Opinion ID: 1928422
Heading Depth: 2
Heading Rank: 2

Heading: Applicable test under section 86.13

Text: Before we address the merits of Christensen's argument, we must articulate the analytical framework required for an award of penalty benefits under section 86.13. The parties dispute whether the full bad faith test enunciated in Dolan v. Aid Insurance Co., 431 N.W.2d 790, 794 (Iowa 1988), applies. In Dolan, our court first recognized a cause of action against an insurer for badfaith conduct relating to a claim made by its insured. We adopted the Wisconsin test for bad faith: To show a claim for bad faith, 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, 431 N.W.2d at 794 (quoting Anderson v. Continental Ins. Co., 85 Wis.2d 675, 271 N.W.2d 368, 376 (1978)) (emphasis added). We went on to hold a reasonable basis exists if the claim is fairly debatable, whether the debate concerns a matter of fact or law. Id. In Boylan v. American Motorists Insurance Co., 489 N.W.2d 742 (Iowa 1992), we extended this common law tort theory to the workers' compensation situation. In Boylan, the employee sued his employer's workers' compensation insurance carrier under a theory of common law bad faith. The district court dismissed the claim 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. Boylan, 489 N.W.2d at 742. We rejected this reasoning on appeal and reinstated the employee's claim, observing: 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. As this rationale implies, our decision in Boylan required that we interpret section 86.13. We held section 86.13 recognizes ... an affirmative obligation on the part of the employer and insurance carrier to act reasonably in regard to benefit payments in the absence of specific direction by the commissioner. Id. at 743 (emphasis added). Since Boylan, we have had at least two occasions to consider whether benefits have been delayed or withheld without reasonable or probable cause or excuse. See Kiesecker v. Webster City Custom Meats, Inc., 528 N.W.2d 109, 111 (Iowa 1995); Covia v. Robinson, 507 N.W.2d 411, 416 (Iowa 1993). In Covia, we borrowed from our bad faith decisions and held that a reasonable excuse existed if the claim for benefits was fairly debatable. Covia, 507 N.W.2d at 416. In Kiesecker, we held a delay in making payments while the insurer investigated the claim was reasonable. Kiesecker, 528 N.W.2d at 111. We believe our interpretation of section 86.13 in these prior cases is consistent with a cardinal rule of statutory construction: When the text of a statute is plain and its meaning clear, the court should not search for a meaning beyond the express terms of the statute or resort to rules of construction. Henriksen v. Younglove Constr., 540 N.W.2d 254, 258 (Iowa 1995). Based on the plain language of section 86.13, we hold an employee is entitled to penalty benefits if there has been a delay in payment unless the employer proves a reasonable cause or excuse. 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. Use of the bad faith fairly debatable standard does not require that we also use the second element of a bad-faith claim: the insurer's knowledge or reckless disregard of the lack of a reasonable basis for denying the claim. See Dolan, 431 N.W.2d at 794. Section 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. The focus is on whether timely payment of the benefits due was made and if not, whether there was a reasonable excuse for the failure to make timely payment of the amount owed.