Opinion
No. 1-677 / 01-0008.
Filed February 20, 2002.
Appeal from the Iowa District Court for Polk County, JOEL D. NOVAK, Judge.
Plaintiff appeals from the summary judgment entered against him in his action for bad faith refusal to settle a workers' compensation claim. AFFIRMED.
Maureen Roach Tobin of Whitfield Eddy, P.L.C., Des Moines, for appellant.
Stephen D. Hardy and Michael A. Carmoney of Grefe Sidney, P.L.C., Des Moines, for appellees.
Considered by SACKETT, C.J., and MAHAN and HECHT, JJ.
Plaintiff-appellant David McIlravy appeals the district court's summary judgment for defendant-appellee North River Insurance Company/Crum and Forster Insurance Company in his suit against them for bad faith refusal to pay him workers' compensation. Plaintiff claims on appeal that the district court erred in granting defendant summary judgment because (1) the claim had been decided in the workers' compensation proceeding and issue preclusion applies, and (2) there is a factual basis for his claim. We affirm.
Plaintiff David McIlravy is a thirty-seven-year-old steelworker whose job includes bending, stooping, lifting, carrying and climbing, often while wearing a tool belt that weighs in excess of twenty pounds. On August 7, 1997, plaintiff, who had experienced no previous problems with his right knee, suddenly heard and felt a loud pop in that knee. At the time of the pop, plaintiff, who was on the job at one of his employer's job sites in Ames, Iowa, was walking across a level concrete floor and was not carrying anything or wearing a tool belt. Plaintiff felt no pain and continued walking. At work the next day plaintiff was forced to leave work due to pain in his knee, which had become swollen and stiff overnight. Plaintiff was directed by his employer to consult Dr. Jon Gehrke, an orthopedic surgeon, who found that plaintiff had torn the cartilage in his knee. The doctor indicated the tear probably occurred when plaintiff felt the pop. Dr. Gehrke was of the opinion that the incident was work-related because it had happened on the job and an injury such as plaintiff's was seen more often in persons such as plaintiff who were involved in labor-intense activities. Dr. Gehrke found that plaintiff's knee was otherwise healthy. He did not note an overall condition of degeneration in the knee joint, and he did not believe the injury could be attributed to any pre-existing condition that might make plaintiff's knee more susceptible to injury.
The workers' compensation carrier, who is the defendant-appellee, denied coverage based on its claim that the alleged injury, which occurred while plaintiff was walking, was not connected with or caused by plaintiff's employment. Defendant did not obtain medical advice before reaching the conclusion that the plaintiff's injury was unrelated to his employment. After defendant denied his claim, plaintiff filed an arbitration petition with the industrial commissioner. The commissioner found plaintiff had established a compensable injury and awarded him healing period benefits, permanent partial disability benefits, and a penalty against the employer for unreasonable denial of a claim. The district court affirmed that decision, as did our court. In the current action plaintiff seeks damages against defendant for defendant's alleged bad faith denial of his claim.
We review summary judgments for errors at law. Iowa R. App. P. 4; Keller v. State, 475 N.W.2d 174, 179 (Iowa 1991). Summary judgment is appropriate only when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Schoff v. Combined Ins. Co., 604 N.W.2d 43, 45 (Iowa 1999); Iowa R. Civ. P. 237(c). We examine the record before the district court to determine whether any genuine issue of material fact existed and whether the court correctly applied the law. Schoff, 604 N.W.2d at 45. The facts are viewed in the light most favorable to the party opposing the motion for summary judgment. Id.
We first address plaintiff's claim that the issue here was already litigated in the workers' compensation proceedings. Plaintiff contends the finding of the deputy commissioner, namely that the employer had no reasonable basis to deny plaintiff's workers' compensation claim, is identical to the issue in the current action and should be given preclusive effect.
There are circumstances when issue preclusion does not apply. See Bagley v. Hughes A. Bagley, Inc., 465 N.W.2d 551, 553 (Iowa Ct. App. 1990). Relitigation of an issue is not necessarily precluded where the burden of persuasion (of plaintiff in this case) with respect to a particular issue is significantly heavier in the second action than it was in the first. See Hunter v. City of Des Moines, 300 N.W.2d 121, 124-25 (Iowa 1981) (citing Restatement (Second) of Judgments § 68.1(d) (Tent. Draft No. 4, 1977)).
In State v. One Certain Conveyance, 1973 Kenworth Semi-Tractor, 316 N.W.2d 675, 678 (Iowa 1982), the court held the government in a subsequent court action should not be precluded from attempting to prove an issue by a preponderance of the evidence merely because it had been unable to sustain the burden of proof beyond a reasonable doubt in an earlier action. The court held the prior litigation of the issue should not be given preclusive effect. Id.
In the instant case plaintiff's burden to show bad faith denial of benefits was significantly greater than it was in his workers' compensation claim in that he needed to show 1) absence of a reasonable basis for denying benefits; and 2) defendant's knowledge or reckless disregard of the lack of a reasonable basis for denying benefits. Boylan v. American Motorists Ins. Co., 489 N.W.2d 742-744 (Iowa 1992) (citing Dolan v. AID Ins. Co., 431 N.W.2d 790, 794 (Iowa 1988)). In contrast, all that was necessary for plaintiff to demonstrate a right to workers' compensation penalty benefits under section 86.13 was a showing of negligence. The burden of proof in the second bad faith action was clearly significantly heavier than it was in the first action. Consequently we find that issue preclusion does not apply.
Defendant next contends the summary judgment was in error because he showed there was an issue of material fact. In order to satisfy his burden to show the absence of a reasonable basis to deny benefits, plaintiff must show the claim for benefits was not "fairly debatable." See Morgan v. American Family Mut. Ins. Co., 534 N.W.2d 92, 96 (Iowa 1995) overruled on other grounds. If the denial of a claim is based on an honest and informed judgment, the denial satisfies the "fairly debatable" standard. Nassen v. National States Ins. Co., 494 N.W.2d 231, 236 (Iowa 1992). Where a claim is "fairly debatable" the insurer is entitled to debate it, whether the debate concerns a matter of fact or law. Dolan, 431 N.W.2d at 794 (citing Anderson v. Continental Ins. Co., 85 Wis.2d 675, 691, 271 N.W.2d 368, 376 (1978)).
We agree with the district court's finding that plaintiff's claim for benefits was fairly debatable. It is well settled in Iowa that for an injury to be compensable, it must occur both in the course of and arise out of employment. Iowa Code § 85.3 (1997); Miedema v. Dial Corp., 551 N.W.2d 309, 310-11 (Iowa 1996).
There was evidence the tear occurred when plaintiff was on the job during normal working hours. For plaintiff to recover workers' compensation benefits it was necessary for him to prove by a preponderance of the evidence that a causal connection existed between the conditions of his employment and his knee injury. Miedema, 551 N.W.2d at 311. It is not enough that the injury coincidentally occurred at work. Id. It must also in some way have been caused by or related to the working environment or the conditions of the employment. Id. The injury must have been a natural incident of the work. Id. It must have been a rational consequence of a hazard connected with the employment. Id.; Cedar Rapids Community Sch. v. Cady, 278 N.W.2d 298, 299 (Iowa 1979).
Plaintiff had the burden of proving his workers' compensation claim by a preponderance of the evidence. We recognize plaintiff did prove it before the industrial commissioner, the district court, and this court. However, the facts of the alleged injury, which were that "it occurred while [plaintiff was] walking on a smooth surface and at a time plaintiff was not wearing a belt or carrying any object," do not indicate to us, in and of themselves, that plaintiff's claim was compensable. It was reasonable for defendant to argue that the occurrence of an injury in this manner was not related to the conditions of employment. See Gilbert, v. U.S.C. Holland, ___ N.W.2d ___ (Iowa 2001); Miedema, 551 N.W.2d at 312.
Plaintiff had medical evidence that the injury arose out of employment: his doctor stated that individuals engaging in heavy labor were subject to knee injuries at a more frequent rate than those who were not. Plaintiff contends that the district court's ruling was flawed because it erred in concluding that a denial of benefits could be made in good faith when the carrier had no medical evidence to rebut claimant's claims. We disagree. In Gilbert the court rejected an employee's claim that the employer had no reason to debate the causal connection between the employee's injury and his employment because the employer offered no medical evidence controverting the testimony of plaintiff's two doctors that the injury was causally connected to his employment. Id. The court noted that medical testimony on causation was not relevant to the resolution of the contested facts of that case. Id.
In the case at hand it is undisputed that the injury to plaintiff suddenly occurred while he was merely walking across a level floor. There is no suggestion he was exposed to a risk in walking that he would not find elsewhere. See Miedema, 511 N.W.2d at 311. Plaintiff had medical evidence that such an injury indeed arose out of employment and supported this theory with his doctor's testimony that individuals engaging in heavy labor were subject to knee injuries at a more frequent rate than those who were not. Defendant concluded the contrary: that the manner in which the injury occurred was evidence of defendant's individual susceptibility to injury, relieving defendant of any liability. We find defendant's conclusion to be a reasonable one, and the question of the source of defendant's injury to be a fairly debatable issue, given the nature of the circumstances under which the injury occurred.
We therefore agree with the district court that plaintiff has failed to present evidence showing lack of a reasonable basis for denying the claim and defendant's knowledge or reckless disregard of a reasonable basis for denial. The summary judgment is affirmed.
AFFIRMED.
HECHT, J. dissents.
I respectfully dissent. I do not believe summary judgment is appropriate in this case. The majority correctly observes McIlravey has the burden in a bad-faith action to show (1) the absence of a reasonable basis for the insurer's denial of his worker's compensation claim, and (2) the insurer knew or had reason to know its denial was without a reasonable basis. Kiner v. Reliance Ins. Co., 463 N.W.2d 9, 12-13 (Iowa 1990). The "question of whether the fairly debatable issue was one for the court or the jury depends on the facts of the individual case." Thompson v. U.S. Fidelity Guar. Co., 559 N.W.2d 288, 290 (Iowa 1997). In this case, I believe the issue was for the jury.
The insurer contends the district court correctly decided the bad faith issue as a matter of law because McIlravey failed to establish the injury arose out of his employment. To arise out of employment, "the injury must be a natural incident of the work" and "a rational consequence of a hazard connected with the employment." Miedema v. Dial Corp., 551 N.W.2d 309, 311 (Iowa 1996) (holding injury sustained when employee turned to flush a toilet at the work place did not arise from a hazard connected with the employment). Because McIlravey's knee "popped" as he was merely walking across a concrete surface at a construction site, the insurer contends, and the majority decides, the district court correctly concluded a reasonable basis existed as a matter of law for the insurer's denial of the claim.
Several factors lead me to disagree. McIlravey alleged he was injured in the course and scope of his employment on August 7, 1997. The insurer denied the claim on August 18, 1997 before receiving medical information from the treating physician on the issue of legal causation. Although medical opinions are usually a crucial factor in establishing causation in workers' compensation cases, our supreme court has indicated imperfect claim investigations, standing alone, do not constitute bad faith if the insurer has an objectively reasonable basis to support denial of a claim. Sampson v. American Standard Ins. Co., 582 N.W.2d 146, 152 (Iowa 1998). However, "[a]n employer's bare assertion that a claim is `fairly debatable' does not make it so." Meyers v. Holiday Express Corp., 557 N.W.2d 502, 505 (Iowa 1996). The insurer must assert facts upon which the court could reasonably find that the claim was fairly debatable. Id. A denial supportable at the time it is made may later lack a reasonable basis in light of subsequent information. Squealer Feeds v. Pickering, 530 N.W.2d 678, 683 (Iowa 1995).
At this summary judgment stage, McIlravey is entitled to every legitimate inference that can be reasonably deduced from the record in his favor. Phillips v. Covenant Clinic, 625 N.W.2d 714, 718 (Iowa 2001). I believe a reasonable juror could find the insurer in this case failed in bad faith to reconsider its denial after it learned no later than February 23, 1998, through the treating physician's deposition testimony, that McIlravey's employment increased the risk of his knee injury. My belief that a reasonable juror could make such a finding on this record is firmly buttressed by the Workers' Compensation Commissioner's determination from the identical facts that there was no reasonable basis for the insurer's denial of the claim. Accordingly, I would reverse the district court's summary judgment ruling and remand for trial.