Karen H. Saltern v. Hni Corporation, Gallagher Bassett Services, Inc., and Ace Property and Casualty Insurance Company ( 2014 )

IN THE COURT OF APPEALS OF IOWA
No. 13-1193
Filed August 13, 2014
KAREN H. SALTERN,
Plaintiff-Appellant,
vs.
HNI CORPORATION, GALLAGHER BASSETT
SERVICES, INC., and ACE PROPERTY
AND CASUALTY INSURANCE COMPANY,
Defendant-Appellees.
________________________________________________________________
Appeal from the Iowa District Court for Muscatine County, Paul L. Macek,
Judge.
Employee Karen Saltern appeals the district court’s ruling denying her
partial motion for summary judgment and granting the defendants’ motion for
summary judgment in her tort action for bad faith. AFFIRMED.
Anthony J. Bribriesco, Andrew W. Bribriesco, and William J. Bribriesco of
William S. Bribriesco & Associates, Bettendorf, for appellant.
Craig A. Levien and Amanda M. Richards of Betty, Neuman & McMahon,
P.L.C., Davenport, for appellee.
Heard by Vogel, P.J., and Doyle and Mullins, JJ.
2
DOYLE, J.
Employee-plaintiff Karen Saltern sued her employer, HNI Corporation
(HNI); her employer’s workers’ compensation insurance carrier, Ace Property
and Casualty Insurance Company (insurer); and her employer’s workers’-
compensation-claim administrator, Gallagher Bassett Services, Inc. (claim
administrator) alleging bad-faith denial and delay of her workers’ compensation
benefits. She asserted the defendants had no reasonable basis to deny and
delay her benefits after she fell at her employer’s premises. Ultimately, the
district court denied her partial motion for summary judgment and granted the
defendants’ motion for summary judgment finding, among other things, that the
defendants had a reasonable basis to deny Saltern’s claim. Because we agree
the defendants were entitled to summary judgment as a matter of law, we affirm.
I. Background Facts and Proceedings.
A reasonable fact finder viewing the summary judgment record in the light
most favorable to Karen Saltern could find the following facts. Saltern is 63 years
old and employed by HNI. On March 11, 2009, Saltern was working at the HNI
factory. She took a break with a coworker in a designated outdoor break area on
the factory’s premises. While walking to go back inside the factory, Saltern fell,
striking her head. She was taken via ambulance to the emergency room, where
it was assessed that she suffered “[m]ultiple injuries from a fall [including] a large
contusion and laceration of the left frontal region and moderate strain of her
neck.” The cause of Saltern’s fall, as well as how Saltern injured her head, is
disputed by the parties.
3
On March 30, 2009, HNI’s claim administrator sent Saltern a letter
“denying primary liability for [her] alleged work injury on March 11, 2009.” The
claim administrator’s letter explained:
At this point in time I have no medical evidence indicating
your [current] symptoms are directly related to your employment
with [HCI]. We have no evidence to support [that] an injury
occurred in the course and scope of employment. During our
conversation you had stated you slipped on ice and this is what
caused your fall. We obtained photos of the accident site,
immediately after your injury, there was no ice on the ground in or
around the area where you fell. Per witness statement you lost
your footing. Per the medical note on 3/12/09 from [the doctor] you
reported you had suddenly slipped and fell forward, no mention of
slipping on ice.
In October 2009, Saltern filed a petition for workers’ compensation
benefits before Iowa Workers’ Compensation Commissioner. HNI and its claim
administrator filed an answer denying that Saltern sustained an injury arising out
of and in the course of her employment with HNI. However, in October 2010, the
parties entered into an agreement for settlement. In the agreement, the parties
agreed Saltern sustained an injury arising out of and in the course of her
employment. The parties further agreed the injury caused Saltern to sustain
disability and resulting entitlement to compensation as set forth in the agreement.
The parties also agreed Saltern was entitled to “[o]ther compensation or benefits
consisting of [p]enalty benefits of $2500.” The commissioner approved the
parties’ settlement on October 8, 2010.
Meanwhile, on September 27, 2010, Saltern filed her petition at law, later
amended, asserting the defendants denied or delayed Saltern’s workers’
compensation benefits in bad faith. Saltern sought compensatory damages,
4
along with punitive and exemplary damages. HNI was served with suit papers on
November 30, 2010. The defendants answered, denying liability.
In 2013, Saltern filed a motion for partial summary judgment against the
defendants. She asserted summary judgment should be granted finding she
established the first element of her bad-faith claim. See Rodda v. Vermeer Mfg.,
734 N.W.2d 480, 483 (Iowa 2007) (requiring a plaintiff to first prove that “the
defendant had no reasonable basis upon which to deny the employee’s
benefits”). Specifically, she claimed the defendants, by agreeing in the parties’
settlement agreement that Saltern was entitled to penalty benefits, necessarily
admitted they lacked a reasonable cause to deny her benefits and should
therefore be judicially estopped from disputing otherwise. The defendants
resisted and filed their own motion for summary judgment on several bases,
including that an objectively reasonable basis existed for denying Saltern’s claim.
Saltern resisted the defendants’ motion.
Following a hearing, the district court entered its orders denying Saltern’s
partial motion for summary judgment and granting the defendants’ motion for
summary judgment. Among other things, the court found Saltern’s inconsistent
statements “in respect to whether or not she actually struck the curb or whether
or not she slipped on ice” created a fairly debatable issue. The court concluded
a reasonable basis existed for denying the claim and that defendants had no
reason to know their basis for denying the claim was unreasonable. In denying
Saltern’s motion for partial summary judgment, the court stated, “[a]s set forth in
the ruling on the defendants’ motion for summary judgment, the court has
determined that [HNI] actually had a reasonable basis to deny or delay benefits.”
5
Pursuant to Iowa Rule of Civil Procedure 1.904(2), Saltern filed a motion
to amend, enlarge, or modify findings and conclusions, requesting, among other
things, that the court find defendants judicially estopped from disputing the first
element of bad faith. Defendants resisted. Before the court ruled, Saltern filed
her notice of appeal. The district court ruled it no longer had jurisdiction to
decide the motion.
Saltern now appeals. She contends the district court erred in granting the
defendants’ summary judgment motion1 and in denying her motion for partial
summary judgment.
II. Scope and Standards of Review.
We review a district court’s ruling on a motion for summary judgment in a
bad-faith claim for the correction of errors at law. Rodda, 734 N.W.2d at 482-83.
“Summary judgment is appropriate if ‘the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.’” Thomas v. Gavin, 838 N.W.2d 518,
521 (Iowa 2013) (quoting Iowa R. Civ. P. 1.981(3)). “An issue is ‘material’ only
when the dispute is over facts that might affect the outcome of the suit, given the
applicable governing law.” Sallee v. Stewart, 827 N.W.2d 128, 132-33 (Iowa
2013). We must “(1) view the facts in the light most favorable to the nonmoving
party, and (2) consider on behalf of the nonmoving party every legitimate
1
Because we find the defendants’ reasonable-basis ground for summary
judgment to be dispositive, we do not address their alternate theory of judicial estoppel
concerning Saltern’s bankruptcy filing.
6
inference reasonably deduced from the record.” Hoyt v. Gutterz Bowl & Lounge
L.L.C., 829 N.W.2d 772, 774 (Iowa 2013).
III. Discussion.
Iowa law recognizes a common-law cause of action against an insurer for
bad-faith denial or delay of insurance benefits, and the tort has been extended to
include workers’ compensation cases. Rodda, 734 N.W.2d at 483; see also
Boylan v. Am. Motorists Ins. Co., 489 N.W.2d 742, 744 (Iowa 1992). In the
analogous area of insurance law, “the tort of bad faith only arises when the
insurance company intentionally denies or fails to process a claim without a
reasonable basis for such action.” Reuter v. State Farm Mut. Auto. Ins. Co., 469
N.W.2d 250, 251 (Iowa 1991). To establish bad faith on the part of a defendant,
the plaintiff must prove two elements, one objective and one subjective. Bellville
v. Farm Bureau Mut. Ins. Co., 702 N.W.2d 468, 473 (Iowa 2005); see also
Rodda, 734 N.W.2d at 483. First, the plaintiff must establish the defendant
objectively “had no reasonable basis for denying benefits under the policy.” Id.
Second, the plaintiff must establish the defendant subjectively “knew or had
reason to know that its denial or refusal was without reasonable basis.” Id.
A. Saltern’s Partial Motion for Summary Judgment.
The parties entered into a section 85.35(2) agreement for settlement. 2 As
a part of the agreement, the parties agreed Saltern was entitled to “[o]ther
compensation or benefits consisting of [p]enalty benefits of $2500.” Pursuant to
2
Iowa Code section 85.35(2) provides: “The parties may enter into an agreement
for settlement that establishes the employer’s liability, fixes the nature and extent of the
employee’s current right to accrued benefits, and establishes the employee’s right to
statutory benefits that accrue in the future.”
7
section 85.35(8), the commissioner approved the settlement, stating: “I find that
substantial evidence supports the terms of the foregoing settlement, the
employee knowingly waives hearing, decision, and resulting statutory benefits
and the settlement is a reasonable and informed compromise of the competing
interests of the parties.”3
On appeal, Saltern asserts the district court erred when it denied her
motion for partial summary judgment. She contends the defendants, in entering
into the agreement for settlement, “asserted that [they] lacked a reasonable basis
to deny benefits in front of the Iowa Workers’ Compensation Commissioner.”
She further contends: “Defendants asserted that [they were] liable for ‘penalty
benefits’ because [they] had violated Iowa Code section 86.13(4).” 4 Saltern
3
Iowa Code section 85.35(8)(a) provides:
A settlement shall be approved by the workers’ compensation
commissioner if the parties show all of the following:
(1) Substantial evidence exists to support the terms of the
settlement.
(2) Waiver of the employee’s right to a hearing, decision, and
statutory benefits is made knowingly by the employee.
(3) The settlement is a reasonable and informed compromise of
the competing interests of the parties.
4
Iowa Code section 86.13(4) provides:
a. If a denial, a delay in payment, or a termination of benefits
occurs without reasonable or probable cause or excuse known to the
employer or insurance carrier at the time of the denial, delay in
payment, or termination of benefits, the workers’ compensation
commissioner shall award benefits in addition to those benefits payable
under this chapter, or chapter 85, 85A, or 85B, up to fifty percent of the
amount of benefits that were denied, delayed, or terminated without
reasonable or probable cause or excuse.
b. The workers’ compensation commissioner shall award benefits
under this subsection if the commissioner finds both of the following
facts:
(1) The employee has demonstrated a denial, delay in payment,
or termination of benefits.
(2) The employer has failed to prove a reasonable or probable
cause or excuse for the denial, delay in payment, or termination of
benefits.
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concludes those admissions judicially estop defendants in the bad-faith action
from asserting they had a reasonable basis to deny or delay benefits.
Consequently, she argues, the district court erred in denying her motion for
partial summary judgment.
The district court’s ruling did not address Saltern’s judicial estoppel issue.
It appears Saltern attempted to preserve the issue for appellate review by filing a
motion pursuant to Iowa Rule of Civil Procedure 1.904(2), but failed to secure a
ruling on her motion before filing her notice of appeal. She therefore divested the
district court of jurisdiction over the case. See IBP, Inc. v. Al Gharib, 604 N.W.2d
621, 628 (Iowa 2008) (“Once an appeal is perfected, the appellate court has
jurisdiction. At the same time, the district court loses jurisdiction over the merits
of the controversy and may not consider any posttrial motions filed after the
notice of appeal.” (Internal citations omitted.)). While the district court was given
the opportunity to address (and preserve) Saltern’s issue, Saltern took away that
opportunity by filing her notice of appeal. See id. (stating that when the party
who has filed a posttrial motion appeals before the district court rules on the
motion, the party is deemed to have waived and abandoned the posttrial motion).
c. In order to be considered a reasonable or probable cause or
excuse under paragraph “b”, an excuse shall satisfy all of the following
criteria:
(1) The excuse was preceded by a reasonable investigation and
evaluation by the employer or insurance carrier into whether benefits
were owed to the employee.
(2) The results of the reasonable investigation and evaluation
were the actual basis upon which the employer or insurance carrier
contemporaneously relied to deny, delay payment of, or terminate
benefits.
(3) The employer or insurance carrier contemporaneously
conveyed the basis for the denial, delay in payment, or termination of
benefits to the employee at the time of the denial, delay, or termination
of benefits.
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Under such circumstances, we are presented nothing on Saltern’s judicial
estoppel issue for review.
B. The Defendants’ Motion for Summary Judgment.
A plaintiff must first establish the defendant objectively “had no reasonable
basis for denying benefits under the policy.” Rodda, 734 N.W.2d at 483. A
defendant can disprove the first element of bad faith, by showing that a claim for
benefits is objectively “fairly debatable.” Id. Whether a claim is “fairly debatable”
can usually be answered by the court as a matter of law. Id. A “fairly debatable”
claim is one that “is open to dispute on any logical basis” or “if reasonable minds
can differ on the coverage-determining facts or law.” Bellville, 702 N.W.2d at
473. In other words, a claim is “fairly debatable” if it is open to dispute on “any
logical basis.” Id. The plaintiff in a bad-faith action must do more than show the
defendant’s position was unreasonable; it is incumbent upon the plaintiff to
negate any reasonable basis for the defendant’s position. Id. at 481. Moreover,
even if the defendant’s “position is ultimately found to lack merit [that fact] is not
sufficient by itself to establish the first element of a bad faith claim.” Id. at 483.
Instead, “[t]he focus is on the existence of a debatable issue, not on which party
was correct.” Id. Thus, when considering conflicting evidence, the court should
not weigh the evidence; rather it should “‘decide whether evidence existed to
justify denial of [a] claim.’” Id. at 474 (quoting State Farm Lloyds, Inc. v. Polasek,
847 S.W.2d 279, 285 (Tex. Ct. App. 1992)). If an objectively reasonable basis
for denial of a claim actually exists, the defendant cannot be held liable for bad
faith as a matter of law. See id. at 473-74. If a plaintiff proves the first, objective
element of bad faith, the plaintiff must still show the second, subjective element—
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that the defendant knew or had reason to know that it lacked a reasonable basis
for denying the benefits. Rodda, 734 N.W.2d at 483. If a plaintiff fails to show
either of these elements, the bad-faith claim will fail. Id. Applying these
principles we find, viewing the facts in the light most favorable to Saltern, the
defendants had an objectively reasonable basis for denying and delaying
payment of Saltern’s benefits.
The relevant law establishes that “[an] injury must arise out of the worker’s
employment to be compensable. This means the injury must not have
coincidentally occurred while at work, but must in some way be caused by or
related to the working environment or the conditions of employment.” McIlravy,
653 N.W.2d at 331. For example, “an injury sustained while walking, without any
additional evidence connecting the injury in some way to the work place
environment,” is not compensable. Id.
Saltern’s petition states she slipped on ice and fell. Cynthia Hampton,
Saltern’s coworker and the only witness to the fall, testified at her deposition that
Saltern fell because she slipped on ice. However, neither Saltern’s nor
Hampton’s written report of the incident mentioned ice. Similarly, neither report
stated how Saltern sustained her head injury. Saltern’s report, completed the
day after her fall, stated she and Hampton
were walking back into [the] plant and [she] felt [her]self slipping
and caught [her] left foot, trip[ped] and tried to catch [her]self by
grabbing the corner of a lunch [picnic] table but [she] had too much
force and fell to [her] left knee and hit the blacktop and stopping at
a cement barrier.
Hampton’s report, given the day of Saltern’s fall, stated Saltern “lost her footing
[and] started falling. [She c]aught herself on the [first] table. When she came
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back up her footing wasn’t right. She lost balance again, falling into the
[concrete] wall that holds the [guard] rails.” Saltern’s account of the incident
given at the hospital the day of her fall did not specifically mention ice, but she
did state that “she was walking outside on break in the parking lot when she
suddenly slipped and fell forward, striking her head into a concrete abutment.”
Later, at her deposition, Saltern herself testified she did not know what caused
her head laceration.
Here, the defendants’ initial investigation of the incident revealed no ice in
the area where Saltern fell, and Saltern’s own report did not state that she
slipped on ice or that she hit her head on the cement wall when she fell.
Because a fall, without more, is not per se compensable, the defendants had an
objectively-reasonable basis to question whether Saltern’s fall and subsequent
injury was work related.5 Additionally, at Saltern’s deposition taken in 2013, she
herself testified that she did not know what caused her injury, agreeing that it was
possible that she hit her head on the ground when she fell. The defendants had
a reasonable basis, even if ultimately determined to be wrong, to deny her
benefits. Upon our review, we agree with the district court that Saltern’s claim for
benefits was fairly debatable as a matter of law, and therefore affirm the district
court’s grant of summary judgment in the defendants’ favor.
5
Idiopathic falls (falls due to personal conditions) onto level surfaces are
generally not held compensable. See Koehler Elec. v. Wills, 608 N.W.2d 1, 4 (Iowa
2000); see also 1 Arthur Larson & Lex K. Larson, Larson’s Workers’ Compensation Law
§ 9.01[4][a], at 9-7 (2013) (“A distinct majority of jurisdictions . . . have denied
compensation in level-fall cases. The reason is that the basic cause of the harm is
personal, and that the employment does not significantly add to the risk.”).
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IV. Conclusion.
For the above reasons, we affirm the district court’s rulings on the motions
for summary judgment.
AFFIRMED.