IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI
NO. 2020-CA-01181-COA
JEREMY THORNHILL APPELLANT
v.
WALKER-HILL ENVIRONMENTAL AND APPELLEES ZURICH AMERICAN INSURANCE COMPANY OF ILLINOIS
DATE OF JUDGMENT: 09/11/2020 TRIAL JUDGE: HON. ANTHONY ALAN MOZINGO COURT FROM WHICH APPEALED: MARION COUNTY CIRCUIT COURT ATTORNEYS FOR APPELLANT: RAYNETRA LASHELL GUSTAVIS ROGEN K. CHHABRA DARRYL MOSES GIBBS ATTORNEYS FOR APPELLEES: OLIVIA YEN TRUONG DORIS THERESA BOBADILLA NATHAN L. BURROW NATURE OF THE CASE: CIVIL - TORTS-OTHER THAN PERSONAL INJURY AND PROPERTY DAMAGE DISPOSITION: REVERSED AND REMANDED - 10/19/2021 MOTION FOR REHEARING FILED: MANDATE ISSUED:
BEFORE WILSON, P.J., McCARTY AND SMITH, JJ.
WILSON, P.J., FOR THE COURT:
¶1. Jeremy Thornhill alleged that he injured his back while working for Walker-Hill
Environmental. He sought workers’ compensation benefits from Walker-Hill and its
insurance carrier, Zurich American Insurance Company of Illinois (collectively, “the
Employer/Carrier”), but the Employer/Carrier denied that Thornhill had sustained a
compensable injury. The parties eventually entered into a compromise settlement, which the
Mississippi Workers’ Compensation Commission approved. After the Commission approved the settlement, Thornhill sued the Employer/Carrier in circuit court, alleging that they had
denied his claim in bad faith. The Employer/Carrier filed a motion to dismiss, arguing that
Thornhill had not exhausted his administrative remedies—and that the circuit court lacked
jurisdiction—because the Commission never made a factual finding that he was entitled to
workers’ compensation benefits. The circuit court agreed and dismissed the case. On appeal,
Thornhill argues that the Commission’s approval of the compromise settlement exhausted
his administrative remedies and that his bad-faith lawsuit against the Employer/Carrier may
go forward in the circuit court. For the reasons discussed below, we agree and reverse and
remand the case for further proceedings consistent with this opinion.
FACTS AND PROCEDURAL HISTORY
¶2. Thornhill worked at Walker-Hill as a supervisor driller. He alleges that he injured his
back while attempting to move a heavy rig on July 5, 2017. He alleges that he reported his
injury to his supervisor the following day, but Walker-Hill denies this allegation. On July
7, Walker-Hill asked Thornhill to take a drug test. Thornhill went to the testing facility and
provided a sample, but the sample was reportedly “cold” (i.e., below the minimum acceptable
temperature for testing). Thornhill says that he tried to produce a second sample but was
unable to do so, and he left without providing a second sample. Walker-Hill says that
Thornhill did not return to work for several days and was fired for refusing to submit to a
drug screen. Thornhill began seeing a doctor for his back injury, and the doctor eventually
recommended that Thornhill undergo back surgery.
¶3. In October 2017, Thornhill filed a petition to controvert with the Commission. In
2 November 2017, the Employer/Carrier filed an answer in which they admitted both that
Thornhill’s injury arose out his employment and that they had received proper notice of the
injury. However, the Employer/Carrier denied that Thornhill was entitled to benefits, citing
his refusal to complete the drug test. In April 2018, the Employer/Carrier filed an amended
answer in which they denied that Thornhill had suffered any work-related injury and denied
that they had received proper notice of the injury.1
¶4. Following a hearing, an administrative judge ordered Thornhill to undergo an
independent medical examination (IME) by Dr. Robert McGuire to “determine [Thornhill’s]
current condition and need for medical treatment.” In his subsequent report, Dr. McGuire
noted that Thornhill had been injured at work in 2015 but was able to return to work and
function normally following conservative treatment. Dr. McGuire concluded that the surgery
recommended by Thornhill’s treating physician was “absolutely appropriate.” Dr. McGuire
concluded that Thornhill needed back surgery because of his injury in July 2017, which had
“substantially aggravated [his] preexisting condition.” Finally, Dr. McGuire concluded that
Thornhill had not reached maximum medical improvement (MMI) and would not reach MMI
until approximately six months post-surgery.
1 The Employer/Carrier state that their attorney in the workers’ compensation case initially believed that the injury occurred on the job and that Walker-Hill received notice because the attorney thought that Thornhill’s July 7 drug test was a post-accident drug test. But the Employer/Carrier now assert that “the drug test was not a post-accident drug screen” and that Thornhill “never reported a work injury . . . prior to filing his [p]etition to [c]ontrovert.” The Employer/Carrier say that they filed an amended answer in the workers’ compensation case after their attorney was advised of his mistake. However, the Employer/Carrier’s amended answer continued to assert that Thornhill was not “entitled to benefits due to his refusal to undergo drug testing.”
3 ¶5. After receiving Dr. McGuire’s IME report, the parties reached a settlement. In July
2019, Thornhill filed an application, which the Employer/Carried joined, for the Commission
to approve their compromise settlement. The application stated that Thornhill contended that
he was entitled to benefits, while the Employer/Carrier denied that Thornhill had sustained
a compensable injury. However, the Employer/Carrier had agreed to pay Thornhill $145,000
to settle the claim. The application stated that it was made pursuant to Mississippi Code
Annotated section 71-3-29 (Rev. 2011) because the compensability of Thornhill’s injury was
“in issue and [it was] impossible to determine the exact extent of the disability suffered by
[Thornhill], if any.” The Commission found that the settlement was in Thornhill’s best
interest, approved the settlement, and dismissed the case with prejudice.
¶6. Pursuant to the settlement, Thornhill signed a general release that released the
Employer/Carrier from all claims arising out of or connected with his alleged on-the-job
injury. However, the general release included the following carve-out:
[Thornhill] reserves and does not release, however, the right to bring a claim for bad faith against any party and the parties agree administrative remedies in [Thornhill’s] workers’ compensation claim have been fully and finally exhausted.
The Employer/Carrier acknowledge that they drafted the release and included the above-
quoted language at the request of Thornhill’s attorney.
¶7. In January 2020, Thornhill sued the Employer/Carrier in circuit court, alleging bad-
faith denial of his workers’ compensation claim. The Employer/Carrier answered and later
filed a motion to dismiss, arguing that Thornhill had not exhausted his administrative
remedies. Specifically, the Employer/Carrier argued that the compromise settlement did not
4 exhaust Thornhill’s administrative remedies because the Commission never made a finding
that Thornhill had a compensable claim or was entitled to benefits. They further argued that
the circuit court lacked “jurisdiction” because the Commission had never made such a
finding. The circuit court agreed and granted the motion to dismiss. The court reasoned that
prior to filing suit for a bad-faith denial of workers’ compensation benefits, a plaintiff must
first obtain a ruling from the Commission that he is entitled to the benefits at issue.
¶8. On appeal, Thornhill raises two issues. First, he argues that the compromise
settlement exhausted his administrative remedies as a matter of law and that he may proceed
on his bad-faith claim in the circuit court. Second, Thornhill argues that the
Employer/Carrier should be estopped from asserting an exhaustion-of-remedies argument
because the Employer/Carrier drafted a release that not only reserved Thornhill’s right to
bring a bad-faith lawsuit but also specifically provided that Thornhill’s “administrative
remedies . . . [had] been fully and finally exhausted.”
¶9. For the reasons explained below, we hold that the Commission’s approval of the
compromise settlement exhausted Thornhill’s administrative remedies and that Thornhill’s
bad-faith lawsuit may go forward in the circuit court. Accordingly, we reverse and remand
for further proceedings consistent with this opinion. Because we reverse on the first issue
raised by Thornhill, it is unnecessary to address his estoppel argument.
ANALYSIS
¶10. We review de novo an order dismissing a complaint for failure to state a claim upon
which relief can be granted. Hardaway v. Howard Indus. Inc., 211 So. 3d 718, 721 (¶15)
5 (Miss. Ct. App. 2016). “We accept as true all well-pled factual allegations in the complaint,
and we will affirm only if it appears beyond doubt that the plaintiff would be unable to prove
any set of facts that would support a right of recovery.” Id. (ellipsis and quotation marks
omitted).
¶11. “[T]he independent tort of bad faith refusal to pay compensation is an exception to”
the general rule that workers’ compensation benefits are an employee’s “exclusive remedy”
for an on-the-job injury. Miss. Power & Light Co. v. Cook, 832 So. 2d 474, 479 (¶8) (Miss.
2002) (citing S. Farm Bureau Cas. Ins. Co. v. Holland, 469 So. 2d 55, 59 (Miss. 1984);
Luckett v. Miss. Wood Inc., 481 So. 2d 288, 290 (Miss. 1985); McCain v. Nw. Nat’l Ins. Co.,
484 So. 2d 1001, 1002 (Miss. 1986); Leathers v. Aetna Cas. & Surety Co., 500 So. 2d 451,
453 (Miss. 1986)). A cause of action for bad-faith refusal arises “when an insurance carrier
or self-insured employer denies benefits without a legitimate or arguable basis, commits a
willful or malicious wrong, or acts with gross and reckless disregard for the claimant’s
rights.” Hardaway, 211 So. 3d at 722 (¶16) (citing Cook, 832 So. 2d at 479 (¶¶8-9);
Chapman v. Coca-Cola Bottling Co., 180 So. 3d 676, 681 (¶20) (Miss. Ct. App. 2015); Walls
v. Franklin Corp., 177 So. 3d 1156, 1163 (¶30) (Miss. Ct. App. 2015) (“Walls II”); AmFed
Cos. v. Jordan, 34 So. 3d 1177, 1183 (¶21) (Miss. Ct. App. 2009)).
¶12. “[U]nder Mississippi law, claimants are required to exhaust their administrative
remedies, i.e., obtain a final judgment from the Commission prior to instituting a bad-faith
action for failure to pay benefits pursuant to the Workers’ Compensation Act.” Harper v.
Cal-Maine Foods Inc., 43 So. 3d 401, 403 (¶5) (Miss. 2010) (quotation marks omitted).
6 Regarding this requirement, our Supreme Court has stated that “our precedent requires only
a determination that a plaintiff is ‘entitled’ to compensation before a bad-faith action may be
brought.” Bullock v. AIU Ins. Co., 995 So. 2d 717, 723 (¶21) (Miss. 2008). In another case,
the Supreme Court stated that a plaintiff “could not maintain a bad faith action for refusal to
pay for disputed medical services and supplies absent the Commission’s prior determination
that those services and supplies were reasonable and necessary.” Walls v. Franklin Corp.,
797 So. 2d 973, 977 (¶18) (Miss. 2001) (“Walls I”). In that case, the Court held that the
plaintiff’s bad-faith lawsuit had to be dismissed because her workers’ compensation case and
her claim for reimbursement for the disputed supplies and services remained pending before
the Commission. Id. at 975-77 (¶¶8-9, 18).
¶13. This Court has also addressed the exhaustion requirement. In Hardaway, we held that
a plaintiff “must obtain a final judgment from the Commission that he is entitled to benefits
. . . before instituting an action for the alleged bad faith denial of those benefits.” Hardaway,
211 So. 3d at 722 (¶16). And in Walls II, this Court held that the Commission must
determine whether the plaintiff is entitled to the disputed benefits before she may sue for bad
faith. Walls II, 177 So. 3d at 1163 (¶¶30-33).
¶14. Finally, our Supreme Court has addressed the exhaustion issue in a case that, like this
one, involved a settlement approved by the Commission. Cook, 832 So. 2d at 480 (¶¶14-15).
In Cook, the employer (MP&L) initially provided workers’ compensation benefits to the
injured employee (Cook) but later reconsidered and cut off his benefits. Id. at 477-78 (¶4).
After Cook filed a petition to controvert, he and MP&L settled his claim. Id. at 478 (¶4).
7 Under the settlement, which the Commission approved, MP&L agreed to pay Cook $55,000,
and Cook reserved his right to bring a bad-faith claim against MP&L. Id. Cook sued MP&L
for bad faith and prevailed following a jury trial in circuit court. Id. On appeal, the Supreme
Court held that Cook had “[c]learly” exhausted the “administrative remedies available to
him” because “[h]e settled his claim, and the [settlement] was approved by the . . .
Commission along with his reservation of rights to bring a bad faith claim.” Id. at 480 (¶14).
The Court also emphasized that there were no “pending claims before the Commission”
when Cook filed suit. Id. at (¶15). Citing Walls I, the Court acknowledged that it had “held
previously that a claimant could not maintain a bad faith action against an employer for
refusal to pay for disputed medical services and supplies absent the Commission’s prior
determination that those services and supplies were reasonable and necessary.” Id. But the
Court held that “what distinguishe[d]” Cook’s case from Walls I was that “Cook’s settlement
claim had been approved by the Commission and nothing was left pending before [the
Commission].” Id.
¶15. At first blush, it would appear that Thornhill has also “[c]learly” exhausted all
“administrative remedies available to him.” Id. at (¶14). As in Cook, Thornhill settled his
workers’ compensation claim while reserving his right to bring a bad-faith claim, the
Commission approved the settlement, and “nothing [is] left pending before [the
Commission].” Id. at (¶15).
¶16. However, the Employer/Carrier argue that Cook is factually distinguishable because
Cook settled his claim under Mississippi Code Annotated section 71-3-37(10) (Rev. 2011),
8 which provides that the Commission may approve a lump-sum payment “equal to the present
value of future compensation payments” if “the [C]ommission determines that” such a
payment is in “the best interests of a person entitled to compensation.” In contrast, Thornhill
settled his claim under section 71-3-29, which permits the Commission to approve
“compromise” settlements in cases in which the existence or extent of the claimant’s
disability is disputed. The Employer/Carrier point out that section 71-3-37(10) requires the
Commission to find that the claimant is “a person entitled to compensation,” whereas section
71-3-29 requires no such finding. The Employer/Carrier further emphasize that in Cook, the
Supreme Court specifically stated, “Under [section] 71-3-37(10) the Commission is entitled
to approve settlements only when it is in the best interest of a ‘person entitled to
compensation.’ Thus, clearly Cook was entitled to compensation based on the settlement
agreement approved by the Commission.” Cook, 832 So. 2d at 480 (¶14). Based on this
language, the Employer/Carrier argue that Cook’s holding only applies to a lump-sum
settlement approved under section 71-3-37(10).
¶17. Before addressing the Employer/Carrier’s argument or delving further into Cook, it
is helpful to briefly explain the differences between the two types of workers’ compensation
settlements. Thornhill’s case was settled under section 71-3-29. Settlements under that
statute are commonly known as “compromise settlements” or “9(i) settlements.” John R.
Bradley & Linda A. Thompson, Mississippi Workers’ Compensation Law § 6:50, at 362
(2021 ed.). They are called “compromise settlements” because section 71-3-29 permits the
Commission to approve settlements in cases in which an employer/carrier dispute the
9 existence of a compensable injury or the extent of the claimant’s disability. Id. They are
referred to as “9(i) settlements” because the provision was section 9(i) of the original
Workmen’s Compensation Law of 1948. Id.
¶18. In contrast, section 71-3-37(10) authorizes the Commission to approve “lump-sum
payments” when an employer/carrier’s liability for compensation has already “been
established by admission . . . or by award.” Id. § 6:49, at 361. These payments are also
known as “13(j) settlements” because this provision was section 13(j) of the Workmen’s
Compensation Law of 1948. Id. at 360. A lump-sum payment does not involve a
compromise of a claim that is still in dispute but is simply the present value of future
compensation payments that the claimant is entitled to receive. Id.
¶19. We now turn back to review the Cook case in more detail. As noted previously, the
Employer/Carrier argue that the critical distinction between this case and Cook is that this
case involves a compromise/9(i) settlement whereas Cook involved a lump-sum/13(j)
settlement. But a review of the record in Cook shows that this is not correct. In fact, the
settlement in Cook was also a compromise/9(i) settlement. In Cook, the Supreme Court was
mistaken when it indicated that the Commission had approved that settlement under section
71-3-37(10).
¶20. In Cook, the Commission entered an “Order Granting Approval of 9(i) Compromise
Settlement.”2 The Commission’s order noted that before MP&L cut off Cook’s benefits,
2 The Commission’s order is part of the record in the Mississippi Supreme Court in case number 2001-CA-00079-SCT. We may take judicial notice of Supreme Court files. Crawford v. Fisher, 213 So. 3d 44, 47 (¶10) (Miss. 2016). We have filed a copy of the Commission’s order as a separate document as part of the record in this case.
10 MP&L paid a total of $11,658.14 in temporary disability benefits and $24,999.86 in medical
bills. The Commission’s order then stated,
[Cook] has contended and now contends that he is entitled to substantial compensation, whereas, [MP&L] has contended, and now contends, that [Cook] is not entitled to further compensation, and in no event to the amount thereof demanded by [Cook]. However, in order to fully compromise and settle the disagreement as to the extent of the disabilities suffered by [Cook], [MP&L] has agreed to pay, and [Cook] has agreed to accept, the sum of $55,000.00, of which 50% is being paid in lieu of workers’ compensation disability benefits, and 50% of which is being paid in lieu of future medical expenses, as a complete, absolute and full and final settlement of any and all claims under the Mississippi Workers’ Compensation Act . . . .
. . . [T]his request and application are made pursuant to the provisions of Section 9(i) of the Workers’ Compensation Act, . . . and this is a case coming within the purview of said Act for the reason that it is impossible to determine the exact extent of the disability, loss of use or loss of wage earning capacity suffered by [Cook], and it would be to the best interests of [Cook] for the Commission to allow [MP&L] to settle and compromise [its dispute] with [Cook] . . . .
¶21. Thus, it turns out that the factual distinction that the Employer/Carrier attempt to draw
between this case and Cook does not exist. Just like this case, Cook involved a
compromise/9(i) settlement under section 71-3-29.
¶22. A few months after the Commission approved the settlement in Cook, Cook filed a
complaint in circuit court alleging that MP&L had stopped payment of temporary disability
benefits and refused to pay permanent disability benefits in bad faith. A jury returned a
verdict in favor of Cook. See Cook, 832 So. 3d at 478, 481, 484 (¶¶4, 17, 32).
¶23. On appeal to the Supreme Court, MP&L made the same basic arguments that the
Employer/Carrier make in this case. MP&L argued that Cook had not exhausted his
administrative remedies because he entered into a compromise settlement and never obtained
11 a determination from the Commission that he was entitled to the benefits that MP&L had
allegedly denied in bad faith. MP&L also argued that the circuit court and the jury lacked
“jurisdiction” to make that finding because the question whether Cook was entitled to the
disputed benefits was within the “exclusive administrative jurisdiction” of the Commission.
See id. at 479-80 (¶¶8-15); Appellant’s Brief, Cook, No. 2001-CA-00079-SCT, at 18-28 (Jan.
17, 2002). As discussed above, the Supreme Court rejected these arguments and held that
Cook was entitled to pursue his bad-faith claim in the circuit court because the Commission
had approved the parties’ settlement, and “nothing was left pending before [the
Commission].” Cook, 832 So. 2d at 480 (¶15).
¶24. After reviewing the record in Cook, it becomes clear that the only arguably significant
distinction between this case and Cook is that MP&L initially admitted that Cook suffered
a compensable injury and, for a period of time, voluntarily paid temporary disability benefits
and Cook’s medical bills. Here, in contrast, the Employer/Carrier have disputed the
existence of a compensable injury from the outset of the case. However, this factual
distinction is not material or legally significant. The relevant comparison is that both in Cook
and in this case, the employer/carrier refused to pay the benefits that were the subject of the
plaintiff’s bad-faith lawsuit, and the Commission had never made a determination that the
plaintiff was entitled to those disputed benefits. Rather, that dispute was the subject of the
parties’ compromise settlement. Thus, consistent with Cook, we conclude that Thornhill
exhausted his administrative remedies by obtaining the Commission’s approval of a
settlement that left nothing more pending before the Commission. Cook, 832 So. 2d at 480
12 (¶¶14-15).
¶25. Finally, as noted above, the Employer/Carrier also argue that the circuit court lacks
jurisdiction to consider Thornhill’s claim. Specifically, they argue that the circuit court lacks
jurisdiction because this Court has stated that
the Commission has exclusive jurisdiction to determine in the first instance whether [a] claimant is entitled to [workers’ compensation] benefits. Therefore, the claimant must obtain a final judgment from the Commission that he is entitled to benefits—i.e., he must exhaust his administrative remedies—before instituting an action for the alleged bad faith denial of those benefits.
Hardaway, 211 So. 3d at 722 (¶16) (emphasis added) (collecting cases).
¶26. However, there is no jurisdictional issue in this case. In prior cases in which this
Court or the Supreme Court has referred to the Commission’s jurisdiction to decide claims
for workers’ compensation benefits, we have done so because a claimant was attempting to
litigate his bad-faith claim while his underlying case was still pending before the
Commission. See, e.g., id. at 720-22 (¶¶5, 9, 17); Walls I, 797 So. 2d at 975-77 (¶¶8-9, 18);
Walls II, 177 So. 3d at 1159, 1163 (¶¶7-8, 31-32). In effect, the claimant was attempting to
circumvent the Commission’s “continuing jurisdiction over such cases.” Walls I, 797 So. 2d
at 977 (¶18). The essential concern in that scenario is that “it would be ‘frighteningly
conceivable’ that a jury could find the [underlying workers’ compensation] claim was
compensable and award punitive damages for bad-faith conduct, even though the
Commission—vested with exclusive jurisdiction—later found the claim was not
compensable.” Walls II, 177 So. 3d at 1163 (¶31) (quoting Kitchens v. Liberty Mut. Ins., 659
F. Supp. 467, 469 (S.D. Miss. 1987)). That risk is absent when, as in this case, the
13 Commission has already approved a full and final settlement of the underlying claim.
Because “nothing [is] left pending before [the Commission],” Cook, 832 So. 2d at 480 (¶15),
there is no risk that a jury will usurp the Commission’s jurisdiction or return a verdict that
conflicts with any finding of the Commission. In such a case, “the circuit court clearly ha[s]
jurisdiction” to hear the claimant’s bad-faith claim. Id. at (¶12).
CONCLUSION
¶27. In summary, we hold that Thornhill exhausted his administrative remedies because
he fully and finally settled his workers’ compensation claim against the Employer/Carrier,
the Commission approved the settlement, and there is nothing left pending before the
Commission. Cook, 832 So. 2d at 480 (¶¶14-15). In addition, because there is nothing left
pending before the Commission, there is no risk of a jury verdict or a judgment that will be
inconsistent with any finding or determination made by the Commission. Accordingly, the
circuit court has jurisdiction to hear Thornhill’s bad-faith claim. Id. at (¶12). Therefore, the
circuit court erred by dismissing the complaint, and we reverse and remand the case so that
Thornhill may proceed on his bad-faith claim in the circuit court.
¶28. REVERSED AND REMANDED.
BARNES, C.J., CARLTON, P.J., GREENLEE, WESTBROOKS, McDONALD, LAWRENCE, McCARTY, SMITH AND EMFINGER, JJ., CONCUR.