING OF A WORKERS' COMPENSATION INSURANCE CLAIM AND CLAIMANT HAS STANDING TO BRING A BAD FAITH CLAIM AGAINST THE CARRIER.

¶2 Although an insurer's duty to deal fairly and in good faith does not extend to every party that may be the eventual recipient of insurance proceeds, when there is a contractual or statutory relationship between the carrier and the party asserting the bad faith claim, the duty will generally attach. Goodwin v. Old Republic Insurance Co., 1992 OK 34, 828 P.2d 431, 432-433; Roach v. Atlas Life Ins. Co., 1989 OK 27, 769 P.2d 158, 161. Goodwin recognized an explicit statutory relationship between an insurer and an injured worker in the workers' compensation context by virtue of 85 O.S.1981, § 65.3, a section of the Oklahoma Workers' Compensation Act (Act), 85 O.S.1981, § 1 et seq., as amended (now 85 O.S.1991, § 1 et seq., as amended). 828 P.2d at 433. Section 65.3 expressly provides that a contract of insurance issued by a carrier for the purpose of insuring an employer against liability under the Act is conclusively presumed to be for the benefit of each person upon whom insurance premiums are paid, collected, or whose employment is considered or used in determining the amount of premium collected. Thus, even though the employer might technically be the insured under a workers' compensation insurance policy, Goodwin recognized a claimant/employee is a third-party beneficiary under the insurance contract , is in the same class as an insured and may expect prompt payment of his/her claim unless the insurer in good faith asserts a basis for contesting it. Id. at 434.

¶3 To understand the third-party beneficiary status of an injured worker a brief look at the purposes behind workers' compensation legislation is helpful. Generally, workers' compensation legislation is a mutual compromise in which an employee relinquishes his/her right to sue the employer or co-employees for damages sustained in job-related injuries at common law; and the employer accepts no-fault liability for a...

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