Opinion ID: 1595870
Heading Depth: 1
Heading Rank: 5

Heading: Motion for Directed Verdict Ruling.

Text: Gibson first contends that the district court erred in directing a verdict in favor of ITT on his claims for punitive damages.
Whether, by a preponderance of clear, convincing, and satisfactory evidence, the conduct of the defendant from which the claim arose constituted willful and wanton disregard for the rights or safety of another. Iowa Code § 668A.1(a). We have defined willful and wanton in the context of this statute to mean that the actor has intentionally done an act of unreasonable character in disregard of a known or obvious risk that was so great as to make it highly probable that harm would follow, and which thus is usually accompanied by a conscious indifference to the consequences. McClure v. Walgreen Co., 613 N.W.2d 225, 230 (Iowa 2000) (quoting Fell v. Kewanee Farm Equip. Co., 457 N.W.2d 911, 919 (Iowa 1990)). To establish the requirement of willful and wanton disregard for the rights or safety of another, a plaintiff must show that the defendant's conduct constituted actual or legal malice. Id. at 231. Actual malice is characterized by such factors as personal spite, hatred, or ill will. Id. Legal malice is shown by wrongful conduct committed or continued with a willful or reckless disregard for another's rights. Id. Necessarily, then, a claim for punitive damages must be supported by something more than merely negligent conduct. Id. at 230. B. Procedural background. In sustaining ITT's motion for directed verdict, the district court recognized that, based on issue preclusion, there was no dispute ITT had committed an intentional act in its failure to pay the additional twenty weeks that Gibson had requested. However, the court went on to explain: If we go as [plaintiff] suggests simply on the unreasonable basis, unreasonable character of the act, then I think we still have to find its highly probable that harm will follow. The harm of failure to pay 20 weeks is not the kind of harm the court believes is contemplated by the [Iowa Supreme] Court in talking about punitive damages. [Whether] [h]arm will follow by not paying psychiatrist's bill[s] or furnishing psychiatric services is maybe a little more close question.... As we've indicated earlier, the acts of the defendant in this case just simply apparently two actsmaybe three. We're talking about the myelogram, the failure to provide, furnish psychiatric care, to pay for Dr. Gutnik's services, and the failure to pay the 20 weeks. Those acts are clearly intentional, and the consequences of those acts are certainly known to a certain degree.... But mythe Court's problem here is that under 668A, there must be a showing of willful and wanton disregard for the rights of the plaintiff.... There isn't actual malice here.... I think what we're dealing with is legal malice.... The Court recognizes ... issue preclusion indicates ... [t]he actions were unreasonable.... [B]ut the court simply does not find there is sufficient evidence for a rational trier of fact to find by clear, convincing and satisfactory evidence that the conduct committed by the defendant was done with willful, wanton or reckless disregard for the rights or safety of the plaintiff or there was a high probability that harm would follow the acts that were taken. C. Analysis. Gibson disagrees with the district court's reasoning. He argues that the evidence in this case that supports the judgment against ITT for bad faith and abuse of process is enough to justify submission of the punitive-damages claim to the jury. The issue, then, narrows to whether the evidence in this case that warranted submission of the bad-faith and abuse-of-process claims also warrants submission of the punitive-damages claim. 1. Bad faith. To establish a first-party bad-faith claim,  `a plaintiff must show the absence of a reasonable basis for denying benefits of the policy and defendant's knowledge or reckless disregard of the lack of a reasonable basis for denying the claim.' Dolan v. Aid Ins. Co., 431 N.W.2d 790, 794 (Iowa 1988) (quoting Anderson v. Continental Ins. Co., 85 Wis.2d 675, 690, 271 N.W.2d 368, 376 (1978)). A reasonable basis exists for denying insurance benefits if the claim is fairly debatable as to either matters of fact or law. Id. In Boylan v. American Motorists Insurance Co., we extended this common-law tort theory to workers' compensation. See 489 N.W.2d 742, 744 (Iowa 1992). We concluded that the relationship between an injured employee and the employer's workers' compensation carrier is analogous to those first-party insurance claims for which this court in Dolan recognized tort liability for bad faith. See id. at 743. We also rejected a district court holding that Iowa Code section 86.13 provided a statutory remedy for unreasonably delayed or withheld workers' compensation benefits thereby providing an exclusive remedy and precluding a common-law bad-faith claim. See id. at 742; see also Iowa Code § 86.13 (providing that the industrial commissioner may award penalty benefits [i]f a delay in commencement or termination of benefits occurs without reasonable or probable cause or excuse). In doing so, we said that it is unlikely that the legislature intended the penalty provision in section 86.13 to be the sole remedy for all types of wrongful conduct by carriers with respect to the administration of workers' compensation benefits. Id. at 744. Finally, we held that section 86.13 recognizes an affirmative duty on the part of the employer and insurance carrier to act reasonably in the absence of specific direction by the commissioner. Id. at 743. Borrowing from our bad-faith decisions, we held in Covia v. Robinson that, in the workers' compensation context, a reasonable excuse exists if the claim for benefits is fairly debatable. 507 N.W.2d 411, 416 (Iowa 1993). In Christensen v. Snap On-Tools Corp., we said that for purposes of Iowa Code section 86.13, [a] reasonable cause or excuse exists if either (1) the delay was necessary for the insurer to investigate the claim or (2) the employer had a reasonable basis to contest the employee's entitlement to benefits. A reasonable basis for denial of the claim exists if the claim is fairly debatable. 554 N.W.2d 254, 260 (Iowa 1996). In sum, when a workers' compensation carrier has no reasonable cause or excuse for a delay in commencement or termination of benefits, such a failure establishes the first prong of a bad-faith claim. However, the [u]se of the bad faith `fairly debatable' standard does not require that we also use the second element of the bad-faith claim: the insurer's `knowledge or reckless disregard of the lack of a reasonable basis for denying the claim.'  Id. (quoting Dolan, 431 N.W.2d at 794). In short, [s]ection 86.13 does not require that the lack of a reasonable excuse be due to any particular type of conduct by the insurer, whether negligent, reckless or intentional. Id. As to Gibson's bad-faith claim, the district court instructed the jury that Gibson had to prove the following: 1. [ITT] denied [Gibson's] claim: (a) for a specific twenty weeks of workers' compensation benefits; or (b) for psychiatric treatment furnished by [ITT]. 2. There was no reasonable basis for denying [Gibson's] claim. 3. [ITT] knew or had reason to know that there was no reasonable basis for denying the claim. 4. The denial was a proximate cause of damage to [Gibson]. 5. The nature and extent of damage. The district court further instructed the jury that a previous determination had already been made that ITT had no reasonable basis for its refusal to pay the twenty weeks of workers' compensation benefits. ITT does not contend that these instructions were erroneous. Nor does it contend that there was insufficient evidence to submit them. In addition, our previous recitation of the facts clearly establishes there was sufficient evidence on each element of the bad-faith claim for the district court to submit it to the jury. The question narrows to whether the evidence that was sufficient to submit the bad-faith claim was also sufficient to submit the punitive-damages claim. For reasons that follow, we think that it was. As mentioned, to prove willful and wanton disregard for the rights and safety of another, Gibson had to prove actual or legal malice. We agree with the district court that what is at issue here is legal malice. As we said, legal malice is shown by wrongful conduct committed or continued with a willful or reckless disregard for another's rights. Our cases are clear that willful and wanton disregard for the rights of another can be shown by the defendant's intentional violation of a statutory right. See, e.g., Lara v. Thomas, 512 N.W.2d 777, 782-83 (Iowa 1994). Here, there was a conclusive finding that ITT had no reasonable basis for its refusal to pay the twenty weeks of workers' compensation benefits to which Gibson was statutorily entitled under Iowa Code section 85.34(2)(u). Additionally, the evidence supports a finding that, as early as July 1994, ITT knew Gibson was entitled to the additional twenty weeks. Nevertheless, ITT terminated his benefits one month later. The evidence also supports a finding that ITT knew Gibson was statutorily entitled to psychiatric treatments pursuant to Iowa Code section 85.27 and had no reasonable basis to refuse payment but nevertheless chose not to pay for those treatments. We conclude the evidence was sufficient to establish legal malice, i.e., that ITT acted with willful and wanton disregard for Gibson's rights. Contrary to the district court, we conclude the evidence in this case was sufficient to show that it was highly probable harm would follow from ITT's decision not to pay the twenty weeks and not to pay for the psychiatric treatments. Loss of function of the mind and mental pain and suffering accounted for a substantial part of the compensatory damages that the jury awarded for the bad-faith claim. Additionally, the jury awarded Gibson damages for penalties he incurred in withdrawing money early from an IRA account after ITT stopped paying benefits. The IRA money was needed to pay bills because ITT was no longer paying Gibson benefits. A jury, using its common sense and experience, could reasonably infer that, as a workers' compensation carrier, ITT was in a position to know there was a high probability its wrongful conduct would result in the kind of harm Gibson suffered. 2. Abuse of process. Abuse of process is the use of legal process, whether criminal or civil, against another primarily to accomplish a purpose for which it was not designed. Fuller v. Local Union No. 106, 567 N.W.2d 419, 421 (Iowa 1997). An abuse-of-process claim has three elements: (1) the use of a legal process (2) in an improper or unauthorized manner (3) that causes the plaintiff to suffer damages as a result of that abuse. Id. The first element can generally be shown by the use of a legal process against the plaintiff. Wilson v. Hayes, 464 N.W.2d 250, 266 (Iowa 1990). As to the second element, [t]he plaintiff must prove that the defendant used the legal process primarily for an impermissible or illegal motive. Id. The district court instructed the jury that, as to his abuse-of-process claim, Gibson had to prove the following: (1) ITT intentionally used an answer to Gibson's petition before the Iowa Industrial Commissioner for workers' compensation benefits; (2) ITT used the legal process primarily to prevent Gibson from obtaining psychiatric care at ITT's expense and to prevent Gibson from obtaining a hearing before the Industrial Commissioner on his application for alternate medical care and not for the legal process's ( i.e., the answer's) intended use; (3) ITT's use of the legal process for the improper purpose was a proximate cause of Gibson's damage; and (4) the amount of damage. ITT challenges various aspects of the abuse-of-process claim. For example, it argues that (1) the answer was not filed (or not withdrawn) in order to refuse to pay for psychiatric care, (2) this action was not unreasonable, and (3) Gibson cannot show damage from ITT's failure to pay the psychiatric bills. Because ITT has not appealed from the judgment in favor of Gibson on this claim, it cannot now challenge the judgment. See Johnson Equip. Corp. v. Indus. Indem., 489 N.W.2d 13, 17 (Iowa 1992) (holding that a party need not cross-appeal a trial court's rejection of a ground urged in the trial court to preserve error on a claim decided in the party's favor but must still cross-appeal to preserve an issue on a claim decided adversely to the party). We reject ITT's contention that it was a successful party on the abuse-of-process claim because the damages for that claim were duplicative of damages for other claims. Under Johnson, ITT was the unsuccessful party on the abuse-of-process claim and therefore, had to cross-appeal from the judgment on that claim to preserve error. For this reason, ITT cannot now claim there was insufficient evidence to support submission to the jury of the abuse-of-process claim. Iowa Code section 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. See Iowa Code § 85.27; Boylan, 489 N.W.2d at 743. By its verdict, the jury found that ITT intentionally denied compensability in its answer to Gibson's petition for benefits for the primary purpose of preventing Gibson from obtaining statutory benefits, i.e., psychiatric treatment at ITT's expense for his work-related depression. ITT's other purpose was to prevent Gibson from having a hearing a statutory right under Iowa Code sections 17A.12 and 85.27on his application for alternate medical care before the industrial commissioner. The evidence that allowed the jury to make this finding was sufficient to establish that ITT intentionally violated Gibson's statutory rights. Such conduct, as we earlier noted, is sufficient to constitute willful and wanton conduct, i.e., legal malice, for punitive damages purposes. The jury allowed compensatory damages for loss of function of the mind and mental pain and suffering on the abuse-of-process claim. Dr. Gutnik was treating Gibson for major depression that was work related. The evidence shows that ITT knew this. From this, the jury could reasonably infer that ITT knew it was highly probable that its conduct could aggravate Gibson's depression and delay improvement of his condition. For all these reasons, we conclude the district court erred in sustaining ITT's motion for directed verdict as to Gibson's claim for punitive damages. By our discussion we do not mean to imply that in every case evidence sufficient to submit a bad-faith claim or an abuse-of-process claim will be sufficient to support submission of a punitive-damages claim. We must make that determination on a case-by-case basis.