Travelers Ins. Co. v. Savio

Decision Date30 September 1985
Docket NumberNo. 83SC316,83SC316
Citation706 P.2d 1258
PartiesTRAVELERS INSURANCE COMPANY, Petitioner, v. William A. SAVIO, Respondent.
CourtColorado Supreme Court

Law Firm of Thomas J. de Marino, Thomas J. de Marino, James R. Florey, Jr., Denver, for petitioner.

Ranson, Thomas & Yukawa, Jon C. Thomas, Colorado Springs, for respondent.

Knapp, Lee & York, P.C., Robert A. Weinberger, Jon A. Pfeiffer, Denver, for amicus curiae Colorado Defense Lawyers Assn.

James L. Gilbert & Associates, P.C., James L. Gilbert, Richard P. Murphy, Arvada, for amicus curiae Colorado Trial Lawyers Assn.


We granted certiorari to review the decision of the Court of Appeals in Savio v. Travelers Insurance Co., 678 P.2d 549 (Colo.App.1983), which held that the Workmen's Compensation Act of Colorado (the Act) does not prohibit an employee from pursuing common law remedies against a workers compensation insurance carrier for bad faith in the processing of the employee's compensation claim and that the standard of care applicable to such carrier's duty to process claims in good faith is simple negligence. We affirm in part and reverse in part.


On December 2, 1977, William Savio fell from a ladder while working as a journeyman electrician for Fischbach & Moore, Inc., and injured his right ankle. Travelers Insurance Co., the workers compensation insurance carrier for Fischbach & Moore, subsequently admitted liability for temporary total disability. Although he had difficulty walking and experienced pain, Savio resumed his employment on January 17, 1978. His ankle continued to cause pain, however, and on September 12, 1978, a subtalar fusion (arthrodesis) was performed on the ankle by Dr. Donald Gazibara.

Savio's ankle remained in a cast for some twelve weeks, and he had limited mobility for several months thereafter. From November of 1978 through February of 1979, monthly reports filed with the Industrial Commission by Dr. Gazibara indicated that the permanency of Savio's disability was "undetermined" and did not project a date when Savio would be able to return to work. In March of 1979, Dr. Gazibara reported that the fusion of the subtalar joint had failed. On April 2, 1979, he performed surgery to re-fuse the joint. Through July of 1979, Dr. Gazibara's monthly reports indicated that the degree of permanency of Savio's disability was undetermined and that Savio remained unable to work.

In July of 1979, Savio received an offer of employment from Joe Rock of Broyles & Rock Plumbing and Electric in Colorado Springs, Colorado, to perform estimating and office work services if Savio completed a week-long course in estimating offered by the Estimatic Corporation. One such course was scheduled in August. On July 26, 1979, Savio's attorney sent a letter to Travelers' counsel indicating that Savio desired vocational rehabilitation and summarizing the training program and attendant expenses. The letter stated that "there [was] a strong probability" that Savio would obtain work if he completed the course and requested Travelers to advise Savio's attorney whether Savio could enroll in the course and whether the cost would be covered by the Act.

Travelers' attorney forwarded this letter to Eugene Lehner, an assistant claims manager for Travelers with authority over vocational rehabilitation claims, with the comment that "it would seem that [Savio] would be entitled to vocational benefits." Travelers' attorney also recommended that Lehner investigate the matter and, if the course seemed attractive, to secure Division of Labor approval prior to providing the benefits.

Lehner reviewed Savio's file and wrote on a review form dated the first week of August 1979, that the "[e]mployee will probably not be able to return to work as an electrician. Consider retraining under Rehab portion of Act." Lehner determined, however, that Savio was not at that time entitled to vocational rehabilitation benefits. 1 Lehner neither contacted Dr. Gazibara for further information nor communicated to anyone his decision to deny Savio's rehabilitation request.

In his October 1979 monthly report, Dr. Gazibara projected that Savio could return to work on January 1, 1980, and recommended that he be considered for rehabilitation. This report also noted that Savio continued to have difficulty standing for more than a couple of hours and that the permanency of the disability remained "undetermined." After receiving this report, Lehner assigned Savio's claim to a Travelers representative, Dottie Healy, R.N., for assistance in preparing a rehabilitation plan. The assignment letter concluded:

In light of the rather bleak outlook for Mr. Savio, I would appreciate it if you would contact [Savio's attorney], gather what information you can in regard to the Estimatic Corporation of Denver, get some background as to what kind of course they offer, the cost, etc.

After conducting an investigation, Healy reported the following findings: the next available estimating course was scheduled for March 4-7, 1980, in Denver; that Savio's ankle was useless except on flat surfaces; and that Savio had slim chances of obtaining an estimating job if the opening at Broyles & Rock were filled. In December of 1979, she met with Joe Rock and learned that the estimating position with his company was no longer available. During this period of time, Dr. Gazibara's monthly reports revised the projected date when Savio would be able to return to work to May 1, 1980. The December report noted the development of painful bony growths on Savio's ankle; on January 15, 1980, the growths were excised.

On January 25, 1980, Savio's attorney wrote to Travelers seeking information on the status of Savio's rehabilitation request. Three weeks later, Travelers' attorney wrote a letter to Lehner noting a lack of action on Savio's request and suggesting reexamination of Savio to determine if he had attained "maximum medical improvement." Apparently, Travelers did not examine Savio for this purpose at that time.

Following the January operation, Healy met with Savio and contacted Savio's attorney. In a February 27, 1980, report to Lehner, Healy stated that Savio was well-motivated and was physically able to attend an Estimatic course in Denver in March. Although Savio had no immediate job prospects for estimating, Healy secured a place for him in the course, contingent on notification by February 29; informed Savio that Travelers would pay all expenses and tuition; and stated that she would call him back to explain the details of the course. Her report to Lehner concluded: "I have discussed this file with Asst Mgr Lehner and he will take further action on it." No action was taken by Travelers at that time, however, and Savio did not attend that course.

Savio's claim was referred to the Division of Rehabilitation, Colorado Department of Social Services, and on April 10, 1980, the Division wrote to Healy requesting Travelers' position with respect to liability for vocational rehabilitation benefits. Two weeks later, in the absence of any response from Healy, Savio's rehabilitation counselor sent a letter to the Division of Labor inquiring into Savio's status. In May 1980, Travelers determined that Savio should receive vocational rehabilitation. Lehner requested the Division of Rehabilitation to develop a rehabilitation plan within two weeks, including an analysis of the labor market for estimators. In June 1980, the parties agreed to a vocational rehabilitation plan involving training at Colorado Technical College which would lead to employment constructing computer chips. Midway through this program, however, Savio received a new offer from Broyles & Rock to perform estimating work. He accepted that job as of November 17, 1980, with the approval of Dr. Gazibara and Travelers, and completed the Estimatic course in December, at Travelers' expense.

Savio commenced this civil action against Travelers on August 1, 1980, seeking compensatory and punitive damages on two claims. Savio's first claim contains the following allegations:

20. Defendant delayed and denied Plaintiff vocational rehabilitation benefits required by law without a reasonable basis, and at the time of delay or denial knew that there was no reasonable basis for that delay or denial.

21. Defendant corporation's tortious conduct constitutes a breach of its implied covenant of good faith and fair dealing which it owes to Plaintiff.

The first claim also alleges that Travelers' conduct "was attended by circumstances of malice and insult, and wanton and reckless disregard of Plaintiff's rights and feelings." Savio's second claim alleges that Travelers' conduct constituted a breach of contract.

Travelers moved to dismiss Savio's complaint, asserting that the Workmen's Compensation Act, §§ 8-40-101 to 8-54-127, 3 C.R.S. (1973 & 1984 Supp.), provides the exclusive remedies and forum for the injuries alleged in Savio's complaint. The trial court denied the motion, and Savio then filed a motion for partial summary judgment on the issue of Travelers' liability, relying in part on depositions of Healy and Lehner and on the affidavit of Dr. Garth Eldredge, a professor of vocational rehabilitation at the University of Northern Colorado. 2 Dr. Eldredge's affidavit contained statements that Savio should have been referred for vocational rehabilitation in February of 1979, and certainly no later than July 26, 1979, and that Lehner was not qualified to determine Savio's eligibility for rehabilitation.

Characterizing Savio's first claim as one for the intentional infliction of emotional distress, the trial court denied Savio's motion on the basis that certain material issues of fact remained in dispute. The trial court also stated that there was "no material issue of fact as to the negligence of the Defendant in processing this claim."

Savio then filed a motion for reconsideration, which...

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