Maryland and Bad Faith (Continued from page 9)


The decision of the Court of Appeals


although denying to the appellant in that case a cause of action in negligence, would suggest a willingness on the part of the Court of Appeals to entertain such a cause of action based upon improper conduct during the course of a first party carrier’s performance of contractual du- ties or obligations that are conceded by the carrier to be owed to the insured. Young was an action brought by an em- ployee/claimant against a workers’ compensation insurance carrier for negli- gence and intentional infliction of emotional distress. The case was based upon allegations that the carrier’s conduct in requesting a defense psychiatric evalu- ation was either negligent or deliberately designed to force the claimant to either give up her claim or to attempt suicide.20 The claimant had, in fact, attempted sui- cide.


in Young v. Hartford Accident and Indem- nity,19


The Court of Appeals affirmed the trial


court’s granting of a demurrer on the neg- ligence count, but upheld the cause of action for intentional infliction of emo- tional distress. Although the court rejected the negligence claim, it is important to note that it did so based upon the exclu- sive remedy provision of the Maryland


19303 Md. 182, 492 A.2d 1270 (1985). 20


Although in a technical sense workers’ com- pensation insurance is liability insurance, as a practical matter courts have tended to treat it as first party insurance, similar to private accident and disability insurance policies. Ashley, supra note 1, at § 1:01 at 1-2.


Workers’ Compensation Act and not on any notion that a tort action could not be maintained for the conduct of a first party insurance carrier in administering a claim. In deciding whether the exclusive remedy provision barred the negligence claim, the court noted that prior decisions had im- bued workers compensation carriers with the same immunity from tort suits as their insured employers. After a thorough analysis of whether the injuries alleged by the claimant would be deemed causally related to the original injury and thus covered by the underlying workers’ com- pensation claim, the court concluded that the injuries would be causally related to the compensable work injury and thus barred under the exclusive remedy provi- sion. In finding that a tort action for the in- tentional infliction of emotional distress could be pursued based on the allegations set forth in the complaint, the court predi- cated its decision on the intentional injury provisions of the Workers’ Compensation Act21


allowing a suit to be maintained


against the employer where the injury was intentionally caused by the employer. The court adopted by analogy its prior rulings on the exclusive remedy provision apply- ing to immunize insurers as well as employers to hold that under the related intentional injury provision of the act an insurer was not protected by the exclu- sive remedy provision in the Workers’ Compensation Act.


The principles enunciated in Young 22 21


Md. Ann Code of 1957, Art. 101, § 44, re- codified as current Md.. L & E Code Ann. §9-509(d)(2).


Decisions in various jurisdictions adopting first party bad faith have noted that insur- ance in today’s society is so essential that it has taken on the magnitude of a vital service that is quasi-public in nature and strongly interwoven with the public interest. Excel- lent arguments have been advanced that the suppliers of these services should owe to the public the duties of fiduciaries. The decisions of insurance adjusters can mean the differ- ence between life and death or health and sickness to individual policy holders, because in many instances their decisions are tanta- mount to the providing or failure to provide medical treatment. Decisions on whether income replacement benefits are continued or terminated are tantamount to medical decisions, because economic necessity dic- tates that workers whose benefits are termi- nated must return to work. Insurance com- panies often directly employ reviewing phy- sicians, nurses, and rehabilitations person- nel. In a very real sense, insurance personnel in today’s insurance industry are practicing a form of medicine, and it would not be un- reasonable to impose a degree of fiduciary responsibility to go along with that role.


10 Trial Reporter Spring 2000


would clearly seem to permit tort claims against carriers arising out of misfeasance in a first party carrier’s performance of obligations it concedes it owes to a claim- ant and in fact undertakes to fulfill, albeit in an improper fashion. Two things about Young must be emphasized: (1) the negli- gence claim was disallowed only because of the exclusive remedy provision of the Workers’ Compensation Act and (2) by allowing the intentional infliction of emo- tional distress count to stand, the court did recognize a tort cause of action aris- ing out of a first party insurance carrier’s improper performance of contractual ob- ligations it had undertaken to perform. At least two decisions of the Maryland


Court of Appeals provide a firm founda- tion for a future holding that would recognize either first party bad faith as a viable cause of action in Maryland or, al- ternatively, a cause of action in traditional negligence principles founded upon a first party carrier’s negligent performance of contractual obligations inherent in the insurance contract. As always, bad facts produce bad law. It is important that the plaintiffs’ bar demonstrate to the courts that certain types of conduct engaged in by first party carriers in today’s society have potentially disastrous consequences, consequences that a contractual remedy inadequately addresses and for which there is a need for deterrence in the form of a tort remedy.22


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