Ball v. Federal Insurance Company

Filing 72

ORDER denying 62 Motion for Summary Judgment. Signed by U.S. District Judge Karen E. Schreier on 05/12/2021. (MSB)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION

RANDY BALL,

4:18-CV-04008-KES
Plaintiff,

vs.
FEDERAL INSURANCE COMPANY,

ORDER DENYING
DEFENDANT’S MOTION FOR
SUMMARY JUDGMENT

Defendant.

Plaintiff, Randy Ball, brought a lawsuit against defendant, Federal
Insurance Company, alleging that Federal acted in bad faith when it denied
Ball’s workers’ compensation claim. Docket 1. Federal moves for summary
judgment. Docket 62. Federal argues that it is entitled to judgment as a matter
of law because its decision to terminate coverage in September 2014 was
debatable. Docket 63 at 2. Ball opposes Federal’s motion and disputes several
of Federal’s statements of fact. Dockets 66, 67. For the following reasons, the
court denies Federal’s motion for summary judgment.
BACKGROUND
The facts, viewed in the light most favorable to Ball, the non-moving
party, are as follows:
On June 21, 2013, Ball was working as a swine technician at a hog
confinement facility in Willow Lake, South Dakota. Docket 67 ¶ 1. EMP Serv
LLC owned the facility. Id. ¶ 2. While making his usual rounds in the barn, Ball

saw a tornado coming toward him and ran down the hallway. Id. ¶ 3. Ball tried
to open a door to an office, but he was knocked backward and hit his head on
a sink. Id. ¶ 4. Ball was unconscious for a period of time and then drove home.
Id. ¶ 5. Ball did not seek medical attention on June 21, 2013. Id. ¶ 6.
Three days later, Ball was evaluated by his regular medical provider,
Judi Anderson, a Certified Nurse Practitioner (CNP), at the Sanford Clinic in
Lake Norden, South Dakota. Id. ¶ 7. Ball exhibited dizziness, nausea, and
fatigue, and he was diagnosed with a concussion. Id. ¶ 8. A CT scan of Ball’s
head indicated a normal result. Id. ¶¶ 9-10. On June 27, 2013, the Lake
Norden clinic entered an order referring Ball to the Sanford Neurology Clinic.
Id. ¶ 11. The parties dispute whether CNP Anderson ordered Ball to remain off
work until July 1 or July 23. Id. ¶ 12. On July 9, Ball returned to see CNP
Anderson. Id. ¶ 16. At that time, Ball was scheduled to see a neurologist in
September. Id. ¶ 17.
Federal was EMP’s workers’ compensation insurance carrier at the time
of Ball’s injury in June 2013. Id. ¶ 14. Federal initially accepted Ball’s claim as
compensable and assigned a claims examiner, Harold White, and a nurse case
manager, Brenda Whiting, to assist Ball in obtaining any recommended
medical care. Id. ¶ 15. In order to understand Ball’s likely treatment path,
White contacted Integrity, a third-party vendor, and requested that a
neurologist examine Ball. Id. ¶¶ 18-19. But Integrity informed White that it
could not provide a neurologist to perform an Independent Medical Evaluation
(IME) at that time. Id. ¶ 20; see also Docket 66 at 2 (clarifying that IME stands
2

for Independent Medical Evaluation). White instead chose Dr. Thomas Jetzer,
an occupational medicine specialist, to conduct an IME of Ball. Docket 67 ¶ 21.
Dr. Jetzer performed his first of three evaluations of Ball on August 17,
2013. Id. ¶¶ 22, 47, 80. Following the first evaluation, Dr. Jetzer’s report
indicated that Ball sustained a closed head injury and may have suffered a
concussion. Id. ¶ 25. The report noted that Ball did not appear dizzy during the
exam, though Ball indicated to Dr. Jetzer that he continued to experience
dizziness since the June 23 incident. Id. ¶ 26; Docket 34-1 at 1-2. Dr. Jetzer’s
report stated that Ball had not yet had an MRI, an Eye, Nose, and Throat (ENT)
consult, vestibular balance testing, or cognitive testing. Docket 67 ¶ 27. Dr.
Jetzer concluded that, at that time, he was unable to determine whether Ball
had any significant ongoing pathology. Id. ¶ 28. Dr. Jetzer believed that Ball
should not return to work until additional testing and determinations were
made. Id. ¶ 28; Docket 34-1 at 5. Dr. Jetzer recommended further testing
including an ENT evaluation, a neurological evaluation, and neurocognitive
testing. Docket 67 ¶ 29.
On September 9, 2013, Ball was examined by Dr. Eugenio Matos, a
neurologist, at the Sanford Neurology Clinic. Id. ¶ 30. Dr. Matos noted that Ball
was unsteady during the examination, and he concluded that Ball had
sustained a closed head injury with possible post-concussion symptoms. Id.
¶¶ 31, 33. Dr. Matos’ examination did not indicate a brain stem stroke or other
abnormal neurological findings. Id. ¶ 32. Dr. Matos ordered Ball to undergo
physical therapy with vestibular exercises and ordered a follow-up appointment
3

in one month. Id. ¶ 34. Ball began physical therapy as ordered by Dr. Matos,
but therapy was temporarily stopped until Ball’s elevated blood pressure could
be controlled. Id. ¶¶ 35-36. Ball’s follow-up appointment with Dr. Matos in
October 2013 found unsteadiness and persistent dizziness. Id. ¶ 38. During
this appointment, Dr. Matos ordered MRI and MRA scans of Ball’s brain. Id.
¶ 39.
An MRI taken on December 6, 2013, was negative for any abnormalities
that could explain his symptoms. Id. ¶¶ 40-41. An MRA exam on December 20,
2013, showed a “tapering vessel extending into the base of the vertebral
artery.” Id. ¶¶ 45-46. Dr. Matos reviewed Ball’s MRA results on December 24,
2013, and ordered an additional MRA of Ball’s neck vessels. Id. ¶¶ 52-53. The
additional MRA test showed an “attenuated and irregular small left vertebral
artery” which could indicate a “congenital variant or perhaps a previously
thrombosed and re-opened vessel.” Id. ¶¶ 55-56. Dr. Matos concurred with
these findings, and he indicated to Ball that he did not believe the findings
were the source of Ball’s problems. Id. ¶¶ 58, 61. Dr. Matos recommended that
Ball work with an ENT physician. Id. ¶ 62.
In December 2013, Ball saw Dr. Gregory DeSautel, an ENT. Id. ¶ 42;
Docket 65-1 at 9. Dr. DeSautel found that Ball suffered from dizziness
secondary to head trauma and anxiety. Id. ¶ 43. Dr. DeSautel recommended
Xanax to alleviate Ball’s symptoms. Id. ¶ 44.
On December 20, 2013, Ball was examined by Dr. Jetzer for a second
time. Id. ¶ 47. Since Ball’s initial exam with Dr. Jetzer, he had been evaluated
4

by a neurologist (Dr. Matos), an ENT specialist (Dr. DeSautel), and had
undergone additional diagnostic testing in the form of a brain MRI and brain
MRA. Id. ¶ 48. Dr. Jetzer reviewed the updated treatment records from Dr.
Matos as well as the new diagnostic studies. Id. ¶ 49. In a report following his
second evaluation of Ball, Dr. Jetzer refrained from offering a definitive opinion
on Ball’s impairment, and he believed that further testing and evaluation by a
neurologist or a neurosurgeon were warranted. Id. ¶¶ 50-51; Docket 34-2 at 5.
In that same report, Dr. Jetzer found that “Ball has not yet reached maximum
medical improvement” and “there are still questions that need to be answered
that are beyond the scope of this independent medical examination.” Docket
34-2 at 5.
On January 31, 2014, Federal adjuster White sent an email to Nurse
Whiting and others about an upcoming phone conference related to Ball’s case.
Docket 67 ¶ 64. The email stated that, in preparation for the upcoming phone
conference, White wanted Nurse Whiting to “think about a couple of [traumatic
brain injury (TBI)] programs as an option for [] Ball preferably [South Dakota]
outpatient or inpatient program[s] in [Minnesota]” in case Ball’s condition did
not improve after seeing an ENT doctor. Id. ¶ 65. Nurse Whiting provided
Adjuster White with information about a TBI program in Omaha, Nebraska,
called the QLI Difference. Id. ¶ 66. An internal Federal document created
around January 2014 notes that it “[w]ill need to approach [Ball’s] counsel with
suggestion of TBI program in [Nebraska].” Docket 34-6 at 2. Ball and Federal
dispute whether Ball was diagnosed with a TBI and whether Federal
5

terminated coverage before a TBI could be diagnosed. See Docket 66 at 4;
Docket 67 ¶ 67.
In February 2014, Ball returned to his ENT doctor, Dr. DeSautel, at the
recommendation of his neurologist, Dr. Matos. Docket 67 ¶ 68. Dr. DeSautel
recommended a different anxiety medication and additional physical therapy.
Id. ¶ 69. Dr. DeSautel re-evaluated Ball after several weeks of physical therapy.
Id. ¶ 70. As of March 20, 2014, Dr. DeSautel noted that Ball had made some
progress with physical therapy and his balance was slowly improving. Id. ¶ 71.
Dr. DeSautel ordered an additional 10 weeks of physical therapy and then
another follow-up appointment. Id. ¶ 72.
Federal avers that in May 2014 Ball also underwent a neuropsychological
evaluation conducted by Dr. Michael McGrath.1 Docket 34-3 at 3; Docket 67
¶¶ 73-76. Federal selected Dr. McGrath and made Ball’s appointment with
him. Docket 69-1 at 12. According to Dr. McGrath, Ball’s responses to the
neuropsychological testing suggested that he was not making a sincere effort in
his recovery. Id. ¶ 74. Dr. McGrath’s report indicated that Ball “performed in a
manner suggestive of inadequate effort on 4 of 5 validity indicators.” Id. ¶ 75.

Ball denies all of Federal’s assertions related to Dr. McGrath and responds
that “[t]here is no evidence that a full neuropsychological exam or report was
completed by McGrath.” Docket 67 ¶¶ 73-76. But Ball fails to identify anything
in the record that directly refutes or even calls into question whether Dr.
McGrath evaluated Ball. See id; see also D.S.D. Civ. LR 56.1.B (“A party
opposing a motion for summary judgment must respond to each numbered
paragraph in the moving party’s statement of material facts with a separately
numbered response and appropriate citations to the record.” (emphasis added)).
Thus, the court includes Federal’s averment but notes Ball’s denial, albeit
without citing contrary facts in the record.
1

6

Dr. McGrath concluded that Ball’s test scores could not be confidently
interpreted due to “probable malingering.” Id. ¶ 76.
On June 11, 2014, Ball returned to ENT physician Dr. DeSautel. Id.
¶ 77. Dr. DeSautel noted that physical therapy had been helpful to Ball and
that his agitation and anxiety had improved. Id. ¶ 78. Dr. DeSautel approved
Ball to return to work in a structured environment and to continue with
physical therapy. Id. ¶ 79.
Ball saw Dr. Jetzer for a third examination on September 13, 2014. Id.
¶ 80. During this exam, Ball refused to lie down when asked, though Ball
alleges this was because lying down caused dizziness and vertigo. Id. ¶ 81. Ball
told Dr. Jetzer that he still felt dizzy, was unable to look at the floor, passed out
when he was flat on his back, had trouble bending forward, and had occasional
headaches. Docket 34-3 at 2. Ball held onto the wall during one of the walking
exams conducted by Dr. Jetzer. Id. at 3. In his final report, Dr. Jetzer stated
that “[Ball] may have suffered a concussion and subsequent dizziness for a
period of time[,]” but “[t]here appears to be . . . no evidence to support any
residual pathology considering his clinical presentation.” Docket 65-6 at 16.
Dr. Jetzer’s third and final report relied in part on Dr. McGrath’s findings.
Docket 34-3 at 3. Dr. Jetzer sent his final report to Federal on September 23,
2014. Id. at 1.
On September 30, 2014, Federal sent a letter to Ball’s attorney stating
that it would deny all treatment after the date of the letter. Docket 67 ¶ 95. Ball
sought additional workers’ compensation benefits through the South Dakota
7

Department of Labor. Id. ¶ 96. Federal and Ball settled his workers’
compensation claim in November 2017. Id. ¶ 99. Ball brought this suit in
January 2018 alleging that Federal acted in bad faith when it “knew that there
was no legitimate and reasonable basis to deny [his] claim[.]” Id. ¶ 100 (second
alteration in original); see also Docket 1. Federal moved for summary judgment
on September 30, 2020, and Ball opposes the motion. Dockets 62, 66.
LEGAL STANDARD
Summary judgment is appropriate if the movant “shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” Fed. R. Civ. P. 56(a). The moving party can meet its burden
by presenting evidence that there is no dispute of material fact or that the
nonmoving party has not presented evidence to support an element of its case
on which it bears the ultimate burden of proof. Celotex Corp. v. Catrett, 477
U.S. 317, 322-23 (1986). The moving party must inform the court of the basis
for its motion and also identify the portions of the record that show there is no
genuine issue in dispute. Hartnagel v. Norman, 953 F.2d 394, 395 (8th Cir.
1992) (citation omitted).
To avoid summary judgment, “[t]he nonmoving party may not ‘rest on
mere allegations or denials, but must demonstrate on the record the existence
of specific facts which create a genuine issue for trial.’ ” Mosley v. City of
Northwoods, 415 F.3d 908, 910 (8th Cir. 2005) (quoting Krenik v. Cnty. of Le
Sueur, 47 F.3d 953, 957 (8th Cir. 1995)). Summary judgment is precluded if
there is a genuine dispute of fact that could affect the outcome of the case.
8

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). When considering
a summary judgment motion, the court views the facts and the inferences
drawn from such facts “in the light most favorable to the party opposing the
motion.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 58788 (1986) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)).
“It is . . . well-settled that in a suit based on diversity of citizenship
jurisdiction the federal courts apply federal law as to matters of procedure but
the substantive law of the relevant state.” Hiatt v. Mazda Motor Corp., 75 F.3d
1252, 1255 (8th Cir. 1996) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64
(1938)). Here, South Dakota law governs substantive issues.
DISCUSSION
An employee aggrieved by an insurer's bad faith failure to pay benefits to
which the employee is entitled under the workers’ compensation statute may
proceed against the insurer by way of an action in tort. Hollman v. Liberty Mut.
Ins. Co., 712 F.2d 1259, 1261 (8th Cir. 1983). “An action for bad faith
compensates an insured for the intentional misconduct of a defendant insurer
as distinguished from merely negligent conduct.” Jordan v. Union Ins. Co., 771
F. Supp. 1031, 1033 (D.S.D. 1991) (citing Simkins v. Great W. Cas. Co., 831
F.2d 792, 793 (8th Cir. 1987)). A two-part test establishes a bad faith denial of
workers’ compensation benefits under South Dakota law: “(1) [t]here was an
absence of a reasonable basis for denial of policy benefits; and (2) [t]he insurer
knew or recklessly disregarded the lack of a reasonable basis for denial.”

9

Johnson v. United Parcel Serv., Inc., 946 N.W.2d 1, 9 (S.D. 2020) (citing Hein v.
Acuity, 731 N.W.2d 231, 236 (S.D. 2007)).
A workers’ compensation insurer is permitted to “ ‘challenge claims
which are fairly debatable,’ and therefore, ‘will be found liable only where it has
intentionally denied (or failed to process or pay) a claim without a reasonable
basis.’ ” Hein, 731 N.W.2d at 236 (quoting Champion v. U.S. Fid. & Guar.
Co., 399 N.W.2d 320, 324 (S.D. 1987)). A claim that is “fairly debatable either
in fact or law” does not establish bad faith. Johnson, 946 N.W.2d at 10 (quoting
Dakota, Minn. & E. R.R. Corp. v. Acuity, 771 N.W.2d 623, 630 (S.D. 2009)). “The
focus is on the existence of a debatable issue, not on which party was correct.”
Id. (citation omitted). Whether an insurer acted in bad faith “is determined
based upon the facts and law available to [the] [i]nsurer at the time it made the
decision to deny coverage.” Acuity, 771 N.W.2d at 629 (S.D. 2009) (quoting
Walz v. Fireman’s Fund Ins. Co., 556 N.W.2d 68, 70 (S.D. 1996)).
I. Absence of Reasonable Basis
Federal argues that it is entitled to summary judgment because its
decision to terminate Ball’s coverage was fairly debatable. Docket 63 at 2.
Federal states its view of Ball’s claim as follows: “[Ball] claims that Federal
committed bad faith because its adjusters did not demand from [Ball]’s treating
physicians that [Ball] be referred for treatment to a special rehabilitation
facility for traumatic brain injury [] patients.” Id. at 1. In support of its
summary judgment motion, Federal emphasizes three allegedly undisputed
facts: “(1) Federal . . . had no authority . . . to order or direct specific medical
10

care for [Ball]; (2) none of [Ball]’s treating physicians ever diagnosed him with a
TBI or recommended that he obtain treatment from a TBI rehabilitation facility;
and (3) Federal never denied any medical care actually ordered by [Ball]’s
medical providers . . . .” Id. at 1-2 (emphasis omitted).
Federal states Ball’s claim too narrowly by focusing only on the absence
of TBI treatment. Ball’s claim is that Federal acted in bad faith when it
terminated workers compensation coverage in September 2014 without a full
investigation leading to a complete diagnosis. Docket 65-10 at 3-4; Docket 66
at 7. According to Ball, Federal’s denial of coverage in September 2014
prevented further investigation, diagnosis, and treatment including, but not
limited to, a referral to a TBI specialist. Docket 65-10 at 3-4; see also Docket 66
at 7. Thus, the court analyzes whether Federal is entitled to summary
judgment based on Federal’s denial of coverage in September 2014.
Federal relies on Petrillo v. Lumbermens Mutual Casualty Co. to support
its argument that a workers’ compensation insurer has no duty to direct an
insured employee’s course of medical treatment. 378 F.3d 767, 769 (8th Cir.
2004); Docket 63 at 18-19. In Petrillo, an employee who slipped and fell was
sent by her employer to a physical therapist who treated her hip pain for two
months and then discharged her. Id. at 768. The insurer, Lumbermens, paid
for the two months of physical therapy and then closed the file. Id.
Lumbermens reopened the file when her pain returned and her employer sent
her back to a physical therapist and then a physician who diagnosed a broken
hip. Id. When an orthopedic surgeon concluded that Petrillo’s hip pain was
11

related to a childhood condition, Lumbermens again terminated benefits. Id.
When an IME later determined that Petrillo’s underlying condition was
aggravated by her work-place injury, Lumbermens reinstated benefits and
retroactively paid for treatment including three hip replacements and an
implanted spinal stimulator. Id. After Petrillo brought suit against Lumbermens
alleging bad faith, a jury found for Lumbermans. Id.
On appeal, Petrillo argued that the jury should have been instructed that
Lumbermans had a duty not only to “pay for reasonable and necessary medical
care,” as it was instructed by the trial court, but also to “furnish” care. Id. at
768-69. Petrillo alleged that Lumbermens’ duty to “furnish” necessary care
included a duty to send her to a physician, and not a physical therapist, at the
outset of her injury. Id. at 769. Petrillo argued that Lumbermens’ failure to do
so exacerbated her injury. Id. The Eighth Circuit Court of Appeals disagreed
with Petrillo and held that an employee cannot bring a claim against an insurer
where the employer exercises its duty under Iowa law to “furnish reasonable
services” and “choose the care.” Id. at 770. Because Petrillo’s employer had
exercised that duty, the insurer had no duty to step in and overrule the
employer’s choice of care. Id.
Petrillo is inapposite to Ball’s case and thus unhelpful to Federal for
several reasons. First, Petrillo argued that her insurer had a duty to direct her
care whereas Ball argues that care was terminated before his pathology was
actually determined and his injuries had been fully addressed. Second, the
posture of the two cases raises vastly different questions. Here, the threshold
12

question is whether there is a dispute of fact as to the reasonableness of
Federal’s denial of benefits. In Petrillo, the issue before the Court was the scope
of the insurer’s legal duty to direct medical care. Third, Iowa employers have a
duty to direct the care of employees seeking workers’ compensation, whereas it
is the employee who chooses his or her own care under South Dakota law.
Docket 63 at 20; compare SDCL § 62-4-1 with Iowa Code § 85.27(4). Federal
acknowledges this distinction and argues that Petrillo is relevant because an
employee’s duty to select his or her own care further attenuates the role of the
insurer in South Dakota. Docket 63 at 20. Because the dispute here is not over
who had a duty to direct Ball’s medical care, this distinction between Iowa and
South Dakota law is not helpful to the court’s analysis. Overall, Federal’s
reliance on Petrillo is misplaced because it incorrectly assumes that the issue
in Ball’s case is limited to the absence of TBI treatment instead of the denial of
all coverage as of September 2014.
A jury could find that Federal had no reasonable basis for denying
coverage on Ball’s claim. While Federal claims that a TBI was never diagnosed,
Ball points to facts that indicate coverage was terminated without a reasonable
basis before such a diagnosis could be reached. Dr. Matos found that a brain
stem injury was possible given Ball’s symptoms. Docket 69-5 at 12. Although
Ball was evaluated by a neurologist, Ball was never evaluated by a
neurosurgeon, as suggested by Dr. Jetzer, or by a neurologist specializing in
closed head injuries. Docket 34-2 at 5; see Docket 69-5 at 10. And Dr.
McGrath concluded that the invalid data in Ball’s tests “does not necessarily
13

imply that he did not suffer a [TBI].” Docket 69-6 at 7. During his time as
Federal’s adjuster on the case, Harold White never saw what he would consider
a “final diagnosis,” and the record is void of any such diagnosis after White quit
working on the case in 2014. Docket 54-1 at 9, 22. Despite no clear diagnosis
and persisting symptoms of dizziness, Federal seems to rely almost entirely on
Dr. McGrath’s conclusion of “probable malingering” to deny any ongoing
coverage. Viewing the facts in the light most favorable to Ball, a jury could find
that Federal’s decision to deny coverage in September 2014 was without a
reasonable basis.
II. Knowledge of Lack of Reasonable Basis
For the first time in its reply brief, Federal argues that it is entitled to
summary judgment because Ball “outright ignores the second element of a
claim for bad faith handling of a workers’ compensation claim, i.e. knowledge of
the lack of a reasonable basis by the insurer.” Docket 70 at 8. The Eighth
Circuit Court of Appeals has stated that a party moving for summary judgment
must inform the court of the basis for its motion. Hartnagel, 953 F.2d at 395.
Nowhere in its memorandum of law in support of its motion for summary
judgment (Docket 63) does Federal argue it is entitled to summary judgment on
the basis that the nonmoving party has not presented evidence to support the
second element of its bad faith claim. See Docket 63. The court was only
informed of this alleged basis for relief in Federal’s reply brief. This ensured
that Ball did not have an opportunity to respond.

14

This court and the Eighth Circuit Court of Appeals have stated that the
court is not required to address arguments made for the first time in a reply
brief. North Star Mut. Ins. Co. v. CNH Am. LLC, No. 4:11-CV-04133-KES, 2013
WL 5156457, at *7 (D.S.D. Sept. 12, 2013); see also Bearden v. Lemon, 475
F.3d 926, 930 (8th Cir. 2007); Johnson v. Berry, 171 F. Supp. 2d 985, 990 n.3
(E.D. Mo. 2001). Thus, the court declines to address Federal’s motion for
summary judgment based on Ball’s alleged failure to provide evidence of the
second element—knowledge of the lack of a reasonable basis—of his claim.
CONCLUSION
Ball demonstrates that disputes of fact exist as to whether Federal had a
reasonable basis to deny Ball’s workers’ compensation claim after September
2014. Thus, Federal has not met its burden of showing that it is entitled to
judgment as a matter of law, and it is
ORDERED that Federal’s motion for summary judgment (Docket 62) is
denied.

DATED this 12th day of May, 2021.

BY THE COURT:

/s/ Karen E. Schreier
KAREN E. SCHREIER
UNITED STATES DISTRICT JUDGE

15