The JDSupra Business Advisor released an article highlighting the legal theories our attorneys’ designed to hold both a worker’s compensation insurer and its Third Party Administrator (“TPA”) liable for improper claims processions actions. In growing fashion, insurance companies “outsource” claims processing to TPAs in order to underwrite risks but still benefit from a TPA’s profit-driven tactics. In turn, the TPA escapes liability because it doesn’t enter into a contractual agreement within the policyholder; but times are changing.
Our client, a customer service representative for Stanley Steemer, fell in a staircase leading to her desk, injuring her knees, hip, and twisting her back. A nurse practitioner later provided a knee brace and issued work restrictions. The nurse practitioner found that, due to worsening pain, this plaintiff was unable to sit at a desk, walk up stairs or stand for long periods.
Through Hartford is Stanley Steemer’sworker’s comp insurer, the company contracted a TPA, Gallagher Bassett (“Gallagher”), to handle the claim. Gallagher’s assigned claims handler began eviscerating the claim. The handler interviewed our client and without speaking to the nurse practitioner concluded the work restrictions listed were “unreasonable.”
This adjuster then denied the nurse’s request that our client visit a pain clinic, and instead hired a private investigator so she could “utilize the results to push for a light duty work release.” She also demanded our client see the insurance company’s medical examiner, but this examiner validated the nurse’s findings. Given the repeated delays of payment, our client has been subjected to significant economic impact, humiliation, worry, distress, and continuing physical damage.
The article discusses our causes of action which were against Hartford’s for breaching its good faith duty to process our client’s claims fairly and equitably, and against Gallagher for aiding and abetting the insurer’s breach. The Arizona federal court agreed with our argument that “the unlawful tactics of a TPA may be imputed to the insurer since good faith is inherent in any insurance contract and cannot be delegated. The court cited Walter v. Simmons, 818 P.2d 214 (Ariz. App. 1991), which found the insurer cannot deprive its insureds of the benefit of the insureds’ bargain just because it passes the off its handling duties.
Regarding direct TPA liability the court agreed that there is a triable issue of fact on the issue of whether the claim had been processed in bad faith by the TPA, and that these entities can be liable for aiding and abetting if the breach consisted entirely of its own actions.
The court’s findings in this case is a victory for all Arizona policyholder’s experiencing improper delay and denials of worker’s comp benefits. The article closes by saying “it would be prudent for insurers and TPAs to anticipate more claims of this type,” and we completely agree.