Baker v. American States Ins. Co.

• Decision Date: 15 December 1981
• Docket Number: No. 1-681A205,1-681A205
• Citation: 428 N.E.2d 1342
• Parties: Randall BAKER, Plaintiff-Appellant, v. AMERICAN STATES INSURANCE COMPANY, Defendant-Appellee.
• Court: Indiana Appellate Court

Page 1342

428 N.E.2d 1342

Randall BAKER, Plaintiff-Appellant, v. AMERICAN STATES INSURANCE COMPANY, Defendant-Appellee.

No. 1-681A205.

Court of Appeals of Indiana, First District.

Dec. 15, 1981.

Leon D. Cline, Cline, King & Beck, Columbus, for plaintiff-appellant.

Thomas C. Bigley, Jr. and James F. Rosner, Sharpnack, Bigley, David & Rumple, Columbus, for defendant-appellee.

STATEMENT OF THE CASE

RATLIFF, Judge.

Plaintiff-appellant Randall Baker brings this appeal from the dismissal by the Bartholomew Superior Court of his amended complaint for damages against defendant-appellee American States Insurance Company. We reverse and remand.

FACTS

The facts as alleged in Baker's amended complaint are essentially as follows. Randall Baker was employed as a carpenter by Claude Wright, doing business as Claude Wright Construction Company of Columbus, Indiana, on July 27, 1978, when he suffered an injury to his left eye while in the course of his employment. The injury was treated by Dr. Fred M. Wilson, II, and other assisting physicians, all of whom were furnished by American States Insurance Company. American States had issued a policy of workmen's compensation insurance to Claude Wright. Baker alleges that he was a third-party beneficiary of the policy and that American States owed him a duty of honesty and fair dealing with regard to claims he might have under the policy.

Baker alleges that as a result of his injuries, he was entitled under state law and the terms of the policy to workmen's compensation benefits for both temporary total disability and permanent partial impairment of his eye. Baker received temporary total disability payments until his eye had healed, but he was left with substantial residual impairment. Baker further alleges that at that time, adjusters for American States fraudulently and knowingly made false statements to him to the effect that Dr. Wilson and the other examining physicians had rated the impairment to Baker's left eye at 24.5%. In reality, the impairment rating given his eye was 62%. These false statements allegedly were made to induce Baker to settle his compensation claim for $2,375.94. Baker contends that Baker asserts that as a result of the fraud, he had to employ an attorney to file and prosecute his claim with the Industrial Board for workmen's compensation benefits. After filing the claim for benefits, he learned the true impairment rating. He was awarded benefits of $7,297.44 on the basis of a 62% permanent partial impairment. However, out of that award he had to pay attorney's fees of $1,394.62, which he would not have incurred but for the fraud of American States.

the true impairment rating was concealed from him so as to defraud him of, and to delay the payment of, the full amount of benefits to which he was entitled, causing him great concern, distress, and mental anguish.

Baker prayed for compensatory damages of $50,000 and punitive damages of $300,000.

American States filed a motion to dismiss Baker's amended complaint pursuant to Ind. Rules of Procedure, Trial Rule 12(B)(6) for failure to state a claim upon which relief can be granted. The trial court granted the motion and dismissed the complaint on the basis of the following conclusions: (1) Baker failed to exhaust his administrative remedy, provided in Ind.Code 22-3-4-12, for recovery of attorney's fees in addition to the workmen's compensation benefits where the employer is guilty of bad faith or lack of diligence; (2) Baker waived his right to recover attorney's fees for bad faith or lack of diligence by failing to exhaust his administrative remedy or to appeal the award of the Industrial Board; (3) the Workmen's Compensation Act provides the exclusive remedy for attorney's fees incurred for advice and representation in matters before the Industrial Board; (4) there is no right to recover punitive damages where the only actual damages are attorney's fees which are not recoverable in this lawsuit; (5) Baker did not rely to his detriment on false, fraudulent, or misleading statements by American States but instead employed an attorney to prosecute his claim before the Industrial Board. Baker filed a motion to correct errors, which was overruled, and he now appeals to this court.

ISSUES

1. Whether The Indiana Workmen's Compensation Act of 1929 ¹ provides the exclusive remedy for an employee where the employer or its insurer negotiates his claim in bad faith or without due diligence.

2. Whether Baker was a third-party beneficiary of the workmen's compensation insurance policy issued by American States to Claude Wright.

3. Whether the trial court erred in ruling as a matter of law that Baker did not rely to his detriment on representations by American States.

4. Whether Baker may recover damages for fees charged by his examining physician.

5. Whether the trial court erred in ruling that punitive damages are not recoverable in this action.

DISCUSSION AND DECISION

Baker's amended complaint was dismissed pursuant to T.R. 12(B)(6) for failure to state a claim upon which relief can be granted. In light of our modern rules of notice pleading, we review a T.R. 12(B)(6) dismissal to determine "whether plaintiff's complaint stated any set of allegations, no matter how inartfully pleaded, upon which the court below could have granted relief." Cochran v. Hallagan, (1980) Ind.App., 409 N.E.2d 701, 703.

Issue One

The threshold question in this appeal is whether Baker's remedies under the Workmen's Compensation Act are exclusive, because, if so, no lawsuit may be maintained.

In Ind.Code 22-3-2-6 we find the following exclusive remedies provision:

"Sec. 6. The rights and remedies herein granted to an employee subject to this act on account of personal injury or death by accident shall exclude all other rights and remedies of such employee, his personal representatives, dependents or next of kin, at common law or otherwise, on account of such injury or death." (Our emphasis.)

Clearly, this section by its terms is designed to make the Workmen's Compensation Act the exclusive remedy of an employee "for personal injury or death by accident arising out of and in the course of the employment." Ind.Code 22-3-2-2. However, Baker is not attempting in his amended complaint to recover damages for his eye injury. Instead, he seeks compensatory and punitive damages for harm allegedly suffered as a result of knowing misrepresentations made by adjusters for American States in an attempt to induce him to settle his claim for permanent partial impairment benefits for less than the amount to which he was entitled.

A section more directly in point here is Ind.Code 22-3-4-12, which reads as follows:

"Sec. 12. The fees of attorneys and physicians and charges of nurses and hospitals for services under this act shall be subject to the approval of the industrial board. When any claimant for compensation is represented by an attorney in the prosecution of his claim, the industrial board shall fix and state in the award, if compensation be awarded, the amount of the claimant's attorney's fees. The fee so fixed shall be binding upon both the claimant and his attorney, and the employer shall pay to the attorney out of the award, the fee so fixed and the receipt of the attorney therefor shall fully acquit the employer for an equal portion of the award; Provided, That whenever the industrial board shall determine upon hearing of a claim that the employer has acted in bad faith in adjusting and settling said award, or whenever the industrial board shall determine upon hearing of a claim that the employer has not pursued the settlement of said claim with diligence, then the board shall, if compensation be awarded, fix the amount of the claimant's attorneys (sic) fees and such attorney fees shall be paid to the attorney and shall not be charged against the award to the claimant. It is further provided that such fees as are fixed and awarded on account of a lack of diligence or because of bad faith on the part of the employer shall not be less than one hundred fifty dollars ($150). The industrial board may withhold the approval of the fees of the attending physician in any case until he shall file (a) report with the industrial board on the form prescribed by such board." (Our emphasis.)

The proviso of IC 22-3-4-12 is binding upon American States by virtue of Ind.Code 22-3-6-1(a), which states that, for the purposes of the Workmen's Compensation Act, the term "employer" includes the employer's insurer where applicable.

Moreover, it is apparent that at least a part of the injury alleged by Baker in his amended complaint is compensable in a proceeding before the Industrial Board. Baker's complaint charged American States with fraudulently misrepresenting his impairment rating, and he alleged that one result of the misrepresentation was that he had to employ an attorney to file and prosecute his claim for workmen's compensation benefits. It has been said in other contexts that "bad faith" and "fraud" are synonymous. Hilgenberg v. Northup, (1893) 134 Ind. 92, 33 N.E. 786; State ex rel. Millice v. Petersen, (1905) 36 Ind.App. 269, 75 N.E. 602. It would have been appropriate for Baker to have alleged bad faith on the part of American States in his claim before the Industrial Board in order to recover attorney's fees in addition to his award. Baker either did not allege bad faith in his claim before the board or was denied a separate award of attorney's fees, because he alleged in his complaint that he had to pay his attorney's fees out of his award. We conclude that the provision in IC 22-3-4-12 for an award of attorney's fees where the employer or its insurer is guilty of bad faith in adjusting and settling an award should be deemed Baker's exclusive remedy for attorney's fees. Consequently, attorney's fees are not recoverable under the allegations of Baker's complaint.

The proviso of IC 22-3-4-12 does not purport to be the exclusive...