Opinion
No. C99-2105
July 23, 2001
ORDER
This matter comes before the court pursuant to defendant IBP, Inc.'s April 23, 2001 motion for summary judgment (docket number 15). The parties consented to the exercise of jurisdiction by a United States Magistrate Judge. For the reasons set forth below, the defendant's motion for summary judgment is granted.
I. Background
This litigation arises out of a long dispute between plaintiff Robert Laughlin ("Laughlin") and defendant IBP, Inc. ("IBP") over the payment of workers' compensation benefits. Laughlin was employed by IBP from June 21, 1990 until December 28, 1990. On August 14, 1992, Laughlin initiated proceedings before the Industrial Commissioner. On June 16, 1994, a hearing was held. In an arbitration decision dated July 15, 1994, the Deputy Industrial Commissioner found in favor of Laughlin. IBP appealed the decision to the Industrial Commissioner. In an appeal decision dated February 27, 1995, the Industrial Commissioner affirmed the decision of the Deputy. IBP appealed the Industrial Commissioner's decision to the Black Hawk District Court and the Iowa Supreme Court. The Iowa Court of Appeals affirmed the decision of the Industrial Commissioner on March 28, 1997. IBP did not seek further review. IBP has made and continues to make indemnity payments to Laughlin.
On November 24, 1997, Laughlin filed with the Industrial Commissioner an Original Notice and Application for Commutation of all remaining benefits. In an amendment to the application, Laughlin stated that the proposed social security changes would adversely affect his running award if he did not get it commuted. IBP resisted Laughlin's request for commutation. A hearing on the application for commutation was held on April 2, 1998. In a decision dated October 19, 1998, the Deputy Industrial Commissioner denied Laughlin's request for commutation. On November 3, 1998, Laughlin served a petition for rehearing. On November 12, 1998, the petition for a rehearing was denied. Laughlin then appealed the decision of the Deputy and on November 29, 1999, an Appeal Decision issued by the Industrial Commissioner denied the commutation. Laughlin did not seek further judicial review.
Laughlin mailed, but did not file, a second Original Notice and Application for Commutation of benefits in February 2000. IBP moved to dismiss the petition on February 21, 2000. The application was dismissed without prejudice. On August 17, 2000, Laughlin filed a third Original Notice and Application for Commutation. IBP again resisted the application and moved to have it dismissed. On September 21, 2000, the Deputy Industry Commissioner denied the motion to dismiss because he was unable to determine, based on the pleadings, whether the application for commutation was based on the same facts as the previous application. Laughlin filed this action on October 11, 1999 alleging that IBP acted in bad faith in its payment of benefits to him.
In his response to IBP's motion for summary judgment, Laughlin asserts that IBP acted in bad faith when it resisted his first application for commutation of benefits, and that IBP acted in bad faith by failing to pay medical expenses on a timely basis, paying prescription costs on a timely basis, and by harassing and intimidating him for prevailing on a workers' compensation claim. Laughlin argues that the court should treat IBP's motion as a motion for partial summary judgment solely on the issue of whether Laughlin is precluded from having a factual determination made in this court on the issue of bad faith in resisting the commutation of benefits. He contends that the court cannot determine, as a matter of law, that IBP did not act in bad faith in its conduct in resisting the application for commutation and payment of medical and prescription benefits.
II. Summary Judgment Standard
A motion for summary judgment may be granted only if, after examining all of the evidence in the light most favorable to the nonmoving party, the court finds that no genuine issues of material fact exist and that the moving party is entitled to judgment as a matter of law. Kegel v. Runnels, 793 F.2d 924, 926 (8th Cir. 1986). Once the movant has properly supported its motion, the nonmovant "may not rest upon the mere allegations or denials of [its] pleading, but . . . must set forth specific facts showing that there is a genuine issue for trial."Fed.R.Civ.P. 56(e). "To preclude the entry of summary judgment, the nonmovant must show that, on an element essential to [its] case and on which [it] will bear the burden of proof at trial, there are genuine issues of material fact." Noll v. Petrovsky, 828 F.2d 461, 462 (8th Cir. 1987) (citing Celotex Corp. v. Catrett, 477 U.S. 317 (1986)). Although "direct proof is not required to create a jury question, . . . to avoid summary judgment, `the facts and circumstances relied upon must attain the dignity of substantial evidence and must not be such as merely to create a suspicion.'" Metge v. Baehler, 762 F.2d 621, 625 (8th Cir. 1985) (quoting Impro Prod., Inc. v. Herrick, 715 F.2d 1267, 1272 (8th Cir. 1983)). In applying these standards, the court must give the nonmoving party the benefit of all reasonable inferences to be drawn from the evidence. Krause v. Perryman, 827 F.2d 346, 350 (8th Cir. 1987).
III. Bad Faith Standard
The first part of Laughlin's argument is that IBP acted in bad faith by resisting his request for commutation of benefits. Iowa courts have not addressed the particular issue of whether an insurer can be found in bad faith for resisting a claimant's request for commutation of benefits. Under Iowa law, a workers' compensation carrier, or self-insured employer for workers' compensation, is subject to liability for the bad faith denial of a claim. Wilson v. IBP, Inc., 558 N.W.2d 132, 137 (Iowa 1997);Reedy v. White Consolidated Industries, Inc., 503 N.W.2d 601, 603 (Iowa 1993). "To establish a first-party bad-faith claim, a plaintiff must show the absence of a reasonable basis for denying benefits of the policy and defendant's knowledge or reckless disregard of the lack of a reasonable basis for denying the claim. A reasonable basis exists for denying insurance benefits if the claim is `fairly debatable' as to either matters of fact or law." Gibson v. ITT Hartford Insurance Co., 621 N.W.2d 388, 396 (Iowa 2001) (quotations and citations omitted).
In the initial arbitration decision issued by the deputy industrial commissioner on July 15, 1994, Laughlin was awarded benefits. IBP appealed this decision several times and lost all appeals.
Iowa Code § 85.45 provides for commutation of workers' compensation benefits:
Future payments of compensation may be commuted to a present worth lump sum payment on the following conditions:
1. When the period during which compensation is payable can be definitely determined.
2. When it shall be shown to the satisfaction of the workers' compensation commissioner that such commutation will be for the best interest of the person or persons entitled to the compensation or that periodical payments as compared with a lump sum payment will entail undue expense, hardship, or inconvenience upon the employer liable therefor.
Iowa Code § 85.45 (2001) (emphasis added). IBP resisted Laughlin's application for commutation of benefits. A hearing was held before the deputy industrial commissioner at which Mr. Laughlin testified. In the decision, the deputy noted that "Laughin harbors a great deal of residual bitterness toward IBP . . . ." He noted that when IBP's liability was upheld in the Iowa Court of Appeals' ruling in April 1997, Laughlin received approximately $46,000. At the time of the ruling in October 1998, he had approximately $3500 remaining. He had made unsecured loans to his brothers totaling $13,000. He testified that he had "just spent" the remainder of money. When asked whether he "wasted it," he responded, "Yes." The deputy explained: "Although it is probably unfair to call those funds `wasted,' neither, can it be said, were they prudently invested."
Iowa Code § 85.45 clearly requires the industrial commissioner to make the determination of whether the commutation of benefits is appropriate. After a full hearing on the matter in which Laughlin testified, the deputy industrial commissioner determined that Laughlin had not met the standard in the code section. Even if an insurer could be held liable for resisting the application for commutation under a bad faith standard, the statute's requirement that the industrial commissioner make the decision, and not the insurer, provides IBP with a "reasonable basis" for resisting the application. The fact that the industrial commissioner denied the application conclusively shows that IBP did not act in bad faith by resisting the commutation.
IV. Issue Preclusion
After the industrial commissioner denied Laughlin's application for commutation, Laughlin did not seek further judicial review as provided by Iowa law. Laughlin contends that the court cannot determine, as a matter of law, that IBP did not act in bad faith in its conduct in resisting the application for commutation and in its payment of medical and prescription benefits. IBP argues that the decision of the industrial commissioner is final and therefore review by this court is barred by issue preclusion. There are four prerequisites for issue preclusion:
(1) The issue concluded must be identical;
(2) The issue must have been raised and litigated in the prior action;
(3) The issue must have been material and relevant to the disposition of the prior action; and
(4) The determination made of the issue in the prior action must have been necessary and essential to the resulting judgment.Weishaar v. Snap-On Tools Corp., 582 N.W.2d 177, 180-181 (Iowa 1998) (quotations and citations omitted). A final decision by an administrative agency is entitled to preclusive effect when the issues raised and litigated in the agency proceeding are identical to the current issues.Polk County Secondary Roads v. Iowa Civil Rights Commission, 468 N.W.2d 811, 817 (Iowa 1991); see also Reedy v. White Consolidated Industries, Inc., 503 N.W.2d 601 (Iowa 1993).
The proceedings before the industrial commissioner are preclusive in this court. In the administrative proceeding, the industrial commissioner determined that Laughlin was not entitled to commutation of benefits. Laughlin was present at the hearing and represented by counsel. The Iowa statute clearly places the decision of commutation with the industrial commissioner. Because the issue of whether Laughlin is entitled to commutation of benefits has been raised and litigated in the state administrative proceeding, the industrial commissioner's finding against commutation is preclusive and it cannot be relitigated in a trial in this court.
To the extent that Laughlin contends that IBP acted in bad faith when it denied him benefits when he initiated proceedings before the industrial commissioner in 1992, those claims are barred by the statute of limitations. In Brown v. Liberty Mutual Insurance Co., 513 N.W.2d 762, 765 (Iowa 1994), the Iowa Supreme Court held actions based on the bad-faith nonpayment of workers' compensation benefits was governed by the five year statute of limitations in Iowa Code 614.1(4). The bad-faith cause of action for "failure to pay workers' compensation benefits accrues upon receipt of notification that the carrier had denied the claim." Id. at 764. Therefore, Laughlin was aware of IBP's decision to deny benefits at least before the hearing held before the deputy industrial commissioner on June 16, 1994. This action was filed on October 11, 1999. Therefore, to the extent that Laughlin claims that IBP acted in bad faith by failing to pay benefits arising from his initial claim, Laughlin's claim is barred by the statute of limitations.
IT IS ORDERED
The defendant's motion for summary judgment is granted. The complaint is dismissed. The Clerk shall enter judgment for the defendant.