Stump v. Commercial Union

• Decision Date: 19 October 1992
• Docket Number: No. 02S00-9203-CQ-169,02S00-9203-CQ-169
• Citation: 601 N.E.2d 327
• Court: Indiana Supreme Court
• Parties: Leland STUMP and Sue Carol Stump, (Plaintiffs Below) v. COMMERCIAL UNION, (Defendant Below).

Page 327

601 N.E.2d 327

Leland STUMP and Sue Carol Stump, (Plaintiffs Below) v. COMMERCIAL UNION, (Defendant Below).

No. 02S00-9203-CQ-169.

Supreme Court of Indiana.

Oct. 19, 1992.

Ronald E. James, Jack E. Morris, Benson, Pantello, Morris & James, Fort Wayne, for plaintiffs.

John D. Walda, David R. Steiner, Barrett & McNagny, Fort Wayne, for defendant.

William Groth, Fillenwarth Dennerline Groth & Towe, Indianapolis, for amicus curiae Indiana State AFL-CIO.

Richard J. Swanson, Segal and Macey, Indianapolis, for amicus curiae Intern. Union, UAW.

David Hollenbeck, Blachly, Tabor, Bozik & Hartman, Valparaiso, for amicus curiae Ind. Trial Lawyers Ass'n DICKSON, Justice.

This cause comes to us as a certified question from the United States District Court, Northern District of Indiana, Fort Wayne Division, pursuant to Appellate Rule 15(O) which allows certification of questions of Indiana law for instruction by this Court. By previous order, we accepted the following question:

Does Indiana law permit a cause of action by an injured employee against an employer's worker's compensation carrier for that carrier's actions during its processing and handling of the worker's compensation claim under any or all of the following circumstances, or are all or some of such actions precluded by the exclusive remedy provisions of the Indiana Worker's Compensation Act, Ind.Code 22-3-2-6:

(a) The carrier's actions were tortious such as gross negligence, intentional infliction of emotional distress, and constructive fraud.

(b) The carrier's actions breached its duty to act in good faith and engage in fair dealings with the injured employee.

(c) The carrier's actions breached a fiduciary obligation owing to the injured employee.

(d) The carrier engaged in intentional conduct to deprive the injured worker of the rights to which the worker is entitled under the Act.

The parties and amici curiae have since provided briefs supporting their respective positions.

In proceedings before the federal District Court prior to its submission of the certified question, ¹ the court denied the defendants' first motion for summary judgment, Stump v. Crawford & Co. (N.D.Ind.1989), 726 F.Supp. 228, and, in an unpublished decision, denied a second motion for summary judgment filed by the Commercial Union directed at plaintiffs' second amended complaint. The order of certification presents the following reasons for denial of summary judgment:

The court reasoned that Mr. Stump's claims against the defendant did not arise out of Mr. Stump's employment, but rather arose as the result of the intentional bad acts of the defendant, and thus the industrial board could offer no remedy to Mr. Stump. Consequently, this court found that the defendant's argument that the plaintiff's claims were precluded by the Worker's Compensation Act was erroneous as the Act clearly was not meant to provide a license to insurance companies to willfully further injure employees who have been initially injured in the course of their employment.

Order of Certification at p. 7. However, because of the apparent inconsistency between Judge Lee's decisions in this case and the subsequent decision of Judge Lozano in Dietrich v. Liberty Mut. Ins. Co. (N.D.Ind.1991), 759 F.Supp. 467, and the absence of controlling Indiana Supreme Court precedent, the District Court has sought our instruction "as to what type of causes of action Indiana law will permit against a worker's compensation insurance carrier arising out of its dealing with an injured worker and the processing of the worker's compensation claim." Order of Certification at p. 8.

As to each of the enumerated circumstances (a) through (d) of the certified question, we are asked whether Indiana law permits such cause of action notwithstanding the exclusive remedy provision, Ind.Code Sec. 22-3-2-6, which provides:

The rights and remedies granted to an employee subject to [Ind.Code Sec.] 22-3-2 through [Ind.Code Sec.] 22-3-6 on account of personal injury or death by accident shall exclude all other rights and remedies of such employee, the employee's personal representatives, dependents or next of kin, at common law or otherwise, on account of such injury or death, except for remedies available under [Ind.Code Sec.] 12-18-6. ²

The right of an injured employee to assert an action for damages against a person other than the employer or a fellow employee ³ is expressly recognized in Ind.Code Sec. 22-3-2-13. Indiana courts have consistently held that the exclusive remedy provision does not apply to bar the right of an employee to assert actions against third parties. Seaton v. U.S. Rubber Co. (1945), 223 Ind. 404, 61 N.E.2d 177; Thiellen v. Graves (1988), Ind.App., 530 N.E.2d 765; Rosander v. Copco Steel & Eng'g Co. (1982), Ind.App., 429 N.E.2d 990; Jackson v. Gibson (1980), Ind.App., 409 N.E.2d 1236; Artificial Ice and Cold Storage Co. v. Waltz (1925), 86 Ind.App. 534, 146 N.E. 826.

The applicability of the exclusive remedy provision was cogently addressed in Baker v. American States Ins. Co. (1981), Ind.App., 428 N.E.2d 1342. In Baker, an employee sought damages against his employer's worker's compensation insurance carrier for harm allegedly suffered as the result of knowing misrepresentations made by the insurer's adjusters in an attempt to settle the employee's claim for less than the amount to which he was entitled. The court stated that:

... [Ind.Code Sec.] 22-3-2-6 speaks to personal injury or death by accident on the job, but it does not purport to prohibit actions by an employee against his employer's workmen's compensation insurance carrier for fraudulent misrepresentations made while the employee and the insurer are attempting to settle the claim.... [T]he alleged fraudulent misrepresentation ... is not the kind of harm for which the Workmen's Compensation Act was calculated to compensate.... The alleged fraudulent misrepresentation did not arise "out of and in the course of the employment...." (Citations omitted.) Instead, it arose after Baker had been temporarily but totally disabled from working for a period of time. If Baker's allegations regarding the behavior of the adjusters for American States prove to be true, then it is in the public interest of this state to discourage such activities and to compensate the victim for resulting injury. We hold that the Workmen's Compensation Act does not preclude Baker's suit for damages, except to the extent that he claims attorney's fees as an element of damages. ⁴

Id. at 1347.

Commercial Union argues that, except for the limited circumstances where the carrier has made fraudulent misrepresentations as occurred in Baker, there is no other exception under the exclusive remedy provision for a direct action by an employee against the worker's compensation insurer, citing Indiana Univ. Hospitals v. Carter (1983), Ind.App., 456 N.E.2d 1051. We disagree. In Carter, the plaintiff, a part-time employee of the defendant hospital, was assaulted in the hospital lounge prior to the start of her workshift. After agreeing to an award of worker's compensation benefits, Carter filed a negligence action against the hospital seeking damages for the hospital's failure to maintain a safe place for business invitees. Commercial Union appears to find support from the following passage under Carter:

Ordinarily, when a party files a workmen's compensation claim which is thereafter approved by the Full Industrial Board, such action represents a valid and binding election to receive workmen's compensation benefits as the claimant's sole and exclusive remedy against the employer. (Citations omitted.) One exception exists. A party to a workmen's compensation agreement can challenge the validity of that agreement in an independent tort action for fraud. (Citations omitted.)

Id. at 1057 (emphasis added). The Carter court did not hold that "only one exception exists." Rather, it noted that by her agreement to receive worker's compensation benefits from the hospital, the plaintiff agreed that the incident arose out of and in the course of her employment. It was this which precluded her from bringing a separate action against her employer. Carter did not involve a claim for subsequent, additional injuries proximately caused by the conduct of the worker's compensation insurance carrier. It does not limit the application of the rationale in Baker.

In Dietrich, 759 F.Supp. 467, the Northern District of Indiana decision in apparent conflict with the summary judgment decisions in the present case, the court reasoned that because a worker's compensation insurance carrier's duty to deal in good faith, and any duty as a fiduciary, necessarily arises out of the course of the employment, any breach of such duties therefore falls within the exclusive remedy provision and must be adjudicated before the Worker's Compensation Board. Id. at 470. However, the decision does not apply the interpretation and application of the exclusive remedy provision established in Baker, 428 N.E.2d 1342, nor does it address whether the claimed injuries were caused by the original employment accident or by the subsequent conduct of the insurance carrier.

The exclusive remedy provision precludes separate actions for employee injuries only when the injury or death (a) occurs by accident, (b) arises out of employment, and (c) arises in the course of employment. Evans v. Yankeetown Dock Corp. (1986), Ind., 491 N.E.2d 969, 973. Actions for employee injuries or death not meeting each of these prerequisites are not excluded and may be pursued in the courts. Id.

The relationship of the compensation insurance carrier to the employer should not afford it special immunity. Various entities may also be involved in assisting employers in fulfilling their obligations under the worker's compensation laws. Ambulance services, physicians, hospitals, pharmacies, medical device manufacturers, and others may participate in providing...