Pair of State Supreme Court Cases Uphold Exclusive Remedy for Workers’ Comp Claims

Two rulings by the Indiana and Kentucky state supreme courts upheld the “exclusive remedy” of workers compensation and
limited a claimant’s ability to sue an employer’s insurance carrier.

“The reversal of the two appellate court decisions in Kentucky and Indiana halted a dangerous trend that could have crippled the workers’ compensation system in both states,” Nancy Schroeder, assistant vice president of workers’ compensation at the National Association of Independent Insurers (NAII), said. “Both rulings affirm the intent of each state’s workers’ compensation act as a sole remedy against insurers and employers.”

In a 4-1 decision, the Indiana Supreme Court upheld the constitutionality of Indiana’s Worker’s Compensation Act in the John Sims v. United States Fidelity Guaranty Company case.

Sims filed a complaint in November, 1998, against his insurance company alleging that U.S. Fidelity and Guaranty Company intentionally deprived him of certain statutory rights by refusing to provide workers’ compensation benefits and by denying him access to timely medical care and physical therapy.

The insurance company argued that the state Workers’ Compensation Board had the exclusive jurisdiction over the claims alleged in Sims’ complaint. The decision by the Indiana Court of
Appeals declared the exclusive jurisdiction of the Workers’ Compensation Board unconstitutional.

However, the Indiana Supreme Court has repeatedly stated the legislature is not prohibited from changing or modifying the Workers’ Compensation Act, therefore, the act does not violate the Indiana constitution by limiting the remedy available to plaintiffs alleging bad faith against their employers’ insurer.

“In Indiana, state law very clearly prohibits a suit against a carrier for unfair claims handling,” Robert Hurns, NAII counsel, who filed an amicus brief in the case, in collaboration with the Insurance Institute of Indiana, added. “In rejecting the claimant’s challenge to Indiana’s Workers’ Compensation Act, the court recognized the claimant had an administrative remedy that he failed to pursue.”

The Kentucky Supreme Court, in a 4-3 decision, disagreed with the Court of Appeals ruling, concluding that any dispute over the payment of a medical bill is between the provider and the carrier, not the provider and the patient.

In Travelers Indemnity Company v. Deborah Reker, the state supreme court ruled that Reker’s claim for “worry and anguish” and “embarrassment” because her medical providers made persistent demands for payment is against those providers, not Travelers Indemnity Company, the workers’ compensation insurance carrier for Reker’s employer. State law does not authorize a civil action for a bad faith refusal to settle, or for a delay in payment of benefits, or for failing to pay benefits during a pending appeal, the
court said.

Kentucky law only authorizes punitive action against the insurer by the commissioner of the state department of workers’ claims. Workers’ compensation insurance is different from other forms of liability insurance, as the Workers’ Compensation Act is part of the labor and human rights statutes, the court decided.

“The Kentucky Supreme Court recognized the unique characteristics of workers’ compensation,” Hurns said. “The Kentucky workers’ compensation statute clearly does not authorize a private cause of action against a workers’ compensation insurer for an alleged unfair claims settlement practice.”