Niver v. Travelers Indem. Co. of Illinois
| Decision Date | 06 February 2006 |
| Docket Number | No. C 01-3064-MWB.,C 01-3064-MWB. |
| Citation | 412 F.Supp.2d 966 |
| Parties | Scott NIVER, Plaintiff, v. TRAVELERS INDEMNITY COMPANY OF ILLINOIS, Defendant. |
| Court | U.S. District Court — Northern District of Iowa |
Bruce L. Braley, Dutton Braun Staack & Hellman, Waterloo, IA, Mindi M. Vervaecke, Fitzsimmons & Vervaecke Law Firm, Mason City, IA, for Plaintiff.
Cecelia Ibson Wagner, Smith, Schneider, Stiles & Serangeli, Des Moines, IA, for Defendant.
I. INTRODUCTION ............................................................ 968
A. Factual Background ................................................... 968
B. Procedural Background ................................................ 972
II. LEGAL ANALYSIS .......................................................... 973
A. Standards For Summary Judgment ....................................... 973
B. The Purported Change In The Law ...................................... 974
1. Arguments of the parties .......................................... 974
2. The Bellville decision ............................................ 976
3. The import of Bellville ........................................... 977
a. Articulation and application of pertinent standards ............ 977
i. Reliance on prior or new authority .......................... 978
ii. Comparison to the opinion of the Iowa Court of Appeals ...... 979
b. The scope of any modification of the applicable standards ...... 982
c. Subsequent application of Bellville by the Iowa Court of
Appeals ...................................................... 984
C. Application Of The Standards ......................................... 986
1. Arguments of the parties .......................................... 986
2. Analysis .......................................................... 988
a. The objective element .......................................... 988
b. The subjective element ......................................... 992
D. Remaining Issues For Trial ........................................... 992
III. CONCLUSION .............................................................. 993
In this action for first-party bad faith for failure to pay workers compensation benefits, the defendant insurer asserts that, despite denial of its first motion for summary judgment, it is now entitled to summary judgment on the plaintiff's bad faith claim, owing to a change in Iowa law purportedly adopted in Bellville v. Farm Bureau Mutual Insurance Company, 702 N.W.2d 468 (Iowa 2005). The insurer contends that, under the new legal standards adopted in Bellville, the plaintiffs workers compensation claim was "fairly debatable" as a matter of law, so that the insurer's refusal to pay that workers compensation claim was not in bad faith. The plaintiff counters that there has been no change in the applicable law and that, in any event, he, not the insurer, is entitled to summary judgment on his bad faith claim. He asserts that, as a matter of law, his workers compensation claim ceased to be "fairly debatable" when all of the evidence pointed to a compensable basis for his renewed medical problems, and the insurer not only should have known, but did actually know, that it had no reasonable basis for continuing to deny his workers compensation claim. Consequently, the court must first determine whether there has been a change in Iowa law concerning claims for first-party bad faith failure to pay an insurance claim, then determine whether either party is entitled to summary judgment on the plaintiff's bad faith claim under the applicable standards and what, if any, issues remain for trial.
The court will not attempt here a detailed dissertation of all of the facts, disputed and undisputed, in this case. Rather, the court will present enough facts, disputed and undisputed, to put in context the parties' arguments concerning their motions for summary judgment.1
Plaintiff Scott Niver was formerly employed by Curries Manufacturing (Curries) in Mason City, Iowa. Defendant Travelers Indemnity Company of Illinois (Travelers) was and is the workers compensation insurance carrier for Curries. However, Curries itself had authority to decide whether to pay workers compensation claims up to a certain dollar amount, because of its "retention," i.e., deductible. In 1995, Niver suffered a work-related hernia, for which he required hernia surgery and, some months later, exploratory surgery to release a nerve entrapped during the hernia surgery. Travelers accepted the 1995 hernia claim at the time without dispute and eventually paid both weekly and medical benefits. Travelers closed the file on the 1995 hernia claim on November 7, 1996, when Niver had not incurred any additional medical expenses for a period of two months. The parties do not dispute that the statute of limitations for any additional weekly benefits or penalty benefits on that claim ran three years later, but that Niver remained entitled to "lifetime" medical benefits on that claim, because weekly benefits had originally been paid.
In 1999, Niver suffered another work-related injury, this time to his knee, and submitted another workers compensation claim. The parties do not dispute that Travelers again paid weekly and medical benefits on the claim for the 1999 knee injury. Niver returned to work at Curries on October 4, 2000, after three months off to recuperate from knee surgery.
The central issue in the present dispute, however, is the compensability of a workers compensation claim for groin problems that Niver reported to Curries on October 12, 2000, just shortly after his return to work after his knee problems. Travelers received that report on October 16, 2000. The parties agree that Niver had seen a doctor about the groin pain on October 4, 2000, and that he had begun experiencing some groin pain about two weeks prior to his return to work. The parties also apparently now agree that Niver did not report a new injury, but that the report of his complaint about groin pain that Curries made to Travelers nevertheless indicated a "date of injury" of October 12, 2000. Niver also demanded benefits, including weekly benefits, medical benefits, and, eventually, penalty benefits, that would only have been available for a new injury claim.
Travelers denied the claim for workers compensation benefits filed October 12, 2000, by letter dated October 26, 2000, stating that the denial was "based upon the information we received." Defendant's Appendix at 29. Travelers's claim notes for October 26, 2000, indicate that the basis for the denial of the claim was that Niver's pain started "about 2 weeks before his RTW [return to work]," so that the adjustor "d[id] not think that [Travelers] ha[d] a new work aggravation claim. . . ." Defendant's Appendix at 17. Notwithstanding denial of his workers compensation claim for the groin pain that he reported in October 2000, Niver underwent groin surgery on December 7, 2000. See Plaintiff's Appendix at 26. On December 25, 2000, Niver was treated for a hematoma at the site of the incision from the December 7, 2000, surgery, after presenting at the emergency room for bleeding and pain in the groin area. See Plaintiff's Appendix at 23. He continued to suffer groin pain after the surgery and other treatment in December 2000. See, e.g., Plaintiff's Appendix at 22 & 29-32.
After his December 2000 surgery, Niver disputed Travelers's denial of his claim for workers compensation benefits for the October 2000 groin pain. Specifically, on March 14, 2001, Niver's attorney provided Travelers with medical records in reference to File No. 043-CB-AYW6895R, with Date of Injury 10/12/2000, as the pertinent claim was designated, on the ground that the medical records submitted made it "clear that ... the treatment for the groin is related to the original [1995 hernia] injury, and is work related." Defendant's Appendix at 30. The attached medical records were from examinations on October 12, 2000, November 6, 2000, and November 27, 2000. Travelers disputes whether the attached medical records showed definitively that the groin pain was related to the 1995 hernia claim.
The medical records from October and November 2000 do, indisputably, indicate that Niver's treating physician initially considered three possible causes for Niver's groin pain: (1) irritation of the iliolinguinal nerve that had been cut during surgery for the 1995 hernia; (2) a muscle sprain; or (3) a hematoma from Coumadin therapy related to Niver's knee injury. Defendant's Appendix at 31-32 (notes for October 12, 2000). The notes for the November 6, 2000, examination indicate that, while the treating physician continued to find that the "[e]tiology is not known," the source of Niver's pain was "unlikely to be a hernia," and could be a "possible nerve entrapment." Defendant's Appendix at 33 (notes for November 6, 2000). The notes for the November 27, 2000, examination reflect that, if pain injections continued to have little effect, exploratory surgery might be required, because Niver's "source of the pain may be the upper end of the divided iliolinguinal nerve causing some phantom pain." Defendant's Appendix at 34 (notes for November 27, 2000). The medical records for Niver's December 2000 surgery, which were also provided to Travelers on March 14, 2001, state that the surgery revealed that Niver had at least one branch of nerve that traversed what appeared to be a small neuroma, which was probably related to the surgery for the 1995 hernia, and that scar tissue from the prior surgery, which was present in a significant manner, had been released....
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