The Supreme Court of Iowa has upheld a provision of Iowa law granting immunity to workers' compensation insurance carriers for inspections they perform (or fail to perform).
The Case
A number of employees and former employees of TPI Iowa, LLC, a wind blade manufacturing facility located in Newton, Iowa, sued TPI's workers' compensation insurance carrier, the Insurance Company of the State of Pennsylvania (“ICSOP”), alleging that ICSOP had failed to conduct or had negligently conducted an insurance inspection at TPI's manufacturing facility, which caused serious health problems for them.
Specifically, the plaintiffs alleged that employees at TPI were exposed to hazardous chemicals while manufacturing wind blades at the TPI manufacturing facility. The plaintiffs alleged that their injuries included skin ruptures, rashes, burns, swollen and wounded eyelids, irregular vaginal bleeding, extensive body itches, congestion in the throat and lungs, and erectile dysfunction.
The plaintiffs sought compensatory damages for their personal injuries, medical expenses, and lost wages. They also sought punitive damages.
ICSOP moved to dismiss the plaintiffs' claims against it. ICSOP noted that the only claims against it arose from its alleged failure to inspect or from its allegedly negligent inspections. ICSOP asserted that it had statutory immunity from such claims under Iowa Code Section 517.5, which provides, “No inspection of any place of employment made by insurance company inspectors . . . shall be the basis for the imposition of civil liability upon the inspector or upon the insurance company.”
The plaintiffs argued that Section 517.5 was unconstitutional under the Iowa constitution.
The trial court held that Section 517.5 was constitutional and granted ICSOP's motion to dismiss.
The dispute reached the Supreme Court of Iowa.
The Iowa Supreme Court's Decision
The court affirmed.
In its decision, the court explained that the “grand bargain embraced in our workers' compensation statute” – where workers gave up their common law right to seek a full range of compensatory and punitive damages available at common law and instead became eligible for limited statutorily-based compensation, in return for which employees no longer had to show employer fault, but only that their injury arose in the course of employment – was “not to be so narrowly construed as to include only provisions related to the employer and the employee.”
According to the court, the “logical extension” of the “grand bargain” was that the legislature could “reasonably provide immunity for inspections performed by a workers' compensation carrier.”
The court reasoned that if an insurance carrier were exposed to risks as a result of negligent inspections, it might choose either to forgo inspections or to raise its insurance rates. In the court's view, the legislature could decide that the grand bargain behind the workers' compensation scheme was “best balanced by including immunity for inspections performed by workers' compensation carriers.”
Concluding that the workers' compensation insurer was “part of the workplace” and was “inextricably tied to the employer,” the court rejected the plaintiffs' constitutional challenge to Section 517.5.
The case is Clark v. Insurance Co. of Pennsylvania, No. 17-2068 (Iowa May 3, 2019). Attorneys involved include: Matthew M. Sahag of Dickey & Campbell Law Firm, PLC, Des Moines, for appellants. Keith P. Duffy and Mitchell R. Kunert of Nyemaster Goode, P.C., Des Moines, for appellee. D. Brian Scieszinski of Bradshaw Fowler Proctor & Fairgrave, Des Moines, for amici curiae Iowa Association of Business and Industry, Employers Mutual Casualty Company, and United Fire & Casualty Company.
Insurance Coverage Law Center Comment
A number of other jurisdictions have decided that the “grand bargain” behind the workers' compensation scheme is best balanced by including immunity for inspections performed by workers' compensation carriers in their workers' compensation laws, either by expressly stating that the term “employer” includes an employer's workers' compensation insurance company or by including language in their statutes making clear that workers' compensation insurance companies, to the extent they are subject to liability, are not liable for activities related to safety inspections. See, e.g., Ala. Code § 25-5-1(4) (term employer includes insurer); Ark. Code Ann. § 11-9-409(e)(1) (insurance company has no liability based on allegation that the accident was caused or could have been prevented by a program or inspection by the insurance company); Del. Code Ann. tit. 19, § 2301 (employer includes insurer as far as practicable); 820 Ill. Comp. Stat. Ann. 305/5(a) (extending statutory immunity to insurer providing safety service, advice, or recommendations); Ind. Code Ann. § 22-3-2-5(a) (insurance carrier is liable only to extent and manner specified by statute); Me. Rev. Stat. Ann. tit. 39-A, § 102(12) (term employer includes insurer unless contrary intent is apparent or inconsistent with legislative purpose).
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].