Burlew v. American Mut. Ins. Co.

• Decision Date: 27 January 1984
• Citation: 471 N.Y.S.2d 908,99 A.D.2d 11
• Parties: Bernice M. BURLEW and Lloyd H. Burlew, Respondents-Appellants, v. AMERICAN MUTUAL INSURANCE COMPANY, Appellant-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 908

471 N.Y.S.2d 908

99 A.D.2d 11

Bernice M. BURLEW and Lloyd H. Burlew, Respondents-Appellants, v. AMERICAN MUTUAL INSURANCE COMPANY, Appellant-Respondent.

Supreme Court, Appellate Division,

Fourth Department.

Jan. 27, 1984.

Harter, Secrest & Emery, Rochester (James Moore, Rochester, of counsel), for appellant-respondent.

Stephen D. Aronson, Canandaigua, for respondents-appellants.

Before DILLON, P.J., and BOOMER, GREEN, O'DONNELL and SCHNEPP, JJ., JJ.

SCHNEPP, Justice.

In this action plaintiffs seek compensatory and punitive damages from defendant, a workers' compensation insurance carrier, based on the claim that defendant negligently and in bad faith delayed authorization for medical treatment for a work-related injury. Defendant appeals and plaintiffs cross-appeal from an order of Special Term which dismissed the complaint for failure to state a cause of action, except to the extent that the complaint is based upon a claim that the defendant acted in bad faith.

Defendant is the workers' compensation insurer for Voplex Corporation which employed plaintiff Bernice Burlew. On July 30, 1979 she became ill after breathing certain fumes at work and thereafter began receiving workers' compensation benefits from the defendant. Later her physician determined that surgery was necessary to correct a condition which she asserts is causally related to her illness. Defendant's authorization was requested by the physician but was not received for some four or five months. This lawsuit was instituted in January, 1983.

In opposition to defendant's motion to dismiss the complaint for failure to state a cause of action (CPLR 3211, subd. [a], par. 7), Mrs. Burlew submitted an affidavit in which she claims that her attending physician advised her of the necessity of surgery "within two or three months from the injury", and that, despite repeated requests for authorization by her physician, defendant neglected and failed to grant authorization "as late as on March 1, 1980". As indicative of defendant's "bad faith" Mrs. Burlew states that while she was waiting for authorization "an agent of the defendant visited [her] at her home and during the course of an interview * * * yelled at [her], in words or substance: "You're crazy if you think we're going to support you for the rest of your life' ". She also alleges as another example of bad faith the defendant's procurement of an affidavit from an employee in personnel purporting to give an expert opinion that her injury was due to a pre-existing injury. Furthermore, she claims in her affidavit that defendant "[i]n its dealings with the general public, and in particular with [her] * * * [has] engaged in a fraudulent scheme evincing such a high degree of moral turpitude and such wanton dishonesty as to imply a criminal indifference to its civil obligations."

Defendant argues that the action is barred by the exclusivity of the Workers' Compensation Law, that no privity exists which would allow the plaintiff to enforce the contract between the defendant and the Voplex Corporation, that the compensatory damages sought are not cognizable in law and that punitive damages are not recoverable. Defendant further argues that the plaintiffs' bad faith cause of action, which is based on defendant's failure to timely authorize medical treatment, and claimed to be a breach of defendant's insurance contract, does not give rise to or state a cause of action for tortious conduct as a matter of law.

Every employer subject to the Workers' Compensation Law must "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 the employment without regard to fault" (Workers' Compensation Law, § 10). The liability of an employer to provide compensation is "exclusive and in place of any other liability whatsoever". (Workers' Compensation Law, § 11.) A claim made under the Workers' Compensation Law for a surgical operation "costing more than seventy-five dollars" is not valid "unless such special services shall have been authorized by the employer or by the board, or unless such authorization shall have been unreasonably withheld, or unless such special services are required in an emergency." (Workers' Compensation Law, § 13-a, subd. [5].) Under the procedures to obtain such authorization a claimant's attending physician must request and secure authorization from the employer or insurance carrier or the chairman of the board by setting forth the medical necessity for the special service required (12 NYCRR 325-1.4[a][1] ). The request may be expedited and there are time limitations within which the requested authorization must be granted or denied. In the event of refusal, a notice must be filed by the carrier with the chairman (12 NYCRR 300.23[d] ). If authorization or denial is not forthcoming within four working days and the patient is hospitalized, or within 21 calendar days, if patient is not hospitalized, the chairman may issue an order after investigation authorizing the special services on the ground that such authorization has been unreasonably withheld, and the employer or carrier is liable for the payment for such special services and investigation (12 NYCRR 325-1.4[a][7] ).

The basic claim raised by plaintiffs, as we view it, is that defendant intentionally and in bad faith caused plaintiff Bernice Burlew emotional distress by wrongfully withholding authorization for the surgery for some four or five months. The threshold issue is whether the Workers' Compensation Law provides the exclusive remedy against the compensation carrier for the harm which may have occurred as the result of this alleged delay.

As we have pointed out, the Workers' Compensation Law provides the exclusive remedy to an employee for a work-related injury. In addition the law is settled that an employee has no cause of action against his employer for the negligent aggravation of such injury (Matter of Parchefsky v. Kroll Bros., Inc., 267 N.Y. 410, 196 N.E. 308; Young v. International Paper Co., 282 App.Div. 750, 122 N.Y.S.2d 39). Furthermore, a compensation carrier stands in the place of the employer and is subrogated to its rights and claims when the carrier performs its obligations under its insurance policy and pays the contractually provided for compensation benefits. It may avail itself of any defense possessed by its insured, the employer (see 57 N.Y.Jur, Subrogation, § 26). It may be concluded, therefore, that if the Workers' Compensation Law affords the sole and exclusive remedy against an employer for a work-related injury, it also precludes the maintenance of a common-law action against the compensation carrier for the same injury (see Penn v. Standard Acc. Ins. Co., 4 A.D.2d 796, 164 N.Y.S.2d 618).

Thus, if in this case plaintiffs seek damages for a work-related physical injury, that is, an injury or any aggravation thereof which is compensable under the law or for which a compensation claim was filed, the Workers' Compensation Law constitutes a bar to their action. Under these circumstances a full remedy against the carrier is available in compensation and to permit the institution of an independent cause of action in tort for damages for an injury compensable in Workers' Compensation would violate the policy, if not the specific terms, of the exclusivity provision of the law. Furthermore, we note that the statutory plan provides a remedy in the event of a delay or denial of authorization for special medical services.

On the other hand, if the injury complained of did not arise out of and in the course of employment, but out of plaintiff's status as a claimant seeking compensation, the exclusivity provision of the act would be inapplicable. The claim for damages then does not result from an industrial injury compensable under the Workers' Compensation Law but from a second, separate and independent injury resulting from the intentional act of the carrier and its agents. Such injury does not arise out of the...