Enlarging The Workers’ Compensation Claim: “Stretching a Single into a Double”

5/1/2005
R. BURKE MCLEMORE, JR., ESQUIRE - This article briefly reviews the trend in modern American law to expand the liability, in tort or in contract, of employers and peripheral workers’ compensation providers to an injured employee. This article will not discuss separate torts under applicable federal or state law for age, racial, sexual, or handicap discrimination. Instead, the purpose of this article is to provide an overview of an alarming trend toward expansion of remedies flowing from a workers’ compensation injury claim.

Workers’ compensation is a branch of the law which is entirely statutory in origin and was unknown to the common law. Fidelity & Casualty Company v. Bedingfield, 60 So.2d 489, 492 (Fl. 1952). The courts typically refer to workers’ compensation and the attendant exclusive remedy provisions of a given act as “part of the quid pro quo in which the sacrifices and gains of employees and employers are to some extent put in balance, for, while the employer assumes a new liability without fault, he is relieved of the prospect of large damage verdicts”. Meerbrey v. Marshall Field & Company, 564 N.E.2d 1222, 1225 ( Ill. 1990). Most states have laws similar to that in the writer’s home state, Pennsylvania, which provides that:

The liability of an employer under this Act shall be exclusive and in place of any and all other liability to such employees, his legal representative, husband or wife, parents, dependents, next of kin, or anyone otherwise entitled to damages in any action at law or otherwise on account of any injury or death as defined in §301(c)(1) and (2) or occupational disease as defined in §108. 77 P.S. §481(a).

This recitation of the statute defines the crux of the issue covered by this article: pursuant to the terms of the typical workers’ compensation statute, in exchange for no fault liability, an employer is given immunity from lawsuits by employees for any “injury” as defined by the Act. Thus, the Act typically provides the exclusive means by which a covered employee can recover against an employer for injury arising in the course of his employment; or stated another way, immunity from a tort action by an employee against the employer for any work‑related injury.[1]

In the ninety years since workers compensation has become ubiquitous, cracks in the wall of immunity have developed and have been exploited by sharp practitioners. When the wall was found insurmountable, ways around the wall were reconnoitered and pursued. Attempts to broaden liability have almost always been directed toward establishing injuries which are wholly separate from and/or subsequent to the work injury, so that the “claim” would not be held compensable under the applicable workers’ compensation act. The process is driven, not in the least, by the fact that most workers’ compensation statutes cap the fees which plaintiffs’ attorneys may obtain. Pennsylvania, for example, statutorily caps fees at twenty (20) percent of the compensation payable. 77 P.S. §998. [2]

Tort awards, however, are not similarly statutorily circumscribed. Thus, not unlike the oil industry which now finds drilling for shale oil profitable, plaintiff’s counsel are “mining the fields” of tort law, looking for golden nuggets of liability. Fortunately, the ramparts have not been entirely breached, despite a relentless onslaught.

The Parties

Typically, there is a tripartite relationship in the workers’ compensation scheme: ordinarily the three parties are the claimant, the employer and its workers’ compensation insurance carrier. Many states, like Pennsylvania, generally immunize the carrier to the same extent that the employer would be immunized, thus leading to a sort of unitary interest on the part of the employer and the carrier. In a self-insured situation, often times a TPA steps into the role of the carrier, but typically these entities are not immunized to the same degree, or in the same fashion as a workers’ compensation carrier is. The basic reason for this is that the carrier, by virtue of its insurance contract, essentially takes on the role of the employer and substitutes its own liability for the financial portion of the claim. TPAs are not similarly situated.

But there are other “players” in this cat and mouse game of extended liability. These are generally described as “peripheral providers”, and may include vocational rehabilitation counselors, physicians, private investigators and surveillance firms, and even defense attorneys themselves. Each may find that they are not immune from civil liability.

Categories Of Claims

Typically, attempts to breach the immunity wall have fallen into several distinct, although sometimes overlapping, categories. These can be loosely defined as follows:
  1. intentional torts or gross negligence claims leading to the workers’ compensation injury itself;
  2. injuries (economic or physical) caused by the claim handling process; so-called “fraud” injuries;
  3. post-injury intentional torts;
  4. “economic injuries”; and
  5. “dual capacity” claims (including claims against a parent or subsidiary of the employer).
Typically, claims sounding purely in negligence have met with poor success in the courts. Thus, the trend has been to allege “intentional”, grossly negligent or “outrageous” conduct in order to affix liability. In this connection the courts have grappled with the distinction between allegations of “outrageous” conduct, and the facts necessary to support these allegations, as will be described below.

Claim Theories

Any number of theories advanced by enterprising claimants have been found to fly below the radar screen of workers’ compensation immunity. For sake of illustration, they may be numerated as follows:
  1. medical malpractice;
  2. intentional acts designed to thwart the compensation process;
  3. vocational rehabilitation malpractice;
  4. libel and slander;
  5. “unfair claims practices” or deceptive trade practices;
  6. “bad faith” claims;[3]
  7. invasion of privacy (including, now, HIPAA violations);
  8. intentional or negligent infliction of emotional distress;
  9. spoliation of evidence; and
  10. uninsured and underinsured motorist claims[4].
A discussion of a number of these sometimes overlapping theories follows.

General Considerations

In analyzing any of these cases, it is important to keep our collective eyes on the legal bouncing ball. It is submitted that the thread which runs through each of these cases involves an analysis, essentially, of five elements:
  1. Was the injury “accidental” as opposed to “intentionally” caused?
  2. Did the injury arise out of the employment? In other words, was it caused by the employment relationship?
  3. Was the injury actually received during the course of the employment relationship? In other words, was it causally connected to and did it draw its essence from the work relationship?
  4. Was the injury otherwise compensable under the applicable workers’ compensation act?
  5. Is there an alternative statutory remedy as a part of, or ancillary to, the workers’ compensation act?
  6. Was the act “outrageous” in the sense that it violates all common norms of decency?
By keeping these factors in focus, analysis of the trends in the case law becomes possible. The more tenuous the relationship to the “work”; or the more “outrageous” the conduct, the more likely the courts will be to find a way around the immunity, as the cases cited below will point out.

Specific Examples of Expanded Liability

A. Private Investigators And Surveillance Firms
Private investigators have been a favorite target of Plaintiffs. Perhaps one of the leading cases in this category is Unruh v. Truck Insurance Exchange, 498 P.2d 1063 ( Cal. 1972). In Unruh the Plaintiff suffered a compensable back injury and underwent four surgical procedures. The defendant, the workers’ compensation carrier, hired accident investigators to conduct surveillance and determine the extent of the plaintiff’s disability. Rather than simply filming her going about her day-to-day activities, one of the ‘private eyes’ befriended the claimant, took her on social and recreational dates (including Disneyland), and enticed her to conduct herself in a manner beyond her physical capabilities. The other private investigator then covertly photographed them. In the midst of this activity the plaintiff became attracted to the investigator. Films of the plaintiff’s activities were eventually shown at a hearing concerning the plaintiff’s worker’s compensation claim, and as a result she alleged she suffered a physical and mental breakdown requiring hospitalization.

A tort action alleging negligence, assault and battery, intentional infliction of emotional distress and conspiracy was filed. Negligence claims were dismissed, as they were held to be within the immunity of the statute. Similarly, the conspiracy claim was dismissed. The remaining claims, however, survived a motion to dismiss; the rationale being that not only had the investigators engaged in deceitful, tortious activity, but that the carrier, too, had removed itself from its proper role as a workers’ compensation insurer by embarking upon a course of conduct involving deceit and misrepresentation. It takes no great stretch of imagination to conceive of the same holding being applied to a self-insured employer or its TPA.

That case, however, can be contrasted with the case of Kennedy v. Jones & Laughlin Steel Corp., 512 A.2d 729 ( Pa. 1986), a per curium decision of the Pennsylvania Superior Court. In that case plaintiff had sued Jones & Laughlin, a self-insured employer, for damages resulting from back injuries sustained on the job. A verdict was subsequently rendered in his favor; but in preparation for the trial, Jones & Laughlin retained Alexis, Inc., a TPA, to investigate plaintiff. Alexis, in turn, retained Inteldex, a surveillance firm, to investigate the claimant. Inteldex devised a plan to surreptitiously film the claimant while engaged in heavy lifting, thus creating evidence that could be used to impeach him at trial. A fictitious entity, “American Marketing Institute”, was invested to aid in the subterfuge. An employee of Inteldex arrived at the plaintiff’s home and introduced himself as a representative of that company. He explained that the plaintiff had been chosen to test market certain products, but that in order to receive those products, he would have to go to an isolated area where he was to unload them. The representative would not permit the goods to be delivered to Plaintiff’s home. He was also told that his participation in the survey could lead to an appearance in a television commercial with its attendant financial gain, and that his children would be given toys and clothing. He was even told that workmen would be available to paint his home at no charge. Plaintiff participated in the “survey”, and on four separate occasions went to the area designated to unload the product. According to him he suffered personal injuries as a result of the unloading activities. Plaintiff claimed that in effect, because he was in dire financial straits, he had no choice but to participate.

Movies taken of the unloading activities were used in the trial in an attempt to impeach the plaintiff, who nevertheless obtained a verdict. The trial court dismissed the complaint, and the Superior Court affirmed. The Superior Court held that plaintiff failed to show that his injuries were “proximately caused” by the misrepresentation of the investigators. While the court held that the misrepresentations were a “but for” cause of the alleged injuries”, they were not proximately caused by the misrepresentations, but instead by plaintiff’s voluntary act of lifting the products. The court noted that:

More than anyone else, Kennedy knew the condition of his physical constitution. More than anyone else, he knew of any risks inherent in his action. Having decided of his own free consent to lift the products, we will not now relieve appellant of the consequences of his choice. While the gifts were the products of an ulterior motive, the injuries were the result of appellant’s assumption of the risk. Opinion at 5.[5]

The court also dismissed a claim for intentional infliction of emotional distress, finding that the actions of the investigators did not rise to the level of “outrageousness”. Instead, the court stated that “individuals must be hardened to occasional acts that are definitely inconsiderate and unkind. To state a cause of action for intentional infliction of emotional distress, the act must rise to the level of an affront to society or to an act utterly intolerable in a civilized community”. Amazingly, the court noted that the investigator’s conduct “far from being illegal, has social value”. The claim for intentional infliction of emotional distress was unfounded, since it arose from the plaintiff’s apprehension and fear suffered during the course of trial when he became aware of the use of the film in rebuttal to his injury claim. The “fear” was simply that he would receive less money by way of a verdict than he would have received, had the film not been used: “The plaintiff’s emotional distress was no greater than the emotional stress suffered by any litigant during the course of the trial faced with evidence that might reduce his verdict”.
B. Vexatious Conduct By An Employer
The case of Johnson v. Federal Reserve Bank of Chicago, 557 N.E.2d 328 ( Ill. 1990), classically illustrates how a worker’s compensation claim can be elevated into a separate tort claim by the actions of the employer itself. In Johnson suit was filed for intentional infliction of emotional distress. Plaintiff alleged he was instructed by his superiors at the bank to begin using various unauthorized procedures, among them improper acts, which compromised the confidentiality of various bank files and deceived customers and inspections by the Treasury Bureau. He claimed that his superiors retaliated against him when he refused their order to not disclose procedures to internal auditors. He further alleged that his superiors harassed him for nearly two years and threatened to fire him, gave him excessive workloads, denied advancement, undervalued the quality of his work, gave him poor reviews and undercut his instructions to direct subordinates. As a result his physical and mental health deteriorated, and he was forced to take a leave of absence. The trial court dismissed the complaint, but on appeal the complaint was reinstated. The court found that although the bank’s conduct was not extreme and outrageous per se, it subsequently became so because of the retaliatory and punitive nature of its conduct, the bank’s position of authority over the plaintiff, the lack of any legitimate purpose for the conduct, and the fact that the conduct continued even after the bank learned of the plaintiff’s susceptibility to emotional distress. Turning to the statutory language, the court found that the workers’ compensation act provided an exclusive remedy for “accidental” injuries in the work place, and even though infliction of emotional distress was remedied under the Act, that remedy only applied to vexatious delay in handling claims under the Act. The court thus held that intentional infliction of emotional distress, apart from vexatious delay, fell outside the scope of the Act. Thus, the employer itself could be held liable for the conduct.
C. “Dual Capacity Doctrine” Cases
The “dual capacity doctrine” holds that an employer or its agents may be held liable in tort if the employer or agent operates in a “second capacity” that creates obligations independent of those imposed upon it as an employer. Guerino v. Depot Place Partnership, 652 N.E.2d 410 ( Ill. 1995).

A good case illustrating this point is Shelley v. Johns-Manville Corp., 798 F.2d 93 (3rd Cir. 1986). In that case plaintiffs filed common law asbestos personal injury claims against various manufacturers of asbestos products, who are also their employers. According to the complaints, plaintiffs, who resided near the manufacturing plants, averred that they developed asbestosis as a result of the employer’s misconduct, resulting in the release of asbestos throughout the community generally, so that the plaintiffs were exposed to asbestos in the normal course of their lives away from the work place, as well as during their employment. The district court initially dismissed the complaints, but on appeal to the third circuit, the complaints were reinstated. While the court found it is likely that most of the asbestos exposure occurred at the workplace, that circumstance did not mean that the claimant failed to state a claim under the “dual capacity” exception to the workers’ compensation statute. Difficulty of proof is not tantamount to the absence of a cause of action.

Similarly, in Tatrai v. Presbyterian University Hospital, 439 A.2d 1162 ( Pa. 1982), the Pennsylvania Supreme Court reinstated a complaint filed by an employee of Presbyterian Hospital who had sued the hospital directly. In that case plaintiff, a hospital employee, became ill and was directed by her supervisor to go to the emergency room to seek medical attention. She was injured when the foot stand of an X-ray table became loose, causing her to fall. The decision does not make it clear whether a worker’s compensation claim was ever filed or not. Nevertheless, the court held that a suit against the hospital for negligence and breach of warranty of safe equipment and services would stand, since in holding itself out to the public as a provider of medical services, the hospital owed a duty to all of its patients. There was, therefore, no basis for distinguishing plaintiff in her role as an employee from one as a paying customer or any other member of the public who might be injured during the course of treatment. Importantly, the court gave little weight to the employer’s argument that when the plaintiff was directed to go to the emergency room by her supervisor, she was “actually engaged in the furtherance” of the employer’s affairs. It noted that mere direction to engage in an activity is not sufficient if the activity was not, in fact, in furtherance of the employer’s business. [6]
D. Medical Treatment Directed or Provided By The Employer
Cases in this category have reached a variety of results. Although most of the cases that have considered this issue have dealt with treatment initiated or directed by a carrier, it takes no great stretch of imagination to conceive of direct employer liability in the self-insured context. However, carrier-directed treatment cases are illuminating.

In one of the leading Pennsylvania cases, Tropiano v. Travelers Insurance Company, 319 A.2d 426 ( Pa. 1974), it was alleged that the defendant carrier directed and controlled the medical treatment received by the plaintiff; treatment that flowed from a worker’s compensation claim. Under such circumstances, the court drew a razor thin distinction between the proper function of the carrier and its improper function. In this particular case the court found that the carrier had stepped over the line by directing and controlling the medical treatment, rather than simply making it available and paying for it. Finding that such an activity was a separate and distinct function of the carrier - - which did not involve the employer and was not part of the “employer’s business operations” - - the carrier was subjected to tort liability. Query whether an identical result would be reached when a self-insured employer stepped over the line and directed and controlled the medical treatment.

A nearly identical result was reached in Taras v. Wausau Insurance Company, 602 A.2d 882 ( Pa. 1992). In that case the carrier allegedly directed the claimant to undergo electroshock therapy, resulting in additional injuries separate and apart from the compensable claim. Plaintiff alleged that the nurse assigned by the carrier to analyze and monitor his treatment, instead went a step further and informed the plaintiff that he had to undergo certain treatment, as determined to be necessary by the carrier, in order to continue his eligibility for benefits. Again, the court found no trouble in determining that the carrier was not immune from suit since it had “crossed the line” from being a provider to being a director of treatment.

The thread that seems to run through these cases is that if the court can find a way to separate the harm from the work injury itself, as opposed to the harm alleged, and to untangle the inextricable relationship between the two “harms”, then liability can attach. Conversely, if the employer can show that the treatment is inextricably bound up in the work injury, liability may be avoided.

Thus, in Budzichowski v. Bell Telephone Company, 445 A.2d 811 ( Pa. 1982), the employer successfully defeated both the “dual capacity” doctrine and an assault on immunity. In that case the plaintiff sustained a work injury in a fall as a telephone installer. The employer, a self-insured entity, had in‑house doctors on staff, to whom plaintiff reported for treatment. He was diagnosed and treated by the in-house doctors, and reported back to work. It was alleged that the doctors failed to discover a condition of aseptic necrosis in the hip. Bell Telephone, as well as the treating doctors, were sued in tort. The court held that all were immune under the workers’ compensation act. The doctors were held to be immune as “co-employees” of the plaintiff, despite an argument that since they were “professional independent contractors” and thus required to exercise independent professional judgment, they could not really be “co-employees”. The court also held that since the employer was required to provide medical treatment, and since an employer is responsible for the sequella of a workers’ compensation claim (including aggravation of the injury due to negligent medical treatment), the claims were inexplicably intertwined, and immunity applied. The court also distinguished the Tatrai decision, stating that plaintiff here “could not have entertained any such expectation that [employer] would provide medical services to him were he not employed there”. In short, he was provided medical services as an employee, not as a “paying member of the public”.

Cases from other jurisdictions, however, have held contra on this point. Thus, a “company doctor” may be subject to tort suit due to a “lack of control” by the employer since the doctor is a “professional”, and therefore the usual right of control rules do not apply. See, e.g., Downey v. Bexley, 317 S.E.2d 523 (Ga. 1984) (physician operating an employee health clinic at employer’s place of business could be held liable in tort for failing to disclose results of surreptitious health monitoring results); Davis v. Stover, 366 S.E. 2d 670 (Ga. 1988) (suit against company doctor permitted since employers should expect and trust doctor to exercise his independent and professional judgment in treating employee).

An interesting case illustrating this point involving the “dual capacity” doctrine in the context of medical treatment is Duprey v. Shane, 241 P.2d 78 (Ca. 1951). In Duprey the employer was a chiropractor who was alleged to have committed malpractice upon his own employee when he was treating her for the results of an occupational injury. The court held that by “aggravating” the effects of the work injury, the employer/chiropractor breached a separate and independent legal duty to the employee/plaintiff. A crucial point to be borne in mind, therefore, is that the “second capacity” must implicate or involve obligations or duties separate and apart from those as an employer.
E. Liability For The Claim HANDLING Process Itself
Most states generally hold that operations ancillary to the main claim, including claim processing, fall under the rubric of immunity. See discussion in Johnson v. First Union Corp., 504 S.E.2d 808 (NC 1988) (noting that many states hold that all “related matters” are covered by the workers’ compensation act; i.e., activities which are ancillary to the original compensable injury enjoy immunity).

There are, however, notable exceptions to immunity. For example, in Demag v. American Insurance Company, 508 A.2d 697 ( Vt. 1986), a widow was permitted to pursue a claim in tort for intentional infliction of emotional distress related to the process of procuring her claim for widow’s benefits. The court noted that the tort claim did not arise out of her husband’s employment, but rather stemmed from her status as a claimant/dependent seeking compensation benefits. [7]

In Senesac v. Employer’s Vocational Resources, Inc., et. al, 754 N.E.2d 363 ( Ill. 2001), a claim was filed alleging negligent and intentional infliction of emotional distress against a carrier and a vocational services provider. Plaintiff had alleged that he injured his back and began receiving workers’ compensation benefits through a State Farm policy. State Farm arranged for a vocational placement service firm to assist the claimant in returning to gainful employment. Plaintiff alleged that the collective failure of the defendants to meet the standards for providers of job placement services, and their failure to deal with him fairly and in good faith, caused physical, mental and emotional harm, including depression, resulting in an inability to find other employment. The court agreed with dismissal of claims based on negligence or malpractice in the administration of the workers’ compensation benefits themselves. The court also rejected application of the “dual capacity” doctrine. It noted that that doctrine cannot apply “when a defendant’s duties in two capacities are so intertwined that its conduct in the second role does not generate any obligations that are unrelated to the duties flowing from its first role as employer or agent of the employer”. Nevertheless, the court permitted the claim for intentional infliction of emotional distress to proceed. It apparently based its determination on the “outrageousness” of the conduct alleged, stating that “a finder of fact could reasonably conclude that requiring a disabled person…to apply for 100 jobs a month in person, knowing that nothing will result from this Sisyphean process except failure, is outrageous, extreme, and atrocious in and of itself”. The court also pointed out that the defendants’ actions “had no legitimate purpose” and that the defendants were previously aware of the plaintiff’s susceptibility to emotional distress, based upon his work-related disability.

Conversely, in the case of Wentworth v. Crawford & Company, 807 A.2d 351 ( Vt. 2002), claims handling was held not to rise to the level of an actionable tort. There it was alleged that the TPA failed to propose a rehabilitation plan and alert the compensation claimant to his reinstatement rights with the defendant employer. Finding that there was no allegation of any type of physical injury, but rather pure economic loss, the court dismissed the claim. This so-called “economic loss doctrine” defense has found favor in a number of other cases, as well, and is an important consideration in preparing to defend against tort claims based upon the claim handling process. [8]

In Alston v. St. Paul Insurance Company, et. al, 567 A.2d 663 ( Pa. 1989), suit was brought against a carrier, a vocational rehabilitation company, and an independent examining physician. It was alleged that the physician who executed the “affidavit of recovery” and a firm engaged by the compensation carrier to administer claims of the workers’ compensation carrier “tortiously conspired” to fraudulently deny workers’ compensation benefits under the act. The court noted that the suit was not directly against the “employer”, but rather its carrier and individuals retained by St. Paul to “shepherd the case through” the compensation process. The court found that this fact, however, was not a distinguishing point, since the same immunity from liability enjoyed by an employer would extend to the carrier as well. It held that the legal immunity afforded to employers and their compensation insurers extends not only to acts of negligence, but also to claims based on intentional, wanton or willful misconduct. The holding, however, was founded upon the “host of administrative remedies” available to claimants who believe that their compensation has been wrongfully jeopardized. It referred to awards of interest, litigation costs, counsel fees and statutory penalties. It also noted that insurers who repeatedly or unreasonably fail to pay prompt compensation may have their license revoked:

Thus, in addition to assuring quick, fair and certain compensation, our legislators also considered the plight of an injured worker who might be intimidated or disadvantaged by the superior bargaining position of an insurance company, and responded with sanctions and procedures designed to obviate the need for common law actions. This system might not be perfect, but its weaknesses should be cured by further legislation rather than the creation of parallel schemes for judicial inquiry into an area so carefully legislated by our General Assembly. Where statutory remedies are provided, the procedure prescribed by the statute must be strictly pursued to the exclusion of other methods of redress. 567 A.2d 669, citing Interstate Traveler Services v. Commonwealth Department of Environmental Resources, 406 A.2d 1020 ( Pa. 1979) (emphasis added).

Thus, the case points to one of the key defenses to expanded tort liability: available, alternative administrative remedies.

Although preceding Alston by two years, the case of McGee v. Feege, 535 A.2d 1020 ( Pa. 1987), dealt with the availability of other administrative remedies, and found that this point is not necessarily determinative when it appears that those remedies are insufficient. There, in the course of a bitterly fought workers’ compensation claim, a series of vexatious petitions to cease benefits was filed. Despite the affirmance of an award by the Supreme Court of Pennsylvania, the employer embarked on a series of frivolous and meritless legal maneuvers designed to delay and frustrate payment to the employee. Categorizing the conduct as a “despicable example of a blatant misuse of the legal process to avoid payment of a legal obligation”, the court permitted the plaintiff to proceed with an abuse of process claim, finding that it is bottomed on a perversion of the legal process, not upon the worker’s compensation claim itself.

It was the outrageousness of the conduct which led the court to the conclusion it reached. Conversely, in Rosipal v. Montgomery Ward, 521 A.2d 49 ( Pa. 1987), the plaintiff, an employee of Montgomery Ward, sustained an injury while working as a security guard. Montgomery Ward, along with its insurance carrier, filed procedural papers to terminate benefits, supported by a physician’s affidavit of recovery. Plaintiff alleged economic duress, intentional infliction of emotional distress, and “procuring a false, fraudulent and perjured affidavit of recovery”. Preliminary objections were sustained and affirmed on appeal. The court held that there was no “separate claim” in that case because in the absence of the work injury, there would have been no worker’s compensation proceeding out of which the instant civil action could arise: “The appellee has failed to state a cause of action in her complaint as all of the allegations have as the ultimate basis an injury compensable under the workmen’s compensation act, and her claims must be considered within the framework of the act”. 521 A.2d at 50‑51.

Similarly, in Danese v. Morrison-Knudsen/Slattery, 784 F.Supp. 228 (E.D. Pa. 1992), a tort suit alleging that the employer committed fraud during the course of a worker’s compensation proceeding by knowingly introducing false evidence causing the denial of worker’s compensation benefits was dismissed. Noting that the workers’ compensation act provided a procedural framework in which a plaintiff may raise the objection to the defendant’s actions that formed the basis of the lawsuit, even if the full relief now sought could not be obtained, the court referred to the fact that there were adequate administrative remedies elsewhere, of which the claimant could avail himself.

In short, available alternative statutory and administrative penalties and enforcement devices are strong deterrents to tort liability, and must be raised and asserted.
F. Vocational Rehabilitation Counselors
Although touched upon previously, vocational rehabilitation counselors have been a particular target of late. As noted earlier in the Senesac case, a vocational counselor can be held liable for intentional infliction of emotional distress. Cases in a variety of states also have considered claims against vocational rehabilitation companies for so-called “professional negligence”. See, e.g., International Rehabilitation Associates, Inc. v. Adams, 613 So.2d 1207 (Al. 1992); Nicholson v. Blachly, 753 P.2d 955 (Or. 1988) and Brown v. Adair, 846 So.2d 587 ( La. 2003) (suit versus a vocational rehabilitation counselor based upon “professional negligence” was not barred by the exclusivity provisions of the Act). It is important to note that a number of these cases turn on the independent duty that a vocational counselor has vis-à-vis an injured claimant. Indeed, under a number of the states’ professional licensing codes, and under the standards of professional conduct for vocational counselors, their duty runs to the injured claimant, not to the employer.

Thus, in Brown v. Adair, suit appropriately lay against the vocational professional for allegedly “fudging” a job description and medical clearance for a return to work, which led to a termination of worker’s compensation benefits by the state. The court held that the “injury” was not covered by the workers’ compensation statute; and the “harm” did not arise directly from the compensable injury itself.

Conversely, however, in Suarez v. Metropolitan Erection Company, 559 So.2d 29 (La. 1990), the court refused to permit a suit against an adjusting company and a rehabilitation service for alleged improper acts (“intentional” delay in payment of benefits), holding that these parties were immune under the workers’ compensation act, since the act contained penalty procedures which covered the situation adequately. In short, the allegations of the complaint were essentially that the defendants had delayed the payment process, despite use of the terms “intentional” or “outrageous”. The court, citing 2A Larson, Workmen’s Compensation Law, §68.34(c) (1987), stated:

It seems clear that a compensation claimant cannot transform a simple delay in payments into an actionable tort by merely invoking the magic words ‘fraudulent, deceitful and intentional’ or ‘intentional infliction of emotional distress’ or ‘outrageous’ conduct in his complaint. The temptation to shatter the exclusiveness principle by reaching for the tort weapon whenever there is a delay in payments or a termination of treatment is all too obvious, and awareness of this possibility has undoubtedly been one reason for the reluctance of courts to recognize this tort except in cases of egregious cruelty or venality.

In the very recent Pennsylvania case of Taylor v. Woods Rehabilitation Services, 846 A.2d 742 ( Pa. 2004), the injured plaintiff alleged both tort and contractual claims against the rehabilitation company. Tort claims in vocational malpractice and intentional infliction of emotional distress were paired with contractual claims based upon an alleged third party beneficiary contract between the rehab company and the TPA for the employer. Citing to Tropiano and Taras v. Wausau Insurance Company, both cited supra, the court emphasized that immunity under the Act is not afforded to compensation or insurance carriers or their agents when their negligent acts result in harm to an employee from a separate, non-work-related injury. Without commenting on the merits of the plaintiff’s claim, the court noted that the allegations of the complaint were that that the rehab company engaged in “unethical and inhumane” acts because they forced the plaintiff to disclose the intimate details of a bowel and bladder incontinence problem to potential employers. Since these events arose four and a half years after the occurrence of the original work injury, and related to an entirely different “injury” than the one for which compensation benefits were paid, immunity did not apply. The court cited to Lewis v. School District of Philadelphia, 538 A.2d 862 (Pa. 1988), to emphasize that when an injury arises from a relationship which is distinct from that of employer and employee, and invokes a different set of obligations than the employer’s duty to its employee, there is no justification for shielding the employer from liability at common law.
G. Defamation Claims
Typically, libel and slander claims have been found inextricably intertwined with the garden variety mental injury worker’s compensation claim. Nevertheless, the courts have recognized that there may be instances in which the employer’s conduct goes well beyond the bounds of mere negative comment upon an employee’s performance and ventures into the realm of defamation. Thus, in Davaris v. Cubaleski, 12 Cal. App.4th 1583, 16 Cal. Rptr.2d 330 (1993), the court held that a slander claim was not barred by the exclusivity provisions of the Act. Basically finding that the claim was one of “outrageous conduct” on the part of the employer, the court concluded that the employer’s statements about the claimant were made for no purpose other than to harm the employee’s reputation. The court found that the “injury” was not in the nature of a “personal injury” which would be covered under the Workers’ Compensation Act. It distinguished cases such as Jenkins v. Family Health Program, 214 Cal. App.3rd 440, 262 Cal. Rptr. 798 (1989), in which the plaintiff was merely being criticized for bad work efforts, denied promotions, etc.

The kernel to be gleaned from all of this is that when the employer steps over the line to intentionally injure the plaintiff for reasons having nothing directly to do with the employer/employee relationship, but instead for the sole purpose of injuring the plaintiff, immunity will not apply.[9]

In another Pennsylvania case, Urban v. Dollar Bank, 725 A.2d 815 ( Pa. 1999), a claim for defamation and malicious abuse of process was permitted to proceed. The facts showed that a staff member of the employer filed an application for the involuntary commitment of the plaintiff to a mental hospital. A commitment order was executed, and after several hours at the hospital and an interview by a psychiatrist, plaintiff was released. It was further alleged that all of these activities were “trumped up” in an attempt to terminate the plaintiff’s employment, and to create a record to justify termination. Holding that injury to reputation involved a proprietary interest, and not a personal injury (which the workers’ compensation act was designed to cover) the exclusivity provisions of the Act did not apply, and therefore defamation and malicious abuse of process claims could proceed.
H. Spoliation Of Evidence
The latest attempt to affix liability on an employer arises from the so‑called “spoliation of evidence” claims. These claims, at bottom, have nothing whatsoever to do with the compensable injuries themselves. Instead, they are based upon an allegation that “but for” the employer’s actions in negligently or intentionally disposing of evidence necessary to support a third party claim, the plaintiff sustained economic harm in the form of either a dismissal of his third party case or reduction in its value. This novel approach runs somewhat counter to the typical employer’s opportunity to recover subrogation out of a third party claim. Nevertheless, the courts have permitted such cases to proceed.

One of the leading cases is Schusse v. Pace Suburban Bus Division, 779 N.E.2d 259 ( Ill. 2002). In that case the plaintiff, an employee of the defendant, was driving one of its buses when the driver’s seat collapsed, allegedly causing a spinal cord injury. A worker’s compensation claim was submitted. Ten months after the accident the employer replaced the suspension system for the driver’s seat, but did not preserve the evidence. Thereafter, plaintiff filed suit against the manufacturers of the bus and the driver’s seat for negligence, strict products liability and breach of warranty. Plaintiff subsequently amended his complaint to add the employer as an additional defendant, alleging negligent spoliation of evidence. Upon motion to dismiss, the court ultimately determined that plaintiff had stated a cause of action. Citing a prior decision, Boyd v. Travelers Insurance Company, 652 N.E.2d 267 ( Ill. 1995), the court held that an action for negligent spoliation can be stated under existing negligence law. Pace, however, argued that it was immune as an employer. Plaintiff countered that the injury (i.e., a reduced verdict) resulted from spoliation of the evidence, and did not arise out of the employment, nor was it in the course of the employment relationship.

The court agreed, noting that the workers’ compensation act covered “bodily injury”, but that spoliation of evidence results in economic injury, not bodily injury. Moreover, in order to be covered by the workers’ compensation act (and hence covered by the immunity provisions of that act, the injuries must “arise out of” the employment. In other words, they must have their origin in a risk created by the causal connection between the employment and the injury. The causal connection is demonstrated where the injury’s origin lies in some risk related to the employment. In addition, to be covered, the injury must be “in the course of employment”, which refers to the time, place and circumstances under which the injury is received. It is “in the course of employment” when it occurs within the time period of employment, at a place where the worker may be reasonably be in the performance of his duties, and while he is fulfilling those duties or engaged in something incidental thereto. Finding that the employer’s failure to preserve the evidence in no way arose out of the plaintiff’s employment, or occurred while the employee was acting in the direction of the employer, or while carrying out the duties of the employer, no immunity applied:

Pace has not shown that the origin of the spoliation lies in some risk related to the employment or increases the employee’s risk of harm beyond that which the general public is exposed, as Pace has not shown that the risk that it will lose or destroy evidence is greater when the plaintiff is an employee, as opposed to a passenger or other member of the public. In sum, the injury in this case did not arise from the plaintiff’s employment, was not received during the course of employment, and was not compensable under the Act. Accordingly, the trial court erred in dismissing the claim as barred under the exclusivity provision of the act.

In this growing trend to enlarge employers’ liability, the courts have gone so far as to state that there is essentially a common law duty on the part of the employer to preserve evidence, enforceable as a separate tort. See, e.g., Shaw v. Cambridge Integrated Services Group, 888 So.2d 58 (Fl. 2004), affirming in pertinent part, Builder’s Square v. Shaw, 755 So.2d 721 (Fl. 1999). See, also, Townsend v. Conshor, Inc., 832 So.2d 166 (Fl. 2002).[10]

In short, an employer who fails to preserve crucial evidence may be hit with the “double whammy” of having to pay a compensable claim for a work injury, and then being not only precluded from recovering its subrogation interest, but also being required to respond in damages when the plaintiff fails to make the recovery he might have otherwise made “but for” the destruction of the evidence necessary to support his third party claim!

This last point illustrates precisely the reason why crafty plaintiff’s lawyers have moved in the direction of expanded liability: they can thwart subrogation efforts by the employer and extract tribute without theoretical limit, all the while collecting large personal injury fees which are not limited by a statutory scheme.

What Have We Learned?

If any conclusions can be gleaned from the foregoing discussion, and in defense of expanded liability, they are as follows:
  1. To avoid tort liability, the employer (and the peripheral provider or other agent) should try to demonstrate that the “injury” or harm alleged is more in the nature of the type of “personal injury” which is covered by the appropriate workers’ compensation statute.
  2. The employer and their peripheral providers should emphasize the presence of alternative, adequate statutory or administrative remedies which limit or provide benefits equivalent to those that would be available in a tort suit.
  3. Employers should argue that a broader (rather than more narrow) interpretation should be given to the workers’ compensation laws, since liability under those laws is fixed.Thus, states with more liberal workers’ compensation laws (i.e., those recognizing more and diffuse “injuries”) are less likely to offer tort remedies, due to the “tradeoff” in immunity. See, e.g., Larson Workmen’s Compensation Law at §104.05[4].In other words, analogize the “harm” to a claim covered by the workers’ compensation act.
  4. Agents or other peripheral providers of the employer should try to be “symbiotic” with the employer for acts of negligence, etc., in order to obtain the “shield of immunity”.
  5. Employers and peripheral providers should demonstrate that the loss is a purely economic loss in those states in which physical harm is required to be proven to achieve tort liability.
  6. Employers and peripheral providers should demonstrate that there is “no legal duty” under applicable tort law; or that there is “no third party intended beneficiary” contractual duty enforceable in tort law or in contract.
  7. Attempts should be made to demonstrate that there was “no professional standard of care” applicable; therefore no increase in duty toward the employee.
  8. Ultimately, it is imperative to show that the workers’ compensation claim and the tort claim are inextricably intertwined; in other words, that the claim is not wholly separate from, or subsequent to, the work injury.The goal is to show that the harm alleged really flows from an extension of the compensable claim itself.
  9. When the “dual capacity” doctrine isasserted, try to show that the two “duties” are so intertwined that the conduct in the secondary capacity does not generate an obligation which is unconnected to the first role as employer or agent.
  10. As a safety precaution, employers may be well advised--even if self-insured for workers’ compensation liability--to secure separate coverage for non-workers’ compensation liability (i.e., employer’s liability coverage) to protect against such suits; to require vendors and peripheral providers to execute indemnification agreements and to endorse the employer as an additional named insured on their own policies of liability insurance.

Conclusion

While not an exhaustive or all-inclusive treatise on the subject, it is hoped that the foregoing will lend some appreciation of where the case law has been and where it is headed. Minimization of risk naturally involves foresight and careful planning. Unfortunately, not all contingencies can be planned for. One thing that is certain, however, is that plaintiffs and their attorneys will continue to storm the ramparts of immunity. The best defense is awareness and the preparedness that comes from awareness.

Copyright, 2005. All rights reserved.


[1] Workers’ compensation coverage is intended solely to compensate for work injuries, and is not intended to provide general life and health protection. Hinkle v. H.J. Heinz, 298 A.2d 632 ( Pa. 1972).

[2] However, compensation judges are permitted to award additional fees for so-called “unreasonable contest” of proceedings, which are they based on a quantum meruit basis. 77 P.S. §996.

[3] Such claims are not the subject of this article since most states have specific statutory measures to deal with “bad faith” claims.

[4] Here again, reference to specific state statutory law must be made. Pennsylvania law, for example, prohibits a self-insured employer from being held liable for UM or UIM claims, Hackenberg v. SEPTA, 586 A.2d 879 (Pa. 1991); Safe Auto Insurance Co. v. School District of Philadelphia, ___ A.2d ___ (2005); other states may not.

[5] Interestingly, the court did not preclude an action in contract if it could be proven that Kennedy did not receive all of the products that he had been promised.

[6] It is apparent from the decision that the “illness” which forced the plaintiff to seek medical treatment was not, in and of itself, a compensable injury. Had it been, the result may have been different.

[7] The court defined intentional infliction of emotional distress as consisting of conduct “so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious and utterly intolerable in a civilized community”, citing Restatement (Second) of Torts, §46, comment d (1965).

[8] Likewise, when a claimant alleged that his schizophrenia was aggravated by the filing of a termination petition by the employer, no separate liability attached, and the matter was still cognizable under the Workers’ Compensation Act. Gulick v. Workers’ Compensation Appeal Board, 711 A.2d 588 ( Pa. 1988). Similarly, in Lewis v. School District of Philadelphia, 538 A.2d 862 (1988), no cause of action existed for failure of a self-insured employer to not provide uninsured motorist benefits to an injured employee; benefits which would otherwise be available to non-employees.

[9] Note that this is not the same concept as, for example, in Poyser v. Newman & Company, Inc., 522 A.2d 548 (Pa. 1987). There the Pennsylvania Supreme Court dismissed a claim in tort against the employer by an employee who alleged that his injury was caused by the employer’s deliberate dereliction of willfully disregarding governmental safety regulations, and by deliberately exposing the plaintiff to a known hazard. This holding is grounded upon the fact that there was no “separate injury”; rather, the alleged intentional conduct is what led to the work injury itself.

[10] Other states, however, such as Pennsylvania, have not yet gone so far as to find liability for losing crucial pieces of evidence. Instead, subrogation rights may well be limited or excluded by equitable principles, as indicated in the early case of Arendas v. Rich & Co., 220 F.Supp. 957 (W.D. Pa. 1963).
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