Jackson v. Travelers Ins. Co.

Decision Date20 October 1998
Docket NumberNo. 4-98-CV-90151.,4-98-CV-90151.
Citation26 F.Supp.2d 1153
PartiesRoger L.A. JACKSON, an individual, and Phoebe Jackson, an individual, Plaintiffs, v. TRAVELERS INSURANCE COMPANY, d/b/a Travelers Property Casualty Company, a member of the Travelers Group, also d/b/a the Travelers Indemnity Company and the Aetna Casualty and Surety Company, a member of the Travelers Group, Defendants.
CourtU.S. District Court — Southern District of Iowa

Marc A. Humphrey, Des Moines, IA, for Plaintiffs.

F. Richard Lyford, Dickinson, Mackaman Tyler & Hagen, Des Moines, IA, for Defendants.


PRATT, District Judge.

This matter comes before the Court on Defendants' Motion to Dismiss. Plaintiffs Roger and Phoebe Jackson originally filed their Complaint in the Iowa District Court for Polk County alleging insurance bad faith, loss of consortium, intentional infliction of emotional distress, and a claim for punitive damages against Defendants Travelers Insurance, et al. ("Travelers"), based on Defendants' handling of a workers' compensation claim filed by Mr. Jackson. Defendants removed the case to this Court and then filed their Motion to Dismiss. After Plaintiffs' Response and Defendants' Reply were submitted, a hearing was held on the Motion.

Defendants ask this Court to dismiss Plaintiffs' Complaint for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). For the reasons set forth below, Defendants' Motion to Dismiss is GRANTED in part, and DENIED in part.

I. Background1

Plaintiff Roger Jackson, a citizen of Nebraska, was employed by the J.W. Brewer Tire Company ("J.W. Brewer"), a Colorado corporation doing business in Nebraska. On February 19, 1993, Mr. Jackson suffered an injury at work while using an air-powered dolly to lift large truck tires. One of the tires fell off and the air pressure caused the platform of the dolly to fly upward and strike Mr. Jackson on the neck and chin. As a result of the accident, he sustained multiple injuries, both physical and emotional. Mr. Jackson filed a workers' compensation claim in Nebraska against J.W. Brewer, and he initiated a products liability action in Nebraska against the manufacturer of the dolly.

J.W. Brewer carried workers' compensation insurance through Defendant Travelers, a Connecticut corporation doing business in Iowa. During the "claims adjusting" process, in which Travelers determined the approved medical benefits and the amount to be paid under the workers' compensation policy in settlement of Mr. Jackson's claim, there were telephone conversations and written correspondence between Travelers' agents and the Jacksons or their attorney. All of the calls and letters traveled between the Jacksons or their attorney in Nebraska and Travelers' representatives in Iowa. All checks issued to, or on behalf of, Mr. Jackson were drafted by Travelers in Iowa. Additionally, all authorization of and payment for medical treatment came from the Travelers office in Iowa.

As a result of the delay and denial of treatment and benefits during the adjusting process, Mr. Jackson suffered injuries including: permanent impairment of Mr. Jackson's physical and emotional recovery from the work-related injury, permanent impairment of the Jacksons' credit rating, permanent impairment of Mr. Jackson's ability to trust others, permanent impairment of Mr. Jackson's self-confidence and self-esteem, and deterioration of Mr. Jackson's mental and emotional health, including having suicidal tendencies.

In addition, the Jacksons were thwarted in the pursuit of their third-party products liability tort action by Travelers' failure to promptly investigate Mr. Jackson's workers' compensation claim and their failure to take possession of the air-powered dolly.

II. Jurisdiction

Defendants' 12(b)(1) defense must be addressed at the outset because jurisdictional issues, whether raised sua sponte2 or by motion, are a barrier to a court's further consideration of the substantive issues in a case. "Without jurisdiction the court cannot proceed at all in any cause. Jurisdiction is power to declare the law, and when it ceases to exist, the only function remaining to the court is that of announcing the fact and dismissing the cause." Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 118 S.Ct. 1003, 1012, 140 L.Ed.2d 210 (1998) (quoting Ex parte McCardle, 74 U.S.(7 Wall.) 506, 514, 19 L.Ed. 264 (1868)) (remanded with instructions to direct that complaint be dismissed).

In their Motion to Dismiss Defendants allege that Plaintiffs' Complaint should be dismissed under Rule 12(b)(1), but do not specify why they believe the Court is without jurisdiction, nor do they discuss the issue in their supporting Memorandum. This argument is without merit. Upon review of Defendant's First Amended Notice of Removal, the Court finds there is complete diversity among the parties and the amount in controversy is over $75,000. The Court thus believes that it properly has subject matter jurisdiction under 28 U.S.C. § 1332(a).

The Court also believes that it has personal jurisdiction over Defendants. While all Defendants are Connecticut corporations with their principal places of business in Connecticut, by operating an office in West Des Moines, Iowa, through which Travelers adjusts claims in workers' compensation cases, Defendants have purposefully established minimum contacts within the forum state such that the assertion of personal jurisdiction comports with "fair play and substantial justice." See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476, 105 S.Ct. 2174, 2184, 85 L.Ed.2d 528 (1985) (citing International Shoe Co. v. Washington, 326 U.S. 310, 320, 66 S.Ct. 154, 160, 90 L.Ed. 95 (1945)). Finally, venue is proper under 28 U.S.C. § 1391(a)(2), Plaintiffs have standing,3 and the case is ripe and is not moot. Defendants' Motion to Dismiss based on 12(b)(1) is therefore DENIED.

III. Conflict of Laws4

Defendants also assert that Plaintiffs' action should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6). As a preliminary matter, however, the parties disagree as to whether Iowa or Nebraska law should control the resolution of the substantive legal issues. "A district court, sitting in diversity, must follow the choice-of-law approach prevailing in the state in which it sits." Dorman v. Emerson Elec. Co., 23 F.3d 1354, 1358 (8th Cir.1994) (citing Birnstill v. Home Sav. of Amo, 907 F.2d 792, 797 (8th Cir.1990). In deciding choice of law questions, however, a court must first determine the nature of the causes of action, see Drinkall v. Used Car Rentals, Inc., 32 F.3d 329, 331 (8th Cir.1994) (citing O'Neal v. Kennamer, 958 F.2d 1044, 1046 (11th Cir.1992)), because a state may have adopted different choice of law approaches depending on the nature of the claim. Second, a court must decide whether there is any conflict or difference between the state laws regarding the claims presented.5 See Phillips v. Marist Soc'y, 80 F.3d 274, 276 (8th Cir.1996) ("[B]efore entangling itself in messy issues of conflict of laws a court ought to satisfy itself that there actually is a difference between the relevant laws of the different states.") (quoting Barron v. Ford Motor Co. of Canada, Ltd., 965 F.2d 195, 197 (7th Cir.1992) (Posner, J.), cert. denied, 506 U.S. 1001, 113 S.Ct. 605, 121 L.Ed.2d 541 (1992)). Third, a court must identify the applicable choice of law principles of the forum state, and finally, apply those principles to decide which state's law applies. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97, 61 S.Ct. 1020, 1021-22, 85 L.Ed. 1477 (1941).

A. Nature of the Claims

The first step in deciding a choice of law question is to determine the nature of the causes of action that are involved. See Drinkall, 32 F.3d at 331. The law of the forum state, in this case Iowa, controls this question. Id. In their Complaint, Plaintiffs allege insurance bad faith, loss of consortium, and intentional infliction of emotional distress. In addition, they bring a claim for punitive damages. These claims all stem from Defendants' handling of Mr. Jackson's workers' compensation claim against his then-employer J.W. Brewer. Specifically, Plaintiffs allege that Defendants, as the workers' compensation insurer for J.W. Brewer, delayed and denied authorization for medical treatment and payment of medical benefits.

Under the law of the forum state, Iowa, all of Plaintiffs' claims of right sound in tort. First, an allegation of first-party insurance bad faith is recognized as a tort claim. See Dolan v. Aid Ins. Co., 431 N.W.2d 790, 790 (Iowa 1988), cited in Stahl v. Preston Mut. Ins. Ass'n, 517 N.W.2d 201, 202 (Iowa 1994). Second, loss of consortium is a tort separate from that of the injured spouse. See Huber v. Hovey, 501 N.W.2d 53, 57 (Iowa 1993). Third, intentional infliction of emotional distress is a clearly recognized tort in Iowa. See Van Baale v. City of Des Moines, 550 N.W.2d 153, 156 (Iowa 1996). Since Iowa case law holds that Plaintiffs' claims of right are torts, if a true conflict exists, the Court will apply tort choice of law rules.6 The claim for punitive damages is a claim for remedy. See Lala v. Peoples Bank & Trust Co., 420 N.W.2d 804, 807 (Iowa 1988) ("Punitive damages are ... incidental to the main cause of action and are not recoverable as of right.") (citation omitted). If a conflict exists with regard to this claim, the Court will apply choice of law rules for damages.

B. Existence of a Conflict

The second step in deciding a choice of law question, after determining the nature of the claim, is for the Court to decide whether a conflict exists.7 See Nesladek v. Ford Motor Co., 46 F.3d 734, 736 (8th Cir.1995), cert. denied, 516 U.S. 814, ...

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