Court Opinion

ID: 9576680
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:27:03.036626+00
Date Added: 2024-06-11T13:12:16.818185
License: Public Domain

Chief Justice ROVIRA
concurring in part and dissenting in part:
While I agree that a self-insured employer owes a duty of good faith and fair dealing to its employees who seek benefits under the Workers’ Compensation Act (the Act) and that this duty cannot be delegated to a claims adjusting service, I do not agree that such a duty is owed by a claims adjusting service such as Wetzel that provides no benefits to the employee. Therefore, because the majority improperly expands the category of persons or entities potentially liable for the tort of bad-faith processing of a compensation claim, I respectfully dissent.
I
We have often recognized that certain duties, whether defined by statute or common law, are nondelegable. The Act imposes an obligation on an employer to secure compensation for its employees for injuries suffered in the course of employment. § 8-44-101(1), 3B C.R.S. (1986). Recognizing that “workers compensation serves the same purpose as insurance in general,” we have previously held that there is a duty on the part of the provider of such compensation to “deal fairly and in good faith with an employee asserting a compensable injury.” Travelers Ins. Co. v. Savio, 706 P.2d 1258, 1273 (Colo.1985). The Act does not permit an employer “to appoint an agent, other than an insurer, and unilaterally vest it with the rights and responsibilities assigned either to employers or insurers by the Workmen’s Compensation Act.” Denny’s Restaurant, Inc. v. Husson, 746 P.2d 63, 65 (Colo.App.1987) (emphasis added). Therefore, since in Sav-io, we found that the responsibility to deal fairly and in good faith arises from the underlying purpose of the Act, I agree with the majority’s conclusion {see maj. op. at 811) that Safeway cannot relieve itself of its obligation of good faith by contracting out its responsibilities.
II
I disagree, however, with the majority’s conclusion that, based on the statutory and regulatory structure of the Act, a claims adjusting company hired by and acting on behalf of a self-insured employer, owes an independent duty of good faith and fair dealing to an employee in the investigation and processing of a workers’ compensation claim. I believe, conversely, that neither the decisions of this court, the statutory and regulatory structure of the Act, nor the laws of agency support an extension of such a duty to independent claims adjusting companies.
A
The imposition of the duty to claims adjusting companies cannot be said to arise from our holding in Savio. In Savio, we adopted the rationale of Farmer’s Group, *814Inc. v. Trimble, 691 P.2d 1138 (Colo.1984). The Trimble rationale states that an insurer’s duty of good faith to its insured when handling claims of third parties against the insured arises from the nature of insurance. Trimble, 691 P.2d at 1141. Adopting this rationale in Savio, we concluded that, since “workers compensation serves the same purpose as insurance in general, the Trimble rationale demands that the provider of such compensation must deal fairly and in good faith with an employee asserting a compensable injury.” Savio, 706 P.2d at 1273 (emphasis added). Recognizing that the compensation funds came from Safeway and that Safeway was charged with the statutory duty to provide compensation, § 8-44-101(1), 3B C.R.S. (1986), it is clear that Wetzel was not a provider of compensation to either Johnson or Tozer within the meaning of Savio. Wetzel was neither Johnson’s or Tozer’s employer nor the insurer of their employer but simply the administrative processor of the claims. Therefore, the decision of this court imposing the obligation of fair dealing and good faith on compensation providers cannot be the basis for extending liability for breach of such duties to entities such as Wetzel who are not providers of compensation.
B
The regulatory structure of the Act, while demonstrating concern that workers’ compensation claimants receive efficient claims processing (see maj. op. at 811-812), establishes that the entity obligated to provide efficient claims administration is the self-insured employer. See 7 Colo.Code Regs. §§ 1101-04 at Part V(A)(2)(k) (1990) (Whether the self-insured employer services its own program with respect to claims and administration or contracts with a service company to provide the services, the self-insured employer is subject to annual review of its permit. The review must include an evaluation of the efficiency and effectiveness of the self-insurer’s claims administration.). So, while recognizing the use of independent claims administration services (see id. at Part 111(A)(5)), the regulatory scheme holds only the self-insurer responsible. It has no provision regulating the independent claims adjusting company, thus indicating that the regulatory scheme envisioned an independent obligation on the part of insurance adjusting companies directly to the insured employees.
C
Furthermore, while the majority declines to examine the law of principal and agent, I find that well settled agency principles support a conclusion that Wetzel did not independently owe a duty of good faith and fair dealing to Johnson and Tozer. Under agency law, obligations arise and are imposed based on the nature of the relationship between the parties. I begin, therefore, by examining the nature of Safeway and Wetzel’s relationship.
An agent is one who acts for or in the place of another by authority from him, or who is entrusted with the business of the other. Pouppirt v. Greenwood, 48 Colo. 405, 407, 110 P. 195, 196 (1910); Governor’s Ranch Professional Center, Ltd. v. Mercy of Colorado, Inc., 793 P.2d 648, 651 (Colo.App.1990). An independent contractor is one who engages to perform services for another, according to his own methods and manner, free from the direction and control of the employer in all matters relating to performance of the work. Continental Bus System, Inc. v. N.L.R.B., 325 F.2d 267, 271 (D.Colo.1963); Restatement (Second) of Agency § 2(3) cmt. b (1958).
In the Johnson case, the trial court, in its order finding that Wetzel was legally capable of committing a tort despite the absence of privity of contract, characterized Wetzel as an independent contractor adjusting company. I agree. As the majority points out, Johnson’s counsel agreed that Wetzel is an adjusting service totally independent of Safeway, that Wetzel contracted with Safeway to provide adjusting services for Safeway on workers’ compensation claims, and that Wetzel did not contract with either Safeway or Johnson to provide insurance. As noted above, Wetzel was performing the administrative work in adjusting workers’ compensation claims, a *815function statutorily assigned to Safeway as a self-insured employer. Wetzel performed this claims administration work for numerous large self-insured employers throughout the country by initially investigating claims, including receiving the first report of injuries from the employer, setting up files, requesting medical reports, and making the necessary filings with the division of labor. In the performance of ministerial tasks, such as how the files should be set up or reports requested, Wetzel was free of control by Safeway and was performing the claims administration services as an independent contractor.
An independent contractor may or may not be an agent. Restatement (Second) of Agency § 2(3) (1958). “An agent ... is ... an independent contractor when he contracts to act on account of the principal.” Id. at cmt. b. Yet, an independent contractor is not an agent where he is not a fiduciary, has no power to make the one employing him a party to a transaction, and is subject to no control over his conduct. Id. Since the regulatory scheme places the burden for administration of claims on the self-insured party, an independent claims adjusting company which the self-insured entity authorizes to administer claims on its behalf is acting as an agent for the self-insurer.1 Any action in claims processing taken by Wetzel bound Safeway because, as noted above, Safeway could not delegate its duty of good faith and fair dealing in processing claims to Wetzel. Wetzel was subject to control by Safeway over decisions that transcended administrative details. The majority points out that Safeway and Wetzel held monthly meetings where Wetzel gave input on how the cases should be handled, but the funds dispensed by Wetzel to claimants were supplied by Safeway, and Safeway resolved all the controversial issues of liability and selected the necessary medical providers and attorneys. Consequently, I conclude that Wet-zel’s role was that of an independent contractor agent.
Just as “[a]n insurance adjuster ... represents his employer, to whom he owes faithful work, and for whose acts in the employer’s interest the employer is responsible so long as the acts are done while the agent is acting within the scope of his employment,” 16A J. Appleman & J. Appleman, Insurance Law & Practice § 8890.35 at 541 (1981) (emphasis added), an independent claims adjusting company represents the self-insurer and the self-insured entity is responsible for acts done by the agent within the scope of its employment. See State ex rel. Ranni Assoc. v. Hartenbach, 742 S.W.2d 134, 140 (Mo.1987) (principal, and not agent, liable for economic loss suffered by beneficiaries of life insurance policy for acts performed by agent within scope of its authority). Whether that also relieves the claims adjustment company of liability hinges on the nature of the duty.
Liability for an agent’s breach of a non-delegable duty remains with the principal. See Restatement (Second) of Agency § 216 (1958). Here, the majority determined that Safeway’s duty of fair dealing and good faith is nondelegable. See maj. op. at 811. Consequently, agency principles do not support a finding that Wetzel owed an independent duty of good faith and fair dealing to compensation claimants.
D
Finally, the majority states that Wetzel owes a duty to employees because, based on the structure of the Act, Wetzel was aware of the importance of its role in carrying out Safeway’s duties to workers’ compensation claimants and by imposing a duty of fair dealing and good faith on claim adjusting companies, the humanitarian purpose of the Act is served. I believe that the humanitarian purpose of the Act evidenced by the statutory and regulatory structure is equally served without extending liability for the tort of bad faith to independent claims adjusting companies. If, as asserted, Wetzel improperly processed Johnson’s and Tozer’s claims, the *816remedy was to seek damages against Safeway. Neither the regulatory or statutory schemes of the Act nor the law of agency supports the imposition of a duty of good faith and fair dealing owed by Wetzel to compensation claimants.
Accordingly, I respectfully dissent and would reverse the judgments of the court of appeals.
I am authorized to state that Justice VOLLACK joins in this concurrence and dissent.

. In their separate complaints, Johnson and Tozer both sued Wetzel as an agent of Safeway, claiming that Safeway, through its agent Wetzel, acted unreasonably, and that Wetzel, acting upon instructions from its principal, Safeway, acted unreasonably.