Supreme Court Concludes that Third-Party Administrator is Not a Proper Party in Bad Faith Action
Acting on a certified question of law from the federal district court, the Supreme Court in De Dios v. Indemnity Insurance Co. of North America and Broadspire Services, Inc. , No. 18-1227 (Iowa May 10, 2019) concluded that a bad faith action was not proper against a third party administrator because the administrator did not possess the attributes that have led to the imposition of bad faith liability The dispute arose out of a workers' compensation claim in which plaintiff sued both the insurance carrier and 3d party administrator for bad faith. The court found that the bad faith cause of action arises from: 1) the special contractual relationship between the insurer and insured, 2) the specific statutory duties imposed on insurers, or 3)some combination of the two. Because a 3d party administrator did not possess these attributes, according to the court, bad faith liability against that entity was improper. The court canvasses the law of bad faith, both generally and in t