The Iowa Supreme Court held that a worker cannot hold a third-party claims administrator liable for failure to pay workers’ comp benefits. In their decision in De Dios v. Indemnity Insurance Co. of North America they said a worker could not pursue a bad-faith cause of action against a TPA of the work comp insurance company.

Samuel De Dios was injured in a vehicle collision on a construction site working for Brand Energy & Infrastructure Services.

He was in the course of his employment and his manager said he could seek treatment wherever he liked. His pain worsened over the next few days and his employer failed to provide him with light duty work. He brought a bad faith suit against both his employer’s insurer, Indemnity Insurance Company of North America, and their TPA, Broadspire Services. De Dios alleged that the insurer and the TPA should have known he had work restrictions and should have paid him temporary total disability benefits or healing period benefits until he was determined to have reached maximum medical improvement.

He said the TPA or the insurer failed to interview him, his doctors or his co-workers who witnessed the incident, but they denied him benefits. He filed a bad-faith suit against Broadspire saying that Indemnity had “delegated its authority of investigating, handling, managing, administering, and paying benefits” to Broadspire.

The court held that Broadspire was not the equivalent of an insurer and therefore a bad-faith tort could not be imposed because there was no insurer/insured relationship. Though Iowa law refers to TPAs it “imposes no obligations on them relative to the handling of workers’ compensation claims”. The law recognizes a difference between insurers and TPAs and only imposes affirmative obligations on insurers. Though De Dios argued that the insurer could delegate their authority to a TPA who could deny coverage or payment, the court said the insurer could not delegate its “duty of good faith” and therefore De Dios could not extend a bad-faith claim to the TPA.

Read the case here and a summary here.