Chapman v. Coca-Cola Bottling Co., No. 2013-CA-01883-COA (Miss. Ct. App. Mar. 17, 2015).
Ruling en banc, court affirms grant of summary judgment for
insurer, adjuster and employer on bad faith claims brought by former
employee and his spouse stemming from denial of benefits related to
injury later determined to be work-related and compensable under
workers’ compensation law.
Thomas and Brenda Chapman sued defendants Coca-Cola Bottling Company
(“Coke”), American Casualty Company and CNA ClaimPlus, alleging that
defendants acted in bad faith by wrongfully denying benefits that arose
from a back injury Thomas suffered while working for Coke in 2001.
Thomas previously injured his back in 1991 while working for Coke, and
injured it again in a vehicle rollover accident in 2000.
Thomas sought
evaluation and treatment at the direction of Coke after the 2001 injury,
and Coke initially approved some of Thomas’s medical expenses.
However, Thomas’s doctors later determined that his injuries resulted
from a preexisting condition and not the 2001 incident.
Thomas filed a
petition to controvert with the Mississippi Workers’ Compensation
Commission, and the administrative law judge ruled that the 2001 injury
was compensable and awarded past-due compensation for temporary total
disability. The defendants appealed the ruling to the Commission, and
the Commission affirmed its ruling. Thereafter, the parties reached a
settlement.
Plaintiffs subsequently filed suit in the Jasper County Circuit Court
alleging, among other things, that the defendants acted in bad faith by
wrongfully denying benefits, refusing to pay Thomas’s workers’
compensation claim, and denying and delaying payments of medical bills
as agreed to in their settlement. After completion of discovery,
defendants filed a motion for summary judgment, which the Circuit Court
granted. Plaintiffs appealed the grant of summary judgment to the Court
of Appeals.
The Court of Appeals, ruling en banc, affirmed the Circuit
Court’s entry of summary judgment for defendants. The Court of Appeals
first analyzed the decision below as it related to the insurer, American
Casualty. To establish a bad faith claim against an insurer under
Mississippi law, the plaintiff “must show that the insurer lacked an
arguable or legitimate basis for denying the claim, or that the insurer
committed a wil[l]ful or malicious wrong, or acted with gross and
reckless disregard for the insured’s rights” (internal quotations
omitted).
“However, the fact that an insurer’s decision to deny
benefits may ultimately turn out to be incorrect does not in and of
itself warrant an award of punitive damages if the decision was reached
in good faith,” such as when the insurer “has a reasonable cause for
such denial or delay” in paying a valid claim (internal quotations
omitted).
Here, plaintiffs failed to carry their burden. The Court found that
American Casualty, through its adjuster, CNA, conducted a prompt and
reasonable investigation, and acted in good faith by speaking with Coke
and reviewing relevant documentation.
American Casualty also reopened
Thomas’s investigation file upon receiving notice of Thomas’s petition
to controvert. After the 2001 incident, American Casualty, through CNA,
received information that linked Thomas’s treatments to a preexisting
condition – the vehicle accident in 2000 – which would not require any
payments under workers’ compensation. The Court determined, at the very
least, that the source of Thomas’s injury was in dispute.
Thomas
admitted as much in his deposition when he agreed that there was a
legitimate dispute between him, Coke and American Casualty over the
workers’ compensation claim. Thomas also attested to the existence of a
legitimate or arguable basis for denying his claim in the settlement
petition approved by the Commission. The Court, therefore, affirmed
summary judgment for American Casualty on plaintiffs’ bad faith claims.
The Court next examined the ruling below as it related to the claims
adjuster, CNA. The Court explained that plaintiffs bear a different
burden in proving that CNA acted in bad faith: “The adjuster does not
owe the insured a fiduciary duty nor a duty to act in good faith”
(internal quotations omitted).
Instead, “an adjuster has a duty to
investigate all relevant information and must make a realistic
evaluation of a claim. . . . He can only incur independent liability
when his conduct constitutes gross negligence, malice, or reckless
disregard for the rights of the insured” (internal quotations omitted).
The Court determined that “CNA conducted an adequate investigation of
the claim in 2001, and reasonably concluded no workers’ compensation
claim existed until receiving notice of Thomas’s petition to
controvert.”
CNA communicated with Coke during the investigation and
reviewed all materials Coke provided. CNA also promptly reopened
Thomas’s file after receiving notice of the petition to controvert. The
Court found that CNA reasonably delayed any payments pending the
Commission’s determination of Thomas’s claim, and thus ruled that any
denial of compensation was neither grossly negligent, malicious, nor
reckless until the dispute was resolved in Thomas’s favor. Thus, the
Court affirmed summary judgment for CNA.