Opinion ID: 1556580
Heading Depth: 1
Heading Rank: 1

Heading: The Workers' Compensation Act and the tort of bad-faith failure to pay workers' compensation benefits.

Text: ¶ 23. A review of pertinent provisions of the Mississippi Workers' Compensation Act and of our bad-faith law is warranted. The Act provides that compensation is payable for disability or death of an employee from injury or occupational disease arising out of and in the course of employment, without regard to fault as to the cause of the injury or occupational disease. Miss.Code Ann. § 71-3-7 (Rev. 2000). The first installment of compensation becomes due on the fourteenth day after the employer has notice of the injury, but an employer disputing the right to compensation may file a petition to controvert with the Commission on or before the day the first installment is due. Miss. Code Ann. § 71-3-37(2), (4) (Rev.2000). Automatic penalties for late payments are assessed in the amount of ten percent for payments not made pursuant to an award, and twenty percent for payments made pursuant to an award. Miss.Code Ann. § 71-3-37(5), (6) (Rev.2000). ¶ 24. Section 71-3-9 of the Mississippi Workers' Compensation Act makes the Act the exclusive remedy available to an employee who has suffered a work-related injury. Miller v. McRae's, Inc., 444 So.2d 368, 370 (Miss.1984). Section 71-3-9 provides: The liability of an employer to pay compensation shall be exclusive and in place of all other liability of such employer to the employee, his legal representative, husband or wife, parents, dependents, next-of-kin, and anyone otherwise entitled to recover damages at common law or otherwise from such employer on account of such injury or death, except that if an employer fails to secure payment of compensation as required by this chapter, an injured employee, or his legal representative in case death results from the injury, may elect to claim compensation under this chapter, or to maintain an action at law for damages on account of such injury or death. In such action the defendant may not plead as a defense that the injury was caused by the negligence of a fellow servant, nor that the employee assumed the risk of his employment, nor that the injury was due to the contributory negligence of the employee. Miss.Code Ann. § 71-3-9 (Rev.2000). Regarding the exclusivity provision, it has been stated that: Three main themes make up the compensation principle that underlies workers' compensation laws. The employer provides benefits for work injuries without regard to fault; the benefits are limited to those prescribed in the statute, and the employee gives up a common law tort claim for the compensable injury against the employer in exchange for the employer's providing the no-fault benefits. John R. Bradley & Linda A. Thompson, Mississippi Workers' Compensation § 11:1 (2007). ¶ 25. In Taylor v. U.S. Fidelity & Guaranty Co., 420 So.2d 564 (Miss.1982), this Court reviewed a trial court's dismissal of an employee's lawsuit against a carrier for bad-faith delay in paying workers' compensation benefits. The complaint had alleged that the carrier negligently, carelessly, wrecklessly [sic], willfully and hazardiously [sic], failed, refused and neglected to process legitimate medical claims ..., causing mental distress and exacerbation of physical pain. Id. at 564. The Court determined that the Legislature had intended that a tort action of this kind be subject to the exclusivity clause. Id. at 566. ¶ 26. In Southern Farm Bureau Casualty Insurance Co. v. Holland, 469 So.2d 55, 59 (Miss.1984), this Court limited Taylor by finding that the Act's exclusivity clause does not bar an injured worker's action against a workers' compensation insurance carrier for the commission of an intentional tort. Holland had alleged that she had suffered mental distress caused by the carrier's termination of her benefits, that the carrier had terminated her benefits in order to force an inadequate settlement of her claim, and that the carrier's actions amounted to tortious breach of contract, breach of fiduciary duties, and an intentional infliction of emotional distress. Id. Relying upon Taylor, the carrier argued that the action was barred by Section 71-3-9. Id. This Court distinguished Taylor, stating: A review of the Taylor record discloses without question that the pleading sounds in negligence. No intentional tort is alleged, as is present in the allegation of this case. The rule in Taylor is accordingly limited to cases where the injured worker attempts to sue the carrier for negligent refusal to pay. In the case sub judice the pleading alleges the withholding of compensation for no legitimate or arguable reason and in an effort to force a settlement for an inadequate amount, harassment regarding an auto insurance policy issued by the same company, refusal to pay medical bills, using economic pressure to force a settlement, all such acts with grossness and recklessness as to evince utter indifference to the plaintiff. The comparison of the pleading factually distinguishes the cases. This Court, therefore, concludes that Taylor does not control this case and has no application to cases alleging independent, intentional torts between a worker and the employer's compensation carrier. Id. at 57. The Court recognized several reasons that actions against the carrier are barred when based on negligence, but not when based on intentional conduct: (1) a carrier's intentional failure to pay workers' compensation benefits does not arise out of the employee's work-related injury, rather, it is independently tortious conduct by the carrier; (2) a carrier is not the alter ego of the employer when the carrier's intentional conduct is alleged; (3) the statutory penalties were intended as the exclusive remedy for claims not promptly paid by the carrier, not for intentional conduct; and (4) the statutory penalties are inadequate to deter carriers from intentional wrongdoing. Id. at 58. ¶ 27. Since Holland, the parameters of a common-law action for bad-faith nonpayment of workers' compensation benefits have become well-established. In Luckett v. Mississippi Wood, Inc., 481 So.2d 288, 290 (Miss.1985), the Court expanded Holland to permit a bad-faith suit against an employer as well as a carrier. In McCain v. Northwestern National Insurance Co., 484 So.2d 1001, 1002 (Miss.1986), the Court held that [t]he same rules applicable to health, fire, casualty, accident, and other insurance policies are likewise applicable to workers' compensation insurance carriers. Punitive damages are available against an insurer that denies a claim without a legitimate or arguable reason, and acts with malice, gross negligence, or reckless disregard for the rights of others. Caldwell v. Alfa Ins. Co., 686 So.2d 1092, 1095 (Miss.1996). ¶ 28. The Court has stated that, to succeed on a bad-faith claim, a workers' compensation claimant must show that the employer or carrier lacked a legitimate or arguable reason to deny the benefits, and that the denial constituted a willful or malicious wrong in disregard for [the claimant's] rights. Miss. Power & Light Co. v. Cook, 832 So.2d 474, 479 (Miss.2002). Where there was a legitimate or arguable reason to delay or deny benefits, there is no basis for an award of punitive damages. Id. However, the absence of an `arguable reason' does not necessarily establish that the insurer acted with malice or with gross negligence or reckless disregard for the insured's rights. Caldwell, 686 So.2d at 1098 (Miss.1996) (quoting Blue Cross & Blue Shield of Miss. v. Maas, 516 So.2d 495, 497 (Miss.1987)). This is because we have repeatedly held that `punitive damages are not mandated by the absence of an arguable reason ... because the denial of the claim could be the result of honest mistake or oversight  ordinary or simple negligence.' Id. (quoting State Farm Fire and Cas. v. Simpson, 477 So.2d 242, 250 (Miss.1985)). ¶ 29. The Court has specifically set out the standard applicable to a bad-faith action against an insurance adjuster for nonpayment of claims. Bass v. California Life Ins. Co., 581 So.2d 1087, 1090 (Miss. 1991). An adjuster's relationship with the insured is purely contractual; it owes the insured no fiduciary duty. Id. (quoting Dunn v. State Farm Fire & Cas. Co., 711 F.Supp. 1359 (N.D.Miss.1987)). Rather, an adjuster's duty is to investigate all relevant information and ... make a realistic evaluation of a claim. Id. An adjuster can be liable for conduct constituting malice, reckless disregard for the rights of the insured, or gross negligence. Id. However, an adjuster is not liable for simple negligence in adjusting a claim. Id. Thus, like an employer or carrier, an adjuster cannot be held liable for bad faith when the conduct at issue amounts to ordinary or simple negligence. This Court applied this standard in Gallagher Bassett v. Jeffcoat, 887 So.2d 777, 786 (Miss.2004), to find that a claims adjuster's delay in paying uninsured motorist benefits due to her unfamiliarity with Mississippi insurance law was simple negligence as a matter of law, not bad faith.