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Crawford & Co. v. Baker-Withrow (12/19/2003) sp-5763
Crawford & Co. v. Baker-Withrow (12/19/2003) sp-5763
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
CRAWFORD & COMPANY and )
NATIONAL UNION FIRE INS. CO. ) Supreme Court No. S-10141
PITTSBURGH, )
Appellants, )
) Superior Court No.
v. ) 4FA-00-1911 CI
)
PENNY T.R. BAKER-WITHROW, ) O P I N I O N
)
Appellee. ) [No. 5763 - December 19, 2003]
)
Appeal from the Superior Court of the State
of Alaska, Fourth Judicial District,
Fairbanks, Ralph R. Beistline, Judge.
Appearances: Zane D. Wilson, Cook, Schuhmann
& Groseclose, Inc., Fairbanks, for Appellant
Crawford & Company. Penny Baker-Withrow, pro
se, North Pole.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, Bryner, and Carpeneti, Justices.
MATTHEWS, Justice.
FABE, Chief Justice, dissenting.
Alaska Statute 23.30.155(o) requires the Alaska
Workers' Compensation Board to notify the Division of Insurance
when it determines that an insurer has frivolously or unfairly
controverted a compensation claim. Upon receiving notice the
division must determine whether the insurer has committed an
unfair claim settlement practice under AS 21.36.125. The
question presented here is whether a board determination of
unfair controversion is a final appealable order. We hold that
it is because the board's decision_making process has been
completed and its determination has an adverse effect on the
insurer since it is binding on the Division of Insurance.
In an order on reconsideration entered July 28, 2000,
the Alaska Workers' Compensation Board determined that Crawford &
Company had unfairly and frivolously controverted claims
submitted by Penny Baker-Withrow on August 30, 1996, and November
5, 1997. In an earlier order the board also found that Crawford
"did not act in good faith." This finding was not modified on
reconsideration. The dispositional portion of the board's order
provided:
Based on the Board's finding the insurer
has committed a frivolous or unfair
controversion, we will send a copy of this
decision to the Division of Insurance to
determine if the insurer has committed an
unfair claim settlement practice.
The order also provided that it "is a final decision" and that
"[p]roceedings to appeal must be instituted in Superior Court
within 30 days . . . ." Crawford appealed this order to the
superior court, which held that there was not yet a final
administrative order to appeal from because the Division of
Insurance had not yet determined whether Crawford had committed
an unfair claim settlement practice.
From the superior court's dismissal on these grounds,
Crawford appealed to this court. We entered an interim order
stating:
The question in this case is whether the
board's finding that Crawford and Company
frivolously or unfairly controverted Baker's
claim is an appealable order. The finding
was made pursuant to AS 23.30.155(o).1
Under the terms of that subsection the board
must notify the Division of Insurance when
such a finding is made, and when so notified
the division must determine whether the
insurer has committed an unfair claim
settlement practice. Critical to our
determination of appealability is whether the
board's finding is binding in subsequent
proceedings conducted by the division, or
whether the insurer can relitigate whether
its controversion was frivolous or unfair as
an original matter in the proceedings before
the division. The regulations, practices,
and procedures, if any, of the Division of
Insurance concerning the effect of board
findings under subsection .155(o) will be
important in determining whether such
findings are binding. No evidence or
information as to such regulations,
practices, and procedures has been presented.
Accordingly, It is Ordered:
That this case is remanded to the
superior court with instructions to make
findings as to [the] existence of any
regulations, practices, or procedures of the
Division of Insurance concerning whether
board findings under subsection .155(o) are
treated as binding. In order to make such
findings the superior court should request
supplemental memoranda from the parties and
the State of Alaska. In addition, the
superior court may authorize discovery and
may conduct an evidentiary hearing if, in the
judgment of the court, such a hearing is
needed. This court will retain jurisdiction
pending receipt of the findings from the
superior court.
On remand the only evidence submitted to the superior
court was the affidavit of Robert Lohr, the Director of the
Division of Insurance. He stated that the division would not re-
examine a board finding of frivolous controversion and that it
was the division's duty to determine whether the frivolous
controversion amounted to an unfair trade practice under AS
21.36.125.2 (b) The provisions of this section do not create
or imply a private cause of action for a violation of this
section. He observed that the elements necessary for a finding
of an unfair claim settlement practice "may be similar to those
necessary for a board finding of frivolous controversion, but
they are not congruent."3 6. It is the division's general
practice - and one followed in the instant case - to stay an
investigation and determination under AS 21.36.125, pending the
outcome of an appeal of a board finding. The superior court
found that the frivolous controversion finding was not binding on
the Division of Insurance, but could not be reversed by the
division. The court found that the finding served as a basis for
the board's referral and determined that if the Division of
Insurance should find that Crawford had committed an unfair claim
practice then the company could appeal that order. Under the
interim order the question of appealability is now ripe for
decision before this court.
A party to an administrative adjudicative proceeding
has the right to appeal a final administrative order to the
superior court.4 But sometimes it is difficult to determine
whether an agency order is final for the purposes of appeal.5 We
have observed that the test used in Alaska to determine finality
is "essentially a practical one."6 In State, Department of Fish
& Game, Sport Fish Division v. Meyer we stated that one measure
of finality "is whether the agency has completed its
decisionmaking process, and whether the result of that process is
one that will directly affect the parties."7
In the present case this standard is met. The board
has completed its decision-making process as to whether the
controversions in question were frivolous. The result of the
order will directly affect Crawford because the order mandates an
investigation by the Division of Insurance as to whether Crawford
has committed unfair claim settlement practices and may serve as
a foundational fact supporting a determination that Crawford has
committed such practices. In proceedings before the Division of
Insurance the board's frivolous controversion determinations
cannot be questioned on evidentiary or legal grounds and thus
will be binding. Since the elements of a frivolous or unfair
controversion under AS 23.30.155(o) are similar to the unfair
claim settlement practice defined in AS 21.36.125(a)(6) - failing
to "attempt in good faith to make prompt and equitable settlement
of claims in which liability is reasonably clear" - the board's
determinations will go a long way toward establishing an unfair
claim settlement practice.
The fact that any decision of the Division of Insurance
determining that Crawford had committed unfair claim settlement
practices would itself be appealable does not, in our view,
destroy the finality of the board's order. The Division of
Insurance is a separate agency from the Alaska Workers'
Compensation Board and proceedings before the division are
separate from proceedings before the board. The division gives
binding effect to the board's frivolous controversion
determination and asks whether the frivolous controversion also
constitutes an unfair claim settlement practice, or some of the
elements of an unfair claim settlement practice. This use of the
board's determination and the fact that the determination
requires Division of Insurance action are, in our view, direct
effects sufficient to impart finality to the board's order.
The board's findings must be subject to appellate
review at some point.8 If review were delayed until a direct
appeal of Division of Insurance proceedings that found an unfair
claim settlement practice based on the board's frivolous
controversion determination, an anomalous situation would be
present. The correctness of the decision of the Division of
Insurance would not necessarily be under review. Instead, the
critical question could be the legal and evidentiary sufficiency
of the determinations made by the Workers' Compensation Board in
the collateral proceeding. The rules governing judicial review
of agency action provide that the agency from which the appeal is
taken has the responsibility for preparing the "record of
proceedings before the agency" including a typed transcript.9
The agency is a party to the appeal that may brief and argue its
position.10 How these provisions would work in an appeal from a
decision of the Division of Insurance that questioned
determinations made by the Workers' Compensation Board is a
question having no ready answer in the appellate rules. Of
course, answers might be improvised, as they should be if
necessary to preserve a party's right to appeal. But the need
for improvisation highlights that the better answer to the
problem is to adhere to the established standards of finality
expressed in Meyer and look to "whether the agency has completed
its decisionmaking process" and whether the result "will directly
affect the parties."11
One practical consequence of our holding that the
board's determination of frivolous or unfair controversion under
AS 23.30.155(o) is appealable may be to delay the Division of
Insurance's determination as to whether Crawford has committed an
unfair claim settlement practice. Lohr stated in his affidavit
that it is the division's general practice to stay an
investigation and determination pending the appeal of a board
finding.12 Although we can understand the reasons for this
practice, it is not required by law. Unless a stay is entered,
final administrative orders have binding effect even though an
appeal from them is pending.13 Thus there is no legal impediment
to the division's investigation going forward during the appeal
of the board's decision. Moreover, if we were to hold that the
board's decision is not appealable until after the division
conducts an investigation and makes a determination, there would
be other practical consequences. If we were to determine
ultimately that the board's findings were invalid and therefore
that sanctions imposed by the division must be reversed because
they were premised on the board's findings, there would be much
wasted effort and money on the part of both Crawford and the
Division of Insurance. Whether that waste is worse than the
delay inherent in the division's current practice is fairly
debatable. It is enough for our purposes to observe that the
answer is not so one sided, nor is the possibility of delay so
critical, as to cast doubt on the application to this case of the
Meyer standards of administrative finality.
For the above reasons, the judgment of the superior
court is REVERSED and this case is REMANDED to the superior court
with instructions to review the merits of Crawford's arguments on
appeal.
FABE, Chief Justice, dissenting.
I disagree with the court's conclusion that the
Workers' Compensation Board's post-settlement finding that
Crawford and Company frivolously and unfairly controverted Penny
Baker-Withrow's claim is a final, appealable order. I depart
from the court's reasoning on several grounds. The court has
created the right to an appeal that frequently will have no
appellee. Furthermore, the Board's finding fails our test for
identifying final appealable agency orders because it does not
require Crawford to take any action. The finding therefore has
no direct effect on the company. And we do not need to be
concerned with the preclusive effect of the Board's finding as
even Crawford admits it is not binding on the Division of
Insurance. Finally, allowing this type of appeal will delay the
Division's investigations, to the detriment of the workers'
compensation scheme and the public policy behind it. I would
affirm the superior court's dismissal of Crawford's appeal and
therefore respectfully dissent from the court's opinion and
judgment.
"The test for determining whether a judgment is or is
not final is essentially a practical one."14 Without even turning
to our doctrine on finality, I believe that the court's holding
cannot meet this simple standard of pragmatism because in many
cases there will be no appellee to defend the appeal the court
today allows. A claimant like Baker-Withrow has already received
the money she needs to make her whole and pay her lawyer. If the
employer appeals only the controversion finding, and compensation
is not at stake, the employee has no reason to defend the appeal.
She will be no better off if the courts affirm the Board than if
they reverse it. And she has no way, other than her own out-of-
pocket funds, to pay her lawyer to chase the appellant through
the appeals process.15 As I explain below, the only direct effect
of the Board's ancillary finding of frivolous or unfair
controversion is that the Division of Insurance will initiate an
investigation into whether the employer or insurer has engaged in
unfair claim settlement practices - an investigation that must
look beyond the facts of the original claimant's case.16 The
Division undertakes this investigation in the public interest,
not to advance the claimant's goals.17 The claimant has no
direct stake in the investigation's outcome, or even in whether
it happens or not. As the court points out, the Board may take
part in an appeal to protect its own interests.18 Unfortunately,
in this case the Board has determined it has no interest not
represented by one of the parties.19 By allowing this appeal, and
by leaving a pro se litigant like Baker-Withrow to handle it on
her own, the court and the Board are asking workers' compensation
claimants to help police claim settlement practices by serving as
private attorneys general, without any of the rewards that
normally attend fulfilling such a role in a qui tam action or a
citizen suit. Although Baker-Withrow has chosen to take on the
task, I doubt that many claimants in her position will do the
same. We will be left deciding appeals based only upon the
arguments of appellants - a notably poor way of getting at the
truth of the matter.
The one-sided nature of this type of appeal should at
least pique our suspicion that the Board's finding is not the
sort of order we ought to consider final and appealable. To
determine whether the administrative order is final and
appealable, the court uses the two-part test laid out in State,
Department of Fish & Game, Sport Fish Division v. Meyer, asking
"whether the agency has completed its decisionmaking process, and
whether the result of that process is one that will directly
affect the parties."20 I agree with the court that the Board has
completed its decisionmaking process in this case, but I would
hold that the finding of frivolous and unfair controversion will
not directly affect Crawford and Company within the meaning of
Meyer.
We have not had occasion to analyze what it means for
an agency decision to "directly affect the parties." Cases from
other jurisdictions that have considered the question have
generally granted review only for agency orders that impose
definite and concrete obligations on parties or otherwise govern
their behavior. In Franklin v. Massachusetts,21 the source of our
Meyer test, the United States Supreme Court held that the
question of finality hinges on "whether [the agency decision's]
impact `is sufficiently direct and immediate' and has a `direct
effect on . . . day-to-day business.' "22 Appealable agency
action "imposes an obligation, denies a right, or fixes a legal
relationship."23 The Board's finding of frivolous controversion
does none of these. It only triggers the investigation.
Crawford is not required by the Board's finding to take any
action, nor is the company barred from any action. The Board's
finding compels no change in the company's behavior. Its legal
status is no different than it was before the finding. The only
possible current effect on Crawford is the harm to its
reputation. Such damage is not only speculative but is also an
"inherent incident[] of [an] open and public administrative
process"24 and insufficient to allow an appeal before the
investigation has even begun.
The court's holding that the Board's nondispositive
finding directly affects Crawford is driven by an unwarranted
concern that an immediate appeal is Crawford's last chance to
challenge the Board's finding, because the Division of Insurance
will give it "binding effect."25 An immediate appeal is
necessary, the court reasons, because the Board's finding of
frivolous and unfair controversion "will go a long way toward
establishing an unfair claim settlement practice" of "failing to
`attempt in good faith to make prompt and equitable settlement of
claims in which liability is reasonably clear,' " because the two
determinations have "similar" "elements."26 But there is no
suggestion in the record that any sort of formal preclusion is at
work in the Division's proceedings.
The affidavit filed by Robert A. Lohr, Director of the
Division of Insurance, does state that the Board's findings are
not open to relitigation. But again, the only mandatory effect
of those findings is to trigger the investigation. This is an
essentially executive action and does not warrant an appeal.27
Director Lohr further states that the Board's finding would be
"relevant, probative and persuasive on the question of whether an
unfair claim settlement practice . . . has occurred." This does
not imply the "binding effect" that worries the court. Rather,
Lohr's affidavit makes clear that the Division views the Board's
finding as good evidence of an unfair claim settlement practice,
but that the finding does not conclusively establish any element
of that determination.
Crawford itself concedes that the Board's finding does
not have a conclusive effect on the Division's decision: "The
Division of Insurance can only determine whether Crawford
committed an unfair claims settlement practice, not whether
Crawford frivolously or unfairly controverted benefits . . . .
[T]here are no provisions of the Unfair Claims Settlement
Practices Act that correlate directly to the Board making a
determination of a frivolous or unfair controversion." Thus, the
Board's finding is not legally conclusive or irrebutable.
Crawford will be able to rebut the finding's relevance to the
question that is before the Division: whether any of the
company's violations of AS 21.36.125 have been "committed so
frequently as to become a trade practice."28 The company will
also be able to appeal any adverse determination that relies on
the Board's finding. This appeal, to which the Division will be
a party, is sufficient to safeguard Crawford's rights. There is
no call for us to provide the company with an extra appeal before
the investigation has led to any determination about Crawford's
practices, let alone before it has even begun.
Finally, the court has granted insurers two levels of
appeal of an ancillary finding of the Board, first to the
superior court and then to this court, ensuring that any Division
investigation triggered by such a finding will be delayed for
years. It is the Division's practice to stay its investigation
while an appeal of the triggering finding is pending. This delay
will weaken the Division's ability to oversee and regulate the
workers' compensation insurance industry. Our respect for the
public policy embodied in Alaska's workers' compensation laws
should warn us away from impeding the Division's work. Under the
scheme the legislature enacted, employees "relinquish[] whatever
rights they had at common law in exchange for a sure recovery
under the compensation statutes."29 Employers must be held to
account for their end of the deal - their liability is limited,
but they are required to play by the rules and compensate their
workers in good faith.30 The delaying tactics that the court
sanctions in this decision will dilute the Division of
Insurance's ability to police the bargain.
For all of these reasons, I respectfully dissent.
_______________________________
1AS 23.30.155(o) provides:
The board shall promptly notify the
division of insurance if the board determines
that the employer's insurer has frivolously
or unfairly controverted compensation due
under this chapter. After receiving notice
from the board, the division of insurance
shall determine if the insurer has committed
an unfair claim settlement practice under AS
21.36.125.
2AS 21.36.125 provides:
(a) A person may not commit any of
the following acts or practices:
(1) misrepresent facts or policy
provisions relating to coverage of an
insurance policy;
(2) fail to acknowledge and act
promptly upon communications regarding a
claim arising under an insurance policy;
(3) fail to adopt and implement
reasonable standards for prompt
investigation of claims;
(4) refuse to pay a claim without a
reasonable investigation of all of the
available information and an explanation
of the basis for denial of the claim or
for an offer of compromise settlement;
(5) fail to affirm or deny coverage
of claims within a reasonable time of the
completion of proof_of_loss statements;
(6) fail to attempt in good faith to
make prompt and equitable settlement of
claims in which liability is reasonably
clear;
(7) engage in a pattern or practice
of compelling insureds to litigate for
recovery of amounts due under insurance
policies by offering substantially less
than the amounts ultimately recovered in
actions brought by those insureds;
(8) compel an insured or third_party
claimant in a case in which liability is
clear to litigate for recovery of an
amount due under an insurance policy by
offering an amount that does not have an
objectively reasonable basis in law and
fact and that has not been documented in
the insurer's file;
(9) attempt to make an unreasonably
low settlement by reference to printed
advertising matter accompanying or
included in an application;
(10) attempt to settle a claim on
the basis of an application that has been
altered without the consent of the
insured;
(11) make a claims payment without
including a statement of the coverage
under which the payment is made;
(12) make known to an insured or
third_party claimant a policy of
appealing from an arbitration award in
favor of an insured or third_party
claimant for the purpose of compelling
the insured or third_party claimant to
accept a settlement or compromise less
than the amount awarded in arbitration;
(13) delay investigation or payment
of claims by requiring submission of
unnecessary or substantially repetitive
claims reports and proof_of_loss forms;
(14) fail to promptly settle claims
under one portion of a policy for the
purpose of influencing settlements under
other portions of the policy;
(15) fail to promptly provide a
reasonable explanation of the basis in
the insurance policy in relation to the
facts or applicable law for denial of a
claim or for the offer of a compromise
settlement; or
(16) offer a form of settlement or
pay a judgment in any manner prohibited
by AS 21.89.030;
(17) violate a provision contained
in AS 21.07.
3In full, the Lohr affidavit states:
Robert A. Lohr, being first
duly sworn states:
1. I am the director for Alaska's
Division of Insurance. I have personal
knowledge of the facts contained in this
affidavit.
2. I offer this affidavit to
present the division's understanding of
the interplay between AS 23.30.155(o) and
AS 21.36.125 and the division's practices
based on that understanding.
3. When the Alaska Workers'
Compensation Board makes a finding that a
frivolous controversion has occurred, it
notifies the Division of Insurance,
pursuant to .155(o). The division will
not re-examine a determination of
frivolous controversion by the board.
The division does not relitigate the
factual findings of the board that led to
the finding of frivolous controversion,
nor will the division relitigate the
board's conclusion that a frivolous
controversion occurred.
4. The division's statutory duty
is to determine whether the frivolous
controversion found by the board
constitutes an unfair trade practice in
violation of AS 21.36.125, and if so,
what penalties are appropriate. The
elements necessary for a finding of an
unfair claim settlement practice may be
similar to those necessary for a board
finding of frivolous controversion, but
they are not congruent. A finding by the
board of frivolous controversion may be
and usually would be relevant to the
determination of an unfair claim
settlement practice, but it is not
necessarily dispositive of the question.
5. It is still the case that a
board finding of frivolous controversion
may be relevant, probative and persuasive
on the question of whether an unfair
claim settlement practice under AS
21.36.125 has occurred - and such a
finding often provides the foundation for
an investigation and ultimate [decision].
4Alaska R. App. P. 601(b); AS 44.62.560(a).
5See Mukluk Freight Lines, Inc. v. Nabors Alaska Drilling, Inc.,
516 P.2d 408, 411 (Alaska 1973), where we quoted the observation
that " `final' in the context of appealability [is] an `abstruse
and infinitely uncertain term.' " Id. at 411 n.11 (quoting Will
v. United States, 389 U.S. 90, 108 (1967) (Black, J.,
concurring)).
6Matanuska Maid, Inc. v. State, 620 P.2d 182, 184 (Alaska 1980).
7906 P.2d 1365, 1370 (Alaska 1995) (quoting Franklin v.
Massachusetts, 505 U.S. 788, 797 (1992)).
8AS 44.62.560(a); Alaska R. App. P. 601(b).
9Alaska R. App. P. 604(b)(1)(A).
10Alaska R. App. P. 602(h). The board frequently participates as
a party in cases on appeal when it determines that it has an
institutional interest separate from the interest of the parties.
On remand under our interim order the board filed a notice of
nonparticipation that stated in relevant part:
The Alaska Workers' Compensation Board
has determined it has no independent interest
in this appeal only of its decision. The
Attorney General's office will not
participate on the Board's behalf unless the
undersigned is advised by letter from a party
that it believes the Board has an independent
interest or receives notice from the Court
under Alaska App. Rule 514(f).
Because the board in this case has an interest in sustaining the
validity of its orders that will not be duplicated by the
interests of a party represented by counsel, we recommend that
the superior court on remand of this decision notify the board
that it has an independent interest in the proceeding and invite
the participation of the attorney general on the board's behalf.
11906 P.2d at 1370.
12See supra note 3.
13See Pipeliners Union 798 v. Alaska State Comm'n for Human
Rights, 681 P.2d 330, 336 (Alaska 1984) ("[I]n a consolidated
proceeding of an action to enforce an [administrative] order and
the appeal of that order, an enforcement judgment may be entered
before the order is reviewed unless the court imposes a stay of
the enforcement cause of action.").
14Matanuska Maid, Inc. v. State, 620 P.2d 182, 185 (Alaska 1980)
(citations and internal quotation marks omitted).
15By the time supplemental briefs were filed in the present case,
Baker-Withrow was without counsel and representing herself.
16See O.K. Lumber Co., Inc. v. Providence Washington Ins. Co., 759
P.2d 523, 526-27 (Alaska 1988).
17See AS 21.36.125(b) ("The provisions of this section do not
create or imply a private cause of action for a violation of this
section."); O.K. Lumber, 759 P.2d at 527.
18Slip Op. at 9 & n.10.
19Id.
20Slip Op. at 7 (quoting State, Dep't of Fish & Game, Sport Fish
Div. v. Meyer, 906 P.2d 1365, 1370 (Alaska 1995) (quoting
Franklin v. Massachusetts, 505 U.S. 788, 797 (1992))).
21505 U.S. 788, 797 (1992).
22Id. at 796-97 (quoting Abbot Laboratories v. Gardner, 387 U.S.
136, 152 (1967)) (second alteration in original).
23Geyen v. Marsh, 775 F.2d 1303, 1309 n.6 (5th Cir. 1985)
(citation omitted).
24Brian v. State By & Through Oregon Gov't Ethics Comm'n, 868 P.2d
1359, 1362-63 (Or. App. 1994).
25Slip Op. at 8.
26Slip Op. at 8 (quoting AS 21.36.125(a)(6)).
27Cf. International Waste Controls, Inc. v. SEC, 362 F. Supp. 117,
199 (S.D.N.Y. 1973) (holding that an order initiating an
investigation is "not reviewable until a final order is entered
as a result of the investigation") (citation omitted).
28O.K. Lumber, 759 P.2d at 527.
29Wright v. Action Vending Co., Inc., 544 P.2d 82, 84-85 (Alaska
1975) (quoting Smither & Co. v. Coles, 242 F.2d 220, 222 (D.C.
Cir. 1957)).
30Id.; AS 21.36.125(6) (requiring good faith attempt to "settle[]
claims in which liability is reasonably clear").
