Or should a state's workers' compensation system remain an exclusive remedy, even if a claims payer intentionally commits egregious acts such as denying benefits that it knows are due in order to "facilitate" a settlement?
WorkCompCentral Legal Editor, Sherri Okamoto, reports that about half of the states have done away with any civil bad faith remedy either through legislative or judicial actions, and the other half of the nation retains that remedy.
The contrasts are stark.
Okamoto cites an Iowa jury award an earlier this month of $25 million in punitive damages, along with $284,000 in damages, payable by his former employer's workers' compensation carrier for its bad-faith handling of his claim. The offense was failure to pay permanent total disability benefits after a 2009 accident left the injured worker with catastrophic injuries.
Other states where there is no civil remedy rely on administrative penalties and administrative judicial enforcement, such as California, which has been criticized because those policies lack sufficient deterrence to bad behavior such as wrongfully denying medical care to the critically injured.
Okamoto notes that the states that do allow for civil remedies vary widely in the standards and definitions for reprehensible conduct.
Alaska and Arizona, for example, define "bad faith" as a refusal to pay a claim without any arguably reasonable basis. In contrast, Arkansas requires a showing of "affirmative misconduct" or “dishonest purpose” to avoid liability.
Colorado, Maine and Michigan make a carrier's failure to act in good faith a breach-of-contract claim. Hawaii and Mississippi make carrier misconduct redressable in tort.
Texas used to permit bad faith actions until the Supreme Court's decision in Texas Mutual Insurance Co. v. Ruttiger, which held there was no common-law bad-faith action in the Lone Star State for workers' compensation claims handling.
Likewise, two months after Ruttiger came out, though, the New Jersey Supreme Court held that the state's injured workers do not have a common-law right of action for pain and suffering caused by an insurer's administration of a workers' compensation claim in Stancil v. Ace USA.
Last week, the North Carolina Court of Appeals ruled that an injured worker cannot bring a tort action to recover damages from an insurance carrier for its alleged bad-faith claims handling.
The split surely raises the passions in people: civil remedies fly in the face of the concept of administrative expediency that underlies workers' compensation; yet, administrative enforcement needs sufficient "teeth" to encourage compliance and deter bad behavior.
What do you think?
At 8 a.m. this morning the pre-recorded introduction webinar to Peter Rousmaniere's ground breaking white paper, Seismic Shifts: An Essential Guide for Practitioners and CEOs in Workers’ Comp, will be broadcast on WorkCompCentral (click here to register to watch the introduction for free, or purchase one or all of the subsequent four parts of the series here, and click here to download the white paper).
Rousmaniere argues that the workers' compensation industry, despite rising costs, is actually shrinking. He explains why, and what industry executives and other professionals should be doing. If your job has anything to do with workers' compensation (and you wouldn't be reading this if it weren't) then you need to at least read the paper - better though, you need to "attend" the webinar series to get the most from Rousmaniere's work, including exclusive interviews with subject matter experts.
If this isn't convincing enough, read Tom Lynch's review of the paper and the series here.