Workers’ Comp Exclusive Remedy Bars Bad Faith Claim in North Carolina

The exclusive remedy provisions in North Carolina’s workers’ compensation law were recently challenged by an injured worker who sought to bring a bad faith claim against the insurer. The worker, Jeff Bowden, was injured while on the job. While his workers’ compensation claim was pending and active, he brought a bad faith lawsuit against First Liberty Insurance Corp. for intentional infliction of emotional distress and bad faith alleging that First Liberty engaged in a host of intentionally wrongful conduct while handling his claim resulting in emotional injury. First Liberty moved to dismiss the claims on the ground that North Carolina’s Industrial Commission had exclusive jurisdiction. The trial court denied First Liberty’s motion First Liberty appealed. The North Carolina Court of Appeals reversed finding that the exclusive remedy provisions of North Carolina’s Workers’ Compensation Act barred Bowden’s intentional infliction of emotional distress and bad faith claims.

Previously, the North Carolina Court of Appeals had held that claims arising from an employer’s or insurer’s processing and handling of a workers’ compensation claim, even intentional torts, fell within the exclusive jurisdiction of North Carolina’s Industrial Commission. See, e.g., Johnson v. First Union Corp., 131 N.C.App. 142, 143-44, 504 S.E.2d 808, 809 (1998) and Deem v. Treadaway & Sons Painting & Wallcovering, Inc., 142 N.C.App. 472, 477-78, 543 S.E.2d 209, 212 (2001). Because the Court found that the claims brought by Bowden were indistinguishable from those that the Court had previously held to be within the exclusive jurisdiction of the Industrial Commission, i.e., the cases of Johnson and Deem, the Appellate Court remanded the case for dismissal of the claims brought against First Liberty for lack of subject matter jurisdiction.

The Court in Bowden, found that North Carolina’s Workers’ Compensation Act provided the exclusive remedy for work-related injuries. Bowden v. Young, 2015 WL 659740 (N.C. Ct. App. 2/17/15) (Citing Johnson, 131 N.C.App. at 145, 504 S.E.2d at 810). The Bowden Court noted that the Workers’ Compensation Act was intended “to provide a swift and certain remedy to an injured workman, but also to insure a limited and determinate liability for employers” (Citing Johnson, 131 N.C.App. at 144, 504 S.E.2d at 810).

The Court in Bowden recognized that the exclusive jurisdiction of the Industrial Commission included not only work-related injuries but also any claims that were “ancillary” to the original compensatory injury (Citing Deem, 142 N.C.App. at 477-78, 543 S.E.2d at 212). “Ancillary” claims included claims brought against insurers for mishandling of the workers’ compensation claim which caused some type of tortious injury to the worker for which the worker sought court sanctioned remedies. (Citing Riley v. Debaer, 149 N.C.App. 520, 526, 562 S.E.2d 69, 72, aff’d per curiam, 356 N.C. 426, 571 S.E.2d 587 (2002)).

The Court rejected Mr. Bowden’s argument that intentional torts fell outside the scope of the Workers’ Compensation Act. This was so because the North Carolina courts had repeatedly held that all claims concerning the processing and handling of a workers’ compensation claim fell within the exclusive jurisdiction of the Industrial Commission irrespective of whether the alleged conduct was intentional or not (Citing Johnson, 131 N.C.App. at 143-44, 504 S.E.2d at 809; Deem, 142 N.C.App. at 477-78, 543 S.E.2d at 212).

Based on this rationale, the Court pronounced in the Bowden case a straightforward rule: “all claims arising from an employer’s or insurer’s processing and handling of a workers’ compensation claim [in North Carolina] fall within the exclusive jurisdiction of the Industrial Commission, regardless of whether the alleged conduct was intentional or merely negligent.” In a specially concurring separate opinion, Judge Dillon rejected the idea that all claims arising from an employer’s or insurer’s processing and handling of a workers’ compensation claim fell within the exclusive jurisdiction of the Industrial Commission. According to Judge Dillon, an “employee can pursue a civil action against his insurer, as he can against his employer, where the insurer ‘intentionally engages in misconduct knowing it is substantially certain to cause serious injury or death’ and that conduct causes injury or death” (citing Trivette v. Yount, 366 N.C. 303, 306, 735 S.E.2d 306, 308-09 (2012)).