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Merkens v. Federal Ins. Co.

Court of Appeals of Arizona, First Division

May 21, 2015

ANGELA MERKENS, an Arizona resident, Plaintiff/Appellant/Cross-Appellee,
v.
FEDERAL INSURANCE COMPANY, a foreign insurer, Defendant/Appellee/Cross-Appellant

Appeal from the Superior Court in Maricopa County. No. CV2011-006767. The Honorable Randall H. Warner, Judge.

Surrano Law Offices, Scottsdale, Charles J. Surrano, III, John N. Wilborn, Counsel for Plaintiff/Appellant/Cross-Appellee.

Broening, Oberg, Woods & Wilson, PC, Phoenix, James R. Broening, Robert T. Sullivan, Kevin R. Myer, Counsel for Defendant/Appellee/Cross-Appellant.

Judge Maurice Portley delivered the Opinion of the Court, in which Presiding Judge Patricia A. Orozco and Judge Randall M. Howe joined.

OPINION

Page 1112

PORTLEY, Judge:

¶1 This is a bad faith case. We are asked to decide whether an injured worker who was receiving medical treatment expenses and temporary total disability workers' compensation benefits can sue the insurance company for bad faith and recover any unpaid benefits and related damages without first challenging the carrier's decision to terminate those benefits with the Industrial Commission. Because we find that the superior court properly granted summary judgment for the carrier and did not abuse its discretion by denying the carrier's request for attorneys' fees, we affirm the judgment.

FACTS AND PROCEDURAL HISTORY

¶2 Angela Merkens was injured in 2010 when she accidentally inhaled vinyl cyclo-hexene diepoxide, a toxic substance, while working as a laboratory research associate for Senestech, Inc. She filed a workers' compensation claim and Federal Insurance Company (" Federal" ), Senestech's workers' compensation carrier, accepted the claim and paid her medical expenses and temporary total disability benefits.

¶3 Merkens was treated by Dr. David Baratz for six months without any improvement and he then recommended an open lung biopsy. Because Merkens was going to be in California, Federal sent her to Dr. Ajit Arora for an independent medical examination (" IME" ). It turned out that although Merkens could not attend the appointment, Dr. Arora prepared a report recognizing that the inhaled substance was toxic, but questioning whether any injury occurred.

¶4 Merkens attended an IME that Federal scheduled in Phoenix with Dr. Amy Silverthorn. After the examination, Dr. Silverthorn found that Merkens suffered from chronic airway disease because of the exposure and recommended further testing. The third IME was with Dr. Lawrence Repsher, who reported that Merkens did not suffer from asthma or any other pulmonary or respiratory conditions or diseases, but suggested she be evaluated by a mental health provider.

¶5 After receiving Repsher's report, Federal filed a notice of claim status terminating Merkens's temporary total disability compensation and medical expenses because she did not have a permanent disability. Merkens did not challenge Federal's decision with the Industrial Commission. Instead, she sued Federal for breach of contract and bad faith.[1]

¶6 Claiming that Merkens had failed to exhaust her administrative remedies or establish bad faith or damages, Federal moved for summary judgment. The superior court found that Merkens's bad faith claim was not barred by her failure to challenge the denial of benefits with the Industrial Commission, but concluded that she failed to establish that any damages she suffered were separate from her workplace injury or denial of benefits. The court also denied Federal's request for attorneys' fees. After the entry of the judgment, Merkens ...


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