Opinion ID: 1556580
Heading Depth: 1
Heading Rank: 3

Heading: The sufficiency of the evidence supporting the verdict in favor of Nabors for breach of contract.

Text: ¶ 38. I turn to the verdict in favor of Nabors against Gallagher Bassett for breach of contract. Gallagher Bassett argues that its conduct was not imputable to Nabors and could not have rendered Nabors liable to Malone. At trial, Nabors's theory of recovery against Gallagher Bassett was that, but for Gallagher Bassett's bad faith, Nabors would not have been liable to Malone, and would not have incurred settlement and defense costs. Nabors contended that Gallagher Bassett's bad-faith delay breached the contract with CNA requiring Gallagher Bassett to provide fair and expeditious handling of Nabors's workers' compensation claims, and the breach proximately caused Nabors to incur liability to Malone. Nabors argued that its potential liability to Malone, based on Gallagher Bassett's bad faith, prompted its Mary Carter settlement with Malone. Nabors's jury instruction D-33 permitted the jury to find that Nabors had proven by a preponderance of the evidence that Gallagher Bassett's breach of contract proximately caused or contributed to Nabors's damages, including: (1) the costs, benefits, and penalties associated with Gary Malone's workers' compensation claim and (2) the settlement and cost of defense, including attorney's fees, incurred in defense of both Gary Malone's bad faith action and Gary Malone's workers' compensation claim against Nabors Drilling USA, L.P. and that Nabors Drilling USA, L.P. would not have incurred but for Gallagher Bassett Services, Inc.'s breach of contract, if any. ¶ 39. In my opinion, Gallagher Bassett correctly argues that its acts were not imputable to Nabors. In Luckett, this Court held that an employer, as well as a carrier, may be held liable for bad-faith nonpayment of workers' compensation benefits. Luckett, 481 So.2d at 290. However, when a carrier acts in bad faith, the carrier ceases to be the `alter ego' of the employer, but is involved in an independent relationship with the employee. Holland, 469 So.2d at 58; Pilate v. Am. Fed. Ins. Co., 865 So.2d 387, 395 (Miss.Ct.App. 2004). The import of this rule is that an employer is not liable for the bad-faith acts of an insurance carrier, or, as in this case, the bad-faith acts of an insurance adjuster with whom the carrier has contracted to determine the compensability of claims. In the context of a fraudulent-joinder claim, the United States District Court for the Southern District of Mississippi determined that an employer who was free from any wrongdoing could not be held liable for the carrier's bad-faith nonpayment of a workers' compensation claim. Toney v. Lowery Woodyards, 278 F.Supp.2d 786, 793 (S.D.Miss.2003) (citing Holland, 469 So.2d at 58). Because the employer and carrier are not alter egos when acting in bad faith, the employer and carrier each are liable for their own bad-faith acts, and the bad-faith acts of one are not imputable to the other. ¶ 40. I have concluded that the evidence was insufficient to support a finding that Gallagher Bassett acted in bad faith. But even if Gallagher Bassett was guilty of bad faith, its bad faith was not imputable to Nabors. Holland, 469 So.2d at 58; Pilate, 865 So.2d at 395; Toney, 278 F.Supp.2d at 793. Nabors settled the case because it perceived its potential liability to Malone; however, any liability which Nabors had to Malone could have arisen only from Nabors's own failure to comply with the Workers' Compensation Act concerning Malone's claim. Evidently, Nabors settled with Malone to avoid this potential liability, and then sought to recover the settlement amount and defense expenses from Gallagher Bassett based on an alter-ego theory. This Nabors could not do, because it was not liable as a matter of law for any bad-faith conduct committed by Gallagher Bassett. I would reverse and render the verdict against Gallagher Bassett in favor of Nabors.