Gallagher v. Bituminous Fire and Marine Ins. Co.

• Decision Date: 01 September 1984
• Docket Number: No. 124,124
• Citation: 492 A.2d 1280,303 Md. 201
• Parties: James Henry GALLAGHER et ux. v. BITUMINOUS FIRE AND MARINE INSURANCE COMPANY et al. ,
• Court: Maryland Court of Appeals

Page 201

303 Md. 201

492 A.2d 1280

James Henry GALLAGHER et ux. v. BITUMINOUS FIRE AND MARINE INSURANCE COMPANY et al.

No. 124, Sept. Term, 1984.

Court of Appeals of Maryland.

May 31, 1985.

Walter P. Drake, Ocean City, for appellants.

James D. Reed, Baltimore (Mark T. Hackman and Reed, Reed & Kelly, P.A., Baltimore, on the brief), for appellees.

Argued before MURPHY, C.J., SMITH, ELDRIDGE, COLE, RODOWSKY and McAULIFFE, JJ., and CHARLES E. ORTH, Jr., Associate Judge of the Court of Appeals (retired), Specially Assigned.

RODOWSKY, Judge.

This multiple-count, third-party action by a workers' compensation claimant against the compensation insurer arises out of the latter's alleged failure timely to pay certain temporary total disability benefits and medical bills. The trial court entered judgment for the insurer on demurrer on the ground that the compensation remedy was exclusive. As hereinafter explained, that holding was too broad. While none of the legal theories stated a cause of action as pleaded in the declaration, one of them, intentional infliction of emotional distress, is not legally precluded by the exclusivity of compensation.

The plaintiffs below and appellants here are James Henry Gallagher (James) and Mary C. Gallagher (Mary), who are husband and wife (the Gallaghers). James was employed as a carpenter by an employer who was insured for workers' compensation by Bituminous Fire and Marine Insurance Company (Bituminous). Paul M. Trimble (Trimble) was an adjuster for Bituminous. Trimble and Bituminous were named as defendants below and are appellees here. After the Gallaghers appealed to the Court of Special Appeals, we issued the writ of certiorari on our own motion prior to consideration of the case by that court, 301 Md. 697, 484 A.2d 640 (1984).

The declaration contains four counts in each of which the Gallaghers are plaintiffs. As indicated by the pleader's labels on the counts, they are intended to sound in negligence (I), "Tortious Delay in Payment" (III), intentional infliction of emotional distress (II), and "Consortium" (IV). By its terms count IV limits the theory of liability underlying that claim to the negligence alleged in count I.

The declaration is lean on facts and larded with conclusions. The outline is that James, on July 20, 1983, while working as a carpenter fell and injured his back. This injury required the removal of a herniated disc on August 11, 1983. The first order of the Workmen's Compensation Commission (the Commission) was entered on September 20, 1983. That order directed Bituminous to pay temporary total disability benefits of $240 per week and promptly to provide medical treatment. It was not until a hearing on December 2, 1983, when the Commission "again ordered the payment of benefits that [James] ever received any of the benefits to which he was entitled by law."

The trial court recited in its order its belief "that Plaintiffs' sole and exclusive remedy is under the Workmen's Compensation law of Maryland...." Inasmuch as the trial court applied that defense to all of the counts, we shall first consider the exclusivity issue. It is governed by Md.Code (1957, 1979 Repl.Vol.), Art. 101 (the Act) which provides in § 15, in part, that

[e]very employer subject to the provisions of this article, shall pay or provide as required herein compensation ... for the disability or death of his employee resulting from an accidental personal injury sustained by the employee arising out of and in the course of his employment....

The liability prescribed by the last preceding paragraph shall be exclusive....

Although count I is labeled as a negligence claim, it is not the Gallaghers' theory that Bituminous intended to pay James but, through negligence, failed to do so. Count I alleges a duty by Bituminous "to pay medical and other benefits in a timely fashion," that Bituminous failed "to pay medical bills when presented" and that it "intentionally [cut] off benefits for temporary total disability without notice, contrary to law, and contrary to an order of the [Commission]." The pleader denounces this conduct not only as "gross negligence of the highest magnitude," but also as demonstrating "actual and implied malice" and a "wanton and reckless disregard ... so as to be morally culpable [and] offensive to public policy...." The ad damnum seeks compensatory and punitive damages. Compensatory damages are to be based on the plaintiffs' having suffered "needless embarrassment, financial hardship, humiliation, pain and suffering, mental anguish and emotional distress" as well as "problems with their credit" and "interference with their credit reputation and standing in the community...." Stripped of its verbiage count I rests on an intentional failure to pay money allegedly due under the Act.

Count III incorporates by reference much of count I. The most significant difference is that count III asserts that

the Defendants wilfully and maliciously withheld the payment of benefits in an effort to discourage [James] from proceeding and from securing the compensation payable under the [Act].

Accordingly, we shall consider these two counts together.

Some courts have held that benefits under a workers' compensation act and the procedures set forth in the statute for obtaining them constitute the exclusive remedy which precludes damages even for an intentional tort arising out of the nonpayment of benefits. See, e.g., Escobedo v. American Employers Ins. Co., 547 F.2d 544 (10th Cir.1977) (New Mexico act); Chavez v. Kennicott Copper Corp., 547 F.2d 541 (10th Cir.1977) (New Mexico act); Sandoval v. Salt River Project Agricultural Improvement & Power Dist., 117 Ariz. 209, 571 P.2d 706 (Ct.App.1977); Physicians and Surgeons Hospital, Inc. v. Leone, 399 So.2d 806 (La.Ct.App.), cert. denied, 401 So.2d 993 (La.1981); Dickson v. Mountain States Mut. Casualty Co., 98 N.M. 479, 650 P.2d 1 (1982); Gonzales v. United States Fidelity & Guar. Co., 99 N.M. 432, 659 P.2d 318 (Ct.App.1983). In general these cases turn not so much on the breadth of the language of the exclusivity provision as on a conclusion that the policy underlying the compensation act does not allow damages recoveries for torts, including intentional torts, in the claims-evaluation and benefit-paying process of the compensation system.

Other cases involving a claim for damages based upon an intentional tort arising out of a compensation carrier's failure to pay benefits have concluded that the tort action is outside of an exclusivity provision. These cases, which have arisen on legal challenges to the sufficiency of the complaint, hold that, while the compensation act is the exclusive remedy for the original work-related injury, the tort claim is separate from the work-related injury because the tort injury is different and did not arise during employment. See, e.g., Hollman v. Liberty Mut. Ins. Co., 712 F.2d 1259 (8th Cir.1983) (South Dakota act); Martin v. Travelers Ins. Co., 497 F.2d 329 (1st Cir.1974) (Longshoremen's and Harbor Workers' Compensation Act); Reed v. Hartford Accident & Indem. Co., 367 F.Supp. 134 (E.D.Pa.1973); Garvin v. Shewbart, 442 So.2d 80 (Ala.1983); Savio v. Travelers Ins. Co., 678 P.2d 549 (Colo.Ct.App.1983); Gibson v. Nat'l Ben Franklin Ins. Co., 387 A.2d 220 (Me.1978); Broaddus v. Ferndale Fastener Div., 84 Mich.App. 593, 269 N.W.2d 689 (1978); Birkenbuel v. Montana State Compensation Ins. Fund, --- Mont. ----, 687 P.2d 700 (1984); Hayes v. Aetna Fire Underwriters, 187 Mont. 148, 609 P.2d 257 (1980); Coleman v. American Universal Ins. Co., 86 Wis.2d 615, 273 N.W.2d 220 (1979).

The analysis of these cases, and particularly that by the Supreme Court of Wisconsin in Coleman, is appropriate to the application of § 15 of the Act in a case like that before us. Section 15 makes compensation exclusive for "the disability ... resulting from an accidental personal injury sustained by an employee arising out of and in the course of his employment...." Here the work-related injury to James was a physical injury to his back, but the intentional tort injuries were nonphysical, at least in the sense that they are not said to disable either plaintiff. The Gallaghers here seek damages only for economic consequences and emotional upset caused by the failure to pay. The alleged cause of James' back injury (an accident) is separate from the alleged cause of the claimed tortious injury (intentional failure to pay). The language of § 15 does not reach the Gallaghers' intentional tort claims. ¹

In order to bring the alleged tortious injuries sued on by the Gallaghers within § 15, it would be necessary to rule that the insurer enjoys an exclusivity defense for all activity in the claims process, including intentional torts. As pointed out in Coleman this argument relies on an extended "but for" rationale which that court rejected for the reasons stated in 2A A. Larson, The Law of Workmen's Compensation, at 13-36 to -37 (1978):

"It is true that but for the original injury the investigation would never have been undertaken and the second injury would not have occurred. But must we go on to say that the carrier acquires complete tort immunity ever after for anything its agents do to carry out their investigation? Suppose the agent had decided to burglarize the claimant's house to get needed evidence. Suppose claimant died of fright on seeing the burglar. Is the compensation act the exclusive remedy, merely because the activity involved, which was the collecting of evidence, was in the mainstream of the agent's duties?

"Again, suppose a claimant has a compensable broken toe, and is being tailed by a photographer. Claimant sees him in the bushes, a scuffle ensues, and claimant receives a skull fracture as a result of a blow from the camera. Is this skull fracture nothing but an aggravation of the broken toe?" [86 Wis.2d at 624, 273 N.W.2d at 223-24.]

We agree with these views.

A variation on the exclusivity...