UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 96-60515

THOMAS ALLEN ROGERS

Plaintiff-Appellant,

VERSUS

HARTFORD ACCIDENT & INDEMNITY COMPANY, ET AL,

 Defendants,

HARTFORD ACCIDENT & INDEMNITY COMPANY,

Defendant-Appellee.

Appeal from the United States District Court

for the Southern District of Mississippi

January 14, 1998

Before HIGGINBOTHAM, WIENER, and DENNIS, Circuit Judges.

DENNIS, Circuit Judge:

The principal issue presented by this appeal is whether the

district court erred in granting summary judgment in favor of

defendant-appellee, Hartford Accident & Indemnity Co. (“Hartford”),

and against plaintiff-appellant Thomas Allen Rogers (“Rogers”) on

the issue of whether Hartford had a legitimate or arguable reason

to initially deny workers’ compensation benefits to Rogers. We

conclude that there was no legitimate or arguable reason to

initially deny Rogers benefits, and therefore vacate the district

court’s order granting summary judgment, render partial summary

judgment in favor of Rogers, and remand.
 

1 An employer or its insurance carrier must file a report of

nonfatal injury when the injury causes loss time in excess of the

waiting period prescribed in Section 71-3-11 of the Mississippi

Workers’ Compensation Law, i.e. the first five days of disability.

The report must be filed within ten days after the waiting period

is satisfied on forms approved by the Commission. MISS. CODE ANN.

§ 71-3-67(1); Vardaman S. Dunn, MISSISSIPPI WORKER’S COMPENSATION. App.

at 125 (3d ed. Supp. 1990). 

2

BACKGROUND

Rogers, a Mississippi domiciliary, was employed by Quick

Change Oil & Lube in Ridgeland, Mississippi. A separately owned

and operated Speedway service station was located next door to

Quick Change. Speedway had an all female staff. An arrangement

developed whereby a male Quick Change employee would climb a ladder

to change the gasoline prices on Speedway’s elevated sign when

needed. Speedway paid Quick Change employees five dollars for this

service.

On August 9, 1991, while on duty at Quick Change, Rogers was

asked to change the price on Speedway’s sign. While changing the

the sign, Rogers fell off a ladder and was injured. As a result of

the injuries, Rogers incurred extensive medical expenses and missed

work for seven months. At the time of the accident, Hartford was

the workers’ compensation insurance carrier for both Speedway and

Quick Change.

Three days after Rogers’ accident, Quick Change filed a Form

B-3 (First Report of Injury) with the Mississippi Workers’

Compensation Commission regarding Rogers’ injury.1 Hartford

responded by refusing to pay or authorize medical treatment under
 

2 MISS. CODE ANN. §71-3-1 et seq.

 

3 A petition to controvert, Workmen’s Compensation Form B-5,

11, must be filed by an employee with the Commission if he wishes

to controvert a workers’ compensation claim. Dunn, supra note 1, at

125. An employer who wishes to controvert a claim must also satisfy

the Commission’s filing requirements. MISS. CODE ANN. § 71-3-37; Dunn,

id.

3

Mississippi’s Workers’ Compensation Law.2 Rogers retained counsel

who sent a letter demanding that Hartford begin paying Rogers the

benefits owed under the Mississippi Workers’ Compensation Law. The

demand letter explained that Hartford, as the workers’ compensation

insurer of both Quick Change and Speedway, was inevitably liable

regardless which of its insureds was Rogers’ employer at the time

of the accident. Nevertheless, Hartford still refused to pay any

benefits.

On October 11, 1991, Rogers’ counsel filed a petition to

controvert against Hartford and Quick Change, but not against

Speedway.3 In its answer to Rogers’ petition to controvert,

Hartford asserted that at the time of the accident Rogers was

Speedway’s borrowed servant and was not acting in the course and

scope of his employment by Quick Change. 

An administrative hearing was held before a Commission

Administrative Law Judge (“ALJ”) on April 14, 1992, to determine

whether Rogers’ injury arose out of the course and scope of his

employment with Quick Change. The ALJ found that Rogers’ injury

did not arise out of the course and scope of his employment with

Quick Change, therefore, Hartford was not responsible for providing

benefits to Rogers under the Quick Change policy. Rogers then
 

4 Emro Marketing d/b/a Speedway and Marathon Oil n/k/a/ Ohio

Oil Company were subsequently dismissed from the suit. These

dismissals are not an issue on appeal. 

4

simultaneously filed a petition to controvert against Speedway and

appealed the ALJ’s decision. On August 10, 1992, a year and a day

after Rogers was injured, Hartford answered the petition to

controvert on behalf of Speedway, admitted that Rogers was a

Speedway employee, and commenced paying Rogers benefits under the

Speedway policy.

On review of the ALJ’s order finding Rogers’ was not a Quick

Change employee at the time of his injury, the Workers’

Compensation Commission reversed. The Circuit Court of Madison

County affirmed the Commission reasoning that Quick Change

necessarily retained control over the timing and circumstances

under which its employees could assist Speedway. The Mississippi

Supreme Court affirmed holding that at the time of his accident

Rogers was not a borrowed servant of Speedway, but was acting in

the course and scope of his employment with Quick Change. Quick

Change Oil and Lube, Inc. v. Rogers, 663 So.2d 585 (Miss. 1995). 

In August 1995, Rogers filed the present action seeking

compensatory and punitive damages because of Hartford’s bad faith

initial denial of worker’s compensation benefits in Mississippi

state court against Hartford, Emro Marketing d/b/a Speedway, and

Marathon Oil n/k/a Ohio Oil Company.4 Todd Coleman and Beth

Coleman, Hartford employees, were also named as defendants. The

defendants timely removed the action to federal district court,

alleging that the Colemans, Mississippi domiciliaries, had been
 

5 Rogers’ argument for remand is based solely on a lack of

diversity of citizenship. He does not argue the action is not

removable under 28 U.S.C. § 1445(c). See, e.g., Patin v. Allied

Signal, Inc., 77 F.3d 782 (5th Cir. 1996).

5

fraudulently joined to defeat diversity. Rogers then moved to

remand.5 The district court denied Rogers’ motion to remand and

upon motion by the Colemans granted summary judgment in their favor

ruling that there was no possibility of independent liability being

imposed. 

After the action was removed to federal court, Rogers moved

for partial summary judgment as to whether Hartford had a

legitimate or arguable basis to deny benefits. Hartford countered

with its own motion for summary judgment. In addition, Rogers

filed a motion requesting the court to (1) alter or set aside its

previous denial of remand pursuant to Federal Rule of Civil

Procedure 60, (2) allow Rogers to amend his complaint to rename

Todd Coleman as a party and to add a non-diverse defendant, Jim

Napper, pursuant to Federal Rule of Civil Procedure 15, and (3)

remand.

The district court granted Hartford’s motion for summary

judgment and denied Rogers’ motion for partial summary judgment and

other motions. The summary judgment in favor of Hartford decreed

that the insurer could not be held liable for bad faith nonpayment

of benefits because it had a legitimate and arguable reason for its

delay of one year in commencing payment of compensation benefits.

Rogers timely appealed.
6

DISCUSSION

As there is no dispute with regard to the facts, the principal

issue is whether, as a matter of law, Hartford had a legitimate or

arguable reason for initially denying workers’ compensation

benefits and payments to Rogers. Although the Mississippi Workers’

Compensation Law, Section 71-3-9, indicates compensation is the

exclusive remedy available to an employee suffering an injury

arising out of and in the course of employment, Mississippi

jurisprudence has held this exclusive remedy provision does not bar

an injured employee’s common law tort action against an insurance

carrier for the commission of an intentional tort independent of

the accident compensable under the worker’s compensation scheme.

Southern Farm Bureau Cas. Ins. v. Holland, 469 So.2d 55, 58-59

(Miss. 1984). From this jurisprudence, we infer that in order to

succeed in this action, the plaintiff must prove: (1) a contract of

workers’ compensation insurance existed between the defendant and

the plaintiff’s employer; (2) the carrier denied the plaintiff’s

compensable workers’ compensation claim without a legitimate or

arguable reason; and (3) the denial of benefits constitutes a

willful and intentional or malicious wrong. See Holland, 469 So.2d

at 58-59, Leathers v. Aetna Casualty & Surety Co., 500 So.2d 451,

452-53 (Miss. 1986); Luckett v. Mississippi Wood, Inc., 481 So.2d

288, 289-90 (Miss. 1985). 

If these elements are satisfied, punitive damages can also be

awarded. Punitive damages may be recovered from an insurer for bad

faith if an insured proves by a preponderance of the evidence that
 

6 Notwithstanding that the Mississippi Supreme Court has

indicated “gross negligence” may be sufficient to justify an award

of punitive damages and that permitting an independent tort action

against insurance carriers in workers’ compensation cases is in

line with cases allowing punitive damages with bad faith insurance

claims, proof of an intentional tort is required to circumvent the

exclusive remedies available under the Mississippi Workers’

Compensation Law. Allegations sounding in negligence are

inadequate. See Holland, 469 So.2d at 57-59, Luckett, 481 So.2d at

290. See also Peaster v. David New Drilling, 642 So.2d 344, 348 

(Miss. 1994).

7

“the insurer acted with [] malice, or [] gross negligence or

reckless disregard for the rights of others.” Caldwell v. Alfa

Insurance Co., 686 So.2d 1092, 1095 (Miss. 1996) (quoting Blue

Cross & Blue Shield v. Maas, 516 So.2d 495, 496 (Miss. 1987)

(citations omitted)).6 The gross negligence must be such as to be

an independent tort. Id. Punitive damages are not available,

however, “[i]f the insurer had a legitimate or arguable reason to

deny payment of the claim.” Caldwell, 686 So.2d at 1095. Finally,

Holland emphasizes that a workers’ compensation claimant seeking

punitive damages because of the carrier’s wrongful refusal to pay

the workers’ compensation claim must “allege and prove the

recognized elements” of the claim. 469 So.2d at 59. 

As for the first element of the bad faith action, it is

undisputed that there was a contract of workers’ compensation

insurance between Hartford and Rogers’ employer. The second

element, whether Hartford had a legitimate or arguable basis for

initially denying payment of Rogers’ workers’ compensation

benefits, is determinative in the present case. The third element,

whether the denial of benefits was a willful and intentional wrong,

was not reached by the district court and is not before us as
8

Rogers has only addressed the existence of the second element on

appeal. 

 The Mississippi Workers’ Compensation Law furnishes the

framework for our analysis of whether Hartford had such a

legitimate or arguable reason. 

§ 71-3-77 “Insurance policy regulations” provides in pertinent

part:

(1) [T]he payments of the claims . . . shall be made

directly from the insurance company to the employee, except

for medical benefits which shall be paid to the medical

provider. A copy of such payments shall be forwarded to the

employer [emphasis added]. 

(2) In any case where the employer is not a self-insurer, in

order that the liability for compensation imposed by this

chapter may be most effectively discharged by the employer and

in order that the administration of this chapter in respect of

such liability may be facilitated, the commission shall by

regulation provide for the discharge, by the carrier or

carriers for such employer, of such obligations and duties of

the employer in respect of such liability imposed by this

chapter upon the employer as it considers proper in order to

effectuate the provisions of this chapter. For such purpose

(a) notice to or knowledge of an employer of the occurrence of

the injury shall be notice to or knowledge of the carrier or

carriers; [emphasis added] 

§ 71-3-37 “Payment of compensation” provides in pertinent part:

 (1) Compensation under this chapter shall be paid

periodically, promptly, in the usual manner, and directly to

the person entitled thereto, without an award except where
9

liability to pay compensation is controverted by the employer

[emphasis added]. 

(2) The first installment of compensation shall become due on

the fourteenth day after the employer has notice, as provided

in Section 71-3-35, of the injury or death, on which date all

compensation then due shall be paid [emphasis added]. 

. . . .

(4) If the employer controverts the right to compensation he

shall file with the commission, on or before the fourteenth

day after he has knowledge of the alleged injury or death, a

notice in accordance with a form prescribed by the commission,

stating that the right to compensation is controverted, the

name of the claimant, the name of the employer, the date of

the alleged injury or death, and the grounds upon which the

right to compensation is controverted. 

Lastly, § 71-3-35 “Limitation” provides in pertinent part:

(1) No claim for compensation shall be maintained unless,

within thirty (30) days after the occurrence of the injury,

actual notice was received by the employer or by an officer,

manager, or designated representative of an employer. Absence

of notice shall not bar recovery if it is found that the

employer had knowledge of the injury and was not prejudiced by

the employee's failure to give notice [emphasis added].

Accordingly, when an employer has knowledge of an employee’s

injury formal notice is not needed to trigger the obligation to

provide benefits, § 71-3-35(1); see also Walker Mfg. Co. v.

Pickens, 206 So.2d 639, 640 (Miss. 1968); Bush v. Dependents of

Byrd, 108 So.2d 211, 212 (Miss. 1959); Ingalls Shipbuilding Co. v.
10

Dickerson, 92 So.2d 354, 358-59 (Miss. 1957), and this knowledge

is, in turn, imputed to the carrier without any formal notification

to the carrier, § 71-3-77(2)(a). When a carrier knows of an

insured’s employee’s injury, and the insured does not controvert

the injury, the carrier has a duty to begin paying benefits

directly to the injured employee, §§ 71-3-37(1), (2), & (4), 71-3-

77(1) & (2). The duty of the carrier to pay benefits is owed by

the carrier to the injured employee, §§ 71-3-37(1) & 71-3-77(1). 

Applying the state statutes and court decisions to the facts

of the present case, we conclude that: (1) it is undisputed that

(a) Hartford was the workers’ compensation carrier of both Speedway

and Quick Change and (b) Rogers was acting in the course and scope

of employment by either Quick Change or Speedway when the accident

occurred; (2) Rogers had no duty to give formal notice of his

injury to Quick Change, Speedway, or Hartford, §§ 71-3-35(1) & 71-

3-77(2)(a); (3) both Speedway and Quick Change had knowledge of

Rogers’ injury immediately after it occurred on August 9, 1991, and

this knowledge was imputed to Hartford, §§ 71-3-35(1) & 71-3-

77(2)(a); (4) neither Speedway nor Quick Change ever controverted

Rogers’ injury, § 71-3-37(1); (5) Hartford had a duty to promptly

make benefits available to Rogers, §§ 71-3-37(1) & 71-3-77(1); (6)

Rogers was entitled to “the first installment of compensation” on

or around August 23, 1991 -- 14 days after Hartford had statutory

knowledge of Rogers’ injury, § 71-3-37(2); and (7) by refusing to

pay benefits until a year and a day after Rogers was injured,

Hartford breached its statutory duty of prompt, direct payment to
11

Rogers, §§ 71-3-37(1) & 71-3-77(1). 

Hartford defends its action by separating its obligation to

pay Rogers as the carrier of Speedway and Quick Change into two

compartmentalized arguments, i.e., that it had independent

legitimate reasons not to pay under either the Quick Change or

Speedway policy. First, Hartford argues that because the issue of

whether Speedway or Quick Change was Rogers’ employer was an

“extremely close question” as stated by the Mississippi Supreme

Court, they had a legitimate reason to deny Rogers’ benefits on the

Quick Change policy. 

In making this argument, Hartford is ignoring the issue sub

judice. For our purposes, the Rogers employment issue is

irrelevant. The issue in this case is whether Hartford, as the

indisputably responsible party to pay benefits, had a legitimate or

arguable reason to deny paying Rogers benefits under the

Mississippi Workers’ Compensation Law. By mischaracterizing the

issue, Hartford was able to persuade the district court. However,

after a careful review of the relevant statutory provisions, we are

convinced that the statutory scheme set forth by the Mississippi

Workers’ Compensation Law clearly demonstrates that, as the

responsible party, Hartford had an obligation to promptly and

directly pay benefits to Rogers notwithstanding which of Hartford’s

insureds was Rogers’ employer and how close the employer

determination might have been. Because it is undisputed Rogers’

accident arose out of and in the course of employment by either

Quick Change or Speedway, Hartford had no justifiable reason to
12

refuse to pay compensation benefits as required under the workers’

compensation statutes.

As for the Speedway policy, Hartford argues that it had a

legitimate or arguable reason to delay benefits because (1) until

the Mississippi Workers’ Compensation Commission ALJ determined

that Rogers was injured while employed by Speedway, Rogers did not

file a petition to controvert against Speedway, (2) Speedway never

filed a Form B-3 and relatedly instructed Hartford not to pay

benefits, (3) as soon as Rogers filed a petition to controvert

against Speedway alleging he was a Speedway employee Hartford began

paying benefits under the Speedway policy and (4) the Mississippi

Supreme Court ultimately held that Speedway was not Rogers’

employer. This argument is equally without merit. As clearly

stated in Sections 71-3-35(1) & 71-3-77(2)(a) of the Mississippi

Workers’ Compensation Law, formal notice of injury is not needed

if the employer had knowledge of the injury. As discussed

previously, it is undisputed that both Quick Change and Speedway

had knowledge of Rogers’ injury, thereby imputing knowledge to

Hartford for the purposes of compensation under the Workers’

Compensation scheme. § 71-3-77(2)(a). Furthermore, an insured’s

failure to file a petition to controvert does not absolve an

insurer from paying on a claim it knows is due. See § 71-3-37. 

Similarly, Speedway’s instruction to not pay the Rogers claim

is of no significance as here Hartford was the only possible

responsible party. Hartford’s own assertion that Rogers was

Speedway’s loaned servant in its answer to Rogers’ petition to
13

controvert filed against Quick Change indicates Hartford’s implicit

recognition of this fact. As Rogers’ attorney advised, Hartford,

as ultimately the only responsible party with regard to this

compensation claim, should not have allowed internal concerns about

whose account to “charge” override its statutory obligation to

Rogers. Rogers should not suffer because by coincidence Quick

Change and Speedway had chosen the same carrier.

Hartford’s contention that it had a legitimate reason to deny

Rogers’ benefits under the Speedway policy as the Mississippi

Supreme Court ultimately determined that Speedway was not Rogers’

employer is also irrelevant to Hartford’s statutory responsibility

as the carrier for both Speedway and Quick Change to promptly make

benefits available to an injured claimant as explained above with

regard to the Quick Change “close question” argument. The argument

is a classic non sequitur in that the inference that Hartford had

a legitimate basis not to provide compensation does not logically

follow from the premise that the Mississippi Supreme Court had

difficulty deciding which of Hartford’s insureds was Rogers’

employer. As explained previously, Hartford had an obligation to

provide benefits to Rogers regardless of whether Quick Change or

Speedway was ultimately found to be the actual employer of Rogers

at the time of the accident. For the foregoing reasons, we

conclude that Hartford did not have a legitimate or arguable reason

for refusing to timely pay Rogers workers’ compensation benefits.

As a final matter, we conclude that the district court

properly (1) granted summary judgment in favor of the Colemans, and
14

(2) denied, on the basis of fraudulent joinder, Rogers’ motion to

amend his complaint by adding Todd Coleman and Jim Napper as

parties and to remand. Fraudulent joinder is established when

resolving all factual disputes and ambiguities in favor of the

plaintiff, there is no possibility that the plaintiff would be able

to establish a cause of action against the nondiverse defendants in

state court. Burden v. General Dynamics Corp., 60 F.3d 213, 217

(5th Cir. 1995); Carriere v. Sears, Roebuck & Co., 893 F.2d 98, 100

(5th Cir.), cert. denied, 498 U.S. 817 (1990); B., Inc. v. Miller

Brewing Co., 663 F.2d 545, 551 (5th Cir. Unit A Dec. 1981). We

conclude no cause of action could be sustained against these

nondiverse Hartford employees as the record reveals they lacked the

requisite authority to deny benefits to Rogers. 

CONCLUSION

For the foregoing reasons, the order of the district court

granting summary judgment in favor of Hartford is VACATED, partial

summary judgment in favor of Rogers decreeing that Hartford did not

have any legitimate or arguable basis for initially denying

benefits is RENDERED, and the case is REMANDED to the district

court for further proceedings.