De Dios v. Indemnity Insurance Company of North America et al

Filing 35

OPINION AND ORDER - Denying without prejudice 17 MOTION to Dismiss for Failure to State a Claim filed by Broadspire Services, Inc. See order text for details. The parties shall have to and including June 25, 2018, to file proposed ame ndments to the question set out in paragraph 2 or different or additional questions they believe should be certified to the Iowa Supreme Court. The parties shall have to and including July 2, 2018, to file responses to the opposing parties' proposed amendments and/or different or additional questions. Signed by Judge Mark W Bennett on 6/13/2018. (src)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
WESTERN DIVISION
SAMUEL DE DIOS,
No. C 18-4015-MWB
Plaintiff,
vs.
INDEMNITY INSURANCE COMPANY
OF NORTH AMERICA and
BROADSPIRE SERVICES, INC.,
Defendants.

OPINION AND ORDER
REGARDING DEFENDANT
BROADSPIRE’S MOTION TO
DISMISS AND REGARDING
CERTIFICATION OF QUESTIONS
TO THE IOWA SUPREME COURT

___________________________
TABLE OF CONTENTS
I. 

INTRODUCTION........................................................................... 2 
A. 
Factual Background ............................................................... 2 
1. 
The parties ................................................................... 2 
2. 
The accident and aftermath .............................................. 4 
3. 
Denial of the claim ......................................................... 5 
B. 
Procedural Background ........................................................... 6 
C. 
Arguments Of The Parties ........................................................ 8 

II. 

LEGAL ANALYSIS ...................................................................... 10 
A. 
Standards For Stating A Claim ................................................ 10 
B. 
Application Of The Standards .................................................. 13 
1. 
Plausible factual allegations ........................................... 13 
2. 
Legal cognizability of the claim ....................................... 15 
C. 
Certification Of The Question .................................................. 16 
1. 
Standards for certification .............................................. 16 
2. 
Application of the standards ........................................... 18 
3. 
Formulation of the question ............................................ 19 

III. 

CONCLUSION ............................................................................ 20 

A plaintiff who alleges that he suffered an injury in a vehicle collision on a
construction site in the course of his employment brought this lawsuit against his
employer’s workers’ compensation insurer and the third-party claims administrator it had
hired to investigate, handle, manage, administer, and pay workers’ compensation claims.
The plaintiff alleges bad faith denial of workers’ compensation benefits by both the
insurer and the third-party claims administrator and vicarious liability of the insurer for
the third-party claims administrator’s bad faith denial of benefits. The third-party claims
administrator has moved to dismiss the plaintiff’s claim against it on the ground that a
bad faith claim will not lie against it under Iowa law, because it does not have an insurerinsured relationship with the plaintiff. Because I conclude that this case presents a novel
question of state law best answered by the Iowa Supreme Court, I conclude sua sponte
that I should certify that question.
I.
A.
1.

INTRODUCTION
Factual Background

The parties

Because this case is before me on a Rule 12(b)(6) motion to dismiss for failure to
state a claim upon which relief can be granted, this statement of the factual background
is necessarily drawn from plaintiff Samuel De Dios’s controlling pleading, his March 20,
2018, Amended Complaint, and should not be construed as findings of fact.1 De Dios
alleges that, at all material times, he has been a resident of Woodbury County, Iowa, and
that he was employed by Brand Energy & Infrastructure Services. He alleges that Brand

1

I will not make an exhaustive recital of all of De Dios’s allegations. Rather, I
will focus on those pertinent to the question of whether or not De Dios’s bad faith claim
will lie against the third-party claims administrator.
2

had a workers’ compensation insurance policy with defendant Indemnity Insurance
Company of North America, but that Indemnity “delegated its authority of investigating,
handling, managing, administering, and paying benefits under Iowa Workers’
Compensation Laws to [defendant] Broadspire Services, Incorporated.”

Amended

Complaint, ¶ 4.
More specifically, De Dios alleges the following about Broadspire’s duties and its
relationship with Indemnity:
5.
At all times material to the Petition, the
INSURANCE COMPANY and BROADSPIRE were
responsible for making timely payment of workers’
compensation benefits to employees of the EMPLOYER,
including SAMUEL. Plaintiff will refer to both the
INSURANCE COMPANY and BROADSPIRE collectively
as “the Defendants.”
6.
BROADSPIRE
and
the
INSURANCE
COMPANY are essentially one and the same entity for
purposes of the instant action.
7.
The INSURANCE COMPANY lacked the
necessary support staff to investigate on-the-job injuries in
Iowa, including SAMUEL’s on-the-job injury.
8.
The INSURANCE COMPANY lacked the
necessary support staff that had the experience or knowledge
to make an informed decision on whether to pay benefits
pursuant to Iowa Workers’ Compensation Laws.
9.
The INSURANCE COMPANY obligated
BROADSPIRE to provide actuarial services for workers’
compensation claims, including SAMUEL’s workers’
compensation claim.
10. The INSURANCE COMPANY obligated
BROADSPIRE to provide underwriting services for workers’

3

compensation claims,
compensation claim.

including

SAMUEL’s

workers’

11. BROADSPIRE performed the tasks of a
workers’ compensation insurance company in Iowa.
12. BROADSPIRE received a percentage of the
premiums that the EMPLOYER paid to the INSURANCE
COMPANY.
13. BROADSPIRE’s compensation package with
the INSURANCE COMPANY was tied to the approval or
denial of workers’ compensation claims: BROADSPIRE
received more of the EMPLOYER’s premium as the payment
of workers’ compensation benefits decreased.
14. BROADSPIRE had a financial risk of loss for
workers’ compensation claims it administered on behalf of the
INSURANCE COMPANY, including SAMUEL’s workers’
compensation claim.
15. The INSURANCE COMPANY had a financial
risk of loss for workers’ compensation claims that were
administered by BROADSPIRE, including SAMUEL’s
workers’ compensation claim.
16. The INSURANCE COMPANY entered into a
reinsurance agreement with BROADSPIRE for payments
made on behalf of workers’ compensation claims, including
SAMUEL’s workers’ compensation claim.
Amended Complaint at ¶¶ 5-16.
2.

The accident and aftermath

De Dios alleges that, on April 8, 2016, he was assigned by Brand to work on a
construction site located on the private property of CF Industries. To enter the property,
he had to drive past a security gate and a security guard. He alleges that, after entering
the property, a vehicle driven by Jonathan Elizondo crashed into the back of his vehicle,
damaging his vehicle and causing him injuries, including a lower back injury. The
4

collision was witnessed by the security guard at the gate, Tina Gregg. De Dios reported
the collision and his work injury to Brand’s safety manager, Ismael Barba. He alleges
that Brand authorized him to choose whatever medical provider he would like to provide
care for the work injury. De Dios chose to be treated at St. Luke’s Hospital, where
Dr. Jeffrey O’Tool provided him with medical care for his work injury.
On April 11, 2016, De Dios returned to work with Brand, but his back pain
worsened. On April 14, 2016, Brand sent De Dios home because of his work injury.
On April 14, 2016, Brand authorized De Dios to choose whatever medical provider he
would like to see to care for his work injury. On April 15, 2016, De Dios’s family
doctor, Alisa M. Olson, DO, treated De Dios for the work injury. De Dios alleges that,
from April 8, 2016, through May 9, 2016, Brand refused to provide him with “light
duty” work. He alleges that, from April 15, 2016, Indemnity and Broadspire knew or
should have known that he had work restrictions as a result of his work injury; that Brand
refused to provide “light duty work” within those restrictions; and that Indemnity and
Broadspire were required to pay him Temporary Total Disability (“TTD”) Benefits
and/or Healing Period (“HP”) Benefits until a determination of maximum medical
improvement was made by a qualified medical expert.
3.

Denial of the claim

De Dios alleges that Broadspire or, in the alternative, Indemnity made the decision
to deny him workers’ compensation benefits. He alleges that, prior to doing so, neither
Indemnity nor Broadspire interviewed him, or interviewed or contacted the security
guard, Tina Gregg, who had witnessed the accident, or his treating physicians,
Dr. O’Tool and Dr. Olson. He alleges that the defendants’ failure to contact these people
violated an insurance industry standard of “Three-Point Contact” before denying him
workers’ compensation benefits.

On June 9, 2016, De Dios filed a workers’

compensation claim with the Iowa Workers’ Compensation Commissioner against
5

Indemnity and Broadspire. On August 23, 2016, Indemnity and Broadspire filed a joint
Answer with the Iowa Workers’ Compensation Commissioner and denied liability for De
Dios’s work injury. De Dios alleges that Indemnity and Broadspire did not convey to
him the basis for their decision to deny his claim at that time, that they, in fact, had no
reasonable basis for denying his claim, and that they knew or should have known that no
reasonable basis existed to deny his claim.
B.

Procedural Background

De Dios filed his original Petition At Law against Indemnity and Broadspire in the
Iowa District Court for Woodbury County on January 4, 2018. The defendants removed
this action to this federal court, pursuant to 28 U.S.C. §§ 1332, 1441, and 1446, on
February 21, 2018. On February 27, 2018, Indemnity filed its Answer, denying De
Dios’s claims and denying knowledge sufficient to admit or deny most of his allegations.
Indemnity did admit, however, that Broadspire was a third-party claims administrator
that administered Brand’s workers’ compensation claims on behalf of Indemnity within
the $1,000,000 self-insured retention limit of Brand’s workers’ compensation policy, but
that Brand did not have an obligation to notify Indemnity of any potential workers’
compensation claims with exposure below $500,000. On February 28, 2018, Broadspire
filed is first Motion To Dismiss For Failure To State A Claim, on the ground that there
was no insurer-insured relationship between Broadspire and De Dios nor was there any
privity between Broadspire and De Dios, so that De Dios has no cognizable claim for
bad faith against it under Iowa law. Indeed, Broadspire contended that Iowa courts have
drawn a bright line limiting bad faith claims to ones against insurers and/or self-insured
employers.
On March 14, 2018, De Dios filed a Motion To Enlarge Time To File Resistance
To Defendant Broadspire’s Motion To Dismiss in which he stated, inter alia, that he
6

intended to file an amended complaint as a matter of course pursuant to Rule 15(a)(1)(B),
which would address the grounds alleged for dismissal.

On March 16, 2018, the

defendants filed a statement that they did not resist De Dios’s “Motion To Amend
Complaint,” although no such motion had actually been filed. On March 20, 2018, De
Dios filed his Amended Complaint, as a matter of course. That same day, he also filed
his Resistance to Broadspire’s original Motion To Dismiss, in which he argued that I
need not address that motion, because Broadspire is not truly a “third party,” but “one
and the same entity” as Indemnity, as alleged in his Amended Complaint. On March 26,
2018, the parties jointly stipulated that Broadspire’s original Motion To Dismiss was
mooted by the filing of De Dios’s Amended Complaint. On April 3, 2018, pursuant to
that stipulation, I denied Broadspire’s original Motion To Dismiss as moot, without
prejudice to any of the defendants’ claims or defenses in this action.
In his Amended Complaint, De Dios asserts the following claims: In Count I, a
claim of “bad faith” against Indemnity; in Count II, a claim of “bad faith” against
Broadspire; and in Count III, a claim of “vicarious liability” of Indemnity for the actions
of Broadspire. De Dios alleges that, because of Indemnity’s actions in denying his claim,
he has sustained harms and losses, including past and future medical expenses; past and
future pain and suffering, including mental anguish; past and future loss of full body;
past lost wages and loss of future earning capacity; consequential damages and other
pecuniary losses; and loss of property. He also alleges that Indemnity’s actions and
conduct were willful and wanton, so as to entitle him to punitive damages.
On April 3, 2018, Indemnity filed its Answer to De Dios’s Amended Complaint,
denying his claims and responding to his factual allegations in essentially the same way
as in its Answer to his original Petition. On April 3, 2018, Broadspire filed its Motion
To Dismiss Plaintiff’s Amended And Substituted Complaint For Failure To State A
Claim, which brought this matter before me, arguing that De Dios’s claim will not lie
7

against it, notwithstanding De Dios’s new allegations, because its role was limited to that
of a third-party claims administrator. De Dios filed his Resistance on April 14, 2018,
and Broadspire filed its Reply on April 19, 2018.
C.

Arguments Of The Parties

In support of its Motion To Dismiss, Broadspire argues that De Dios’s allegation
that Broadspire and Indemnity “are essentially one and the same entity” is erroneous.
Broadspire argues that its role with respect to De Dios’s claim was that of a third-party
claims administrator, that it is not De Dios’s insurer, and that it has no relationship with
Indemnity other than acting as a third-party claims administrator. Broadspire also points
out that it is not an insurer or a self-insured employer. Broadspire argues that Iowa courts
have established clear precedent that bad faith claims do not extend to third-party claims
administrators and that the tort of bad faith for failing to provide workers’ compensation
benefits cannot be imposed absent an insurer-insured relationship.
Broadspire argues that the issue of bad faith liability against third-party claims
administrators was addressed directly, and rejected, in Raymie v. Ins. Co., Case No.
4:09-cv-00222-JAJ, 2009 WL 8621559 (S.D. Iowa Sept. 29, 2009). Broadspire argues
that the court in Raymie analyzed the two considerations established in Iowa cases for
bad faith claims: (1) whether the plaintiff had alleged any contractual relationship with
the third-party claims administrators and whether the third-party claims administrators
had issued an insurance policy to the plaintiff; and (2) whether, even without recourse
against the third-party claims administrators, the plaintiff could still seek remedies against
the insurer and be adequately compensated if liability was warranted. Broadspire argues
that the court concluded that both considerations warranted dismissal of the bad faith
claims against the third-party claims administrators.

8

Here, Broadspire argues, De Dios does not allege that he is in privity with
Broadspire or that Broadspire has issued any insurance policy which would cover his
workers’ compensation claim. Instead, Broadspire argues that De Dios’s allegation that
Broadspire and Indemnity are “essentially one and the same entity” is illogical, because
Iowa courts have established a clear distinction between insurers, which issue policies,
and third-party claims administrators, which manage claims under those policies.
Broadspire contends that Iowa courts have made clear that they do not view third-party
claims administrators as the alter egos of insurers.
In short, Broadspire argues that De Dios’s bad faith claim lacks the critical and
mandatory element of an insurer-insured relationship. Even so, Broadspire points out,
De Dios is not without a remedy, because he can still seek relief against Indemnity.
In response, De Dios argues that I need not address the legal issue of whether a
third-party claims administrator may be held directly liable for a bad faith denial or delay
of insurance benefits, which he alleges is one of first impression, because Broadspire was
not truly a third party, but one and the same entity as Indemnity. He argues that, because
he has asserted factual allegations that establish a plausible claim of bad faith against
Broadspire, who acted like an insurer when it denied him insurance benefits, Broadspire’s
Motion To Dismiss should be denied.
De Dios also argues that the unpublished decision in Raymie is distinguishable and
was entered without the benefit of the Iowa Supreme Court addressing the issue of first
impression. He argues that he may not have other remedies, if he is unable to sue the
purported third-party claims administrator, because Indemnity has asserted in its Answer,
among other things, an affirmative defense that he has failed to state a claim upon which
relief can be granted, and he also contends that Brand may have been “self-insured.” He
also points out that the third-party claims administrators in Raymie only investigated and
handled the plaintiff’s workers’ compensation claim, but he has alleged that Broadspire
9

acted like an insurer and was essentially one and the same as Indemnity for purposes of
his claim. De Dios also points out that other jurisdictions have recognized bad faith
claims against third-party claims administrators and that, under the standards applied in
those jurisdictions, his claim against Broadspire would lie.
In reply, Broadspire argues that De Dios’s Resistance fails to refute the authority
from state and federal courts in Iowa holding that bad faith claims cannot be imposed
absent an insurer-insured relationship and, specifically, are not recognized against thirdparty claims administrators. Instead, Broadspire argues that De Dios has relied on the
conclusory and unfounded allegation that Broadspire “was essentially one and the same”
as Indemnity and has cited merely persuasive, not binding, authority allowing bad faith
claims against third-party claims administrators.

Broadspire argues that Raymie

recognized that third-party claims administrators are not the substantial equivalent of or
one and the same as insurers. Broadspire reiterates that De Dios still has recourse against
Indemnity for Broadspire’s actions. Indeed, Broadspire points out that Indemnity has
admitted that Broadspire was acting as its agent. Broadspire argues that the reality is that
De Dios is simply unwilling to accept that Iowa does not recognize bad faith claims
against third-party claims administrators.
II.
A.

LEGAL ANALYSIS

Standards For Stating A Claim

Broadspire’s Motion To Dismiss is pursuant to Rule 12(b)(6) of the Federal Rules
of Civil Procedure. That rule authorizes a pre-answer motion to dismiss for “failure to
state a claim upon which relief can be granted.” FED. R. CIV. P. 12(b)(6). As the Eighth
Circuit Court of Appeals has explained,
We review de novo the district court’s grant of a
motion to dismiss, accepting as true all factual allegations in
the complaint and drawing all reasonable inferences in favor
10

of the nonmoving party. See Palmer v. Ill. Farmers Ins. Co.,
666 F.3d 1081, 1083 (8th Cir. 2012); see also Fed.R.Civ.P.
12(b)(6). “To survive a motion to dismiss, a complaint must
contain sufficient factual matter, accepted as true, to state a
claim to relief that is plausible on its face.” Ashcroft v. Iqbal,
556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)
(internal quotation omitted). “A claim has facial plausibility
when the plaintiff pleads factual content that allows the court
to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id.
Richter v. Advance Auto Parts, Inc., 686 F.3d 847, 850 (8th Cir. 2012); accord Freitas
v. Wells Fargo Home Mortg., Inc., 703 F.3d 436, 438 (8th Cir. 2013) (quoting Richter,
686 F.3d at 850); Whitney v. Guys, Inc., 700 F.3d 1118, 1128 (8th Cir. 2012) (stating
the same standards).
Courts consider “plausibility” under this Twom-bal standard2 by “‘draw[ing] on
[their own] judicial experience and common sense.’” Whitney, 700 F.3d at 1128 (quoting
Iqbal, 556 U.S. at 679). Also, courts must “‘review the plausibility of the plaintiff’s
claim as a whole, not the plausibility of each individual allegation.’” Id. (quoting Zoltek
Corp. v. Structural Polymer Grp., 592 F.3d 893, 896 n.4 (8th Cir. 2010)). The Eighth
Circuit Court of Appeals has refused, at the pleading stage, “to incorporate some general
and formal level of evidentiary proof into the ‘plausibility’ requirement of Iqbal and
Twombly.” Id. Nevertheless, the question “is not whether [the pleader] might at some
later stage be able to prove [facts alleged]; the question is whether [it] has adequately
2

The “Twom-bal” standard is my nickname for the “plausibility” pleading
standard established in the United States Supreme Court’s twin decisions on pleading
requirements, and standards for dismissal for failure to state a claim upon which relief
can be granted pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, for
claims in federal court. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct.
1955, 167 L.Ed.2d 929 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173
L.Ed.2d 868 (2009).
11

asserted facts (as contrasted with naked legal conclusions) to support [its] claims.” Id.
at 1129. Thus,
[w]hile this court must “accept as true all facts pleaded by the
non-moving party and grant all reasonable inferences from the
pleadings in favor of the non-moving party,” United States v.
Any & All Radio Station Transmission Equip., 207 F.3d 458,
462 (8th Cir. 2000), “[a] pleading that offers ‘labels and
conclusions’ or ‘a formulaic recitation of the elements of a
cause of action will not do.’” Iqbal, 556 U.S. at 678, 129
S.Ct. 1937 (quoting [Bell Atl. Corp. v.] Twombly, 550 U.S.
[544,] 555, 127 S.Ct. 1955 [(2007)]).
Gallagher v. City of Clayton, 699 F.3d 1013, 1016 (8th Cir. 2012); accord Whitney, 700
F.3d at 1128 (stating the same standards).
Various federal Circuit Courts of Appeals have expressly recognized that, in
addition to dismissal for factual implausibility, the Twom-bal standard still permits
dismissal pursuant to Rule 12(b)(6) of a claim that lacks a cognizable legal theory. See,
e.g., Somers v. Apple, Inc., 729 F.3d 953, 959 (9th Cir. 2013); Ball v. Famiglio, 726
F.3d 448, 469 (3d Cir. 2013) (a claim may be dismissed if it is based on an “indisputably
meritless legal theory”); Commonwealth Property Advocates, L.L.C. v. Mortgage
Electronic Registration Sys., Inc., 680 F.3d 1194, 1202 (10th Cir. 2011) (“Dismissal is
appropriate if the law simply affords no relief.”); see also Philadelphia Indem. Ins. Co.
v. Youth Alive, Inc., 732 F.3d 645, 649 (6th Cir. 2013) (recognizing that a claim must
plead sufficient facts under a “viable legal theory”). The Eighth Circuit Court of Appeals
has suggested the same. See Brown v. Mortgage Electronic Registration Sys., Inc., 738
F.3d 926, 933 n.7, 934 (8th Cir. 2013) (noting the appellate court’s agreement “with the
district court’s sound reasoning that the facts pled do not state a cognizable claim under
Arkansas law” and holding that dismissal pursuant to Rule 12(b)(6) was appropriate,

12

because Arkansas law did not impose the purported duty on which an unjust enrichment
claim and a state statutory claim were based).
B.
1.

Application Of The Standards

Plausible factual allegations

Broadspire disputes that it is, or that De Dios has alleged that it is, anything other
than a third-party claims administrator for Indemnity. Broadspire argues that De Dios’s
allegation that Broadspire and Indemnity are “essentially one and the same entity” is
“illogical,” because Iowa courts have established a clear distinction between insurers,
which issue policies, and third-party claims administrators, which manage claims under
those policies. Thus, I conclude that the first question is whether De Dios has plausibly
alleged that Broadspire is anything other than a third-party claims administrator. See
Richter, 686 F.3d at 850 (“A claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” (Internal quotation marks and citation omitted)).
Broadspire is correct that, in Raymie, Judge Jarvey concluded that “third-party
claims administrators” who “were responsible for the investigation and administration of
[the plaintiff’s] worker’s compensation claim” were not liable for bad faith. 2009 WL
8621559 at *2. He did not, however, hold that third-party claims administrators can
never be liable for bad faith, nor has Broadspire cited any decision of an Iowa state court
expressly so holding. Bremer v. Wallace, 728 N.W.2d 803, 806 (Iowa 2007), on which
Broadspire also relies, is not such a decision, because the liability of a third-party claims
administrator was not even at issue; rather, the court addressed the question of whether
Iowa recognizes a common-law claim for bad-faith refusal to pay workers’ compensation
benefits by an uninsured employer. 728 N.W.2d at 804.

13

Here, De Dios has alleged that “BROADSPIRE and the INSURANCE
COMPANY are essentially one and the same entity for purposes of the instant action,”
Amended Complaint at ¶ 6, and he has alleged that Broadspire was responsible for much
more than “investigation and administration” of his workers’ compensation claim.
Specifically, De Dios has alleged that Indemnity “delegated its authority of investigating,
handling, managing, administering, and paying benefits under Iowa Workers’
Compensation Laws to Broadspire Services, Incorporated,” and “performed the tasks of
a workers’ compensation insurance company in Iowa.” Amended Complaint, ¶¶ 4, 11.
As the alleged factual basis for these contentions, De Dios has alleged that Indemnity
“lacked the necessary support staff to investigate on-the-job injuries in Iowa”; “lacked
the necessary support staff that had the experience or knowledge to make an informed
decision on whether to pay benefits pursuant to Iowa Workers’ Compensation Laws”;
“obligated BROADSPIRE to provide actuarial services for workers’ compensation
claims”; “obligated BROADSPIRE to provide underwriting services for workers’
compensation claims”; and “entered into a reinsurance agreement with BROADSPIRE
for payments made on behalf of workers’ compensation claims.” Amended Complaint
at ¶¶ 7-10, 16. He has also alleged that Broadspire “received a percentage of the
premiums that the EMPLOYER paid to the INSURANCE COMPANY”; that its
“compensation package with the INSURANCE COMPANY was tied to the approval or
denial of workers’ compensation claims,” that is, that it “received more of the
EMPLOYER’s premium as the payment of workers’ compensation benefits decreased”;
and “had a financial risk of loss for workers’ compensation claims it administered on
behalf of the INSURANCE COMPANY.” Amended Complaint at ¶¶ 12-14.
These allegations provide a plausible factual basis that Broadspire and Indemnity
were “one and the same” for purposes of workers’ compensation claims, such as De
Dios’s. Whitney, 700 F.3d at 1128 (explaining that the question is whether the plaintiff
14

has adequately asserted facts (as contrasted with naked legal conclusions) to support its
claim).
2.

Legal cognizability of the claim

Even if the plaintiff has pleaded a plausible factual basis for a claim, to survive a
Rule 12(b)(6) motion to dismiss, the plaintiff must also establish that the claim is legally
cognizable. See Brown, 738 F.3d at 933 n.7, 934. Broadspire argues that De Dios’s
bad faith claim against it is not legally cognizable, because Raymie recognized that thirdparty claims administrators are not the substantial equivalent of or one and the same as
insurers. Again, Broadspire overstates Judge Jarvey’s conclusion on the issue in Raymie.
In Raymie, Judge Jarvey noted,
[In Bremer,] [t]he court discussed the reasons for extending
the tort of bad-faith liability to workers’ compensation cases
and self-insured employers in Boylan [v. American Motorists
Insurance Co., 489 N.W.2d 742 (Iowa 1992]), and Reedy [v.
White Consolidated Industries, Inc., 503 N.W.2d 601 (Iowa
1993)], saying the “common thread in these decisions is the
defendant’s status as an insurer, or in the case of a self-insured
employer, the substantial equivalent of an insurer.” Bremer,
728 N.W.2d at 805. The court found that an uninsured
employer is not the substantial equivalent of an insurer, and
thus declined to extend the tort of bad faith to this type of
defendant. Id. at 806. The question here is whether third-party
claims administrators who are responsible for the
investigation and administration of workers’ compensation
claims on behalf of insurance carriers are the “substantial
equivalent” of an insurer for the purposes of the tort of bad
faith. Plaintiff cites the court to no Iowa case holding that they
are.
Raymie, 2009 WL 8621559, at *2. Thus, Judge Jarvey’s denial of a bad faith claim
against third-party claims administrators, on the ground that the third-party claims
administrators were not the “substantial equivalent” of the insurer, was subject to two
15

caveats: (1) the third-party claims administrators in question were, again, identified as
responsible only for “the investigation and administration” of workers’ compensation
claims; and (2) the plaintiff failed to cite any Iowa cases holding that third-party claims
administrators are the “substantial equivalent” of insurers.

Again, De Dios has

adequately alleged that Broadspire did much more than investigate and administer
workers’ compensation claims for Indemnity, and the question of whether any third-party
claims administrator, generally, and a third-party claims administrator with the duties
and relationship to the insurer he alleges, specifically, is the “substantial equivalent” of
the insurer remains an unresolved question under Iowa law.
In short, there is an unresolved question of the legal cognizability of De Dios’s
claim against Broadspire: In what circumstances, if any, concerning a third-party claims
administrator’s duties and relationship with a workers’ compensation insurer, can an
injured employee hold the third-party claims administrator liable for the tort of bad faith?
C.

Certification Of The Question

Because this novel question of Iowa law is unresolved, I consider, sua sponte,
whether it should be certified to the Iowa Supreme Court. I begin with the standards for
certification of questions to the highest state court.
1.

Standards for certification

Certification of questions by this federal court to the Iowa Supreme Court is
authorized by IOWA CODE § 684A.1 and N.D. IA. L.R. 83. I have previously explained,
in a case in which I likewise certified questions sua sponte, the reasons that a district
court has the discretion to certify questions to a state’s highest court:
As the United States Supreme Court has recognized,
Certification procedure ... allows a federal court faced with a
novel state-law question to put the question directly to the
State’s highest court, reducing the delay, cutting the cost, and
16

increasing the assurance of gaining an authoritative response.
Arizonans for Official English v. Arizona, 520 U.S. 43, 76,
117 S.Ct. 1055, 137 L.Ed.2d 170 (1997); see Lehman Bros.
v. Schein, 416 U.S. 386, 391, 94 S.Ct. 1741, 40 L.Ed.2d 215
(1974) (by certifying a question of state law, the federal court
may save “time, energy and resources and hel[p] build a
cooperative judicial federalism”). Thus, “[t]aking advantage
of certification made available by a State may ‘greatly
simplif[y]’ an ultimate adjudication in federal court.”
Arizonans for Official English, 520 U.S. at 76, 117 S.Ct.
1055 (citing Bellotti v. Baird, 428 U.S. 132, 151, 96 S.Ct.
2857, 49 L.Ed.2d 844 (1976)). Whether a federal district
court should certify a question of state law to the state’s
highest court is a matter committed to the district court’s
discretion. Schein, 416 U.S. at 391, 94 S.Ct. 1741
(“[Certification’s] use in a given case rests in the sound
discretion of the federal court.”); Babinski v. American
Family Ins. Group, 569 F.3d 349, 353 (8th Cir.2009)
(“‘Whether a federal court should certify a question to a state
court is a matter of discretion.’” (quoting Johnson v. John
Deere Co., 935 F.2d 151, 153 (8th Cir.1991)).
Roth v. The Evangelical Lutheran Good Samaritan Soc’y, 147 F. Supp. 3d 806, 813
(N.D. Iowa 2015). As the Eighth Circuit Court of Appeals has cautioned, however,
“‘[A]bsent a close question of state law or a lack of state guidance, a federal court should
determine all the issues before it.’” County of Ramsey v. MERSCORP Holdings, Inc.,
776 F.3d 947, 951 (8th Cir. 2014) (quoting Anderson v. Hess Corp., 649 F.3d 891, 895
(8th Cir. 2011)).
I have also set forth the pertinent factors in deciding whether or not to certify
questions in Hagen v. Siouxland Obstetrics & Gynecology, P.C., 964 F. Supp. 2d 951,
961 (N.D. Iowa 2013), and Leiberkneckt v. Bridgestone/Firestone, Inc., 980 F. Supp.
300, 310 (N.D. Iowa 1997). See Roth, 147 F. Supp. 3d at 814 (citing Hagen, which in
turn cites Leiberkneckt). Those factors are the following: 1) the extent to which the legal
17

issue under consideration has been left unsettled by the state courts; (2) the availability
of legal resources which would aid the court in coming to a conclusion on the legal issue;
(3) the court’s familiarity with the pertinent state law; (4) the time demands on the court’s
docket and the docket of the state supreme court; (5) the frequency that the legal issue in
question is likely to recur; and (6) the age of the current litigation and the possible
prejudice to the litigants which may result from certification. Hagen, 964 F. Supp. 2d
at 961 (quoting Leiberkneckt, 980 F. Supp. at 310).
2.

Application of the standards

Here, I find that the question identified at the end of section II.B.2., page 16,
above, involves matters of Iowa workers’ compensation and tort law best answered, in
the first instance, by the Iowa Supreme Court. As explained, above, that question has
been left unsettled by the state courts. Leiberkneckt, 980 F. Supp. at 310 (relevant
factors). This court may have the same legal resources available as the state courts,
substantial familiarity with the pertinent Iowa law, and no greater demand on its docket
than the Iowa Supreme Court, see id., but only the Iowa Supreme Court can provide an
authoritative answer to the question. Arizonans for Official English, 520 U.S. at 76
(explaining that certification of questions “increase[es] the assurance of gaining an
authoritative response”). While the question at issue is one of first impression, it is a
question that is likely to recur, because of the prevalence of workers’ compensation
claims. Leiberkneckt, 980 F. Supp. at 310. Finally, because this case is still at the
pleading stage, the resources of the parties are likely to be saved by obtaining an early
answer, and I don’t believe that the parties will suffer any prejudice from certification,
which will provide a definitive answer, thus greatly simplifying this litigation. See
Arizonans for Official English, 520 U.S. at 76 (explaining that certification may also
“reduc[e] the delay [and] cut[ ] the cost” to the parties and “may ‘greatly simplif[y]’ an

18

ultimate adjudication in federal court.”). Therefore, I will certify the question raised in
this case, in some form, to the Iowa Supreme Court.
3.

Formulation of the question

I have tentatively formulated the question to be certified to the Iowa Supreme Court
as follows: In what circumstances, if any, concerning a third-party claims administrator’s
duties and relationship with a workers’ compensation insurer, can an injured employee
hold the third-party claims administrator liable for the tort of bad faith for failure to pay
workers’ compensation benefits?

I recognize that there may be several subsidiary

questions, some of which have been directly posed by the parties’ arguments. Those
subsidiary questions include, but are not limited to, the following: Does Iowa have a
bright-line rule that insurers and self-insured employers are the only entities that can be
held liable for the tort of bad faith failure to pay workers’ compensation benefits? Are
there entities other than a self-insured employer that are the substantial equivalent of or
one and the same as insurers for purposes of the tort of bad faith failure to pay workers’
compensation benefits?

Does Iowa law preclude the liability of third-party claims

administrators on the tort of bad faith failure to pay workers’ compensation benefits,
without regard to their duties or relationship with the insurer, because they lack an
insured-insurer relationship with the claimant? Is there any need to recognize the tort of
bad faith failure to pay workers’ compensation benefits against third-party claims
administrators, without regard to their duties or relationship with the insurer, because of
the availability of the tort against the insurer?

The principal question, as I have

formulated it, seems to me to encompasses all these subsidiary questions.3

3

A related question is whether any rule that a third-party claims administrator can
be held liable for the tort of bad faith failure to pay workers’ compensation claims would
extend beyond this context to other kinds of insurance. I believe that question falls outside
the scope of the present litigation, however.
19

Nevertheless, I believe that it is prudent to provide the parties with the opportunity
to offer amendments to the question I propose or to offer different and additional
questions that will lead to the authoritative and efficient disposition of De Dios’s bad faith
claim against Broadspire.
III.

CONCLUSION

Upon the foregoing, I conclude that some form of the following question should
be certified to the Iowa Supreme Court: In what circumstances, if any, concerning a
third-party claims administrator’s duties and relationship with a workers’ compensation
insurer, can an injured employee hold the third-party claims administrator liable for the
tort of bad faith for failure to pay workers’ compensation benefits? I will set a deadline
for the parties to offer amendments to this question or to offer different and additional
questions to be certified. My determination that the key question animating Broadspire’s
Motion To Dismiss should be certified to the Iowa Supreme Court also leads to the
conclusion that Broadspire’s Motion To Dismiss should be denied without prejudice to
reassertion, once the Iowa Supreme Court either declines to answer the certified question
or questions or provides an answer or answers.
THEREFORE,
1.

Defendant Broadspire’s April 3, 2018, Motion To Dismiss Plaintiff’s

Amended And Substituted Complaint For Failure To State A Claim (docket no. 17) is
denied, without prejudice to reassertion upon notice from the Iowa Supreme Court that
it declines to answer the certified question, as set out in paragraph 2, below, or any
subsequently amended and/or different or additional certified questions, or provides an
answer or answers;
2.

Pursuant to IOWA CODE § 684A.1 and N.D. IA. L.R. 83, I will certify to

the Iowa Supreme Court the following question or amended and/or different or additional
20

questions: In what circumstances, if any, concerning a third-party claims administrator’s
duties and relationship with a workers’ compensation insurer, can an injured employee
hold the third-party claims administrator liable for the tort of bad faith for failure to pay
workers’ compensation benefits?
3.

The parties shall have to and including June 25, 2018, to file proposed

amendments to the question set out in paragraph 2 or different or additional questions
they believe should be certified to the Iowa Supreme Court. The parties shall have to
and including July 2, 2018, to file responses to the opposing parties’ proposed
amendments and/or different or additional questions.
IT IS SO ORDERED.
DATED this 13th day of June, 2018.

______________________________________
MARK W. BENNETT
U.S. DISTRICT COURT JUDGE
NORTHERN DISTRICT OF IOWA

21