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By Steven K Wellman Of Jenkins Fenstermaker, PLLC on 06/27/2019
Addressing Claims against Third-Party Workers’ Compensation Administrators

The upheaval in the West Virginia (WV) appellate court from 2018 has passed, and the current appellate judiciary has begun to issue opinions. The "new" WV Supreme Court of Appeals has handed down its first decisions regarding workers' compensation appeals since three new justices were seated. In an opinion released June 12, 2019, the court addressed claims against third-party workers' compensation administrators in WV in a decision that could have important implications for the workers' compensation world in West Virginia.

Are All Claims against Third-Party Workers' Compensation Administrators Barred?

While West Virginia law provides workers' compensation as the "exclusive remedy" for workplace injuries, there are several exceptions to this statutory immunity. For example, an employee may sue the employer for excess damages if the injury is alleged to have resulted from the employer's "deliberate intent," as that phrase is defined in our law. Other potentially viable causes of action against the employer related to a workplace injury include workers' compensation discrimination and/or workers' compensation fraud.

In a recent opinion, the West Virginia Supreme Court of Appeals considered whether workers' compensation discrimination claims may be brought against an insurer or workers' compensation claim administrator and mentioned, without actually making a ruling, the issue of workers' compensation fraud claims against insurers and claim administrators. While the holding did not include a bar to statutory fraud claims, the opinion is nevertheless advantageous for employers and those working with them."

The Facts Underlying the Third-Party Workers' Compensation Claim

The court's opinion is State ex rel. Gallagher Bassett Services, Inc. v. Webster, et al., a case involving injuries to claimant Robin Lusk, a former employee of a trucking company whose claims were administered by Gallagher Bassett. There was no dispute that Lusk had been injured, but the employer opposed the workers' compensation claim, stating that Lusk's injuries were not incurred in the course of her employment because she had falsified her log book and essentially had taken herself out of the scope of employment.

Based on the information regarding the circumstances of the claim and the allegedly falsified log book, the claim administrator denied the workers' compensation claim. The claimant protested the denial of her workers' compensation claim, and, following an expedited hearing on October 9, 2015, the WV Workers' Compensation Office of Judges reversed the denial of the claim and held it compensable for various injuries. Lusk then filed suit against the employer, asserting various claims.

A Civil Suit Alleging Workers' Compensation Fraud and Discrimination Claims against Third-Party Workers' Compensation Administrators

On January 4, 2018, the claimant sought to amend her civil complaint against the employer, seeking to add workers' compensation fraud and discrimination claims against Gallagher Bassett. Gallagher Bassett moved to dismiss the claims, but the trial court denied Gallagher Bassett's motion. Gallagher Bassett then filed a petition with the West Virginia Supreme Court of Appeals known as a writ of prohibition, asking the court to dismiss Lusk's claims against it. Gallagher Bassett argued that the workers' compensation discrimination claim was barred by statute and that both claims were untimely filed and, thus, were barred by the statute of limitations.

The Exclusivity Rule for Third-Party Administrators in WV Bars the Discrimination Claim

WV Code § 23-2C-21(a) (2009) states as follows: "No civil action may be brought or maintained by an employee against a private carrier or a third-party administrator, or any employee or agent of a private carrier or third-party administrator, who violates any provision of this chapter or chapter thirty-three of this code." The court held that this code section plainly prohibits any claim for workers' compensation discrimination against a workers' compensation claim administrator. Therefore, the complaint against Gallagher Bassett alleging that it discriminated against Lusk on the basis of her workers' compensation claim was dismissed.

The court also held that both claims against Gallagher Bassett, i.e. the workers' compensation discrimination and fraud claims, were untimely under the applicable statute of limitations and were therefore dismissed on that basis.

No Ruling on Whether the Exclusivity Rule Applies to Fraud Claims against Third-Party Workers' Compensation Administrators

While Gallagher Bassett argued that the discrimination claim was barred by WV Code § 23-2C-21(a), it did not argue that the same statute barred the fraud claim. Regarding the fraud claim, the only argument presented was that the claim was barred because it was not timely filed. However, in footnote 11, the court touched upon the potential applicability of WV Code § 23-2C-21 to workers' compensation fraud claims, commenting:

"Our holding suggests a further question as to whether W. Va. Code § 23-2C-21(a) also bars Ms. Lusk from asserting a cause of action against Gallagher Bassett for workers' compensation fraud. In [Persinger v. Peabody Coal Co., 196 W. Va. 707, 474 S.E.2d 887 (1996)], we recognized a cause of action for 'knowingly and intentionally fraudulently misrepresenting facts . . . in opposition to [an] employee's [workers' compensation] claim . . . with the intention of depriving the employee of benefits rightfully due him.' Syl. Pt. 1, in part, Persinger, 196 W. Va. 707, 474 S.E.2d 887. Conduct that would provide a cause of action under Persinger would also seem 'unreasonable' for purposes of W. Va. Code § 23-2C-21(c), which might plausibly implicate Section 21's ban on civil actions against third-party administrators for 'violat[ing] any provision of this chapter[.]' W. Va. Code § 23-2C-21(a) (emphasis added)."

Because Gallagher Bassett was not yet arguing that the workers' compensation fraud claim should be dismissed pursuant to WV Code § 23-2C-21(a), and because the claim was time-barred under the statute of limitations in the first place, the court declined to address whether WV Code § 23-2C-21(a) bars fraud claims against insurers and third-party administrators in WV in the workers' compensation context and reserved this for decision in subsequent litigation.

A Summary of What State ex rel. Gallagher Bassett Does and Does Not Say

The court's holding that a workers' compensation discrimination claim cannot be brought against an insurer or claim administrator is extremely favorable for companies offering those products and/or performing those services. If the court ultimately holds that workers' compensation fraud claims cannot be brought against a workers' compensation insurer or claim administrator, then the exclusive remedy for alleged workers' compensation fraud by an insurer or claim administrator would be an award of attorneys' fees and costs, as provided by WV Code § 23-2C-21(c), for "unreasonably" denying the claim or benefits.

It is important to note that the Gallagher Bassett case does not apply to or prohibit a claim for discrimination or fraud against a claimant's employer. In addition, the court expressly noted that Lusk's complaint asserted statutory causes of action; even if a statutory fraud claim is ultimately barred by WV Code § 23-2C-21(a), there could still be a viable cause of action for common law fraud.

For further explanation of claims against third-party workers' compensation administrators in WV, including fraud claims against third-party administrators, or other workers' compensation matters, contact Steve Wellman, one of the highly respected WV workers' compensation attorneys at Jenkins Fenstermaker, PLLC. With offices conveniently located in Huntington, and Clarksburg, you can reach us by calling (304) 523-2100 or (866) 617-4736 toll-free or by completing our online contact form.