United States District Court, N.D. Iowa, Cedar Rapids Division
MEMORANDUM OPINION AND ORDER ON MOTION TO DISMISS
LEONARD T. STRAND, CHIEF JUDGE.
case is before me on a motion (Doc. No. 8) by defendants
Whirlpool Corporation (Whirlpool) and Gallagher Bassett
Services, Inc. (Gallagher Bassett), to dismiss Count II
(Intentional Infliction of Emotional Distress) of
plaintiff's petition (Doc. No. 6) as well as
plaintiff's claim for severe emotional distress damages
alleged under Count I (Breach of Contract). Defendant
ExamWorks Clinical Solutions, LLC (ExamWorks) joins in the
motion. See Doc. No. 9. Plaintiff Teodora Shaw
(Shaw) has filed a resistance (Doc. Nos. 15,
16).ExamWorks has filed a reply (Doc. No. 18),
as have Whirlpool and Gallagher Bassett (Doc. No. 21). I find
that oral argument is not necessary. See Local Rule
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
filed her petition (Doc. No. 6) in the Iowa District Court
for Linn County on December 3, 2018. On January 11, 2019,
ExamWorks removed the case to this court based on diversity
of citizenship jurisdiction pursuant to 28 U.S.C. §
1332. See Doc. No. 1. Gallagher Bassett and
Whirlpool consented to the removal. See Doc. No. 4.
speaking, Shaw alleges:
breach of contract and/or tortuously wrongful conduct in the
failure to carefully, reasonably, promptly and transparently,
and in good faith, complete settlement, obtain Medicare
approval and agreement as to conditional Medicare payments
and lien, obtain Medicare approval and agreement as to a
Medicare Set-Aside Agreement and to promptly provide payments
as required under the settlement agreement of [Shaw]'s
worker compensation claims.
Doc. No. 6 at 1. She describes the relationship between the
parties as follows:
At times relevant to the processing of the underlying case as
alleged herein, Ms. Shaw, as an injured worker from Whirlpool
and with a proposed worker compensation claim and/or
settlement with Whirlpool, which involved a Medicare Set
Aside ("MSA") proposal and Medicare conditional
payment proposals ("MSP") as stated hereinafter, was a
third-party beneficiary of a contract between Whirlpool
and/or Gallagher Bassett, and with ExamWorks for the
provision of services to submit and obtain approval of Center
for Medicare and Medicaid Services [CMS] as to a Medicare Set
Aside Arrangement and Medicare conditional payment terms to
complete the proposed worker compensation settlement
agreement alleged hereinafter.
Id. at 4.
alleges that she worked for Whirlpool when she suffered
injuries on October 8, 2009, and March 21, 2011. Id.
at 4-5. As a result of her work-related injuries, Shaw filed
for workers' compensation benefits. Id. at 5.
Gallagher Bassett worked as Whirlpool's third-party
administrator concerning workers' compensation claims.
Whirlpool and Gallagher Bassett disputed Shaw's claim for
workers' compensation benefits. While her claim was
pending, Whirlpool terminated Shaw's employment.
7, 2016, Shaw and Whirlpool (through Gallagher Bassett)
entered into a contingent compromise settlement agreement
(Settlement Agreement) of the workers' compensation claim
pursuant to Iowa Code § 85.35(3). Id. at 5-6.
According to the petition, the Settlement Agreement provided
a. Whirlpool, upon approval of the Iowa Worker Compensation
Commissioner of the Settlement Agreement, was to pay Shaw the
sum of $172, 400.
b. Whirlpool would satisfy future payments and/or past
conditional payments made by Medicare per the terms and
conditions of the "contingency" as set forth on the
Contingent Settlement Cover Sheet attached to the settlement
Id. at 6. That contingency provided:
These parties agree the accompanying settlement and its
approval are conditioned upon the occurrence of the following
event: The collective amount of any MSA/CMS for
Claimant's future medical expenses and any and all
conditional payments, payments of liens made by or asserted
by CMS, Medicare or Medicaid being at the amount at or below
of the Settlement Agreement, Shaw agreed to a release in
which she waived any and all claims against Whirlpool and
Gallagher Bassett and their agents, including all past claims
for bad faith in the processing of the worker compensation
claims and claims arising from her employment and termination
with Whirlpool. Id. at 7. The release did not
include a release of actions related to performance of the
Settlement Agreement. Id. The Iowa Worker
Compensation Commissioner approved the Settlement Agreement
on September 16, 2016.
to the Settlement Agreement, Whirlpool and Gallagher Bassett
were to submit the MSA and MSP conditional payment requests
to CMS and obtain prompt approval of the MSA and MSP
conditional payment liens. Id. Shaw alleges that
ExamWorks did not submit a report to CMS for MSA approval
until January 23, 2017, despite several requests by Shaw to
Whirlpool, ExamWorks and Gallagher Bassett for an update on
completion of the contingencies and after Shaw and her
attorney had to hire Medivest Allocation Services, Inc.
(Medivest), to assist in obtaining the necessary CMS MSA
approval. Id. at 8. Medivest prepared and submitted
a package for approval from CMS of an MSA Agreement.
Id. CMS approved an MSA in the amount of $19, 135 on
February 15, 2017. Id. That same day, Shaw (through
her attorney) requested documentation between the adjuster
and vendor(s) used by Whirlpool, Gallagher Bassett or
ExamWorks for purposes of transparency. Id. at 9. No
documentation was provided.
submitted a request for reconsideration to CMS by March 22,
2017, and CMS confirmed its previous decision to determine
the MSA to be $19, 135. Id. This completed the
process for approval of the MSA for settlement. Id.
On March 24, 2017, Shaw attempted to complete the settlement
and payment of the monies under the settlement. Id.
Whirlpool and Gallagher Bassett refused on the grounds that
the agreement of the amount and extent of the MSP conditional
payments had not yet been obtained by Whirlpool, Gallagher
Bassett or ExamWorks. Shaw requested that Whirlpool and
Gallagher Bassett authorize Medivest to directly work with
CMS for approval of the MSP conditional payment resolution.
This request was rejected. Id.
April 10, 2017, Shaw's attorney contacted CMS and
discovered that the claims for the March 21, 2011, and
October 8, 2009, injuries were incorrectly reported and
further work on the MSP conditional payments could not be
completed until the claims were amended or corrected.
Id. at 9-10. Shaw relayed this information to
Whirlpool and Gallagher Bassett. Id. at 10. On April
24, 2017, Whirlpool, Gallagher Bassett and ExamWorks obtained
an MSP conditional benefits letter stating there were no
conditional payments as to the October 8, 2009, injury date.
Shaw and her attorney requested that Whirlpool make
corrections to complete the process so the proper MSP
conditional payment agreements and resolutions could be
16, 2017, Whirlpool, upon requests from Shaw's attorney,
authorized Medivest to act as its representative to access
information and act to obtain appropriate MSP conditional
payment letters. Medivest worked with Shaw and her attorney
and was able to obtain a final MSP conditional letter payment
amount. On July 28, 2017, CMS issued an MSP conditional
payment letter showing no monies were due and owing for the
March 21, 2011, injury. Shaw alleges that Whirlpool and
Gallagher Bassett acknowledged this letter on August 4, 2017,
but did not immediately provide the final settlement payment.
In carrying out the actions for approval of the MSA and
calculation and payment of any MSP conditional payments made
and/or due to CMS, Shaw alleges that Whirlpool and Gallagher
a. Failed to timely and properly complete the paperwork for
the calculation of and determination and payment of any MSP
conditional payments for past medical expenses paid by
Medicare through CMS.
b. Failed to timely and properly complete the paperwork for
such approval of an MSA/CMS approval.
c. Failed and refused to comply with transparency and
reasonably advise Shaw of the submissions made by and
submitted to CMS by Whirlpool, Gallagher Bassett and
ExamWorks for the MSA approvals and MSP conditional payment
Id. at 12.
obtained a judgment dated August 18, 2017, from the Iowa
District Court under Iowa Code § 85.42 for a judgment on
the order of the Iowa Worker Compensation Commissioner and
payment of the monies due and owing thereunder. Id.
at 13. Despite this judgment, she alleges that Whirlpool and
Gallagher Bassett continued to fail and refuse to complete
the settlement, including the payment of the remaining lump
sum due and owing from the settlement amount of $172, 400.
Shaw received the payment due under the Settlement Agreement
in September 2017.
alleges two counts against all defendants as a result of the
• Count I - Breach of Contract for Failure to Act to
Obtain CMS Approvals
• Count II - Intentional and Tortious Infliction of
Emotional Distress for Failure to Act to Comply with
Agreement to Provide for Conditional Payment ...