Cook v. Mack's Transfer & Storage

• Decision Date: 16 September 1986
• Docket Number: No. 0844,0844
• Citation: 352 S.E.2d 296,291 S.C. 84
• Court: South Carolina Court of Appeals
• Parties: Kenneth COOK, Respondent, v. MACK'S TRANSFER & STORAGE, Mayfield & Taylor and United States Fidelity & Guaranty Company. Appeal of MACK'S TRANSFER & STORAGE and United States Fidelity & Guaranty Company. . Heard

Page 296

352 S.E.2d 296

291 S.C. 84

Kenneth COOK, Respondent, v. MACK'S TRANSFER & STORAGE, Mayfield & Taylor and United States Fidelity & Guaranty Company Appeal of MACK'S TRANSFER & STORAGE and United States Fidelity & Guaranty Company.

No. 0844.

Court of Appeals of South Carolina.

Heard Sept. 16, 1986.

Decided Dec. 29, 1986.

Arthur M. Flowers, Jr., of Moore, Flowers & Doar, Georgetown, for appellant Mack's Transfer & Storage.

Elliott T. Halio, of Halio & Halio, Charleston, for appellant U.S. Fidelity & Guar. Co.

Clack D. Hopkins, Jr., Hanahan, for respondent.

BELL, Judge:

Kenneth Cook commenced this action in the circuit court for bad faith refusal to pay benefits due on a workers' compensation claim. Mack's Transfer & Storage was Cook's employer at the time of the accident giving rise to the claim. United States Fidelity & Guaranty Company was Mack's workers' compensation insurance carrier. Both defendants demurred to the complaint on the ground that the circuit court lacks subject matter jurisdiction in that Cook's exclusive remedy is under the Workers' Compensation Act. ¹ The circuit court held the complaint stated a cause of action under Nichols v. State Farm Mutual Automobile Insurance Co., 279 S.C. 336, 306 S.E.2d 616 (1983), and overruled the demurrers. Mack's and the Guaranty Company appeal. We reverse.

The complaint alleges the following facts, which are taken as true for the purpose of ruling on the demurrers. Cook was employed as a long distance driver by Mack's. He was injured in an automobile accident arising out of and in the course of his employment. He gave Mack's notice of the accident and his injury. However, Mack's initially failed to advise Guaranty Company of the information necessary to process Cook's workers' compensation claim. When Mack's and Cook eventually supplied Guaranty Company with the information, Guaranty Company refused to honor the claim. As a result, Cook has incurred unreimbursed medical expenses, has been denied workers' compensation benefits of $287.16 weekly, has been unable to pay his debts or provide for his family, and has experienced mental suffering. Cook alleges Guaranty Company's refusal to pay his workers' compensation claim was willful, malicious, and in bad faith. He seeks judgment against Mack's and Guaranty Company, jointly and severally, for one million dollars actual and punitive damages.

The issue on appeal is whether a worker who sustains an injury covered by the Workers' Compensation Act may bring a separate action in the courts for damages if the employer and the employer's insurance carrier allegedly act in bad faith in processing and paying his claim. We hold such an action may not be maintained.

I.

Workers' compensation was enacted to correct a perceived inadequacy of the common law to provide a remedy for employees who sustain work related injuries. The common law required the worker to prove he was injured as a result of fault on the part of his employer in order to receive compensation. It also gave the employer the defenses of assumption of risk, contributory negligence, and the fellow servant rule. Injured employees often received little or no compensation because of the difficulty of proving the employer's negligence or because of the availability of a defense to bar recovery. The Workers' Compensation Act was founded upon a recognition that it is desirable to discard the common law doctrines of tort liability in the employer-employee relationship and substitute a duty of the employer, regardless of fault, to compensate the employee, in predetermined amounts based upon his wages, for loss of earnings resulting from accidental injury arising out of and in the course of his employment. See Parker v. Williams & Madjanik, Inc., 275 S.C. 65, 267 S.E.2d 524 (1980).

In effect, the Workers' Compensation Act shifts from the employee to the employer the risk of work related injuries incident to modern industrial activity. In return, it requires the worker, as a condition for receiving the benefits of the Act, to surrender his right to sue at common law. This balancing of advantages is embodied in the exclusive rights and remedies provision of the Act:

The rights and remedies granted by this Title to an employee when he and his employer have accepted the provisions of this Title, respectively, to pay and accept compensation on account of personal injury or death by accident, shall exclude all other rights and remedies of such employee ... as against his employer, at common law or otherwise, on account of such injury, loss of service or death.

Section 42-1-540, Code of Laws of South Carolina, 1976.

This provision bars all actions against an employer where a personal injury to an employee comes within the Act. It makes the Act the exclusive means of settling all such claims. Doe v. South Carolina State Hospital, 285 S.C. 183, 328 S.E.2d 652 (Ct.App.1985). In some cases, the amount of compensation available under the Act may be substantially less than could be recovered in a successful common law action; but in other cases the employee will receive benefits he would not otherwise have enjoyed because of his inability to establish the employer's common law liability. This is a balance struck by the Legislature in order to afford the widest practical coverage for work related injuries.

The Workers' Compensation Act provides an exclusive system of compensation in derogation of common law rights and is not cumulative or supplemental thereto, but wholly substitutional. Caughman v. Columbia YMCA, 212 S.C. 337, 47 S.E.2d 788 (1948). The compensation afforded by the Act is statutory in character, and the right of any claimant thereto is dependent upon the terms and conditions of the statute. Owens v. Herndon, 252 S.C. 166, 165 S.E.2d 696 (1969); Young v. Hyman Motors, Inc., 199 S.C. 233, 19 S.E.2d 109 (1942). These include the procedures for adjudicating a compensation claim as well as the terms and conditions of substantive entitlement.

This case involves an alleged refusal to pay statutory compensation benefits, a situation expressly covered by the Act. The Act provides that if an employer and injured employee fail to reach an agreement in regard to compensation within fourteen days after the employer has knowledge of the injury, then the worker may make application to the Commission for a hearing in regard to the matters at issue and for ruling thereon. Section 42-17-20. The statute further provides that all questions arising under the Act, if not settled by agreement of the parties, shall be determined by the Commission. Section 42-3-180. Thus, where a remedy exists under the statute, the injured worker no longer has the right to bring a common law action to enforce his claim. As noted above, the Act excludes all other rights and remedies of the employee at common law or otherwise. Section 42-1-540.

Since Mack's and the Guaranty Company allegedly refused to pay Cook's compensation claim, the Act gave Cook the right to make application to the Commission for benefits. The Act itself provides for speedy adjudication of all controversies over the processing of an injured worker's claim for benefits. If the dispute concerns an alleged wrongful denial of statutory benefits, the Commission has exclusive jurisdiction to adjudicate the controversy. Whether the denial is willful, in bad faith, negligent, or the result of a good faith difference is immaterial to the question of the Commission's exclusive jurisdiction. Since a remedy exists under the statute, the injured worker has no right to bring a common law action in the courts. Accordingly, the circuit court erred in holding Cook may prosecute an action in the courts for refusal to pay workers' compensation benefits.

II.

Cook acknowledges the Commission's exclusive jurisdiction of claims for workers' compensation benefits. He argues, however, that his injury arises not from his employment, but from the refusal of Mack's and the Guaranty Company to pay him benefits. Moreover, he asserts the remedies provided by the Act are not sufficient to compensate him for the additional damages he suffered as a result of the delay in paying his claim. Thus, he maintains, he has an independent cause of action under Nichols v. State Farm Mutual Automobile Insurance Co., supra. This argument is unpersuasive for several reasons.

A.

We have previously explained that Nichols changed the law by modifying the rule that damages for breach of an obligation to pay money are generally limited to the amount due plus interest. See Brown v. South Carolina Insurance Co., 284 S.C. 47, 324 S.E.2d 641 (Ct.App.1984), appeal dismissed, 290 S.C. 154, 348 S.E.2d 530 (1986). In Nichols, the Supreme Court held that if an insured can demonstrate bad faith or unreasonable refusal by an insurer to pay first party benefits due under a mutually binding insurance contract, he can recover damages not limited to the face amount of the policy. A necessary element of the plaintiff's case in a Nichols action is to prove benefits are due under a mutually binding contract. See Bartlett v. Nationwide Mutual Fire Insurance Co., 290 S.C. 154, 348 S.E.2d 530 (Ct.App.1986).

In this case, Cook's substantive entitlement to benefits is a creature of statute, not contract. By analogy, therefore, Cook would have to prove the injury for which he claims benefits is compensable under the statute in order to recover on a Nichols cause of action. Otherwise, the refusal to pay benefits would not be wrongful. Yet it is precisely the question of whether an injury is compensable under the statute which is within the exclusive jurisdiction of the Commission, not the courts.

The purpose of the Workmen's Compensation Law is to provide an exclusive means of settling all claims for personal injuries arising out of and in the course of an employment relationship.

Lowery v. Wade Hampton Co., 270 S.C. 194, 198, 241 S.E.2d 556, 558 (1978). Consequently, to...