Case Title: KUYKENDALL v. GULFSTREAM AEROSPACE TECHNOLOGIES

Citation: 

Docket Number: 97036

State: oklahoma

Court: Oklahoma Supreme Court

Date: 2002-12-17T00:00:00Z

Document:
KUYKENDALL v. GULFSTREAM AEROSPACE TECHNOLOGIES  KUYKENDALL v. GULFSTREAM AEROSPACE TECHNOLOGIES 2002 OK 96 66 P.3d 374 Case Number: 97036 Decided: 12/17/2002 THE SUPREME COURT OF THE STATE OF OKLAHOMA C. C. KUYKENDALL, Appellant, v. GULFSTREAM AEROSPACE TECHNOLOGIES, Appellee. ON CERTIORARI TO THE COURT OF CIVIL APPEALS, DIVISION 1 ¶0 The appellant, C. C. Kuykendall, appeals an order granting a motion to dismiss for failure to state a claim upon which relief can be granted. Kuykendall sued the appellee, Gulfstream Aerospace Technologies, for its bad faith failure to pay for Kuykendall's medical prescriptions as ordered by the Workers' Compensation Court. The Court of Civil Appeals reversed and remanded. CERTIORARI PREVIOUSLY GRANTED; OPINION OF THE COURT OF CIVIL APPEALS VACATED; JUDGMENT OF THE DISTRICT COURT AFFIRMED. Louis P. Falsetti, BRADY, SCHAULAT & FALSETTI, Oklahoma City, Oklahoma; Attorneys for Appellant. Gary C. Pierson, Shawn E. Harrell, Nathan L. Whatley, McAFEE & TAFT A PROFESSIONAL CORPORATION, Oklahoma City, Oklahoma; Attorneys for Appellee. WINCHESTER, J ¶1 The issue before us is whether Oklahoma will recognize a tort for bad faith against a self-insured employer who failed to pay for medicine prescribed for its employee as ordered by a Workers' Compensation Court. We decline to create a common law remedy when the legislature has provided a statutory remedy in the Workers' Compensation Act. ¶2 On August 14, 2001, the appellant, C. C. Kuykendall, filed a petition in district court naming Gulfstream Aerospace Technologies, the appellee, as defendant. The petition alleged that Kuykendall filed pleadings in Workers' Compensation Court to reopen a prior court order for a change of condition, the worsening of a neck injury he had suffered. An order for permanent partial disability was filed on September 8, 2000, which was appealed to the Workers' Compensation Court En Banc. That court affirmed the trial court's order on November 29, 2000. The trial court's order provided that Gulfstream, a self-insured employer, should provide the claimant, Kuykendall, with continuing prescription medication from Dr. Steve Drabek to maintain Kuykendall's condition.[66 P.3d 375] ¶3 Kuykendall forwarded these prescription receipts to Gulfstream for reimbursement in January 2001. The total amount for the prescriptions was $2,629.78. Without an explanation, Gulfstream forwarded a check to Kuykendall for $1,311.89, and refused to pay the balance of the prescriptions, all of which were prescribed by Dr. Drabek. On January 18, 2001, Kuykendall filed pleadings in Work-[66 P.3d 375]-ers' Compensation Court to revoke Gulfstream's "own risk" permit. The court denied Kuykendall's request for revocation, but required Gulfstream to pay for the treatment. However, Gulfstream has continued to refuse to pay the balance for the prescriptions. Kuykendall subsequently filed his petition in district court. ¶4 The petition alleged that Gulfstream's actions were in bad faith and malicious, and that its disregard for the orders of the Workers' Compensation Court were without reason or justification. The petition asked for the balance for the prescriptions in the amount of $1,317.89, plus punitive damages. Gulfstream answered with a motion to dismiss claiming that the district court did not have subject matter jurisdiction, and that Kuykendall failed to state a claim against Gulfstream upon which relief could be granted. After Kuykendall responded, the trial court dismissed the case with prejudice. The court found that Kuykendall had failed to state a claim upon which relief could be granted because no viable cause of action existed for bad faith post-award conduct arising out of a workers' compensation case in Oklahoma. The Court of Civil Appeals reversed and remanded. We previously granted certiorari. ¶5 Gulfstream, in its petition for writ of certiorari, argues that the Court of Civil Appeals' opinion has created a new tort for bad faith post-award conduct in a workers' compensation case despite decisions by this Court to the contrary. Gulfstream cites three cases, Fehring v. State Ins. Fund, ¶6 Kuykendall answers that the issue in Fehring was narrow. In that case a claimant and his wife sued the State Insurance Fund (SIF) for bad faith failure to pay a workers' compensation award. Their petition alleged that the Workers' Compensation Court awarded Fehring permanent partial disability benefits. After the order became final, the benefits were not timely paid by the SIF. Another Workers' Compensation Court order issued because the SIF had not paid. After that order became final, SIF still refused to pay. The Court found that the Governmental Tort Claims Act (GTCA) protected the SIF against a bad faith cause of action. For an agency to be liable under the GTCA, the plaintiff must prove that the conduct of the agency's employee was within the employee's scope of employment. To be within the scope of employment, the employee's actions must be in good faith. If an agency's employee acted in bad faith, the employee would not be acting within the scope of employment and the agency would be immune under the act. Kuykendall concludes that Fehring did not exclude future recognition of a cause of action for bad faith post-award conduct. He urges that Fehring assumed such a cause of action existed, as had all prior decisions of this Court. ¶7 The Goodwin and Anderson cases, which are cited in Fehring, discuss bad faith refusal to pay an employee's workers' compensation award. Both cases assume for the purpose of resolving the issues that a workers' compensation insurance company may be subjected to liability in tort for willful, malicious, and bad faith refusal to pay. Goodwin, ¶8 No Oklahoma case holds that a workers' compensation insurer has a duty of [66 P.3d 376]good faith in paying a workers' compensation award, the violation of which is a tort. A holding of a case declares the conclusion of law reached by the court as to the legal effect of the facts disclosed. Black's Law Dictionary 658, (5th ed. 1979). "Holding" may be contrasted with obiter dictum, which is a statement in a decision that is unnecessary to support the conclusion reached. American Trailers v. Walker, ¶9 Even if this Court were to recognize an insurer's duty to exercise good faith and fair dealing toward a worker's compensation claimant, that duty would not apply equally to a self-insured employer. The cited cases draw a distinction between workers' compensation insurers and self-insured employers. In Goodwin the Court cited the exclusivity provision, now codified as ¶10 In Whitson, the claimant argued that his employer, which happened to be an insurance company, but not the carrier for workers' compensation, had a duty of good faith toward him tantamount to that owed by an insurance company to its insured. After citing the exclusivity provision, the Court referred to Goodwin and concluded that "an employer's liability to an injured worker is limited to that created by § 12 of the Workers' Compensation Act. Whitson, ¶11 Harter Concrete Products v. Harris, ¶12 The Workers' Compensation Act provides remedies available to employees when their employers or insurance companies violate a provision. Section 42 sets forth the sole remedy available when there is a failure to pay compensation due under the terms of an award. Lum v. Lee Way Motor Freight, If payment of compensation or an installment payment of compensation due under the terms of an award . . . is not made within ten (10) days after the same is due by the employer or insurance carrier liable therefor, the Court may order a certified copy of the award to be filed in the office of the court clerk of any county, which award whether accumulative or lump sum shall have the same force and be subject to the same law as judgments of the district court. Any compensation awarded and all payments thereof directed to be made by [66 P.3d 377]order of the Court, except in the case of an appeal of an award . . . shall bear interest at the rate of eighteen percent (18%) per year from the date ordered paid by the Court until the date of satisfaction. . . . Upon the filing of the certified copy of the Court's award a writ of execution shall issue and process shall be executed and the cost thereof taxed, as in the case of writs of execution, on judgments of courts of record, as provided by Title 12 of the Oklahoma Statutes; provided, however, the provisions of this section relating to execution and process for the enforcement of awards shall be and are cumulative to other provisions now existing or which may hereafter be adopted relating to liens or enforcement of awards or claims for compensation. ¶13 This statute provides the remedy for an employee to collect from the self-insured employer who refuses to pay the amount awarded by the workers' compensation court. When a certified copy of the award is filed in the offices of the court clerk of a county, and entered on the judgment docket, that certified unpaid award effectively becomes and is enforceable as a district court judgment. Enforcement proceedings may then be conducted in the district courts. Bishop v. Wilson Quality Homes, CERTIORARI PREVIOUSLY GRANTED; OPINION OF THE COURT OF CIVIL APPEALS VACATED; JUDGMENT OF THE DISTRICT COURT AFFIRMED. ¶ 14 HARGRAVE, C.J., LAVENDER, OPALA, SUMMERS, WINCHESTER, JJ., concur ¶ 15 WATT, V.C.J., HODGES, KAUGER, BOUDREAU, JJ., dissent Hodges, J., dissenting, with whom Watt, V.C.J. and Boudreau, J. join. ¶1 In 1915, Oklahoma workers and employers became parties to an "industrial bargain" imposed by statute. Employers gave up their common law defenses of contributory negligevice, assumption of risk, and the fellow servant doctrine. They received fixed no-fault liability. Employees gave up their common law right to sue in district court. In return they received wage benefits and medical care as their exclusive remedy under the Workers' Compensation Act. ¶2 The cost of these benefits is placed on the consumer through the medium of insurance, the premium cost of which is passed on in the price of products or services. An employer may purchase workers' compensation insurance or elect, under certain criteria, to become self-insured. Insurers, or employers functioning as an insurer, have never been parties to the industrial bargain. ¶3 Today, this Court extends the exclusive remedy provisions of the Workers' Compensation Act to insurers, thus relieving them of their common law duty to deal fairly and act in good faith. This gift to workers' compensation insurers is not authorized by the Act, nor is it supported by precedent. To the contrary this Court has noted that "the excusivity provision of the statute relates to the liability of the employer - not that of the insurer." Goodwin v. Old Republic Insurance Co., ¶4 Section 42(A), as this Court held in Lum v. Lee Way Motor Freight, ¶5 Today's extension of the industrial bargain to insurers is legally unjustified for another reason. An insurer's refusal to deal fairly and act in good faith is an intentional tort. Buzzard v. Farmers Ins. Co., Inc., ¶6 Workers' compensation was constructed to address "accidental personal injury." Okla. Stat. tit. 85, § 11 (2001). That jurisdictional element of a workers' compensation claim is missing when an insurer or a self-insured employer willfully inflicts injury by refusing to pay an award out of animosity towards the claimant or the Workers' Compensation Court. In such a situation, the injured worker should be allowed to seek redress for the insurer's conduct in the district court. ¶7 This Court has never indicated that a self-insured employer is entitled to the benefit of the Act's exclusive remedy provision when, while acting as an insurer, it wrongfully and intentionally refuses to pay a workers' compensation award. I would hold that a workers' compensation insurer or a self-insured employer standing in an insurer's shoes faces liability for its bad faith refusal to pay the for medical care or wage benefits provided in a workers' compensation award. KAUGER, J., with whom Watt, V.C.J., Hodges and Boudreau, JJ. join, dissenting: ¶1 A single, first impression question of law is presented: whether a self-insured employer is shielded by the Workers' Compensation Act, FACTS ¶2 While in the employ of the defendant/appellee, Gulfstream Aerospace Technologies (employer), the plaintiff/appellee, C.C. Kuykendall (employee), suffered a work-related injury. The employer is self insured for purposes of guaranteeing payment of its workers' compensation obligations. ¶4 Almost a year after the employer was initially ordered to pay the costs of the employee's prescription drugs and five months after the second order for reimbursement, the employee filed this cause in district court. The employee sought actual and punitive damages for his employer's bad faith, malicious, post-award conduct in refusing to pay for the court-ordered prescription drugs. ¶5 On October 23, 2001, the trial court granted the employer's motion to dismiss with prejudice finding that Oklahoma did not recognize a bad faith cause of action for post-award conduct arising from a workers' compensation case. Determining that the employee had stated a valid claim for bad faith post-award conduct, the Court of Civil Appeals reversed and remanded the cause on February 15, 2002. We granted certiorari review on April 22, 2002. ¶6 THE MAJORITY'S REFUSAL TO RECOGNIZE A CAUSE OF ACTION FOR THE POST-AWARD BAD FAITH BREACH OF A WORKERS' COMPENSATION INSURER IS UNSUPPORTED BY LEGISLATIVE MANDATE, OUR OPINIONS CONSIDERING THE NATURE OF BAD FAITH ACTIONS IN THE WORKERS' COMPENSATION ARENA OR WELL-REASONED EXTANT JURISPRUDENCE. ¶7 The employer argues that Oklahoma jurisprudence will not support the recognition of a bad faith claim for post-award conduct in the workers' compensation arena. Further, the employer asserts that ¶8 Here, the employer is wearing two hats, that of employer and that of an insurer. The insurer's hat was substituted for the employer's hat once the Workers' Compensation Court ordered payment of prescription expenses. The same protections accorded to an employer under the Workers Compensation Act do not extend to that of an insurer. I. ¶9 A. AN INJURED EMPLOYEE MAY MAINTAIN A COMMON LAW ACTION FOR DAMAGES IF THE EMPLOYER FAILS TO SECURE THE PAYMENT OF COMPENSATION FOR THE INJURIES. ¶10 Title ". . . If an employer has failed to secure the payment of compensation for his injured employee, or his legal representatives if death results from the injury, may maintain an action in the courts for damages on account of such injury, and in such action the defendant may not plead or prove as a defense that the injury was caused by the negligence of a fellow servant, or that the employee assumed the risk of his employment, or that the injury was due to the contributory negligence of the employee . . ." The legislatively-imposed penalties are severe. The employer is striped of the defenses of negligence of a fellow servant, assumption of the risk and the employee's contributory negligence. "If any insurance carrier intentionally, knowingly, or willfully violates any of the provisions of the Workers' Compensation Act or any published rules or regulations promulgated thereunder, the Insurance Commissioner, on the request of a judge of the Court or the Administrator, shall suspend or revoke the license or authority of such insurance carrier to do a compensation business in this state." ¶12 Coverage or the ability to pay are not at issue here, and there is no question that the self-insured employer provided some workers' compensation benefits. The dispositive issue is whether the employer secured payment of compensation for its employee's injuries. The employee has not been paid for expenses which twice have been determined by the Workers' Compensation Court to be for a work-related injury. The employer has ignored two orders issued from the Workers' Compensation Court. ¶13 The common law remains in full force in Oklahoma, unless a statute explicitly provides to the contrary. ¶14 This Court should not -- in the presence of statutory language which contemplates that employers who do not secure workers' compensation benefits are subject to suit in district court and in the absence of the expressed legislative intent to deprive an employee of the bad faith cause of action -- bar a post-award suit for the intentional tort in district court. It is difficult to fathom how the employee -- who remains unpaid for court-ordered benefits -- is in a position much improved from the employee who finds his employer has obtained no coverage. In both instances, the employee may well remain unpaid for a work-related injury. ¶15 B. INTENTIONAL ACTS OF BAD FAITH DO NOT FALL WITHIN THE RUBRIC OF "ACCIDENTAL" INJURIES COMPENSABLE UNDER THE WORKERS' COMPENSATION ACT. ¶16 Section 11 ¶17 Recovery for damages associated with the intentional tort of bad faith simply do not fall within the exclusive jurisdiction of the Workers' Compensation Court. ¶18 C. AS A STATUTORILY DEFINED THIRD-PARTY BENEFICIARY OF THE WORKERS' COMPENSATION INSURANCE CONTRACT, THE EMPLOYEE MAY MAINTAIN A BAD FAITH CAUSE OF ACTION AGAINST THE INSURER. ¶19 This Court first recognized a cause of action in tort for an insurance company's bad faith refusal to pay a valid insurance claim in Christian v. American Home Assurance Co., "Every contract of insurance issued by an insurance carrier for the purpose of insuring an employer against liability under the Workers' Compensation Act shall be conclusively presumed to be a contract for the benefit of each and every person upon whom insurance premiums are paid, collected, or whose employment is considered or used in determination of the amount of premium collected under such policy for the payment of benefits . . . which contract may be enforced by such employee as the beneficiary thereof." [Emphasis supplied.] Under §65.3, employees are specifically denominated as third party beneficiaries with the express right to enforce the workers' compensation insurance contract. ¶21 Insurers owe a duty of good faith to employees deemed to be a third-party beneficiaries of a workers' compensation insurance contract. ¶22 D. THE PENALTY PROVISION OF THE WORKERS' COMPENSATION ACT IS INADEQUATE TO MAKE AN EMPLOYEE WHOLE FOR INJURIES CAUSED BY THE INSURER'S BAD FAITH BREACH. ¶23 Pursuant to ¶24 Section 42 does not have a provision allowing the award of attorney's fees -- an employee seeking imposition of either of the penalties will be required to expend a portion of the recovered award and interest in compensation of legal counsel. In a bad faith action, the employee would be entitled to the award. ¶26 Under the facts presented, the majority has effectively left the employee with no satisfaction. The employee did attempt to get the employer's self-insured status suspended or revoked. The record is unclear why the request was denied, but it is undisputed that it was. Also, with only $1,317.89 left unpaid, it is doubtful that the employee could even afford to hire an attorney to pursue enforcement of the judgment -- to do so would most certainly cost more than the benefits and interest he might eventually be awarded. There is absolutely no reason to believe that the employer would be any more likely to respond to the district court's order than he was to those of the Workers' Compensation Court. Even with an enforceable judgment, the employee would most likely come away empty handed and with an attorneys' fee to pay. ¶27 Finally, the fact that an essentially administrative penalty is provided in the Workers' Compensation Act to encourage prompt payment of awards should not preclude suit for bad faith breach of the insurance contract. Attorneys, doctors, teachers and other professionals may be subject to discipline through administrative procedures. Nevertheless, provision for such professional discipline will not preclude malpractice actions. It should not preclude an action for bad faith breach of the workers' compensation insurance contract. [66 P.3d 384] II. ¶28 OKLAHOMA JURISPRUDENCE HAS LED EMPLOYEES TO REASONABLY EXPECT FAIR DEALING AND HAS PUT WORKERS' COMPENSATION INSURERS ON NOTICE THAT ACTING IN BAD FAITH MAY SUBJECT THE INSURER TO TORT DAMAGES. ¶29 Our most recent pronouncement concerning the possibility of bringing a bad faith action for post-award conduct in the workers' compensation arena, Fehring v. State Ins. Fund, ¶30 Nevertheless, Fehring did not involve either an insurance company or a self-insured employer's failure to pay a workers' compensation award. Rather, it determined that the State Insurance Fund was a state entity entitled to immunity under the Governmental Tort Claims Act, "It is undisputed that intentional acts are statutorily excluded under the Workers Compensation Act. It is undisputed that the bad faith refusal to pay an insurance contract under its terms may be an intentional tort. It is undisputed that The same premises indisputable and undisputed in Goodwin remain so today. Only accidental injuries are covered by the Workers' Compensation Act. Third party beneficiaries may enforce contract terms made for their benefit. Bad faith breaches may be intentional torts. Employees continue to be third party beneficiaries of the workers' compensation insurance contract. These employees should be allowed to enforce the terms of the contract and to bring suit in district court for the contract's bad faith breach. [66 P.3d 385] ¶32 Anderson v. United States Fidelity & Guaranty Co., ¶33 Perhaps the most obvious signal to workers' compensation insurers of the need to act in good faith is YMCA of Oklahoma City v. Melson, ¶34 When considered together -- Fehring, Goodwin, Anderson and YMCA -- have forecast, to insurance carriers and self-insured employers, the need to act in good faith to avoid tort liability. With those cases as a part of Oklahoma's jurisprudence, it is reasonable both for the employee to expect fair dealing and for insurers and self-insured employers to be required to act in good faith. II. ¶36 WELL-REASONED EXTANT JURISPRUDENCE -- NEITHER CONSIDERED NOR ANALYZED BY THE MAJORITY -- SUPPORTS THE RECOGNITION OF THE TORT OF BAD FAITH FOR POST-AWARD CONDUCT. ¶37 Just as the employer ignored two court orders to pay for the employee's pre-[66 P.3d 386]scription drugs, the majority ignores persuasive extant jurisprudence supporting the imposition of a bad faith cause of action for post-award conduct. The majority makes no reference to extant jurisprudence. Nevertheless, many courts have considered whether workers' compensations statutes similar to Oklahoma's prohibit the institution of bad faith claims against insurers. ¶38 Courts refusing to acknowledge an independent tort action have done so: on grounds that no third-party beneficiary status exists between the employer and the insurer ¶39 The better reasoned opinions -- and those more closely aligned both with Oklahoma's legislative framework and with the forecast of this Court's opinions indicating that a bad faith tort action might lie for post-award conduct -- allow independent actions for bad faith. They provide that the exclusivity provisions of their respective workers' compensation schemes are inapplicable because: bad faith is not a direct or natural consequence of the original compensable injury; ¶40 Neither do these courts determine that remedies encompassed within the workers' compensation context prevent recovery of bad faith damages. These findings are supported by the recognition that the statutory remedies: are most often modest when compared to recoveries at common law; CONCLUSION ¶41 It is axiomatic that an employee's rights and remedies from an accidental injury suffered in the course of employment are exclusively provided under the Workers' Compensation Act, 85 O.S. 2001 §1, et seq. District courts have no subject matter jurisdiction over a claim to workers' compensation benefits. Nevertheless, the exclusivity principle is limited to matters surrounding a job-related accidental injury. It does not extend to post-award dealings during which a tort may arise by reason of a bad faith breach by the insurer or self-insured employer. Although administrative fines may have some deterrent effect on self-insured employers, they do not purport to address the plight of the injured worker who may suffer great deprivation as a result of the tortious denial or delay of benefits. Further, allowing an employee to proceed in tort in the district court does not invade the province of the Workers' Compensation Court. Before an employee may file a bad faith action, the Workers' Compensation Court's work will have been concluded -- the award for the job-related injury will be in place. Once the award has been finally determined by the Workers' Compensation Court, the issue will be identical to any bad faith tort action -- whether the insurer has failed to execute its contract in good faith. ¶42 Today, the majority places an overbroad interpretation on the exclusivity and remedy provisions of the Workers' Compensation Act. It does so without overruling cases which would indicate that employees are entitled to expect, and that insurers are required to act, in good faith in the workers' compensation arena. It extends immunity from a bad faith suit to a self-insured employer in absence of specific statutory language requiring such a result and in the presence of the Legislature's declaration that, as third-party beneficiaries, employees may enforce such contracts. The majority does so although the Legislature has had the benefit of numerous rulings of this Court indicating that such a cause of action might well lie in post-award situations. Rather than judicially legislating a result not supported or required by the Workers' Compensation Act, our prior jurisprudence or well-reasoned extant case law, I would recognize the cause of action without expressing whether the facts presented support an award. The decision to preempt the common law action should be left to the Legislature's wisdom through the use of specific language if it disagrees with such a resolution. [66 P.3d 389] FOOT