Opinion ID: 2222019
Heading Depth: 1
Heading Rank: 2

Heading: Breach of Duty to Act in Good Faith and Engage in Fair Dealings

Text: The certified question next seeks instruction as to whether an employee may have a cause of action against the worker's compensation carrier for breach of duty to act in good faith and engage in fair dealings with the injured employee. Indiana has long recognized that there is a legal duty implied in an insurance contract that the insurer must deal in good faith with its insured. Wedzeb Enter. v. Aetna Life & Casualty Co. (1991), Ind. App., 570 N.E.2d 60; Liberty Mut. Ins. Co. v. Parkinson (1985), Ind. App., 487 N.E.2d 162, reh'g denied (1986), 491 N.E.2d 229. However, under liability insurance principles, an adverse claimant is not an insured party under the contract. The briefs of the parties and amici have cited no Indiana case imposing upon an insurer a duty of good faith and fair dealings as to its conduct with an adverse claimant. In contrast, the relationship of the worker's compensation insurer to the injured employee is affected by statute. Under the Worker's Compensation Act, an employer may be subjected to payment of the employee's attorney fees for bad faith in adjusting and settling or for failure to pursue settlement with diligence. [P]rovided, that whenever the industrial board shall determine upon hearing of a claim that the employer has acted in bad faith in adjusting and settling said award, or whenever the industrial board shall determine upon hearing of a claim that the employer has not pursued the settlement of said claim with diligence, then the board shall, if compensation be awarded, fix the amount of the claimant's attorneys fees and such attorney fees shall be paid to the attorney and shall not be charged against the award to the claimant. Ind. Code § 22-3-4-12. As noted in Baker, 428 N.E.2d at 1346, this provision is binding upon the employer's compensation carrier by virtue of Ind. Code § 22-3-6-1(a), which states that, for the purposes of the Act, the term employer includes the employer's insurer where applicable. These statutory provisions are the exclusive remedy for attorney fees where the employer or insurer is guilty of bad faith in adjusting or settling. Id. at 1347. However, Baker expressly also observes: The proviso of [Ind. Code §] XX-X-X-XX does not purport to be the exclusive remedy for all injuries suffered as a result of bad faith in adjusting and settling an award  only for attorney's fees incurred. Id. (emphasis in original). We disagree. While the Act imposes upon worker's compensation insurance carriers the statutory duties of good faith and diligence in adjusting and settling claims, it does not authorize separate recourse to the courts in the event these duties are breached. Rather, the remedy for such remains within the exclusive authority of the board.