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Clements v. Alternative Workforce8/14/2002
An employee appeals from the district court's dismissal of a common law action against his uninsured employer for bad faith denial of his worker's compensation claim. REVERSED AND REMANDED.
Can an injured employee maintain a common law action against his uninsured employer for bad faith failure to pay workers' compensation benefits? The district court said no. We disagree and, accordingly, reverse and remand.
I. Background Facts and Proceedings
The facts are essentially undisputed. David Clements worked for Alternative Workforce, Inc. "Alternative" in Dubuque. Clements was injured on the job . Alternative had no workers' compensation coverage in Iowa and declined to pay Clements any benefits.
Clements sued Alternative, claiming the employer acted in bad faith. Alternative answered and asserted in part that Iowa had not recognized a common law bad faith action against an uninsured employer. Alternative subsequently filed a motion for adjudication of law points. The district court initially denied but later granted the motion and dismissed Clements' petition. This appeal followed.
II. Scope and Standard of Review
Our rules of civil procedure allow a court to "separately hear and determine any point of law raised in any pleading which goes to the whole or any material part of the case." Iowa R. Civ. P. 1.454. Such a ruling is known as an adjudication of law points. Id. Ordinarily, it must be based only on the uncontroverted facts in the pleadings. Explore Info. Servs. v. Iowa Info. Sys., 636 N.W.2d 50, 56 (Iowa 2001). Our review of the ruling is on error. Westfield Ins. Co. v. Economy Fire & Cas. Co., 623 N.W.2d 871, 876 (Iowa 2001).
III. Bad Faith Claim
In deciding what type of redress an injured employee has against an employer who lacks workers' compensation insurance, we turn first to Iowa's workers' compensation statutes. Those statutes provide different remedies for insured and uninsured employers.
The liability of an insured employer is limited to the remedies authorized under the workers' compensation statutes. Iowa Code § 85.20. Those remedies are "the exclusive and only" remedies "on account of injury." Id.
An uninsured employer, in contrast, has more expansive liability. Iowa Code § 87.21. An employee may seek compensation for "personal injury" either as authorized under the workers' compensation statutes or "by an action at law for damages." Id. The employer does not receive protection against common law personal injury actions and cannot avail itself of certain defenses to which an insured employer would be entitled. Id.
There is, however, a limitation on the liability of uninsured employers: an employee can only pursue one of the remedies set forth in section 87.21. See Stroup v. Reno, 530 N.W.2d 441, 443 (Iowa 1995) (holding that once an employee has chosen to pursue one of two methods of recovery, statute forecloses later pursuit of other remedy). An employee may either file a statutory workers' compensation claim before the workers' compensation commissioner or may file a common law personal injury action in court, but cannot do both. Id.
Clements elected to pursue the administrative option, but when Alternative refused to pay statutory benefits, Clements filed this common law bad faith action. Alternative maintains the election of remedies language of section 87.21 prevents Clements from maintaining this action. We disagree.
Section 87.21, by its terms, pertains to remedies for personal injury. Iowa Code § 87.21. Clements' lawsuit does not seek compensatory damages for injuries sustained in the accident but punitive
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