Sims v. United States Fidelity & Guaranty Co.

ATTORNEY FOR APPELLANT: ATTORNEYS FOR APPELLEE:

W. F. CONOUR JULIA BLACKWELL GELINAS

Conour Doehrman DAVID T. KASPER

Indianapolis, Indiana NELSON D. ALEXANDER

Locke Reynolds LLP

Indianapolis, Indiana

ATTORNEYS FOR AMICUS CURIAE ATTORNEY FOR AMICUS CURIAE

INDIANA STATE AFL-CIO IN THE INSURANCE INSTITUTE OF

OPPOSITION TO TRANSFER: INDIANA, THE INDIANA CHAMBER

OF COMMERCE, THE AMERICAN

WILLIAM R. GROTH INSURANCE ASSOCIATION, THE

GEOFFREY S. LOHMAN NATIONAL ASSOCIATION OF

Fillenwarth Dennerline Groth & Towe INDEPENDENT INSURERS, AND

Indianapolis, Indiana THE ALLIANCE OF AMERICAN

INSURERS IN SUPPORT OF

TRANSFER:

NATHAN B. MAUDLIN

Ice Miller

Indianapolis, Indiana

IN THE

SUPREME COURT OF INDIANA

JOHN SIMS, )

)

Appellant (Plaintiff), ) Supreme Court Cause Number

) 49S02-0105-CV-229

v. )

)

UNITED STATES FIDELITY & ) Court of Appeals Cause Number

GUARANTY COMPANY, ) 49A02-9904-CV-295

)

Appellee (Defendant). )

APPEAL FROM THE MARION SUPERIOR COURT NO. 12

The Honorable Susan Macey Thompson, Judge

Cause No. 49D12-9904-CT-489

CIVIL TRANSFER

January 28, 2003

RUCKER, Justice

Indiana Code section 22-3-4-12.1 grants exclusive jurisdiction to the

Worker’s Compensation Board to determine whether a worker’s compensation

insurance carrier committed an independent tort in adjusting or settling

the injured worker’s claim. Specifically subsection (a) of the statute

provides:

The worker’s compensation board, upon hearing a claim for benefits,

has the exclusive jurisdiction to determine whether the employer, the

employer’s worker’s compensation administrator, or the worker’s

compensation insurance carrier has acted with a lack of diligence, in

bad faith, or has committed an independent tort in adjusting or

settling the claim for compensation.

We decide today that the statute is not constitutionally infirm.

Facts and Procedural History

John Sims was employed as a laborer for Hagerman Construction

Corporation. On September 9, 1998, he was injured while working at Conseco

Fieldhouse in Indianapolis. More particularly, while walking down a flight

of metal stairs, Sims tripped over a welding lead that had been draped

across the stairway. Falling down the stairs, Sims sprained his left ankle

and sustained a fracture to his left tibia.

Hagerman Construction filed a “First Report of Injury” notice with its

worker’s compensation carrier, United States Fidelity and Guaranty Company

(“USF&G”). On October 20, 1998, USF&G sent Sims a letter requesting that

he complete a “Statement of Claim” form. Sims did so and returned the

form. On October 22, 1998, Sims contacted USF&G by letter seeking to

schedule medical care and requesting payment of temporary total disability

benefits under the Worker’s Compensation Act (“Act”). USF&G did not

respond. He followed up the request on November 11, 1998. Again the

insurance carrier failed to respond. On November 23, 1998, Sims filed a

complaint in the Marion Superior Court alleging USF&G was grossly

negligent, intentionally inflicted emotional distress, and intentionally

deprived him of certain statutory rights by refusing to provide worker’s

compensation benefits and by denying him access to timely medical care and

physical therapy.

In response, USF&G filed a motion to dismiss under Indiana Trial Rule

12(B)(1) alleging lack of subject matter jurisdiction. Citing Indiana Code

section 22-3-4-12.1, USF&G argued that the Worker’s Compensation Board had

the exclusive jurisdiction over the claims alleged in Sims’ complaint. The

trial court agreed and granted the motion to dismiss. Sims appealed making

several Indiana constitutional challenges to the statute. Finding two of

the challenges dispositive, a divided panel of the Court of Appeals

reversed the trial court holding Indiana Code section 22-3-4-12.1 violated

the “open courts” provision of Article I, Section 12 of the Indiana

Constitution and the right to a trial by jury as expressed in Article I,

Section 20 of the Indiana Constitution. See Sims v. U.S. Fid. & Guar. Co.,

730 N.E.2d 232, 234 (Ind. Ct. App. 2000). Having previously granted

transfer, we conclude the statute violates neither section of the Indiana

Constitution and thus affirm the trial court.

Standard of Review

When a statute is challenged as an alleged violation of the Indiana

Constitution, our standard of review is well settled. A statute is

presumed constitutional until the party challenging its constitutionality

clearly overcomes the presumption by a contrary showing. Boehm v. Town of

St. John, 675 N.E.2d 318, 321 (Ind. 1996). If a statute has two reasonable

interpretations, one constitutional and the other not, we will choose the

interpretation that will uphold the constitutionality of the statute. Id.

We do not presume that the General Assembly violated the constitution

unless the unambiguous language of the statute so mandates. Id. This

Court should “nullify a statute on constitutional grounds only where such

result is clearly rational and necessary.” Bd. of Comm’rs of the County of

Howard v. Kokomo City Plan Comm’n, 263 Ind. 282, 330 N.E.2d 92, 95 (1975).

Discussion

I.

Article I, Section 12 of the Indiana Constitution provides: “All

courts shall be open; and every person, for injury done to him in his

person, property, or reputation, shall have remedy by due course of law.

Justice shall be administered freely, and without purchase; completely, and

without denial; speedily, and without delay.” Ind. Const. art I, § 12

(emphasis added). Sims contends, and the Court of Appeals agreed, that

granting the Worker’s Compensation Board the exclusive jurisdiction to

adjudicate independent tort claims “effectively closes the courthouse doors

to workers seeking to pursue redress against errant employers or worker’s

compensation insurance carriers in attempting to settle their worker’s

compensation claims.” Sims, 730 N.E.2d at 235.

The Worker’s Compensation Act contains an exclusivity provision that

provides:

The rights and remedies granted to an employee . . . on account

of personal injury or death by accident shall exclude all other rights

and remedies of such employee, the employee’s personal

representatives, dependents, or next of kin, at common law or

otherwise, on account of such injury or death, except for remedies

available under IC 5-2-6.1.

Ind. Code § 22-3-2-6 (West Supp. 2002). This statute limits an employee

whose injury meets the jurisdictional requirements of the Act to the rights

and remedies provided therein. Perry v. Stitzer Buick GMC, Inc., 637

N.E.2d 1282, 1285 (Ind. 1994); Campbell v. Eckman/Freeman & Assocs., 670

N.E.2d 925, 930 (Ind. Ct. App. 1996), trans. denied. Accordingly, if an

employee’s injury occurred by accident arising out of and in the course of

employment, then the employee is entitled to worker’s compensation

benefits. The exclusivity provision bars a court from hearing any common

law action brought by the employee for the same injuries. Campbell, 670

N.E.2d at 930; see Wine-Settergren v. Lamey, 716 N.E.2d 381, 384 (Ind.

1999). However, the Act permits an action against third party tortfeasors,

so long as the third party is neither the plaintiff’s employer nor his

fellow employee. I.C. § 22-3-2-13 (West Supp. 2002); see Wine-Settergren,

716 N.E.2d at 384; Campbell, 670 N.E.2d at 930. Under the Act, the term

“employer” includes the worker’s compensation carrier. See I.C. § 22-3-6-

1(a) (West Supp. 2002).

In Stump v. Commercial Union, 601 N.E.2d 327 (Ind. 1992) this Court

was called upon to respond to a certified question from the United States

District Court, Northern District of Indiana, Fort Wayne Division. We were

asked whether Indiana law permitted a cause of action by an injured

employee against a worker’s compensation insurance carrier for injuries

proximately caused by the insurance carrier’s tortious conduct such as

gross negligence, intentional infliction of emotional distress, and

constructive fraud. Id. at 329. This Court held that the exclusive remedy

provision of the Act does not preclude an employee from filing a complaint

in court against a worker’s compensation insurance for such claims. Id. at

333. We reasoned that the exclusive remedy provision precludes an

employee’s action outside the Act only when the injury occurs by accident

and in the course of employment. Id. at 331. However an additional harm

caused by a carrier’s mishandling of a claim was not the type of harm the

Act was intended to compensate. Id. Although not expressly analyzing the

point, we also noted that this interpretation was consistent with the “open

courts” provision of Article I, Section 12. Id.

Relying on the reasoning in Stump, the Court of Appeals majority in

this case held that the portion of Indiana Code section 22-3-4-12.1 which

declares that the Worker’s Compensation Board “‘has the exclusive

jurisdiction to determine whether the . . . employer’s worker’s

compensation insurance carrier has . . . committed an independent tort in

adjusting or settling the claim for compensation ’” violates Article I,

Section 12 of the Indiana Constitution. Sims, 730 N.E.2d at 235 (quoting

I.C. § 22-3-4-12.1(a)). However, Indiana Code section 22-3-4-12.1 was

enacted after Stump and likely represented a legislative response to it.

The Court of Appeals majority acknowledged as much but nonetheless found

that the statute violated the “open courts” clause of the Indiana

Constitution by unreasonably denying Sims access to the courts and denying

him a complete remedy for the insurance carrier’s alleged independent tort.

Id. However, because of the legislative enactment, Stump is no longer

controlling.

In Martin v. Richey, 711 N.E.2d 1273 (Ind. 1999), this Court examined

Article I, Section 12 in the context of considering the constitutionality

of the medical malpractice statute of limitations. In so doing, we noted

that this Court has never held that there is a “fundamental right” to

access to the courts. Id. at 1283. Rather, the legislature “has the

authority to modify or abrogate common law rights provided that such change

does not interfere with constitutional rights.” Id. We reiterated “there

is a right of access to the courts, and . . . the legislature cannot

unreasonably deny citizens the right to exercise this right.” Id.

Here, the Court of Appeals seized on the quoted language to support

the conclusion that the statute violated Article I, Section 12 of the

Indiana Constitution. However, our ruling in Martin did not sweep quite so

broadly. Instead, we determined that the occurrence-based statute of

limitations was unconstitutional as applied to the plaintiff primarily

because otherwise the statute “would impose an impossible condition on

plaintiff’s access to courts and ability to pursue an otherwise valid tort

claim.” Id. at 1284 (emphasis added). In other words, the statute as

applied completely denied plaintiff Martin all access to the courts.

Unlike Martin, Sims is not completely denied access to the courts.

Rather, he is merely required to present his claim first to the full

Worker’s Compensation Board. Thereafter, if he receives an adverse ruling,

then he may invoke the jurisdiction of the appellate courts. See I.C. § 22-

3-4-8(b); Sheets v. Disabilities Servs., Inc., 602 N.E.2d 506, 506 (Ind.

1992). As the Court of Appeals has previously observed, “[t]he

legislature, in enacting [I.C. § 22-3-4-12.1(a)], has merely acted to

restrict the remedy available for a breach of duty imposed upon the

worker’s compensation insurance carrier.” Borgman v. State Farm Ins. Co.,

713 N.E.2d 851, 856 (Ind. Ct. App. 1999), trans. denied, (rejecting a claim

that the statute violated the “open courts” provision of Article I, Section

12). We agree with the Borgman court. Accordingly, we conclude that Sims

has failed to overcome the presumptive constitutional validity of the

challenged statute.

II.

Sims also contends that Indiana Code section 22-3-4-12.1

unconstitutionally deprives him of a jury trial by requiring that his claim

be submitted to the Worker’s Compensation Board. He relies on Article I,

Section 20 of the Indiana Constitution, which dictates, “In all civil

cases, the right of trial by jury shall remain inviolate.” Ind. Const.

art. I, § 20. The phrase “civil cases” has been construed to preserve a

jury right in those civil cases triable by jury at common law. Wright v.

Fulz, 138 Ind. 594, 38 N.E. 175, 175 (1894); Allen v. Anderson, 57 Ind.

388, 389 (1877); Lake Erie, Wabash & St. Louis R.R. Co. v. Heath, 9 Ind.

558, 559-60 (1857). It is true that actions for injuries caused by another

were known under the common law and triable by jury. Warren v. Ind. Tel.

Co., 217 Ind. 93, 26 N.E.2d 399, 403 (1940). However, Sims’ right to

pursue the insurance carrier arose only because of the existence of the

Act. Namely, because of his on-the-job injury, and regardless of fault,

Sims is entitled to compensation. In the words of Judge Baker, “but for

the Act there would be no insurance carrier against whom to bring an

action.” Sims, 730 N.E.2d at 237-38 (Baker, J., dissenting). We agree.

As explained in more detail below, Indiana Code section 22-3-4-12.1 is part

of a special statutory proceeding, and not a “civil case” as contemplated

by Article I, Section 20.

Prior to the enactment of worker’s compensation acts, workers were

faced with the harshness of the common law. An action in tort against the

employer was the only remedy available to an employee injured in the

workplace by the alleged negligence of an employer. These claims were

rarely successful due to the common law defenses of contributory

negligence, assumption of risk, and injury by a fellow servant. See

Frampton v. Cent. Ind. Gas Co., 260 Ind. 249, 297 N.E.2d 425, 427 (1973).

The basic policy underlying the Act was to shift the economic burden for

employment connected injuries from the employee to the employer:

When an injury to a servant is found to be covered by a workers’

compensation act, it is uniformly held that the statutory compensation

is the sole remedy, and that any recovery against the employer at

common law is barred. It is recognized that this remedy is in the

nature of a compromise, by which the worker is to accept a limited

compensation, usually less than the estimate which a jury might place

upon his damages, in return for an extended liability of the employer,

and an assurance that he will be paid.

W. Page Keeton et al., Prosser and Keeton on the Law of Torts § 80, at 574

(5th ed. 1984) (footnotes omitted). This quid pro quo regime represents a

deliberate policy choice by the General Assembly in an apparent response to

the Industrial Revolution when “more and more men poured their lives, their

limbs, and their health into the might of industry.” Ben F. Small,

Workmen’s Compensation Law of Indiana, § 1.2, at 4-5 (1950). As Justice

Dickson has pointed out, “the continuing vitality of a workmen’s

compensation system not only serves the interests of the injured worker, it

also benefits the business community in providing protection from large

verdicts and by permitting the business community to more easily predict,

quantify and plan for anticipated costs from employee injuries.” Evans v.

Yankeetown Dock Corp., 491 N.E.2d 969, 971 (Ind. 1986).

By enacting the Worker’s Compensation Act, the General Assembly has

changed the common law by establishing a statutory scheme that approaches

strict liability: if the accidental injury arises out of and in the course

of employment, then the employer must pay. And this is so regardless of

whether the employee contributed to the injury, assumed the risk of working

in a particular environment, or was injured not by the act of the employer,

but by a fellow employee.

Sims is correct that we have long held that the General Assembly has

the authority to modify or abrogate the common law “so long as such change

does not interfere with constitutional rights.” Martin, 711 N.E.2d at

1283; State v. Rendleman, 603 N.E.2d 1333, 1336 (Ind. 1992). However,

“Indiana’s Constitution does not forbid abolition of old rights recognized

by the common law in order to attain permissible legislative [objectives].”

Rendleman, 603 N.E.2d at 1336. It is axiomatic that because the

employee’s common law right to proceed in court against an allegedly

negligent employer for work related injuries has been abolished by the

Legislature, all attendant rights have been abolished as well. In its

place, the Legislature has provided a special statutory scheme as the

exclusive remedy for such claims. We of course acknowledge that the right

to a jury trial is a “fundamental right in our democratic judicial system”

that must be “scrupulously guarded” against encroachment. Levinson v.

Citizens Nat. Bank of Evansville, 644 N.E.2d 1264, 1267 (Ind. Ct. App.

1994). Nonetheless, this court has held “that there is no ‘fundamental

right’ . . . to bring a particular cause of action to remedy an asserted

wrong.” Martin, 711 N.E.2d at 1283.

Considering the underlying policy and purpose of the Act, the

prohibition against trial by jury is reasonable in our view. The Act is

designed for the humanitarian purpose of providing injured workers with an

expeditious and adequate remedy. Walker v. State, 694 N.E.2d 258, 266

(Ind. 1998); see also Leisure v. Leisure, 605 N.E.2d 755, 758 (Ind. 1993)

(explaining “[t]he Act was enacted to remove obstacles and insure a more

certain remedy for the injured worker.”). One may argue that the remedy

here was neither certain nor expeditious in that USF&G’s delay and non-

responsiveness prompted Sims to file a complaint in the first place.

However, the Act itself is not the culprit. And it still provides an

avenue for redress unencumbered by the inherent delay caused by congested

trial court dockets. In sum, we conclude that Indiana Code section 22-3-4-

12.1 does not violate Article I, Section 20 of the Indiana Constitution.

III.

Last, Sims argued before the Court of Appeals that Indiana Code

section 22-3-4-12.1 also violates Article I, Section 23 of the Indiana

Constitution which provides, “The General Assembly shall not grant to any

citizen, or class of citizens, privileges or immunities, which, upon the

same terms, shall not equally belong to all citizens.” Ind. Const. art. I,

§ 23. Because the court ruled in favor of Sims on other grounds, it did

not reach this issue. We now address this claim as well.[1]

According to Sims, the statute creates an impermissible distinction

between worker’s compensation carriers on the one hand and all other

insurance carriers on the other hand. Sims also complains that injured

workers are treated differently than other injured parties. Specifically,

he says, “under the statute, a tort claimant who suffers additional injury

at the hands of a worker’s compensation insurance carrier faces a greater

burden, diminished remedies, and less compensation than other tort

claimants seeking similar recovery from other types of insurance companies

or insurance coverage.” Br. of Appellant at 19.

Claims asserted under Article I, Section 23 are subject to a two-part

test. First, the disparate treatment accorded by the legislation must be

reasonably related to inherent characteristics, which distinguish the

unequally treated classes. Collins v. Day, 644 N.E.2d 72, 78-79 (Ind.

1994). Second, the preferential treatment must be uniformly applicable and

equally available to all persons similarly situated. Id. at 80. In

determining whether a statute complies with or violates Article I, Section

23, courts must exercise substantial deference to legislative discretion.

Legislative classification becomes a judicial question only

where the lines drawn appear arbitrary or manifestly unreasonable. So

long as the classification is based upon substantial distinctions with

reference to the subject matter, we will not substitute our judgment

for that of the legislature; nor will we inquire into the legislative

motives prompting such classification.

Id. The burden is on the challenger “to negative every conceivable basis

which might have supported the classification.” Id. In this case, Sims

challenges the statute only upon the first part of the Collins two-part

test.

The underlying purposes and policy of the Act, as more fully

discussed in Part II above, justify the difference in treatment that

Indiana Code section 22-3-4-12.1 affords worker’s compensation insurance

carriers versus other insurance carriers as well as injured workers versus

other injured claimants. To provide an “expeditious and adequate remedy”

for workers injured in work-related accidents, regardless of fault, Walker,

694 N.E.2d at 266, and to “insure a more certain remedy for the injured

worker,” Smith v. Smith, 676 N.E.2d 388, 390 (Ind. Ct. App. 1997), the Act

obligates employers covered thereby to provide compensation to injured

employees who at common law were precluded from recovery because of the

common law defenses of contributory negligence, assumption of risk, or

injury by a fellow servant. Unlike other tort claimants, a worker covered

under the Act is absolutely assured of compensation provided the injury was

by accident and arose out of and in the course of employment. Too, the Act

imposes obligations on worker’s compensation carriers that are unique

within the insurance industry. For example, an employer’s notice or

knowledge of an employee’s injury is imputed to the worker’s compensation

carrier, I.C. § 22-3-5-5(c)(3) (West Supp. 2002); the worker’s compensation

carrier is obligated to pay benefits to an injured employee regardless of

any default by the employer after the injury occurred, I.C. § 22-3-5-

5(c)(4), -5.5 (d) (West Supp. 2002); and the employer is required to give

ten days notice to the Worker’s Compensation Board before a worker’s

compensation carrier can terminate an employee’s coverage, I.C. § 22-3-5-

5(c)(5) (West Supp. 2002). By vesting in the Worker’s Compensation Board

the authority to determine whether a worker’s compensation carrier has

committed an independent tort in adjusting or settling a claim, the General

Assembly has drawn classifications between injured claimants and insurers

that are neither arbitrary nor manifestly unreasonable. Because the

disparate treatment in this case is reasonably related to inherent

characteristics, which distinguish the unequally treated classes, we

conclude that Indiana Code section 22-3-4-12.1 does not violate Article I,

Section 23 of the Indiana Constitution.

Conclusion

A party challenging the constitutionality of a statute carries a

heavy burden. In this case, Sims has not carried his burden of

demonstrating that Indiana Code section 22-3-4-12.1 violates Article I,

Section 12; Article I, Section 20; or Article I, Section 23 of the Indiana

Constitution. Therefore, we affirm the judgment of the trial court.

SHEPARD, C.J., and SULLIVAN and BOEHM, JJ., concur.

DICKSON, J., dissents with separate opinion.

DICKSON, J., dissenting.

In Stump v. Commercial Union, 601 N.E.2d 327, 333 (Ind. 1992), we

held that the Indiana Worker's Compensation Act does not authorize injured

employees to seek separate recourse in the courts for claims against their

employers' worker's compensation insurance carriers based on either (a)

breach of duty to act in good faith and to engage in fair dealings with the

employee, or (b) breach of fiduciary obligation owed the employee. However,

we recognized that an injured employee could maintain a common law claim

against the carrier for "tortious conduct such as to constitute gross

negligence, intentional infliction of emotional distress, or constructive

fraud." Id.

In 1997, the Indiana General Assembly enacted a statute declaring that

the Worker's Compensation Board has "exclusive jurisdiction to determine

whether the employer, the employer's worker's compensation administrator,

or the worker's compensation insurance carrier has acted with a lack of

diligence, in bad faith, or has committed an independent tort in adjusting

or settling the claim for compensation" and providing for maximum recovery

of $20,000. Ind. Code § 22-3-4-12.1(a), (b).

This statute does not abolish the civil cause of action recognized

under Stump, but rather compels exclusive recourse to an administrative

tribunal, depriving an injured claimant from seeking redress through courts

of law, and denying the right to a jury trial. I remain convinced that the

statute thereby violates Article I, Section 12 ("All courts shall be open;

and every person, for injury done to him in his person, property, or

reputation, shall have remedy by due course of law. Justice shall be

administered . . . completely, and without denial; . . .") and Section 20

("In all civil cases, the right of trial by jury shall remain inviolate.")

of the Indiana Constitution. Our Constitution prohibits the legislature

from eviscerating a recognized common law cause of action by proclaiming it

ineligible for jury trial.

For these reasons, I would reverse the trial court's order granting

the motion to dismiss.

-----------------------

[1] Sims also contended the statute violates several other Indiana

constitutional provisions: (i) the separation of powers as expressed in

Article III, Section 1; (ii) the prohibition of special legislation found

in Article IV, Sections 22 and 23; and (iii) the grant of judicial

authority as expressed in Article VII, Section 1. Because Sims cites no

authority in support of his contentions, they are waived. In addition,

Sims argued before the Court of Appeals that Indiana Code section 22-3-4-

12.1 was unconstitutional because it limited recovery to a maximum of

$20,000. The Court of Appeals majority declined to address this issue on

the ground that it was not properly raised in the trial court. Sims has

not raised this issue on transfer, and therefore we decline to address it.