Thurston v. Liberty Mut. Ins. Co., Civ. A. 97-31 MMS.

• Decision Date: 17 July 1998
• Docket Number: No. Civ. A. 97-31 MMS.,Civ. A. 97-31 MMS.
• Citation: 16 F.Supp.2d 441
• Parties: Sandra W. THURSTON, Plaintiff, v. LIBERTY MUTUAL INSURANCE COMPANY, a Massachusetts corporation, Defendant.
• Court: U.S. District Court — District of Delaware

16 F.Supp.2d 441

Sandra W. THURSTON, Plaintiff, v. LIBERTY MUTUAL INSURANCE COMPANY, a Massachusetts corporation, Defendant.

No. Civ. A. 97-31 MMS.

United States District Court, D. Delaware.

July 17, 1998.

COPYRIGHT MATERIAL OMITTED

James J. Woods, Jr., Connolly, Bove, Lodge & Hutz, Wilmington, DE, for plaintiff.

Nancy E. Chrissinger, Chrissinger & Baumberger, Wilmington, DE, for defendant.

OPINION

MURRAY M. SCHWARTZ, Senior District Judge.

Introduction

Plaintiff Sandra Thurston ("Thurston") filed a claim against Liberty Mutual Insurance Co. ("Liberty") on January 15, 1997, alleging Liberty breached its duty of good faith and fair dealing in responding to her worker's compensation claim, which arose out of an accident that occurred on October 21, 1993. More specifically, Thurston alleged Liberty breached its duty by failing to provide timely and adequate compensation for treatment and by interfering with her relationship with a physician. Thurston seeks compensatory damages for her severe emotional distress and concomitant physical symptoms, as well as punitive damages. On January 20, 1998, Liberty filed a motion for summary judgment. This Court has jurisdiction pursuant to 28 U.S.C. § 1332, diversity jurisdiction. For the reasons which follow, defendant's motion will be granted in part and denied in part.

Standard of Review

Under the Federal Rules of Civil Procedure, the Court shall grant summary judgment if "there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c). "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute is genuine only if a reasonable jury could return a verdict for the nonmoving party. See id. When considering a motion for summary judgment, the Court must "view all facts and inferences in the light most favorable to the party opposing the motion." Stephens v. Kerrigan, 122 F.3d 171, 176-177 (3d Cir.1997). The Supreme Court has clarified that the moving party must "bear the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). After such a demonstration has been made, however, the nonmoving party must go beyond the pleadings and, based on the same types of evidence, must demonstrate "specific facts showing that there is a genuine issue for trial." Id. 477 U.S. at 324, 106 S.Ct. 2548. See also Williams v. Borough of West Chester, 891 F.2d 458, 460 (3d Cir.1989) (stating that a non-moving party must "adduce more than a scintilla of evidence in its favor ... and cannot simply reassert factually unsupported allegations contained in its pleadings").

Statement of Facts

On October 21, 1993, plaintiff, a science teacher, fell off of a ladder while hanging a mural at school. As a result of this fall, plaintiff sustained serious injuries to her right elbow and wrist and less serious injuries to one of her ankles. As a result of the injuries to her arm, plaintiff proceeded to undergo significant medical treatment, including but not limited to four surgeries (including one that required transplanting part of one knee to her arm, leading to a damaged nerve in her knee), physical therapy and multiple, long-term medications. Unfortunately, her condition did not improve and she developed a chronic pain syndrome known as Complex Regional Pain Syndrome ("CRPS") or Reflex Sympathetic Dystrophy ("RSD"). The permanent disability rating for her arm was determined to be 95 percent. Over the course of her treatment, plaintiff began to suffer from CRPS in her legs as well.

During plaintiff's treatment, defendant did not pay all of plaintiff's bills within the required 30 days of when the bills were sent for payment. Defendant also refused to pay some of the bills at all, asserting in most cases either that the medical service rendered was for a condition not caused by plaintiff's work related injury or that, per evaluation by an independent medical examiner, the treatment was not necessary. Moreover, at one point during plaintiff's treatment with her orthopedic surgeon, a nurse assigned to plaintiff by the insurance company erroneously told the surgeon that plaintiff was planning on filing a malpractice claim against the doctor. This information altered how the doctor responded personally to the plaintiff. Soon after this false information was transmitted to the surgeon, he referred plaintiff to other doctors.

Plaintiff's dealings with the insurance company, the problems associated with obtaining reimbursement for the medical services and finding alternate means of paying bills, and the experience with the nurse who misinformed the doctor about plaintiff's intentions have caused plaintiff severe emotional distress. This distress has caused plaintiff various problems, including depression, sleeplessness, anxiety, vomiting and gastric distress.

Discussion

Defendant first argues plaintiff cannot pursue a claim for defendant's failure to follow the strictures of Delaware's workers' compensation law because she has not requested a hearing by the Industrial Accident Board ("the Board") to review the merits of her claim. Moreover, defendant argues there is no record evidence of bills untimely paid or denied prior to the filing of the lawsuit. Further, there is no genuine dispute over whether the denial of any bills was reasonable. Defendant also asserts plaintiff cannot, on a contract claim, pursue compensatory damages based on emotional distress. Finally, defendant avers plaintiff cannot establish punitive damages as a matter of law.

Plaintiff contends the record supports the existence of delays in payment as well as denials of compensation prior to the filing of the lawsuit and that no Board review is necessary. Plaintiff also argues she has presented physical injuries as well as emotional distress, which provide sufficient grounds for compensatory damages. Finally, plaintiff asserts the record supports a claim of punitive damages.

I. Breach of the Duty of Good Faith and Fair Dealing Claim

The purpose of the workers' compensation law is "to provide for the speedy compensation of injured employees." Pierce v. International Ins. Co. of Ill., 671 A.2d 1361, 1364 (Del.1996). Because employees are the intended beneficiaries of workers' compensation contracts between insurance carriers and employers, employees are able to enforce the contracts even though the workers are not in privity with the carriers. See id. The rights an employee can enforce include the right to payment as set forth in the contract and the right "not to be deprived of the essential benefits of the contract, which include income security and a reduction in uncertainty." Id. 671 A.2d at 1366. Further, to ensure the "reasonable expectations of [the] parties" are satisfied,¹ the carrier's contractual obligations to an employee include a duty of good faith and fair dealing. Id.

A. The Exclusive Province of the Board

Defendant argues plaintiff is barred from suit because she must pursue her complaint under the Delaware's workers' compensation statute by seeking a hearing before the Board. Delaware's workers' compensation law requires that an employee resolve disputes about compensation by petitioning the Board to make a determination regarding the claim. See D.I. 38 at 142;² 19 Del. C. Ann. § 2346 (1997).³ Further, the law states that, except where specifically provided, the workers' compensation statutes shall provide the exclusive remedies and rights for personal injury "arising out of and in the course of employment ...." 19 Del. C. Ann. § 2304 (1997).⁴

Although defendant relies on Correa v. Pennsylvania Manufacturers Association Insurance Company, 618 F.Supp. 915 (D.Del.1985), to argue that these provisions of the law bar plaintiff's suit, the holding to which defendant refers is inapposite to plaintiff's complaint. Correa held that the plaintiffs could not sue the defendant carrier over compensation for treatment of work related injuries prior to seeking a hearing before the Board. Correa, 618 F.Supp. at 921-922. The Correa court also held, however, that a claim for breach of the duty of good faith and fair dealing is not precluded by a failure to seek Board review if "the injuries for which recovery is sought are not components of the physical injuries which originally gave rise to plaintiff['s] worker's compensation claims" but rather arise out of a delay of or out of a refusal to pay medical benefits. Id. 618 F.Supp. at 923.

Since Correa, the Supreme Court of Delaware has determined that this duty of good faith sounds in contract rather than in tort, see Pierce, 671 A.2d at 1366-1367, thereby rejecting the federal court's holding to the contrary. See Correa, 618 F.Supp. at 923. Nevertheless, the Pierce court held that when the "injury alleged by the employee arose after the work-related accident, [the exclusivity provision is] inapplicable" even when the action sounds in contract. 671 A.2d at 1364-1365, 1367 (permitting contract-based bad faith claim based on delayed compensation). As is evident from the record, plaintiff is pursuing a claim for injuries stemming from Liberty's alleged mishandling of her case, not for injuries resulting from the fall. Therefore, plaintiff's claim does not run afoul of Correa or Pierce by virtue of plaintiff's failure to obtain a Board hearing.

B. Delayed and denied compensation

The duty of good faith and fair dealing arises at two major stages in the processing of a claim. The...