Iowa Court of Appeals Affirms Summary Judgment Ruling Against Claimant in Bad Faith Claim

In Saltern v. HNI Corporation and Gallagher Bassett Services, No. 18-1748 (Iowa App. Oct. 9, 2019), the Court of Appeals affirmed a district court ruling dismissing a bad faith claim brought by plaintiff Saltern.  The ruling was premised on the court's conclusion that the employer did not lack a reasonable basis for denying benefits and thus the first prong of the bad faith test was not met.

Claimant had prevailed in her workers' compensation claim on her claim for injury due to carpal tunnel syndrome.  Penalty was awarded based on the fact that HNI had not communicated its basis for rejecting the claim under section 86.13 of the Code.  Following the resolution of the workers' compensation claim, Saltern brought a bad faith action.  The district court concluded on summary judgment that at the time that HNI first denied the claim, there was no information to indicate that her carpal tunnel was related to employment. Specifically, no doctor had concluded that the injury was work-related.  

On appeal, claimant argued that because the employer knew the nature of her work and because the employer had not communicated the basis of its denial, bad faith was appropriate. The court concluded that because claimant had not met her burden of demonstrating that the injury arose in the course of employment at that juncture, the claim was fairly debatable and bad faith was inappropriate.  The fact that the employer knew the repetitive nature of her work was not sufficient to demonstrate that the claim was not fairly debatable.  The court also noted that claimant had not raised the date on which an IME report had been issued as a separate date for determining whether the claim was fairly debatable.  

Claimant also argued that under 86.13, defendants had a continuing duty to investigate the claim.  The court found that although this was true, penalty under 86.13 was distinct from bad faith.  The court noted that a penalty finding in the workers' compensation claim was not a guarantee of a bad faith finding. The court concluded that "HNI tried to investigate Saltern's claim, but was stymied by the lack of medical records tying her carpal tunnel syndrome to her sewing work."  The denial of plaintiff's bad faith claim was affirmed.  

    


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