Court Says Good Faith Dispute is Not Bad

In the case Ag One Co-Op & Trane Co. v. Scott, the Court of Appeals took up the question of whether there could be a finding of bad faith claims handling against the employer if the Worker's Compensation Board of Indiana had found that the employer had properly denied the employee's claim. Scott worked for Trane, where he had a shoulder injury in 2002. His employment with Trane ended in January 2003, but he wasn't actually released by the authorized treating physician at maximum medical improvement until January 2004. From March through May 2004, Scott was employed by Ag One. Then, in June 2004, Scott returned to the authorized treating physician for Trane indicating that he had increased shoulder pain. That physician felt that Scott's shoulder pain was due to an intervening injury, during his employment with Ag One, but Scott never contended he had any injury or aggravation while he worked at Ag One. The Board ordered an independent medical examination with Dr. Angelicchio, who said that Scott's injuries were due to the previous employment with Trane, not his employment with Ag One. Both physicians agreed that Scott needed further care.

Scott filed an application against Trane in 2004 but brought nothing against Ag One. In May 2005, Trane moved to add Ag One as a defendant, contending that Ag One was responsible for at least a portion of Scott's claim, and the Board did join Ag One.

Throughout the course of the claim, Scott insisted that his problems were attributable to his employment with Trane, not Ag One. The hearing was held in January 2006 and the Single Hearing Member found that there was no superseding or intervening injury, and that Trane, not Ag One, was responsible for Scott's medical care and compensation.

Trane filed for Full Board review which was heard in August 2006, and the Full Board affirmed. At that point, Trane went ahead and provided Scott with the recommended medical care. The Full Board also indicated that Ag One was not released pending any claims concerning attorney's fees and damages for bad faith. The Full Board encouraged Scott to interpose a claim and, by his attorney, he did so. Following a hearing on the petition for an award of bad faith damages and attorney's fees, Judge Lester held that denying benefits due to a dispute between defendants is unacceptable, and that both Trane and Ag One had acted in bad faith and owed Scott damages.

Ag One sought review by the Full Board and the hearing was held in January 2009. The Full Board issued an award affirming the Single Hearing Member's decision. Ag One then appealed the Full Board's decision to the Court of Appeals. The Court reversed the award and remanded the decision to the Full Board with instructions to vacate it.

The Court's reasoning was very sound. It observed that, under existing legal authorities, simply denying benefits, even carelessly or negligently, was not a basis for bad faith. Rather, bad faith required some culpable or dishonest state of mind. The Court observed that, if a claim for bad faith does not arise even if a claim is erroneously denied, it seems ludicrous to suggest that there could be bad faith in properly denying a claim. The Court said "we are unable to agree with the Board that Ag One somehow acted in bad faith in properly denying Scott's claim for benefits." See, Ag One Co-Op & Trane v. Scott, 914 N.E.2d 860 (Ind. Ct. App. 2009).

PRACTICE POINTERS:

This is obviously a sound decision, but it would be unwise to push the decision too far. The fact is, the Judges of the Worker's Compensation Board do not like to see a claimant hanging out, without medical care or compensation, while two defendants, employers or carriers contest their liability. The safer practice in most cases is probably for the defendants to reach agreement as to who will pay, pending a determination of liability from the Board. The agreement should include a provision for reimbursement, depending on who is ultimately found to be liability. It also would be wise to move these cases forward just as quickly as possible.

If you have questions about a claim or any of your other worker's compensation questions, please contact Ann Stewart.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice.  The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.