Seguro-Suarez v. Key Risk Ins. Co.Â

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA17-697
Filed: 4 September 2018
Mecklenburg County, No. 16-CVS-19007
MARIO SEGURO-SUAREZ, by and through his Guardian Ad Litem, EDWARD G.
CONNETTE, Plaintiff,
v.
KEY RISK INSURANCE COMPANY, JOSEPH J. ABRIOLA, SHARON SOSEBEE,
SUZANNE MCAULIFFE, CHERYL GLESS, ROBERT E. HILL AND CAROLINA
INVESTIGATIVE SERVICES, INC., Defendants.
Appeal by Defendants Key Risk Insurance Company, Joseph J. Abriola,
Sharon Sosebee, Suzanne McAuliffe, and Cheryl Gless from Order entered 30
January 2017 by Judge Jesse B. Caldwell, III, in Mecklenburg County Superior
Court. Heard in the Court of Appeals 8 February 2018.
Edwards Kirby L.L.P., by David F. Kirby and William B. Bystrynski, for
Plaintiff-Appellee.
Hedrick Gardner Kincheloe & Garofalo LLP, by Mel J. Garofalo, C. Rob Wilson,
Linda Stephens, and M. Duane Jones, for Defendant-Appellants Key Risk
Insurance Company, Joseph J. Abriola, Sharon Sosebee, Suzanne McAuliffe,
and Cheryl Gless.
INMAN, Judge.
When a North Carolina worker is hurt on the job, his injury is within the
exclusive scope of the Workers’ Compensation Act and he can obtain relief only by
pursuing a claim before the North Carolina Industrial Commission (the
SEGURO-SUAREZ V. KEY RISK INS. CO.
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“Commission”). But when, after the Commission awards the injured worker benefits,
an employer’s insurance company knowingly provides false information to police to
frame him for insurance fraud, resulting in his arrest, incarceration, and indictment
on felony charges, the worker’s claims for malicious prosecution, abuse of process,
and unfair and deceptive trade practices (“UDTP”) exceed the scope of the Workers’
Compensation Act and are properly before the General Court of Justice.
Plaintiff Mario Seguro-Suarez (“Plaintiff”) brought suit against Defendants
Key Risk Insurance Company (“Key Risk”), Joseph J. Abriola, Sharon Sosebee,
Suzanne McAuliffe, and Cheryl Gless (collectively the “Individual Defendants”
together with Key Risk as “Defendants”)1 for malicious prosecution, abuse of process,
UDTP, bad faith, willful and wanton conduct, conspiracy, and punitive damages.
Defendants appeal the denial of their motions to dismiss all of Plaintiff’s claims
pursuant to Rules 12(b)(1) and 12(b)(6) of the North Carolina Rules of Civil
Procedure. After careful review of the record and applicable law, we hold that the
trial court did not err in denying the motions to dismiss pursuant to Rule 12(b)(1),
but that it did err in failing to dismiss Plaintiff’s bad faith and civil conspiracy claims
under Rule 12(b)(6). We therefore affirm the trial court’s order in part, reverse in
part, and remand for further proceedings.
1 The other defendants named in the action, Robert E. Hill and Carolina Investigative Services,
Inc., did not appeal. We therefore limit our use of “Defendants” in this opinion to Key Risk and the
Individual Defendants.
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I. FACTUAL AND PROCEDURAL HISTORY
The record below, consisting primarily of the allegations in Plaintiff’s
complaint, indicates the following:
In 2003, Plaintiff was working for his employer, Southern Fiber, when he fell
from a height of approximately 18 feet onto concrete, striking his head. As a result
of the fall, Plaintiff suffered several broken bones and severe traumatic brain injury.
He was rendered comatose, required intubation and ventilation support to breathe,
and underwent emergency neurosurgery at Carolinas Medical Center in Charlotte,
North Carolina, to relieve pressure on his brain. He eventually emerged from his
coma but the brain injury changed his personality, required physical, speech, and
occupational therapy, and Plaintiff currently suffers from significant behavioral and
memory deficits, including deficits in executive functioning, problem solving,
planning, and balance. Plaintiff’s injuries have rendered him dependent on others
for: (1) dressing; (2) feeding; (3) toileting; (4) assistance in daily activities; (5)
grooming; (6) bathing; and (7) home management. Southern Fiber and Key Risk, as
Southern Fiber’s insurance carrier, admitted that Plaintiff’s injuries were
compensable.
While Plaintiff was in inpatient care, Key Risk was informed multiple times
that Plaintiff would require 24-hour care upon discharge. Rather than provide for
care at an assisted living center or by an at-home professional caregiver, Key Risk
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and its employees arranged for Plaintiff’s 18-year-old daughter, who had immigrated
to the United States only two months prior, to assume all home care for Plaintiff.
After approximately 11 weeks, Plaintiff’s daughter moved him into the home of a
family friend, who assumed caregiving duties. Key Risk did not pay Plaintiff’s
daughter or friend for assuming the 24-hour care of Plaintiff.
Plaintiff saw an authorized treating physician, Dr. Flora Hammond,
throughout 2003, 2004, and 2005. Dr. Hammond performed multiple tests on
Plaintiff to discern the nature and extent of his condition, with each test showing
symptoms consistent with traumatic brain injury. Dr. Hammond also requested an
occupational home therapy evaluation, as she recognized that Plaintiff continued to
suffer injuries as a result of several falls stemming from his balance issues. Key Risk
denied the request and refused to provide the evaluation. Dr. Hammond later
requested an evaluation by a neurologist, which Key Risk again declined to provide;
instead, Plaintiff was evaluated by Dr. Thomas Gaultieri, a neuropsychologist. Key
Risk refused to authorize continued treatment by Dr. Hammond after Plaintiff was
referred to Dr. Gaultieri.
Dr. Gaultieri treated Plaintiff from 2005 to mid-2007. Though he first believed
Plaintiff was legitimately suffering from the conditions described above, Key Risk
eventually provided Dr. Gaultieri with video footage that convinced him otherwise.
The video, cut from 9 hours of surveillance footage taken by Key Risk over a six-
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month period and edited down to 45 minutes, led Dr. Gaultieri to opine that Plaintiff
was willfully exaggerating his symptoms and that he needed no further treatment.
The above conduct by Key Risk in administering Plaintiff’s care for an
admittedly compensable injury led to considerable litigation. In 2008, a deputy
commissioner of the Commission ordered Key Risk to authorize further treatment by
Dr. Hammond, and Plaintiff returned to her care. In 2010, after Key Risk argued
that Plaintiff’s benefits should be cut off for fraud and misrepresentation, a deputy
commissioner entered an opinion and award requiring Key Risk to pay continued
compensation for Plaintiff’s care. On 29 April 2011, the Full Commission entered its
own opinion and award in Plaintiff’s favor (the “Opinion and Award”). Not only did
the Full Commission award Plaintiff continued benefits, but it concluded as a matter
of law that “[Key Risk and Southern Fiber] brought and defended this claim without
reasonable grounds. . . . [Key Risk’s and Southern Fiber’s] position is not based upon
reason.” As a result, the Full Commission awarded Plaintiff attorney’s fees,
continued Key Risk’s payment obligations in the amount of $345.35 per week “until
further Order of the [Commission,]” and ordered that Plaintiff’s daughter and family
friend be reimbursed for their caregiving services, finding that Key Risk’s refusal to
pay prior to the entry of the Opinion and Award “was unreasonable and . . .
constituted stubborn, unfounded litigiousness.” Key Risk filed an untimely appeal of
the Full Commission’s decision to this Court, which was dismissed by order. Order,
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Seguro-Suarez v. Southern Fiber, COA12-238-1 (N.C. Ct. App. May 15, 2012). Key
Risk next petitioned the North Carolina Supreme Court for writ of certiorari, but its
petition was denied. Seguro-Suarez v. Southern Fiber, 366 N.C. 408, 735 S.E.2d 324
(2012).
Following its losses before the Commission, and after exhausting its appeal
efforts, Key Risk, by and through its employees Individual Defendants, hired
Carolina Investigative Services and Robert E. Hill (the “Investigator”) to
surreptitiously surveil and record Plaintiff for several weeks. Key Risk also arranged
for an independent medical exam of Plaintiff on 10 June 2013 in order to determine
whether his symptoms were legitimate and if Plaintiff actually required ongoing care.
The forensic psychiatrist who examined Plaintiff observed Plaintiff’s “childlike”
demeanor and concluded he was suffering from dementia, traumatic brain injury,
chronic dizziness, and chronic headaches—all stemming from his workplace injury.
Key Risk’s chosen examiner further opined that Plaintiff’s “symptoms appeared to be
valid. There was no apparent malingering, in [her] opinion.”
The mounting medical evidence and full-throated rebuke from the Commission
left Key Risk undeterred in its efforts to undermine Plaintiff’s medical diagnosis and
continued care. After the independent medical exam, Key Risk directed its
Investigator to convince the Lincolnton Police Department (the “LPD”) to bring
criminal charges against Plaintiff under the theory that he was obtaining his workers’
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compensation benefits by false pretenses, i.e., by faking his diagnosed symptoms from
his traumatic brain injury. The Investigator provided the LPD with an extensively
edited videotape similar to that shown to Dr. Gaultieri in the proceeding before the
Commission; as a result, the LPD arrested and jailed Plaintiff on 24 October 2013.
On 10 March 2014, Plaintiff was indicted on 25 counts of obtaining property by false
pretenses and one count of insurance fraud, all for accepting the checks ordered paid
to him by the Commission.
After his first appearance in criminal court, Plaintiff was ordered to undergo a
psychological examination at Central Regional Hospital in Butner, North Carolina to
determine his competency to stand trial. The examining psychologist noted that
Plaintiff “exhibited cognitive deficit consistent with his documented history,
including memory impairment[,]” and concluded that Plaintiff was mentally
incapable of both proceeding to trial and effectively assisting counsel. The State
ultimately dismissed all charges against Plaintiff after a hearing in which the trial
court asked the State if it “really want[ed] to assist in the establishment of a malicious
prosecution claim[,]” and expressed “some real concerns when a man is drawing a
check pursuant to an order, in effect, pursuant to a court order, and one side doesn’t
like the court order and decides to take out criminal charges because they disagree
with what the ruling was.”
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After his release from custody, Plaintiff filed suit against Defendants and the
Investigator in Mecklenburg County Superior Court, asserting causes of action for:
(1) malicious prosecution; (2) abuse of process; (3) UDTP; (4) bad faith; (5) willful and
wanton conduct; (6) civil conspiracy; and (7) punitive damages. Plaintiff’s complaint
asserts that Defendants undertook the above actions with the aim of terminating
Plaintiff’s workers’ compensation benefits and relieving Key Risk of its financial
burden. Defendants filed a motion to dismiss pursuant to Rules of Civil Procedure
12(b)(1) and 12(b)(6), asserting that the trial court lacked subject matter jurisdiction
and that the complaint failed to state a claim upon which relief could be granted. The
trial court denied Defendants’ motion by order entered 30 January 2017, and
Defendants timely filed their notice of appeal on 13 February 2017.
II. ANALYSIS
A. Appellate Jurisdiction
The denial of a motion to dismiss brought pursuant to Rules 12(b)(1) and
12(b)(6) is an interlocutory order and typically not subject to immediate appellate
review unless it affects a substantial right. See, e.g., Murray v. Univ. of N.C. at
Chapel Hill, 246 N.C. App. 86, 91-95, 782 S.E.2d 531, 535-37 (2016), aff’d per curiam,
369 N.C. 585, 792 S.E.2d 612 (2017) (reviewing case law concerning immediate
appeals of motions to dismiss under Rules 12(b)(1) and 12(b)(6)). However, “our
Supreme Court has determined that the denial of a motion to dismiss under Rule
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12(b)(1) and the exclusivity provision of the [Workers’ Compensation] Act affects a
substantial right ‘and will work injury if not corrected before final judgment . . . .’ ”
Estate of Vaughn v. Pike Elec., LLC, 230 N.C. App. 485, 491, 751 S.E.2d 227, 231
(2013) (quoting Burton v. Phx. Fabricators & Erectors, Inc., 362 N.C. 352, 661 S.E.2d
242 (2008)). Because Defendants’ motion to dismiss expressly “contend[s] that th[e
trial court] lacks subject matter jurisdiction . . . pursuant to the North Carolina
Workers’ Compensation Act” under Rule 12(b)(1), the denial of their motion on that
ground affects a substantial right and is immediately appealable. See Vaughn, 230
N.C. App. at 491, 751 S.E.2d at 231.
As for the denial of Defendants’ motion to dismiss pursuant to Rule 12(b)(6),
Defendants request that we exercise our discretion to consider their appeal thereof
“to expedite the administration of justice,” as allowed in Flaherty v. Hunt, 82 N.C.
App. 112, 113, 345 S.E.2d 426, 427 (1986). Plaintiff, for his part, asserts no argument
against such an exercise. Because this Court already has jurisdiction over the denial
of Defendants’ motion pursuant to Rule 12(b)(1), and in the absence of any argument
to the contrary, we exercise our discretion to hear Defendants’ appeal of the denial of
their motion to dismiss under Rule 12(b)(6). Id. at 113-14, 345 S.E.2d at 428.
B. Standards of Review
We consider the denial of a motion to dismiss under Rule 12(b)(1) for lack of
subject matter jurisdiction de novo, in which we “consider[ ] the matter anew and
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freely substitute[ ] [our] judgment for that of the [trial court].” Blow v. DSM Pharms.,
Inc., 197 N.C. App. 586, 588, 678 S.E.2d 245, 248 (2009) (internal quotation marks
and citation omitted) (final alteration in original). In this review, we take as true all
allegations in the complaint. Good Hope Hosp., Inc. v. N.C. Dept. of Health and
Human Svcs., 174 N.C. App. 266, 274, 620 S.E.2d 873, 880 (2005). But we also are
permitted to consider matters outside the pleadings. Harris v. Matthews, 361 N.C.
265, 271, 643 S.E.2d 566, 570 (2007).
Similarly, we apply the de novo standard to review a trial court’s ruling on a
motion to dismiss pursuant to Rule 12(b)(6). Green v. Kearney, 203 N.C. App. 260,
265, 690 S.E.2d 755, 761 (2010). “The scope of our review is ‘whether, as a matter of
law, the allegations of the complaint, treated as true, are sufficient to state a claim
upon which relief may be granted under some legal theory.’ ” Holton v. Holton, ___
N.C. App. ___, ___, 813 S.E.2d 649, 655 (2018) (quoting State Emps. Ass’n of N.C., Inc.
v. N.C. Dep’t of State Treasurer, 264 N.C. 205, 210, 695 S.E.2d 91, 95 (2010)). “We
consider the allegations in the complaint true, construe the complaint liberally, and
only reverse the trial court’s denial of a motion to dismiss if plaintiff is entitled to no
relief under any set of facts which could be proven in support of the claim.” Christmas
v. Cabarrus Cty, 192 N.C. App. 227, 231, 664 S.E.2d 649, 652 (2008) (citation omitted).
C. Subject Matter Jurisdiction
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Defendants argue that three prior decisions by this Court compel a conclusion
that the Commission exercises exclusive jurisdiction over the tort claims alleged in
Plaintiff’s complaint. We reject this argument, because each of the prior decisions is
inapposite to this matter. We address each in turn.
In Johnson v. First Union Corp., 131 N.C. App. 142, 504 S.E.2d 808 (1998), we
held that the Commission has exclusive jurisdiction “over workers compensation
claims and all related matters . . . .” 131 N.C. App. at 143-44, 504 S.E.2d at 809.
Johnson involved alleged tortious acts in the procedural course of workers’
compensation proceedings that directly resulted in claims being denied by the
Commission. Id. at 143, 504 S.E.2d at 809. The plaintiffs, two employees previously
diagnosed with repetitive motion injuries, brought suit in superior court alleging that
their employer and its insurance carrier presented a fraudulent videotape to their
physician inaccurately portraying the physical requirements of their jobs, causing the
physician to withdraw the diagnosis of work-related injury. Id. at 143, 504 S.E.2d at
809. One plaintiff also alleged that the employer fraudulently altered a workers’
compensation form after she had signed it, further interfering with the proceeding.
Id. at 143, 504 S.E.2d at 809. We held that the Commission had exclusive jurisdiction
to address fraud in the settlement of a workers’ compensation claim and affirmed the
trial court’s dismissal of the plaintiffs’ civil claims because “the Workers’
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Compensation Act is a comprehensive regulatory scheme, and collateral attacks are
inappropriate.” Id. at 145, 504 S.E.2d at 810.
In Deem v. Treadway & Sons Painting & Wallcovering, Inc., 142 N.C. App. 472,
477-78, 543 S.E.2d 209, 212-13 (2001), the plaintiff filed suit in superior court to set
aside the settlement of his workers’ compensation claim, alleging that it was
predicated on fraudulent and unlawful acts committed by the defendants, including
his employer and its insurer. We held that, because the Commission possessed
express statutory authority to set aside a workers’ compensation settlement for fraud,
the “plaintiff’s sole remedy in this case was to petition the Industrial Commission to
set aside his agreement . . . .” Id. at 478, 543 S.E.2d at 212. We reasoned that the
plaintiff’s complaint was “nothing more than an allegation that defendants did not
appropriately handle his workers’ compensation claim, and thus he was injured
because he did not receive his entitled benefit. This is the exact argument of the
Johnson plaintiffs . . . .” Id. at 477, 543 S.E.2d at 212.
Bowden v. Young, 239 N.C. App. 287, 768 S.E.2d 622 (2015), like Deem and
Johnson, involved alleged tortious acts conducted within the course of a workers’
compensation proceeding in the Commission. The employee in Bowden brought suit
in superior court for bad faith and intentional infliction of emotional distress,
asserting that his employer’s insurance carrier “communicated with his doctors
without his permission[,] . . . wrongly sought a second opinion[,] . . . treated him
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belligerently over the phone, denied some of his requests for medical treatment via
‘form letter,’ improperly filed paperwork to suspend his compensation, and ‘insisted
that [the employee] needed to settle his Workers Compensation claim.’ ” 239 N.C. at
289, 768 S.E.2d at 624. In affirming the trial court’s dismissal of the action, this
Court explained that “[w]e distill from Johnson and Deem a straightforward rule: all
claims arising from an employer’s or insurer’s processing and handling of a workers’
compensation claim fall within the exclusive jurisdiction of the Industrial
Commission, regardless of whether the alleged conduct was intentional or merely
negligent.” Id. at 291, 768 S.E.2d at 625.
We further recognized in Bowden that the “ ‘the Industrial Commission,
charged with administration of the Workers’ Compensation Act, is better suited than
the Court to identify and regulate alleged abuses, if any, by insurance carriers and
health care providers in matters under the Workers’ Compensation Act.’ ” Id. at 290,
768 S.E.2d at 624-25 (quoting N.C. Chiropractic Ass’n, Inc. v. Aetna Cas. & Sur. Co.,
89 N.C. App. 1, 9, 365 S.E.2d 312, 316 (1988)). Although we acknowledged that
intentional torts “generally fall outside the scope of the Workers’ Compensation Act,”
id. at 290, 768 S.E.2d at 625 (citing Woodson v. Rowland, 329 N.C. 330, 340-41, 407
S.E.2d 222, 228 (1991)), we affirmed the trial court’s dismissal of the employee’s
complaint, because “all claims concerning the processing and handling of a workers’
compensation claim are within the exclusive jurisdiction of the Industrial
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Commission, whether the alleged conduct is intentional or not.” Id. at 290-91, 768
S.E.2d at 625 (citing Johnson, 131 N.C. App. at 143-44, 504 S.E.2d at 809; Deem, 142
N.C. App. at 477-78, 543 S.E.2d at 212) (emphasis in original).
To apply the “straightforward rule” recognized in Johnson, Deem, and Bowden
to Plaintiff’s action, as Defendants request, would stretch it beyond its factual and
legal underpinnings. Plaintiff’s complaint does not allege that he has been denied
any workers’ compensation benefits; to the contrary, he acknowledged at the final
hearing in the criminal matter that Key Risk was still making the workers’
compensation payments. Plaintiff’s action, therefore, is markedly different from
those brought in Johnson and Deem, which involved “allegation[s] that defendants
did not appropriately handle his workers’ compensation claim, and thus he was
injured because he did not receive his entitled benefit.” Deem, 142 N.C. App. at 477,
543 S.E.2d at 212 (emphasis added); see also Johnson, 131 N.C. App. at 143-44, 504
S.E.2d at 809. Plaintiff’s case is further distinguishable from Johnson, Deem, and
Bowden because, fundamentally, it does not concern the “processing and handling of
a workers’ compensation claim . . . .” Bowden, 239 N.C. App. at 290, 768 S.E.2d at
625 (citing Johnson, 131 N.C. App. at 143-44, 504 S.E.2d at 809 and Deem, 142 N.C.
App. at 477-78, 543 S.E.2d at 212) (emphasis in original).
Plaintiff’s tort claims, though tangentially associated with his ongoing
workers’ compensation payments, concern the initiation and continued pursuit of a
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criminal prosecution, not a workers’ compensation claim. “General jurisdiction for
the trial of criminal actions is vested in the superior court and the district court
divisions of the General Court of Justice.” N.C. Gen. Stat. § 7A-270 (2017). By
contrast, “the North Carolina Industrial Commission is not a court of general
jurisdiction; the Commission is a quasi-judicial administrative board created by the
legislature to administer the Workers’ Compensation Act and has no authority
beyond that provided by statute.” Cornell v. W. and S. Life Ins. Co., 162 N.C. App.
106, 108, 590 S.E.2d 294, 296 (2004); see also Barber v. Minges, 223 N.C. 213, 217, 25
S.E.2d 837, 839 (1943) (“The Industrial Commission is not a court of general
jurisdiction. It can have no implied jurisdiction beyond the presumption that it is
clothed with power to perform the duties required of it by the law entrusted to it for
administration.” (emphasis added)).
Law enforcement officers and prosecutors employed by the State and its
subdivisions are not tasked with “processing and handling” workers’ compensation
claims, and neither are the district and superior court divisions of the General Court
of Justice. Malicious use and abuse thereof, therefore, does not “aris[e] from . . . [the]
processing and handling of a workers’ compensation claim . . . within the exclusive
jurisdiction of the Industrial Commission[.]” Bowden, 239 N.C. App. at 290, 768
S.E.2d at 625.
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Although Plaintiff’s complaint alleges that Defendants committed tortious acts
in order to avoid liability to pay his workers’ compensation, motivational concerns are
irrelevant to our analysis. Taken to its logical end, this argument would allow a
workers’ compensation carrier to hire an assassin to kill an injured employee in order
to terminate ongoing workers’ compensation but avoid tort liability for wrongful
death in civil court. Our Supreme Court has expressly held that:
When an employer intentionally engages in misconduct
knowing it is substantially certain to cause serious injury
or death to employees and an employee is injured or killed
by that misconduct, that employee, or the personal
representative of the estate in the case of death, may
pursue a civil action against the employer. Such
misconduct is tantamount to an intentional tort, and civil
actions based thereon are not barred by the exclusivity
provisions of the [Workers’ Compensation] Act.
Woodson, 329 N.C. at 340-41, 407 S.E.2d at 228 (emphasis added). Indeed, Bowden
recognized that “intentional torts generally fall outside the scope of the Workers’
Compensation Act” based on Woodson, 239 N.C. App. at 290, 768 S.E.2d at 625, and
“distilled from Johnson and Deem a straightforward rule” that operates
independently of any motivational considerations. That rule is limited to “all claims
arising from an employer’s or insurer’s processing and handling of a workers’
compensation claim . . . regardless of whether the alleged conduct was intentional or
merely negligent.” 239 N.C. App. at 291, 768 S.E.2d at 625.
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Because the acts complained of in Plaintiff’s complaint do not “aris[e] from an
employer’s or insurer’s processing and handling of a workers’ compensation claim[,]”
id. at 91, 768 S.E.2d at 625, we reject Defendants’ argument that motivational
considerations, rather than the factual and legal underpinnings of this case, would
somehow bring this action within the exclusive jurisdiction of the Commission.2
Plaintiff’s claims do not fall within the scope of the Workers’ Compensation Act, and,
as a result, the trial court did not err in denying Defendants’ motion to dismiss for
lack of subject matter jurisdiction pursuant to Rule 12(b)(1).
D. Rule 12(b)(6)
In the alternative to their argument under Rule 12(b)(1), Defendants posit that
Plaintiff’s complaint entirely fails to state a claim upon which relief can be granted
under Rule 12(b)(6). We therefore address each of Plaintiff’s individual claims in
turn.
1. Malicious Prosecution
Plaintiff’s first claim seeks redress for malicious prosecution. “To establish
malicious prosecution, a plaintiff must show that the defendant (1) initiated or
2 Defendants contend that an allegation in Plaintiff’s complaint that Defendants’ tortious acts
“relate[d] to the defense of the worker’s compensation claim” necessitates a holding that Plaintiff’s
action “arise[s] from” said workers’ compensation claim. As explained supra, this is not so—that
Defendants’ motivation was to terminate the obligation to pay Plaintiff compensation does not render
the tortious acts themselves “arising from . . . [Key Risk’s] processing and handling of [Plaintiff’s]
workers’ compensation claim[,]” Bowden, 239 N.C. App. at 292, 768 S.E.2d at 625, where they in fact
arise from the processing and handling of a criminal prosecution. This argument is analogous to the
defense of a person charged with killing a homeowner in the course of a burglary, who argues that he
cannot be prosecuted for murder because the death was only incidental to his motivation to steal.
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participated in the earlier proceeding, (2) did so maliciously, (3) without probable
cause, and (4) the earlier proceeding ended in favor of the plaintiff.” Turner v.
Thomas, 369 N.C. 419, 425, 794 S.E.2d 439, 444 (2016) (citing N.C. Farm Bureau
Mut. Ins. Co. v. Cully’s Motorcross Park, Inc., 366 N.C. 505, 512, 742 S.E.2d 781, 786
(2013)). Defendants contend that Plaintiff has failed to allege the first “initiation”
element of a malicious prosecution claim because, under their reading of Farm
Bureau, “[p]arties cannot be liable for malicious prosecution where they provide
information to law enforcement and prosecutors later decide to initiate criminal
proceedings based on that information, even if the information provided was
inaccurate or incomplete.” Defendants’ argument is unpersuasive.
In Farm Bureau, an investigator for the insurance company conducted an in-
depth investigation of a house fire following a claim by an insured. 366 N.C. at 508-
509, 742 S.E.2d at 784-85. The investigator discovered evidence suggesting that the
house fire was not an accident but the result of arson on the part of the insured, and
he provided this information to local law enforcement. Id. at 509-10, 742 S.E.2d at
785. Law enforcement arrested the insured but the district attorney later dismissed
all criminal charges; the insured thereafter brought a malicious prosecution claim
against the insurance company. Id. at 510, 742 S.E.2d at 785. Following a bench
trial, the insurer was found liable for malicious prosecution, a ruling that was later
affirmed by this Court on the basis that, but for the insurer’s actions, the insured
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would not have been prosecuted. 220 N.C. App. 212, 725 S.E.2d 638 (2012). The
Supreme Court, however, reversed our decision, holding that “the Court of Appeals’
interpretation of the element of initiation in a malicious prosecution case does not
account adequately for the roles played by police and prosecutorial discretion.” 366
N.C. at 513, 742 S.E.2d at 787. Our Supreme Court instead adopted the following
language from the Restatement (Second) of Torts:
Influencing a public prosecutor. A private person who gives
to a public official information of another’s supposed
criminal misconduct, of which the official is ignorant,
obviously causes the institution of such subsequent
proceedings as the official may begin on his own initiative,
but giving the information or even making an accusation of
criminal misconduct does not constitute a procurement of
the proceedings initiated by the officer if it is left entirely
to his discretion to initiate the proceedings or not. When a
private person gives to a prosecuting officer information
that he believes to be true, and the officer in exercise of his
uncontrolled discretion initiates criminal proceedings
based upon that information, the informer is not liable
under the rule stated in this Section even though the
information proves to be false and his belief was one that a
reasonable man would not entertain. The exercise of the
officer’s discretion makes the initiation of the prosecution
his own and protects from liability the person whose
information or accusation has led the officer to initiate the
proceedings.
Id. at 513, 742 S.E.2d at 787 (quoting Restatement (Second) of Torts § 653 cmt. g
(1977) (emphasis added)). Though the Court noted the Restatement’s formulation
“allows citizens to make reports in good faith to police and prosecutors without fear
of retaliation if the information proves to be incomplete or inaccurate[,]” it went on to
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Opinion of the Court
note that “[i]f the information is false, this formulation only protects a party who
believes it to be true. . . .” Id. at 513-14, 742 S.E.2d at 787 (emphasis added). A party
therefore “initiates” a malicious prosecution under Farm Bureau irrespective of
independent prosecutorial discretion when it knowingly provides false information to
authorities. Id. at 514, 742 S.E.2d at 787.
Here, Plaintiff’s complaint alleges that Defendants “decided to falsely and
maliciously accuse [Plaintiff] of committing insurance fraud and taking property by
false pretenses,” that they “caused criminal proceedings to be initiated against [him,]”
and that they “acted with malice in providing false and misleading information to the
[LPD] . . . .” It further alleges that Defendants “intentionally and maliciously caused
incomplete, false and misleading information [to] be given to the [LPD] . . . .”3
Employing a liberal construction of Plaintiff’s complaint, we hold that these
allegations are sufficient to survive Defendants’ motion to dismiss pursuant to Rule
12(b)(6), and affirm the trial court’s denial thereof on this claim.4
2. Abuse of Process
3 Although this allegation is made under a different cause of action, dismissal under Rule
12(b)(6) is not proper where “the allegations of the complaint . . . are sufficient to state a claim . . .
under some legal theory, whether properly labeled or not.” Chapel H.O.M. Assocs., LLC v. RME Mgmt.,
LLC, ___ N.C. App. ___, ___, 808 S.E.2d 576, 578 (2017) (emphasis added) (quoting Leary v. N.C. Forest
Prods., Inc., 157 N.C. App. 396, 400, 580 S.E.2d 1, 4 (2003)).
4 Whether these allegations ultimately are supported by evidence is yet to be determined.
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Plaintiff’s second claim for relief is for abuse of process. “Two elements must
be proved to find abuse of process: (1) that the defendant had an ulterior motive to
achieve a collateral purpose not within the normal scope of the process used, and (2)
that the defendant committed some act that is a ‘malicious misuse or misapplication
of that process after issuance to accomplish some purpose not warranted or
commanded by the writ.’ ” Pinewood Homes, Inc. v. Harris, 184 N.C. App. 597, 602,
646 S.E.2d 826, 831 (2007) (quoting Stanback v. Stanback, 297 N.C. 181, 200, 254
S.E.2d 611, 624 (1979)) (emphasis in original). Here, Defendants contend that
Plaintiff has failed to allege facts satisfying the second element because “the
Complaint does not allege that the Defendants took any actions after providing
information to the LPD.” Again, we disagree. The complaint alleges that after
Plaintiff was charged and arrested, “Defendants caused criminal proceedings to be
continued against [him], which led to him being indicted . . . .” It further alleges that,
“[a]fter the warrants for arrest were issued, the defendants used the process to
attempt to recoup its [sic] funds . . . .” We hold these allegations are sufficient under
our liberal pleading standards to set forth the second element of an abuse of process
claim and affirm the trial court’s denial of Defendants’ motion on this ground.
3. Unfair and Deceptive Trade Practices
Plaintiff’s third cause of action asserts a UDTP claim against Key Risk based
on Section 75-1.1 of the North Carolina General Statutes. Defendants argue that
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Opinion of the Court
Plaintiff’s claim is barred for lack of privity, relying on our holding in Wilson v.
Wilson, 121 N.C. App. 662, 468 S.E.2d 495 (1996), that “North Carolina does not
recognize a cause of action for third-party claimants against the insurance company
of an adverse party based on unfair and deceptive trade practices under [N.C. Gen.
Stat.] § 75-1.1.” 121 N.C. App. at 665, 468 S.E.2d at 497. Plaintiff contends that,
because Key Risk was already obligated to pay him his workers’ compensation
benefits at the time of its tortious conduct, Wilson should not bar his claim.
Reviewing Wilson and subsequent case law, we agree with Plaintiff.
The same year that Wilson was decided, this Court held it was inapposite to a
third party’s UDTP claim against an insured driver’s carrier. Murray v. Nationwide
Mut. Ins. Co., 123 N.C. App. 1, 15, 472 S.E.2d 358, 366 (1996). In Murray, we first
acknowledged that “[o]ur case law establishes that ‘if the third party is an intended
beneficiary, the law implies privity of contract.’ ” We then held that “[t]he injured
party in an automobile accident is an intended third-party beneficiary to the
insurance contract between insurer and the tortfeasor/insured party[,]” and that “the
instant [third-party] plaintiff is in contractual privity with [the driver’s carrier], and
for this reason alone, is not bound by the third-party restrictions set forth in Wilson.”
Id. at 15, 472 S.E.2d at 366. Nearly a decade later, we construed Murray to require
a third-party plaintiff to first obtain a judgment before bringing a UDTP claim
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Opinion of the Court
against the insurer. Craven v. Demidovich, 172 N.C. App. 340, 342, 615 S.E.2d 722,
724 (2005).
Most recently, this Court has summarized the rule of Murray and its progeny
as follows: “In the automobile accident context, an injured party is recognized as a
third-party beneficiary to the liability insurance policy, because, under the statute,
‘[t]he primary purpose of th[e] compulsory motor vehicle liability insurance is to
compensate innocent victims who have been injured by financially irresponsible
motorists.’ ” USA Trouser, S.A. de C.V. v. Williams, ___ N.C. App. ___, ___, 812 S.E.2d
373, 377 (2018) (quoting Nationwide Mut. Ins. Co. v. Chantos, 293 N.C. 431, 440, 238
S.E.2d 597, 604 (1977)). This Court has further recognized the imposition of privity
between third parties and insurers sufficient to support a UDTP claim when similar
statutory obligations exist for like purposes. Nash Hosps., Inc. v. State Farm Mut.
Auto. Ins. Co., ___ N.C. App. ___, ___, 803 S.E.2d 256, 263 (2017) (holding insurance
company liable for payment practices violating the statutory subrogation rights of a
claimant’s medical providers), disc. rev. denied, ___ N.C. ___, 809 S.E.2d 869 (2018).
In Nash Hospitals, after providing medical treatment to a person injured in an
automobile accident, Nash Hospitals sent notice of a medical lien to State Farm, the
injuring party’s insurer. Id. at ___, 803 S.E.2d at 259. The injured person,
unrepresented by counsel, negotiated a settlement with the insurer, State Farm, who
issued a joint check to the injured person, Nash Hospitals, and a third medical
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Opinion of the Court
lienholder. Id. at ___, 803 S.E.2d at 258-59. Nash Hospitals informed State Farm
that the issuance of a joint check violated Sections 44-49 and 44-50 of our General
Statutes, which required insurers to pay valid medical liens prior to any settlement
disbursement to a claimant. Id. at ___, 803 S.E.2d at 259. When State Farm refused
to otherwise satisfy the medical lien, Nash Hospitals filed suit for UDTP against
State Farm and ultimately obtained a favorable judgment on the merits. Id. at ___,
803 S.E.2d at 259. State Farm appealed the judgment, arguing that, based on Wilson,
Nash Hospitals lacked privity to sue the insurer. Id. at ___, 803 S.E.2d at 262-63.
We disagreed, holding that, because Sections 44-49 and 44-50 were enacted “to
protect hospitals and other health care providers that provide medical services to
injured persons[,]” they “expanded the scope of [third-party beneficiary] privity to
hospitals and medical service providers.” Id. at ___, 803 S.E.2d at 263. Because Nash
Hospitals was in statutory privity with State Farm, and because the UDTP claim
involved post-settlement conduct, we held Wilson inapposite and affirmed that
portion of the trial court’s judgment. Id. at ___, 803 S.E.2d at 263.
Like compulsory automobile insurance, “[t]he General Assembly has mandated
that every employer subject to the Workers’ Compensation Act maintain the ability
to pay compensation benefits, either by purchasing workers’ compensation insurance
. . . or by self-insuring.” N.C. Ins. Guar. Ass’n v. Board of Trs. of Guilford Tech. Cmty.
College, 364 N.C. 102, 108-09, 691 S.E.2d 694, 698 (2010) (citing N.C. Gen. Stat. § 97-
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93 (2007)). And, just as “[t]he primary purpose of th[e] compulsory motor vehicle
liability insurance is to compensate innocent victims who have been injured by
financially irresponsible motorists[,]” Chantos, 293 N.C. at 440, 238 S.E.2d at 604,
“[t]he [p]rimary consideration [of the Workers’ Compensation Act] is compensation
for injured employees. . . . ‘The title and theory of the act import the idea of
compensation for work[ers] and their dependents.’ ” Roberts v. City Ice & Fuel Co.,
210 N.C. 17, 21, 185 S.E. 438, 440-41 (1936) (quoting Hodges v. Mortgage Co., 201
N.C. 701, 704, 161 S.E. 220, 222 (1931)).
Given the marked similarities between the compulsory automobile and
workers’ compensation insurance statutes, the reasoning in Murray that an “injured
party in an automobile accident is an intended third-party beneficiary to the
insurance contract between insurer and the tortfeasor/insured party,” 123 N.C. App.
at 15, 472 S.E.2d at 366, supports our holding that Plaintiff is an intended third-party
beneficiary of Southern Fiber’s insurance contract with Key Risk. Indeed, the
Workers’ Compensation Act itself provides that a workers’ compensation insurance
policy must “contain[] the agreement of the insurer that it will promptly pay to the
person entitled to same all benefits conferred by this Article. . . . Such agreement
shall be construed to be a direct promise by the insurer to the person entitled to
compensation enforceable in his name.” N.C. Gen. Stat. § 97-98 (2017) (emphasis
added). Our Supreme Court has held that this provision creates an express benefit
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Opinion of the Court
for, and enforceable by, the employee. See Hartsell v. Thermoid Co., Southern
Division, 249 N.C. 527, 533, 107 S.E.2d 115, 119 (1959) (“Under the Act, plaintiff has
a right to enforce the insurance contract made for his benefit.” (citing N.C. Gen. Stat.
§ 97-98)). Because employees are, by statutory mandate, intended third-party
beneficiaries of their employers’ compulsory insurance policies, we hold that “the
instant plaintiff is in contractual privity [with the insurer] . . . and for this reason
alone, is not bound by the third-party restrictions set forth in Wilson.” Murray, 123
N.C. App. at 15, 472 S.E.2d at 366.
Defendants urge this Court to reach a contrary result on the basis that they
continue to litigate Plaintiff’s compensation pursuant to N.C. Gen. Stat. § 97-18.1(c),
so that the Opinion and Award requiring payment to Plaintiff is not akin to a civil
judgment. Defendants further argue that allowing Plaintiff’s UDTP claim to continue
creates a potential conflict of interest for Key Risk with respect to its insured,
Plaintiff’s employer. See Wilson, 121 N.C. App. at 667, 468 S.E.2d at 498 (“[A]llowing
a third-party claim against the insurer of an adverse party for violating [N.C. Gen.
Stat.] § 58-63-15 may result in a conflict of interest for the insurance company.”); but
see Murray, 123 N.C. App. at 10, 472 S.E.2d at 363 (holding a third-party beneficiary
of an automobile liability insurance contract could pursue a UDTP claim against the
insured’s carrier for violation of N.C. Gen. Stat. § 58-63-15). We reject these
arguments.
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Opinion of the Court
Unlike the insurer in Wilson, Defendants have an ongoing legal obligation to
pay Plaintiff as required by the Opinion and Award and Key Risk’s own insurance
policy with Southern Fiber. “[W]here the policy of insurance is against liability . . .
and the liability of the insured has been established by judgment, the injured person
may maintain an action on the policy of insurance, that is, coverage attaches when
liability attaches . . . .” Hall v. Harleysville Mut. Cas. Co., 233 N.C. 339, 340, 64
S.E.2d 160, 161 (1951) (citations omitted) (emphasis added); see also Craven, 172 N.C.
App. at 342, 615 S.E.2d at 124 (quoting Lavender v. State Farm. Mut. Auto. Ins. Co.,
117 N.C. App. 135, 136, 450 S.E.2d 34, 35 (1994), and Hall to explain the necessity of
a civil judgment to bring a UDTP claim as a third-party beneficiary against an insurer
under Murray). Key Risk’s insurance policy with Southern Fiber states that the
former will “pay promptly when due the benefits required of [Southern Fiber] by the
workers compensation law.” Key Risk’s liability to Plaintiff therefore attached, at the
latest,5 upon entry of the Opinion and Award, as “a payment is due and payable when
the Commission has entered an opinion awarding benefits to a claimant.” Smith v.
Richardson Sports Ltd. I.C. Partners d/b/a Carolina Panthers, 172 N.C. App. 200,
206, 616 S.E.2d 245, 250 (2005) (citation omitted).
5 “By virtue of [N.C. Gen. Stat. § 97-98], once the employer has accepted an injury as
compensable, benefits are ‘due and payable[.]’ ” Moretz v. Richards & Assocs., Inc., 316 N.C. 539, 541,
342 S.E.2d 844, 846 (1986). Here, the Opinion and Award includes a finding of fact that “Plaintiff
sustained an admittedly compensable injury by accident . . . . Defendants accepted this claim . . . .”
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Opinion of the Court
Also, Section 97-18.1 includes no provision allowing or authorizing an
employer’s carrier to maliciously seek the arrest, incarceration, and felony
prosecution of an employee for accepting workers’ compensation payments awarded
to him by the Commission, and no such action is permitted by Key Risk’s insurance
policy with Southern Fiber.
Wilson concerned a pre-trial UDTP complaint against both the insurer and the
insured. 121 N.C. App. at 666, 468 S.E.2d at 498. By contrast, Plaintiff’s complaint
in the instant action was filed against Key Risk—and not Southern Fiber—five years
after the Opinion and Award was entered and left undisturbed on appeal, all while
Key Risk continued to pay the benefits ordered thereunder and as required by its
insurance contract with Southern Fiber. This case is therefore more akin to the
UDTP action in Murray, which we held stated a viable claim. 123 N.C. App. at 16,
472 S.E.2d at 366.
4. Bad Faith and Civil Conspiracy
Although we affirm the portion of the trial court’s order denying the dismissal
of Plaintiff’s malicious prosecution, abuse of process, and UDTP claims, we are
persuaded by Defendants’ challenges to Plaintiff’s bad faith and civil conspiracy
claims. We address each claim in turn.
A necessary element of a bad faith claim against an insurer is a refusal by the
insurer to pay a valid claim. Lovell v. Nationwide Mut. Ins. Co., 108 N.C. App. 416,
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Opinion of the Court
420, 424 S.E.2d 181, 184 (1993). Plaintiff’s complaint alleges no refusal to pay, and
he acknowledges in his briefing that Key Risk “continued to pay his claim[.]” Though
he argues that a bad faith claim “covers a wider variety of acts[ ] than simply failing
to pay a legitimate claim,” every case he cites concerns exactly that. See, e.g., Newton
v. Standard Fire Ins. Co., 291 N.C. 105, 116, 229 S.E.2d 297, 303 (1976) (noting that
the tort exists to “deter refusals on the part of insurers to pay valid claims when the
refusals are both unjustified and in bad faith”). Because Plaintiff has failed to plead
a necessary element of this claim, we reverse this portion of the trial court’s denial of
Defendants’ motion to dismiss.
Like the bad faith claim, we also reverse the portion of the trial court’s order
denying dismissal of Plaintiff’s civil conspiracy claim based on the intra-corporate
immunity rule. The doctrine provides that, “because ‘at least two persons must be
present to form a conspiracy, a corporation cannot conspire with itself, just as an
individual cannot conspire with himself.’ ” Conleys Creek Ltd. P’ship. v. Smoky
Mountain Country Club Prop. Owners Ass’n, Inc., ___ N.C. App. ___, ___, 805 S.E.2d
147, 156 (2017) (quoting State ex rel. Cooper v. Ridgeway Brands Mfg., LLC, 184 N.C.
App. 613, 625, 646 S.E.2d 790, 799 (2007), rev’d on other grounds, State ex rel. Cooper,
362 N.C. 431, 666 S.E.2d 107 (2008)). “[A]n allegation that a corporation is conspiring
with its agents, officers or employees is tantamount to accusing a corporation of
conspiring with itself[,]” State ex rel. Cooper, 184 N.C. App. at 625, 646 S.E.2d at 799,
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Opinion of the Court
and is therefore insufficient to establish a claim for civil conspiracy. Here, Plaintiff
asserts a civil conspiracy claim against Key Risk, several of its employees—all of
whom were acting “in the course and scope of [their] employment” with Key Risk—
and a private investigator hired by Key Risk. Nowhere in the complaint does Plaintiff
allege that the various defendants conspired with anyone outside an employment or
agent relationship with Key Risk. Nor does the complaint allege conduct outside of
those employment or agency relationships.6 Because Plaintiff’s complaint fails to
allege a conspiracy with anyone outside of Key Risk, its employees, and its agents, it
fails to state a claim for which relief can be granted, and we reverse the trial court’s
order as to this claim.
5. Punitive Damages
Finally, Defendants argue that we should reverse the trial court’s order as to
Plaintiff’s punitive damages claim because his complaint should have been dismissed
in its entirety. As set forth supra, however, we hold that Plaintiff has stated tort
claims for malicious prosecution, abuse of process, and UDTP sufficient to survive
Defendants’ motion to dismiss. His allegations of fraudulent, malicious, and willful
and wanton conduct on the part of Defendants in perpetrating those acts are
6 We note that some jurisdictions provide for exceptions to intra-corporate immunity where:
(1) the employees or agents possess an independent motive from their employer or principal; or (2) the
alleged conspiratorial acts were taken outside the scope of the employment or agency. See, e.g.,
Painter’s Mill Grille, LLC v. Brown, 716 F.3d 342, 353 (4th Cir. 2013). We need not determine the
applicability of these exceptions to the instant case, however, because Plaintiff’s complaint is devoid
of any allegations that would fall within them.
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Opinion of the Court
sufficient to allege punitive damages within the meaning of Section 1D-15 of our
General Statutes. N.C. Gen. Stat. § 1D-15 (2017); see also, e.g., Horne v. Cumberland
Cty Hosp. Sys., Inc., 228 N.C. App. 142, 150, 746 S.E.2d 13, 20 (2013) (affirming
dismissal of a punitive damages claim where all substantive claims were also
properly dismissed). We reject Defendants’ argument.
III. CONCLUSION
Plaintiff’s tort claims, although they pertain to a workers’ compensation
award, do not, as a matter of fact or law, “arise[ ] from an . . . insurer’s processing and
handling of a workers’ compensation claim.” Rather, Plaintiff’s complaint arises out
of a fraudulently and maliciously instituted criminal prosecution over which the
Commission has no jurisdiction. Further, Plaintiff, as an injured employee who has
obtained an award requiring payments to him under his employer’s workers’
compensation insurance policy is an intended third-party beneficiary of the policy in
privity to bring a UDTP claim against the insurer. Plaintiff has sufficiently alleged
claims for malicious prosecution, abuse of process, UDTP, and punitive damages; he
has failed, however, to sufficiently allege claims for bad faith and civil conspiracy.
For these reasons, we: (1) affirm the denial of Defendants’ motion to dismiss all claims
pursuant to Rule 12(b)(1); (2) affirm the denial of Defendants’ motion pursuant to
Rule 12(b)(6) as it pertains to Plaintiff’s malicious prosecution, abuse of process,
UDTP, and punitive damages claims; and (3) reverse the denial of Defendants’ motion
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Opinion of the Court
to dismiss pursuant to Rule 12(b)(6) as it pertains to Plaintiff’s bad faith and civil
conspiracy claims.
AFFIRMED IN PART; REVERSED IN PART.
Judges STROUD and DILLON concur.
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