Thompson v. National Union Fire Insurance Company of Pittsburg
Filing
90
MEMORANDUM OPINION AND ORDER granting in part 52 Motion to Exclude Expert Testimony of Elliott Flood; granting in part and denying in part 55 Motion for Summary Judgment; granting in part and denying in part 59 Motion to Exclude Expert Testimony of Robert Anderson. Signed by U.S. District Judge Lawrence L. Piersol on 5/17/21. (SKK)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION
CIV. NO. 18-4011
KRISTI H. THOMPSON,
vs.
MEMORANDUM OPINION AND ORDER
GRANTING IN PART MOTION TO
EXCLUDE EXPERT TESTIMONY OF
ELLIOTT FLOOD, GRANTING IN PART
AND DENYING IN PART MOTION TO
EXCLUDE EXPERT TESTIMONY OF
ROBERT ANDERSON, AND GRANTING
IN PART AND DENYING IN PART
MOTION FOR SUMMARY JUDGMENT
Plaintiff,
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURG,
Defendant.
Plaintiff, Kristi H. Thompson (“Thompson”) filed a complaint against Defendant, National
Union Fire Insurance Company of Pittsburg’s (“National Union”) alleging claims for breach of
contract and bad faith denial of workers’ compensation benefits. Pending before the Court is
Thompson’s Motion to Exclude National Union’s Expert Testimony of Robert Anderson, Doc. 52;
National Union’s Motion for Summary Judgment, Doc. 55; and National Union’s Motion to
Exclude Expert Testimony of Elliott S. Flood, Doc. 59. For the following reasons, National
Union’s Motion to Exclude Expert Testimony of Elliott S. Flood is granted in part; Thompson’s
Motion to Exclude National Union’s Expert Testimony of Robert Anderson is granted in part and
denied in part; and National Union’s Motion for Summary Judgment is granted in part and denied
in part.
BACKGROUND
JC Penney Incident & Employment
On February 21, 2011, Plaintiff, Kristi Thompson (“Thompson”) was employed by JC
Penney in Brookings, South Dakota, as a manager in its jewelry department. (Docs. 56, ¶ 1; 67, ¶
1). While working in a back room, Thompson bent down to open the door of jewelry safe. (Docs.
56, ¶ 2; 67, ¶ 2). As she stood up, Thompson struck her head on a cabinet that was above the area
where the safe was located. (Docs. 56, ¶ 3; 67, ¶ 3).
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Thompson provided notice to her employer of the incident, but did not seek immediate
medical attention. (Docs. 56, ¶ 5; 67, ¶ 5). Thompson continued to work the day of the incident,
was able to drive herself home, and returned to work the following day. (Docs. 56, ¶ 6; 67, ¶ 6).
Thompson does not recall missing any work at JC Penney due to the February 21, 2011
work incident. (Docs. 56, ¶ 19; 67, ¶ 19). While she was working at JC Penney, Thompson worked
a second job, working as much as 60 hours per week, but struggled to work the same shifts as she
had done prior to the JC Penney incident due to her pain. (Docs. 56, ¶ 20; 67, ¶ 20).
On January 18, 2012, Thompson resigned from her position with JC Penney. (Docs. 56, ¶
59; 67, ¶ 59). Thompson’s husband had been offered a job in Sioux Falls and Thompson had
requested a transfer to the Sioux Falls JC Penney, but her request was not granted. (Doc. 58-3,
DOL Transcript 230:15-24). In exit paperwork provided to JC Penney, Thompson indicated that
she resigned because “We have moved to Sioux Falls and wanted to transfer but [Ms.] Cambern
told me I could not transfer. I really like JC Penney and felt it was a great company to work for,
but again, I was told I was unable to transfer.” (Doc. 58-3, Ex. G at 22). Thompson had been an
employee of JC Penney since November 3, 2009. (Doc. 58-9, Ex. G at 20).
Workers’ Compensation Claims
In February 2011, Defendant National Union was the workers’ compensation insurance
carrier for Thompson’s employer, JC Penney. (Docs. 56, ¶ 7; 67, ¶ 7). Pursuant to a contractual
arrangement, Thompson’s claim was administered by a third-party administrator, Sedgwick
Claims Management Services, Inc. (“Sedgwick”). (Docs. 56, ¶ 8; 67; ¶ 8).
Thompson’s first post-accident visit to a medical provider was on February 23, 2011, when
she visited her chiropractor at Brookings Chiropractic. (Docs 56, ¶ 10; 67, ¶ 10). Thompson’s
chiropractic records indicate that she described to her chiropractor that when she hit her head
underneath the cabinet, it caused immediate pain to her head and neck and left a bump on the top
of her head. (Doc. 58-4, Ex. C-2 at 23). Thompson said that at times, the pain in her neck was “a
sharp shooting pain” and that she was also experiencing pain in her left upper back and shoulder
and a lot of tightness. (Doc. 58-4, Ex. C-2 at 23).
Thompson continued with intermittent
chiropractic care through May 2, 2011. (Docs. 56, ¶ 11; 67, ¶ 11). Thompson then had a gap in
receiving care while Thompson was waiting for a worker’s compensation case manager to approve
treatment. (Docs. 56, ¶ 12; 67, ¶ 12).
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On July 22, 2011, Thompson underwent a cervical MRI which revealed degenerative disc
changes at multiple levels in Thompson’s cervical spine. (Docs. 56, ¶¶ 12-13; 67, ¶¶ 12-13).
Thompson’s first appointment with a medical doctor for her neck pain was on August 2,
2011. (Docs. 56, ¶ 14; 67, ¶ 14). Thompson reported to Dr. Merritt Warren (“Dr. Warren”), her
primary physician of 25 years, that she had hit her head on the bottom of the countertop after
closing the safe, and that afterward, she noted “immediate neck pain and a ‘migraine’ headache.”
(Doc. 58-4, Ex. C-2 at 1). Thompson told Dr. Warren that after hitting her head, she was dazed,
but not unconscious. (Doc. 58-7, Ex. E., Warren Dep. 15:11-15). Dr. Warren reviewed the July
22, 2011 MRI and noted that it showed degenerative joint disease. (Doc. 58-7, 43:15-25). Dr.
Warren prescribed Thompson a muscle relaxant and referred her to physical therapy. (Docs. 56,
¶ 16; 67, ¶ 16). While Thompson reported to Dr. Warren on August 30, 2011, that physical therapy
was slowly helping her condition, subsequent notes by Dr. Warren indicate that Thompson’s pain
subsequently increased. (Docs. 56, ¶ 18; 67, ¶ 18).
Thompson’s Prior Medical History
Prior to the February 21, 2011 incident, Thompson had a history of neck problems and
treatment for neck pain. (Docs. 56, ¶ 25; 67, ¶ 25). In 1999, Thompson treated with an Avera
physician for right neck pain and decreased range of motion in her cervical spine. (Docs. 56, ¶ 26;
67, ¶ 26). Thompson reported neck pain again in 2000. (Docs. 56, ¶ 27; 67, ¶ 27). In late 2003early 2004, Thompson saw Dr. Warren and reported left neck pain of almost a month’s duration.
(Docs. 56, ¶ 28; 67, ¶ 28).
In October 2005, Thompson was evaluated at the Orthopedic Institute for complaints of
pain in her neck following a motor vehicle accident. (Docs. 56, ¶ 30; 67, ¶ 30). In late 2007,
Thompson began treating with Brookings Chiropractic for pain through her neck, mid back region
and low back region. (Docs. 56, ¶ 31; 67, ¶ 31). In February 2008, Thompson reported a fall while
walking to church which “compressed her spine and jarred her neck.” (Docs. 56, ¶ 32; 67, ¶ 32).
On April 18, 2008, Thompson reported a fall going down some stairs and approximately ten days
later, Johnson was treated for pain on the right side of her neck. (Docs. 56, ¶¶ 33-34; 67, ¶¶ 3334).
Thompson reported neck pain again during her next appointment on May 6, 2008. (Docs.
56, ¶ 35; 67, ¶ 35). In March 2009, Thompson returned to Brookings Chiropractic complaining of
pain through her neck and upper shoulders following an incident where she hit her head on a beam
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in her barn. (Docs. 56, ¶ 36; 67, ¶ 36). Approximately one month later, Thompson returned to
Brookings Chiropractic to treat the discomfort in her neck after she had fallen off a ladder. (Docs.
56, ¶ 37; 67, ¶ 37). On June 22, 2009, Thompson slipped off another ladder, causing “a little
whipping motion to her neck” and resulting neck pain. (Docs. 56, ¶ 38; 67, ¶ 38). A little more
than two weeks later, Thompson got into an accident with her riding mower and jarred her upper
back and neck. (Docs. 56, ¶ 39; 67, ¶ 39). Thompson continued treatment with Brookings
Chiropractic for complaints of recurring headaches and pain through her neck and upper shoulder
region on August 11, 2009, September 25, 2009, November 12, 2009, and December 15, 2009.
(Docs. 56, ¶ 40; 67, ¶ 40). On January 1, 2010, Thompson reported falling off some mounds of
snow and having discomfort through the right side of her neck and shoulder. (Docs. 56, ¶ 41; 67,
¶ 41). In December 2010, Thompson was putting up Christmas decorations on a ladder and fell
off, hurting the right side of her neck. (Docs. 56, ¶ 42; 67, ¶ 42). Thompson’s last treatment for
neck pain prior to the JC Penney incident on February 21, 2011, was on January 4, 2011, with
Brookings Chiropractic. (Docs. 56, ¶ 43; 67, ¶ 43).
First Independent Medical Examination
In December 2011, roughly ten months after the date of injury, Sedgwick opted to have
Thompson submit to an independent medical examination (“IME”). (Docs. 56, ¶ 44; 67, ¶ 44).
The claims adjuster assigned to the file at that time, Laurie (Rosenberry) Talbot, contacted
Integrity, a third-party vendor from Minneapolis, Minnesota, and requested a qualified physician
to examine Thompson. (Docs. 56, ¶ 45; 67, ¶ 45). Integrity assigned Dr. Paul Cederberg. (Docs.
56, ¶ 46; 67, ¶ 46). Neither Sedgwick nor National Union requested that Integrity assign Dr.
Cederberg to perform Thompson’s IME. (Docs. 56, ¶ 47; 67, ¶ 47). Ms. Talbot does not recall
ever using Dr. Cederberg prior to Thompson’s case. (Docs. 56, ¶ 48; 67, ¶ 48).
Dr. Cederberg is a board-certified orthopedic surgeon from St. Louis Park, Minnesota.
(Docs. 56, ¶ 49; 67, ¶ 49). Dr. Cederberg has been practicing orthopedics since the early 1980’s
and is licensed to practice in multiple states, including South Dakota. (Docs. 56, ¶ 50; 67, ¶ 50).
Thompson does not dispute that Dr. Cederberg was sufficiently qualified to perform her IME.
(Docs. 56, ¶ 51; 67, ¶ 51).
On January 13, 2012, Dr. Cederberg met with and examined Thompson in Sioux Falls,
South Dakota. (Doc. 56, ¶ 52; 67, ¶ 52). During his examination, Dr. Cederberg questioned
Thompson about her past medical history. (Docs. 56, ¶ 53; 67, ¶ 53). Integrity had not given Dr.
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Cederberg any of Thompson’s medical records from prior to Thompson’s work accident. (Doc.
58-9, Ex. G, Cederberg Dep. 7:5-8). According to Dr. Cederberg’s report dated January 23, 2012,
Thompson denied any history of neck problems prior to February 21, 2011. (Docs. 56, ¶ 54; 67,
¶ 54). When describing the incident at JC Penney, Thompson said she had an abrasion on top of
her head, but said she did not remember ever losing consciousness, feeling nauseous or seeing
stars after she hit her head. (Doc. 58-9, Ex. G, Cederberg Dep. 7:24-8:3).
Dr. Cederberg reviewed Thompson’s chiropractic records after the JC Penney incident
diagnosing Thompson with a cervical sprain and strain, cervical facet syndrome with associated
thoracic myofascial pain secondary to her injury at JC Penney. (Doc. 58-9, Ex. G at 12). Dr.
Cederberg noted that Thompson had been treated by her chiropractor during 11 separate visits until
May 2, 2011 and that at that time, rated her pain around 5/10. (Doc. 58-9, Ex. G at 12). Dr.
Cederberg noted a gap in treatment from May 2, 2011, until July 27, 2011, which Thompson
described was due to her workers’ compensation case manager’s delay in approving treatment.
(Doc. 58-9, Ex. G at 12). Dr. Cederberg reviewed Thompson’s last chiropractic treatment record
from July 27, 2011, which showed that Thompson was experiencing low back pain after gardening
the previous day. (Doc. 58-9, Ex. G at 12).
As part of his IME, Dr. Cederberg reviewed Thompson’s July 22, 2011, cervical spine MRI
which showed a straightening of the cervical spine with mild degenerative changes at C4-5, C5-6
and C6-7. (Doc. 58-9, Ex. G at 12). He noted that Thompson was treated at the Avera Brookings
Medical Group from August 2, 2011, through December 6, 2011, and that on August 2, 2011, she
had reported that she jammed her neck in February and has experienced pain in her neck. (Doc.
58-9, Ex. G at 12). Dr. Cederberg noted that Ms. Thompson began physical therapy at Avera
Brookings Medical Clinic on August 9, 2011, with the chief complaint of left-sided neck pain and
that Thompson had reported to her physical therapist that after she hit her head at JC Penney, she
experienced immediate neck pain and a “migraine” along with progressive left-sided neck pain.
(Doc. 58-9, Ex. G at 12). Dr. Cederberg stated that the records showed a Job Accommodation
request dated August 30, 2011, requesting various accommodations due to Ms. Thompson’s neck
pain and that an October 10, 2011, Avera Medical Group clinic note indicated that Thompson
continued to experience severe pain and stiffness in her left neck despite ibprofen, muscle
relaxants, and physical therapy. (Doc. 58-9, Ex. G at 13). Dr. Cederberg reviewed Thompson’s
October 27, 2011, therapy record which showed that Thompson continued to experience left-sided
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neck pain and noted a Work Ability Report from December 6, 2011, placing Thompson on further
restrictions. (Doc. 58-9, Ex. G at 13).
In his report dated January 23, 2012, Dr. Cederberg summarized Thompson’s symptoms
as “left-sided neck pain, headaches, and sense of being tired; and easy fatigability [and reported
that Thompson] denied any prior history of concussion, neck or head injury.” (Doc. 58-9, Ex. G
at 15). Dr. Cederberg concluded that Thompson had sustained three distinct injuries as a result of
the work incident on February 21, 2011: (1) a contusion to her scalp; (2) a neck strain; and (3) a
mild closed head injury. (Docs. 56, ¶ 55; 67, ¶ 55). Dr. Cederberg noted in his examination that
she had hyperreflexia in the lower extremities and stated that Thompson should have a repeat MRI
scan of her neck and an MRI scan of her brain to rule out a subdural hematoma from the February
21, 2011 injury and to see if there was another injured region in the cervical spine that was not
evidenced in the original MRI scan of her neck. (Doc. 58-9, Ex. G at 15). Dr. Cederberg expressed
the opinion that Thompson was exhibiting objective findings on examination and that her February
21, 2011 injury was not yet resolved. (Docs. 56, ¶ 56; 67, ¶ 56).
Medical Treatment after First IME
In accordance with Dr. Cederberg’s recommendations, and those provided by Thompson’s
treating physician, Dr. Warren, Thompson continued to treat her injuries and underwent a second
cervical MRI in June 2012. (Docs. 56, ¶ 61; 67, ¶ 61). On September 28, 2012, Integrity scheduled
Thompson for a second IME with Dr. Cederberg for October 5, 2012. (Doc. 66-5.)
Second IME
Thompson returned for a follow-up IME by Dr. Cederberg on October 5, 2012. (Docs. 56,
¶ 62, 67, ¶ 62). With regard to Thompson’s medical history, Dr. Cederberg noted:
I reviewed my prior report dated January 23, 2012. In that report, I noted that she
had diminished range of motion rotating her neck to the left and had hyperreflexia
at the time I saw her in the lower extremities. I diagnosed contusion to the scalp
with neck strain and mild closed head injury. Based on her findings in the lower
extremities, I recommended she have a follow up MRI scan of her neck and an MRI
scan of her brain to rule out some other type of intracranial process that would
explain the hyperreflexia in her lower extremities.
(Doc. 58-9, Ex. G at 17). As part of his October 5, 2012 exam, Dr. Cederberg reviewed additional
medical records of Thompson’s, including the June 21, 2012, MRI study following his first
examination. (Dos. 56, ¶ 63; 67, ¶ 63). Dr. Cederberg noted that the MRI “showed degenerative
disc disease at two levels without any evidence of spinal cord changes that would account for the
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hyperreflexia in her lower extremities.” (Doc. 58-9, Ex. G at 18). Dr. Cederberg noted that she
was seen by Dr. Murunga at Avera Medical Group in August 2012 for neck pain and numbness in
her fingers. (Doc. 58-9, Ex. G at 18). Dr. Cederberg noted that Dr. Warren felt that physical
therapy had not been successful and referred Thompson to a chronic pain specialist for an epidural
steroid injunction which was never performed. (Doc. 58-9, Ex. G at 18; Doc. 68, ¶ 13; 72-3, Ex.
Q at 6). Dr. Cederberg reported that Thompson “feels exhausted,” and has “left-sided headaches,
global numbness in her left arm, and diminished movement in her neck.” (Doc. 58-9, Ex. G at
18).
Dr. Cederberg also performed a physical examination of Thompson. He characterized
Thompson as being “quite tearful” and found that Thompson had a diminished range of motion in
her neck and tenderness on the left side of her neck. (Doc. 58-9, Ex. G at 18). Dr. Cederberg
found that Thompson did not have hyperreflexia in her knees or ankles or in the lower extremities
on this date. (Doc. 58-9, Ex. G at 18). He noted that Thompson’s grip on the right hand averaged
40 pounds compared to unrecordable grip strength on the left and stated that there was no visible
atrophy or discernible cause for the opposite left grip strength. (Doc. 58-9, Ex. G at 18).
Dr. Cederberg reiterated that the injury sustained by Thompson on February 21, 2011, was
a contusion to the scalp, a mild closed head injury and a cervical strain superimposed on
degenerative disc disease of the cervical spine. (Docs. 58-9, Ex. G at 19; 56, ¶ 65; 67, ¶ 65). He
diagnosed her with “degenerative disc disease of the cervical spine with symptoms out of
proportion to objective clinical and radiographic findings” and stated that the degenerative disc
disease was unrelated to the February 21, 2011, injury. (Docs. 58-9, Ex. G at 19; 56, ¶¶ 66-67; 67,
¶¶ 66-67). Dr. Cederberg stated that when he examined Thompson, she did not have any objective
findings that would correlate with her symptoms and that in his opinion, the injury from February
21, 2011, had been resolved. (Doc. 58-9, Ex. G at 19). Dr. Cederberg stated that “[b]ased on her
persistent cervical spine complaint, [he] would rate [Thompson] as having a 0% permanent partial
disability to the whole person.” (Doc. 58-9, Ex. G). Dr. Cederberg stated that in his opinion,
Thompson “does not require additional medical treatment, injections, physical therapy,
medications or diagnostic evaluation of any kind as a result of the injury on February 21, 2011.”
(Doc. 59-9, Ex. G at 19). In his deposition, Dr. Cederberg explained why he arrived at the 0%
permanent partial disability rating as follows: “I can’t explain her symptoms. The findings on the
MRI scan are mild. The mechanism of injury, in my opinion, is a trivial injury, and there’s just
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nothing objective that—that would correlate with her symptoms.” (Doc. 58-9, Ex. G, Cederberg
Dep. 17:12-16).
Medical Treatment after Second IME
Not present in the record before this Court on summary judgment are many of Thompson’s
medical records after her second IME with Dr. Cederberg. Although Plaintiff cites to the
administrative law judge’s findings of fact to show the medical care that Thompson received
during this time, the Court is not obligated to give the administrative law judge’s finding of fact
any deference in evaluating Thompson’s tort claim that was not litigated at the administrative level.
Thus, the findings of fact made by the administrative law judge may not serve as evidence to
support the parties’ factual assertions.
On October 29, 2012, Thompson saw Dr. Warren who noted that Thompson showed
marked tenderness in her paraspinal muscles and over areas of the cervical spine, that Thompson
showed limited range of motion, that her hand grasp, especially the left, was weak, and that she
had pain radiating down her left arm. (Doc. 72-3 at 9). During that appointment, Dr. Warren also
referred Thompson to Dr. Wilson Asfora, a neurosurgeon for consultation. (Doc. 72-3 at 9).
Thompson’s first consultation with Dr. Asfora was in November 2012. (Doc. 66-1, Thompson
Dep. 75:20-76:9).
Denial of Benefits
On or about December 21, 2012, Sedgwick gave notice to Thompson that National Union
was denying all further workers’ compensation benefits to Thompson related to the February 21,
2011 injury. (Docs. 56, ¶ 68; 67, ¶ 68). Sedgwick stated that that “[b]ased on Dr. Cederberg’s
opinions, JC Penney/National Union Fire Insurance Company is denying all further worker’s
compensation benefits to Ms. Thompson relating to her February 21, 2011 injury. The denial
includes the additional medical treatment recently requested, as well as any additional benefits
under SDCL Title 62.” (Doc. 58-6, Ex. D at 6). Prior to December 21, 2012, National Union had
approved and paid for all treatment obtained by Thompson pursuant to the recommendations of
her treating providers. (Docs. 56, ¶ 69; 67, ¶ 69).
Medical Treatment after Denial of Benefits
On January 2013, Thompson visited Dr. Asfora who expressed that her symptoms may be
associated with a condition called fibromyalgia/chronic pain syndrome. (Docs. 66-1, Ex. A,
Thompson Dep. 80:13-81:6; 58-11, Ex. I, Asfora Dep. 12:10-13:15). In February 2013, upon Dr.
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Asfora’s recommendation, Thompson underwent a three-level cervical fusion surgery. (Docs. 56,
¶ 70; 67, ¶ 70).
Petition for Additional Workers’ Compensation Benefits and Administrative Hearing
On August 29, 2014, Thompson filed a Petition for Hearing with the South Dakota
Department of Labor (“DOL”) seeking additional workers’ compensation benefits. (Docs. 56, ¶
71; 67, ¶ 71). On September 2, 2014, Thompson filed an Amended Petition for Hearing. (Doc.
63, 1-2). In Thompson’s Amended Petition, she sought additional workers’ compensation benefits
under South Dakota Codified Laws Title 62 for the following: (1) payment of all medical expenses
in conjunction with treatment for her injuries under SDCL 62-4-1; (2) temporary total disability
benefits under SDCL 62-4-3; (3) payment of permanent partial disability benefits under SDCL 624-6; (4) vocational retraining benefits and/or permanent total disability benefits under SDCL 624-6.1 and/or 62-4-53. Doc. 64-1. In addition, Thompson sought in her amended petition: attorney
fees and costs incurred herein; prejudgment interest; post-judgment interest; and such other and
further relief as the Department of Labor may deem just and equitable. Doc. 64-1.
National
Union filed an Answer to the Petition, denying that Thompson was entitled to any further benefits.
(Docs. 56, ¶ 72; 67, ¶ 72).
On September 7 and 8, 2016, a hearing on Thompson’s Petition was held before an
administrative law judge with the South Dakota Department of Labor & Regulation. (Docs. 5814; 56, ¶ 74; 67, ¶ 74). During the hearing before the DOL, Thompson was asked about her history
of neck problems and related treatment prior to February 21, 2011, and she provided testimony
regarding those issues. (Docs. 56, ¶ 75; 67, ¶ 75). At the hearing before the DOL, various medical
professionals offered opinions as to the cause of Thompson’s post-denial medical treatment.
(Docs. 56, ¶ 76; 67, ¶ 76). Thompson presented expert medical testimony from her family practice
physician, Dr. Warren, and retained a physical medicine and rehabilitation specialist, Dr.
Christopher Janssen. (Docs. 56, ¶ 77; 67, ¶ 77). Dr. Janssen’s report and opinions in the workers’
compensation litigation were not produced until January 2016, over three years following the
December 21, 2012 denial. (Docs. 56, ¶ 78; 67, ¶ 78). At the hearing before the DOL, Dr. Janssen
testified that he had not seen records showing Thompson’s neck pain and prescriptions for pain
medications prior to 2009. (Docs. 56, ¶ 79; 67, ¶ 79). At the hearing before the DOL, Dr. Janssen
testified that his opinions were based, in part on his belief that “Dr. Asfora and Dr. Warren have
both given the opinion that the injury was a major contributing factor to her continuing symptoms.”
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(Docs. 56, ¶ 80; 67, ¶ 80). Dr. Warren testified that he was unaware of numerous neck injuries
and chiropractic treatments for Thompson occurring between 2009 and 2011. (Docs. 56, ¶ 81; 67,
¶ 81). Dr. Warren also testified that it was not within the scope of his expertise to offer an opinion
as to whether the degenerative condition shown in Thompson’s July 2011 MRI would occur in a
five to six month time period. (Docs. 56, ¶ 82; 67, ¶ 82).
At the hearing before the DOL, JC Penney and National Union presented testimony from
two surgeons, Dr. Cederberg and Dr. Asfora. (Docs. 56, ¶ 83; 67, ¶ 83). Dr. Asfora testified that
degenerative disc disease is not an acute injury, but something that develops over a long period of
time. (Docs. 56, ¶ 84; 67, ¶ 84). With respect to the specific degenerative disc disease observed
on Thompson’s July 2011 MRI, Dr. Asfora testified that the issue of causation was related to the
severity of the incident. (Docs. 56, ¶ 85; 67, ¶ 85).
On February 23, 2017, the Department of Labor issued a decision addressing the following
legal issues: (a) Whether Thompson was injured to the extent she claims on or about February 21,
2011; (b) Whether Thompson is entitled to any worker’s compensation benefits, including
permanent total disability benefits, permanent partial disability benefits, temporary total disability
benefits, and temporary partial disability benefits; and (c) Whether Thompson is entitled to prior
and future medical benefits. (Doc. 58-14). In its decision, the Department of Labor and Regulation
concluded that Thompson had demonstrated that she is permanently and totally disabled pursuant
to SDCL 62-4-53. (Doc. 58-14). The administrative law judge granted Thompson’s request for
permanent total disability benefits. (Doc. 58-14). Noting that the weekly rate was in dispute, the
administrative law judge ordered the parties to include their calculations in the findings of fact and
conclusions of law.
(Doc. 58-14).
The administrative law judge further ordered that the
Department will retain jurisdictions as to future and past medical benefits. (Doc. 58-14). Finally,
the administrative law judge ordered both parties to submit Findings of Fact and Conclusions of
Law and an Order consistent with the decision or a Stipulation as to a waiver of Findings of Fact
and Conclusions of Law along with an Order consistent with the decision. (Doc. 58-14).
Thompson and National Union submitted a Settlement Agreement with the Department
on August 21, 2017. (Doc. 64-2). Therein, they agreed to a lump sum payment of $400,000.00
“in exchange for full release of all [Thompson’s] worker’s compensation claims, including
temporary total disability, temporary partial disability, permanent total disability, permanent
partial disability, retraining, rehabilitation, Odd-Lot, all appellate claims, and any and all other
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claims arising out of her employment with JC Penney.” (Doc. 64-2). The Settlement Agreement
further provided that:
It is agreed to by and between the parties that this settlement was entered into with
the understanding that the lump sum payment of $400,000.00 represents the only
award that [Thompson] will ever receive from Employer/Insurer with respect to the
contested work related injuries alleged, and, therefore, should be allocated to that
period of time extending from the date that [the Settlement] Agreement is executed
. . . through the period of [Thompson’s] life. According to The Period Life Table,
2014, as published by the Social Security Administration, [Thompson], who . . . is
presently fifty-four (54) year old, has a remaining life expectancy of 29.70 years or
356 months. Dividing this number of months into the net settlement amount of
$189,645.64 [ ] after deducting estimated attorney fees, estimated costs and medical
bills, produced a monthly settlement rate of $553.11 [ ] as envisioned by, and agreed
to, by [Thompson], [JC Penney] and [National Union].
(Doc. 64-2). The Settlement Agreement provides that a Medicare Set-Aside will be submitted by
JC Penney and National Union to the Center for Medicare and Medicaid Services (CMS) for
approval in 30-45 days after receipt of an opinion letter from Thompson’s treating physician, Dr.
Warren. (Doc. 64-2). In the event the MSA is approved by CMS is an amount acceptable to JC
Penney/National Union, the Settlement Agreement provides that JC Penney/National Union agrees
to pay for primary and secondary future medical services related to the February 21, 2011 injury
and “an immediate cash amount for seed money to be used for all reasonable, necessary and
authorized medical expenses and to pay to an annuity company a lump sum to fund an annuity for
the same purpose” which will pay annually a set amount to be used for all reasonable, necessary
and authorized medical expenses over 25 years while Thompson is still living. (Doc. 64-2). In
the event that the final recommended MSA that is approved by CMS exceeds the sums deemed
acceptable by JC Penney/National Union, the Settlement Agreement provides that JC
Penney/National Union “may elect to proceed by having [Thompson’s] lifetime future medical
remain in place, unaffected by th[e] settlement.” (Doc. 64-2). Finally, the Settlement Agreement
provides that the parties “have reached a settlement as to all the issues set forth in [Thompson’s]
Petition for Hearing,” and that the parties agreement that the Petition “shall be dismissed with
prejudice upon approval by the Department of Labor of th[e] Settlement Agreement.” (Doc. 642).
On August 21, 2017, the administrative law judge with the Department of Labor approved
of the Settlement Agreement, finding that it “appear[ed] to be fair and reasonable to all parties.”
Doc. 64-2. The administrative law judge ordered that Thompson’s “Petition for Hearing is
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dismissed on its merits, with prejudice, each party bearing their costs and attorney’s fees” and that
Thompson’s costs and attorney’s fees (which the Settlement Agreement provided were to be
deducted from $400,000.00 lump sum payment) were reasonable and granted. Doc. 64-2.
Present Lawsuit
On January 25, 2018, Thompson filed a Complaint against National Union alleging that
National Union breached its contract to provide workers’ compensation benefits to Thompson and
committed bad faith by terminating additional benefits to Plaintiff in December 2012. (Doc. 1).
With regard to her claim of bad faith, Thompson’s Complaint alleges that “[National Union] knew
that there was a lack of a reasonable basis for denial of the claim, or else acted in reckless disregard
as to whether or not a reasonable basis existed for the denial of the claim.” (Docs. 56, ¶ 89; 67, ¶
89). With regard to her claim for breach of contract, Thompsons alleges the following:
29. By virtue of its policy of worker’s compensation insurance with JC Penney in
effect on or about February 21, 2011, and Mrs. Thompson status as an insured under
the policy, Defendant was contractually obligated to pay Plaintiff worker’s
compensation benefits as a result of her work related injury.
30. Defendant breached its duty to pay Mrs. Thompson worker’s compensation
benefits in a timely manner pursuant to the policy.
31. Defendant’s breach of its duty to under it policy resulted in substantial damage
to Mrs. Thompson.
32.
Defendant’s refusal to pay the full amount of worker’s compensation
benefits as determined by the Department was vexatious and without reasonable
cause and Plaintiff is entitled to attorney’s fees pursuant to SDCL § 58-12-3.
(Doc. 1, ¶¶ 28-32). In her Complaint, Thompson alleges that National Union had failed to pay
Thompson’s medical expenses or fully fund a Medicare Set-Aside Agreement (Doc. 1, ¶ 27).
However, Thompson testified in her deposition that the Set-Aside was funded approximately one
year after the parties’ entered into the Settlement Agreement. (Doc. 58-1, Ex. A, Thompson Dep.
91:16-25).
Pending before the Court is a National Union’s Motion for Summary Judgment and Motion
to Exclude Expert Testimony of Elliott Flood as well as Thompson’s Motion to Exclude Expert
Testimony of Robert Anderson. The motions have been fully briefed by that parties. Upon order
of the Court, the parties also filed supplemental briefs on issues relating to National Union’s
Motion for Summary Judgment and held a hearing on all pending motions on March 18, 2021. In
her supplemental brief and at oral argument, Thompson withdrew her breach of contract claim and
stated that Count 1 of her Complaint was limited to a claim for attorneys’ fees under SDCL 5812
12-3. At oral argument, the Court also ordered additional briefing on National Union’s Motion to
Exclude Testimony of Elliott Flood, as set out in his supplemental report dated June 28, 2020.
DISCUSSION
I.
Motion to Exclude Expert Testimony of Elliott Flood
A. Background
National Union had moved to exclude testimony by Thompson’s expert, Elliott Flood, that
Dr. Cederberg was biased in favor of insurance companies and that Sedgwick knew or recklessly
disregarded alleged evidence of bias. (Doc. 59).
In his initial expert report dated September 30, 2018, Plaintiff’s expert, Elliott Flood, stated
that “the potential for bias in insurance medical examinations is a well-recognized concern in the
insurance industry.” (Doc. 58-10, Ex. H at 12). On January 23, 2020, Flood was deposed by
counsel for National Union. During his deposition, Flood was asked whether he intended to offer
the opinion at trial that Dr. Cederberg was biased in favor of insurance companies. Flood testified
at that time that he did not intend to offer such an opinion:
Q:
Okay. Are you offering the opinion in this case that Dr. Cederberg is biased
in favor of insurance companies?
A:
If I’ve not written it in my report, I am not yet offering it.
Q:
So my understanding, having read your report, is you are not currently
offering that opinion. Is that fair?
A:
Yes.
(Doc. 58-10, Ex. H, Flood Dep. at 102:22-103:6).
On June 30, 2020, Plaintiff served National Union with the Supplemental Report of Elliott
S. Flood. (Doc. 58-16, Ex. N). In his Supplemental Report, Flood indicates that since his
deposition, he has reviewed additional 97 IME reports authored by Dr. Cederberg in other cases.
(Doc. 58-16, Ex. N. at 4). These reports were provided to the parties by a third-party IME vendor
pursuant to a subpoena. (Doc. 60 at 2). Prior to their production, the IME reports were redacted
to remove all references to the examinee’s name or personally identifiable information. (Doc. 5816). Based on his review, Flood now intends to offer the following additional opinions at trial:
•
As noted in my original report, Sedgwick denied any further benefits based on
Dr. Cederberg’s opinion. The new materials received since my original report
pertain to Dr. Cederberg’s IME practice. I was provided with redacted IME
reports issued by Dr. Cederberg, of which 97 reached a conclusion. Of those,
87 (90%) were adverse to the injured worker. The new materials provide
13
additional support for my opinion that the use of Dr. Cederberg contravened the
primary purpose of independent medical examinations, that is, to obtain a fair,
objective, and unbiased evaluation of an injured worker’s medical condition.
•
My original report noted that industry standard requiring the claim handlers to
investigate any concerns of bias by a supposedly independent reviewer. The
new materials on Dr. Cederberg are precisely the type of information that
should have been uncovered by any reasonable claim handler before relying on
Dr. Cederberg to deny a claim. The materials show that Dr. Cederberg, in
approximately 90% of his IME findings, supported the insurer’s denial of
claims. This is a gigantic red flag that any reasonable claim handler would have
recognized indicated that Dr. Cederberg could not provided [sic] a reasonable
basis to deny claims.
•
This adds to my original opinion that Sedgwick was not providing the oversight
and management required to fairly handle claims. In addition to the opinions
expressed in my original report, it now appears that any reasonable claim
handler would know that Dr. Cederberg was an unacceptable choice to render
a fair, objective, and unbiased evaluation of an injured workers’ medical
condition.
(Doc. 58-16, Ex. N. at 4).
B. Legal Standard
Proposed expert testimony must meet three prerequisites to be admissible under Federal
Rule of Evidence 702. Lauzon v. Senco Prods., Inc., 270 F.3d 681, 686 (8th Cir. 2001). “First,
evidence based on scientific, technical, or other specialized knowledge must be useful to the finder
of fact in deciding the ultimate issue of fact.” Id. Second, the proposed expert must be qualified.
Id. Third, the proposed evidence must be “reliable or trustworthy in an evidentiary sense, so that,
if the finder of fact accepts it as true, it provides the assistance the finder of fact requires.” Id.
“Courts should resolve doubts regarding the usefulness of an expert's testimony in favor of
admissibility.” Marmo v. Tyson Fresh Meats, Inc., 457 F.3d 748, 758 (8th Cir.2006). “As a
general rule, the factual basis of an expert opinion goes to the credibility of the testimony, not the
admissibility, and it is up to the opposing party to examine the factual basis for the opinion in
cross-examination.” Bonner v. ISP Techs., Inc., 259 F.3d 924, 929 (8th Cir. 2001) (citation
omitted). However, an expert's opinion must be excluded if it “is so fundamentally unsupported
that it can offer no assistance to the jury.” Id. at 929–30 (citation omitted). The proponent of the
expert testimony bears the burden of proving its admissibility by a preponderance of the evidence.
Lauzon, 270 F.3d at 686 (citing Daubert v. Merrell Dow Pharm., 509 U.S. 579, 592 (1993)).
14
C. Discussion
In his supplemental expert report, Flood stated that he was provided with redacted IME
reports issued by Dr. Cederberg during discovery, of which 97 reached a conclusion. Of those 97
reports, Flood concludes that 87 (90%) were adverse to the injured worker. (Doc. 53-4). Flood
opines that it is industry standard for claims handlers to investigate any concerns of bias by
physicians performing IME’s and that a reasonable claims handler should have uncovered this
information of potential bias by Dr. Cederberg and in doing so, would not have relied on his
opinion in denying Thompson benefits.
National Union has moved to exclude Flood’s opinion of Dr. Cederberg’s alleged bias.
National Union contends that his opinion is not reliable because it assumes, without any factual
basis, that the decisions by Dr. Cederberg that are allegedly “adverse” to the injured worker are a
result of bias. (Doc. 60 at 7). National Union states that the reports examined by Dr. Cederberg
are a small, self-selected sample and that Flood makes no attempt to identify other IME reports
authored by Dr. Cederberg before December 21, 2012—the time of Thompson’s denial. (Doc. 60
at 7). National Union also argues that Flood’s opinion that Dr. Cederberg was incapable of “a fair,
objective, and unbiased evaluation” is contradicted by the evidence in this case because Dr.
Cederberg’s findings following his initial examination of Thompson were favorable to Thompson.
(Doc. 60 at 7-8). National Union highlights that it was only following Dr. Cederberg’s second
examination of Thompson on October 5, 2012, that Sedgwick denied additional workers’
compensation benefits. (Doc. 60 at 8).
Also weighing against admissibility, National Union argues, is the fact that the majority of
the 97 IME reports upon which Flood bases his opinion of bias were issued after National Union
denied Thompson benefits. (Doc. 60 at 8). National Union states that according to Flood’s
supplemental report, 72 of the 97 IME reports reviewed were authored by Dr. Cederberg after he
issued his first IME report favorable to Thompson, and 59 of the 97 reports were authored after
Sedgwick issued its denial to Thompson 9 months later. (Docs. 60 at 8; 53-4). National Union
argues that as a result, the majority of these IME reports are not relevant to the question of whether
Sedgwick had knowledge of Dr. Cederberg’s alleged bias at the time it denied Thompson benefits.
(Doc. 60 at 8).
As noted above, National Union argues that IME reports authored by Dr. Cederberg and
examined by Flood that were adverse to workers’ compensation claimants are not reliable evidence
15
of bias because Flood did not examine the specific facts and claims related to each examinee. In
support of its argument, National Union cites to Bronick v. State Farm Mut. Auto. Ins. Co., Civ.
No. 11-1442, 2013 WL 3716600 (D. Ariz. Jul. 15, 2013). In Bronick, the plaintiff had argued,
similar to Thompson in this case, that the insurance company intentionally 1 hired the IME
physician to prepare a biased IME report in its favor based on the fact that only five of 151 IMEs
previously performed by the physician favored the patients. Id. at *9-10. The district court
excluded such testimony, in part, on the basis that:
[H]ad Defendant done what Plaintiff suggests it should have done, it would still be
irrelevant to the ultimate question of whether Defendant hired a biased physician.
As discussed above, whether Dr. Hartzler has found for defendant insurers in the
past is irrelevant to whether he is unfair and biased, the central question regarding
bias is whether Dr. Hartzler has performed unfair and biased IMEs in the past.
Under Plaintiff’s reasoning, Defendant would be expected to do what [Plaintiff’s
expert] failed to do in his report, and Defendant would be expected to cull the facts
of all 151 prior cases that Dr. Hartzler has been hired to do an IME in and determine
whether the facts of each of those cases shows Dr. Harzler acted unfairly and biased
toward a defendant.
Id. at *10-11. This Court declines to adopt the reasoning used in Bronick. The admissibility of
bias evidence is more nuanced than Bronick suggests. If only 5 of 151 IMEs previously performed
by the physician favored the patients, that can be relevant evidence on whether or not a physician
is biased. However, whether or not a physician is biased in favor of insurance companies is not
relevant to a claim for bad faith denial of workers’ compensation benefits under South Dakota law
if there is no corresponding evidence that the insurer knew or recklessly disregarded evidence of
physician bias. In South Dakota, to show a bad faith denial of workers’ compensation benefits,
the plaintiff must demonstrate not only that there is an absence of a reasonable basis for denial of
policy benefits; but also that the insurer knew or recklessly disregarded the lack of a reasonable
basis for denial. See Hein v. Acuity, 731 N.W.2d 231, 236 (S.D. 2007). Likewise, an insurer
cannot recklessly ignore evidence which suggests bias.
In the present case, Thompson argues that Dr. Cederberg’s second IME report did not
provide National Union with a reasonable basis upon which to deny Thompson additional workers’
compensation benefits because, she argues, there is evidence that Dr. Cederberg is biased in favor
The Court notes that in this case, Thompson does not contend that National Union intentionally hired a Dr.
Cederberg to prepare a biased IME report. Instead, Thompson contends that National Union recklessly disregarded
evidence of bias by Dr. Cederberg.
1
16
of insurance companies. Thompson relies on the opinion of Flood who examined 97 redacted IME
reports issued by Dr. Cederberg in other cases, 87 (90%) of which were adverse to the injured
worker. As the Court has already stated, evidence that an IME physician has made findings
adverse to claimants in a significant majority of IMEs performed may be relevant to the issue of
bias. However, the Court finds that there is no evidence in the record suggesting that prior to
retaining Dr. Cederberg to evaluate Ms. Thompson, National Union knew or recklessly
disregarded evidence of any potential bias by Dr. Cederberg. For example, there is no evidence
that Dr. Cederberg had performed IME’s for National Union in the past. In this case, Sedgwick
contacted Integrity, a third-party vendor, and requested that a qualified physician examine
Thompson. Integrity assigned Dr. Cederberg. Ms. Talbot, the Sedgwick claims adjuster, testified
that she does not recall using Dr. Cederberg prior to Thompson’s case. There is no evidence that
National Union had any knowledge of the IME opinions that Dr. Cederberg had given when
retained by other insurance companies, nor did National Union inquire. 2
The question in this case is not whether Dr. Cederberg was biased. Indeed, Thompson does
not argue that because of Dr. Cederberg’s alleged bias, National Union was reckless in relying
upon all of Dr. Cederberg’s IMEs of Thompson, including the first IME report that was favorable
to her. Rather, the issue in this case is whether it was reckless for National Union to not inquire
into the question of medical examiner bias before cutting off benefits when the second IME by the
same physician was decidedly different than his first IME with arguably no clear explanation for
the change in opinion. Since the question is not whether Dr. Cederberg was biased, neither Flood
nor Anderson will be permitted to give any opinion on that point. The Court does not reach the
question of whether either expert witness could give an opinion on bias if Dr. Cederberg’s bias
was a relevant issue.
In the civil context, ‘recklessness’ encompasses an objective standard—specifically, ‘[t]he
civil law generally calls a person reckless who acts or (if the person has a duty to act) fails to act
2
The Court notes that the majority of the IME reports by Dr. Cederberg that were examined by Flood were issued
after National Union rendered its decision denying Thompson benefits. 72 of 97 of these IMEs were authored after
Dr. Cederberg conducted his first IME of Thompson and 59 of the 97 IMEs cited to by Flood were issued after Dr.
Cederberg issued his second IME. As the Court stated at oral argument, IME reports issued by Dr. Cederberg after
National Union denied Thompson benefits are irrelevant to the issue of bad faith which must be determined based
on the facts available to National Union at the time of the denial. See Walz v. Fireman’s Fund Ins. Co., 556 N.W.2d
68, 70 (S.D. 1996).
17
in the face of an unjustifiably high risk of harm that is either known or so obvious that is should
be known. United States v. Horowitz, 978 F.3d 80, 89 (4th Cir. 2020) (quoting Farmer v. Brennan,
511 U.S. 825, 836 (1994)); see also Restatement (Second) of Torts § 500. The Restatement
(Second) provides that recklessness may consist of either of two different types of conduct.
In one the actor knows, or has reason to know, . . . of facts which create a high degree of
risk of [] harm to another, and deliberately proceeds to act, or fail to act, in conscious
disregard of, or indifference to, that risk. In the other the actor has such knowledge, or
reasons to know, of the facts, but does not realize or appreciate the high degree of risk
involved, although a reasonable [person] in his position would do so.
Restatement (Second) of Torts § 500. A question in this case exists as to whether National Union
knew or had reason to know after Dr. Cederberg’s second IME report that there was an
unjustifiably high risk that Dr. Cederberg’s second IME report was biased such that it did not,
without further inquiry, provide a reasonable basis upon which to deny Thompson further workers’
compensation benefits. National Union through its agent Sedgwick was aware that in his first IME
report, Dr. Cederberg had a favorable opinion in support of Thompson. National Union through
its agent Sedgwick was also aware that they had not provided Thompson’s previous medical
history to Dr. Cederberg. Then without any other cause to do so, National Union cuts off benefits
to Thompson after receiving a second IME report from Dr. Cederberg. The second IME report
was decidedly negative toward Thompson with no real explanation why. When a question of IME
examiner bias is presented, an insurer need not always examine all previous IME reports of the
physician. National Union correctly points out that at the time of the second IME that information
would not be available. However, the IME physician could be asked for at least his own
compilation of what percentage of time he essentially finds in favor of or against the claimant on
IMEs. In this case, there is enough evidence to present a fact question to the jury on whether or
not it was reckless for National Union through its agents to not inquire into bias on the part of Dr.
Cederberg before denying all further benefits on the basis of his second IME report. The Court
cannot say as a matter of law that under the facts there is no issue of reckless action or inaction.
Even though a fact question is presented, that does not necessarily mean that Flood, or for
that matter Anderson, can testify as to their opinions on that fact question. The question is not was
Dr. Cederberg biased, but rather was the insurer reckless in not inquiring as to whether or not Dr.
Cederberg was biased after obtaining his second IME opinion and relying on it, apparently
exclusively, in denying benefits. It is the Court’s position that under some circumstances an
18
insurer has a duty to inquire as to whether or not an IME examiner is biased in favor of insurers.
A claimant seeking bad faith damages has a high hurdle to cross before proving liability. It is not
a question of whether the insurer was negligent, but instead, whether the insurer was reckless under
the set of facts presented, in not making inquiry into potential bias on the part of the IME examiner.
The Court, not the expert witnesses, will instruct the jury on the law. Each expert witness has
different involvement in the insurance industry. The perspective of each may be of assistance to
the jury in deciding whether or not it was reckless for National Union to fail to inquire into potential
basis on the part of the IME examiner before denying further benefits on the basis of Dr.
Cederberg’s second IME report.
II.
Motion to Exclude Expert Testimony of Robert Anderson
National Union seeks to introduce Robert Anderson as an expert in order to show that it
was reasonable for National Union to rely on Dr. Cederberg, a Minneapolis, Minnesota, doctor to
perform an IME on Thompson in Sioux Falls, South Dakota. Mr. Anderson opines in his report
that it is difficult to obtain IME doctors in South Dakota and that therefore it was reasonable for
National Union to rely on an out-of-state physician to conduct an IME. Mr. Anderson also opines
in his report that National Union reasonably exercised its statutory right to obtain an IME and that
under the facts and circumstances, reasonably relied on the opinion of Dr. Cederberg in ultimately
denying Thompson further workers’ compensation benefits.
Mr. Anderson has been a partner with the May, Adam, Gerdes & Thompson law firm in
Pierre, South Dakota since 1982. (Doc. 53-2, Anderson Dep. 5:22-6:9). At the time of his
deposition, approximately 20 percent of his caseload was workers’ compensation cases although
he testified that this type of work used to comprise a greater percentage of his caseload. (Doc. 532, Anderson Dep. 6:10-22). Anderson testified that he had also mediated approximately 400
workers’ compensation cases. (Doc. 53-5 at 2). As part of his law and mediation practice,
Anderson has experience trying to locate and hire physicians to conduct IME’s in South Dakota
and has had numerous discussions with claims handlers and other attorneys regarding the
difficulties in obtaining IME’s in South Dakota. (Doc. 53-5 at 2). In his expert report, Anderson
opines that because it was difficult to obtain IME doctors within Sioux Falls, South Dakota area,
it was reasonable for National Union to rely upon Dr. Cederberg to conduct the IME in
Thompson’s worker’s compensation case. (Doc. 53-5).
19
Thompson has moved to exclude Anderson’s proffered testimony on the difficulty of hiring
IME physicians in South Dakota on the basis that it lacks sufficient reliability and should be
excluded. (Doc. 54 at 4). Thompson argues that Anderson’s opinion that a “small and shrinking
pool of willing and eligible physicians” made it difficult for National Union to procure an IME
from a doctor in South Dakota is not based on sufficient facts or data, nor on reliable principles
and methods. (Doc. 54 at 5). In support of her argument, Thompson notes that Anderson’s opinion
is not based on any documents or publications related to the standards or best practices in the
industry. (Doc. 54 at 6). In addition, she notes that Anderson did not conduct an independent
search for physicians who performed IME’s in South Dakota while Thompson’s workers’
compensation claim was pending and was unfamiliar in his deposition with several physicians who
were performing IME’s in the Sioux Falls area at the time. (Doc. 54 at 6). Thompson argues that
instead, Anderson based his conclusion on his “own dealings with insurers, his own cases during
this time frame, and his conversations with other lawyers, health care providers, and doctors trying
to find people to perform IME’s throughout his career.” (Doc. 54 at 5-6). Thompson argues that
Anderson’s opinion is unreliable because it is based on his own “subjective assumptions” rather
than on facts and data. (Doc. 54 at 6).
In South Dakota, to show a bad faith denial of workers’ compensation benefits, the plaintiff
must demonstrate that (1) there is an absence of a reasonable basis for denial of policy benefits;
and (2) the insurer knew or recklessly disregarded the lack of a reasonable basis for denial. See
Hein v. Acuity, 731 N.W.2d 231, 236 (S.D. 2007). In support of her bad faith claim, Thompson’s
expert, Flood, opines that it is unreasonable for an insurance company to rely on an out of town
IME doctor unless there are no local IME physicians available. At trial, National Union seeks to
introduce the opinion of its expert, Anderson, as rebuttal testimony to educate the jury on the
difficulty in obtaining IME doctors in South Dakota and to opine that it was thus reasonable for
National Union to rely on an out-of-state physician to conduct an IME. During oral argument on
this motion, the Court inquired whether there was any evidence regarding whether the claims
administrator for Sedgwick had knowledge of any difficulties in obtaining qualified IME
physicians in South Dakota and both parties agreed that there was no such evidence in the record.
The Court concludes, then, that evidence regarding the potential lack of availability of qualified,
local IME physicians is not relevant to the issue of bad faith since there is no evidence in the record
that Sedgwick attempted to hire a physician locally or that any possible lack of availability of local
20
IME physicians factored into Sedgwick’s hiring decision. The evidence simply shows that
Sedgwick exercised its statutory right to have Thompson submit to an IME exam and contacted
Integrity to locate and hire a qualified physician to perform the exam. Any evidence by either
Anderson or Flood regarding the availability of or difficulty in finding local IME physicians is not
relevant to Thompson’s bad faith claim because Sedgwick never considered the availability of
South Dakota IME examiners in its hiring of an IME physician. Flood will be able to testify why
it is desirable to have a local IME physician examiner. However, if Flood proceeds to testify that
it was unreasonable for National Union to rely on out-of-state physicians assuming they were
available as was the case with his written opinion, Anderson may offer rebuttal testimony on the
difficulty of hiring qualified, local IME physicians. Anderson, in any event, will be permitted to
offer his opinion that National Union reasonably exercised its statutory right to obtain an IME and
that under the facts and circumstances, reasonably relied on the opinion of Dr. Cederberg in
ultimately denying Thompson further workers’ compensation benefits. The Court finds that
Anderson is qualified to testify to such matters and that his knowledge about and experience in
litigating and mediating workers’ compensation cases in South Dakota will aid the jury in its
understanding of this issue.
II.
Summary Judgment
A. Bad Faith Claim
1. Legal Standard
In South Dakota, to show a bad faith denial of workers’ compensation benefits, the plaintiff
must demonstrate that (1) there is an absence of a reasonable basis for denial of policy benefits;
and (2) the insurer knew or recklessly disregarded the lack of a reasonable basis for denial. See
Hein v. Acuity, 731 N.W.2d 231, 236 (S.D. 2007). “[K]nowledge of the lack of a reasonable basis
may be inferred and imputed to an insurance company where there is a reckless disregard of a lack
of a reasonable basis for denial or a reckless indifference to facts or to proofs submitted by the
insured.” Champion v. U.S. Fidelity & Guar. Co., 399 N.W.2d 320, 324 (S.D. 1987). It is well
established that an insurer may “challenge claims which are fairly debatable,” and thus will only
be liable for bad faith when the insurer “has intentionally denied (or failed to process or pay) a
claim without a reasonable basis.” Hein, 731 N.W.2d at 236. As the South Dakota Supreme Court
held in Dakota, Minnesota & Eastern Railroad Corp. v. Acuity (DM&E):
21
If an insured’s claim is fairly debatable either in fact or law, an insurer cannot be
said to have denied the claim in bad faith. The fact that the insurer’s position is
ultimately found to lack merit is not sufficient by itself to establish that the insurer
had a reasonable basis to deny the claim. The focus is on the existence of a
debatable issue, not on which party was correct.
771 N.W.2d 623, 630 (S.D. 2009) (citation omitted). Whether an insurer acted in bad faith is
determined based upon the facts and law available to the insurer at the time it made the decision
to deny coverage. Id. at 629.
A “plaintiff’s bad faith claim survives summary judgment only if [the] defendant had no
reasonable basis” to discontinue benefits. See Johnson v. Acuity Mut. Ins. Co., Civ. No. 18-5076,
2020 WL 1444962, at *6 (D.S.D. Mar. 25, 2020) (J. Viken). “If the record shows no genuine
dispute that a reasonable basis existed for the denial, [a] defendant is entitled to summary
judgment.” Id.; see also Arp v. AON/Combined Ins. Co., 300 F.3d 913, 917 (8th Cir. 2002) (citing
Ulrich v. St. Paul Fire & Marine Ins. Co., 912 F.2d 961, 963 (8th Cir. 1990) (“In order to withstand
the motion for summary judgment, the Arps were required to create an issue of material fact
concerning whether AON had a reasonable basis for denying their claims.”)); Case v. Toshiba Am.
Info. Sys., Inc., 7 F.3d 771, 773 (8th Cir. 1993) (citing Ulrich, 912 F.2d at 963). The parties do
not appear to dispute that Sedgwick was the agent acting on behalf of National Union at all relevant
times, and that any tortious action by Sedgwick is imputed to National Union. See also Chem-Age
Indus., Inc. v. Glover, 652 N.W.2d 756, 773 (S.D. 2002) (citing Restatement (Second) of Torts
§876(b)) (“For harm resulting to a third person from the tortious conduct of another, one is subject
to liability if he knows that the other’s conduct constitutes a breach of duty and gives substantial
assistance or encouragement to the other so to conduct himself.”); see also Fair v. Nash Finch Co.,
Civ. No. 11-5005, 2012 WL 13173043, at *15 (D.S.D. Oct. 30, 2012) (J. Duffy) (holding that a
self-insured employer that hired Sedgwick to administer its workers’ compensation claims on its
behalf may be held liable, under a vicarious liability theory, for the foreseeable acts of Sedgwick
which were done in whole or part to further the employer’s business interests), report and
recommendation adopted in relevant part, 2013 WL 1241201, at *4 (D.S.D. Mar. 25, 2013).
2. Analysis
National Union has moved for summary judgment on Thompson’s bad faith claim. In
opposition to National Union’s motion for summary judgment, Thompson argues that questions
of fact exist as to whether National Union knew or recklessly disregarded a lack of a reasonable
22
basis to deny Thompson benefits. Specifically, Thompson argues that a jury question exists as to
whether Dr. Cederberg’s October 2012 IME report provided Sedgwick with a reasonable basis to
deny Thompson benefits in light of: (1) Thompson’s unabated need for treatment after her work
injury and Dr. Cederberg’s first IME report finding Thompson’s work injury compensable; (2)
Sedgwick’s knowledge that Dr. Cederberg had not considered whether Thompson’s work injury
was a major contributing cause of her disability in light of her history of back and neck pain; and
(3) the opinions of Thompson’s treating physicians that her work injury was a major contributing
cause of her condition. (Doc. 69).
At the outset, the Court notes that although both parties cited to expert opinions by Dr.
Asfora, Dr. Warren, and Dr. Janssen in support and in opposition to whether National Union’s
denial was in bad faith, the Court must base its determination on the facts and law available to
Sedgwick/National Union at the time of the benefits denial on December 21, 2012. DM&E, 771
N.W.2d at 629. The opinions of these experts were produced after the National Union issued its
decision denying Thompson further workers’ compensation coverage and may not be considered
by the Court in determining whether a jury question exists as to Thompson’s bad faith claim. See
DM&E, 771 N.W.2d at 631-32 (stating that the deposition of the plaintiff’s attorney and plaintiff’s
actions at the summary judgment and directed verdict stages of the case were “insufficient to show
that the claim was fairly debatable at the time [the defendant] made its decision to deny the
claim.”).
The Court concludes that a jury question exists as to whether Dr. Cederberg’s opinion
provided National Union with a reasonable basis upon which to deny benefits and if so, whether
National Union knew or recklessly disregarded such a lack of reasonable basis for the denial. In
January 2012, after noting in his IME report that he had reviewed Thompson’s MRI showing mild
degenerative disc disease, Dr. Cederberg opined that Thompson’s February 2011 work injury was
the cause of the symptoms she was experiencing at that time. Despite the fact that Thompson
continued to experience and treat such symptoms since the date of her injury, Dr. Cederberg
concluded approximately 9 months later during his second IME of Thompson that Thompson’s
symptoms were no longer a major contributing factor to her condition, attributing her condition to
the pre-existing degenerative disc disease evidenced in her June 2012 MRI—a condition which
Dr. Cederberg had not found to be significant at the time of his first IME and which, in his second
IME report, Dr. Cederberg acknowledged did not fully explain the symptoms Thompson was
23
experiencing. (Doc. 58-9) (“Her current diagnosis is degenerative disc disease of the cervical spine
with symptoms out of proportion to objective clinical and radiographic findings.”). Dr. Cederberg
was not provided any of Thompson’s medical records prior to her work injury and thus had not
considered whether her work injury may have aggravated or combined with her other neck and
back injuries and degenerative disc disease to produce the disability for which she sought
compensation. See St. Luke’s Midland Regional v. Kennedy, 653 N.W.2d 880, 884-85 (S.D. 2002)
(“A pre-existing medical condition or infirmity does not disqualify a claim under the ‘arising out
of employment’ requirement if the employment aggravated, accelerated, or combined with the
condition or infirmity to produce the disability for which compensation is sought.”). Thompson
had not required such extensive medical treatment prior to her February 2011 injury, nor had she
previously had difficulty engaging in everyday functions. Based on these facts, the Court
concludes that a reasonable jury could find that Dr. Cederberg’s opinion did not provide a
reasonable basis to deny Thompson benefits and that National Union knew or recklessly
disregarded a lack of a reasonable basis for the denial. See Hein v. Acuity, 731 N.W.2d 231, 236
(S.D. 2007). Accordingly, National Union’s Motion for Summary Judgment on Thompson’s claim
for bad faith is denied.
B. Attorney’s Fees Under SDCL 58-12-3
Thompson alleges that National Union had a contractual duty under the policy to pay her
workers’ compensation benefits and that its breach of such duty was vexatious and without
reasonable cause, entitling her to attorney’s fees pursuant to SDCL 58-12-3.
National Union argues that Thompson’s claims for breach of contract and attorney’s fees
under SDCL 58-12-3 are barred by release. The Settlement Agreement in this case provides that
the “Claimant and Insurer have agreed to a lump sum payment of Four Hundred Thousand Dollars
($400,000.00), in exchange for full release of all her workers’ compensation claims . . .” and for a
net settlement amount of $189,645.64 after deducting estimated attorney fees, estimated costs and
medical bills.” (Doc. 64-2). The administrative law judge entered an order approving the
Settlement Agreement and finding that costs and attorney’s fees referenced therein to be
reasonable. (Doc. 64-2). National Union contends that the breach of contract claim is the same
claim that was litigated at the administrative level and that Thompson released National Union
from further liability for such claim. National Union contends that attorney’s fees were accounted
for in the Settlement Agreement and that Thompson may not now get a “second bite at the apple.”
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In response, Thompson contends that her claim that National Union’s refusal to pay
workers’ compensation benefits was vexatious or without reasonable cause is independent of her
workers’ compensation claim and was not subject to the release. (Doc. 69 at 29.). This Court
disagrees, as explained more fully below.
SDCL 58-12-3 provides that in an action or proceeding against an insurance company on
any policy or certificate of insurance:
[i]f it appears from the evidence that such company . . . has refused to pay the full
amount of such loss, and that such refusal is vexatious or without reasonable cause,
the Department of Labor and Regulation, the trial court and the appellate court,
shall, if judgment or an award is rendered for plaintiff, allow the plaintiff a
reasonable sum as an attorney’s fee to be recovered and collected as part of the
costs.
SDCL 58-12-3. A claimant must petition for a hearing on attorney’s fees under SDCL 58-2-3 no
later than 10 days after a judgment or award is rendered for the claimant, and the Department of
Labor or a court 3 must make a separate determination as to whether the insurer’s refusal to pay the
loss was “vexatious or without reasonable cause.” See SDCL 58-12-3.1. 4
Section 58-12-3 “is remedial in nature, designed to recompense a claimant for the legal
expenses incurred when an insurance company unreasonably forces the claimant to resort to
litigation to obtain contractual benefits.” Tripp v. Nat’l Mut. Ins. Co., 664 F.3d 1200, 1206-07
(8th Cir. 2011). In the context of workers’ compensation, the benefits sought by a claimant are
pursuant to the workers’ compensation statutes and the contract that an insurer has with an
employer to provide such benefits to employees.
A claimant’s entitlement to workers’
SDCL 58-12-3 is not limited to workers’ compensation insurance policies and applies to “any policy or certificate
of insurance.” SDCL 58-12-3.
3
4
Specifically, SDCL 58-12-3.1 provides that,
The determination of entitlement to an allowance of attorney fees as costs and the amount thereof
under 58-12-3 shall be made by the court or the Department of Labor and Regulation at a separate
hearing of record subsequent to the entry of a judgment or award in favor of the person making
claim against the insurance company, and, if an allowance is made, the amount thereof shall be
inserted in or added to the judgment or award. Such a hearing shall be afforded upon request of
the claimant made within ten days after entry of the judgment or award.
SDCL 58-12-3.1; see also Lewis v. State Dept. of Transp., 667 N.W.2d 283, 290-91 (S.D. 2003), overruled on other
grounds, Wells v. Howe Heating & Plumbing, Inc., 677 N.W.2d 586 (S.D. 2004) (“The plain language of SDCL 58-123.1 [ ] requires a request for attorney fees within ten days of entry of a favorable judgment or award. . . .”).
25
compensation benefits is a determination that must be made by the Department of Labor in the
first instance, although its decision is subject to judicial review. If the Department concludes that
a party failed to honor its obligation to provider workers’ compensation benefits, whether or not
its refusal to pay workers’ compensation benefits was vexatious and without reasonable cause is a
question of fact, Biegler v. Am. Family Mut. Ins. Co., 621 N.W.2d 592, 606 (S.D. 2001), that also
must be made by the Department of Labor in the first instance upon petition of the claimant made
within 10 days upon receiving a favorable award. See SDCL 58-12-3.1; Hollman v. Dale
Electronics, 298 N.W.2d 177, 178 (S.D. 1980) (remanding to the Department of Labor to conduct
a hearing on attorney’s fees sought under SDCL 58-12-3 when claimant’s petition request such
fees and when claimant renewed her request 3 days after the Department granted claimant’s
workers’ compensation claim); Howie v. Pennington County, 563 N.W.2d 116, 117 (S.D. 1997)
(involving a claimant who filed a petition for attorney’s fees with the Department of Labor in a
workers’ compensation case after receiving a favorable award from the Department); Johnson v.
Skelly Oil Co., 359 N.W.2d 130, 132, 135 (S.D. 1984) (affirming the Department of Labor’s
decision denying attorney’s fees under SDCL 58-12-3 after the Department conducted a separate
hearing on the issue).
In the present case, Thompson prevailed at the administrative level when the administrative
law judge found Thompson was entitled to benefits under the workers’ compensation statutes and
pursuant to the insurance policy by and between JC Penney and National Union.
The
administrative law judge entered her decision finding that Thompson was permanently and totally
disabled, granting her permanent total disability benefits, and retaining jurisdiction as to past and
future medical benefits. Subsequently, the parties entered a Settlement Agreement providing for
a lump sum payment to Thompson less costs and attorney’s fees in exchange for a full release by
Thompson of all her workers’ compensation claims. On August 21, 2017, an order was entered
by the administrative law judge approving the Settlement Agreement, thus giving it the same force
and effect as an adjudicated award. See Leichtnam v. Am. Zurich Ins. Co., Civ. No. 15-5012, 2019
WL 5870367, at *4 (D.S.D. Aug. 28, 2019) (report and recommendation) (quoting Sopko v. C &
R. Transfer Co., 575 N.W.2d 225, 229 (S.D. 1998) (“Compromise agreements permitted under
SDCL 62-7-5 have the same force and effect as adjudicated awards.”)); see also Ball v. Fed. Ins.
Co., Civ. No. 18-4008, 2019 WL 5191679, at *3 (D.S.D. Oct. 15, 2019) (finding that the settlement
agreement entered into by the parties and approved by the Department of Labor to be a
26
compensation agreement contemplated under SDCL 62-7-5 carrying the same force and effect as
an adjudicated award). Thompson did not attempt to pursue a claim for attorney’s fees under
SDCL 58-12-3 within the 10-day period prescribed by statute, SDCL 58-12-3.1. Thompson is
now precluded from recovering such fees from this Court.
The Court concludes as well that Thompson’s claim for attorney’s fees under SDCL 5812-3 is barred by the defense of release. In her Complaint, Thompson alleges that National Union
breached its contractual duty to pay Thompson workers’ compensation benefits as a result of her
work-related injury. 5 Thompson’s claim alleging a failure to honor an obligation to pay workers’
compensation benefits falls within the exclusive jurisdiction of the Department of Labor, is the
exact claim that was litigated at the administrative level and which Thompson released National
Union from all further liability. By releasing National Union from any further liability for this
claim, Thompson also released any claim that National Union’s breach of its obligation to pay
workers’ compensation benefits was vexatious or without reasonable cause.
Thompson has not provided the Court with any cases showing that federal courts may
award a claimant attorneys’ fees under SDCL 58-12-3 if an insurer vexatiously or without
reasonable cause refused to pay workers’ compensation benefits. The parties in this case were
both represented by counsel at the administrative level. Under the plain and unambiguous
language of the Settlement Agreement, Thompson fully released National Union from all liability
for its workers’ compensation claims and the Court concludes that this release encompasses any
claim that National Union’s denial of benefits was made vexatiously or without reasonable cause
in violation of its contractual and statutory duties.
To the extent that Thompson is seeking to recover attorney’s fees under SDCL 58-12-3 for
litigating its bad faith claim before this Court, such fees are plainly unrecoverable under South
Dakota law. See Isaac v. State Farm Mut. Auto. Ins. Co., 522 N.W.2d 752, 763 (S.D. 1994) (“A
bad faith claim ‘is tortious in nature i.e., for the wrongful refusal to settle within the policy limits
of its insured,’ and not an action against an insurance company on a policy of insurance within the
contemplation of SDCL 58-12-3.”) (quoting Crabb v. Nat’l Indem. Co., 205 N.W.2d 633, 639
(S.D. 1973)).
In her supplemental brief, Thompson stated that she is withdrawing her breach of contract claim, but argues that
attorneys’ fees are recoverable for vexatious refusal to pay workers’ compensation benefits even if a breach of
contract claim is not pending in the present action. The Court disagrees for the reasons discussed in this Opinion.
5
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For these reasons, National Union’s Motion for Summary Judgment on Thompson’s breach
of contract claim and claim for attorney’s fees under SDCL 58-12-3 is granted.
Accordingly, it is hereby ORDERED that:
1) National Union’s Motion to Exclude Expert Testimony of Elliott Flood (Doc. 59) is
GRANTED IN PART; Flood is precluded from offering an opinion that it was
unreasonable for National Union to rely on Dr. Cederberg’s opinion in denying
Thompson benefits on the basis that Dr. Cederberg was biased in favor of insurance
companies;
2) Thompson’s Motion to Exclude Expert Testimony of Robert Anderson (Doc. 52) is
GRANTED IN PART and DENIED IN PART; Anderson will not be allowed to
offer his opinion on the difficulty of hiring qualified, local IME physicians unless Flood
opens the door to such rebuttal evidence;
3) National Union’s Motion for Summary Judgment (Doc. 55) is GRANTED IN PART
AND DENIED IN PART as follows:
a. DENIED as to Thompson’s bad faith claim;
b. GRANTED as to Thompson’s breach of contract and claim for attorneys’ fees
under SDCL 58-12-3.
Dated this 17th day of May, 2021.
BY THE COURT:
ATTEST:
MATTHEW W. THELEN, CLERK
________________________________
Lawrence L. Piersol
United States District Judge
______________________________
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