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Insurer Had Basis to Deny Nonmedical Living Expenses


A man suffered a spinal-cord injury in a work-related accident that left him permanently paraplegic. His employer was insured for workers' compensation claims. The insurer paid the costs of the man's medical treatment and rehabilitation services.

 

After he was discharged from the hospital, the man entered a post-acute care rehabilitation facility. When he was capable of basic self-care, community access, and independent meal preparation, the facility set an anticipated discharge date. However, his case manager was unable to locate suitable, affordable housing for him by his discharge date. The insurer notified the man that it would not pay for his living expenses, such as rent, utilities, groceries, and cable television at the facility after the discharge date because his stay was no longer medically necessary. The man continued to live at the facility.

 

The man filed a petition with the Iowa Workers' Compensation Commissioner seeking payment from the insurer for his living expenses at the facility. The commissioner found that the special circumstances of the man's case made his continued stay at the facility both appropriate and compensable. The commissioner required the insurer to pay for the man's living expenses at the facility until suitable housing could be found.

 

The man sued the insurer in Iowa state court alleging bad-faith denial of benefits. The insurer removed the matter to federal district court based on the diversity of the parties and moved for summary judgment. The United States District Court for the Southern District of Iowa granted summary judgment for the insurer.

 

The Eighth Circuit United States Court of Appeals affirmed. The court held that the workers’ compensation insurer had a reasonable basis for denying benefits for the man's nonmedical living expenses.

 

The workers’ compensation insurer had a reasonable basis for denying benefits for the man's nonmedical living expenses. Under Iowa law, a prima facie claim of bad-faith denial of insurance benefits requires proof of two elements: (1) that the insurer had no reasonable basis for denying the plaintiff's claim, and (2) the defendant knew or had reason to know that its denial or refusal was without a reasonable basis. The court held that the insurer had a reasonable basis for denying benefits for the man's nonmedical living expenses, even though the insurer was ultimately required to pay the nonmedical living expenses and the insurer investigated the man's status as an undocumented Mexican national. The insurer had conceded its responsibility to pay benefits even if the man was deported. Iowa’s workers’ compensation statute required insurers to pay for medical services and supplies and for necessary appliances, not necessarily for living expenses, such as rent, utilities, groceries, and cable television, incurred by an injured worker. It was not readily apparent that the expenses claimed, including rent, utilities, groceries, and cable television, were similar to those found compensable in prior cases. Both the Iowa Workers' Compensation Commissioner and an Iowa state court noted that the claimed living expenses were generally not the responsibility of an employer.

 

The Eighth Circuit United States Court of Appeals affirmed the district court’s grant of summary judgment in favor of the workers’ compensation insurer.

 

See: Paulino v. Chartis Claims, Inc., 2014 WL 7236874 (C.A.8 (Iowa), December 19, 2014) (not designated for publication).

 

 

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