Title: SIZEMORE v. CONTINENTAL CASUALTY COMPANY

State: oklahoma

Issuer: Oklahoma Supreme Court

Document:

SIZEMORE v. CONTINENTAL CASUALTY COMPANY  SIZEMORE v. CONTINENTAL CASUALTY COMPANY 2006 OK 36 142 P.3d 47 Case Number: 99940 Decided: 05/30/2006 THE SUPREME COURT OF THE STATE OF OKLAHOMA Sherrie Sizemore, Plaintiff, v. Continental Casualty Company, d/b/a CNA Insurance Company, an Illinois Corporation, and Kerr Group, Inc., a Delaware Corporation, and Transportation Insurance Company, an Illinois Corporation, Defendants. CERTIFIED QUESTION OF LAW ¶0 United States District Court, Northern District of Oklahoma, Honorable Terence C. Kern, certified question of law asking whether Oklahoma law recognizes tort of bad faith against workers' compensation insurer. CERTIFIED QUESTION ANSWERED Wilson N. Jones, lll, and Susan Hamilton Jones, Wilson Jones P.C., Tulsa, Oklahoma; Allen Smallwood, Tulsa, Oklahoma; and Jon Bryan Wallis, Tulsa, Oklahoma, for Plaintiff. James K. Secrest, ll, Roger N. Butler, Jr., Edward J. Main, Secrest, Hill & Butler, Tulsa, Oklahoma, for Defendants, Continental Casualty Company and Transportation Insurance Company. COLBERT, J. ¶1 The United States District Court for the Northern District of Oklahoma has certified the following question pursuant to the Revised Uniform Certification of Questions of Law Act, Okla. Stat. tit. 20, §§ 1601-1611 (2001): Does Oklahoma law recognize a tort for bad faith against a workers' compensation insurer? In response, this Court recognizes such a tort for a workers' compensation insurance carrier's refusal to pay a workers' compensation award and rejects decisions to the contrary. FACTS ¶2 Sherrie Sizemore (Claimant) worked for Kerr Glass in Tulsa, Oklahoma. Kerr Glass was an insured of Continental Casualty Company and Transportation Insurance Company (collectively "Insurer"). In 1991, Claimant was injured in a job-related accident. She received awards of workers' compensation benefits for both temporary total disability and permanent partial disability. In November 2000, Claimant's temporary total disability payments ceased. Claimant alleges that at that time she should have started receiving permanent partial disability payments from her employer's workers' compensation insurance carrier, but did not. In March 2001, the Workers' Compensation Court found that the permanent partial disability payments were past due, accelerated the entire balance, and assessed 18 per cent interest pursuant to section 42(A) of the Workers' Compensation Act. Claimant's action in federal court asserts that Insurer's conduct constitutes a breach of the implied duty of good faith and fair dealing. Insurer contends that no such cause of action exists under Oklahoma law against a workers' compensation insurer. The federal court decided sua sponte to certify the question. ¶3 The question certified is nearly identical to one certified in the recent decision in Deanda v. AIU Insurance, ¶4 This matter provides this Court the opportunity to revisit an issue addressed in Deanda and in Kuykendall v. Gulfstream Aerospace Technologies, HISTORICAL BACKGROUND ¶5 In 1992, this Court foreshadowed application of a common law tort action against a workers' compensation insurer for breach of the implied duty to deal fairly and in good faith by refusing to pay a workers' compensation award. In Goodwin v. Old Republic Insurance Co., ¶6 This Court's signal that it would apply such an action intensified in a line of cases that continued to assume the action's viability. In 1995, this Court went so far as to state: "We also held [in Goodwin] that an injured worker has a cause of action for bad faith against his employer's insurance carrier for refusing to timely pay the injured worker's compensation award." Whitson v. Okla. Farmers Union Mut. Ins. Co., ¶7 In 1996, this Court denied certiorari review of a published Court of Civil Appeals decision which affirmed a judgment entered on a jury's verdict awarding damages for the workers' compensation insurer's bad faith failure to timely pay an award. See Cooper v. Nat'l Union Fire Ins. Co., ¶8 Two years later, this Court once again denied certiorari review of a published opinion of the Court of Civil Appeals which "assumed the [own risk employer's] liability for bad faith" but decided the matter "on the narrower grounds that the alleged bad-faith conduct predated a final award." Heintz v. Trucks For You, Inc., ¶9 The point of this historical analysis is that for a decade this Court expressly assumed the viability of an action based on an insurer's refusal to pay a workers' compensation award. Further, this Court refused to review at least one Court of Civil Appeals decision in which the tort was actually applied by a jury. See Cooper, ¶10 An abrupt halt in the evolution of this Court's emerging recognition of the tort occurred in Kuykendall, ¶11 Kuykendall reasoned that, because section 42(A) of the Workers' Compensation Act provided for interest on overdue payment of an award and because that section provided a mechanism for enforcement of awards in district court, somehow this was the injured worker's sole remedy for a self-insured employer's bad faith failure to pay an award. ¶12 That answer came in Deanda, ¶13 First, as stated in Kuykendall, the Deanda Court asserted that "there are no Oklahoma cases holding an employer liable for bad faith breach in paying a Workers' Compensation award." Deanda, ¶14 Second, the exclusive remedy provision of section 12 applies expressly to the liability in section 11 for accidental personal injury arising out of and in the course of employment. Deanda treated the insurer's bad faith failure to pay an award as an injury arising from the employment relationship. Even if that conclusion were accurate, such conduct cannot be said to have occurred in the course of the injured worker's employment. "[A] bad faith claim is separate and apart from the work relationship, and it arises against an insurer only after there has been an award against the employer." Goodwin, WORKERS' COMPENSATION INSURER'S DUTY TO DEAL FAIRLY AND ACT IN GOOD FAITH IN PAYING AWARD ¶15 "An insurer has an implied duty to deal fairly and act in good faith with its insured and . . . the violation of this duty gives rise to an action in tort for which consequential and, in a proper case, punitive damages may be sought." Christian v. Am. Home Assurance Co., ¶16 Workers in Oklahoma enjoy both a contractual and a statutory status as third party beneficiaries of a workers' compensation insurance agreement. "A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it." Okla. Stat. tit. 15, § 29 (2001). That rule applies specifically to workers in the text of the Workers' Compensation Act: 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 upon such policy for the payment of benefits as provided by the Workers' Compensation Act . . . which contract may be enforced by such employee as the beneficiary thereof. Okla. Stat. tit. 85, § 65.3 (2001). Thus, the right to enforce the insurance agreement, and the attendant duty of good faith and fair dealing implied in that contract, belongs to the injured worker. This is true whether the insurer is an insurance company or a self-insured employer who voluntarily assumes insurer status. ¶17 The Workers' Compensation Act now defines "insurance carrier" to include "stock corporations, reciprocal or interinsurance associations, or mutual associations with which employers have insured, and employers permitted to pay compensation, directly under the provisions of paragraph 4 of subsection A of Section 61 of this title." Okla. Stat. tit. 85, § 3(15) (Supp. 2005). Thus, under this recent amendment, an "individual self-insured or a group self-insurance association" is expressly included in the definition of "insurance carrier." SCOPE OF EXCLUSIVE REMEDY PROVISION ¶18 Employers are required by section 11 of the Workers' Compensation Act to pay compensation for "accidental personal injury sustained by the employee arising out of and in the course of employment." Section 12 makes such liability "exclusive and in place of all other liability of the employer . . . at common law or otherwise, for such injury, loss of services, or death" (emphasis added). Thus, the Legislature has limited the exclusive remedy of workers' compensation to an employer's liability for accidental injury arising out of and in the course of employment. Nothing in section 12's exclusive remedy provision extends common law immunity to an insurance carrier for its failure to act in good faith and deal fairly in payment of an award. ¶19 This action against the insurer is not controlled by the exclusive remedy provision of the Workers' Compensation Act. An insurance carrier's bad faith in failing to pay court-ordered benefits is not reasonably encompassed within the "industrial bargain" by which the worker "gave up the right to bring a common law negligence action against the employer and in return received automatic guaranteed medical and wage benefits. The employer gave up the common law defenses and received reduced exposure to liability." Parret v. UNICCO Serv. Co., ¶20 "[T]he intent of the Work[ers'] Compensation Law is to make the insurance carrier one and the same as the employer as to liability and immunity." U.S. Fid. & Guar. Co. v. Theus, ¶21 An insurer's refusal to pay a workers' compensation award fails to meet three of the section 11 elements of a valid workers' compensation claim. It is not (1) an accidental injury (2) arising out of and (3) in the course of employment. Although "accidental injury" is not defined in the Act, "compensable injury" is defined as "any injury or occupational illness, causing internal or external harm to the body, which arises out of and in the course of employment if such employment was the major cause of the specific injury or illness." Okla. Stat. tit. 85, § 3(13) (Supp. 2005). Refusal to pay an award does not "arise out of" the worker's employment because there is no causal nexus between the conditions under which the work was performed and the resulting injury. See Moore v. City of Norman, ¶22 The Workers' Compensation Act provides a comprehensive scheme for providing medical care and wage benefits to injured workers. However, not every injury connected to work falls within the exclusive remedy provision of the Act. Some injuries are expressly excluded from the provisions of the Act. These include: (1) third party claims under section 44 of the Act; (2) a common law action under the penalty provision of section 12 against an employer who fails to secure compensation in the manner provided by section 61 of the Act; (3) certain exceptions to the Act, found in section 11, based on an employee's willful injury to self or another, failure to use a guard or protection furnished against accident, substance abuse, or horseplay; and (4) non-accidental injury which the employer knew was certain or substantially certain to result from the employer's conduct, See Parret, SECTION 42 PENALTY PROVISIONS ¶23 This Court has struggled with the question of whether section 42 ¶24 "This Court will look to the text of the Workers' Compensation Act, its underlying policies, and to the purposes of workers' compensation generally in applying the provisions of the Act." Parret, ¶25 Section 42(A) addresses late payment of workers' compensation benefits. When payment under the terms of a workers' compensation award are not made within 10 days, the Workers' Compensation Court may order a certified copy of the award to be filed in a district court clerk's office to be enforced as a judgment of the district court. The award bears interest at the rate of 18 per cent until paid. Thus, the Legislature has provided an incentive for prompt payment of workers' compensation awards ¶26 A claimant seeking to enforce an award must first utilize the mechanism provided in section 42(A) of the Act and have the award certified for enforcement. But if the insurance carrier still refuses to pay the award, as is alleged in this matter, an action for the insurer's bad faith refusal to do so will lie in district court. ¶27 This holding gives the Legislature's intended effect to section 42. It recognizes that the provision was never intended to be exclusive, nor is it adequate to deter an insurance carrier's refusal to pay or to adequately compensate the injured worker for attorney fees and other items of harm flowing from the carrier's refusal to pay. Although section 42 expresses the Legislature's intent that awards be paid promptly, nothing in the Act has supplanted a worker's common law remedy for an insurance carrier's bad faith in refusing to pay a workers' compensation award. CONCLUSION ¶28 Today, this Court recognizes that a common law tort action exists for an insurance carrier's bad faith in refusing to pay a workers' compensation award. In doing so, this Court reaches the result foreshadowed by a line of decisions dating back to 1992. Any language in Kuykendall or Deanda that is contrary to this opinion is rejected. ¶29 This Court approves and adopts the rule that where a workers' compensation claimant has followed the mechanism for enforcement of an award pursuant to section 42(A) of the Workers' Compensation Act and the insurer fails to act in good faith and deal fairly by paying the award, that failure gives rise to a common law action for bad faith in tort. Such action may be brought against a workers' compensation insurer, a self-insured employer, or any entity meeting the Act's definition of "insurance carrier" found at section 3(15). CERTIFIED QUESTION ANSWERED CONCUR: Watt, C.J., Kauger, Edmondson, Taylor, Colbert, JJ. DISSENT: Winchester, V.C.J., Lavender, Hargrave, Opala, JJ. FOOT