Breton v. Travelers

• Court: Court of Appeals for the First Circuit
• Decided: June 25, 1998
• Docket: 98-1024
• Status: Published

Opinion

USCA1 Opinion

                 United States Court of Appeals

                     For the First Circuit


No. 98-1024


RICHARD BRETON and CANDACE BRETON,



                     Plaintiffs, Appellants,



                                v.



                THE TRAVELERS INSURANCE COMPANY

                                

                      Defendant, Appellee,


ON APPEAL FROM THE UNITED STATES DISTRICT COURT



FOR THE DISTRICT OF MAINE



          [Hon. D. Brock Hornby, U.S. District Judge] 


Before

                                

                     Torruella, Chief Judge,

                Selya and Lynch, Circuit Judges.


Mark L. Randall, with whom Daniel G. Lilley Law Offices, P.A.,

was on brief, for appellant.

     Barbara Werthmann for appellee.    


June 25, 1998


LYNCH, Circuit Judge.  This case presents the question of

whether Maine law permits an employee to sue his employer's

workers' compensation insurance carrier in tort, where that

insurer, in its handling of the defense of that claim, has

intentionally caused delay, including delayed payment of benefits

to the employee.  The district court found that such an action is

not viable in Maine.  A review of the Maine Workers' Compensation

Act and the Maine Law Court cases leads us to agree.

                               I.

  In August 1997, Richard Breton filed an amended

complaint, under diversity jurisdiction, against The Travelers

Insurance Company ("Travelers"), alleging that Travelers had

intentionally and tortiously mishandled his claim for workers'

compensation benefits due him under the Maine Workers' Compensation

Act ("Act"), Me. Rev. Stat. Ann. tit. 39-A,  101 et seq.  In his

complaint, Breton alleged the following course of events.

     In November 1989, while he was an employee of

Maine/Sysco, Inc., Breton was severely injured at work.  Breton

promptly notified his employer of his injury.  Travelers was

Maine/Sysco's workers' compensation insurance carrier during that

time.  In August 1990, Travelers filed a "notice of controversy"

with the Workers' Compensation Commission, contesting Breton's

claim for workers' compensation benefits.  The complaint states

that 

     [f]rom Defendant's initial involvement during

     August of 1990 until Defendant's payment of

     the final worker's compensation benefits to

     Plaintiff, Defendant individually and by and

     through its agents, servants or employers . .

     . engaged in a pattern of intentional tortuous

     [sic] conduct designed to inflict severe

     emotional distress and physical injury upon

     the Plaintiff by continuously refusing to pay

     and delaying payment of legitimate claims for

     worker's compensation benefits.  

Breton alleged that Travelers (i) repeatedly failed to write a

letter denying Breton's compensation claims, which would have

enabled Breton to be reimbursed for medical bills by his personal

health insurance carrier; (ii) intentionally obstructed Breton's

receipt of medical care and delayed the payment of medical bills;

(iii) obstructed the administration of Breton's claim, causing

delay in Breton's receipt of medical care; (iv) failed to

communicate with Breton or answer his lawyer's inquiries; and (v)

delayed the payment of medical bills which the Workers'

Compensation Commission had ordered Travelers to pay.  The

complaint alleges the elements of the Maine tort of intentional

infliction of emotional distress, and requests compensatory and

punitive damages.

     Travelers, which had controverted the claim for benefits,

denied any wrongdoing in the administration of Breton's claim and

asserted, inter alia, the affirmative defense that "[t]he exclusive

remedy for the claims asserted by the Plaintiffs appears in the

Maine Workers' Compensation Act."  Travelers moved to dismiss the

complaint under Fed. R. Civ. P. 12(b)(1), for lack of subject

matter jurisdiction, and 12(b)(6), for failure to state a claim. 

It argued that under the Act, an employer's workers' compensation

carrier is immune from suit in tort for actions taken in the

administration of a workers' compensation claim, and that the Act

provides the exclusive remedies for an employee injured in the

course of employment and aggrieved by the insurer's conduct.  The

district court, adopting the well-reasoned recommended decision of

the magistrate judge, agreed and dismissed Breton's complaint. 

                              II.

     We review de novo a decision to dismiss a complaint,

taking the alleged facts to be true and drawing all reasonable

inferences in Breton's favor.  See Beddall v. State St. Bank and

Trust Co., 137 F.3d 12, 16 (1st Cir. 1998).  The issue before us is

whether, assuming Breton's allegations of Travelers' wrongdoing are

true, his action is nevertheless barred by the immunity and

exclusivity provisions and administrative framework of the Act.

     The Act imposes liability, without fault, on employers

for injuries to employees that "arise out of and in the course of

employment."  Me. Rev. Stat. Ann. tit. 39-A,  209.  In exchange

for this no-fault liability, employers are granted immunity from

common law or statutory actions "involving personal injuries"

covered by the Act, see id. at  104, and the Act is the

employees' exclusive remedy for such injuries, see id. at  408. 

The immunity and exclusivity provisions of the Act encompass an

employer's intentional conduct.  See Li v. C.N. Brown Co., 645 A.2d

606, 607-8 (Me. 1994).  Under the Act, a workers' compensation

insurance carrier's immunity from civil liability is coextensive

with that of the employer, unless a contrary intent by the

legislature is apparent or such immunity is inconsistent with the

purposes of the Act.  See Me. Rev. Stat. Ann. tit. 39-A,  102.

     The Act provides an administrative framework for dealing

with insurers and employers who delay payment of claims or

otherwise mishandle claims for compensation.  The Act creates a

Workers' Compensation Board (formerly called the Workers'

Compensation Commission) to, inter alia, "serve the employees and

employers of the State fairly and expeditiously by ensuring

compliance with the workers' compensation laws [and] ensuring the

prompt delivery of benefits legally due."  Id. at  151-A.  In

order to "ensure just and efficient administration of claims,"  id.at  153, the Board's duties include creating an "abuse

investigation unit" to investigate "all complaints or allegations

of fraud, illegal or improper conduct or violation of this Act or

rules of the board relating to workers' compensation insurance,

benefits or programs, including those acts by employers, employees

or insurers."  Id. at  153(5)(B).

     Additionally, the Act provides that if an employer or

insurance carrier fails to pay compensation as required by the Act,

it is subject to a penalty of $200 a day, of which $50 goes to the

employee:

     [I]f an employer or insurance carrier fails to

     pay compensation as provided in this section,

     the board shall assess against the employer or

     insurance carrier a forfeiture of up to $200

     for each day of noncompliance,. . . . 

          (1) The forfeiture for each day of

     noncompliance must be divided as follows:  Of

     each day's forfeiture amount, the first $50 is

     paid to the employee to whom compensation is

     due and the remainder must be paid to the

     board . . . .



Id. at  324(2)(A).  An insurer who is ordered to pay a forfeiture

must pay "reasonable costs and attorney's fees related to the

forfeiture" to an employee who petitions for the forfeiture.  Id.at  324(2)(A)(2).

     The Act gives the Board authority to audit claims files

on an ongoing basis to determine whether insurers have met their

obligations.  In addition to ordering that any delinquent

compensation be paid to deserving employees, the Board may assess

a penalty on a derelict insurer "not to exceed $10,000 upon

finding, after hearing, that an employer [or] insurer . . . has

engaged in a pattern of questionable claims-handling techniques or

repeated unreasonably contested claims."  Id. at  359(2). 

Finally, the Board has "general authority" to "assess, after

hearing, a civil penalty in an amount not to exceed $1,000 for an

individual and $10,000 for a corporation, partnership or other

legal entity for any willful violation of this Act, fraud or

intentional misrepresentation."  Id. at  360(2). 

     Travelers argues that the Act's immunity and exclusivity

provisions bar Breton's claims, and that the administrative

framework provides the sole remedy for an insurer's negligent or

intentional delay in payment.  Travelers bolsters this position by

pointing to the historic "quid pro quo" behind the Act, and the

fact that most jurisdictions provide immunity for insurers in this

situation.  In response, Breton argues that the immunity provisions

do not bar his claim because his alleged injury -- emotional

distress due to Travelers' intentional mishandling of his benefits

claim -- did not arise out of and in the course of employment.  He

further argues that the Maine legislature could not have intended

the administrative framework to be a benefits claimant's sole

remedy for an insurer's intentional misconduct, because that

framework provides that the employee may receive a maximum of only

$50 per day for every day of delay.  In order to give insurers

incentive to handle claims properly, Breton argues, it is necessary

to preserve common law remedies.

     Breton's arguments are far from frivolous and present

exactly the type of policy issues on which the various states have

differed in their workers' compensation systems.  But an

examination of Maine case law and the policies behind workers'

compensation laws leads us to conclude that the Maine Law Court

would find Breton's claim barred by the Act.

A. Case Law

     There are two Law Court cases primarily pertinent to this

issue:  Gibson v. National Ben Franklin Ins. Co., 387 A.2d 220 (Me.

1978), and Procise v. Electric Mut. Liab. Ins. Co., 494 A.2d 1375

(Me. 1985).  Although an isolated reading of Gibson supports

plaintiffs' position, Procise interpreted and limited Gibson in a

manner which we believe is inconsistent with Breton's claims.

     In Gibson, the Court held that an employee's claim

against her employer's workers' compensation insurance carrier for

tortious termination of payments under a settlement agreement was

not barred, despite the Act's immunity provisions and the

administrative scheme for dealing with insurer misconduct.  The

defendant insurer had argued for a dismissal on the same grounds

Travelers argues here:  that the Act provides the exclusive

remedies against an employer and its insurer, and that the

administrative provisions for enforcing compensation claims were

the sole means for enforcing the insurer's obligations to

employees.  The Court found both arguments unpersuasive, noting

that because the plaintiff had already established her right to

benefits in the form of an "approved compensation agreement," the

injury alleged by her -- emotional distress due to the insurer's

tortious withholding of benefits -- "was not an injury 'arising out

of the employment' within the meaning of the Act."  Gibson, 387

A.2d at 222.  The Court's language suggested that had plaintiff not

established with finality her right to benefits, and the claim were

still in dispute, an injury alleged as a result of the insurer's

conduct would have arisen out of the employment relationship and

therefore have had its exclusive remedy in the Act.  See id.("[T]he case arises not out of appellant's original employment

relationship but out of her relationship to the carrier after her

basic remedies as an injured employee had been settled through

procedures provided by the Act.").

     The court addressed the insurer's second argument, that

there were penalty provisions in the statute for non-payment and

these should be the exclusive remedy.  The Court found that

"[a]lthough [the Act] provides for sanctions against a carrier for

failure to make timely payments of compensation . . . we think it

was not intended to exclude every other remedy in a case of

intentional wrongdoing."  Id. at 223.  "One reason" for the Court's

non-exclusivity conclusion was "the fact that the penalties

provided for by [the Act were] payable to the State rather than the

claimant."  Id.

     Several years later, the Law Court decided Procise. 

Procise had been injured, but it was not clear whether that injury

arose out of his employment.  Either disability insurance or

workers' compensation covered his claim.  His employer's claims

administrator characterized the injury as not work-related,

allowing him to receive prompt disability benefits, but not

workers' compensation benefits.  Procise sought workers'

compensation benefits, and ultimately obtained a lump sum

settlement from the insurer, approved by the Workers' Compensation

Commission.  The sums owed under that settlement were paid. 

Procise later filed suit against the claims administrator, his

employer's insurer, and several other parties for their actions

before the settlement.  He alleged, inter alia, fraud, deceit, and

infliction of emotional distress.  

     The Court found that Procise's claims, all of which

"stem[med] from the handling of his injury claim as a claim for

disability unrelated to his employment rather than as a claim for

worker's compensation for a related injury," Procise, 494 A.2d at

1381, were barred by the exclusivity provisions of the Act.  Id. at

1381-82.  The Court emphasized that the Act provided an

administrative procedure for addressing the types of claims Procise

was making, and that Procise should have resorted to such

procedures in lieu of bringing a common law action in the courts. 

"The Workers' Compensation Act provides the exclusive procedure for

review of any administrative decision in which the basic contention

is that the plaintiff was wrongfully denied workers' compensation

benefits."  Id. at 1382.

     The Court held that equating the insurer with the

employer for immunity purposes in these circumstances did not

conflict with the purposes of the Act.  See Me. Rev. Stat. Ann.

tit. 39-A,  102 (defining "employer" to include the employer's

insurer "unless the contrary intent is apparent from the context or

is inconsistent with the purposes of this Act.").  The Court

distinguished Gibson on the ground that it was the establishment

with finality of Gibson's entitlement to benefits which created the

distinct relationship between the plaintiff and the insurer and

permitted Gibson's claim to proceed despite the Act's exclusivity

provisions.  In contrast, the Procise plaintiff's claims all arose

out of the original handling of his benefits claims.



     Breton points out that Procise arose in a very different

situation than did Gibson -- a difference, he claims, which makes

Procise irrelevant to the issues before us.  It is true that the

facts in Procise were distinct from the facts in Gibson.  In

Procise the employee had accepted a lump-sum settlement which had

not been overturned by the Workers' Compensation Commission, and

the employee nevertheless sought to bring a common law action

against the insurer.  But the language in Procise distinguishing

Gibson was necessary to the Court's conclusion that the insurer was

immune from common law liability for actions it took prior to the

lump-sum settlement agreement.  Thus, the Procise analysis is

highly relevant to this case.

     After Procise, the question is whether the employee has

alleged that the insurer's misconduct occurred after his "basic

remedies as an employee ha[d] been settled."  Breton does not

allege as much.  Indeed, he alleges the defendant acted tortiously

"from Defendant's initial involvement" with the processing of

Breton's claim.

     Breton argues that his claim should survive under Gibsonand Procise because he actively pursued his remedies and he was

entitled to benefits.  But he does not allege a final agreement of

the sort described in Gibson and Procise which would establish an

independent relationship between the employee and the insurer

outside the employment relationship.  The closest Breton comes to

making such an allegation is the claim that Travelers delayed

payment of benefits after the Workers' Compensation Board had

ordered payment.  But there is no allegation that the time period

for appeal had expired, making the order a final adjudication of

benefits, and that payment was absolutely and unconditionally due. 

This is not enough to clear the substantial hurdle created by

Procise. 

     Breton also argues that the legislature cannot have

intended the Act to provide his sole remedies, because the Act

provides a maximum of only $50 per day to the injured claimant. 

See Me. Rev. Stat. Ann. tit. 39-A,  342(2)(A).  On the contrary,

we think that the existence of a sum of money -- albeit a small sum

-- payable to the benefits claimant evidences the legislature's

intent to confine disputes over delayed payments and other

allegations of claims mishandling to the jurisdiction of the

workers' compensation system.  See 6 Larson's Workers' Compensation

Law,  68.34(c) at 13-230 (1997) (hereinafter Larson's) ("A

majority of the courts have taken the view that [the presence of an

administrative penalty for delayed payments] evidences a

legislative intent that the remedy for delay in payments, even

vexatious delay, shall remain within the system in the form of some

kind of penalty."); cf. Gibson, 387 A.2d at 223 ("One reason for

our conclusion [that the administrative remedies are not the

plaintiff's sole remedies] is the fact that the penalties provided

by [the Act] are payable to the State rather than the claimant."). 

If the sum is not sufficient to make Breton whole for any damages

he has suffered from the insurer's delay, that is a policy matter

for the legislature.  See Searway v. Rainey, 1998 WL 207782 at *1

(Me. April 29, 1998) ("Having created the statutory scheme, the

Legislature is 'better equipped to determine the impact of its

actions,' if it chooses to alter the immunity and exclusivity

provisions of the Act.") (quoting Beaulieu v. Maine Med. Ctr., 675

A.2d 110, 112 (Me. 1996)); cf. Doss v. Food Lion, Inc., 477 S.E.2d

577, 578 (Ga. 1996) ("The exclusivity provision is the bedrock of

the workers' compensation system. . . . Workers' compensation has

never been intended to make the employee whole -- it excludes

benefits for pain and suffering, for loss of consortium, and it

provides a cap on wage benefits.").

     There are valid reasons why a legislature might choose to

make its administrative remedy exclusive.  Permitting common law

actions against a workers' compensation insurer where there has

been delayed payment would provide incentives to claimants to file

suit.  This would measurably increase the costs of the workers'

compensation system.  This, in turn, would threaten to undermine

the original intent of the law to provide definite benefits to

injured employees in exchange for predictable and limited costs to

the employers and insurers.  As Professor Larson has observed,

     [i]t 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 the 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.

6 Larson's,  68.34(c) at 13-230.

     The Law Court has on numerous occasions, in diverse

factual situations, emphasized the importance of the historical

quid pro quo, saying once:

     Generally [this Court] has looked upon this

     legislation as a transfer of the burdens

     resulting from industrial accidents,

     regardless of who may be at fault, from the

     individual to the industry and an ultimate

     distribution of such burdens upon society as a

     whole . . . .  Our Court, on the other hand,

     has maintained that employers [and their

     insurers] have rights and they also are

     entitled to rely on the certainty of the

     compensation to be paid and the amount of the

     services to be rendered.  Perversion of the

     law, either to benefit the employee or protect

     the employer, has the tendency only to bring

     the law into contempt. . . .  The intent of

     the statute was not to burden the industries

     of the State beyond the scope of the act as

     defined by the lawmakers.



Roberts v. American Chain and Cable Co., 259 A.2d 43, 48-49 (Me.

1969) (citations omitted).  See also Li, 645 A.2d at 608 (noting

that the legislature made "[t]he wording of the [exclusivity and

immunity] sections . . . broad and encompassing" in order to give

effect to the Act's underlying quid pro quo policy, and declining

to "create a judicial exception to the exclusivity and immunity

provisions for employers' intentional torts"); Beverage v.

Cumberland Farms N., Inc., 502 A.2d 486, 489 (Me. 1985) (noting

that the "legislative intendment in enacting the comprehensive

scheme for worker's compensation' was to giv[e] effect to the

underlying policy of providing certainty of remedy to the injured

employee and absolute but limited and determinate liability for the

employer") (quotation marks and citation omitted).

     In light of these interpretations, to permit Breton's

case to proceed would pervert the understood intent of the Act, and

would place greater and unintended burdens on Maine's industries

through higher workers' compensation insurance premiums.

     Maine may choose at some point to balance the scales

differently, to permit common law actions against insurers who

delay proceedings and payments, even at the cost of decreased

certainty and increased expense to the companies involved.  But it

has not done so to date.  

     Our holding, as always, is confined to the facts of this

case.  We stress that this case does not involve either of two

situations in which other states have permitted common law actions. 

The first is of a claimant who alleges "extreme cruelty or

venality" on the part of the insurer.  See 6 Larson's,  68.34(c)

at 13-230.  The second is when the insurer's conduct is so far

outside its role as a workers' compensation insurer that it ceases

to benefit from the Act's immunity.  See, e.g., Unruh v. Truck Ins.

Exch., 498 P.2d 1063 (Cal. 1972) (action by employee against her

employer's workers' compensation insurer for, inter alia,

intentional infliction of emotional distress was cognizable where

insurer hired private investigator to observe and photograph

employee performing activities inconsistent with her claimed

injuries).  Where, as here, the plaintiff's claim is one of

misconduct in the carrying out of the core function of a workers'

compensation insurer, we believe Maine law immunizes insurers from

common law actions and directs that such claims be resolved within

the administrative framework of the Act.

     Affirmed.  Costs are awarded to Travelers.