Roger D. Forman
Forman & Crane
Charleston, West Virginia
Attorney for the Plaintiff
Gerard R. Stowers
Michael J. Schessler
Bowles, Rice, McDavid, Graff & Love
Charleston, West Virginia
Attorneys for the Defendant
JUSTICE WORKMAN delivered the Opinion of the Court.
1. West Virginia Code 23-2-6 (1994) does not preclude an employee from
maintaining a separate and distinct cause of action against an employer for damages as a
result of the employer knowingly and intentionally fraudulently misrepresenting facts to the
Workers' Compensation Fund that are not only in opposition to the employee's claim, but are
made with the intention of depriving the employee of benefits rightfully due him.
2. Pursuant to West Virginia Code 23-4-1a and 23-4-1c (1994), an employer has
a statutory right as a party to a workers' compensation action to contest the compensability
of an employee's injury and/or to object to any subsequent finding or award.
3. An employee's cause of action against his/her employer for fraudulent
misrepresentation concerning the employee's workers' compensation claim must be pled with
particularity and must be supported by factual allegations identifying the employer's
particular acts or circumstances which distinguish the intentional tort of fraudulent
misrepresentation from the employer's negligent misrepresentation or mere delay in
processing or payment of said claim, the latter two of which are not sufficient to support an
employee's independent cause of action.
4. In order for a plaintiff employee to prevail on the narrowly construed cause of
action by the employee against an employer for fraudulent misrepresentation concerning the
employee's workers' compensation claim, the employee must (1) plead his or her claim with
particularity, specifically identifying the facts and circumstances that constitute the
fraudulent misrepresentation, and (2) prove by clear and convincing evidence all essential
elements of the claim, including the injury resulting from the fraudulent conduct. A plaintiff
employee is not entitled to recover unless the evidence at trial is persuasive enough for both
the judge and jury to find substantial, outrageous and reprehensible conduct which falls
outside of the permissible boundary of protected behavior under the statute. If the pleadings
or evidence adduced is insufficient to establish either of the two factors stated above, the
trial court may dismiss the action pursuant to Rule 12(b), Rule 56 or Rule 50 of the West
Virginia Rules of Civil Procedure.
This case is before the Court upon the following certified questions posed by the July 26, 1995, order of the United States District Court of the Southern District of West Virginia at Beckley:
May an employee, who has filed a Workers' Compensation
claim and who has been awarded benefits by the West Virginia
Workers' Compensation Fund, maintain a cause of action
against his employer for damages as a result of the employer
knowingly filing a false and/or misleading statement with the
Fund in opposition to the employee's claim?
If such a cause of action for fraud is available, what damages
are available to the employee?
This action arises out of an injury which the Plaintiff, Roger Persinger, claims he
sustained on June 17, 1992, while he was employed by the Defendant, Peabody Coal
Company and Seats, Inc. ("Peabody") at the Montcoal No. 7 Mine Preparation Plant refuse
area as a slate truck driver. According to the accident report filled out by the Plaintiff's
supervisor, Don Deskins, in connection with the Plaintiff's report of the injury to him, the
Plaintiff was hauling slate from the preparation plant to the site where it was to be dumped,
when his truck "hit a bump in the road, the bump jarred him and he hit in the seat solid[,]"
due to his air suspension seat deflating completely. During his deposition, Mr. Deskins
stated that at the time the Plaintiff reported his injury, the Plaintiff told him that "this was a
reoccurrence of an old injury[,]" and that he observed that the Plaintiff "was bent holding his
lower back[.]" Despite what the Plaintiff reported and what Mr. Deskins observed, Mr.
Deskins stated that he had doubts regarding the Plaintiff's injuries, because "[b]ack injuries
are always suspect to me." Mr. Deskins indicated, however, that he did not convey his doubt
regarding the Plaintiff's injury to anyone else.(1) The Plaintiff left work after reporting the
The next morning, the Plaintiff went to Raleigh General Hospital where, upon examination, he was diagnosed as suffering from an acute lumbar sprain. The Plaintiff was given a cane, placed on pain medications, and referred to Dr. George Orphanos. Dr. Orphanos saw the Plaintiff on June 24, 1992, and, based on his examination, noted that "[m]ost probably lumbar sacral sp[r]ain occur[r]ed[.]" The Plaintiff continued to see Dr. Orphanos until January 29, 1993, when he was released from the doctor's care. During Dr. Orphano's treatment of the Plaintiff, the doctor opined that his patient "remained disabled until the time of release" from his care.(2)
On June 18, 1992, the Plaintiff filed a workers' compensation claim with the West
Virginia Workers' Compensation Fund ("Fund") regarding his injury. In opposition to the
Plaintiff's claim, Steve Farley, the Defendant's Employee Relations Representative,
completed the employer's portion of the Workers' Compensation claim and stated on said
form that "No known job-related injury occurred on 6-17-92. Please see attached
documentation."(3) The Plaintiff alleges that "[t]here was no information contained in Mr.
Farley's notes that would support a denial of Mr. Persinger's work injury." The Plaintiff,
through discovery, has also unearthed information in the form of a notarized letter dated July
17, 1994, from Larry D. McKnight, a UMWA Workers' Compensation Representative
working at Peabody, which indicated that "Mr Farley told me of an incident concerning
Roger Persinger's accident of June 17,1992. He told me that Mr. Gerald Blair,
Compensation Representative of Peabody Coal Co., had conspired with Mr. Bill Pennington,
Slate Truck Foreman . . . , to deny Mr. Roger Persinger his Compensation Benefits."
The Plaintiff's workers' compensation claim was originally denied. He appealed the
decision, however, and was awarded workers' compensation benefits dating back to the date
of the injury.(4)
The Plaintiff then filed a civil action for fraud against the Defendant in the United
States District Court for the Southern District of West Virginia at Beckley. The Plaintiff
alleges in the action that in response to his workers' compensation claim, the Defendant,
through its management employees, filed with the Fund a statement which they knew to be
false and misleading. The Plaintiff claims that this action caused his claim to be denied
originally, and subsequently caused him "to expend all of his life savings to support his
family, to borrow from others and as a consequence suffered serious physical and psychiatric
The Defendant contends that there is no private cause of action for wrongfully
protesting a workers' compensation claim and, even if such a private right of action exists,
the Plaintiff has no damages because he ultimately received workers' compensation benefits.
Further, the Defendant, indicates in its brief before this Court that even if such a claim exists,
that it protested the claim believing the circumstances of the Plaintiff's claim were suspicious
and not work-related, because its investigation revealed the seat to be operational and the
Plaintiff's description of the accident did not seem to correspond with the physical facts.
Moreover, during discovery, the Defendant indicated that it learned that the Plaintiff was
assisted in filing his workers' compensation claim by a close friend and union representative,
Terry Cameron. Mr. Cameron, who was deposed twice, initially invoked his Fifth
Amendment right against self-incrimination and refused to testify during a deposition. He
later testified and admitted to removing documents from the Defendant's files related to the
truck in which the Plaintiff was injured. Further, Mr. Cameron recently has given a written
statement to a fraud investigator working for the Fund wherein he admits that he and the
Plaintiff set out to defraud the Fund when the Plaintiff hurt his back at home by conspiring
to make the injury appear to be work-related.
The district court has denied, without prejudice, the Defendant's motion for summary
judgment with regard to the Plaintiff's cause of action in fraud. Based on our review of the
record, the parties' briefs and arguments, and all other matters submitted before this Court,
we find that an employee can maintain a private cause of action in fraud against his employer
for damages as a result of the employer knowingly and intentionally filing a false statement
with the Fund in opposition to the employee's claim.
The first certified question concerns whether a private cause of action in fraud for
damages exists in favor of an employee who alleges that his employer knowingly filed a
false or misleading statement with the Fund in opposition to the employee's claim, even
though the employee was ultimately awarded benefits from the Fund. The Plaintiff argues
that West Virginia Code 23-2-6 (1994), which grants an exemption from damages arising
out of common law actions to employers who contribute to the Fund, removes the cloak of
immunity where an employer fails to comply fully with all the provisions of chapter 23 of
the West Virginia Code.(6) See W. Va. Code 23-2-6. The Plaintiff asserts that the
Defendant did not fully comply with the provisions in chapter 23 when it submitted a false
statement to the Fund in contravention of West Virginia Code 23-1-16 (1991).(7) The
Plaintiff further maintains that, assuming arguendo, that the Defendant does not
automatically lose the immunity granted under West Virginia Code 23-2-6, the Defendant's
fraudulent actions nonetheless place it outside the workers' compensation immunity bar
regarding civil actions. Conversely, the Defendant argues that the remedies against an
employer are strictly limited and governed by statute. Thus, the Defendant asserts that the
Plaintiff's claim of fraud arising from the alleged submission of false or misleading
documents is not permitted by statute. Moreover, the Defendant contends that a common
law suit for fraud against it is unnecessary because an adequate remedy is provided by
protest and sanctions administered by the Fund.(8)
We begin by examining West Virginia Code 23-2-6 which provides that
[a]ny employer subject to this chapter who shall
subscribe and pay into the workers' compensation fund the
premiums provided by this chapter or who shall elect to make
direct payments of compensation as herein provided shall not be
liable to respond in damages at common law or by statute for
the injury(9) or death of any employee, however occurring, after
so subscribing or electing, and during any period in which such
employer shall not be in default in the payment of such
premiums or direct payments and shall have complied fully with
all other provisions of this chapter.
Id. (footnote added) (emphasis added). It is undisputed that the result of the above-mentioned statute is that it provides "statutory immunity from suit for those employers who
either subscribe to the West Virginia Workers' Compensation Fund . . . or elect to be a self-insurer and comply fully with the requirements of the Act."(10) Smith v. Monsanto Co., 822
F. Supp. 327, 329 (S.D.W.Va. 1992) (emphasis added). "The Workmen's Compensation Act
was designed to remove negligently caused industrial accidents from the common law tort
system." Mandolidis v. Elkins Indus. Inc., 161 W. Va. 695, 700, 246 S.E.2d 907, 911
(1978), superseded by statute as stated in Handley v. Union Carbide Corp., 804 F.2d 265
(4th Cir. 1986). "The benefits of this system accrue both to the employer, who is relieved
from common-law tort liability for negligently inflicted injuries, and to the employee, who
is assured prompt payment of benefits." Meadows v. Lewis, 172 W. Va. 457, 469, 307
S.E.2d 625, 638 (1983) (emphasis added).
It is clear that worker's compensation is the exclusive remedy when an employee is
negligently injured in the workplace. The Plaintiff in the instant case, however, is not
attempting to recover damages for his initial injury that occurred during the course of his
employment. Instead, according to the amended complaint, the Plaintiff seeks compensatory
and punitive damages for harm he allegedly suffered from "Peabody Coal Company, through
its management employees, fil[ing] with the Workers' Compensation Fund a statement which
they knew to be false and misleading[,]" which resulted in the Fund originally denying him
benefits "causing . . . [him] to go without income or benefits for over one year and forcing
. . . [him] at his own expense to hire an attorney." Because the issue of whether a private
cause of action in fraud can be maintained by an employee against an employer in light of
the exclusive remedy provision set forth in West Virginia Code 23-2-6 is one of first
impression, we examine how scholars and other jurisdictions have dealt with this issue.
it might seem self-evident that the exclusive-remedy provision would never apply to such torts as . . . fraud, deceit, [and] malicious misrepresentation . . . . The reason is that ordinarily these torts would not come within the basic coverage formula of the typical workmen's compensation act: "personal injury by accident arising out of and in the course of employment." But the matter is complicated by the fact that occasionally a tort of this type will become intertwined with a compensable injury in some way. The question then becomes a closer one. It is not whether the tort action will lie when no workmen's compensation claim is possible, but whether a tort action will lie when a compensation claim is also possible, and indeed may have been filed and granted.
2A Arthur Larson and Lex K. Larson, The Law of Workmen's Compensation 68.30 at 13-134-135 (1995) (footnotes omitted). Where the tort action is one of fraud or deceit, and "the
alleged deceit has acted, not upon plaintiff's physical condition, but upon his legal rights
under the compensation act[,] [t]he majority of decisions, but by no means all, have held that
this gives rise to a separate cause of action free of the exclusiveness bar." Larson, supra
68.32(b) at 13-147 to -152 (footnotes omitted); see Michael A. Rosenhouse, Annotation,
Tort Liability of Worker's Compensation Insurer for Wrongful Delay or Refusal to Make
Payments Due, 8 A.L.R.4th 902 (1981 & Supp. 1995); Erwin S. Barbre, Annotation,
Workmen's Compensation Provision as Precluding Employee's Action Against Employer for
Fraud, False Imprisonment, Defamation, or the Like, 46 A.L.R.3d 1279 (1972 & Supp.
Included in those jurisdictions which have held that a separate cause of action exits
is the Supreme Court of Montana's decision in Birkenbuel v. Montana State Compensation
Insurance Fund, 687 P.2d 700 (Mont. 1984). The Birkenbuel case, while not directly on
point, is instructive in determining the issue before us. In that case, the plaintiff suffered a
compensable injury during the course of his employment and the Montana State
Compensation Insurance Fund ("State Fund") paid the plaintiff temporary total disability
benefits during his healing period. Id. at 701. Three years after the accident, the State Fund
determined that the plaintiff had achieved his maximum healing and sought to negotiate a
settlement. While the State Fund proposed to settle for $6,000, based on a 20% impairment,
the plaintiff sought $35,000. The State Fund counteroffered for $17,325. The plaintiff
initially rejected this offer, but then accepted it. When the plaintiff went to the State Fund
office to accept the money, however, the State Fund declined to honor the $17,325 offer,
taking "exception to the strongly worded cover letter drafted by claimant's counsel[,]"
prepared in connection with the plaintiff's acceptance of the offer. Id.
In upholding a private cause of action by the employee against the State Fund for its failure to negotiate in good faith and fraudulent and intentional infliction of emotional distress, the Supreme Court of Montana stated that:
[w]e reaffirm our approval of those decisions upholding
the right of a worker to assert a separate claim for tortious
conduct occurring outside the employment relationship and
during the processing and settlement of a workers' compensation
claim. Stafford v. Westchester Fire Ins. Co. of N.Y., Inc.
(Alaska 1974), 526 P.2d 37 [,overruled on other grounds by
Cooper v. Argonaut Ins. Co., 556 P.2d 525 (Alaska 1976)];
Gibson v. Nat. Ben Franklin Ins. Co. (Me. 1978), 387 A.2d 220;
Hollman v. Liberty Mut. Ins. Co. (8th Cir. 1983), 712 F.2d 1259
(interpreting South Dakota law); Coleman v. American
Universal Ins. Co. (1970), 86 Wis.2d 615, 273 N.W.2d 220;
Martin v. Travelers Insurance Company (1st Cir. 1974), 497
687 P.2d at 703-04. The court further explained that
[t]he alleged tortious conduct did not arise within the employment relationship of Birkenbuel and his employer. The emotional injury described in the complaint occurred subsequent in time to this employment and is not work-related.
Our statutory system of workers' compensation does not
provide workers with benefits for injury sustained from
settlement negotiations with an insurance carrier. As such, the
exclusivity provisions of the Workers' Compensation Act do not
bar independent actions for tortious conduct arising from such
interactions. Any contrary interpretation would result in the
inequity whereby workers surrendered more protection than
they received when our statutory system of compensation was
Id. at 702.
The Court of Appeals of Indiana issued a similar ruling in Baker v. American States
Insurance Co., 428 N.E.2d 1342 (Ind. Ct. App. 1981). In Baker, the workers' compensation
claimant brought action against the employer's compensation carrier(11) averring that he was
entitled to workmen's compensation benefits for both temporary total disability and
permanent partial impairment for an injury to his left eye suffered during the course of his
employment. The claimant alleged that adjusters for American States fraudulently and
knowingly made false statements to him to the effect that doctors who had examined his eye
had rated the impairment at 24.5%, when, in reality, the impairment rating given the eye was
62%. The claimant maintained that the insurer made the false statements to induce him to
settle his compensation claim for less than the amount he was entitled to receive. Id. at 1344.
The claimant asserted that as a result of the fraud, he had to employ an attorney to file and
prosecute his claim with the Industrial Board for benefits and thus incurred attorney fees
which he would not have otherwise incurred. Id. at 1345. It was not until after he filed his
claim that he learned the true impairment rating of his eye and was awarded benefits on the
basis of the 62% permanent partial impairment. Id.
The Baker court, in considering whether the Indiana Workmen's Compensation Act was the exclusive remedy for the claimant, reasoned that
[a]s we suggested before, I[nd.] C[ode]  22-3-2-6 speaks to personal
injury or death by accident on the job, but it does not purport to
prohibit actions by an employee against his employer's workmen's
compensation insurance carrier for fraudulent misrepresentations made
while the employee and the insurer are attempting to settle the claim.
Baker [the claimant] could not have brought a lawsuit against his
employer for damages for his eye injury. However, the alleged
fraudulent misrepresentation by American States of Baker's impairment
rating is not the kind of harm for which the Workmen's Compensation
Act was calculated to compensate . . . .
428 N.E.2d at 1347 (citation omitted);(12) accord Reed v. Hartford Accident & Indem. Co., 367
F. Supp. 134, 135 (E.D Pa. 1973) (finding that employee could maintain common law claims
against employer's workers' compensation carrier based in part on carrier filing false,
fraudulent and perjured modification petition which caused claimant's total disability benefits
to discontinue since "[t]he exclusivity of the [Workmen's Compensation] Act is irrelevant
to causes of action which are not covered by it"). The court further stated that "[i]f Baker's
allegations regarding the behavior of the adjusters for American States prove to be true, then
it is in the public interest of this state to discourage such activities and to compensate the
victim for resulting injury." 428 N.E.2d at 1347.
Likewise, in Griggs v. All-Steel Buildings, Inc, 433 S.E.2d 89 (Ga. Ct. App. 1993),
an employee brought action against his former employer and its workers' compensation
carrier for damages resulting from the defendants' fraudulent procurement of a settlement
agreement where the employee sustained a severe head injury during the course of his
employment which resulted in brain damage that left him permanently mentally impaired.
Id. at 89-90. An agent of the employer's compensation carrier met with the employee
concerning a settlement. The employee responded that he wished to contact an attorney and
the agent told him that it "was unnecessary as an attorney would only cost him money." Id.
at 90. The employee proceeded to enter into a settlement agreement with the employer and
its compensation carrier, but the defendants failed to advise the State Board of Workers'
Compensation about the employee's head injuries, the employee's impaired mental capacity,
the employee's request for an attorney, or the carrier's agent's improper advice. Id.
In concluding that the employee's fraud claim was not barred by the Georgia Workers' Compensation Act, the Griggs court stated
[i]t is true, that in general, our workers' compensation
law provides an employee's exclusive remedy against his
employer for on-the-job injuries and provides benefits to such
employee injured "by accident arising out of and in the course
of employment." Fraud, however, is not an "accident" and the
damages resulting therefrom do not arise "out of or in the course
of the employment," but rather, result from the intentional
misconduct of the defendants subsequent to the physical injuries
which gave rise to the original workers' compensation claim.
Id. at 90 (quoting, in part, OCGA 34-9-1(4)) (citation omitted); see Gibson v. Southern
Guar. Ins. Co., 623 So.2d 1065, 1066 (Ala. 1993) (holding that exclusivity of Workers'
Compensation Act barred worker's claims against workers' compensation insurer except
those alleging intentional fraud and tort); Flamm v. Bethlehem Steel Co., 185 N.Y.S.2d 136,
138 (N.Y. Sup. Ct. 1959), aff'd, 202 N.Y.S.2d 222 (N.Y. App. Div. 1960) (interpreting
exclusivity provision of Longshoremen's and Harbor Workers' Compensation Act and finding
that where defendant employer and defendant physician conspired to deprive employee of
compensation benefits by submitting false and fraudulent medical report to Deputy
Commissioner of Compensation which was intended to and did deprive plaintiff of his rights
under statute, that "[t]he wrongful interference with and the resultant deprivation of
plaintiff's statutory rights constitute a wilful tort against the plaintiff, separate and distinct
from the original wrong" not barred by Act); Harris v. Varo, Inc., 814 S.W.2d 520, 525-26
(Tex. Ct. App. 1991) (finding that exclusive remedy provision of workers' compensation act
did not preclude employee from maintaining cause of action against employer for its
allegedly fraudulent misrepresentations before Industrial Accident Board concerning its
insurance coverage, where employer allegedly misrepresented identity of its workers'
compensation carrier with intent to deceive employee and to deprive her from filing claim);
see generally Johns-Manville Prod. Corp. v. Contra Costa Superior Court, 612 P.2d 948, 955
(Cal. 1980) (finding allegations sufficient to state cause of action for aggravation of disease
against employer notwithstanding workers' compensation law where plaintiff alleged
employer fraudulently concealed from him that he was suffering from disease caused by
ingestion of asbestos, thereby preventing him from receiving treatment for disease and
inducing him to continue working under hazardous conditions); Millison v. E. I. du Pont de
Nemours & Co, 501 A.2d 505 (N.J. 1985) (finding that although employees are limited to
workers' compensation benefits for any initial occupational disease disabilities related to
hazards of employment, New Jersey's Workers' Compensation Act does not bar cause of
action for aggravation of such illnesses resulting from employer's and company physician's
fraudulent concealment of already discovered disabilities regarding asbestos use and
The common rationale prevalent throughout the decisions which have found that an
employee can maintain a cause of action in fraud against an employer outside the realm of
workers' compensation exclusivity provision is to permit recovery when: 1) the injury giving
rise to the cause of action is not suffered during the course of employment; and 2) the
employer's fraudulent misrepresentation of facts in an attempt to deprive an injured employee
of benefits rightfully due him from a previous work-related injury is separate and distinct
from any injury envisioned to be encompassed under workers' compensation laws. Because
we are persuaded by the reasoning employed in these decisions, we find that West Virginia
Code 23-2-6 only contemplates an exemption of contributing employers from liability for
"damages at common law or by statute for the injury or death of any employee" arising out
of a negligently-inflicted(14) injury of an employee. Id. Absent from this statutory provision
is any language evincing that an employer is similarly exempted from liability for the
intentional tort of fraudulent misrepresentation. Accordingly, we hold that West Virginia
Code 23-2-6 does not preclude an employee from maintaining a separate and distinct cause
of action against an employer for damages as a result of the employer knowingly and
intentionally fraudulently misrepresenting facts to the Workers' Compensation Fund that are
not only in opposition to the employee's claim, but are made with the intention of depriving
the employee of benefits rightfully due him.
In recognizing the existence of this type of action, we do not wish to open a Pandora's box of litigation, nor do we wish to infringe upon an employer's right to contest an employee's claim. See W. Va. Code 23-4-1b and 23-4-1c (1994).(15) Therefore, we carefully balance the countervailing interests in drafting the parameters for such a cause of action. From the employer's perspective, we are very mindful of the fact that West Virginia Code 23-4-1b provides, in pertinent part, that
[i]t shall be the duty of every employer to report to the commissioner every injury sustained by any person in his employ. Such report shall be on forms prescribed by the commissioner; and shall be made within five days of the employer's receipt of the employee's notice of injury . . . . The employer's report of injury shall include a statement as to whether or not, on the basis of the information then available, the employer disputes the compensability of the injury or objects to the payment of temporary total disability benefits in connection therewith. Such statements by the employer shall not prejudice the employer's right thereafter to contest the compensability of the injury, or to object to any subsequent finding or award . . . .
Id. (emphasis added). Moreover, West Virginia Code 23-4-1c clearly states that "[a]ny
party shall have the right to protest the order of the commissioner and obtain an evidentiary
hearing as provided in section one [ 23-5-1], article five of this chapter." W. Va. Code
23-4-1c(a). Thus, pursuant to West Virginia Code 23-4-1a and 23-4-1c, an employer has
a statutory right as a party to a worker's compensation action to contest the compensability
of an employee's injury and/or to object to any subsequent finding or award.
Because of the statutory right of the employer, we very narrowly construe the cause
of action afforded to any employee who alleges fraudulent misrepresentation against the
employer. We find instructive the California Court of Appeal's decision in Jablonski v.
Royal Globe Insurance Co., 251 Cal. Rptr. 160 (Cal. Ct. App. 1988). In Jablonski, a
workers' compensation claimant brought action against a workers' compensation insurer(16) and
its agents alleging fraud. The claimant averred in his complaint that the insurer and its
agents , who were the insurer's independent claims administrators, were retained by the
claimant's employer, Notres Lines, to provide said employer with workers' compensation
coverage. The claimant was injured during the course of his employment as a truck driver.
The insurer, however, misrepresented the existence of coverage, delayed acting on the claim,
and improperly investigated said claim, even though it knew that the claimant was covered
under the policy. The claimant further maintained that "[d]efendants knew of documents
constituting evidence in plaintiff's workers' compensation case and 'concealed, lost, destroyed
or otherwise disposed of' this evidence." Id. at 162.
The California court ultimately found that an insurer's fraudulent misrepresentation that no policy existed, made for the purpose of advancing the insurer's economic interest and defeating the injured employee's just entitlement, constitutes the type of outrageous reprehensible conduct which falls outside of permissible boundary of protected behavior by insurer. Id. at 167. In reaching this decision, the Jablonski court reasoned:
The sham procedure of asserting the subjective characterization
that the acts of the carrier or its agents are "fraudulent, deceitful
and intentional" will not suffice. Otherwise, a disgruntled
worker could sue the compensation carrier in a court of law
merely by alleging that the acts in question were intentional,
deceptive, outrageous and fraudulent without alleging specific
conduct and how it was carried out. These conclusory
pleadings, if permitted, "would make a shambles of the workers'
compensation system . . ." In short, there must be factual
allegations identifying the particular acts or circumstances
which distinguish the tort of outrageous conduct from the
ordinary nonperformance of the insurer's statutory duty to
Id. at 164. (quoting, in part, Unruh v. Truck Ins. Exch., 498 P.2d 1063 (1972)) (citation
omitted); see McCutchen v. Liberty Mut. Ins. Co., 699 F. Supp. 701, 706 n.1 (N.D. Ind.
1988) (quoting Barr Co. v. Safeco Ins. Co., 583 F. Supp. 248, 258 (N.D. Ill. 1984)) (referring
to Federal Rule of Civil Procedure 9(b) which requires allegations of fraud to be pleaded
with particularity and stating that the circumstances of fraud which must be particularly
averred refer to "'matter[s] such as the time, place, and conten[t]s of the false representations,
as well as the identity of those persons involved'"); Funeral Servs. by Gregory, Inc. v.
Bluefield Community Hosp., 186 W. Va. 424, 430, 413 S.E.2d 79, 85 (1979), overruled on
other grounds by Courtney v. Courtney, 190 W. Va. 126, 437 S.E.2d 436 (1993) (stating that
"in order to establish fraud, the circumstances must be clearly alleged and proved"); W. Va.
R. Civ. P. 9(b) (stating that "[i]n all averments of fraud . . . the circumstances constituting
fraud . . . shall be stated with particularity").
The Jablonski court likened the type of fraud which must be alleged to "the
reprehensible conduct engaged in when the 'insurer intentionally embarks upon a deceitful
course of conduct in its investigations which causes injury to the subject of the
investigation.'" Id. at 167 (quoting Unruh, 498 P.2d 1063). Thus, "mere delay in payment
or other conduct related to the botched processing of a compensation claim does not cause
the insurer to lose its exclusivity defense." 251 Cal. Rptr. at 165; see Griggs, 433 S.E.2d
at 91 (finding that allegations of fraud give rise to independent cause of action and that
allegations of mere delay in payment do not).
Based upon the reasoning in Jablonski and applying West Virginia Rule of Civil
Procedure 9(b), we hold that an employee's cause of action against his/her employer for
fraudulent misrepresentation concerning the employee's workers' compensation claim must
be pled with particularity and must be supported by factual allegations identifying the
employer's particular acts or circumstances which distinguish the intentional tort of
fraudulent misrepresentation from the employer's negligent misrepresentation or mere delay
in processing or payment of said claim, the latter two of which are not sufficient to support
an employee's independent cause of action.
More specifically stated, in order for a plaintiff employee to prevail on the narrowly
construed cause of action by the employee against an employer for fraudulent
misrepresentation concerning the employee's workers' compensation claim, the employee
must (1) plead his or her claim with particularity, specifically identifying the facts and
circumstances that constitute the fraudulent misrepresentation, and (2) prove by clear and
convincing evidence all essential elements of the claim, including the injury resulting from
the fraudulent conduct. A plaintiff employee is not entitled to recover unless the evidence
at trial is persuasive enough for both the judge and jury to find substantial, outrageous and
reprehensible conduct which falls outside of the permissible boundary of protected behavior
under the statute. If the pleadings or evidence adduced is insufficient to establish either of
the two factors stated above, the trial court may dismiss the action pursuant to Rule 12(b),
Rule 56 or Rule 50 of the West Virginia Rules of Civil Procedure.
Finally, the Defendant in the instant action, relying on West Virginia Code 23-1-16 (1991), posits that there is no need for a private cause of action because
[a]ny person or firm or the officer of any corporation,
who knowingly makes a false report or statement under oath,
affidavit or certification respecting any information required by
the commissioner, or who shall knowingly testify falsely in any
proceeding before the commissioner, shall be considered guilty
of perjury, and, upon conviction thereof, shall be punished as
provided by law.
Id. The Defendant maintains that the penalties provided for by the statute are the sole
remedies available when an employer engages in the type of conduct that the statute prohibits
and that since the statute provides no private cause of action or civil remedy against the
employer or employee for submitting allegedly false evidence or claims, then no such action
We disagree with the Defendant's contentions. Contrary to the Defendant's assertion,
we find the lack of any statutory provision regarding a private cause of action for submitting
false evidence supportive of the fact that such a cause of action can exist. If the legislature
would have intended for the statute to supplant such a cause of action it would have
expressly stated that within the statute.
The second certified question concerns what damages are available to the employee
asserting a cause of action in fraud. The Plaintiff argues that he is entitled to damages for
emotional and psychiatric conditions, aggravation of his work injury, annoyance and
inconvenience, in addition to punitive damages and attorney's fees and costs.(17) The
Defendant only argues that since the Plaintiff has received all workers' compensation benefits
to which he is entitled, he should have no separate cause of action for damages.
It is axiomatic that the plaintiff's measure of damages in a cause of action in fraud
would be any injury incurred as a result of the defendant's fraudulent conduct. Further
guidance in what the damages may encompass is summed up best in Capper v. Gates, 193
W. Va. 9, 454 S.E.2d 54 (1994). In Capper, a case involving a cause of action in fraud, we
stated that in addition to full compensation for all injuries directly or indirectly resulting
from the wrong,(18) "'[p]unitive or exemplary damages are such as, in a proper case, a jury
may allow against the defendant by way of punishment for willfulness, wantonness, malice,
or other like aggravation of his wrong to the plaintiff . . . .'" Id. at 18, 454 S.E.2d at 63
(quoting Syl. Pt. 3, Chesser ex rel. Hadley v. Hathaway, 190 W. Va. 594, 439 S.E.2d 459
(1993); Syl. Pt. 1, O'Brien v. Snodgrass, 123 W. Va. 483, 16 S.E.2d 621 (1941); Syl. Pt. 4,
Harless v. First Nat'l Bank , 169 W. Va. 673, 289 S.E.2d 692 (1982)). Further, "[w]here it
can be shown by clear and convincing evidence that a defendant has engaged in fraudulent
conduct which has injured a plaintiff, recovery of reasonable attorney's fees may be
obtained in addition to the damages sustained as a result of the fraudulent conduct." Syl. Pt.
4, Bowling v. Ansted Chrysler-Plymouth-Dodge, Inc., 188 W. Va. 468, 425 S.E.2d 144
Based on the foregoing, the certified questions from the United States District Court
of the Southern District of West Virginia at Beckley are hereby answered. Accordingly, we
dismiss this case from the docket of this Court.
Certified questions answered.
1. 1This fact is corroborated by notes Stephen D. Farley, the Defendant's Employee Relations Representative, made concerning his conversations with various supervisors at the plant site regarding the Plaintiff's injury. In an entry dated June 18, 1992, Mr. Farley writes that in a discussion he had about the incident with Barry Webb, a Peabody supervisor, he asked Mr. Webb if he knew of anything that would dispute the Plaintiff's claim and Mr. Webb told him he did not have any such knowledge. The only negative reference regarding the Plaintiff's claim was that Mr. Webb told Mr. Farley that the Plaintiff had a reputation for driving fast and Mr. Webb felt that the Plaintiff's driving style could make him more susceptible to such a mishap.
2. 2The Plaintiff's appendix also contains the report of Dr. Kwan Ho Lee, who, in a letter to the Commissioner of Workers' Compensation, Andrew Richardson, made the following diagnosis regarding the Plaintiff: "Claimant continues to be temporarily and totally disabled due to the compensable condition." The Plaintiff also has been seen by two psychiatrists and has been admitted to St. Albans Psychiatric Hospital to deal with emotional and mental problems that the Plaintiff claims "all relat[e] to the initial unfair actions by Peabody to have his claim denied. . . ."
3. 3The attachment consisted of the following letter dated July 8, 1992, from Billy L.
Pennington, Top Supervisor:
TO WHOM IT MAY CONCERN:
I supervise the repair and maintenance of the M45 Mack
trucks which are used at this facility. Mr. Roger Persinger
was operating one of these vehicles, Unit No. 740, on June
I checked Unit 740 after Mr. Persinger allegedly injured himself and there were no mechanical defects in the seat or suspension. All of these vehicles are equipped with specially designed seats which use air to cushion the force of any unexpected blows. Also, the operator of Unit No. 740 on the
shifts before and after Mr. Persinger['s] did not complain of anything unusual about the
way that the vehicle drove or handled.
I am also responsible for the upkeep of the road that Mr.
Persinger traveled on June 17, 1992. This road is well-maintained and receives attention on a daily basis to ensure
that it stays that way. There were three other trucks using
that road on June 17, 1992, and none of these vehicle's
operators complained about any holes or other defects in the
road's surface that day.
4. 4The Plaintiff received over $95,000 in workers' compensation benefits.
5. 5By order dated November 28, 1994, emanating from a motion to compel Defendant to
produce certain documents requested by the Plaintiff, the district court found the
The court has also scrutinized the Item 1 documents for any light they may shed on plaintiff's assertion of fraud. The court finds that plaintiff has made out a prima facie showing of fraud by one or more of Peabody's employees in connection with Mr. Persinger's Workers' Compensation claim.
6. 6See W. Va. Code 23-1-1 to -6-1 (1994).
7. 7West Virginia Code 23-1-16 provides, in pertinent part:
Any person or firm, or the officer of any corporation,
who knowingly makes a false report or statement under oath,
affidavit or certification respecting any information required
by the commissioner, or who shall knowingly testify falsely
in any proceeding before the commissioner, shall be
considered guilty of perjury, and, upon conviction thereof,
shall be punished as provided by law.
Id. We note that West Virginia Code 23-1-16 was amended in 1993 and 1995. The pertinent 1993 amendments essentially changed the language in the 1991 statute that the individual submitting the false information "shall be considered guilty of perjury" to "shall be considered guilty of a felony, and, upon conviction thereof, shall be fined not less than one thousand dollars and not more than ten thousand dollars or confined in the penitentiary for not more than three years, or both." See W. Va. Code 23-1-16 (1993). The 1995 amendments once again change the applicable penalties. See W. Va. Code
23-1-16(b) (Supp. 1995). We use the 1991 version of the statute since the alleged false misrepresentations to the commissioner occurred in 1992.
8. 8Upon a review of the record and the pertinent case law, we find no merit to the Defendant's contention that the Plaintiff is attempting to circumvent the Defendant's statutory workers' compensation immunity by alleging fraud in handling the claim under a what the Defendant alleges is a "dual capacity theory." See Deller v. Naymick, 176 W. Va. 108, 342 S.E.2d 73 (1985).
9. 9While the statute does not expressly state that the injury or death must be work-related, it is certainly implied.
10. 10As the district court in Smith v. Monsanto Co., 822 F.Supp. 327 (S.D.W. Va. 1992), stated, "[u]nder the Act, an employer who is otherwise entitled to immunity under 23-2-6 may lose immunity in only one of two ways: (1) by defaulting in payments required by the Act or otherwise failing to comply with the provisions of the Act, or (2) by deliberately intending to produce injury or death to the employee." 822 F. Supp. at 330 (citation omitted).
11. 11Under the Indiana workers' compensation statute, "for the purposes of the Workmen's Compensation Act, the term 'employer' includes the employer's insurer where applicable." 428 N.E.2d at 1346 (citing Ind. Code 22-3-6-1(a)).
12. 12The Baker court did conclude that Indiana Code 22-3-4-12 which provides for an award of attorney's fees where the employer or its insurer has acted in bad faith in adjusting and settling a claim for workmen's compensation benefits was the claimant's exclusive remedy for his request for attorney's fees. 428 N.E.2d at 1347.
13. 13We are mindful that there are jurisdictions that have held that under circumstances comparable to those presented in the instant case, workers' compensation still would be the exclusive remedy. See Yocum v. Phillips Petroleum Co., 612 P.2d 649 (Kansas 1980) (holding that relief provided under workers' compensation statute was exclusive remedy available to employee and barred employee from maintaining common-law action for fraud against employer where employee sought to set aside compensation settlement award because of employer's fraud in obtaining said settlement); Gordineer v. Bellotti, 785 P.2d 362 (Or. Ct. App.), review denied, 794 P.2d 793 (Or. 1990) (finding that exclusive remedy of workers' compensation act applied to worker's claim that employer furnished false and perjured testimony in workers' compensation hearing, and that employer's testimony resulted in loss of temporary total disability benefits to which employee was entitled).
14. 14Obviously, the statute covers work-related injuries where no negligence occurs and civil liability is not at issue.
15. 15West Virginia Code 23-4-1c was amended in 1994 and 1995; those amendments, however, do not effect the outcome of the present case.
16. 16Under the California workers' compensation scheme, the term employer included insurers for the purpose of third-party suits. See Jablonski, 251 Cal. Rptr. at 163.
17. 17The Defendant is entitled to an offset for damages which may be awarded in the instant action that have already been paid or will be paid as compensable injuries in the Plaintiff's coincident workers' compensation claim. See Mooney v. Eastern Assoc. Coal Corp., 174 W. Va. 350, 326 S.E.2d 427 (1984).
18. 18Damages for annoyance and inconvenience are properly included in compensatory damages. See Muzelak v. King Chevrolet, Inc., 179 W. Va. 340, 345-46, 368 S.E.2d 710, 715-16 (1988).