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.]
OPINION
BOLGER, JUSTICE
I.
INTRODUCTION
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.
II.
FACTS AND 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.
III.
STANDARD OF REVIEW
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]
IV.
DISCUSSION
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
...