April 19, 2024 – The exclusive remedy provision of the state workers’ compensation law bars a tort lawsuit against a third-party claims administrator, the Wisconsin Court of Appeals (District III) has ruled in Graef v. Applied Underwriters, Inc., 2023AP420 (April 9, 2024).

In November 2012, Francis Graef was gored by a bull while working for Equity Livestock (Equity). He was physically injured and later suffered from depression.

A doctor prescribed Graef an antidepressant. Continental Indemnity Company (Continental), the workers’ compensation insurer for Equity, was responsible for authorizing the prescription for the antidepressant and paying for it.

In June 2015, Graef went to the pharmacy to pick up a refill of the antidepressant. But Continental denied the pharmacy’s request for payment, and Graef left without the medicine because he couldn’t afford it.

Two months later, Graef suffered a gunshot wound when he attempted suicide.

Tort Lawsuit

Graef sued Continental in Marinette County Circuit Court in 2017. He claimed that Continental was negligent by failing to continue to pay for his antidepressant.

When the circuit court denied Continental’s motion for summary judgment, Continental appealed.

The Wisconsin Court of Appeals reversed the circuit court. Graef appealed.

The Wisconsin Supreme Court affirmed the Court of Appeals in Graef v. Continental Indemnity Company, 2021 WI 45 (May 20, 2021).

The Supreme Court held that Graef’s only remedy against Continental was the one provided by the state’s workers’ compensation law. The Supreme Court dismissed Continental from the lawsuit and remanded the case to the circuit court.

Second Insurer Added to Suit

Before the Supreme Court issued its decision, Graef filed a separate lawsuit against Applied Underwriters, Inc., (Applied) – the company hired by Continental to adjust its workers’ compensation claims.

On remand from the Supreme Court, Applied moved to dismiss the lawsuit. The circuit court granted the motion and Graef appealed.

Walstrom Governs

On appeal, Graef argued that Wis. Stat. section 102.03(2), the exclusive remedy provision of the workers’ compensation law, didn’t apply to Applied because Applied was neither his employer, workers’ compensation carrier, or a co-worker.

But writing for a three-judge panel, Presiding Judge Lisa Stark explained in an unpublished opinion that the Court of Appeals held in Walstrom v. Gallagher Bassett Services, Inc., 2000 WI App 247, 239 Wis. 2d 473, 620 N.W. 2d 223 that section 102.03(2) applies to agents and representatives of an employer, workers’ compensation carrier, or a co-worker.

“Walstrom is on point and represents binding precedent on the issue of law presented on appeal,” Stark wrote.

Graef argued that Walstrom was wrongly decided and thus didn’t apply to his lawsuit against Applied.

But Judge Stark pointed out that under Cook v. Cook, 208 Wis. 2d 166, 560 N.W. 2d 246 (1997), only the Supreme Court has the authority to overrule, change, or eliminate wording from a published Court of Appeals opinion.

Stark concluded that even if Walstrom were wrongly decided, Graef’s argument would upend the “grand bargain” that lies at the heart of the workers’ compensation scheme – one in which workers give up the right to sue for workplace injuries in exchange for more certainty, if smaller, sums of recovery.

“We agree with Applied Underwriters that a contrary decision in … Walstrom … would have undermined the grand bargain by creating a loophole that would allow workers’ compensation claims against the insurer but then also allow tort recovery against agents of the insurer involved in handling workers’ compensation claims,” Judge Stark wrote.

Third-party Exception Doesn’t Apply

Graef argued that Applied was a third party whom he was entitled to sue in tort under section 102.29(1).

That statute specifies that a worker retains the right to sue in tort “against any other party for such injury or death, hereinafter referred to as a 3^rd party.”

But Judge Stark noted that nothing in section 102.29(1) explicitly includes agents or representatives of a workers’ compensation insurer within the terms “any other party” or “a 3^rd party.”

“Graef cites no legal authority, beyond some general statutory interpretation principles, for the proposition that because Wis. Stat. section 102.03(2) does not explicitly include agents or representatives, section 102.29(1) must include them,” Judge Stark wrote.

Walstrom Not Overruled

Graef next argued that the Supreme Court had implicitly overruled Walstrom in Aslakson v. Gallagher Bassett Services, Inc., 2007 WI 39, 300 Wis. 2d 92, 729 N.W. 712.

In Aslakson, the Supreme Court held that a bad faith tort claim against a person hired by the state Department of Workforce Development (DWD) as a third-party administrator of the uninsured employers’ fund was not barred by section 102.03(2).

But Stark pointed out that neither the fund nor DWD were an “employer or insurance carrier” under the workers’ compensation scheme because they were not subject to section 102.(18)(1)(bp).

“Here, Applied … is not the third-party administrator of the Fund or an agent of DWD,” Judge Stark wrote. “It is an agent or representative of a worker’s compensation insurer, which is entitled to immunity under the exclusive remedy provision.”

No Independent Tort Duty

Graef argued that Applied assumed a tort duty to him when it contracted to provide his antidepressant.

But Stark pointed out that Applied’s contract was with Continental, not Graef. She also wrote that the contract “clearly states that Continental retained all responsibility for any actions Applied Underwriters took under the Act.”

Judge Stark also reasoned that even if Applied owed Graef a tort duty, it was the same tort duty that Continental owed Graef – one that was subject to the exclusive remedy provision of section 102.03(2).

“The same duty results in the same immunity: Graef is only entitled to the same claims against Applied Underwriters as he would against Continental,” Stark wrote. “A contrary result would undermine the Act’s grand bargain.”