WORKERS COMPENSATION BAD FAITH LITIGATION IN THE WAKE OF SUMMERS v. ZURICH AMERICAN

1. WORKERS COMPENSATION BAD FAITH LITIGATION IN THE WAKE OF SUMMERS v. ZURICH AMERICAN Presented By: Bryan N.B. King Brooks A. Richardson Fellers, Snider, Blankenship, Bailey & Tippens 100 N. Broadway, Suite 1700 Oklahoma City, Oklahoma 73102 (405) 232-0621

2. Overview I. Discussion of the Summers opinion and background. II. “Functional Equivalent” of Certification? III. Bad Faith Claims Based on Provision To Provide Non-Monetary Benefits? IV. “Reasonable Inference” Arising from Certification Order? V. Other Issues: Post-Filing

3. SECTION I:A DISCUSSION OFSummers v. Zurich American

4. Summers v. Zurich AmericanBackground • Nancy Summers sustained a work-related injury on March 31, 2004. • Workers Compensation Claim made for medical and wage benefits. • Between May 6, 2005 and October 16, 2007, WCC entered several orders relating to: (1) payment of wage benefits; (2) payment of travel and meal expenses; and (3) provision of medical treatment.

5. Summers v. Zurich AmericanNon-Monetary Benefit Orders

6. Summers v. Zurich AmericanNon-Monetary Benefit Orders

7. Summers v. Zurich AmericanNon-Monetary Benefit Orders

8. Summers v. Zurich AmericanForm 13 Request

9. Summers v. Zurich American“The Certification Order” • October 16, 2007 • On Form 13 Request for specific monetary benefits that Respondent paid prior to hearing. • Resulted in “Agreed Order” • Recites prior orders for non-monetary benefits of “reasonable and necessary medical treatment” (¶2-¶3) • Authorizes specific medical treatment to continue (¶4) • Orders respondent shall pay for specific medical treatment already provided and mileage (¶5 - ¶6) • Directs respondent to “take all reasonable measures to facilitate claimant’s treatment as set out herein within 30 days”

10. Summers v. Zurich AmericanThe Bad Faith Case • Bad Faith petition filed November 17, 2007. • Insurer moved for summary judgment based on Sizemore v. Continental Cas. Co., 2006 OK 36, 142 P.3d 47. • “A claimant seeking to enforce an award must first utilize the mechanism provided in section 42(A) of the [Workers Compensation] Act and have the award certified for enforcement.”

11. Summers v. Zurich AmericanThe Bad Faith Case • Plaintiff argued that • (1) certification not required due to order denying rehearing in Sizemore, which held that a claimant does not have to seek enforcement of a certified award in district court before filing a bad faith action. • (2) certification not required with a failure to provide non-monetary medical treatment.

12. Summers v. Zurich AmericanThe Bad Faith Case • District Court granted summary judgment but said Sizemore was not clear. • Court of Civil Appeals affirmed summary judgment but said Sizemore was not clear. • Oklahoma Supreme Court vacated Court of Civil Appeals, reversed District Court summary judgment, and remanded.

13. Summers v. Zurich AmericanThe Opinion • Holding # 1: Certification of a prior WCC award IS REQUIRED as a pre- requisite to any bad faith action. Discussion: Proper procedure for having an award certified as unpaid under WCC Rule 58.

14. Summers v. Zurich AmericanThe Opinion • Holding # 2: WCC’s 10/16/07 Order was the “functional equivalent” of a certification order. Discussion: Order “demonstrating that medical treatment repeatedly ordered by that Court had not been satisfied.”

15. Summers v. Zurich AmericanThe Opinion • Petition for Rehearing (6/15/09) • No facts in the record demonstrating: • Good cause or lack of good cause was at issue • Notice of a certification hearing was given • Bad Faith claims cannot be premised on failure to provide non-monetary medical treatment in the form of pre-certification. • Rehearing Denied (6/22/09) • Mandate Issued (7/23/09)

16. Summers v. Zurich AmericanIssues On Remand: • “There is no doubt that at the very least a fact issue exists as to whether Insurer has complied with orders of the Workers Compensation Court.” • Whether Insurer has “any justification for its alleged failure to provide all the medical treatment ordered by the Workers’ Compensation Court.”

17. SECTION II:“Functional Equivalence”: (1) When does the “functional equivalent” of a certification order occur? (2) How does a respondent/insurer prevent a “functionally equivalent” order from occurring?

18. The Functional Equivalent Of A Certification Order What Is Not Required: • No notice of a show cause hearing • No Rule 58 motion • No evidence or argument at a hearing concerning cause for non-payment or non-provision of benefits. • No mention of “certification” or “good cause”

19. The Functional Equivalent Of A Certification Order The Hallmarks of A “Functionally Equivalent” Order: • Existence of one or more prior orders awarding benefits or authorizing treatment that appear to involve the same monetary benefits, body parts, or medical visits as discussed in order claimed to be “functionally equivalent.” • Order recites prior order(s) awarding benefits or authorizing treatment, then repeats or contains a more specific order.

20. Example:The “Functionally Equivalent” Order in Summers: ¶1 - 2: “THAT on May 9, 2005 an order was entered . . . THAT . . . directed the respondent to provide the claimant with reasonable and necessary medical treatment by Dr. Douglas Kaplan and Dr. John Munneke, including any necessary referral to Dr. David Johnsen.” * * * ¶4: “THAT Dr. Kaplan, M.D. is authorized to perform treatment set out in his report of April 3, 2007 . . . Dr. John Munneke, M.D. is authorized to continue with examinations and recommendations.”

21. Red Flags When A “Functionally Equivalent” Order May Issue Without Notice: • Whenever a disagreement or dispute arises concerning the scope or nature of medical treatment to be given following an order authorizing “reasonable and necessary” care. • Repeated requests by medical providers for pre-certification by insurer for treatment not specifically authorized but which might be argued to be “reasonable and necessary.”

22. How To Prevent The “Functionally Equivalent” Order • Pre-certify all treatment when requested, regardless of merit? • That’s one way … but unrealistic • Request clarification from WCC in every order authorizing or directing “reasonable and necessary” medical treatment as to what is “reasonable and necessary” • Request language in every order authorizing benefits that the order is not a certification of any failure to provide previously awarded benefits.

23. How To Prevent The “Functionally Equivalent” Order • If clarification language is refused, request continuance in order to present evidence of benefits provided and justification for prior decisions by respondent / insurer. • Request immediate clarification from WCC if a disagreement arises as to what is “reasonable and necessary” treatment . . . don’t wait for claimants to return. • Request written stipulation from claimant’s counsel that certification is not being requested prior to hearing.

24. SECTION III:“Bad Faith Failure to Provide Medical Treatment” (1) What conduct with respect to the provision of non-monetary medical benefits can give rise to a bad faith claim? (2) How does a respondent/insurer prevent a bad faith allegation arising from failure to pre-certify medical care?

25. “Bad Faith Failure to Provide Medical Treatment” THE ISSUE • Respondents do not “provide” medical care • Respondents are not the doctors, nurses, therapists . . . other providers • Respondents do not pick up the claimants, or force them to get treatment

26. “Bad Faith Failure to Provide Medical Treatment” THE ISSUE • Respondents do not “provide” medical care • Respondents are not the doctors, nurses, therapists . . . other providers • Respondents do not pick up the claimants, or force them to get treatment

27. “Bad Faith Failure to Provide Medical Treatment” THE ISSUE • Insurers agree to pay monetary benefits • to insure against expenses resulting from injuries compensable through WC system • no agreement to pre-certify treatment when requested • no requirement of pre-certification before medical treatment given • Insurers not set up for timely pre-certification of all medical treatment

28. “Bad Faith Failure to Provide Medical Treatment” THE ISSUE • The basis of bad faith law in Oklahoma since 1977 has always been failure to pay. • SeeSkinner v. John Deere Ins. Co., 2000 OK 18, ¶ 16, 998 P.2d 1219, 1223 (“tort liability arises only where there is a clear showing that the insurer unreasonably, and in bad faith, withholds payment of the claim of its insured”)(emphasis added); Sizemore v. Cont’l Cas. Co., 2006 OK 36, ¶ 26, 142 P.3d 47, 54 (common law tort action exists against an insurance carrier for failure to pay workers’ compensation award); Fehring v. State Ins. Fund, 2001 OK 11, ¶ 26, 19 P.3d 276, 284 (discussing potential liability of workers’ compensation insurer for failure to timely pay a workers’ compensation award); Barnes v. Oklahoma Farm Bureau Mut. Ins. Co., 2000 OK 55, ¶ 51, 11 P.3d 162, 180-81 (discussing the availability of attorney’s fees for bad faith refusal to pay against an insurer); Newport v. USAA, 2000 OK 59, ¶¶ 12-24, 11 P.3d 190, 196-97 (issue of bad faith against insurer for making “low ball” offers for payment was for jury to decide); . . . Christian v. Am. Home Assur. Co., 1977 OK 141, 577 P.2d 899 (reversing summary judgment for insurer and remanding for further proceedings on a bad faith failure to pay claim).

29. What Conduct Can Constitute “Bad Faith Failure To Provide Medical Treatment” OBVIOUS • Failure to pay for specifically ordered treatment after it has been given and payment has been requested • unless legitimate dispute about scope of order exists and insurer is taking action to resolve.

30. What Conduct Can Constitute “Bad Faith Failure To Provide Medical Treatment” ARGUABLE • Failure to pre-certify (guarantee payment for) specifically ordered treatment before it is given when requested by provider. • Failure to pre-certify specific medical treatment after “reasonable and necessary” treatment has been authorized, if insurer knows/believes that the specific medical treatment for which pre-certification requested is “reasonable and necessary.” • Failure to pre-certify uncertain scope of treatment after “reasonable and necessary” treatment has been authorized, if insurer knows/believes that the medical treatment to be given will be “reasonable and necessary.”

31. How To Prevent Bad Faith Claims Arising From Requests For Pre-Certification Options On Two Ends of Spectrum: • Pre-certify all treatment when requested, regardless of merit? • That’s one way … but unrealistic • Refuse all pre-certification requests, but let providers know (i) when specific treatment has been ordered and that payment will be made once given and payment requested; (ii) all “reasonable and necessary” medical treatment will be paid once given and payment requested? • Demonstrates nothing awarded is actually being refused. • A Solution? Why not pre-authorize treatment if obviously legitimate?

32. How To Prevent Bad Faith Claims Arising From Requests For Pre-Certification Options in Middle Ground: • Pre-certify specifically ordered treatment. • Pre-certify specific treatment when requested if legitimate belief exists that treatment is “reasonable and necessary” • If “reasonableness and necessity” of specific treatment for which pre-certification has been requested are legitimately questioned, then let provider know, in writing, that pre-certification of specific treatment cannot be given because of legitimate questions about proposed treatment but that if treatment once provided is determined to be “reasonable and necessary” after further investigation, then payment will be made.

33. How To Prevent Bad Faith Claims Arising From Requests For Pre-Certification Options in Middle Ground: • If “reasonableness and necessity” of proposed treatment without definite boundaries (i.e., start and end dates, clearly defined scope, etc.) are legitimately questioned, then let providers know, in writing, that treatment cannot be pre-certified because of questions about scope, necessity and reasonableness, but that if treatment once provided is determined to be “reasonable and necessary” after investigation, then payment will be made.

34. How To Prevent Bad Faith Claims Arising From Requests For Pre-Certification Options in Middle Ground: • Request hearing with WCC regarding requests for pre-certification • Discuss with WCC difficulty posed by pre-certification requests for undefined treatment.

35. SECTION IV:“A Reasonable Inference Arises . . .” • What is the reasonable inference that arises from a certification order? • Does the same inference arise from a “functionally equivalent” order? • What can plaintiffs do with the reasonable inference? • How does a defendant overcome it?

36. The “Reasonable Inference” fromSummers v. Zurich American ¶ 14 “The purpose of Sizemore’s certification requirement is twofold. First, it is the legislatively provided incentive for prompt payment of claims for monetary benefits within workers’ compensation, independent of any bad faith claim. Second, the Rule 58 certification hearing by the Workers’ Compensation Court provides the insurer the opportunity to show good cause as to why a final award of benefits remains unfulfilled. When an insurer has failed to provide court-ordered benefits and cannot demonstrate good cause for doing so, a reasonable inference arises that the reason for the failure to obey the award involves a refusal to comply, not mere negligence.”

37. What Does The “Reasonable Inference” of a “Refusal To Comply” Mean? • “Not mere negligence” = permissible inference that insurer’s failure resulted from bad faith. • Badillo v. Mid-Century:“In our view, under Christian and later cases, the minimum level of culpability necessary for liability against an insurer to attach is more than simple negligence, but less than the reckless conduct necessary to sanction a punitive damage award against said insurer.” • No summary adjudication that failure was merely negligent.

38. Arises From Rule 58 Hearing • In Summers, discussion of reasonable inference comes within context of discussing Rule 58 certification hearing. • To create “inference” (i.e., rebuttable presumption), insurer must have an opportunity to show cause why a final award of benefits remains unfulfilled.

39. Does The Inference Arise From A “Functionally Equivalent” Order? YES Arguments • “Functional Equivalence” means just that • The Oklahoma Supreme Court did not distinguish between the two types of Orders, so there is no reason for a district court to distinguish between the two types of Orders.

40. Does The Inference Arise From A “Functionally Equivalent” Order? NO Arguments • In Summers, discussion of reasonable inference comes within context of discussing Rule 58 certification hearing. • In Summers, Supreme Court found “functional equivalence” but noted “at the very least a fact issue exists as to whether Insurer has complied with orders of the [WCC]” • To create “inference” (i.e., rebuttable presumption), insurer must have an opportunity to show cause why a final award of benefits remains unfulfilled.

41. What Does Plaintiff Do With Reasonable Inference? • Oppose Motions for Summary Judgment • Request Jury Instruction on effect of Certification Order from WCC? • Move for summary adjudication on elements of failure to provide benefits and bad faith? • Damages trial only? • Argue insurer has no evidence to rebut inference?

42. How Does Defendant Overcome Reasonable Inference? • Insurer must present evidence of legitimate disagreement over whether benefits were owed (or required to be provided) and efforts to reasonably resolve issue. • Insurer should challenge correctness of WCC Certification Order in order to maintain appellate issue – no concession that “good cause” did not exist.

43. OTHER ISSUES • What happens when WCC case continues while bad faith litigation is pending? • Post-certification conduct? • Global settlement issues • Can post-bad-faith-action orders in WCC affect bad faith action? • Privilege Issues • Reserve discovery in ongoing WCC case

44. WORKERS COMPENSATION BAD FAITH LITIGATION IN THE WAKE OF SUMMERS v. ZURICH AMERICAN Presented By: Bryan N.B. King Brooks A. Richardson Fellers, Snider, Blankenship, Bailey & Tippens 100 N. Broadway, Suite 1700 Oklahoma City, Oklahoma 73102 (405) 232-0621