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Iowa Supreme Court Addresses Work Comp Insurer, Third-Party Administrator Liability for Civil Damages

• Jun 05, 2019

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Legal Update by Attorney Alison Stewart

Two recent Iowa Supreme Court decisions have addressed liability of workers’ compensation carriers and third-party administrators. In both cases, the Court declined to extend liability.

Clark, et al v. Ins. Co. of the State of Penn., File No. 17-2068 (Iowa, May 3, 2019)

Recently, the Iowa Supreme Court addressed whether Iowa Code section 517.5, which mandates that no inspection of any place of employment made by insurance inspectors shall be the basis for imposition of civil liability upon the inspector or insurance carrier, is constitutional. In Clark, the plaintiffs alleged employees of the insured were exposed to hazardous chemicals while manufacturing wind blades and that the workers’ compensation carrier’s failure to inspect the employer was the cause of plaintiffs’ injuries. These claims were brought in district court. The Iowa Supreme Court disagreed and outlined a detailed history of the policy behind the exclusive remedy doctrine which requires injury claims brought by employees against their employer must be brought before the workers’ compensation commissioner. This means that immunity remains for carriers who either fail to inspect or negligently inspect the premises of an insured.

De Bois v. Broadspire, File No. 18-1227 (Iowa, May 10, 2019)

The Iowa Supreme Court ruled an injured worker cannot sue a workers’ compensation third party administrator for civil bad faith. In Iowa, an injured worker can establish damages beyond those entitlements provided pursuant to the workers’ compensation chapter where benefits are denied without a reasonable basis and that the carrier knew or should have known its refusal or delay was without such a basis. The Court reasoned that the duties imposed upon a workers’ compensation insurer are non-delegable, and thus, the acts of a third-party administrator, are the acts of the insurer. The liability of third party administrators remains limited to the contractual obligation they have to their insurers.

 

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