Opinion
No. 5-829 / 04-1176
Filed December 21, 2005
Appeal from the Iowa District Court for Dickinson County, David A. Lester, Judge.
Jerry Wallace and Iowa Great Lakes Lifts appeal the district court's entry of a default judgment on Robert Bremer's claims based on Wallace's failure to pay workers' compensation benefits. AFFIRMED.
Michael H. Johnson of Stoller Johnson, Spirit Lake, for appellants.
Pete Leehey of Pete Leehey Law Firm, P.C., Cedar Rapids, for appellee.
Considered by Sackett, C.J., Eisenhauer, J., and Brown, S.J.
Senior Judge assigned by order pursuant to Iowa Code section 602.9206 (2005).
Jerry Wallace and Iowa Great Lake Lifts (referred to collectively as Wallace) appeal the district court's entry of a default judgment on Robert Bremer's claims based on Wallace's failure to pay workers' compensation benefits. Wallace claims the district court lacked subject matter jurisdiction to address Bremer's action. He also claims the award of compensatory and punitive damages was excessive and not supported by the evidence. We affirm.
I. Background Facts Proceedings
Bremer was formerly employed by Wallace, and he sustained an injury to his knee during the course of his employment on May 8, 2002. Bremer filed a claim for workers' compensation benefits. Wallace, apparently uninsured, did not file an answer, and a default judgment was entered against him. Wallace was ordered to pay healing period benefits, eleven weeks of permanent partial disability benefits, and medical expenses. Wallace did not pay any of these benefits to Bremer.
On January 9, 2004, Bremer filed a petition in district court alleging Wallace "recklessly disregarded Bremer's rights in unreasonably refusing to pay workers' compensation benefits. . . ." Again, Wallace did not file an answer, and Bremer filed an application for entry of a default judgment. Wallace still did not respond, and the district court held a hearing to determine the amount of Bremer's damages. The court determined Wallace acted in bad faith by failing to have workers' compensation insurance and by failing to pay benefits to Bremer. The court awarded Bremer $20,000 in compensatory damages and $100,000 in punitive damages.
II. Standard of Review
This case was brought at law, and our review is for the correction of errors at law. Iowa R. App. P. 6.4.
III. Subject Matter Jurisdiction
Wallace contends that the district court did not have subject matter jurisdiction to consider Bremer's claims. The issue of subject matter jurisdiction may be raised at any time. See In re Estate of Falck, 672 N.W.2d 785, 789 (Iowa 2003). Subject matter jurisdiction "is the power to hear and determine cases of the general class to which the proceedings belong." Heartland Express v. Gardner, 675 N.W.2d 259, 262 (Iowa 2003) (citation omitted). In Iowa Code section 85.20 (2003), the legislature granted the workers' compensation commissioner exclusive jurisdiction of actions brought under chapter 85. Thus, the district court does not ordinarily have subject matter jurisdiction over original workers' compensation claims. See Heartland Express, 675 N.W. 2d at 262.
The commissioner's exclusive jurisdiction, however, "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." Tallman v. Hanssen, 427 N.W.2d 868, 870 (Iowa 1988). Thus, the district court has subject matter jurisdiction to consider an independent tort arising from an insurer's failure to pay workers' compensation benefits. Id. at 871. Iowa recognizes a tort claim against insurers for the willful or reckless disregard of an obligation to pay workers' compensation benefits. Gibson v. ITT Hartford Ins. Co., 621 N.W.2d 388, 397 (Iowa 2001); Boylan v. American Motorist Ins. Co., 489 N.W.2d 742, 744 (Iowa 1992).
A self-insured employer may also be subject to a bad faith claim. Reedy v. White Consol. Indus., Inc., 503 N.W.2d 601, 603 (Iowa 1993). In that case the supreme court stated:
A self-insured employer under the Workers' Compensation Act is not an employer who fails to secure insurance against workers' compensation liability. Without more, an employer who fails to secure insurance against such claims merely waives the protection of the act against common-law claims. Iowa Code § 87.21. To be a qualified self-insured employer under the act, it is necessary to voluntarily assume a recognized status under the workers' compensation laws as an insurer. Iowa Code § 87.4. For purposes of a bad-faith tort claim, we see no distinction between a workers' compensation insurance carrier for an employer and an employer who voluntarily assumes self-insured status under the act.
Id.
On appeal, Wallace contends that he is not a qualified self-insured employer under section 87.4, and therefore Reedy did not authorize a bad faith claim against him. See id. He points out that under section 87.21 an employer who fails to obtain insurance may be liable in a personal injury action, or for workers' compensation benefits, but not both. See Stroup v. Reno, 530 N.W.2d 441, 444 (Iowa 1995).
We determine Bremer is not seeking to relitigate the claims he brought in the original workers' compensation action, but is bringing a separate bad faith action against Wallace. The damages in this case are based on the inconvenience to Bremer and the prolonged pain he suffered due to not receiving timely or local medical assistance. Bremer could not bring his bad faith claim before the workers' compensation commissioner. See Doyle v. Dugan, 229 Iowa 724, 729, 295 N.W. 128, 131 (1940) (noting that the commissioner does not have jurisdiction to determine issues of fraud). Bremer should not be left without a forum for bringing his bad faith claims. Therefore, we conclude the district court had jurisdiction in this case.
We note that when we previously addressed this issue in an unpublished decision, Clements v. Alternative Workforce, Inc., No. 00-998 (Iowa Ct.App. Aug. 14, 2002), we reached the same conclusion: a separate bad faith action may be maintained by an employee against the employer in district court.
IV. Amount of Damages
Wallace asserts that the award of compensatory and punitive damages in this case was not supported by the evidence. Because Wallace was in default, he did not present any arguments or evidence before the district court. A default judgment precludes a defendant from arguing issues of fact on appeal. Rowan v. Everhard, 554 N.W.2d 548, 550 (Iowa 1996). Also, Wallace did not file a motion to set aside the default judgment under Iowa Rule of Civil Procedure 1.977. We determine he has not preserved this issue for appeal. See In re S.P., 672 N.W.2d 842, 845 (Iowa 2003) (noting that the court would assume, without deciding, that a party failed to preserve error by failing to file a motion to set aside a default judgment).
Wallace relies upon Ezzone v. Riccardi, 525 N.W.2d 388, 399 (Iowa 1994) (citing Honda Motor Co. v. Oberg, 512 U.S. 415, 426-32, 114 S. Ct. 2331, 2338-41, 129 L. Ed. 2d 336, 346-51 (1994)), to argue that the supreme court has held it is a denial of due process for a State to allow punitive damages without according appellate review of the appropriateness of the amount. Wallace's reading of these cases is too expansive. The cases actually indicate only that there must be an opportunity for appellate review to pass constitutional muster. Honda Motor Co., 512 U.S. at 426-32, 114 S. Ct. at 2338-41, 129 L. Ed. 2d at 346-51; Ezzone, 515 N.W.2d at 399. That opportunity, like other constitutional issues, may be waived. See State v. Lyon, 223 N.W.2d 193, 194 (Iowa 1974). The United States Supreme Court does not appear to require appellate courts to consider a due process claim that was not raised below. See Browning-Ferris Indus. v. Kelco Disposal, Inc., 492 U.S. 257, 277, 109 S. Ct. 2909, 2921, 106 L. Ed. 2d 219, 239 (1989). Wallace did not raise this issue before the district court, and we conclude it has not been preserved for appellate review.
We affirm the decision of the district court.
AFFIRMED.
Eisenhauer, J., concurs; Sackett, C.J., dissents.
I dissent.
The district court does not have subject matter jurisdiction to maintain a common law action against an uninsured employer for bad faith failure to pay workers' compensation benefits.
Any analysis of the rights of an injured employee begins with the Iowa Workers' Compensation Act, Iowa Code chapter 85 (2003). Iowa Code section 85.20 makes an injured employee's right to workers' compensation his exclusive remedy against his employer. Iowa Code § 85.20. It states in pertinent part:
The rights and remedies provided in this chapter . . . for an employee . . . on account of injury . . . for which benefits under this chapter . . . are recoverable, shall be the exclusive and only rights and remedies of such employee . . . at common law or otherwise, on account of such injury . . . against . . .:
1. Against the employee's employer . . .
Thus, the liability of an employer in an action brought under Iowa Code chapter 85 is clearly limited to remedies authorized under that chapter.
An employer who has failed to obtain workers' compensation liability insurance may also be subject to a tort action under section 87.21, which makes an uninsured employer liable to an employee for a personal injury in the course of and arising out of the employee's employment. Iowa Code § 87.21; Stroup v. Reno, 530 N.W.2d 441, 443 (Iowa 1995). Section 87.21 further provides that once an employee enforces the employer's liability by an action at law for damages or collects compensation under the workers' compensation statutes, subsequent pursuit of the alternate method is foreclosed. Stroup, 530 N.W.2d at 443.
Once Bremer made this election, he was forever limited to the rights and remedies granted by statute. The Iowa Supreme Court has consistently interpreted statutory creation of employer liability to an employee as prohibiting an employee from suing his or her employer for damages. See, e.g., Glenn v. Farmland Foods, Inc., 344 N.W.2d 240, 242 (Iowa 1984).
In Tallman v. Hanssen, 427 N.W.2d 868, 870 (Iowa 1988), the court recognized that the exclusive-remedy defense contained in section 85.20 was available to an employer but did not protect a workers' compensation insurer from a bad-faith claim. In Boylan v. American Motorists Insurance Company, 489 N.W.2d 742, 744 (Iowa 1992), the court said, "We conclude that it is unlikely that the legislature intended the penalty provision in section 86.13 to be the sole remedy for all types of wrongful conduct by carriers with respect to administration of workers' compensation benefits." (Emphasis supplied.) The court there approved bringing a bad-faith claim against a workers' compensation insurer. Id.
In Reedy v. White Consolidated Industries, Inc., 503 N.W.2d 601, 602 (Iowa 1993), the court said the liability recognized in Boylan should extend to self-insured employers. In doing so the court reasoned,
A self-insured employer under the Workers' Compensation Act is not an employer who fails to secure insurance against workers' compensation liability. Without more, an employer who fails to secure insurance against such claims merely waives the protection of the act against common-law claims. Iowa Code § 87.21 (1993). To be a qualified self-insured employer under the act, it is necessary to voluntarily assume a recognized status under the workers' compensation laws as an insurer. Iowa Code § 87.4 (1987). For purposes of a bad-faith tort claim, we see no distinction between a workers' compensation insurance carrier for an employer and an employer who voluntarily assumes self-insured status under the act.
Reedy, 503 N.W.2d at 603 (emphasis supplied).
Reedy clearly distinguishes a self-insured employer from one who has not obtained insurance. This the majority tends to overlook. An insurer or self-insured is required to meet certain requirements, including a promise to pay benefits assessed under section 85.20 against its insured. A self-insurer puts itself in the position of an insurer by meeting certain requirements. As a result, an employer who has insurance or is self-insured is not subject to liability in tort under section 87.21.
The defendant here was subject to section 87.21. It is neither an insurer nor a recognized self-insurer. There is no controlling precedent holding that an employer is subject to a bad faith action under the facts here. In passing section 87.21, the legislature recognized a need to sanction an employer for failing to obtain insurance or to qualify as a recognized self-insurer. There is no basis to adopt the majority's position that there should be an additional tort against an uninsured employer.