Brady v. The Travelers Indemnity Company et al

Filing 40

MEMORANDUM OPINION AND ORDER denying 17 Motion for Summary Judgment. Signed by District Judge Keith Starrett on 2/25/2014 (scp)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
EASTERN DIVISION
BRENDA BRADY
V.

PLAINTIFF
CIVIL ACTION NO. 2:12cv245-KS-MTP

THE TRAVELERS INDEMNITY COMPANY and
ON ASSIGNMENT STAFFING SERVICES, INC.

DEFENDANTS

MEMORANDUM OPINION AND ORDER
This matter is before the Court on the Motion for Summary Judgment [17] of the
Defendants The Travelers Indemnity Company (“Travelers”) and On Assignment
Staffing Services, Inc. (“On Assignment”). Having considered the submissions of the
parties, the record, and the applicable law, the Court finds that the motion should be
denied.
I. BACKGROUND
This is a suit for bad faith denial of workers’ compensation benefits brought by
Brenda Brady against her former employer, On Assignment, and its insurer, Travelers.
On or about April 3, 2007, Brady sustained certain injuries when she slipped and fell
while working in the course and scope of her employment with On Assignment. Brady
subsequently asserted a workers’ compensation claim against On Assignment and
Travelers for her injuries arising out of the accident. In March of 2012, Brady settled her
workers’ compensation claim against On Assignment and Travelers. The settlement
was effected through a Release [17-2] executed by Brady on March 21, 2012, and an
Order Approving Final Compromise Settlement and Dismissing Claim with Prejudice
[17-1] entered by the Mississippi Workers’ Compensation Commission (“MWCC”) on
March 26, 2012.

On October 24, 2012, Brady filed suit against On Assignment and Travelers in
the Circuit Court of Lamar County, Mississippi. (See Compl. [17-5].) The Complaint
alleges that Brady suffered injury as a result of Travelers’ failure to authorize diagnostic
exams and failure to approve medical treatment. The Complaint further asserts that the
Defendants’ willful refusal to provide timely compensation benefits without any
legitimate basis for the refusal and willful use of the parties’ unequal bargaining
positions to force the Plaintiff to accept an inadequate settlement constitute independent
torts not subject to the exclusivity provision of the Mississippi Workers’ Compensation
Act (the “Act”).
On December 26, 2012, Travelers removed the proceeding to this Court on the
basis of diversity of citizenship jurisdiction under Title 28 U.S.C. § 1332. (See Notice of
Removal [1].) On February 12, 2013, Brady filed an Amended Complaint [5], correcting
a misnomer as to the name of On Assignment.
On August 26, 2013, the Defendants filed their Motion for Summary Judgment
[17]. The Defendants contend that summary judgment is due in their favor because the
MWCC Order and Release each released and discharged all of Brady’s claims arising
out of her work accident, including the bad faith claim asserted in this lawsuit. Brady
contends that she only released her workers’ compensation claim against the
Defendants. The Court has fully considered the parties’ positions and is ready to rule.
II. DISCUSSION
A.

Standard of Review

Federal Rule of Civil Procedure 56 provides that “[t]he court shall grant summary
judgment if the movant shows that there is no genuine dispute as to any material fact
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and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
Initially, the movant has “the burden of demonstrating the absence of a genuine issue of
material fact.” Cannata v. Catholic Diocese of Austin, 700 F.3d 169, 172 (5th Cir. 2012)
(citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265
(1986)). If the movant meets this burden, the nonmovant must go beyond the pleadings
and point out specific facts showing the existence of a genuine issue for trial. Id. “‘An
issue is material if its resolution could affect the outcome of the action.’” Sierra Club,
Inc. v. Sandy Creek Energy Assocs., L.P., 627 F.3d 134, 138 (5th Cir. 2010) (quoting
Daniels v. City of Arlington, Tex., 246 F.3d 500, 502 (5th Cir. 2001)). “An issue is
‘genuine’ if the evidence is sufficient for a reasonable jury to return a verdict for the
nonmoving party.” Cuadra v. Houston Indep. Sch. Dist., 626 F.3d 808, 812 (5th Cir.
2010) (citation omitted).
The Court is not permitted to make credibility determinations or weigh the
evidence. Deville v. Marcantel, 567 F.3d 156, 164 (5th Cir. 2009) (citing Turner v.
Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007)). When deciding
whether a genuine fact issue exists, “the court must view the facts and the inferences to
be drawn therefrom in the light most favorable to the nonmoving party.” Sierra Club,
Inc., 627 F.3d at 138. However, “[c]onclusional allegations and denials, speculation,
improbable inferences, unsubstantiated assertions, and legalistic argumentation do not
adequately substitute for specific facts showing a genuine issue for trial.” Oliver v.
Scott, 276 F.3d 736, 744 (5th Cir. 2002) (citation omitted).
B.

Analysis
1.

Whether Brady’s Bad Faith Claim Was Discharged by the
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MWCC Order [17-1]
The Court first addresses the Defendants’ argument that the MWCC Order
“completely discharges Brady’s claims against On Assignment and Travelers in this
action.” (Defs.’ Mem. in Supp. of Mot. for SJ [18] at p. 3.) The Defendants quote the
following portions of the MWCC Order in support of this argument:
IT IS FURTHER ORDERED that upon the payment of the
consideration specified herein, employer and carrier shall stand fully, finally
and forever discharged of any other or further liability to claimant for the
accidental injuries sustained by claimant . . . .
IT IS FURTHER ORDERED that claimant is hereby authorized to
execute such release as is required by the employer and carrier to evidence
their complete release, acquittance, and discharge herein and that, except
for the consideration and only that consideration specified herein, this claim
is fully and finally dismissed with prejudice.
(MWCC Order [17-1] at pp. 5-6.) Brady argues that her bad faith claim arises outside
the scope of the Act, and thus, the claim remains viable in this action.
The Court finds that Brady has the better side of the argument. The Fifth Circuit
has recently examined the nature of a claim for bad faith refusal to pay workers’
compensation benefits under Mississippi law.1 See Williams v. Liberty Mut. Ins. Co.,
No. 11-60818, 2014 WL 321839 (5th Cir. Jan. 28, 2014). “The action ‘derives from the
independent and allegedly intentional, tortious conduct of [the insurer] in refusing to pay
benefits owing under the . . . Act without an arguable basis therefor.’” Id. at *3 (quoting
S. Farm Bureau Cas. Ins. Co. v. Holland, 469 So. 2d 55, 59 (Miss. 1984)). Also, the
exclusivity provision of the Act does not bar a civil action alleging this tort since the

1

The substantive law of Mississippi applies in this diversity action. See Specialty
Rental Tools & Supply, LP v. Shoemaker, 553 F.3d 415, 419 (5th Cir. 2008).
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independent tort is not compensable under the Act. See id. (citations omitted). The
Fifth Circuit summarized Mississippi Supreme Court precedent addressing the claim as
follows:
Holland and the cases following it make clear that an insurer's intentional
bad-faith refusal to pay worker's compensation timely is an independent tort
committed by the insurer outside of the scope of the worker's employment;
that it does not arise out of the employee's job-related personal injury or the
Workers' Compensation Act; and that it, therefore, is legally distinct from and
independent of any claims arising under the Workers' Compensation Act.
Id.
The MWCC Order did not discharge Brady’s bad faith claim because it is legally
distinct from and independent of any of her claims for compensation asserted against
Travelers and On Assignment in the MWCC proceeding. Notwithstanding the
provisions of the MWCC Order quoted by the Defendants, the Order also provides that
the MWCC “has jurisdiction in this matter and that the case is a proper one for
disposition under the provisions of the Mississippi Workers’ Compensation Act . . . .”
(MWCC Order [17-1] at p. 1.) Brady’s intentional tort allegations are neither appropriate
for disposition nor compensable under the provisions of the Act since they arose outside
the scope of her employment. Thus, the MWCC Order is incapable of extinguishing or
discharging the subject bad faith claim, and the Defendants’ request for summary
judgment based on the MWCC Order is rejected.
2.

Whether the Release [17-2] Executed by Brady Encompasses
Her Bad Faith Claim

Settlement agreements are contracts under Mississippi law. See, e.g., Bogy v.
Ford Motor Co., 824 F. Supp. 2d 733, 739 (S.D. Miss. 2011); Chantey Music Publ’g, Inc.
v. Malaco, Inc., 915 So. 2d 1052, 1056 (Miss. 2005). The Court is unaware of any rule
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of contract law that renders a settlement agreement void merely because it resolves
claims filed in one legal proceeding and additional claims capable of being filed in a
separate action. Therefore, the fact that the Release [17-2] arose from and was
executed in connection with the settlement of Brady’s workers’ compensation claim
does not negate the possibility of it encompassing her separate and distinct bad faith
cause of action. The construction of the Release (the parties’ settlement contract) will
determine if the claims asserted in this case fall within its scope.
Mississippi courts employ “a three-tiered approach to contract interpretation.”
Tupelo Redevelopment Agency v. Abernathy, 913 So. 2d 278, 284 (¶ 13) (Miss. 2005)
(citing Pursue Energy Corp. v. Perkins, 558 So. 2d 349, 351-53 (Miss. 1990)). “First,
the ‘four corners’ test is applied, wherein the reviewing court looks to the language that
the parties used in expressing their agreement.” Id. The court should “read the contract
as a whole, so as to give effect to all of its clauses.” Facilities, Inc. v. Rogers-Usry
Chevrolet, Inc., 908 So. 2d 107, 111 (¶ 10) (Miss. 2005) (citation omitted). “When an
instrument’s substance is determined to be clear or unambiguous, the parties’ intent
must be effectuated.” Pursue Energy Corp., 558 So. 2d at 352. Second, a court should
look to “the discretionary canons of contract construction”2 if the parties’ intent remains
unclear or illusive after a reading of the instrument. Austin v. Carpenter, 3 So. 3d 147,
150 (¶ 15) (Miss. Ct. App. 2009). Third, “if the contract continues to evade clarity as to
the parties’ intent, the court should consider extrinsic or parol evidence.” Crisler v.
2

Ambiguities are construed against the party that drafted the agreement. See
Pursue Energy Corp., 558 So. 2d at 352-53. Written contract provisions prevail over
conflicting printed terms. See id. at 353. There are other canons that need not be
stated here.
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Crisler, 963 So. 2d 1248, 1252 (¶ 8) (Miss. Ct. App. 2007) (citation omitted). The
Mississippi Supreme Court does not require strict adherence to this step-by-step
approach in all circumstances. See Pursue Energy Corp., 558 So. 2d at 351 n.6
(“Indeed, overlapping of steps is not inconceivable.”). Further, a court need not go
through the entire three steps in the context of a request for summary judgment. See
Epperson v. SOUTHBank, 93 So. 3d 10, 17 (¶ 20) (Miss. 2012), cert. denied, 133 S. Ct.
889 (2013). “If the reviewing Court finds the terms of the contract to be ambiguous or
subject to more than one interpretation, the case must be submitted to the trier of fact,
and summary judgment is not appropriate.” Id.; see also Bogy, 824 F. Supp. 2d at 739
(finding the interpretation of an ambiguous contract provision to be a jury question).
The Defendants claim that the ensuing language in the Release effected the
release and discharge of Brady’s bad faith claim:
I, Brenda Brady, . . . hereinafter referred to as claimant, for the
consideration and only the consideration named below, . . . do hereby
release and finally discharge On Assignment, . . . Travelers, . . . and all
others in privity of interest therewith, from any and all claims of every kind
and character arising out of or in any way connected with my claims for
injuries allegedly sustained by me on or about April 3, 2007 . . . .
(Release [17-2] at p. 1) (emphasis added). The Defendants further assert that Brady’s
express reservation of certain claims against other parties in the Release shows that the
claims asserted against them in this lawsuit have been discharged. As to the latter
contention, the Release provides in pertinent part:
I do hereby expressly reserve the right to pursue any other claims or
causes of action which I might have against any other parties who might be
responsible for the injuries allegedly received in my accident, and this release
shall not be construed so as to diminish or waive any other claims or causes
of action I might have against anyone other than the parties herein released.
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(Release [17-2] at p. 2) (emphasis added).
Brady contends that the language of the Release makes clear that only her
workers’ compensation claim was released: “This release shall bind myself, my heirs,
executors, administrators, or assigns, and I accept this consideration and only this
consideration as a full and final settlement of any and all claims I have or may later have
against the parties herein released under the Mississippi Workers’ Compensation Act.”
(Release [17-2] at p. 1) (emphasis added). Brady alternatively argues that the Release
is ambiguous and that she should be allowed to present parol evidence to clear up the
ambiguity.
The Court finds that the Release is ambiguous as to whether a claim for bad faith
refusal to provide workers’ compensation benefits falls within its scope. A contract
should be considered ambiguous if “a careful reading of the instrument reveals it to be
less than clear, definite, explicit, harmonious in all its provisions, and free from
ambiguity throughout . . . .” Barnett v. Getty Oil Co., 266 So. 2d 581, 586 (Miss. 1972).
Furthermore, “contractual provisions are ambiguous where they are susceptible of two
or more reasonable interpretations, or where one provision is in direct conflict with
another provision, or where terms are unclear or of doubtful meaning.” Reece v. State
Farm Fire & Cas. Co., 684 F. Supp. 140, 143 (N.D. Miss. 1987) (citing Dennis v. Searle,
457 So. 2d 941 (Miss. 1984)). Ambiguity may also arise when contract terms are silent
as to certain issues arising between contracting parties. See Arledge v. Gulf Oil Corp.,
571 F.2d 1388, 1391 (5th Cir. 1978) (citing Mississippi cases for the proposition that the
fact-finder may turn to extrinsic evidence to determine the parties’ intent “[w]here a
written agreement is silent or ambiguous”); Tubb v. Monroe County Elec. Power Ass’n,
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912 So. 2d 192, 197 (¶ 17) (Miss. Ct. App. 2005) (providing that an ambiguity exists and
the intentions of the parties must be determined where the grant of an easement is
silent as to its width); but cf. Facilities, Inc., 908 So. 2d at 115 (¶ 19) (“[S]ilence alone
does not necessarily create an ambiguity as a matter of law.”).
The above-quoted Release language cited by the Defendants supports a finding
that Brady released her bad faith claim against them. The allegation that the
Defendants wrongfully refused to provide workers’ compensation benefits on a timely
basis can be rationally construed to fall within the scope of “all claims of every kind and
character arising out of or in any way connected with” Brady’s claims for work-related
injuries. (Release [17-2] at p. 1.) There could not have been any alleged bad faith
denial of workers’ compensation benefits in the absence of an underlying claim for
benefits. Thus, one can infer that the subject claim is “connected with” Brady’s “claims
for injuries allegedly sustained . . . on or about April 3, 2007”. (Release [17-2] at p. 1.)
Conversely, the contract provision cited by Brady referencing the “Mississippi
Workers’ Compensation Act” and the following Release provisions appear to tie the
settlement to Brady’s claim for workers’ compensation benefits:
The purpose of this settlement agreement is to provide the Claimant
with funds that will compensate her for future workers compensation benefits,
including medical benefits, and that will foreclose the employer/insurer’s
responsibility for such benefits.
....
This release was authorized in a settlement approved by the final
order of the Mississippi Workers’ Compensation Commission in Cause No.
0703743-K-4519-A, and I covenant not to assert any further claims against
the parties herein released, directly or indirectly, or to attempt to reopen this
claim in any manner, all for the consideration and only the consideration
named herein.
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I further state that Donald W. Medley, Esquire is my only and
exclusive attorney in this matter, and I will pay him the fee authorized by the
Mississippi Workers’ Compensation Commission.
(Release [17-2] at pp. 1, 3, 4.) As recognized by the Fifth Circuit, a claim for bad faith
refusal to provide workers’ compensation benefits is legally separate and distinct from
any claims arising under the Act. See Williams, 2014 WL 321839, at *3. Consequently,
Brady’s release “of any and all claims” against Travelers and On Assignment “under the
Mississippi Workers’ Compensation Act” does not extend to her bad faith claim.
(Release [17-2] at p. 1.)
The preceding contract clauses, standing alone, are not ambiguous. However,
when the provisions are read together, they conflict. “A contract is ambiguous if it
contains conflicting clauses when the contract is read as a whole.” Dalton v. Cellular S.,
Inc., 20 So. 3d 1227, 1232 (¶ 10), 1233 (¶ 12) (Miss. 2009) (holding that conflicting
termination clauses in an agency agreement created an ambiguity). “The release at
issue in the case sub judice is not ‘clear, definite, explicit, harmonious in all of its
provisions, and free from ambiguity throughout.” Farragut v. Massey, 612 So. 2d 325,
329 (Miss. 1992) (ruling that a release agreement was ambiguous where competing
clauses made the extent of claims released unclear). The Court is unable to determine
from the four corners of the Release if the subject bad faith claim is encompassed within
its scope due to ambiguity. As a result, the interpretation of the Release is a question
for the finder of fact. See Enniss Family Realty I, LLC v. Schneider Nat’l Carriers, Inc.,
916 F. Supp. 2d 702, 711 (S.D. Miss. 2013) (denying summary judgment due to the
existence of ambiguous contract provisions); Bogy, 824 F. Supp. 2d at 739 (same);
Dalton, 20 So. 3d at 1235 (¶ 19) (reversing the trial court’s grant of summary judgment
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because the contract was ambiguous).
The fact that Brady’s “present attorney reviewed and revised [the Release] prior
to execution” fails to support a grant of the Defendants’ request for summary judgment.
(Defs.’ Mem. in Supp. of Mot. for SJ [18] at p. 4.) The summary judgment record shows
that Brady’s counsel removed the terms “arising out of the handling of my claims”, “the
handling of my claims regarding my accident”, and “causes of action whatsoever” from
the original release prepared by Defendants’ counsel. (Doc. No. [30-2] at p. 1.) Brady’s
counsel also inserted the “under the Mississippi Workers’ Compensation Act” language
into the release. (See Doc. No. [30-2] at p. 1.) The letter sent by Brady’s counsel to the
Defendants’ counsel accompanying the revised release states that “[w]e made some
adjustments allowing for only releasing the comp claim as addressed in the petition to
be presented to the Workers’ Comp Commission.” (Doc. No. [30-3].) These
circumstances, viewed in Brady’s favor, lead to the reasonable inference that she had
no intention of releasing her bad faith claim as part of the subject settlement agreement.
Nonetheless, the Court will leave to the jury the ultimate determination of whether any
extrinsic or parole evidence clarifies the scope of the Release.
The Defendants’ argument in rebuttal that Brady failed to include express
language in the Release reserving her bad faith claim is not well taken. (See Defs.’
Rebuttal in Supp. of Mot. for SJ [33] at ¶¶ 9, 11.) An objective reading of the Release
also fails to reveal any provision expressly, as opposed to inferentially, including the
claim under the scope of claims released and extinguished. It does appear that the
Defendants attempted to reference such a claim in the original draft of the agreement.
(See Doc. No. [30-2] at p. 1.) However, the absence of any objection from the
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Defendants to the Plaintiff’s removal of certain language from the agreement leaves
them in no better position than her regarding blameworthiness for the lack of clarity in
the scope of claims released.
III. CONCLUSION
Jury issues exist with respect to whether the March of 2012 settlement
agreement between the Plaintiff and the Defendants encompasses the claims asserted
in this action.
IT IS THEREFORE ORDERED AND ADJUDGED that the Defendants’ Motion for
Summary Judgment [17] is denied.
SO ORDERED AND ADJUDGED this the 25th day of February, 2014.

s/ Keith Starrett
UNITED STATES DISTRICT JUDGE

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