Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-03-02860/USCOURTS-ca8-03-02860-0/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 

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The Honorable LINDA R. READE, United States District Judge for the

Northern District of Iowa.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 03-2860

___________

Tamela J. Petrillo, et al., *

*

Plaintiffs - Appellants, *

* Appeal from the United States

v. * District Court for the

* Northern District of Iowa.

Lumbermens Mutual Casualty *

Company, et al., *

*

Defendants - Appellees. *

___________

Submitted: April 12, 2004

Filed: August 5, 2004 

___________

Before LOKEN, Chief Judge, RICHARD S. ARNOLD and FAGG, Circuit Judges.

___________

LOKEN, Chief Judge.

The principal issue presented by this appeal is whether Iowa law imposes tort

liability on a workers’ compensation insurer for bad-faith failure to monitor and direct

the medical treatment being furnished by the employer-insured to an injured

employee. Like the district court,1

 we conclude that the insurer’s duty in this situation

is limited to paying the workers’ compensation benefits to which the employee is

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Lumbermens terminated benefits because the Iowa workers’ compensation law

requires employers to pay only for injuries “arising out of and in the course of the

employment.” IOWA CODE ANN. § 85.3(1). That decision is not an issue on appeal.

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entitled. Accordingly, the district court properly instructed the jury, and its judgment

entered on the jury’s verdict in favor of the insurer must be affirmed. 

Tamela Petrillo slipped and fell at work in February 1999. She reported the

accident to T.I. Group, her employer. T.I. Group sent her to a physical therapist who

treated Petrillo’s hip pain for two months and discharged her. T.I. Group also

notified its compensation insurer, Lumbermens Mutual Casualty Company.

Lumbermens paid for the two months of treatment and closed its file. Petrillo

continued working. In November she complained to T.I. Group that her hip pain had

returned. T.I. Group sent her back to the therapist and then to a physician, who

diagnosed a broken hip. Lumbermens reopened the file and resumed paying benefits.

The physician referred Petrillo to an orthopedic surgeon, who concluded that

her hip pain was most likely related to a childhood condition known as Perthes.

When notified of this medical opinion, Lumbermens terminated benefits as of

March 4, 2000.2

 Petrillo continued her medical treatment, eventually undergoing

three hip replacement surgeries and surgery to implant a spinal stimulator. She

experienced significant hip deterioration and developed chronic regional pain

syndrome. In June 2001, Lumbermens ordered an independent medical examination.

When the physician opined that Petrillo suffered from a preexisting hip condition

aggravated by the work injury, Lumbermens reinstated workers’ compensation

benefits and paid Petrillo’s medical bills retroactive to March 4, 2000, together with

interest. 

Petrillo and her family then commenced this diversity action against T.I. Group

and Lumbermens, asserting various claims. The district court dismissed all claims

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against T.I. Group and submitted the bad faith claim against Lumbermens to a jury.

Over Petrillo’s timely objection, the court instructed the jury that Iowa law imposes

a duty on a workers’ compensation carrier “to pay for reasonable and necessary

medical care” provided an employee for a compensable injury. The jury returned a

verdict in favor of Lumbermens. Petrillo appeals, contending that the jury should

have been instructed that Lumbermens had a duty to “furnish” as well as “pay for”

reasonable and necessary medical care. By limiting Lumbermens’s duty to paying for

her medical care, Petrillo argues, the court’s instruction foreclosed her claim that

Lumbermens acted in bad faith by not having her sent to a physician, rather than a

physical therapist, between February and November 1999, greatly enhancing her

injuries. We review the court’s jury instructions for abuse of discretion. “A district

court by definition abuses its discretion when it makes an error of law.” Computrol,

Inc. v. Newtrend, L.P., 203 F.3d 1064, 1070 (8th Cir. 2000).

In Dolan v. Aid Insurance Co., the Supreme Court of Iowa recognized a cause

of action in tort against an insurance carrier for bad faith conduct in denying an

insured’s first-party claim for the “benefits of the policy.” 431 N.W.2d 790, 794

(Iowa 1988) (en banc). In Boylan v. American Motorists Insurance Co., the Court

extended this doctrine to an employee’s claim that a workers’ compensation insurance

carrier was “guilty of the type of bad-faith conduct for which tort liability was

recognized in Dolan.” 489 N.W.2d 742, 744 (Iowa 1992). Petrillo bases her bad

faith claim on Boylan, which limited an insurer’s liability to bad faith denial of

“benefits of the policy.” Here, Petrillo’s employer unilaterally made the decision to

send her to a physical therapist after she reported the workplace injury. It is

undisputed that the Lumbermens policy reserved to the employer-insured the

discretion to choose the medical provider who would provide services for which

Lumbermens was obligated to pay. Thus, Petrillo’s claim that Lumbermens was

guilty of bad faith in not overruling T.I. Group’s choice of the appropriate medical

provider is not a claim for bad faith denial of “benefits of the policy” within the

meaning of Dolan as applied in Boylan. 

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The Court of Appeals of Iowa recently quoted a trial court’s observation that

“[u]p to now, all of the appellate decisions in our state considering bad faith torts in

the worker’s [sic] compensation context have involved a bad faith failure to pay

benefits.” Thielen v. Aetna Cas. & Sur. Co., 662 N.W.2d 370, 2003 WL 118204, at

*3 (Iowa App. Jan. 15, 2003) (unpublished). 

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The Iowa workers’ compensation statute provides that “the employer is obliged

to furnish reasonable services . . . to treat an injured employee, and has the right to

choose the care.” IOWA CODE ANN. § 85.27(4). In deciding that an injured

employee’s bad faith claim is similar to the first-party claim in Dolan, the Supreme

Court of Iowa commented in Boylan: “Although the . . . statute speaks only of the

obligation of the employer, the commissioner’s regulations consign these obligations

to the employer’s insurance carrier.” 489 N.W.2d at 743. Similarly, the Court

recently stated that § 85.27 “imposes an affirmative duty on the part of the employer

and the workers’ compensation carrier to furnish reasonable and necessary medical

care to an injured employee.” Gibson v. ITT Hartford Ins. Co., 621 N.W.2d 388, 399

(Iowa 2001). 

Petrillo argues that these dicta establish that an employer and its workers’

compensation insurer have a joint obligation to furnish reasonable and necessary

medical care and therefore a bad faith action will lie if the insurer fails to overrule the

employer’s choice of an inadequate medical provider. We disagree. Both Boylan and

Gibson involved a workers’ compensation insurer’s alleged failure to pay benefits,

not a failure to furnish adequate medical treatment. The regulations cited in Boylan

provide only that licensed insurers must designate a knowledgeable local agent “to

expedite the handling of all matters,” and that the insurer “shall be deemed a party in

any action against the insured.” IOWA ADMIN. CODE §§ 876-2.3, -4.10. These

regulations do not establish that the insurer has a duty to supervise and control an

employer exercising its right under § 85.27(4) to choose the medical provider.

Petrillo cites no case in which an Iowa court has held a workers’ compensation

insurer liable for bad faith furnishing of medical care.3

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We conclude that, under Iowa law, no claim for bad faith failure to furnish

medical services will lie against a workers’ compensation insurer where the employer,

consistent with the policy, has exercised its statutory duty “to furnish reasonable

services” and its right “to choose the care.” We need not consider whether the insurer

could be liable in bad faith if the policy delegated the employer’s right to choose the

care to the insurer, or if the insurer in fact chose the medical provider in a particular

case. In such a case, one question would no doubt be whether a bad faith claim would

lie for an employee who, like Petrillo, failed to file a petition for alternate care, the

statutory remedy in Iowa for an employee who is “dissatisfied with the care offered.”

IOWA CODE ANN. § 85.27(4). 

The judgment of the district court is affirmed.

______________________________

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