De Dios v. Indem. Ins. Co. of N. Am.

• Decision Date: 13 June 2018
• Docket Number: No. C 18-4015-MWB,C 18-4015-MWB
• Parties: SAMUEL DE DIOS, Plaintiff, v. INDEMNITY INSURANCE COMPANY OF NORTH AMERICA and BROADSPIRE SERVICES, INC., Defendants.
• Court: U.S. District Court — Northern District of Iowa

SAMUEL DE DIOS, Plaintiff, v. INDEMNITY INSURANCE COMPANY OF NORTH AMERICAand BROADSPIRE SERVICES, INC., Defendants.

No. C 18-4015-MWB

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF IOWA WESTERN DIVISION

June 13, 2018

OPINION AND ORDER REGARDING DEFENDANT BROADSPIRE'S MOTION TO DISMISS AND REGARDING CERTIFICATION OF QUESTIONS TO THE IOWA SUPREME COURT

TABLE OF CONTENTS

I.INTRODUCTION ........................................................................... 2

A.Factual Background ............................................................... 2

1.The parties ................................................................... 2

2.The accident and aftermath .............................................. 4

3.Denial of the claim ......................................................... 5

B.Procedural Background ........................................................... 6

C.Arguments Of The Parties ........................................................ 8

II.LEGAL ANALYSIS ...................................................................... 10

A.Standards For Stating A Claim ................................................ 10

B.Application Of The Standards .................................................. 13

1.Plausible factual allegations ........................................... 13

2.Legal cognizability of the claim ....................................... 15

C.Certification Of The Question .................................................. 16

1.Standards for certification .............................................. 16

2.Application of the standards ........................................... 18

3.Formulation of the question ............................................ 19

III.CONCLUSION ............................................................................ 20

A plaintiff who alleges that he suffered an injury in a vehicle collision on a construction site in the course of his employment brought this lawsuit against his employer's workers' compensation insurer and the third-party claims administrator it had hired to investigate, handle, manage, administer, and pay workers' compensation claims.The plaintiff alleges bad faith denial of workers' compensation benefits by both the insurer and the third-party claims administrator and vicarious liability of the insurer for the third-party claims administrator's bad faith denial of benefits.The third-party claims administrator has moved to dismiss the plaintiff's claim against it on the ground that a bad faith claim will not lie against it under Iowa law, because it does not have an insurer-insured relationship with the plaintiff.Because I conclude that this case presents a novel question of state law best answered by the Iowa Supreme Court, I conclude sua sponte that I should certify that question.

I.INTRODUCTION

A.Factual Background

1.The parties

Because this case is before me on a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted, this statement of the factual background is necessarily drawn from plaintiffSamuel De Dios's controlling pleading, his March 20, 2018, Amended Complaint, and should not be construed as findings of fact.¹De Dios alleges that, at all material times, he has been a resident of Woodbury County, Iowa, and that he was employed by Brand Energy & Infrastructure Services.He alleges that Brandhad a workers' compensation insurance policy with defendantIndemnity Insurance Company of North America, but that Indemnity "delegated its authority of investigating, handling, managing, administering, and paying benefits under Iowa Workers' Compensation Laws to [defendant]Broadspire Services, Incorporated."Amended Complaint, ¶ 4.

More specifically, De Dios alleges the following about Broadspire's duties and its relationship with Indemnity:

5.At all times material to the Petition, the INSURANCE COMPANY and BROADSPIRE were responsible for making timely payment of workers' compensation benefits to employees of the EMPLOYER, including SAMUEL.Plaintiff will refer to both the INSURANCE COMPANY and BROADSPIRE collectively as "the Defendants."

6.BROADSPIRE and the INSURANCE COMPANY are essentially one and the same entity for purposes of the instant action.

7.The INSURANCE COMPANY lacked the necessary support staff to investigate on-the-job injuries in Iowa, including SAMUEL's on-the-job injury.

8.The INSURANCE COMPANY lacked the necessary support staff that had the experience or knowledge to make an informed decision on whether to pay benefits pursuant to Iowa Workers' Compensation Laws.

9.The INSURANCE COMPANY obligated BROADSPIRE to provide actuarial services for workers' compensation claims, including SAMUEL's workers' compensation claim.

10.The INSURANCE COMPANY obligated BROADSPIRE to provide underwriting services for workers'compensation claims, including SAMUEL's workers' compensation claim.

11.BROADSPIRE performed the tasks of a workers' compensation insurance company in Iowa.

12.BROADSPIRE received a percentage of the premiums that the EMPLOYER paid to the INSURANCE COMPANY.

13.BROADSPIRE's compensation package with the INSURANCE COMPANY was tied to the approval or denial of workers' compensation claims: BROADSPIRE received more of the EMPLOYER's premium as the payment of workers' compensation benefits decreased.

14.BROADSPIRE had a financial risk of loss for workers' compensation claims it administered on behalf of the INSURANCE COMPANY, including SAMUEL's workers' compensation claim.

15.The INSURANCE COMPANY had a financial risk of loss for workers' compensation claims that were administered by BROADSPIRE, including SAMUEL's workers' compensation claim.

16.The INSURANCE COMPANY entered into a reinsurance agreement with BROADSPIRE for payments made on behalf of workers' compensation claims, including SAMUEL's workers' compensation claim.

Amended Complaintat ¶¶ 5-16.

2.The accident and aftermath

De Dios alleges that, on April 8, 2016, he was assigned by Brand to work on a construction site located on the private property of CF Industries.To enter the property, he had to drive past a security gate and a security guard.He alleges that, after entering the property, a vehicle driven by Jonathan Elizondo crashed into the back of his vehicle, damaging his vehicle and causing him injuries, including a lower back injury.Thecollision was witnessed by the security guard at the gate, Tina Gregg.De Dios reported the collision and his work injury to Brand's safety manager, Ismael Barba.He alleges that Brand authorized him to choose whatever medical provider he would like to provide care for the work injury.De Dios chose to be treated at St. Luke's Hospital, where Dr. Jeffrey O'Tool provided him with medical care for his work injury.

On April 11, 2016, De Dios returned to work with Brand, but his back pain worsened.On April 14, 2016, Brand sent De Dios home because of his work injury.On April 14, 2016, Brand authorized De Dios to choose whatever medical provider he would like to see to care for his work injury.On April 15, 2016, De Dios's family doctor, Alisa M. Olson, DO, treated De Dios for the work injury.De Dios alleges that, from April 8, 2016, through May 9, 2016, Brand refused to provide him with "light duty" work.He alleges that, from April 15, 2016, Indemnity and Broadspire knew or should have known that he had work restrictions as a result of his work injury; that Brand refused to provide "light duty work" within those restrictions; and that Indemnity and Broadspire were required to pay him Temporary Total Disability ("TTD") Benefits and/or Healing Period ("HP") Benefits until a determination of maximum medical improvement was made by a qualified medical expert.

3.Denial of the claim

De Dios alleges that Broadspire or, in the alternative, Indemnity made the decision to deny him workers' compensation benefits.He alleges that, prior to doing so, neither Indemnity nor Broadspire interviewed him, or interviewed or contacted the security guard, Tina Gregg, who had witnessed the accident, or his treating physicians, Dr. O'Tool and Dr. Olson.He alleges that the defendants' failure to contact these people violated an insurance industry standard of "Three-Point Contact" before denying him workers' compensation benefits.On June 9, 2016, De Dios filed a workers' compensation claim with the Iowa Workers' Compensation Commissioner againstIndemnity and Broadspire.On August 23, 2016, Indemnity and Broadspire filed a joint Answer with the Iowa Workers' Compensation Commissioner and denied liability for De Dios's work injury.De Dios alleges that Indemnity and Broadspire did not convey to him the basis for their decision to deny his claim at that time, that they, in fact, had no reasonable basis for denying his claim, and that they knew or should have known that no reasonable basis existed to deny his claim.

B.Procedural Background

De Dios filed his original Petition At Law against Indemnity and Broadspire in the Iowa District Court for Woodbury County on January 4, 2018.The defendants removed this action to this federal court, pursuant to 28 U.S.C. §§ 1332,1441, and1446, on February 21, 2018.On February 27, 2018, Indemnity filed its Answer, denying De Dios's claims and denying knowledge sufficient to admit or deny most of his allegations.Indemnity did admit, however, that Broadspire was a third-party claims administrator that administered Brand's workers' compensation claims on behalf of Indemnity within the $1,000,000 self-insured retention limit of Brand's workers' compensation policy, but that Brand did not have an obligation to notify Indemnity of any potential workers' compensation claims with exposure below $500,000.On February 28, 2018, Broadspire filed is first Motion To Dismiss For Failure To State A Claim, on the ground that there was no insurer-insured relationship between Broadspire and De Dios nor was there any privity between Broadspire and De Dios, so...