Thomas James Dunlap v. AIG, Inc., Commerce and Industry Insurance Company and AIG Domestic Claims, Inc. Corporations ( 2019 )

IN THE COURT OF APPEALS OF IOWA
No. 17-1503
Filed January 9, 2019
THOMAS JAMES DUNLAP,
Plaintiff-Appellant,
vs.
AIG, INC., COMMERCE AND INDUSTRY INSURANCE COMPANY and AIG
DOMESTIC CLAIMS, INC. CORPORATIONS,
Defendants-Appellees.
________________________________________________________________
Appeal from the Iowa District Court for Polk County, Jeanie K. Vaudt, Judge.
Thomas Dunlap appeals the dismissal of his civil suit against his former
employer’s workers’ compensation insurance carrier following the district court’s
grant of summary judgment in the insurers’ favor. AFFIRMED IN PART,
REVERSED IN PART, AND REMANDED FOR FURTHER PROCEEDINGS.
Steven J. Crowley and Edward J. Prill of Crowley & Prill, Burlington, for
appellant.
Keith P. Duffy, Coreen K. Sweeney, and Stephanie L. Marett of Nyemaster
Goode, P.C., Des Moines, for appellees.
Heard by Potterfield, P.J., Doyle, J., and Danilson, S.J.*
*Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2019).
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DOYLE, Judge.
Workers’ compensation claimant Thomas Dunlap brought a civil action
asserting claims of bad faith and intentional infliction of emotional distress against
his former employer’s workers’ compensation insurance carriers relating to the
handling of his workers’ compensation claims. Following motions for summary
judgment, the district court found Dunlap could not establish elements of his claims
and granted summary judgment in favor of the insurers. Dunlap appeals,
challenging the district court’s ruling in numerous respects. Upon our review, we
affirm in part, reverse in part, and remand for further proceedings.
I. Background Facts and Proceedings.
In July 2007, Thomas Dunlap sustained a work injury while employed by
Action Warehouse. See Dunlap v. Action Warehouse, 824 N.W.2d 545, 548 (Iowa
Ct. App. 2012). He filed a claim for workers’ compensation and was ultimately
awarded benefits in 2009 following a hearing. See id. The deputy workers’
compensation commissioner
found the greater weight of the evidence showed Dunlap’s low back,
left leg, and left arm symptoms were caused by Dunlap’s July 2007
work injury, Dunlap had clearly not reached maximum medical
improvement, and Dunlap was in a running healing period. The
deputy further found Dunlap’s employment was terminated because
he was unable to work due to his back condition caused by the work
injury and was therefore entitled to temporary partial disability and
healing period benefits. The deputy declined Dunlap’s request for
penalty benefits, finding [two doctors’ expert] opinions made [his
employer’s] liability fairly debatable.
Id. at 553-54. The deputy’s opinion was affirmed by the workers’ compensation
commissioner on appeal. See id. at 554. Following a judicial review by the district
court, this court affirmed the agency’s decision in all respects, including that
3
penalty benefits were not appropriate because the issue of liability was fairly
debatable. See id. at 554-60 (reversing the district court’s reversal of the agency’s
determination that the issue of liability was fairly debatable, resulting in our total
affirmance of the agency’s decision).
In September 2009, while that agency action and litigation was pending,
Dunlap filed a civil action against Action Warehouse and its workers’ compensation
insurance carriers Commerce and Industry Insurance Company, AIG Domestic
Claims, Inc., and AIG, Inc.1 This is the matter presently at issue on appeal.
Relevant here, Dunlap asserted claims of bad faith and intentional infliction of
emotional distress against the defendants related to his 2007 work injury and
workers’ compensation claim. The civil case was stayed a number of times over
the years as Dunlap’s 2007 workers’ compensation claim progressed through the
previously described administrative process.
Meanwhile, in 2013, Dunlap filed a review-reopening petition before the
workers’ compensation commissioner seeking to review and reopen the 2009
agency decision “to convert the running healing period” and receive permanent
total disability benefits. Since the 2009 agency hearing, “Dunlap’s medical and
physical condition ha[d] deteriorated,” and he had “required ongoing and extensive
medical care for his low back.” “Dunlap developed mental health problems” and
experienced “sleep difficulties and disturbances related to his low back symptoms.”
“As a result of his low back injury and resulting symptoms, [Dunlap] began using a
1
Dunlap later dismissed his suit against Action Warehouse. Additionally, though he
originally named “AIG International Group” as a defendant, the district court permitted him
to amend his petition to instead name “AIG, Inc.” as the proper defendant. We collectively
refer to the remaining defendants collectively as “the defendants.”
4
cane to assist with walking,” using his right hand to hold the cane. Over time,
Dunlap developed bilateral carpal, cubital, and ulnar tunnel syndrome (referred to
as “arm injuries” or “2012 injuries” in this opinion). Three doctors opined Dunlap’s
arm injuries were causally related to his prior 2007 work injury.
Nevertheless, the defendants denied liability for the arm injuries, relying
upon the opinions of Dunlap’s neurologist, Dr. Irving Wolfe, who evaluated Dunlap
in November 2011. Dr. Wolfe “noted symptoms in both the right and left arms” and
referred Dunlap to a hand specialist, who in turn recommended surgeries for
Dunlap’s arm injuries. The hand specialist is one of the three doctors that opined
Dunlap’s arm injuries were causally connected to his 2007 work injury.
After “defense counsel conferenced with Dr. Wolfe,” Dr. Wolfe in April 2012
opined in a report there was “no causality regarding [Dunlap’s arm conditions and]
symptoms in regard to” Dunlap’s 2007 work injury. A month later, Dr. Wolfe
“clarified his medical opinions in a report requested by [Dunlap’s] counsel,” opining,
“It is possible (e.g., less than 51%) that [Dunlap’s arm injuries] while not directly
caused by the . . . 2007, work-related injury are a result of the natural
consequences of [Dunlap’s] back injury requiring him to ambulate with the use of
a cane.” Dr. Wolfe stated further testing could rule out other possible causes such
that his opinion of a causal connection could rise from possible to probable.
Nevertheless, the defendants continued to deny liability based upon Dr. Wolfe’s
opinions.
Following a hearing in November 2014, the deputy concluded Dunlap
established his arm injuries were directly related to his 2007 work injury “or arose
as a sequela of that work injury,” and the defendants were “responsible for each
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of these compression neuropathy conditions.” The deputy granted Dunlap’s
request for alternate medical care, ordered the defendants to “continue to pay
[Dunlap] healing period benefits,” and ordered the defendants to pay certain costs
such as filing fees, transcript fees, doctors’ reporting fees, and reimbursement for
fees related to Dunlap’s independent medical evaluation. However, the deputy
found the issue of permanent disability was not ripe for determination at that point
because Dunlap had not reached maximum medical improvement.
In a rehearing application, Dunlap asserted several challenges to the
deputy’s decision. The deputy subsequently determined the permanent disability
issue was ripe and concluded Dunlap is permanently and totally disabled as a
result of his low back and mental health injuries. The deputy awarded Dunlap
compensation for his permanent total disability and ordered the defendants to pay
Dunlap’s mileage claim related to his travel for his evaluation, among other things.2
In 2015, the district court in the civil case granted Dunlap’s first motion to
amend his petition, including adding a claim of bad faith related to his 2012 injuries
and permanent-disability-benefits award. The civil matter subsequently
culminated in a motion for summary judgment filed by the defendants at the end
of 2016. While the summary judgment matter was pending, Dunlap on March 22,
2017, filed a second motion to amend his previously amended petition seeking to
add a claim of abuse of process against the defendants.
A hearing on the defendants’ summary judgment motion was held March
31, 2017. Before ruling on Dunlap’s second motion to amend, the district court
2
The defendants appealed the deputy’s rulings, and the workers’ compensation
commissioner affirmed the rulings in 2016.
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entered its ruling partially granting and partially denying the defendants’ summary
judgment motion. The court found the claims asserted by Dunlap in his first
amended petition against the defendants could be broken down into three
components as follows: (1) bad faith for the defendants’ handling of his 2007 and
2012 injuries, (2) bad faith for the defendants’ handling of his mileage claim, and
(3) intentional infliction of emotional distress. After considering all the relevant
evidence in the record, the district court determined no issues of material fact
existed concerning the defendants’ handling of Dunlap’s 2007 workers’
compensation claim to establish the defendants acted in bad faith, and the
defendants were accordingly entitled to summary judgment on those related issues
as a matter of law. The court found the defendants’ actions in handling or
mishandling of Dunlap’s initial workers’ compensation claim was fully litigated
before the agency and again on appeal of the agency’s decision. Citing our 2012
opinion upholding the agency’s award of benefits to Dunlap, as well as the
agency’s denial of penalty benefits, the district court found it had been previously
determined the defendants had “a reasonable basis for [their] position that no
benefits were owing to Dunlap.” See Dunlap, 824 N.W.2d at 558. The court
reasoned Dunlap was therefore precluded from re-litigating the issue in his civil
case. The court further concluded that even if issue preclusion did not apply, it
would still find, for the reasons found by the agency and affirmed on appeal, that
the defendants had a reasonable basis for their position that Dunlap was not owed
benefits related to his 2007 work injury. The court found supporting opinion
evidence in the record that Dunlap did not establish causation made the issue fairly
debatable. Consequently, the court found Dunlap could not show the defendants
7
acted in bad faith in initially denying his initial workers’ compensation claim, and
the defendants were entitled to summary judgment with respect to that aspect of
Dunlap’s bad-faith claim.
However, the district court did find a genuine dispute of material fact existed
as to the defendants’ handling of Dunlap’s later claims concerning injuries in his
arms. Though the defendants cited an expert’s opinion for its position that
Dunlap’s arm injuries were not caused by his 2007 work injury, the district court
found their reliance on that opinion was not reasonable under the circumstances.
The court concluded that, on this claim, the defendants “took a position that
reasonable minds could not hold in light of the quantity and quality of conflicting
expert opinions provided on the issue.”
On the bad faith claim relating to the defendants’ failure to pay mileage, the
court found it lacked jurisdiction to decide the issue because Dunlap failed to
exhaust his administrative remedies to resolve the claim. The court concluded an
“alternate medical care petition provide[d] [Dunlap] with his exclusive remedy, and
there is no dispute that he failed to exhaust it.” Consequently, the court held it
lacked jurisdiction over this claim. Nevertheless, the court further reasoned that if
it had jurisdiction to address the issue, it would conclude the defendants had a
reasonable basis for their delay in payment of Dunlap’s mileage, since the delay
was
reasonably attributable to the initial provision by [Dunlap] of
incomplete information to the [defendants] and subsequent
verification of the missing information by the [defendants] once the
missing information was provided. The communication disconnect
and delay ran both directions and amounted to nothing more, and
nothing less. It did not rise to bad faith by the [defendants].
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Finally, the court noted Dunlap must establish, as an element of a claim for
intentional infliction of emotional distress, that the defendants “engaged in extreme
and outrageous conduct,” defined as “conduct so extreme as to go beyond all
possible bounds of decency and to be regarded as atrocious and utterly intolerable
in a civilized community.” The court reasoned that while the defendants “tracking
and oversight of [Dunlap’s] claims file was shoddy, . . . their management of his
claims file was not so extreme as to go beyond all possible bounds of decency and
to be regarded as atrocious and utterly intolerable in a civilized community.”
“Under this record, reasonable minds—while perhaps not impressed by the
[defendants’] handling of [Dunlap’s] claims—could not differ regarding their lack of
liability for intentional infliction of emotional distress upon [Dunlap].” The court
determined summary judgment was proper on the issue. Accordingly, the district
court concluded all but one of Dunlap’s claims must be dismissed. Both Dunlap
and the defendants filed motions requesting the district court reconsider its
summary judgment ruling.
While the parties’ motions to reconsider were pending, the district court
entered its ruling on other motions pending in the case. The court denied the
paragraph of Dunlap’s second motion to amend his petition to add an abuse-of-
process claim against the defendants. The court noted “Iowa law does not extend
abuse-of-process claims to cases arising from alleged abuses committed by
defendants in administrative proceedings,” and the court declined Dunlap’s
request to expand the scope to include actions before administrative agencies.
In August 2017, after reconsidering the issues raised in the parties’ motions
to reconsider the court’s summary judgment ruling, the district court determined
9
the defendants were entitled to summary judgment on the one issue it did not
dismiss in its earlier ruling. Upon further consideration, the court noted the
defendants relied upon an expert’s opinion given in two separate letters opining
Dunlap’s arm injuries were not caused by his earlier back injury. The court
concluded Dunlap did not meet
his burden in responding to this evidence by producing his own
evidence supporting his argument that it would be unreasonable for
the [defendants] to rely upon [their expert’s] two “no causation”
opinions. There is no evidence before the court that a jury could
reasonably rely upon in concluding reliance on a medical doctor’s
twice-stated and consistent no-causation opinion was unreasonable.
Accordingly, the district court found the defendants’ “motion to reconsider and their
motion for summary judgment as to the second period claim should be granted.”
The court denied Dunlap’s motion to reconsider and dismissed his amended
petition.
Dunlap now appeals the district court’s grant of summary judgment in favor
of the defendants.
II. Scope of Review.
The appellate courts review rulings on motions for summary judgment for
correction of errors at law. See Homan v. Branstad, 887 N.W.2d 153, 163 (Iowa
2016). Summary judgment is appropriate when the pleadings, depositions,
answers to interrogatories, admissions on file, and affidavits show there is no
genuine issue of material fact, and the moving party is entitled to a judgment as a
matter of law. Iowa R. Civ. P. 1.981(3); Mueller v. Wellmark, Inc., 818 N.W.2d 244,
253 (Iowa 2012). The district court’s findings of fact are binding on us if supported
by substantial evidence. Iowa R. App. P. 6.904(3)(a). If the moving party has
10
shown there is no genuine issue regarding any material fact, entitling the moving
party to judgment as a matter of law, summary judgment is appropriate. See Iowa
R. Civ. P. 1.981(3). Therefore, our review is limited to two questions: (1) whether
there is a genuine dispute regarding the existence of a material fact, and
(2) whether the district court correctly applied the law to the undisputed facts. See
Homan, 887 N.W.2d. at 164.
A fact is material if it may affect the lawsuit’s outcome. See id. There is a
genuine dispute as to the existence of a fact if reasonable minds can differ as to
how the factual question should be resolved. See id. “Even if facts are undisputed,
summary judgment is not proper if reasonable minds could draw from them
different inferences and reach different conclusions.” Walker Shoe Store v.
Howard’s Hobby Shop, 327 N.W.2d 725, 728 (Iowa 1982).
In reviewing summary judgment rulings, we view the record in the light most
favorable to the nonmoving party. See Homan, 887 N.W.2d at 163-64. This
includes drawing all legitimate inferences that the record supports in favor of the
nonmoving party. See id. at 164. The nonmoving party is also given the benefit
of any doubt in determining whether granting summary judgment is appropriate.
See Butler v. Hoover Nature Trail, Inc., 530 N.W.2d 85, 88 (Iowa Ct. App. 1994).
We therefore view the record in the light most favorable to Dunlap, the nonmoving
party. See id.
“Questions of jurisdiction, authority, and venue are legal issues to be
reviewed for corrections of errors at law.” Thornton v. Am. Interstate Ins. Co., 897
N.W.2d 445, 460 (Iowa 2017); Schaefer v. Putnam, 841 N.W.2d 68, 74 (Iowa
2013). However, a district court’s refusal to allow amendment of a petition to
11
conform to the proof will only be reversed upon a showing of a clear abuse of
discretion. See In re Estate of Workman, 903 N.W.2d 170, 175 (Iowa 2017).
III. Discussion.
Dunlap challenges the district court’s ruling in five respects. The first two
issues relate to his bad-faith claims, arguing the court erred in applying issue
preclusion, finding no jurisdiction to consider an issue, and in determining the
defendants had a reasonable basis to deny liability for his claims. Third, Dunlap
asserts the court erred in ruling that it lacked jurisdiction to consider his bad faith
claim relating to payment for mileage. Fourth, Dunlap contends summary
judgment was inappropriate on his claim of intentional infliction of emotional
distress. Finally, Dunlap maintains the court should have granted his request to
add his claim of abuse of process in his second motion to amend his petition.
A. Bad Faith.
Iowa Code chapter 85 (2009) provides the exclusive rights and remedies
for an employee to seek compensation from an employer for injuries arising out of
and in the course of employment. See Iowa Code § 85.20; Baker v.
Bridgestone/Firestone, 872 N.W.2d 672, 676 (Iowa 2015); see also Thornton, 897
N.W.2d at 462. “In the grand bargain removing workers’ compensation matters
from the civil justice system, employers receive immunity from potentially large tort
lawsuits and jury verdicts on the condition that they pay compensation benefits for
injuries arising out of and in the course of employment without regard to fault.”
Baker, 872 N.W.2d at 676-77. But, as part of this quid pro quo, workers’
compensation insurers have an “obligation to act in good faith in the exercise of
this authority.” Thornton, 897 N.W.2d at 445, 462, 472-73.
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Once a work injury has been established, an injured employee, as a general
rule, “may recover compensation for a new injury or an aggravation of an
injury . . . if there is no intervening independent cause to break the chain of
causation between the new injury or aggravation and the original injury.” 82 Am.
Jur. 2d Workers’ Compensation § 345 (Westlaw 2018); see also Steven Plitt et al.,
9A Couch on Ins. § 136:63-64; Pella Corp. v. Sharp, No. 09-0502, 2009 WL
5126121, at *2-3 (Iowa Ct. App. Dec. 30, 2009) (discussing 1 Arthur Larson & Lex
K. Larson, Larson’s Worker’s Compensation Law § 10.01, at 10-2 (ed. 2008)). “In
other words, where an accident occurs to an employee in the usual course of his
employment, the employer is liable for all consequences that naturally and
proximately flow from the accident.” DeShaw v. Energy Mfg. Co., 192 N.W.2d 777,
780 (Iowa 1971) (quoting Oldham v. Scofield & Welch, 266 N.W. 480, 482 (Iowa
1936)).
While a civil penalty may be imposed upon an employer and its workers’
compensation insurance carrier administratively pursuant to Iowa Code
section 86.13(4)(a) if workers’ compensation benefits are unreasonably delayed or
terminated, subsequent actions by the insurer may expose the insurer to civil tort
liability outside the administrative arena. See Thornton, 897 N.W.2d at 472-73;
see also Boylan v. Am. Motorists Ins. Co., 489 N.W.2d 742, 744 (Iowa 1992).
Specifically, Iowa recognizes a common law, first-party bad faith tort action against
a workers’ compensation insurer that willfully or recklessly disregards its obligation
to pay benefits to its injured employee. See Boylan, 489 N.W.2d at 743-44
(extending the tort of first-party insurer bad faith recognized in Dolan v. AID
Insurance Co., 431 N.W.2d 790, 794 (Iowa 1988), to workers’ compensation
13
insurers); see also Thornton, 897 N.W.2d at 462 (discussing Boylan). This action
does “not fall within the commissioner’s exclusive jurisdiction” but rather
supplements the workers’ compensation statute. Thornton, 897 N.W.2d at 472-
73.
“To establish a first-party bad-faith claim against a workers’ compensation
insurer, [a] plaintiff must show ‘(1) that the insurer had no reasonable basis for
denying benefits under the policy and, (2) the insurer knew, or had reason to know,
that its denial was without basis.’” Id. at 461-62. “The first element is objective;
the second is subjective.” Id. at 465. The Iowa Supreme Court recently addressed
the “reasonable basis” element of a bad-faith claim in Thorton:
A reasonable basis for denying insurance benefits exists if the claim
is fairly debatable as to either a matter of fact or law. A fairly
debatable claim is one that is open to dispute on any logical basis.
Stated another way, if reasonable minds can differ on the coverage-
determining facts or law, then the claim is fairly debatable.
The fact that the insurer’s position is ultimately found
to lack merit is not sufficient by itself to establish the
first element of a bad faith claim. The focus is on the
existence of a debatable issue, not on which party was
correct.
Whether an issue of fact is debatable can ordinarily be
decided by the court. That is because where an objectively
reasonable basis for denial of a claim actually exists, the insurer
cannot be held liable for bad faith as a matter of law. Courts and
juries do not weigh the conflicting evidence that was before the
insurer; they decide whether evidence existed to justify denial of the
claim. In many cases, a directed verdict or summary judgment for
the insurer dismissing the bad-faith claim may be appropriate
because some evidence existed to justify its denial as a matter of
law.
Id. at 465-66 (cleaned up).
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1. 2007 Claim – Issue Preclusion.
“Under issue preclusion, once a court has decided an issue of fact or law
necessary to its judgment, the same issue cannot be relitigated in later
proceedings.” Winnebago Indus., Inc. v. Haverly, 727 N.W.2d 567, 571 (Iowa
2006). Specifically, an issue will not be permitted to be heard if all of the following
are true:
(1) the issue determined in the prior action is identical to the present
issue; (2) the issue was raised and litigated in the prior action; (3) the
issue was material and relevant to the disposition in the prior action;
and (4) the determination made of the issue in the prior action was
necessary and essential to that resulting judgment.
Id. at 572 (citation omitted); see also Gardner v. Hartford Ins. Accident & Indemn.
Co., 659 N.W.2d 198, 206 (Iowa 2003). “The ultimate final judgment need not be
on the specific issue to be given preclusive effect. . . . However, it must be ‘firm
and considered’ or ‘resolved.’” Stender v. Blessum, 897 N.W.2d 491, 513 (Iowa
2017) (cleaned up).
Dunlap seeks to distinguish the penalty-benefits issue before the agency
from his civil claims, noting “penalty benefits can only be imposed if weekly
compensation benefits have been unreasonably denied, as there are no penalty
benefits available for the unreasonable denial of medical care.” Dunlap contends
he therefore could not have litigated whether the defendants acted in bad faith in
denying his medical care.
Viewing the facts in the light most favorable to Dunlap, we agree with the
district court that whether the defendants unreasonably denied Dunlap medical
care in handling his 2007 claim is the same issue litigated and decided by the
deputy. While the tort of bad faith is not within the jurisdiction of the workers’
15
compensation commissioner, the reasonable-basis issue itself was directly before
the agency as part of the determination of whether Dunlap was entitled to penalty
benefits under section 86.13. The defendants held the burden of proof at the
agency proceeding and were essentially required to establish they acted in good
faith. See Brcka v. St. Paul Travelers Cos., Inc., 366 F. Supp. 2d 850, 857 (S.D.
Iowa 2005). The deputy expressly found the defendants’ reliance upon their
expert’s opinion that Dunlap’s conditions were not related to his work injury to deny
benefits was not unreasonable. There is nothing to indicate that the agency
proceedings were not fair or that Dunlap did not have an opportunity to litigate the
reasonableness of the defendants’ denial of liability of that claim. The deputy’s
finding is simply an alternative way of stating the issue of whether the defendants
were liable for Dunlap’s injury was fairly debatable. Because the deputy already
determined the defendants’ denial of liability on the basis of their expert’s opinion
that Dunlap’s conditions were not related to his work injury, the district court
corrected concluded Dunlap is precluded from again arguing lack of a reasonable
basis in the form of a bad-faith tort action concerning the defendants’ conduct
related to their handling of his 2007 workers’ compensation claim.
2. Conduct Relating to 2012 Injury Claims.
Though the district court initially found summary judgment was not
appropriate, the court ultimately determined there was no genuine issue of material
fact as to whether the defendants had a reasonable basis to deny benefits relating
to their handling of Dunlap’s 2012 injury claims. In its reconsideration ruling, the
court relied upon “two opinion letters . . . from [Dr. Wolfe] . . . stat[ing] that it was
16
his ‘medical opinion that there is no causality’ regarding [Dunlap’s arm injuries].”
Based upon Dr. Wolfe’s letters, the court found Dunlap did not meet
his burden in responding to this evidence by producing his own
evidence supporting his argument that it would be unreasonable for
[the defendants] to rely upon Dr. Wolfe’s two ‘no causation’ opinions.
There is no evidence before the court that a jury could reasonably
rely upon in concluding reliance on a medical doctor’s twice-stated
and consistent no-causation opinion was unreasonable.
Dunlap first asserts that “the district court erroneously applied the ‘no gray
area’ version of the fairly debatable standard.” We believe this argument can be
summarized as follows: the district court must have found the mere existence of
an expert opinion denying causality sufficient to show the issue of liability was fairly
debatable. Stated another way, paraphrasing Dunlap’s counsel’s oral argument,
“Would the opinion of a veterinarian stating there was no causality between
Dunlap’s 2007 work injury and his later arm injuries be sufficient to support the
defendants’ denial of liability, just because that opinion exists?” Dunlap asks that
we “clarify the definition and application of the ‘fairly debatable’ [standard] to
require a complete consideration of all relevant facts and circumstances before
concluding that any case is ‘fairly debatable’ as a matter of law.” Insofar as Dunlap
requests we overrule precedent, we decline his invitation, as we are not at liberty
to do so. See, e.g., State v. Miller, 841 N.W.2d 583, 584 n.1 (Iowa 2014)
(“Generally, it is the role of the supreme court to decide if case precedent should
no longer be followed.”); State v. Beck, 854 N.W.2d 56, 64 (Iowa Ct. App. 2014)
(“We are not at liberty to overrule controlling supreme court precedent.”). But in
any event, considering the facts in the light most favorable to Dunlap, we find the
district court erred in finding there was no genuine issue of material fact that the
17
defendants reasonably relied upon their expert’s opinion in denying Dunlap’s arm
injuries claim.
To be sure, an opinion denying causality by itself is not enough to make an
issue of liability fairly debatable. See Thornton, 897 N.W.2d at 465-66; Reuter v.
State Farm Mut. Auto. Ins. Co., 469 N.W.2d 250, 254 (Iowa 1991). Rather, an
insurer can only rely upon a reasonable opinion denying causation to successfully
defeat a claim of bad faith. See id.; Villarreal v. United Fire & Cas. Co., 873 N.W.2d
714, 727 (Iowa 2016) (stating again “one essential element of a first-party bad-
faith claim is that the insurer lacked an objectively reasonable basis for denying
the claim”); see also Steven Plitt et al., 14 Couch on Ins. § 207:4 (3d ed. 2018)
(“An insurer’s reliance on the opinion of independent expert is a reasonable basis
for denial of a claim, provided that the expert’s report is objectively prepared and
the insurer’s reliance on the report is reasonable.” (footnotes omitted)). Other
courts have reached similar conclusions. See, e.g., Guebara v. Allstate Ins. Co.,
237 F.3d 987, 996 (9th Cir. 2001) (“Expert testimony does not automatically
insulate insurers from bad faith claims based on biased investigations.”); State
Farm Lloyds v. Nicolau, 951 S.W.2d 444, 448 (Tex. 1997) (“[W]e have repeatedly
acknowledged that an insurer’s reliance upon an expert’s report, standing alone,
will not necessarily shield the carrier if there is evidence that the report was not
objectively prepared or the insurer’s reliance on the report was unreasonable.”).
Here, however, the district court concluded Dunlap failed to prove the defendants’
reliance was unreasonable, therefore making the issue fairly debatable. Thus, it
is not just that there was an opinion upon which the defendants’ relied—it was that
there was an opinion they asserted was reasonable upon which to deny liability,
18
making the issue fairly debatable. This may seem a parsing of words, but there is
a difference.
However:
Even after an initial determination, it is incumbent on an employer to
continue to monitor and investigate any claim for benefits.
When . . . sufficient proof justifies a reexamination of an initial
determination of nonliability, the employer should be encouraged to
change its position to accept liability for an employee’s work-related
injury.
Brewer-Strong v. HNI Corp., 913 N.W.2d 235, 244 (Iowa 2018). “While a claim
may be fairly debatable at one point in time, if the insurer becomes aware at a later
date that the claim is no longer fairly debatable, liability for bad faith may still be
imposed.” Zimmer v. Travelers Ins. Co., 521 F. Supp. 2d 910, 931-32 (S.D. Iowa
2007); see also McIlravy v. N. River Ins. Co., 653 N.W.2d 323, 331 (Iowa 2002);
Ivy v. V’s Holding Co., 859 So. 2d 22 (La. Ct. App. 1st Cir. 2003)
(“Termination/denial of benefits may be considered arbitrary when it appears
further medical information was required to make an exact determination of the
employee’s condition. This obligation is continuing in nature. If an insurer or
employer first receives an optimistic medical report, but later receives information
indicating the possibility of continuing disability, it may not blindly rely on the earlier
report to avoid penalties and attorney’s fees.”); Hill v. Nationwide Ins. Co., 570
A.2d 574, 580 (Pa. Super. 1990) (“Nationwide’s decision to rely upon the reports
of its own doctors, only one of whom appears actually to have examined Hill, in the
face of the overwhelming contrary evidence showing Hill’s actual need for
continuing treatment, can easily be seen as having no reasonable foundation.”).
The district court must “carefully review the facts and the particular circumstances
19
in making its determination as to what is the precise issue or issues that are
debatable.” Reuter, 469 N.W.2d at 254.
That Dunlap was injured at work in 2007 has already been litigated and is
fact. He asserted his subsequent injuries to his arms were causally connected to
that 2007 injury. Dr. Wolfe did not offer any alterative causes but merely stated in
his first report it was his “medical opinion that there is no causality regarding
[Dunlap’s arm injuries] in regards to the [w]orkmen’s [c]ompensation injury of
2007.” Dr. Wolfe’s second letter similarly stated, in an attempt to clarify his opinion,
“It was and is my medical opinion that there is no causality regarding [Dunlap’s
arm injuries] in regards to the worker’s compensation injury of 2007.” However,
Dr. Wolfe further explained in the second letter he was also responding to a
different question asked by Dunlap’s counsel—whether, within a reasonable
degree of medical certainty, the development of Dunlap’s arm injuries were related
to his 2007 work injury. Dr. Wolfe found it was
possible (e.g., less than 51%) that [Dunlap’s] bilateral carpal tunnel
syndrome and right ulnar nerve entrapment at the elbow while not
directly caused by the July 18, 2007, work-related injury are a result
of the natural consequences of [Dunlap’s] back injury requiring him
to ambulate with the use of a cane.
Dr. Wolfe further opined additional testing to rule out other causes could result in
him elevating his opinion from “possible” to “probable.” And, as the deputy
workers’ compensation commissioner noted in his review-reopening decision, the
additional testing mentioned by Dr. Wolfe in the second letter had previously been
performed by another doctor to rule out other causes, and, had Dr. Wolfe been so
advised, would thus likely have changed his opinion.
20
Contrary to Dr. Wolfe’s opinion, three other doctors opined there was a
causal connection between the 2007 injury and the later injuries. Dr. Brunz, who
referred Dunlap to Dr. Wolfe, expressed a detailed opinion:
. . . It is my opinion that Mr. Dunlap presents himself in an
honest and straightforward fashion with regard to his symptoms and
the limitations he currently has resulting from his back injury.
It has been necessary for Mr. Dunlap to use the assistance of
a cane while ambulating due to the ongoing pain symptoms he has
resulting from his back injury. I referred Mr. Dunlap to Dr. Wolfe, a
neurologist, because of his ongoing problems with ambulation end
gait disturbance. Dr. Wolfe, in turn, referred Mr. Dunlap to
Dr. [Cherny], a hand specialist. Mr. Dunlap was diagnosed with
carpal tunnel and ulnar nerve entrapment. It is probable that the use
of Mr. Dunlap’s cane as result of his work·related back injury was a
substantial, but not necessarily exclusive, factor in causing his carpal
tunnel and ulnar nerve entrapments.
Similarly, Dr. Cherny explicitly opined Dunlap’s arm injuries were causally related
to Dunlap’s 2007 work injury. Dr. Kuhnlein, who performed Dunlap’s independent
medical examination in 2008, also re-examined Dunlap in 2014. After reviewing
Dunlap’s substantial medical history and performing the examination, Dr. Kuhnlein
opined:
The low back pain and left cubital tunnel syndrome were
directly and causally related to the July 18, 2007, fall. The right
cubital tunnel syndrome, and the bilateral carpal tunnel syndrome,
developed as sequelae to the original injury, based on
accommodations made by Mr. Dunlap to accommodate to his
chronic back pain, particularly with the use of the cane and with the
changes in the way he has used his arms after the injury. The July
18, 2007, injury was a substantial, more than minor, but not exclusive
factor, in the later development of the right cubital tunnel syndrome
and bilateral carpal tunnel syndrome.
While the defendants’ reliance upon Dr. Wolfe’s opinion may have initially
been reasonable, we believe, viewing the evidence in the light most favorable to
Dunlap, that a reasonable fact finder could find the defendants failed to “exercise
21
an honest and informed judgment” when they continued to rely upon Dr. Wolfe’s
initial opinion despite Dunlap’s other three physicians’ opinions to the contrary and
Dr. Wolfe’s conditional statements in his second letter. We cannot say, as a matter
of law, that the defendants’ continued reliance upon Dr. Wolfe’s opinion was not a
reasonable basis for denying liability for Dunlap’s arm injuries. See, e.g., McIlravy,
653 N.W.2d at 333 (“The reasonableness of the denial of a workers’ compensation
claim by an insurer is a question of law only when the evidence is undisputed and
only one inference can be drawn from the evidence). Nevertheless, it certainly
evidences that a genuine issue of material fact exists as to whether the defendants
had a reasonable basis to continue to deny liability in light of Dr. Wolfe’s
clarification and other medical experts’ opinions. See, e.g., id. (“[T]hough the new
information provided . . . did not necessarily render the compensability issue
undebatable, it did transform the reasonableness of the continued denial by North
River into a jury question . . . . A reasonable inference to be drawn from North
River’s failure to investigate further is that it knew it had no reasonable basis for
denying McIlravy’s claim.”). Because a genuine issue of material fact existed as
to whether the defendants’ continued denial of Dunlap’s claim after May 2012
based upon Dr. Wolfe’s opinion constituted a reasonable basis, the district court
erred in granting summary judgment in favor of the defendants on the issue.
Accordingly, we must reverse the ruling and remand for further proceedings on this
issue.
22
3. Conduct Relating to Dunlap’s Mileage Claims.
a. Subject Matter Jurisdiction.
“Subject matter jurisdiction is the power of a court to hear and determine
cases of the general class to which the proceedings in question belong, not merely
the particular case then occupying the court’s attention.” De Stefano v. Apts.
Downtown, Inc., 879 N.W.2d 155, 164 (Iowa 2016) (cleaned up). In most
situations, Iowa Code section 85.20 “clearly and plainly bar[s] a plaintiff’s tort suit
against his employer.” Tigges v. City of Ames, 356 N.W.2d 503, 509 (Iowa 1984);
see also Smith v. Iowa State Univ. of Sci. & Tech., 851 N.W.2d 1, 19 (Iowa 2014)
(parenthetically stating section 85.20 “making the rights of the employee under the
[Iowa Workers’ Compensation Act) exclusive in certain circumstances”). In those
circumstances, unless the employee exhausted his or her administrative
procedures, the “district court does not acquire subject matter jurisdiction over a
claim” and the claim must be dismissed for lack of jurisdiction. McGill v. Fish, 790
N.W.2d 113, 118 (Iowa 2010); see also Kloster v. Hormel Foods Corp., 612
N.W.2d 772, 775 (Iowa 2000).
However, one exception carved out concerns bad-faith tort actions, as
discussed above. See Thornton, 897 N.W.2d at 472; see also Tallman v.
Hanssen, 427 N.W.2d 868, 870-71 (Iowa 1988) (“A district court would ordinarily
have no subject matter jurisdiction over a claim that an employee is entitled to
workers’ compensation benefits. But this exclusivity principle is limited to matters
surrounding a job-related injury and does not extend to subsequent dealings during
which a tort may arise by reason of bad faith on the part of an employer’s insurer.”).
Though the claim was set out by Dunlap as a bad-faith tort claim, the defendants
23
urged and the district court agreed that Dunlap’s claim was actually a claim for
alternative medical care, which required proceeding through the agency if he was
dissatisfied with the defendants’ delinquent payment of his mileage expenses.
Because Dunlap did not, the district court concluded it lacked subject matter
jurisdiction to consider the claim and the defendants were entitled to summary
judgment on the matter. On appeal, Dunlap challenges this characterization of his
claim and its dismissal for lack of jurisdiction.
Upon our review, we agree with Dunlap. This situation is very similar to the
one considered by the supreme court in Tallman. See 427 N.W.2d at 870-71.
There, the employee brought an intentional-infliction-of-emotional-distress claim
against his employer’s workers’ compensation insurance carrier for “refusing to
pay his medical bills or to provide a physician.” Id. at 870. The insurer claimed
because the employee failed to go through the administrative process set forth
under chapter 85 the district court did not have jurisdiction to hear the claim. See
id. The district court agreed and dismissed the claim for lack of subject matter
jurisdiction, and the supreme court reversed on appeal. See id. at 870-71. Quoting
from another case, the court explained:
The liability sought here to be imposed upon [the insurer] does not
arise out of the injury suffered by [the employee] on October 6, 1977.
It derives from the independent and allegedly intentional, tortious
conduct of [the insurer] in refusing to pay benefits owing under the
[Workers’ Compensation] Act without an arguable basis therefor.
See id. at 870 (quoting In re Certification of Question of Law, 399 N.W.2d 320
(S.D.1987)). The court did not express any opinion on whether the employee’s
intentional-infliction-of-emotional-distress claim had any merit, but it determined
“only that the trial court had subject matter jurisdiction to consider it” and remanded
24
the case. See id. at 871. Similarly, in Thornton, the court found “the district court
has subject matter jurisdiction over [the employee’s] bad-faith claim alleging [the
insurer] unreasonably delayed the delivery of his new wheelchair.” 897 N.W.2d at
473.
Here, Dunlap’s claim was not whether he was entitled to payment of his
transportation expenses. See Iowa Code § 85.27(1) (“The employer, for all injuries
compensable under this chapter . . . , shall furnish reasonable . . . services and
supplies therefor and shall allow reasonably necessary transportation expenses
incurred for such services.”), (4) (“[T]he employer is obliged to furnish reasonable
services and supplies to treat an injured employee”); Iowa Admin. Code r. 876-
8.1(5) (2012) (“Transportation expense in the form of reimbursement for mileage
which is incurred in the course of treatment or an examination . . . shall be payable
at such time as 50 miles or more have accumulated or upon completion of medical
care, whichever occurs first.”). Rather, his claim was that the defendants’ failed to
reimburse him in a timely matter, constituting bad faith for which he was damaged.
Clearly, the district court had subject matter jurisdiction to consider this tort claim.
b. Merits.
The district court found that even if it had subject matter jurisdiction to
consider the mileage issue, the defendants were entitled to summary judgment as
a matter of law because the defendants had a reasonable basis for their delayed
reimbursement of Dunlap’s transportation expenses:
It would be reasonable for an insurer to verify that an injured worker
actually attended doctor appointments and picked up prescriptions
before making payment for these things. [The defendants] reviewed
[Dunlap’s] claim once they received all requested information, as
shown by the e-mail exchanges between counsel itemized
25
above. . . . When these communications are viewed in total and in
context, the court would find that any delay is payment is reasonably
attributable to the initial provision by [Dunlap] of incomplete
information to [the defendants] and subsequent verification of the
missing information by [the defendants] once the missing information
was provided. The communication disconnect and delay ran both
directions and amounted to nothing more, and nothing less. It did
not rise to bad faith by [the defendants].
Upon our review, we agree with the district court’s conclusion. We do not
find—nor were we directed to—a statutory deadline for repayment of transportation
expenses. One treatise suggests:
Although bad faith claims can be brought against an insurer
based upon an assertion that the insurer did not handle the claim in
a timely fashion, it must be recognized that delays are inherent in
handling complex insurance coverage claims. An insurer can hardly
be guilty of bad faith because it exercised caution before paying or
formally denying coverage. For example, in Allstate Insurance Co.
v. Salahutdin, [815 F. Supp. 1309, 1313 (N.D. Cal. 1992)], the court
held that a five month delay in advising an insured of a coverage
decision after the insurer has all of the facts upon which to base a
decision does not constitute bad faith. A lengthy delay in a payment
owed by an insurer does not automatically constitute bad faith, since
the delay could be due to negligence. It could also be due to the
insured failing to provide information that is reasonably requested by
the insurer. Obviously, an insurer can, in good faith, delay payment
based upon information that it does not yet have. It is only if the
delay was due to an evil motive or a reckless indifference to the rights
of the insured that bad faith can be present.
An insurer is not guilty of bad faith simply because it chooses
to conduct a relevant investigation before deciding whether to
provide policy benefits. If the information timely sought by the insurer
is potentially relevant, the investigation would not constitute a bad
faith dilatory tactic. If the insurer purposefully mishandles a claim,
however, by not conducting any investigation, that conduct might
constitute a bad faith dilatory tactic.
Allan D. Windt, 2 Insurance Claims and Disputes § 9:26 (6th ed. Westlaw 2018)
(internal footnotes omitted).
Here, the mileage claims were submitted by Dunlap all at once, and the
defendants processed all of the claims and submitted its decision, with payment of
26
almost all of the claims, all at once. There is no evidence the defendants
purposefully mishandled Dunlap’s mileage claims, and it appears part of the delay
was due to Dunlap failing to provide information requested by the defendants.
Under the circumstances, we do not find the district court erred in finding the
defendants had a reasonable basis as a matter of law and affirm the district court’s
grant of summary judgment on the issue.
B. Intentional-Infliction-of-Emotional-Distress Claim.
To establish a claim of intentional infliction of emotional distress, a plaintiff
must prove “(1) outrageous conduct by the defendant; (2) the defendant
intentionally caused, or recklessly disregarded the probability of causing, the
emotional distress; (3) plaintiff suffered severe or extreme emotional distress; and
(4) the defendant’s outrageous conduct was the actual and proximate cause of the
emotional distress.” Smith, 851 N.W.2d at 26. The controlling question here,
under the first element, is whether the alleged conduct could reasonably be
regarded as outrageous. See Taggart v. Drake Univ., 549 N.W.2d 796, 802 (Iowa
1996). “Outrageous conduct” is more than “mere bad conduct.” See id.
“Outrageous conduct” is conduct that a civilized community would find to be
outrageous in character and extreme in degree. This civilized community would
regard the conduct as atrocious, “utterly intolerable,” and going “beyond all
possible bounds of decency.” See id. A member of this civilized community would
exclaim, “Outrageous!” when confronted with the conduct. See id. The bar to be
met is high. See Eckles v. City of Corydon, 341 F.3d 762, 770 (8th Cir. 2003);
Vinson v. Linn-Mar Cmty. Sch. Dist., 360 N.W.2d 108, 119 (Iowa 1984).
27
While we find the question of what constitutes outrageous conduct is a
difficult one, we agree with the district court’s assessment that, viewing the
evidence in the light most favorable to Dunlap, the defendants’ conduct does not
rise to the level of “outrageous conduct.” On the basis of the pleadings and other
filed documents, even giving them the widest latitude, it is clear that defendants’
acts did not even approach this type of conduct. See Clark-Peterson Co. v. Indep.
Ins. Assocs., Ltd., 514 N.W.2d 912, 916 (Iowa 1994). A jury could find that
defendants’ actions were petty and wrong, even malicious, but we do not believe
a fact-finder could reasonably conclude that the conduct went beyond all possible
bounds of decency and must be regarded as atrocious and utterly intolerable in a
civilized community. Because Dunlap cannot establish the defendants’ conduct
was truly outrageous, his claim fails as a matter of law. Accordingly, the district
court did not err in granting the defendants’ summary judgment on the issue.
C. Motion to Amend.
Finally, Dunlap argues the district court erred in denying his second motion
to amend his petition to add a claim of abuse of process against the defendants.
Though the district court decided the issue upon the defendants’ motion for
summary judgment, our review is for an abuse of discretion. See Workman, 903
N.W.2d at 175; Daniels v. Holtz, 794 N.W.2d 813, 817 (Iowa 2010) (“Denial of a
motion to amend will only be reversed where a clear abuse of discretion is
shown.”). “An abuse of discretion occurs when the district court bases its decision
on grounds clearly untenable or to an extent clearly unreasonable.” Baker v. City
of Iowa City, 867 N.W.2d 44, 51 (Iowa 2015). “If there is a solid legal basis
28
supporting the ruling on a motion to amend, there is no abuse of discretion.” In re
Estate of Bearbower, 426 N.W.2d 392, 394 (Iowa 1988).
In Dunlap’s second amended petition, he alleges:
(22) From July 18, 2007 through the filing of this petition, [the
defendants] intentionally and repeatedly miss-used:
a. Their right to control [Dunlap’s] medical care under Chapter
85.27 . . . .
b. The administrative process, including the procedure for
alternative medical care petitions;
c. The worker’s compensation appellate process.
(23) The defendants used the legal processes in the
preceding paragraph primarily to avoid paying benefits under
Chapter 85 . . . and to force [Dunlap] to abandon his worker’s
compensation claim or settle it for minimal value, and not for its
intended purpose, good faith legal and factual disputes.
(24) [The defendants] use of the legal process for the
improper purpose was a cause of damage to [Dunlap], including
additional physical pain, mental pain and suffering, litigation
expense, and delay in the receipt of valuable benefits.
The district court denied his motion to add the claim, finding abuse-of-process
claims arising from a proceeding in front of a state agency rather than the court is
not actionable in Iowa.
“Abuse of process is ‘the use of legal process, whether criminal or civil,
against another primarily to accomplish a purpose for which it was not designed.’”
Gibson v. ITT Hartford Ins. Co., 621 N.W.2d 388, 398 (Iowa 2001). “To prove a
claim of abuse of process, a plaintiff must show (1) use of the legal process, (2) in
an improper or unauthorized manner, and (3) that damages were sustained as a
result of the abuse.” Stew-Mc Dev., Inc. v. Fischer, 770 N.W.2d 839, 849 (Iowa
2009). “The first element can generally be shown by the use of a legal process
against the plaintiff.” Wilson v. Hayes, 464 N.W.2d 250, 266 (Iowa 1990).
29
In an unpublished case, a panel of this court concluded that administrative
proceedings do not constitute a “legal process” within the meaning of an abuse of
process. See Dobratz v. Krier, No. 11-0120, 2011 WL 5867067, *2-4 (Iowa Ct.
App. Nov. 23, 2011). Dunlap does not point us to any other Iowa case that has
expressly accepted administrative proceedings as being a “legal process” or
directly addressed this issue. Instead, he refers us to Gibson v. ITT Hartford
Insurance Co., wherein an abuse-of-process claim was brought for a defendant’s
alleged misuse of administrative proceedings. See 621 N.W.2d 388, 398-99 (Iowa
2001). However, whether an administrative proceeding was a legal process was
not was not an issue in that case. See id. Cases that have expressly referred to
what constitutes a “legal process” generically refer to criminal or civil proceedings.
See, e.g., Wilson, 464 N.W.2d at 266 (referring to civil and criminal proceedings);
Tomash v. John Deere Indus. Equip. Co., 399 N.W.2d 387, 390-91 (Iowa 1987)
(same).
Here, Dunlap’s motion to amend failed to sufficiently plead facts to support
the first element of his abuse-of-process claim. Accordingly, there is a solid legal
basis supporting the district court’s ruling denying his motion to amend. The district
court did not abuse its discretion in denying Dunlap’s motion to amend. We
therefore affirm this issue.
IV. Conclusion.
Upon our review, we affirm the district court’s ruling in all respects but one.
The district court erred in finding the defendants were entitled to summary
judgment as a matter of law on Dunlap’s 2012 injury claim because a genuine
issue of material fact existed as to whether the defendants’ reliance upon
30
Dr. Wolfe’s subsequent opinion was reasonable. Viewing the evidence in the light
most favorable to Dunlap, a reasonable fact-finder could find that the defendants’
reliance was simply not reasonable once they were aware three other experts had
opined a causal connection existed between Dunlap’s established 2007 work injury
and his later injuries and Dr. Wolfe clarified his opinion with a condition that could
change his opinion from possible causation to probable causation. Because a fact
question exists as to whether the defendants’ reliance was reasonable, the claim
was not fairly debatable as a matter of law. Consequently, we reverse the district
court’s ruling in that regard and remand for further proceedings consistent with this
opinion. We do not retain jurisdiction, and any costs are assessed to the
defendants.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED FOR
FURTHER PROCEEDINGS.