Sizemore v. Continental Cas. Co.

Page 47

142 P.3d 47

2006 OK 36

Sherrie SIZEMORE, Plaintiff, v. CONTINENTAL CASUALTY COMPANY, d/b/a CNA Insurance Company, an Illinois Corporation, and Kerr Group, Inc., a Delaware Corporation, and Transportation Insurance Company, an Illinois Corporation, Defendants.

No. 99940.

Supreme Court of Oklahoma.

May 30, 2006.

Rehearing Denied June 26, 2006.

Certified Question of Law.

¶ 0 United States District Court, Northern District of Oklahoma, Honorable Terence C. Kern, certified question of law asking whether Oklahoma law recognizes tort of bad faith against workers' compensation insurer.

CERTIFIED QUESTION ANSWERED.

Wilson N. Jones, III, and Susan Hamilton Jones, Wilson Jones P.C., Tulsa, OK; Allen Smallwood, Tulsa, OK; and Jon Bryan Wallis, Tulsa, OK, for Plaintiff.

James K. Secrest, II, Roger N. Butler, Jr., Edward J. Main, Secrest, Hill & Butler, Tulsa, Oklahoma, for Defendants, Continental Casualty Company and Transportation Insurance Company.

COLBERT, J.

¶ 1 The United States District Court for the Northern District of Oklahoma has certified the following question pursuant to the Revised Uniform Certification of Questions of Law Act, Okla. Stat. tit. 20, §§ 1601-1611 (2001):

Does Oklahoma law recognize a tort for bad faith against a workers' compensation insurer?

In response, this Court recognizes such a tort for a workers' compensation insurance carrier's refusal to pay a workers' compensation award and rejects decisions to the contrary.

FACTS

¶ 2 Sherrie Sizemore (Claimant) worked for Kerr Glass in Tulsa, Oklahoma. Kerr Glass was an insured of Continental Casualty Company and Transportation Insurance Company (collectively "Insurer"). In 1991, Claimant was injured in a job-related accident. She received awards of workers' compensation benefits for both temporary total disability and permanent partial disability. In November 2000, Claimant's temporary total disability payments ceased. Claimant alleges that at that time she should have started receiving permanent partial disability payments from her employer's workers' compensation insurance carrier, but did not. In March 2001, the Workers' Compensation Court found that the permanent partial disability payments were past due, accelerated the entire balance, and assessed 18 per cent interest pursuant to section 42(A) of the Workers' Compensation Act. Claimant's action in federal court asserts that Insurer's conduct constitutes a breach of the implied duty of good faith and fair dealing. Insurer contends that no such cause of action exists under Oklahoma law against a workers' compensation insurer. The federal court decided sua sponte to certify the question.

¶ 3 The question certified is nearly identical to one certified in the recent decision in DeAnda v. AIU Insurance, 2004 OK 54, 98 P.3d 1080. No petition for rehearing was filed in that matter.

¶ 4 This matter provides this Court the opportunity to revisit an issue addressed in DeAnda and in Kuykendall v. Gulfstream Aerospace Technologies, 2002 OK 96, 66 P.3d 374, to better define the scope of the Workers' Compensation Act as it relates to the duty of a workers' compensation insurance carrier to pay court-ordered benefits. At the same time, it provides this Court the opportunity to give effect to a workers' compensation claimant's common law remedy for a tort that lies beyond the scope of the Workers' Compensation Act.

HISTORICAL BACKGROUND

¶ 5 In 1992, this Court foreshadowed application of a common law tort action against a workers' compensation insurer for breach of the implied duty to deal fairly and in good faith by refusing to pay a workers' compensation award. In Goodwin v. Old Republic Insurance Co., 1992 OK 34, 828 P.2d 431, this Court assumed that an insurer would be liable in tort for its bad faith refusal to pay a workers' compensation award. The facts in Goodwin, however, did not support an action for bad faith. Id. ¶ 17, 828 P.2d at 436.

¶ 6 This Court's signal that it would apply such an action intensified in a line of cases that continued to assume the action's viability. In 1995, this Court went so far as to state: "We also held [in Goodwin] that an injured worker has a cause of action for bad faith against his employer's insurance carrier for refusing to timely pay the injured worker's compensation award." Whitson v. Okla. Farmers Union Mut. Ins. Co., 1995 OK 4, ¶ 9, 889 P.2d 285, 287. No bad faith action could be maintained in Whitson, however, because the claimant had sued his employer who happened to be an insurer but was not the employer's workers' compensation carrier. Id. That same year, in McGehee v. State Insurance Fund, 1995 OK 85, 904 P.2d 70, this Court upheld the trial court's decision to dismiss a claimant's bad faith claim. That decision was based on the fact that the bad faith claim was untimely, not on a belief that the claim was not viable.

¶ 7 In 1996, this Court denied certiorari review of a published Court of Civil Appeals decision which affirmed a judgment entered on a jury's verdict awarding damages for the workers' compensation insurer's bad faith failure to timely pay an award. See Cooper v. Nat'l Union Fire Ins. Co., 1996 OK CIV APP 52, 921 P.2d 1297, cert. denied. In 1997, this Court answered a federal certified question and held that Oklahoma does not recognize the tort of bad faith for the pre-award conduct of a workers' compensation carrier. See Anderson v. U.S. Fid. & Guar. Co., 1997 OK 124, 948 P.2d 1216. That decision noted Goodwin's assumption "that an insurer could be subject to a bad faith claim for failure to pay benefits under an award." Id. ¶ 6, 948 P.2d at 1217. That same year, this Court compelled a workers' compensation self-insured group to produce financial records in an action brought by a claimant for nonpayment of court-ordered workers' compensation benefits. See YMCA v. Melson, 1997 OK 81, 944 P.2d 304. No hint was made that the underlying action might be based on a claim that was not recognized in Oklahoma law.

¶ 8 Two years later, this Court once again denied certiorari review of a published opinion of the Court of Civil Appeals which "assumed the [own risk employer's] liability for bad faith" but decided the matter "on the narrower grounds that the alleged bad-faith conduct predated a final award." Heintz v. Trucks For You, Inc., 1999 OK CIV APP 64, ¶ 10, 984 P.2d 255, 258. In 2001, this Court reviewed an action against the State Insurance Fund for its alleged bad faith in failing to timely pay a workers' compensation award. See Fehring v. State Ins. Fund, 2001 OK 11, 19 P.3d 276. This Court stated again its assumption that a bad faith claim existed but noted that "this Court has not unequivocally sanctioned the viability of a tort suit against a workers' compensation insurer for the bad faith post-award conduct of failing to timely pay a workers' compensation award." Id. ¶ 26, 19 P.3d at 284. This Court held that, even assuming the viability of such a claim, the State Insurance Fund was a state entity and thus entitled to immunity under the Governmental Tort Claims Act, Okla. Stat. tit. 51, §§ 152-167 (2001 & Supp.2005). Fehring, 2001 OK 11, ¶¶ 23-29, 19 P.3d at 283-85.

¶ 9 The point of this historical analysis is that for a decade this Court expressly assumed the viability of an action based on an insurer's refusal to pay a workers' compensation award. Further, this Court refused to review at least one Court of Civil Appeals decision in which the tort was actually applied by a jury. See Cooper, 1996 OK CIV APP 52, 921 P.2d 1297.

¶ 10 An abrupt halt in the evolution of this Court's emerging recognition of the tort occurred in Kuykendall, 2002 OK 96, 66 P.3d 374. The defendant there was a self-insured employer which refused to pay for prescribed medication as twice ordered by the Workers' Compensation Court. Kuykendall dismissed the entire line of cases which had signaled enforcement of a workers' compensation insurer's duty of good faith and fair dealing as "obiter dictum." Further, a distinction was drawn between a workers' compensation insurer and a self-insured employer. The self-insured employer, acting as an insurer, was given the benefit of the exclusive remedy provision of section 12 of the Workers' Compensation Act for "the liability prescribed in Section 11." That tort immunity is for "accidental personal injury sustained by the employee arising out of and in the course of employment ...." Okla. Stat. tit. 85, § 11 (2001).

¶ 11 Kuykendall reasoned that, because section 42(A) of the Workers' Compensation Act provided for interest on overdue payment of an award and because that section provided a mechanism for enforcement of awards in district court, somehow this was the injured worker's sole remedy for a self-insured employer's bad faith failure to pay an award. 2002 OK 96, ¶ 13, 66 P.3d at 378. This left open the question of whether the holding in Kuykendall was so broad as to require the same conclusion when a workers' compensation insurer refuses to pay an award.

¶ 12 That answer came in DeAnda, 2004 OK 54, 98 P.3d 1080, which marked a complete about-face in this Court's signaled resolution to the issue of bad faith by a workers' compensation insurer in failing to pay an award. DeAnda merely extended the holding in Kuykendall to hold that section 42 provided the sole remedy for any bad faith failure to pay court-ordered workers' compensation benefits. See id. ¶ 1, 98 P.3d at 1080. No rehearing was sought in DeAnda but its analysis is flawed in two respects.

¶ 13 First, as stated in Kuykendall, the DeAnda Court asserted that "there are no Oklahoma cases holding an employer liable for bad faith breach in paying a Workers' Compensation award." DeAnda, 2004 OK 54, ¶ 24, 98 P.3d at 1085 (citing Kuykendall, 2002 OK 96, ¶ 8, 66 P.3d at 376-77). DeAnda failed to note, however, the published opinion of the Court of Civil Appeals in Cooper, 1996 OK CIV APP 52, 921 P.2d 1297. There, the Court of Civil Appeals r...