Opinion ID: 180810
Heading Depth: 3
Heading Rank: 1

Heading: Bad Faith Refusal of Workers Compensation

Text: Summary judgment is appropriate when there is no question of material fact and the moving party is entitled to a judgment as a matter of law. We review a district court’s grant of summary judgment de novo, applying the same legal standards as the district court.8 Under Mississippi law, the liability of an employer to pay workers compensation is the employee’s exclusive remedy against his employer.9 But “the independent tort of bad faith refusal to pay compensation is an exception to this provision.”10 The Mississippi Supreme Court has summarized the tort as follows: 4 Bullock v. AIU Ins. Co., 503 F.3d 384, 388 (5th Cir. 2007). 5 Bullock v. AIU Ins. Co., 995 So. 2d 717, 723 (Miss. 2008). 6 Bullock v. AIU Ins. Co., 554 F.3d 524, 525 (5th Cir. 2008). 7 Bullock, 2010 WL 1141122, at . 8 See FED . R. CIV . P. 56(a) (as amended effective Dec. 1, 2010). 9 See MISS . CODE ANN . § 71-3-9. 10 Miss. Power & Light Co. v. Cook, 832 So. 2d 474, 479 (Miss. 2002) (en banc). 4 Case: 10-60294 Document: 00511317712 Page: 5 Date Filed: 12/09/2010 No. 10-60294 In order to prevail in a claim for damages for bad faith there must be a determination as to whether there was a legitimate or arguable reason to deny the benefits, and/or that the denial constituted a willful or malicious wrong in disregard for [the employee’s] rights. Really the only test . . . is whether the injury is compensable under the act. The two prongs of the test are not separate requirements, but rather part of the inquiry into whether the injury is compensable. Furthermore, where there is a legitimate or arguable basis in the delay or denial of payments, there is no valid claim for punitive damages.11 In addition, “[t]he fact that an [employer’s] decision to deny benefits may ultimately turn out to be incorrect does not in and of itself warrant an award of punitive damages if the decision was reached in good faith.”12 Ultimately, then, we must determine whether there was an arguable basis for Gottfried’s initial refusal of workers compensation to Bullock—in other words, whether there was “a reason ‘sufficiently supported by credible evidence as to lead a reasonable [employer] to deny the claim.’” 13 Here, credible evidence supports the conclusion that Gottfried had an arguable basis for disputing Bullock’s workers compensation claim. Bullock’s written contract with Gottfried stated that Bullock had to maintain his own workers compensation insurance coverage. Bullock had also provided Gottfried with a certificate of insurance that was effective at the time of the subject injury, and he never provided Gottfried with a written cancellation notice. Lastly, Bullock had received payments without the deducted backcharge both before and after his injury before submitting the final invoice months later with the 11 Id. (citations omitted). 12 Liberty Mut. Ins. Co. v. McKneely, 862 So. 2d 530, 533 (Miss. 2003). 13 Sobley v. S. Natural Gas Co., 302 F.3d 325 (5th Cir. 2002) (quoting State Farm Mut. Auto. Ins. Co. v. Grimes, 722 So. 2d 637, 642 (Miss. 1998)). See also Luckett v. Miss. Wood Inc., 481 So. 2d 288, 290 (Miss. 1985) (extending the tort of bad faith refusal of workers compensation to employers as well as insurance carriers). 5 Case: 10-60294 Document: 00511317712 Page: 6 Date Filed: 12/09/2010 No. 10-60294 backcharge included. In sum, despite the fact that Gottfried eventually was required to cover Bullock’s injury, Gottfried had an arguable basis to deny coverage initially.