Aslakson v. Gallagher Bassett Services, Inc.
| Decision Date | 29 March 2007 |
| Docket Number | No. 2004AP2588.,2004AP2588. |
| Citation | 729 N.W.2d 712,2007 WI 39 |
| Parties | Christopher ASLAKSON, Plaintiff-Respondent-Petitioner, v. GALLAGHER BASSETT SERVICES, INC., Defendant-Appellant, Wisconsin Worker's Compensation Uninsured Employers Fund, Defendant. |
| Court | Wisconsin Supreme Court |
For the plaintiff-respondent-petitioner there were briefs by Daniel C. Arndt and Arndt, Buswell & Thorn, S.C., Sparta, and oral argument by Daniel C. Arndt.
For the defendant-appellant there was a brief by David A. Piehler, Eric C. Pease, and Piehler & Strande, S.C., Wausau, and oral argument by David A. Piehler.
An amicus curiae brief was filed by Jennifer Sloan Lattis, Assistant Attorney General, with whom on the brief was Peggy A. Lautenschlater, Attorney General, on behalf of the Department of Workforce Development.
An amicus curiae brief was filed by John B. Edmondson, Jennifer Lee Edmondson, and Edmonson Law Office, Appleton; Michael H. Gillick and Gillick, Wicht, Gillick & Graf, Milwaukee, on behalf of the Wisconsin Academy of Trial Lawyers.
This is a review of a published decision of the court of appeals on interlocutory appeal, reversing an order of the circuit court for Dane County, Moria Krueger Judge.1 The circuit court's order denied Gallagher Bassett Services, Inc.'s motion to dismiss the complaint, holding that Christopher Aslakson's tort claim of bad faith against Gallagher Bassett Services, Inc. was not barred by the Worker's Compensation Act. The circuit court dismissed the complaint against the Wisconsin Worker's Compensation Uninsured Employers Fund on the ground of sovereign immunity.
¶ 2 The court of appeals reversed the order of the circuit court, holding that Wis. Stat. §§ 102.81(1)(a) and 102.18(1)(bp) (2003-04)2 and Wis. Admin. Code § DWD 80.62(7)(b) (Sept.2005) establish Christopher Aslakson's exclusive remedy for bad faith claims against Gallagher Services and that these provisions also disallow any recovery of tort damages for bad faith from Gallagher Services.
¶ 3 The liability of the Uninsured Employers Fund is not at issue here. The Uninsured Employers Fund is a "nonlapsible trust" fund created by the legislature as part of the Worker's Compensation Act.3 The Uninsured Employers Fund provides compensation to employees who suffer injuries for which their uninsured employer is liable.4
¶ 4 The Department of Workforce Development is the administrator of the Wisconsin worker's compensation system.5 The Department retained Gallagher Services under Wis. Stat. § 102.81(2) "to process, investigate and pay claims" under the Uninsured Employers Fund.6 Thus, Gallagher Services is the third-party administrator of the Uninsured Employers Fund; we shall often refer to Gallagher Services as the administrator of the Uninsured Employers Fund. The regulations of the Department of Workforce Development refer to the administrator of the Uninsured Employers Fund as an agent of the Department.7
¶ 5 Christopher Aslakson, the plaintiff, received (after significant delay) substantial worker's compensation payments from the Uninsured Employers Fund for his job-related injuries and does not seek additional worker's compensation benefits in this proceeding. Gallagher Services handled the plaintiff's claim for worker's compensation. In the present case, the plaintiff brings a bad faith tort action against Gallagher Services for an injury allegedly arising out of the bad faith conduct of Gallagher Services in its capacity as administrator of the Uninsured Employers Fund and thus as an agent of the Department.
¶ 6 The question presented is whether Wis. Stat. § 102.81(1)(a), read in conjunction with § 102.18(1)(bp) of the Worker's Compensation Act and Wis. Admin Code § DWD 80.62(7)(b), precludes an employee's bad faith tort claim against the administrator of the Uninsured Employers Fund (an agent of the Department) for its misconduct while processing the worker's compensation claim. Our answer, like that of the circuit court, is No.
¶ 7 For the reasons set forth, we conclude that the text of Wis. Stat. § 102.81(1)(a) and § 102.18(1)(bp) and Wis. Admin. Code § DWD 80.62(7)(b) do not bar the plaintiff's bad faith tort claim against Gallagher Services. Properly read, these provisions apply as follows in the present case:
¶ 8 The Department or its agent must pay an amount equal to the worker's compensation owed to an injured employee for an injury for which the uninsured employer is liable. The Department and its agent are not, however, liable to pay an injured employee of an uninsured employer for the penalty statutorily imposed on the employer for bad faith conduct.
¶ 9 The provisions at issue do not in any way govern the plaintiff's bad faith tort action against Gallagher Services. The Worker's Compensation Act does not provide any remedy to the plaintiff for his bad faith claim against Gallagher Services for its alleged bad faith conduct in processing a worker's compensation claim, let alone an exclusive remedy.
¶ 10 The injury for which the plaintiff seeks relief in this tort action is the injury caused by Gallagher Services' alleged bad faith handling of the plaintiff's worker's compensation claim against an uninsured employer. This injury is separate and distinct from the original injury for which the uninsured employer and the Department are liable under the Worker's Compensation Act.
¶ 11 Our case law recognizes a bad faith tort claim against a worker's compensation insurer for an injury separate and distinct from the initial injury for which an employer is liable under the Act, even though the bad faith occurred during the processing of a worker's compensation claim. The same reasoning applies to allow the plaintiff to pursue a bad faith tort action against Gallagher Services.
¶ 12 Accordingly, we reverse the decision of the court of appeals and affirm the order of the circuit court. We remand the cause to the circuit court to reinstate the complaint against Gallagher Services.
¶ 13 The facts relevant to our review are not in dispute. On a motion to dismiss, we take the plaintiff's allegations in the complaint as true.
¶ 14 In 1998, the plaintiff was working as a carpenter for Ken Donais Construction, which, in turn, was doing subcontractor work for the Cleary Building Corporation. On July 9, 1998, while the plaintiff was building a pole barn, he fell approximately eighteen feet to the ground and sustained several serious injuries for which he received substantial medical treatment and which resulted in temporary and permanent physical disability. Because Ken Donais Construction did not have worker's compensation insurance, the plaintiff submitted a worker's compensation claim to the Uninsured Employers Fund on January 7, 2000.
¶ 15 After initially denying the plaintiff's claim for worker's compensation, Gallagher Services required the plaintiff to submit to an independent medical examination. On March 13, 2000, the independent medical examination confirmed the plaintiff's temporary and permanent disability but found disability levels lower than those determined by the plaintiff's personal physician.8 Nonetheless, the findings of the independent medical examination clearly entitled the plaintiff to worker's compensation benefits. Despite the plaintiff's repeated requests, as of September 2001, Gallagher Services had not distributed any worker's compensation benefits to the plaintiff.
¶ 16 The plaintiff sought a hearing before the Worker's Compensation Division regarding Gallagher Services' denial of worker's compensation benefits. On November 29, 2001, the administrative law judge found in the plaintiff's favor and ordered payment of benefits totaling approximately $100,000. Gallagher Services, however, authorized the Uninsured Employers Fund to pay only $4,000 and refused to pay the remainder of the award.
¶ 17 Gallagher Services vigorously sought review of the award. On May 31, 2002, the Labor and Industry Review Commission (LIRC) adopted the findings and order of the administrative law judge as its own. Gallagher Services then sought review in the Dane County Circuit Court, which on December 12, 2002 affirmed the LIRC decision. Gallagher Services then appealed to the court of appeals, which on September 25, 2003 upheld the LIRC decision. Only then did Gallagher Services finally pay the balance of the plaintiff's claim.
¶ 18 The plaintiff brought the present action in circuit court against the Uninsured Employers Fund and Gallagher Services, alleging that both the initial denial of benefits and the numerous reviews were pursued in bad faith. The plaintiff asserts that at no time did the Uninsured Employers Fund and Gallagher Services have a good faith basis for contesting his worker's compensation claim and that the appeals were taken merely to delay payment of rightfully owed benefits.
¶ 19 Gallagher Services and the Uninsured Employers Fund filed a motion to dismiss the complaint in the circuit court, contending that sovereign immunity precluded the claims against the Uninsured Employers Fund; that the plaintiff's claims were factually insufficient; and that the "exclusive remedies" provisions in the Worker's Compensation Act precluded the bad faith claims against both Gallagher Services and the Uninsured Employers Fund.
¶ 20 The circuit court granted the Uninsured Employers Fund's motion to dismiss the claim against it on sovereign immunity grounds. The plaintiff does not challenge the circuit court's dismissal of the claim against the Uninsured Employers Fund, and we do not address this issue.
¶ 21 The circuit court denied Gallagher Services' motion to dismiss the complaint against it, holding that the complaint alleged sufficient facts to support a bad faith claim. The circuit court concluded that Wis. Stat. §§ 102.81(1)(a) and 102.18(1)(bp) did not govern a remedy for the bad faith conduct of Gallagher Services, the administrator...
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