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.

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.