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The junkyard dog of bad faith in multi-state workers’ compensation claims

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The constitutional right to travel freely within the United States combined with the fact, by fluke of legal history, that workers’ compensation laws are state laws often leads to injured workers having to pursue claims in distant states.

Fortunately, this glitch in our legal system sometimes allows injured workers to pursue and collect benefits in multiple states. Experienced and competent workers’ compensation lawyers know to see if other states have jurisdiction and to try to compare benefits between states.

But I’ve never heard lawyers discuss the impact of bad faith laws when it comes to picking a jurisdiction to bring a claim. I think it’s a fact to ponder.

What is bad faith?

A bad faith claim is a way to sue an insurer for failing to pay a claim without a reasonable basis. At least two states that border Nebraska, South Dakota and Iowa, have bad faith claims for workers’ compensation. Nebraska courts have rejected bad faith claims because the exclusive remedy of penalties under Neb. Rev. Stat. 48-125 punishes employers for unreasonable denials. Penalties under 48-125 include attorney fees, usually computed on an hourly basis, and 50 percent fee on late payment of indemnity benefits. The 50 percent penalty doesn’t apply to late payment of medical bills. In practice these fees and penalties are almost always awarded for late payments of benefits due to clerical oversights.

One former workers compensation judge in Nebraska compared 48-125 to a yipping in porch dog. In short, these remedies don’t discourage questionable denials.

But in other states instead of yipping porch dog, the junkyard dog of bad faith lurks for insurers and claims administrators who find cute ways to deny claims.

The junkyard dog of bad faith vs. the yipping porch dog of Neb. Rev. Stat. 48-125

A recent South Dakota Supreme Court decision reversed a workers’ compensation bad faith verdict of $500,000 with $10,000,000 in punitive damages. You don’t see eight-figure verdicts in the universe of Nebraska workers’ compensation The decision was reversed, but it was reversed based on a decision about a jury instruction rather than the size of the verdict. So what is the practical effect of an insurer being liable for an eight figure verdict for an unreasonable denial of a claim?

I think it goes without saying that the prospect of a massive bad faith verdict encourages employers to pay claims. So even if the underlying benefits may be better in a state like Nebraska without bad faith, the pressure of a bad faith claim in another state, may encourage an insurer to pay benefits under another state’s laws.

So even if long-term and maximum benefits are worse under one state’s laws, at least in the short-term getting paid some benefits is better than not getting paid benefits at all.

That’s why it could make sense to initially collect benefits in a state with worse benefits but stronger penalties for non-payment, then collect in a state with better underlying workers’ compensation benefits but weaker penalties for non-payment of benefits.

Some, may complain that workers collecting benefits in two states are “getting two bites at the apple.” That argument misses the point that workers’ compensation benefits, which by design, don’t fully compensate workers for their harms and losses from a work injury. Supreme Court Justice Hugo Black equated workers’ compensation benefits to pension-type benefits. These incomplete benefits are part of the “grand bargain” of workers’ compensation which pays workers benefits for work injuries in spite of fault.

But another part of the grand bargain, is that by fluke of legal history, that workers’ compensation laws are state laws. Sometimes this means workers are forced to pursue cases in distant states and/or are stuck with terrible benefits. But on some occasions it means that workers can collect benefits in multiple states. The presence of strong bad faith laws in a state may affect where an employee initially brings their claim.

The offices of Rehm, Bennett, Moore & Rehm, which also sponsors the Trucker Lawyers website, are located in Lincoln and Omaha, Nebraska. Five attorneys represent plaintiffs in workers’ compensation, personal injury, employment and Social Security disability claims. The firm’s lawyers have combined experience of more than 95 years of practice representing injured workers and truck drivers in Nebraska, Iowa and other states with Nebraska and Iowa jurisdiction. The lawyers regularly represent hurt truck drivers and often sue Crete Carrier Corporation, K&B Trucking, Werner Enterprises, UPS, and FedEx. Lawyers in the firm hold licenses in Nebraska and Iowa and are active in groups such as the College of Workers’ Compensation Lawyers, Workers' Injury Law & Advocacy Group (WILG), American Association for Justice (AAJ), the Nebraska Association of Trial Attorneys (NATA), and the American Board of Trial Advocates (ABOTA). We have the knowledge, experience and toughness to win rightful compensation for people who have been injured or mistreated.

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