FEHRING v. STATE INS. FUND

FEHRING v. STATE INS. FUND
2001 OK 11
19 P.3d 276
72 OBJ 545
Case Number: 92828
Decided: 02/06/2001
Mandate Issued: 03/08/2001

RALPH FEHRING and DOROTHY FEHRING, Plaintiffs/Appellants
v.
STATE INSURANCE FUND, Defendant/Third Party Plaintiff/Appellee,
and
CRAWFORD & COMPANY, Third Party Defendant

CERTIORARI TO THE COURT OF CIVIL APPEALS, DIVISION II

APPEAL FROM THE DISTRICT COURT OF OKLAHOMA COUNTY, STATE OF OKLAHOMA

HONORABLE BYRON C. DIXON, TRIAL JUDGE

¶0 Appellants (injured worker and spouse) sued appellee, State Insurance Fund (SIF) in tort for failure to timely pay a workers' compensation award. The trial court gave summary judgment to SIF, ruling: 1) in that appellants had to prove SIF employees acted in bad faith to have a viable claim for breach of the implied duty of good faith and fair dealing and 2) the Governmental Tort Claims Act (GTCA),

CERTIORARI PREVIOUSLY GRANTED;
COURT OF CIVIL APPEALS' OPINION VACATED; TRIAL COURT JUDGMENT
AFFIRMED.

Rick W. Bisher of Boettcher, Ryan & Martin, Oklahoma City, Oklahoma for Appellants.
Jeff L. Hartman, Oklahoma City, Oklahoma for Appellee.

LAVENDER, J.

[19 P.3d 278]

¶1 We decide whether the Governmental Tort Claims Act (GTCA),

¶2 In addition, we must decide if a majority of the COCA panel erred by going on to rule SIF was still amenable to suit in contract and subject to liability for the same damages potentially recoverable in tort, but for the GTCA immunity. As to this ruling, we hold the COCA majority erred. The damages recoverable under a tort theory of liability for breach of the implied duty of good faith and fair dealing are not coextensive with damages recoverable under a contractual theory. Further, to allow appellants, Ralph Fehring (injured worker) and Dorothy Fehring (spouse) to proceed on a contractual theory would thwart and/or eviscerate the exclusivity provisions of the Oklahoma Workers' Compensation Act (WCA),

PART I. STANDARD OF REVIEW.

¶3 Summary judgment is reviewed de novo [Carmichael v. Beller,

PART II. FACTUAL RECORD AND PROCEDURAL HISTORY.

¶4 Appellants sued SIF for bad faith failure to timely pay a workers' compensation award. Their petition, in effect, alleged: 1) by order, an Oklahoma Workers' Compensation Court (WCC) judge awarded Mr. Fehring permanent partial disability benefits; 2) the order became final and was not timely paid by SIF - employer's workers' compensation insurer; 3) another WCC order issued because of the failure to timely pay the first order; 4) the second order became final and SIF failed to timely pay amounts due under it; and 5) SIF's failure to timely pay was in bad faith, entitling appellants to damages for emotional distress, pain, suffering and detriment to their economic status.

¶5 SIF's answer to the petition, in effect, denied any bad faith conduct and pled affirmative defenses unnecessary for us to detail.

¶7 The trial judge ruled SIF was covered by the GTCA and it was impossible to prove both a valid claim of bad faith failure to timely pay the compensation award and that SIF employees acted in good faith within the scope of their employment. He gave summary judgment to SIF based on GTCA immunity. Appellants appealed.

¶8 All three judges of the COCA division handling the appeal agreed SIF was entitled to GTCA immunity. However, a majority held, sua sponte, SIF was still subject to suit on a contract theory and potentially liable for the same damages potentially recoverable in tort, but for the GTCA immunity. One judge dissented from the latter ruling(s), thinking it improper to address the issue(s) because appellants had not sought recovery in contract or, on appeal, alleged trial court error as to any contract claim. He also believed the WCA set forth the proper remedial methodology for enforcing a workers' compensation award not paid in a timely manner.

¶9 Both appellants and SIF sought certiorari - appellants as to the immunity ruling; SIF as to the reversal and remand to allow appellants to proceed on a contractually-based theory of liability. We granted both petitions for certiorari.

PART III. THE GTCA PROVIDES IMMUNITY TO SIF FOR ANY POST-AWARD BAD FAITH CONDUCT OF ITS EMPLOYEES OF FAILING TO TIMELY PAY A WORKERS' COMPENSATION AWARD.

A. SIF IS A STATE ENTITY COVERED BY THE GTCA.

¶10 The issue of whether SIF is a State entity covered by the GTCA is a first impression question.

¶11 SIF's purpose, powers, duties and structure are primarily set out in

¶12 Supervision over administration/operation of SIF is conducted by a Board of Managers.

¶13 Day-to-day management is handled by the State Insurance Fund Commissioner, whom the Board of Managers appoints.

¶15 Title

¶16 The Oklahoma Attorney General has opined that SIF is an "agency" of the State under the OPA [Okl. A. G. Opin. No. 95-36, 25 Okl. Op. Atty. Gen. 83, 1995 WL 647525 (Okl. A. G.)] which defines "agency" as: "[] any office, department, board, commission or institution of the executive branch of state government[.]"

¶17 Although this Court has recognized that generally the funds of SIF are not State funds

¶21 Further, although State ex rel. State Insurance Fund v. Bone,

¶22 In the final analysis, we believe SIF is a State entity coming within the term "agency" as used in the GTCA and it was intended to be covered by the provisions of that Act by the Oklahoma Legislature. Its employees are categorized as State employees and its entire structure is permeated with control and direction by the legislative and executive arms of State government, the latter of which it is a part. Thus, we hold SIF is a State entity falling within the GTCA.

B. SIF IS ENTITLED TO GTCA IMMUNITY BECAUSE IT IS LEGALLY IMPOSSIBLE FOR APPELLANTS TO PROVE BOTH A VALID CLAIM OF BAD FAITH FAILURE TO TIMELY PAY THE COMPENSATION AWARD AND THAT SIF EMPLOYEES WERE ACTING WITHIN THE SCOPE OF THEIR EMPLOYMENT AS DELINEATED IN THE GTCA

¶23 After this Court abrogated common-law sovereign immunity in Vanderpool v. State, supra, the Oklahoma Legislature re-adopted sovereign immunity statutorily, waiving such immunity "only to the extent and in the manner provided in [the GTCA]." Parker v. City of Midwest City,

¶24 Parker involved a suit against a City covered by the GTCA for the tort of malicious prosecution.

[Plaintiff] cannot recover damages from the City on the theory of malicious prosecution. If [the police officer's] actions were in bad faith he was acting outside his scope of employment, and thus the City is not liable.

850 P.2d at 1068.

¶25 McMullen involved a suit against another GTCA-covered City for the tort of outrage or intentional infliction of emotional distress. In McMullen the COCA, Div. 1, relying on Parker, held: in that the tort of outrage or intentional infliction of emotional distress is viable only when it is shown - by extreme and outrageous conduct - a defendant intentionally (or, at a minimum, recklessly) causes severe emotional distress, it was not possible to have a viable GTCA claim against the City because intentional infliction of emotional distress cannot be shown if the defendant acted in good faith. 920 P.2d at 531. Therefore, it is necessary to decide whether, in order to prevail on the tort theory of liability sued upon here - i.e. breach of the implied duty of good faith and fair dealing in the form of untimely payment of Mr. Fehring's workers' compensation award - appellants would be required, as a matter of law, to show conduct on the part of SIF employees that would mandate a determination the employees were not acting in good faith. We believe appellants would be required to so show.19

¶28 Further, the entire tenor of the Goodwin opinion was that the potential viability of a suit against a workers' compensation insurer for untimely payment of an award would be dependent on a showing of intentional, wilful and malicious actions on the part of the carrier. Part of the rationale of Goodwin also seemed to be that only an intentional, wilful act on the part of the insurer would be sufficient to take the matter out of the exclusivity provisions of the Workers' Compensation Act (WCA).

¶29 Even if we were to sanction a tort claim against a workers' compensation carrier for untimely payment of an award based on a standard of culpability of reckless conduct the same result would obtain. Acts performed with reckless disregard for an individual's rights also lack good faith and are outside the scope of employment under the provisions of the GTCA. Houston v. Reich, 932 F.2d 883, 889-890 (10th Cir. 1991), cited favorably in Parker, supra,

PART IV.

¶30 The damages recoverable against an insurance carrier under a tort theory of liability for breach of the implied duty of good faith and fair dealing, i.e. for bad faith, are not coextensive with damages recoverable under a contractual theory. In Taylor v. State Farm Fire and Casualty Co.,

In an ex contractu claim it is solely the insured loss that may be recovered, while the elements of recovery in the bad faith suit are for more than the insured loss: (a) the loss to be indemnified under the policy plus (b) the harm from insurer's bad faith refusal to settle. (italics in original)

[19 P.3d 286]

981 P.2d at 1258 f. n. 22. Therefore, appellants may not avoid the GTCA immunity provided to SIF merely by recasting their tort theory of liability into a contractually-based one.

¶31 Furthermore, to allow appellants to proceed on a contractual theory would unnecessarily thwart and/or eviscerate the exclusivity provisions of the WCA. As we stated in Part III(B), this Court has recognized that the WCC is vested with exclusive jurisdiction to determine and enforce a compensation risk carrier's liability to a claimant. State Insurance Fund v. Brooks, supra. The WCA provides a procedure for collecting a workers' compensation award. 85 O.S. Supp. 1999, § 42(A) provides:

A. If payment of compensation or an installment payment of compensation due under the terms of an award, except in the case of an appeal of an award or an award from the Multiple Injury Trust Fund, is not made within ten (10) days after the same is due by the employer or insurance carrier liable therefor, the Court may order a certified copy of the award to be filed in the office of the court clerk of any county, which award whether accumulative or lump sum shall have the same force and be subject to the same law as judgments of the district court. Any compensation awarded and all payments thereof directed to be made by order of the Court, except in the case of an appeal of an award or an award of compensation from the Multiple Injury Trust Fund, shall bear interest at the rate of eighteen percent (18%) per year from the date ordered paid by the Court until the date of satisfaction. Compensation ordered to be paid from the Multiple Injury Trust Fund shall bear interest at the rate of interest applicable to judgments in civil cases pursuant to Section 727 of Title 12 of the Oklahoma Statutes from the date of the award. Any award from the Multiple Injury Trust Fund prior to November 4, 1994, shall bear interest at the rate of interest applicable to judgments in civil cases pursuant to Section 727 of Title 12 of the Oklahoma Statutes. Upon the filing of the certified copy of the Court's award a writ of execution shall issue and process shall be executed and the cost thereof taxed, as in the case of writs of execution, on judgments of courts of record, as provided by Title 12 of the Oklahoma Statutes; provided, however, the provisions of this section relating to execution and process for the enforcement of awards shall be and are cumulative to other provisions now existing or which may hereafter be adopted relating to liens or enforcement of awards or claims for compensation.

Mr. Fehring's workers' compensation award was subject to enforcement under § 42(A) and there is simply no warrant to allow a contract action which would sanction monetary recovery over that which is allowed by the WCA. Thus, the COCA majority erred by reversing in part the trial court judgment and remanding for further proceedings. Instead, the trial court summary judgment in favor of SIF should have been affirmed.

PART V. CONCLUSION.

¶32 SIF is a State entity coming within the coverage of the GTCA. Its employees are categorized as State employees and its entire structure is permeated with control and direction by the legislative and executive arms of State government, the latter of which it is a part. In the circumstances of this case, SIF was properly granted GTCA immunity because it is legally impossible for appellants to prove both a valid claim of bad faith failure to timely pay the compensation award and that SIF employees were acting within the scope of their employment. Finally, a majority of the COCA erred in ruling SIF was still subject to suit in contract and potentially liable for the same damages potentially recoverable in tort, but for the GTCA immunity. Such ruling failed to recognize that contractual damages are not coextensive with the damages potentially recoverable in tort for the bad faith conduct of an insurer and failed to properly consider the impact of the WCA provision(s) for enforcing a workers' compensation award.

¶33 For the reasons specified, the Court of Civil Appeals' opinion is VACATED and the trial court judgment is AFFIRMED.

¶34 HARGRAVE, C.J., HODGES, LAVENDER, SUMMERS and WINCHESTER, JJ., concur.

¶35 WATT, V.C.J. and KAUGER, J., concur by reason of stare decisis.

¶36 OPALA, J., concur in Parts I, II, III; concur in judgment but not in the court's pronouncement in Part IV.

¶37 BOUDREAU, J., disqualified.

FOOTNOTES

1 Although the record does not expressly show that appellant, Dorothy Fehring is appellant, Ralph Fehring's spouse, we make that assumption. We note to having no occasion here to delineate the circumstances, if any, in which the spouse of an injured worker would have a viable claim - in tort or contract outside the confines of the Oklahoma Workers' Compensation Act, (WCA), 85 O.S. 1991, § 1, et seq., as amended - against the worker's employer's workers' compensation insurer for failure to timely pay a workers' compensation award.

2Appellants' petition also asserted the failure of appellee, State Insurance Fund (SIF) to authorize medical treatment for Mr. Fehring was wrongful. We also note, the appeal record does not contain copies of the Workers' Compensation Court orders or conclusively show the length of delay in paying benefits due under the orders. We need not know the exact content of the orders or the particular circumstances of the failure to timely pay to reach a correct disposition.

3SIF also sued Crawford & Company (C & C) by a third-party petition, asserting it hired C & C in August 1996 to administer Mr. Fehring's workers' compensation claim. Basically, SIF asked for judgment against C & C for any SIF liability found to exist in favor of appellants for bad faith conduct occurring after C & C took over handling the compensation claim.

4Section 152 of the Governmental Tort Claims Act (GTCA), 51 O.S. 1991, § 151 et seq., as amended, was amended by 2000 Okla. Sess. Laws, Ch. 59, § 2, in a way not material to our disposition. Subsection 9 of § 152 remained unchanged.

5In that McGehee v. State Insurance Fund, 1995 OK 85, 904 P.2d 70 held a worker's tort claim against SIF (employer's workers' compensation carrier) for bad faith denial of a compensation claim was untimely under either the one-year notice of loss provision found at 51 O.S. 1991, § 156(B) of the GTCA or the two-year tort limitation period found in 12 O.S. 1991, § 95, it was unnecessary to address the issue of whether SIF was a State entity covered by the GTCA.

6SIF is also authorized to offer malpractice insurance for health care providers in certain circumstances by 76 O.S. 1991, § 22.

7The Oklahoma Central Purchasing Act (OCPA) defines "State agency" as: "[] any office, officer, bureau, board, counsel, court, commission, institution, unit, division, body or house of the executive or judicial branches of the state government, whether elected or appointed, excluding only political subdivisions of the state[.]" 74 O.S. Supp. 2000, § 85.2(32). When Okl. A. G. Opin. No. 88-61 issued, the OCPA defined "State agency" or "agency" in an almost identical fashion, the only difference being the last phrase read: "excluding only municipalities, counties and other governmental subdivisions of the state." 74 O.S. Supp. 1986, § 85.2(1).

8Investment funds and revenues are to be placed with a bank or trust company offering master custodial services. 85 O.S. Supp. 2000, § 138(G). Authorization exists to transfer monies used for investment purposes from the SIF fund in the State Treasury to the custodian bank or trust company. 85 O.S. Supp. 1994, § 135(A).

9The Oklahoma Personnel Act (OPA) defines "classified service" as: "[] state employees and positions under the jurisdiction of the Oklahoma Merit System of Personnel Administration [OMSPA]" and "unclassified service" as: "[] employees and positions excluded from coverage of the [OMSPA.]" 74 O.S. Supp. 1999, § 840-1.3(6) and § 840-1.3(26).

10The OPA contained an identical definition of "agency" when Okl. A. G. Opin. No. 95-36 was issued. 74 O.S. Supp. 1994, § 840-1.3(1).

11In fact, 85 O.S. Supp. 1995, § 131 expressly provides that there can be no liability upon the State beyond the amount of the SIF fund.

1212 O.S. Supp. 1999, § 66 provides:

A. Whenever an action is filed in any of the courts in this state by the State of Oklahoma, or by direction of any department of the state, no bond, including cost, replevin, attachment, garnishment, redelivery, injunction, appeal, or other obligation of security shall be required from the state or from any party acting under the direction of the state, either to prosecute, answer or appeal the action. In case of an adverse decision, such costs as by law are taxable against the state, or against the party acting by its direction, shall be paid out of the funds of the department under whose direction the proceedings were instituted; provided, that the court shall direct the nonprevailing party to pay all costs of the action in the final order of the court.

B. Costs shall be paid to the court fund of the district court in which an action is filed from the first funds collected in satisfaction of any judgment obtained by this state or any party acting under the direction of this state, except when the funds are collected pursuant to a child support order or judgment. No action filed by this state or by any party acting under the direction of this state shall be dismissed without the prior notification of the district court clerk of the county in which the action was filed.

13The Multiple Injury Trust Fund's (MITF) general purpose is to protect employers from responsibility for a combination of old and new disabilities so they can hire physically impaired persons without fear of having to pay for prior disabilities and, thereby, encourage employment of previously impaired workers. Barber v. Special Indemnity Fund, 1994 OK CIV APP 55, 875 P.2d 449, 450; see also Special Indemnity Fund v. Davidson, 1945 OK 287, 162 P.2d 1016, 1017-1018.

14Of course, SIF also obtains funds by virtue of investment revenue.

15The MITF may obtain additional funds by virtue of 85 O.S. Supp. 2000, § 173(E) which authorizes a certain percentage of the money held in the MITF to be invested in specified investments. Also, current law allows rebates that would otherwise go to State agency policyholders insured by SIF to be credited to the MITF or the General Revenue Fund of the State Treasury. 85 O.S. Supp. 2000, § 173.1 provides:

Any dividend, rebate, or other distribution, payable by [SIF] or any other workers' compensation insurance carrier, to a state agency policyholder shall be paid to the State Treasurer, and shall be credited as follows:

1. In the event of failure of the [MITF] to meet all lawful obligations, the monies shall be credited to the [MITF] and shall be used by the [MITF] to meet all lawful obligations of the [MITF]; and

2. Otherwise, all future dividends made by [SIF] or any workers' compensation insurance carrier, on behalf of state agencies, shall be deposited to the credit of the General Revenue Fund of the State Treasury.

16State ex rel. State Insurance Fund v. Bone, 1959 OK 135, 344 P.2d 562 concerned a negligence suit against SIF for an employee's involvement in a vehicular accident. In addition to, in effect, relying on the governmental/proprietary sovereign immunity dichotomy, Bone held legislative consent to suits against SIF was granted by 85 O.S. 1991, § 133(1) that allows SIF to:

Sue and be sued in all the courts of the state, in all actions arising out of any act, deed, matter or things made, omitted, entered into, done or suffered in connection with the State Insurance Fund . . . .

17Concomitantly, State employees, except resident physicians and interns, may not be named as defendants in a GTCA action when they do act in the scope of their employment. 51 O.S. Supp. 1999, § 163(C); Carswell v. Oklahoma State University, 1999 OK 102, ¶ 18, 995 P.2d 1118.

18The malicious prosecution suit in Parker v. City of Midwest City, 1993 OK 29, 850 P.2d 1065 had its genesis in a City police officer initiating a driving under the influence charge against the plaintiff - upon which plaintiff was acquitted.

19We note there are situations where the scope of employment issue, as it concerns a governmental entity's immunity under the GTCA, cannot be decided as a matter of law. See e.g. Nail v. City of Henryetta, 1996 OK 12, 911 P.2d 914. In Nail alternative theories of liability were alleged: either the intentional and malicious or negligent use of excessive force when a police officer arrested an intoxicated person. We held in such a situation factual questions concerning whether the officer acted in a malicious, wilful and wanton manner or, instead, merely negligently, precluded summary judgment in favor of City in a GTCA-based suit.

20Although Whitson v. Oklahoma Farmers Union Mut. Ins. Co., 1995 OK 4, 889 P.2d 285, 287 contains a statement that this Court held in Goodwin v. Old Republic Ins. Co., 1992 OK 34, 828 P.2d 431 that an injured worker has a cause of action for bad faith against his employer's insurance carrier for untimely paying the injured worker's compensation award, Goodwin merely assumed such a claim existed. Goodwin, 828 P.2d at 431-432, 435-436.

21The Court has explicitly rejected the viability of a bad faith claim against a workers' compensation insurer for pre-award conduct. Anderson v. United States Fidelity and Guaranty Company, 1997 OK 124, ¶ 11, 948 P.2d 1216 (Oklahoma law does not recognize the tort of bad faith for unjustified denial of workers' compensation insurance coverage or the assertion of a groundless defense based on alleged damages incurred for insurer's conduct that predates a claimant's workers' compensation award).