Paulino v. Chartis Claims – Bad Faith Insurance Claim in Workers’ Compensation

Workers’ compensation claims in South Carolina are bound by exclusive remedy, meaning you can’t sue an employer for negligence resulting in a work-related injury or illness. However, there are some cases in which a workers’ compensation insurance company can be sued for acting in bad faith.
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Of course, insurance companies in general are known for practices intended to modify compensation or sidestep paying claims altogether. However, when these efforts are carried out in bad faith, they are considered to be so egregious as to warrant punitive damage payouts equaling up to three times the amount of the original claim (treble damages).

Some examples may include nonpayment of a legitimate claim, mass denial of claims or internal incentive programs that encourage adjusters to deny payouts.

The implementation of treble damages is meant to serve as a deterrent to insurers to engage in these types of bad faith actions. It doesn’t always work.

However, proving a bad faith claim in a workers’ compensation case can prove challenging. It’s important to have an experienced Spartanburg workers’ compensation lawyer on your side, furthering your best interests.

In the recent case of Paulino v. Chartis Claims, Inc., the U.S. Court of Appeals for the Eight Circuit affirmed the summary judgment favoring a defendant insurer in a workers’ compensation bad faith claim. However, the earlier separate judgment by the state district court requiring the insurer to pay ongoing medical and living expenses for a former employee who became paraplegic following a work-related injury still stands.

The case began several years ago when an undocumented Mexican national working for a company in Iowa suffered a work-related spinal cord injury that left him permanently unable to walk. The employer’s insurance paid the workers’ compensation claim, including the cost of treatment and rehabilitation services. Several months into intensive rehabilitation, the worker was moved to a post-acute facility in preparation for discharge to a more independent living arrangement.

By the spring of 2006, the former employee was ready for discharge. But there was a problem. He received less than $400 monthly in workers’ compensation benefits. Because he was an illegal resident, he did not qualify for additional federal benefits, such as Social Security Disability Insurance. That meant he couldn’t afford permanent independent housing.

Still, the insurance company argued it would no longer pay for the pricy care he was receiving. It agreed to pay for modification of a permanent residence to meet worker’s needs, but promised to cut off payments to the in-patient center, which it did, despite a caseworker protesting it could find no suitable, affordable housing to meet the need criteria.

Still, the center refused to discharge the patient until suitable housing could be found.

Ultimately, the workers’ compensation claim through district court ended with the worker emerging victorious. The company’s insurer would have to pay for worker’s stay until suitable permanent housing was secured.

Following this decision, former worker filed a bad faith claim against the insurer, seeking consequential and punitive damages. Defendant insurer sought and was granted summary judgment in federal district court. Ultimately, the federal appellate court affirmed this ruling.

The basis for the judgment in favor of the insurer came down to the fact plaintiff failed to prove the two following elements:

  • That the insurer had no reasonable basis to deny his claim
  • Defendant knew or should have known its denial/refusal was without reasonable basis

The court further did not find evidence, as plaintiff suggested, that employer sought to have him deported in order to avoid paying his claim. It is true his immigration status affected his ability for certain federal benefits, and those considerations were highly relevant to the case. But the company would remain responsible to pay for his care even if he were deported, the court ruled.

The company needed only to show it had reasonable basis to deny the claim, and the court found it had done so.

If you have been injured at work, contact the Lee Law Offices at 800-887-1965.

Additional Resources:
Paulino v. Chartis Claims, Inc., Dec. 19, 2014, U.S. Court of Appeals for the Eight cuit

More Blog Entries
Morales v. Zenith Ins. – Wrongful Death Payout Barred by Exclusive Remedy, Dec. 26, 2014, Spartanburg Worker Compensation Lawyer Blog

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