Douglas Spencer v. Annett Holdings, Inc.
757 F.3d 790
8th Cir.2014Background
- In Jan 2007 Spencer, an Annett trucker, reported a work-related knee injury; Annett initially provided and directed medical care and authorized light duty and later surgery after some review.
- Spencer sought additional care without Annett’s approval, obtained a surgeon’s recommendation for surgery, and retained counsel who disputed which state’s law governed his care; Iowa law ultimately controlled.
- Spencer delayed an independent exam in Des Moines requested by Annett; Annett suspended benefits and withheld authorization while investigating, then ultimately authorized surgery after administrative petitions and settlement-related communications.
- After surgery and settlement on some issues, Spencer sued Annett in Iowa state court (2009) for bad-faith denial/delay of care and healing-period benefits; Annett later learned (from a neighbor) facts suggesting the injury occurred at Spencer’s home and counterclaimed for fraud and unjust enrichment.
- Spencer filed a federal diversity action repeating state-law bad-faith claims; cross-motions for summary judgment resulted in dismissal by the district court.
- The Eighth Circuit affirmed: it held Spencer had to exhaust workers’ compensation administrative remedies for the denial-of-care claim, that Annett had a reasonable basis to withhold benefits while Spencer refused the requested exam, and that judicial estoppel barred Annett’s later fraud counterclaim after it had admitted liability in an earlier administrative proceeding.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Spencer could sue in court for bad-faith denial of medical care without exhausting Iowa workers’ compensation remedies | Spencer: his bad-faith claim is independent (total denial) and need not be exhausted | Annett: exclusivity of Iowa workers’ comp remedies requires administrative exhaustion for dissatisfaction-with-care claims | Court: Must exhaust administrative remedies; claim is one of dissatisfaction with care and falls within exclusivity of Iowa workers’ compensation law |
| Whether Annett acted in bad faith by refusing to pay healing-period benefits (Apr–Oct 2007) | Spencer: Annett unreasonably delayed payment while he awaited surgery | Annett: Benefits suspension was reasonable because Spencer refused company-appointed IME and employer may suspend benefits under Iowa Code § 85.39 | Court: Annett had a reasonable basis; the denial was at least fairly debatable, so no bad-faith liability |
| Whether it was unreasonable for Annett to require Spencer to travel ~700 miles for an independent medical exam | Spencer: the distance was an undue burden making the IME unreasonable | Annett: Iowa law permits IMEs at the employer’s chosen physician; travel limits for treating physicians don’t automatically constrain IMEs | Court: No controlling authority made such a long IME per se unreasonable; Annett’s request was reasonable under existing law |
| Whether Annett could pursue fraud/unjust-enrichment counterclaims after admitting liability in an earlier administrative proceeding | Spencer: judicial estoppel prevents Annett from reversing a prior, successful admission of liability | Annett: New evidence (neighbor’s statement) produced a significant factual change justifying the change in position; district court should have applied federal law | Court: Judicial estoppel under Iowa law bars Annett; the alleged new evidence was known before the admission and no significant change justified the switch; applying state rather than federal law was proper and outcome would be same |
Key Cases Cited
- Petrillo v. Lumbermens Mut. Cas. Co., 378 F.3d 767 (8th Cir. 2004) (employer’s right to choose employee’s care under Iowa law)
- Kloster v. Hormel Foods Corp., 612 N.W.2d 772 (Iowa 2000) (employee must petition commissioner when dissatisfied with employer-provided care)
- Good v. Tyson Foods, Inc., 756 N.W.2d 42 (Iowa Ct. App. 2008) (exclusivity of workers’ compensation remedies covers dissatisfaction-with-care claims)
- Gibson v. ITT Hartford Ins. Co., 621 N.W.2d 388 (Iowa 2001) (bad faith requires lack of reasonable excuse; fairly debatable claims defeat bad-faith finding)
- Rodda v. Vermeer Mfg., 734 N.W.2d 480 (Iowa 2007) (framework for bad-faith refusal to pay benefits)
- Winnebago Indus., Inc. v. Haverly, 727 N.W.2d 567 (Iowa 2006) (judicial estoppel disallows inconsistent positions absent significant change in facts)
- New Hampshire v. Maine, 532 U.S. 742 (2001) (federal judicial-estoppel principles comparing unfair advantage/detriment)