Dunlavey v. Economy Fire and Cas. Co.

Decision Date18 January 1995
Docket NumberNo. 93-1429,93-1429
Citation526 N.W.2d 845
PartiesFrancis C. DUNLAVEY, Appellee, v. ECONOMY FIRE AND CASUALTY CO. and Lumbermens Mutual Casualty Co., Appellants.
CourtIowa Supreme Court

Michael A. McEnroe and J. Scott Bayne of Dutton, Braun, Staack, Hellman & Iversen, P.L.C., Waterloo, for appellants.

Robert S. Kinsey III of Brown, Kinsey & Funkhouser, Mason City, for appellee.

Sara J. Sersland of Nyemaster, Goode, McLaughlin, Voigts, West, Hansell & O'Brien, P.C., Des Moines, for amicus curiae Iowa Ass'n of Business and Industry.


McGIVERIN, Chief Justice.

This case presents the question of whether our workers' compensation statutes, Iowa Code Chapter 85 (1993), permit an employee, Francis C. Dunlavey, to recover from his employer, Economy Fire and Casualty Company, for a nontraumatic mental injury caused by mental stimuli in the work environment.

Because we conclude that the definition of the term "personal injuries" found in Iowa Code section 85.3(1) includes pure mental injuries, we agree with the district court and the industrial commissioner that an employee may recover for a nontraumatic mental injury.

We further conclude that the employee must satisfy two requirements. First, the employee must establish factual or medical causation; the employee must prove that the employee has a mental injury which was caused in fact by mental stimuli in the work environment. Second, the employee must meet the legal causation standard; the employee must prove that the mental injury was caused by workplace stress of greater magnitude than the day-to-day mental stresses experienced by other workers employed in the same or similar jobs, regardless of their employer.

After viewing the record as a whole, we further agree with the district court that substantial evidence supports the commissioner's decision that the employee in this case, Dunlavey, has satisfied the first of these two requirements. All of the doctors giving an opinion in this case agreed that Dunlavey's work environment at Economy Fire and Casualty Company was the substantial or major cause of his depression. Accordingly, we affirm the district court's judgment and the industrial commissioner's decision regarding medical causation.

However, we reverse the district court's judgment and the industrial commissioner's decision regarding the legal causation issue because they both applied an incorrect legal standard. Accordingly, we remand for application by the commissioner of the correct legal causation standard as described in this opinion.

I. Background facts and proceedings.

A. Employment and medical history. Francis C. Dunlavey (Dunlavey) is a sixty-two year old married man who resides in Mason City, Iowa and has a bachelors degree in business administration. He has been employed in the insurance industry for approximately thirty years and had been employed by Iowa Kemper Insurance Company (Iowa Kemper) from 1977 until March of 1986, when Iowa Kemper merged with Economy Fire and Casualty Company (Economy).

Prior to the merger of Iowa Kemper and Economy, Dunlavey enjoyed his work as a claims adjuster for Iowa Kemper and denies having had any mental injuries or ever having seen a mental health professional. He claims he had always received good employment evaluations and periodically received increased responsibility and pay. After the announcement of the merger in 1985, however, Dunlavey insists his work environment grew increasingly more stressful, initially due to uncertainty about the continuation of his employment and later due to restructuring resulting from the merger of the two insurance companies.

Dunlavey and one of his coworkers, Howard Anderson (Anderson), testified that the merger caused many changes in the work environment of former Iowa Kemper claims adjusters, including a revision of claims handling procedures, different managerial personnel, and an increase in workload.

According to Dunlavey, the most troublesome of these changes were the increase in workload and his new supervisors' criticism of his performance. Dunlavey and Anderson testified that their supervisors gave them unrealistic demands and constantly downgraded them through unfavorable evaluations. Among other new responsibilities, Dunlavey was required to exercise more supervision over adjusters and to work on Economy files while converting pending Iowa Kemper files into Economy files. Dunlavey put in overtime in an effort to comply with these new requirements, generally working daily from six-thirty in the morning to six-thirty in the evening and several hours on the weekends. Despite this time investment, Dunlavey's level of performance was evaluated only as marginally acceptable.

Anderson testified that he also received unfavorable performance appraisals and was downgraded. He believes that such treatment was part of a process of intimidation and that Economy did not want him. Both Dunlavey and Anderson claim that former Iowa Kemper employees developed a fear that the new Economy management intended to get rid of them in one way or another. According to Anderson and Dunlavey, many claims examiners left because they felt they would be systematically eliminated. Dunlavey testified that after the merger occurred he looked for other employment but was unable to find any and, as a result, decided to remain with Economy until retirement.

Dunlavey and Anderson claim that as part of the intimidation, the former Iowa Kemper employees had to perform more work than the personnel brought in by Economy and, by and large, worked more hours than the original Economy personnel. Both Dunlavey and Anderson testified that they could not feasibly perform all of the work which the Economy managers placed upon them without working many extra hours. They also testified that the stress the Economy managers placed upon them was greater than the stress they placed on other Economy employees.

On the other hand, Denise Bollesen, an Economy claims examiner, Mary Joan Ward, Economy's assistant claims manager, and Patrick Walters, Economy's claims manager, all testified that Dunlavey's workload was not unusual or out of the ordinary from that routinely carried by other claims examiners.

Economy terminated Anderson in February 1987, just after he had completed converting his assigned Iowa Kemper files to the Economy system. By June 1987, only one claims examiner remained employed by Economy out of the five who had been employed by Iowa Kemper at the time of the merger.

During that same year, Dunlavey's wife, Lila, claims she noticed Dunlavey appeared depressed. Lila stated that her husband came home from work really tired and spoke of problems he had had at work. She stated that he would come home drained of any emotion and would not want to eat or do anything.

Shortly after Lila noticed these changes in her husband, Dunlavey's family physician, Dr. James K. Coddington, M.D., diagnosed Dunlavey as having depression. Dr. Coddington wrote that "job stress is a definite causative factor." At that time Dunlavey was taken off work and, except for approximately one week in the fall of 1987, has not since returned.

Since Dr. Coddington's diagnosis of depression, Dunlavey has been hospitalized, evaluated and treated extensively. Psychiatrists who have treated him include Ed Loon J. Chua, M.D., Ron M. Larsen, M.D., Bruce Pfohl, M.D., and Mary Hennessy, M.D. They uniformly agree that Dunlavey is afflicted with major depression. Doctors Coddington, Chua and Larsen have all expressed the opinion that Dunlavey's employment stress was a causative or aggravating factor in the development of his depression. Dr. Pfohl stated that Dunlavey's work stress is probably a substantial factor in causing Dunlavey's depression, but he declined to compare its significance to other known stresses in Dunlavey's life. Dr. Hennessy, however, declined to express an opinion regarding the cause of Dunlavey's mental injury.

With regard to Dunlavey's ability to resume employment, the doctors generally agreed that Dunlavey was not capable of returning to work at the time of the hearing. The doctors also generally agree that depression is usually a temporary condition and that most individuals who suffer from it recover and are able to return to work. However, they generally declined to express a specific prognosis for Dunlavey, since his depression has existed for an unusually long period of time. The doctors vacillated in their opinions, ranging from the opinion that Dunlavey was not capable of returning to any type of regular employment to the opinion that he could possibly try a low stress job, or that, with rehabilitation services, he could possibly resume employment.

B. The present action. Dunlavey filed a petition for arbitration with the Iowa industrial commissioner against his employer Economy and its insurance carrier, Lumbermens Mutual Casualty Company, alleging that he had sustained a psychological injury as a result of stress to which he had been exposed through his employment at Economy. See Iowa Code § 85.26(3). He sought compensation for permanent total disability and payment of medical benefits. Respondents denied petitioner's allegations, insisting that without any physical injury Dunlavey had no basis for recovery under Iowa's workers' compensation statutes.

After a hearing in this contested case, see id. section 86.14, the deputy commissioner found and concluded, and the industrial commissioner agreed, that Dunlavey developed a depression as a result of stresses to which he was subjected through his employment at Economy and that those stresses exceeded the magnitude of the day-to-day stresses which must be endured by all employees. The deputy commissioner made these decisions without considering the deposition testimony and exhibits of respondents' expert witness, Dr. Robert Smith. The deputy refused to admit Dr....

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