Certified questions of law from the United States District
Court for the Northern District of Iowa, Mark W. Bennett,
federal district court certified a question of Iowa law in a
bad-faith action brought by an injured worker against a
workers' compensation carrier and a third-party claims
Anthony J. Bribriesco of Bribriesco Law Firm, PLLC,
Bettendorf, for appellant.
Goosmann and Anthony Osborn of Goosmann Law Firm, PLC, Sioux
City, for appellees.
P. Duffy of Nyemaster Goode, P.C., Des Moines, for amici
curiae Iowa Defense Counsel Association and the American
worker was injured on the job when his vehicle was
rear-ended. He filed a claim for benefits with the workers
compensation commissioner. Later, he filed a bad-faith action
in the district court against his employer's workers'
compensation carrier and its third-party administrator. The
action was removed to federal court.
federal district court has asked us to answer the following
certified question of Iowa law: "In what circumstances,
if any, can an injured employee hold a third-party claims
administrator liable for the tort of bad faith for failure to
pay workers' compensation benefits?"
Iowa, the bad-faith cause of action arises from (1) the
special contractual relationship between insurer and insured,
(2) the specific statutory and administrative duties imposed
on insurers, or (3) some combination of the two. In
workers' compensation, we have emphasized the statutory
and administrative duties of workers' compensation
carriers. As we discuss herein, a third-party administrator
does not possess these attributes that have led to the
imposition of bad-faith liability. Accordingly, we answer the
question as follows: under Iowa law, a common law cause of
action for bad-faith failure to pay workers' compensation
benefits is not available against a third-party claims
administrator of a worker's compensation insurance
Background Facts and Proceedings.
we answer a certified question, we rely upon the facts
provided with the certified question," and therefore
"restate the facts as set forth by the federal district
court." Baldwin v. City of Estherville, 915
N.W.2d 259, 261 (Iowa 2018). The United States District Court
for the Northern District of Iowa described the facts as
[Samuel] De Dios alleges that, at all material times, he has
been a resident of Woodbury County, Iowa, and that he was
employed by Brand Energy & Infrastructure Services. He
alleges that Brand had a workers' compensation insurance
policy with defendant Indemnity Insurance Company of North
America, but that Indemnity "delegated its authority of
investigating, handling, managing, administering, and paying
benefits under Iowa Workers' Compensation Laws to
[defendant] Broadspire Services, Incorporated." Amended
Complaint, ¶ 4.
More specifically, De Dios alleges the following about
Broadspire's duties and its relationship with Indemnity:
5. At all times material to the Petition, the INSURANCE
COMPANY and BROADSPIRE were responsible for making timely
payment of workers' compensation benefits to employees of
the EMPLOYER, including SAMUEL. Plaintiff will refer to both
the INSURANCE COMPANY and BROADSPIRE collectively as
6. BROADSPIRE and the INSURANCE COMPANY are essentially one
and the same entity for purposes of the instant action.
7. The INSURANCE COMPANY lacked the necessary support staff
to investigate on-the-job injuries in Iowa, including
SAMUEL's on-the-job injury.
8. The INSURANCE COMPANY lacked the necessary support staff
that had the experience or knowledge to make an informed
decision on whether to pay benefits pursuant to Iowa
Workers' Compensation Laws.
9. The INSURANCE COMPANY obligated BROADSPIRE to provide
actuarial services for workers' compensation claims,
including SAMUEL's workers' compensation claim.
10. The INSURANCE COMPANY obligated BROADSPIRE to provide
underwriting services for workers' compensation claims,
including SAMUEL's workers' compensation claim.
11. BROADSPIRE performed the tasks of a workers'
compensation insurance company in Iowa.
12. BROADSPIRE received a percentage of the premiums that the
EMPLOYER paid to the INSURANCE COMPANY.
13. BROADSPIRE's compensation package with the INSURANCE
COMPANY was tied to the approval or denial of workers'
compensation claims: BROADSPIRE received more of the
EMPLOYER's premium as the payment of workers'
compensation benefits decreased.
14. BROADSPIRE had a financial risk of loss for workers'
compensation claims it administered on behalf of the
INSURANCE COMPANY, including SAMUEL's workers'
15. The INSURANCE COMPANY had a financial risk of loss for
workers' compensation claims that were administered by
BROADSPIRE, including SAMUEL's workers' compensation
16. The INSURANCE COMPANY entered into a reinsurance
agreement with BROADSPIRE for payments made on behalf of
workers' compensation claims, including SAMUEL's
workers' compensation claim.
Complaint at ¶¶ 5-16.
The accident and aftermath
De Dios alleges that, on April 8, 2016, he was assigned by
Brand to work on a construction site located on the private
property of CF Industries. To enter the property, he had to
drive past a security gate and a security guard. He alleges
that, after [he] enter[ed] the property, a vehicle driven by
Jonathan Elizondo crashed into the back of his vehicle,
damaging his vehicle and causing him injuries, including a
lower back injury. The collision was witnessed by the
security guard at the gate, Tina Gregg. De Dios reported the
collision and his work injury to Brand's safety manager,
Ismael Barba. He alleges that Brand authorized him to choose
whatever medical provider he would like to provide care for
the work injury. De Dios chose to be treated at St.
Luke's Hospital, where Dr. Jeffrey O'Tool provided
him with medical care for his work injury.
On April 11, 2016, De Dios returned to work with Brand, but
his back pain worsened. On April 14, 2016, Brand sent De Dios
home because of his work injury. On April 14, 2016, Brand
authorized De Dios to choose whatever medical provider he
would like to see to care for his work injury. On April 15,
2016, De Dios's family doctor, Alisa M. Olson, DO,
treated De Dios for the work injury. De Dios alleges that,
from April 8, 2016, through May 9, 2016, Brand refused to
provide him with "light duty" work. He alleges
that, from April 15, 2016, Indemnity and Broadspire knew or
should have known that he had work restrictions as a result
of his work injury; that Brand refused to provide "light
duty work" within those restrictions; and that Indemnity
and Broadspire were required to pay him Temporary Total
Disability ("TTD") Benefits and/or Healing Period
("HP") Benefits until a determination of maximum
medical improvement was made by a qualified medical expert.
Denial of the claim
De Dios alleges that Broadspire or, in the alternative,
Indemnity made the decision to deny him workers'
compensation benefits. He alleges that, prior to doing so,
neither Indemnity nor Broadspire interviewed him, or
interviewed or contacted the security guard, Tina Gregg, who
had witnessed the accident, or his treating physicians, Dr.
O'Tool and Dr. Olson. He alleges that the defendants'
failure to contact these people violated an insurance
industry standard of "Three-Point Contact" before
denying him workers' compensation benefits. On June 9,
2016, De Dios filed a workers' compensation claim with
the Iowa Workers' Compensation Commissioner against
Indemnity and Broadspire. On August 23, 2016, Indemnity and
Broadspire filed a joint Answer with the Iowa Workers'
Compensation Commissioner and denied liability for De
Dios's work injury. De Dios alleges that Indemnity and
Broadspire did not convey to him the basis for their decision
to deny his claim at that time, that they, in fact, had no
reasonable basis for denying his claim, and that they knew or
should have known that no reasonable basis existed to deny
Standard of Review and Criteria for Answering a Certified
this Court's power to answer certified questions of law,
Iowa Code section 684A.1 provides,
The supreme court may answer questions of law certified to it
by the supreme court of the United States, a court of appeals
of the United States, a United States district court or the
highest appellate court or the intermediate appellate court
of another state, when requested by the certifying court, if
there are involved in a proceeding before it questions of law
of this state which may be determinative of the cause then
pending in the certifying court and as to which it appears to
the certifying court there is no controlling precedent in the
decisions of the appellate courts of this state.
Iowa Code § 684A.1 (2018).
We have therefore held,
It is within our discretion to answer certified questions
from a United States district court. We may answer a question
certified to us when (1) a proper court certified the
question, (2) the question involves a matter of Iowa law, (3)
the question "may be determinative of the cause . . .
pending in the certifying court," and (4) it appears to
the certifying court that there is no controlling Iowa
Baldwin, 915 N.W.2d at 265 (quoting Roth v.
Evangelical Lutheran Good Samaritan Soc'y, 886
N.W.2d 601, 605 (Iowa 2016) (omission in original)).
case, the answer to the certified question will determine
whether De Dios's claim against Broadspire can proceed,
and it does not appear to us (nor did it appear to the
federal district court) that there is any controlling Iowa
precedent. We conclude we should answer the certified
Dolan v. Aid Insurance Company, we first recognized
the tort of first-party insurer bad faith. 431 N.W.2d 790,
790, 794 (Iowa 1988) (en banc). There, the plaintiff filed
suit against his insurer, claiming bad-faith failure to
settle for the underinsured motorist policy limit.
Id. at 791. We found it was "appropriate to
recognize the first-party bad faith tort to provide the
insured an adequate remedy for an insurer's wrongful
conduct" because traditional breach of contract damages
would not always be adequate to compensate for bad faith and
the alternative remedy of intentional infliction of emotional
distress was inadequate due to its limited applicability.
Id. at 794.
found that recognition of the tort was justified "by the
nature of the contractual relationship between the insurer
and insured." Id. We explained,
Although we do not believe this relationship involves the
same fiduciary duties as in the third-party situations, . . .
we have frequently noted that insurance policies are
contracts of adhesion. This is due to the inherently unequal
bargaining power between the insurer and insured, which
persists throughout the parties' relationship and becomes
particularly acute when the insured sustains a physical
injury or economic loss for which coverage is sought.
Recognition of the first-party bad faith tort redresses this
Id. (citations omitted). We adopted the test for bad
faith applied by the Wisconsin Supreme Court in Anderson
v. Continental Insurance Company:
To show a claim for bad faith, a plaintiff must show the
absence of a reasonable basis for denying benefits of the
policy and defendant's knowledge or reckless disregard of
the lack of a reasonable basis for denying the claim.
Id. (quoting Anderson, 271 N.W.2d 368, 376
(Wis. 1978)). We ultimately reversed the district court's
order denying the insurer's motion for summary judgment,
finding as a matter of law that the insured had failed to
show the lack of a reasonable basis for the insurer's
actions under the Anderson test. Id. at
years later, we decided that our holding in Dolan
logically extended to workers' compensation. Boylan
v. Am. Motorists Ins., 489 N.W.2d 742, 744 (Iowa 1992).
In Boylan v. American Motorists Insurance Company,
we held that injured workers could pursue bad-faith claims
against workers' compensation carriers. Id.
There, we reversed an order dismissing a bad-faith tort claim
brought by an employee against his employer's
workers' compensation carrier. Id. at 742, 744.
The district court had found "the relationship between
an injured employee and the employer's workers'
compensation carrier" was unlike the insurer/insured
relationship in which we had recognized tort liability for
bad faith. Id. at 742. The district court relied on
our reasoning in Long v. McAllister, which held,
The insurer has a fiduciary duty to the insured but an
adversary relationship with the victim. The effect of the
policy is to align the insurer's interests with those of
the insured. In meeting its duty to the insured, the insurer
must give as much consideration to the insured's
interests as it does to its own.
Boylan, 489 N.W.2d at 743 (quoting Long,
319 N.W.2d 256, 262 (Iowa 1982)). The district court had also
observed that "an employer or workers' compensation
insurance carrier is not required to pay weekly benefits or
to pay medical service providers prior to the time the
industrial commissioner has determined the employee's
entitlement to benefits." Id.
found, however, that Iowa statutes and the Iowa
administrative code placed obligations on insurers.
Id. We recognized that Iowa Code section 86.13
(1991) imposed "an affirmative obligation on the part of
the employer and insurance carrier to act reasonably in
regard to benefit payments . . . ." Id. We also
noted section 85.27 established an "affirmative
obligation to furnish medical and hospital supplies to an
injured employee," and "although [this] statute
speaks only of the obligation of the employer, the
commissioner's regulations consign these obligations to
the employer's insurance carrier."
Id. The regulations at issue were Iowa Admin.
Code r. 876-2.3 and r. 876-4.10. Id. Rule 876-2.3
Representative within the state. All
licensed insurers, foreign and domestic, insuring
workers' compensation and all employers relieved from
insurance pursuant to Iowa Code section 87.11 shall
designate one or more persons geographically located within
the borders of this state, which person or persons shall be
knowledgeable of the Iowa Workers' Compensation Law and
Rules and shall be given the authority and have the
responsibility to expedite the handling of all matters within
the scope of Iowa Code chapters 85, 85A, 85B, 86, and 87.
The Iowa workers' compensation commissioner shall be
advised by letter of the name, address, and telephone number
of each of the persons so designated. Any change in the
identity, address or telephone number of the persons so
designated shall be reported to the Iowa workers'
compensation commissioner within ten days after such change
(Emphasis added). Rule 876-4.10 states,
Insurance carrier as a party. Whenever
any insurance carrier shall issue a policy with a
clause in substance providing that jurisdiction of the
employer is jurisdiction of the insurance carrier, the
insurance carrier shall be deemed a party in any
action against the insured.
This rule is intended to implement Iowa Code section
Boylan, the predominant justification for
recognizing a bad-faith tort against workers'
compensation carriers was the existence of certain
"affirmative obligations" placed upon them by our
statutory and regulatory scheme. See 489 N.W.2d at
743; see also Joel E. Fenton, The Tort of Bad
Faith in Iowa Workers' Compensation Law, 45 Drake L.
Rev. 839, 847 (1997) ("This bundle of statutory and
administrative obligations imposed on the insurance carrier
creates a Dolan-like relationship between claimant
and insurance carrier, which brings it into the circle of
first-party relationships."). We also noted that the
exclusive remedy defense found in Iowa Code section 85.20
(1991) was not available to insurance carriers.See
Boylan, 489 N.W.2d at 743-44 (citing Tallman v.
Hanssen, 427 N.W.2d 868, 870 (Iowa 1988) ("This
court . . . ...