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Cornelison v. Tig Insurance

Supreme Court of Alaska

August 12, 2016


         Appeal from the Superior Court of the State of Alaska, Third Judicial District, Palmer, Gregory L. Heath, Judge.

          Floyd and Judy Cornelison, pro se, Wasilla, Appellants. Adolf V. Zeman, Landye Bennett Blumstein LLP, Anchorage, for Appellees

          TIG Insurance and Crawford Company/Broadspire. Ray R. Brown, Jessica Dillon, and Michelle Nesbett, Dillon & Findley, P.C., Anchorage, for Appellees Griffin & Smith, Robert Griffin, and Christi Niemann. Matthew D. Regan and Alex Vasauskas, Holmes Weddle & Barcott, PC, Anchorage, for Appellees

          Northern Investigative Associates, Dennis Johnson, and Denara, Inc. Scott Leuning, Leuning & Renner, LLC, Sioux Falls, South Dakota, for Appellee Joel Seres, M.D.

          Before: Fabe, Winfree, and Bolger, Justices. [Stowers, Chief Justice and Maassen, Justice, not participating.]




         An employer and its workers' compensation insurer challenged a former employee's continuing eligibility for workers' compensation, relying on surreptitious video surveillance and a doctor's report issued after the doctor viewed an edited surveillance video. The employee and his wife sued the employer's workers' compensation carrier and a number of others involved in the attempt to terminate benefits; they alleged several causes of action, contending that the video had been purposely edited to provide a false picture of the employee's physical abilities and that the defendants had participated to varying degrees in a scheme to defraud the Alaska Workers' Compensation Board. The trial court granted summary judgment or dismissal as to all of the defendants on all counts. We affirm in part, reverse in part, and remand for further proceedings.


         Floyd Cornelison injured his back at work in 1996 while shoveling dirt. He had back surgery later that year, but it did little to improve his condition. The Board found he was permanently and totally disabled (PTD) in 2001 under the odd-lot doctrine.[1] TIG Insurance, the workers' compensation insurer for Floyd's employer, did not contest that he was PTD; it reclassified his workers' compensation benefits as PTD in 2000. Floyd also received Social Security disability payments, and the employer received an offset for those payments.

         In 2007 TIG began an investigation into Floyd's claim; in pleadings before the superior court, TIG said it sought "potential evidence to show that the benefits being paid [to Floyd] may be excessive." TIG hired a private investigation firm, Northern Investigative Associates, to conduct surveillance and search for information about Floyd. Dennis Johnson was the president and owner of Northern Investigative Associates and an officer of Denara, Inc., which did business under the name Northern Investigative Associates. After investigators employed by the firm surreptitiously filmed Floyd, Johnson created edited videos and presented those videos to TIG. Johnson also wrote reports based on the investigators' notes.

         Floyd and his wife, Judy, alleged that Johnson edited the video to create a false impression of Floyd's physical capacities, making him look more capable than he was in reality and editing out behaviors that showed he was in pain, and contended that Johnson knew from prior experience in workers' compensation cases what type of evidence he needed to produce. They alleged Johnson created this false video to bolster his own business because he knew that if he did not provide sufficient evidence to terminate Floyd's benefits, the insurer would likely not use his investigative services in the future.

         After Johnson reported that Floyd was more active than he claimed to be and provided the edited video, TIG required Floyd to attend an employer's medical evaluation (EME) in 2008 with Dr. Joel Seres, who had previously conducted other EMEs related to Floyd's workers' compensation case.[2] In a 1999 report Dr. Seres told the employer that Floyd had "a significant pain problem that precludes his ability to sit or stand for any significant length of time"; Dr. Seres thought Floyd had "a legitimate source for his pain, " relating it to "the remarkable scarring and sclerosis of musculature that has occurred in his lower back as the direct result of his surgical procedures." That same year, a neuropsychologist associated with Dr. Seres administered a psychological assessment of Floyd and concluded that Floyd provided a reasonable effort in the evaluation and had "a considerable pain problem." And in a 2001 report, Dr. Seres wrote that Floyd had "[p]ersisting mechanical low back pain" and "[m]arked scarring of the musculature of the low back."

         Before the 2008 EME, TIG supplied Dr. Seres with copies of the edited video and Johnson's reports. In his 2008 report, Dr. Seres had a completely different impression of Floyd, writing, "His exaggerated physical limitations as demonstrated in today's evaluation are in sharp contrast to the movements recorded in the surveillance reports and videos." Dr. Seres concluded Floyd had "an exaggerated pain syndrome, which is not supported adequately by the physical findings and is virtually invalidated by the surveillance study." Dr. Seres's report raised "the possibility of drug diversion" and mentioned the edited videos multiple times. According to an email between the insurance adjuster and the law firm representing the employer, Dr. Seres "strongly indicate[d] he [did] not believe [Floyd] is permanently and totally disabled based on the information contained in the surveillance video and the inconsistencies in the evaluation."

         TIG subsequently authorized more surveillance by Johnson; the adjuster's notes record a conversation with one of Johnson's investigators in which the investigator reported that Floyd was "active in his shop and yard on a level of 10 hours a day every day." Johnson created another edited video, which TIG again sent to Dr. Seres. In a 2009 report, Dr. Seres noted that the new edited video contained "remarkable new material... that strongly argues that [Floyd] is actually not impaired in any significant way from a physical standpoint." Dr. Seres also commented, "I have never seen a more remarkable discrepancy between the severe disability that the patient demonstrates when he is seen by me, in comparison to the remarkably normal behavior and physical abilities seen in these surveillance films." He then proceeded to present his "conclusions based upon [his] medical review of the patient's physical capacities demonstrated during the surveillance." Dr. Seres concluded Floyd was "capable of returning to any type of work without restrictions on a full time basis." After acknowledging that he had been retained to give an opinion on Floyd's PTD benefits, Dr. Seres included the following comment in his report: "[Floyd] has indicated to me in the past that he is receiving Social Security Disability (SSDI) income as well. If this is true I believe that the [edited videos] demonstrate Social Security [f]raud."

         In April 2009 TIG filed a petition asking the Alaska Workers' Compensation Board to terminate Floyd's PTD benefits; the law firm of Griffin & Smith represented the insurer, with a paralegal, Christi Niemann, signing the petition itself. Although the petition alleged "new evidence" supported terminating Floyd's benefits, no evidence accompanied the petition, and the petition did not set out any specific facts to support the assertion that Floyd was no longer PTD. Floyd filed a pro se opposition to the petition, denied that he was no longer PTD, and said, "There was no evidence stated or attached in the Petition." The next month, Griffin & Smith filed Dr. Seres's 2008 and 2009 reports with the Board.

         The Board proceedings progressed toward a hearing. Floyd eventually obtained representation, but for a portion of the Board proceedings a non-attorney represented him. In 2012 the employer filed an amended petition to terminate Floyd's benefits in which it set out the factual bases for its petition, including Dr. Seres's reports from 2008 and 2009. In the petition the employer stated that the date Floyd's disability ended was "a date in the future when the . . . Board determines that [Floyd] is not permanently and totally disabled." Floyd continued to receive PTD benefits during the course of the Board proceedings to terminate them.[3]

         In 2011 both Floyd and Judy, representing themselves, filed suit in superior court against some of those involved in the attempt to terminate Floyd's benefits.[4] In their initial complaint they sued only TIG; its adjusters, Crawford & Company and Broadspire Services, Inc.; Griffin & Smith; and two of Griffin & Smith's employees, Niemann and attorney Robert Griffin. The Cornelisons alleged several tort claims and requested damages in excess of $100, 000. About a month later they filed an amended complaint, adding as defendants Dr. Seres, Johnson, Northern Investigative Associates, and Denara, Inc. They filed a second amended complaint in October 2011; this is the latest complaint they filed. An out-of-state attorney, appearing with local counsel, represented the Cornelisons when they filed the second amended complaint.

         In the second amended complaint, the Cornelisons' causes of action included tortious interference with contract rights; negligent infliction of emotional distress (NIED); intentional infliction of emotional distress (IIED); abuse of process; fraud, false light, defamation, libel, slander, and "other misrepresentations"; breach of professional obligations on the part of the defendants; and violations of the Alaska Unfair Trade Practices and Consumer Protection Act (UTPA). The Cornelisons sought damages in excess of $ 100, 000 and some type of injunctive relief against the defendants to prevent a situation like theirs from occurring again. The defendants answered, denying all claims and raising affirmative defenses. The defendants grouped themselves as follows for purposes of representation: Dr. Seres; Johnson, Northern Investigative Associates, and Denara, Inc. (Johnson); TIG, [5] Crawford & Company, and Broadspire Services, Inc. (TIG); and Griffin & Smith, Griffin, and Niemann (Griffin & Smith).

         Litigation ensued, including discovery disputes. The Board proceeding continued toward a hearing as well. In February 2012 the Cornelisons asked the superior court to stay the proceedings until the Board case ended, basing their argument on two alternative grounds: primary jurisdiction and a balancing test imported from situations with both civil and criminal cases proceeding at the same time. In their motion for a stay they referred to AS 23.30.250(a) and (c), [6] and they said they would "submit a Third Amended Complaint to make this particular statutory claim perfectly clear" to the defendants after the Board's decision. The defendants opposed, arguing that the Board did not have jurisdiction over tort claims so that primary jurisdiction did not apply. The court denied the motion to stay, holding that primary jurisdiction did not apply because none of the claims fell within the Board's primary jurisdiction; the court also decided that it was "not required to address the claims in the worker[s'] compensation case, " so a stay would only prejudice the defendants.

         In March 2013 Dr. Seres moved for summary judgment on all of the claims against him. That month Griffin & Smith moved for judgment on the pleadings under Alaska Civil Rule 12(c), arguing, that the exclusive remedy provision of the Alaska Workers' Compensation Act (AWCA) barred the suit.

         In May 2013 the Cornelisons' attorneys asked to withdraw, and the Cornelisons moved for a stay of the proceedings so they could find new counsel. After an ex parte hearing on the motion to withdraw, the court permitted the withdrawal and granted a 90-day stay; the court also stated that it would not grant further continuances for the Cornelisons to get an attorney.

         The Cornelisons did not find new counsel within 90 days, so they again asked the court to stay the proceedings pending resolution of the Board case. The court denied the stay. The Cornelisons petitioned this court for review of the order denying the stay; we denied review because by the time we considered the petition, the Board had already issued its final decision denying the petition to terminate Floyd's benefits. The Cornelisons filed a copy of the Board's decision and order with the superior court in December 2013.[7] In its decision, the Board found that Floyd continued to be permanently and totally disabled, declined to give any weight to Dr. Seres's reports, described Johnson's edited videos as "flawed" based in part on its review of one day of surveillance footage, and decided there was no evidence that Floyd had committed fraud in obtaining either his PTD or Social Security benefits. The Board awarded attorney's fees and costs to the Cornelisons.

         TIG moved for summary judgment in the superior court in November 2013, arguing that there were no issues of material fact with regard to any of the claims against it. In June 2014 Johnson moved for summary judgment on some counts and for dismissal of others under Alaska Civil Rule 12(b)(6).

         The superior court granted summary judgment to Dr. Seres in May 2014. It concluded that Dr. Seres owed no duty to the Cornelisons, so there could be no breach of a duty. It also decided that claims against Dr. Seres were time-barred because the evaluation that was the basis of the claims occurred in 2008, and the Cornelisons did not bring suit until 2011.[8] The superior court explained that the discovery rule for statute of limitations did not apply because the Cornelisons had alleged that Dr. Seres injured Floyd during the EME.[9] The court next decided that Dr. Seres was shielded from liability by AS 23.30.095(k) because he was an employer's independent medical examiner.[10] It stated that AS 23.30.095(k) also protected Dr. Seres from any claims related to libel, and it noted Judy's concession that the fraud claims were not aimed at Dr. Seres; accordingly it granted summary judgment to Dr. Seres on the fraud, false light, defamation, libel, slander, and misrepresentation claim. The court found no basis for the other claims against Dr. Seres, and it granted summary judgment for him on all remaining claims.

         In July the court granted Griffin & Smith's motion for judgment on the pleadings. It first concluded that, because Griffin & Smith served as attorneys for TIG in the workers' compensation case, Griffin & Smith "stepped into the shoes of TIG" and was thus "a party to the initial economic relationship, " so that no liability for interfering with an economic relationship could attach. The court also observed that Floyd's benefits were "never unilaterally terminated, " so no breach occurred. The court concluded the Cornelisons had not adequately pleaded either their negligent or intentional infliction of emotional distress claim against Griffin & Smith, so it granted judgment on the pleadings on those claims as well. It also found no abuse of process because (1) the proceeding that served as the basis for the abuse of process claim was administrative rather than judicial and (2) the defendants were "simply exercising [their] right to be heard." The court decided any defamatory statements were privileged because they had been made in the workers' compensation proceeding. It also decided there was no misrepresentation, no plausible professional malpractice claim, and no plausible UTPA claim.

         That day, the court also granted summary judgment to TIG. For the tortious interference with contract claim, the court used essentially the same rationale as it had in its order on Griffin & Smith's motion. Its reasoning for the abuse of process claim and the emotional distress claims was also similar. As for the misrepresentation claim, the court decided the Cornelisons had failed to show justifiable reliance on any statement and dismissed that claim. The court granted summary judgment on the defamation claims, noting that the defendants have an absolute privilege to publish defamatory matter within the bounds of an adjudicative proceeding. Finally, the court determined that the Cornelisons did not have a cause of action against TIG for professional malpractice or for a UTPA violation.

         The court also granted Johnson's motion for summary judgment or for failure to state a claim. It decided that Johnson was an agent or employee of TIG, so no cause of action for tortious interference with any contract between TIG and the Cornelisons existed; the court accordingly dismissed this claim for failure to state a claim. With respect to the intentional infliction of emotional distress claim, the court cited Chizmar v. Mackie[11] for the proposition that it must make a "threshold determination 'whether the severity of the emotional distress and the conduct of the offending party warrant an instruction on intentional infliction of emotional distress.' " The court concluded that the Cornelisons did "not present any specific emotional injuries resulting from [the] defendants' conduct" but "only generally claim[ed] 'emotional distress.' " After summarizing some case law, the court decided Johnson's conduct did not "[]rise to [the] level of outrageous conduct necessary to attach liability." It granted summary judgment to Johnson on that claim. With respect to the NIED claim, the court decided that there was no physical injury to the Cornelisons and that they did not fall within any exception to the rule requiring some type of physical injury, so it granted Johnson's Rule 12(b)(6) motion on that claim. The court dismissed the abuse of process claim against Johnson because Johnson was working for TIG and had no control over the administrative or legal proceedings.

         The court decided that under AS 23.30.280(e), Johnson was immune from liability for any defamation claims because he was only providing information related to suspected fraud. The court explained that the alleged facts did "not support any type of misconduct" on Johnson's part and that "[r]egardless of how defendants edited the [video] for purposes of reporting the information to TIG, the evidence shows that the [edited video] accurately depicted [Floyd's] outdoor activities." It declined to find "editing, however sloppily, the high numbers of hours of footage into a compact presentable report of the relevant information amounts to any type of misconduct." Finally, it decided that any defamatory statements were privileged if made in conjunction with an adjudicative hearing. The court dismissed the professional negligence claim because there was no duty of care, and it dismissed the UTPA claim because the UTPA did not apply.

         At the end of the three July 31, 2014 orders, the court included the following paragraph:

The court finds itself an improper forum for claims of emotional distress resulting from [Board] hearings, yet, is concerned that claimants have little protection from poorly constructed and pursued claims for termination of benefits pursuant to the AWCA. The AWCA provides penalties for several types of actions under AS . . . 23.30.250 through AS . .. 23.30.260. However, the Act does not contemplate the emotional distress suffered by claimants who are the victim[s] of injudicious, imprudent claims. The Department of Labor and Workforce Development should consider implementing mechanisms to ensure that only well-founded complaints are allowed to protract over time.
The Cornelisons appeal.


         We review grants of summary judgment de novo.[12] Summary judgment is appropriate if there is no genuine factual dispute and the moving party is entitled to judgment as a matter of law.[13] In reviewing summary judgment, we draw all reasonable inferences in favor of the nonmoving party.[14] We can affirm a grant of summary judgment on any basis appearing in the record.[15]

         We review the grant of a motion for judgment on the pleadings de novo.[16]When reviewing a dismissal granted under Civil Rule 12(c), "we read the facts alleged in the pleadings and the inferences to be drawn therefrom in a light most favorable to the non-movant."[17]

         We review grants of motions to dismiss under Civil Rule 12(b)(6) de novo, "construing the complaint liberally and accepting as true all factual allegations."[18] "In reviewing a motion to dismiss, we do not consider materials outside the complaint and its attachments."[19] " 'Motions to dismiss are disfavored, ' and before dismissal will be granted it must be 'beyond doubt that the plaintiff can prove no set of facts that would entitle him or her to relief.' "[20] In reviewing motions to dismiss, we view the facts in the light most favorable to the nonmoving party and draw all reasonable inferences in favor of that party.[21]

         "Interpretation of a statute is a question of law to which we apply our independent judgment; we interpret the statute according to reason, practicality, and common sense, considering the meaning of the statute's language, its legislative history, and its purpose."[22]


         A. The Superior Court Properly Dismissed Or Granted Summary Judgment On The Abuse Of Process Claims.

         The Cornelisons argue that the superior court improperly dismissed their abuse of process claims on several grounds, including Griffin & Smith's failure to comply with Board regulations for filing the petition to terminate benefits and Johnson's alleged manipulation of the evidence. Griffin & Smith, TIG, and Dr. Seres all contend that the Cornelisons' abuse of process claim fails as a matter of law because it fails to identify any ulterior motive in bringing the Board proceeding. Johnson argues that abuse of process does not apply to an administrative proceeding.

         The Cornelisons claimed in their complaint that the defendants committed the tort of abuse of process in the course of the petition to terminate Floyd's benefits. They alleged the defendants submitted "junk evidence" to the Board and in so doing breached various duties; they also alleged some defendants failed to follow prescribed Board processes, thereby thwarting the purposes of the AWCA.[23] But they did not allege any purpose in bringing the petition except to terminate Floyd's benefits.

         In Greywolf v. Carroll we defined abuse of process as "the misuse of a legal process against another primarily to accomplish a purpose for which it was not designed."[24] Alaska law requires two elements for such a claim: (1) an "ulterior purpose independent from the process" and (2) "a willful act in the use of the process that is not proper in the regular conduct of the proceeding."[25] In Sands v. Living Word Fellowship, we emphasized that "a claim for abuse of process is a claim that the defendant misused process to attain some separate ulterior purpose independent from the process - for example, to extort the plaintiff and force him to take some action by the use of the process as a threat."[26] The tort of abuse of process applies to those who "us[e] the process to put pressure upon the other to compel him to pay a different debt or to take some other action or refrain from it."[27]

         The Cornelisons implicitly argued that TIG wanted to terminate Floyd's benefits because the benefits were expensive, not because TIG thought Floyd was in fact no longer disabled. But even accepting this claim as true, TIG used the appropriate process-a Board proceeding-to accomplish this goal. The Cornelisons do not point to a "separate ulterior purpose" in bringing the petition to terminate Floyd's workers' compensation, so they have not alleged facts sufficient to support this claim. Their allegation that Johnson hoped to further his business by supplying TIG with an edited video that would result in termination of Floyd's benefits is not the type of ulterior purpose that supports an abuse of process claim. The required motive in an abuse of process claim is to put pressure on the person who is wrongfully sued to perform or to refrain from performing an action unrelated to the process.[28] The superior court properly dismissed or granted summary judgment on the abuse of process claims.

         B. The Superior Court Properly Dismissed The UTPA Claims.

         The Cornelisons' UTPA claim alleged that the defendants had committed "many acts or practices" that "were and are intentional or reckless, unfair and deceptive, immoral, unethical, oppressive, and unscrupulous and offend public policy and constitute an inequitable assertion of power or position." The superior court relied on different reasons to dismiss or grant summary judgment to the defendants on this claim. It decided that "neither trade nor commerce" was exchanged between Dr. Seres and the Cornelisons and that the Cornelisons "did not purchase or lease any goods or services" from either Griffin & Smith or Johnson, and thus the UTPA did not apply. As to TIG, it decided that the UTPA expressly exempted the insurance company.

         Alaska Statute 45.50.481(a)(3) exempts from the UTPA "an act or transaction regulated under AS 21.36 ... or a regulation adopted under [its] authority." Alaska Statutes 21.36 regulates "Act[s]" and "trade practice[s] in the business of insurance, " including prohibitions on "unfair or deceptive act[s] or practice[s]."[29] Alaska Statute 21.3 6.125(a) specifically prohibits a number of acts or practices in the settlement of insurance claims, like misrepresentation of facts and failure to act in good faith. We agree with Griffin & Smith that the Cornelisons' claim is essentially one for unfair claims settlement, which falls within the AS 45.50.481(a)(3) exemption. The Cornelisons alleged the defendants acted in concert to misrepresent Floyd's physical capacities, delayed the proceedings before the Board in an attempt to gain an advantage, and refused to acknowledge their mistakes when confronted by the Cornelisons. Because this alleged conduct falls within the insurance industry exemption to the UTPA, the superior court properly dismissed the UTPA claim.

         C. The Superior Court Properly Dismissed The Interference With Contract Claims.

         The Cornelisons alleged a cause of action they called tortious interference with their financial rights and interests. As part of this cause of action, they alleged they had "an established and continuing financial property right and interest" in the PTD benefits Floyd received under the Board's 2001 order. They alleged the defendants interfered with this property right through the investigation, the medical evaluation, and the subsequent filing of the petition to terminate Floyd's benefits.

         The superior court analyzed this claim as either a tortious interference with contract claim or a tortious interference with a prospective economic advantage claim. We consider the Cornelisons' claim to be one for tortious interference with contract because no prospective business relationship is at issue in this case.[30]

         The tort of intentional interference with contractual relations has six elements: "(1) an existing contract between [the plaintiff] and a third party; (2) defendant's knowledge of the contract and intent to induce a breach; (3) breach; (4) wrongful conduct of the defendant causing the breach; (5) damages; and (6) absence of privilege or justification for the defendant's conduct."[31] The Cornelisons' claim appears to be based on their theory that Floyd is a third-party beneficiary of the insurance contract between his former employer and the employer's workers' compensation insurer.

         But even if we were to accept this theory - and we do not now decide the question whether workers' compensation recipients are third-party beneficiaries of the insurance contract between the insurer and employer - there was never a breach of the contract because Floyd continued to received benefits throughout the litigation.[32] As a result, we agree with the superior court that the Cornelisons failed to set out a prima facie case of interference with contract rights. Therefore this cause of action was properly dismissed.

         D. The Superior Court Properly Dismissed Or Granted Summary Judgment On The Common Law Fraud Claims.

         The Cornelisons alleged common law fraud against the defendants, but this cause of action fails as a matter of law. The elements of common law fraud are "(1) a false representation of fact; (2) knowledge of the falsity of the representation; (3) intention to induce reliance; (4) justifiable reliance; and (5) damages."[33] "As a general rule, in common law fraud, a person cannot justifiably rely on a statement she knows to be false."[34] The Cornelisons alleged that the defendants made false representations about Floyd's physical capabilities in the context of the workers' compensation case; they also contended that the statements in Dr. Seres's reports about possible drug diversion and Social Security fraud, with the implication that Dr. Seres would report the suspected fraud, were misrepresentations. The Cornelisons alleged that the defendants "launch[ed] and orchestrate[d] an extreme and outrageous offense" on them and "perpetuate[d] a fraud upon" both them and the Board by making misrepresentations about them.

         The misrepresentations about Floyd's physical capabilities cannot serve as a basis of a misrepresentation claim by the Cornelisons. Presumably the Cornelisons were aware these representations were false; if so, they could not have justifiably relied on those representations as a matter of law. Without this required element of justifiable reliance, their common law fraud claim was inadequate, and the superior court correctly dismissed the common law fraud claim.

         But the Cornelisons also appear to advance a second theory of misrepresentation: they apparently also allege that (1) Dr. Seres and Griffin & Smith misrepresented their intention to report Floyd to Social Security for fraud; (2) Dr. Seres and Griffin & Smith knew they were not going to report fraud but falsely implied to the Board and the Cornelisons that they would do so; (3) they intended this threat of a fraud report to intimidate the Cornelisons and possibly cause the Cornelisons not to contest the petition to terminate benefits; (4) the Cornelisons justifiably relied on the statement of intent; and (5) the Cornelisons were damaged.

         But the Cornelisons cannot show justifiable reliance on this asserted misrepresentation either. According to the Restatement, "[t]he recipient of a fraudulent misrepresentation can recover against its maker for [his] pecuniary loss resulting from [the misrepresentation] if, but only if, (a) he relies on the misrepresentation in acting or refraining from action, and (b) his reliance is justifiable."[35] The Cornelisons did not allege they suffered a loss because of any action they took or failed to take in reliance on the misrepresentation. They appear to allege they suffered emotional distress because they were concerned that Dr. Seres or Griffin & Smith would report Floyd for Social Security fraud; they also have alleged damages based on the time and energy expended in this lawsuit and in opposing the petition to terminate. But as we understand their argument, the emotional distress resulted from the misrepresentation itself, not from some action they took in reliance on it. And the action they took-vigorously opposing the petition to terminate benefits and suing the defendants in this case - does not show any reliance on the statements "in Dr. Seres's reports suggesting social security fraud and Dr. Seres's duty to report it." To the contrary, it indicates that the Cornelisons did not believe the truth of the statements and wanted to clear their name. The superior court thus correctly dismissed or granted summary judgment on the common law fraud claim.

         E. The Superior Court Properly Dismissed The Professional Negligence Claims.

         The Cornelisons brought a professional negligence action against Dr. Seres, TIG, and Johnson, alleging these defendants had not exercised the required level of skill that a reasonably prudent professional in their respective professions would exercise.[36]The superior court dismissed most of these claims because none of the defendants owed a legal duty to the Cornelisons. It dismissed the claim against TIG based on O.K. Lumber Co. v. Providence Washington Insurance Co., where we held that a third party who is injured by a tortfeasor does not have a cause of action for breach of the covenant of good faith and fair dealing against the tortfeasor's insurer.[37]

         "A professional malpractice action involves' a professional's alleged breach of a duty of due care which was implied by law as a result of a contractual undertaking.' "[38] In this case, the Cornelisons did not have a contract with Johnson, and thus the superior court determined they had no cause of action for professional malpractice against him. The court also decided there was no attorney-client or doctor-patient relationship between the Cornelisons and Griffin & Smith or Dr. Seres, so there could be no professional liability.

         Our decision in Smith v. Radecki held that an employer's doctor in a workers' compensation case generally does not enter into a physician-patient relationship with the injured worker; we also acknowledged a "growing body of case law from other states" that recognizes independent medical examiners may have limited duties to those they examine.[39] But as in Smith, [40] these limited duties are not implicated here. The superior court thus correctly dismissed the professional negligence action against Dr. Seres. Because any professional malpractice action against TIG is barred by AS 23.30.05 5[41] and no contractual duty that gave rise to a duty of care existed between the Cornelisons and the other defendants here, the superior court properly dismissed the professional malpractice claims.

         F. Summary Judgment On Or Dismissal Of The Negligent Infliction Of Emotional Distress Claims Was Error.

         The Cornelisons alleged that the defendants negligently caused them "severe emotional distress, unnecessary pain and suffering[, ] and inconvenience" by their conduct during the workers' compensation proceedings. In their complaint they also alleged that the defendants had caused them "physical distress" and "great physical... harm." We have held that "there is no recovery of damages for emotional distress where the emotional distress arises from negligent conduct and is unaccompanied by physical injury."[42] We have recognized two exceptions to this rule: the bystander exception and the preexisting duty exception.[43]

         The superior court granted summary judgment to Dr. Seres on the NIED claim and dismissed the claim as to the other defendants on various grounds. It ruled that the claim against TIG was barred by AS 23.30.055, the exclusive remedy provision of the AWCA. It granted judgment on the pleadings to Griffin & Smith on the NIED claim for several reasons, concluding first that the Cornelisons had not alleged a physical injury or a special duty that would exempt them from pleading a physical injury. It then decided that AS 23.30.055 applied to Griffin & Smith, barring any "claim for NIED arising out of . . . untimely payments." The court also decided that AS 23.30.130 "foreclose[d] tort liability based on petitions for modification."[44] The court dismissed the NIED claim against Johnson under Rule 12(b)(6), because the Cornelisons "offer[ed] no facts to show that physical injury resulted from the conduct of defendants." The court granted summary judgment to Dr. Seres, concluding that he did not owe the Cornelisons a preexisting duty and that he was shielded from suit by AS 23.30.095(k), which immunizes a second independent medical evaluation physician from damages for providing an opinion in a workers' compensation case.

         1. Dr. Seres

         While we agree with the superior court that Dr. Seres did not owe the Cornelisons a preexisting duty that would excuse them from pleading a physical injury, we disagree that AS 23.30.095(k) shields Dr. Seres from liability. Alaska Statute 23.30.095(k) sets out the process the Board can use to order a second independent medical evaluation. It permits the Board to "require ... a second independent medical evaluation" when there is a dispute "between the employee's attending physician and the employer's independent medical evaluation."[45] The second independent medical evaluation must be "conducted by a physician or physicians selected by the [B]oard" and paid for by the employer.[46] The statute also provides, "A person may not seek damages from an independent medical examiner caused by the rendering of an opinion or providing testimony under this subsection, except in the event of fraud or gross incompetence."[47]

         Dr. Seres did not render an opinion as an independent medical examiner under AS 23.30.095(k); rather he was selected by the insurance carrier, its adjuster, or its attorney to perform a medical evaluation of Floyd under AS 23.30.095(e).[48] Because Dr. Seres's opinion was not rendered under AS 23.30.095(k), the immunity provided in that subsection does not shield him from liability based on his written reports.[49] Although Dr. Seres may not have had a special duty to the Cornelisons that would excuse them from alleging physical injury, they adequately alleged physical injury, as explained more fully in the following subsection. We therefore reverse the summary judgment entered in favor of Dr. Seres on the NIED claim and remand for further proceedings.

         2. Griffin & Smith

         The superior court granted Griffin & Smith judgment on the pleadings under Rule 12(c) in part because the Cornelisons had not pleaded a physical injury. While we have not specified the type of injury that constitutes physical injury for purposes of an NIED claim, in Hancock v. Northcutt, we relied on a leading torts treatise for the "general rule" that physical injury is required for an NIED claim.[50] According to that treatise, physical injury for purposes of an NIED claim can include illness or other physical consequences of the emotional distress.[51] The Restatement (Second) of Torts also recognizes that "long continued nausea or headaches may amount to physical illness, which is bodily harm" and "even long continued mental disturbance" may be an illness.[52]A defendant can prevail on a Rule 12(c) motion "only if [the plaintiffs] pleadings contain no allegations that would permit recovery if proven."[53] The Cornelisons' allegations that they suffered great physical harm and physical distress are adequate at the pleading stage to set out the physical injury element of an NIED claim.[54]

         Griffin & Smith denied in its answer the Cornelisons' allegations that they suffered great physical harm and physical distress. We have previously stated that "a Rule 12(c) motion 'only has utility when all material allegations of fact are admitted in the pleadings and only questions of law remain.' "[55] Material issues of fact remained after Griffin & Smith filed an answer, including whether the Cornelisons suffered physical injury, so the superior court erred in granting judgment on the pleadings on this basis.

         On appeal, Griffin & Smith also contends that AS 23.30.055, the exclusive remedy provision of the AWCA, shields it from liability. But AS 23.30.055 provides protection from negligence claims to an employer and the injured worker's fellow employees, not to an employer's attorney. Suits against third parties are not barred by the exclusive remedy provision, [56] and Griffin & Smith is not Floyd's employer for purposes of the AWCA. Alaska Statute 23.30.055 provides in pertinent part, "The liability of an employer prescribed in AS 23.30.045 is exclusive and in place of all other liability of the employer and any fellow employee to the employee . . . ." Alaska Statute 23.30.045(a) provides that "[a]n employer is liable for and shall secure the payment to employees of the compensation due under [certain sections of the AWCA]." Griffin & Smith is not liable for the compensation due Floyd; TIG, as the compensation carrier for his former employer, is liable for that compensation. Griffin & Smith points to no authority supporting its contention that the employer's attorney is protected by the exclusive remedy provision, and we have found none.[57] The superior court erred in granting judgment on the pleadings to Griffin & Smith on this basis as well. We therefore reverse the superior court's grant to Griffin & Smith of judgment on the pleadings as to the NIED claim.

         3. Johnson

         The superior court dismissed the NIED claim against Johnson pursuant to Rule 12(b)(6); it wrote that the Cornelisons "offer[ed] no facts to show that physical injury resulted from the conduct of defendants." When a court considers a motion to dismiss under Rule 12(b)(6), it must accept as true all factual allegations in the complaint.[58] As set out above, the Cornelisons adequately alleged that the defendants' conduct caused ...

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