        IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI

                              NO. 2013-CA-00524-COA

CINDY WALLS                                                              APPELLANT

v.

FRANKLIN CORPORATION AND EMPLOYERS                                        APPELLEES
INSURANCE OF WAUSAU

DATE OF JUDGMENT:                        01/24/2013
TRIAL JUDGE:                             HON. ANDREW K. HOWORTH
COURT FROM WHICH APPEALED:               CHICKASAW COUNTY CIRCUIT COURT
ATTORNEY FOR APPELLANT:                  ROY O. PARKER JR.
ATTORNEYS FOR APPELLEES:                 CLIFFORD KAVANAUGH BAILEY III
                                         RUSSELL LATINO III
NATURE OF THE CASE:                      CIVIL - INSURANCE
TRIAL COURT DISPOSITION:                 DISMISSED BAD-FAITH CLAIM AGAINST
                                         THE EMPLOYER BY DIRECTED VERDICT
                                         AND DISMISSED BAD-FAITH CLAIM
                                         AGAINST THE CARRIER BASED ON JURY
                                         VERDICT IN CARRIER’S FAVOR
DISPOSITION:                             AFFIRMED IN PART; REVERSED AND
                                         REMANDED IN PART - 05/05/2015
MOTION FOR REHEARING FILED:
MANDATE ISSUED:

      BEFORE LEE, C.J., BARNES AND MAXWELL, JJ.

      MAXWELL, J., FOR THE COURT:

¶1.   In an earlier appeal, the Mississippi Supreme Court held that Cindy Walls “could not

maintain a bad faith action for refusal to pay for disputed medical services and supplies

absent the [Mississippi Workers’ Compensation] Commission’s prior determination that
those services and supplies were reasonable and necessary.”1 The circuit judge interpreted

this to mean Walls’s second bad-faith lawsuit—filed after she obtained the required

determination by the Commission—must be strictly limited to only those actions the

employer and carrier took after Walls had exhausted her administrative remedies in April

2002. But our review of Walls I and later decisions applying it shows this view was too

restrictive.

¶2.    Walls I does not say an employer or carrier cannot act in bad faith before an employee

exhausts her administrative remedies at the Commission. Rather, it says an employee cannot

“maintain,” that is, cannot file “a bad faith action” prior to exhausting her administrative

remedies.2 So while a final Commission order is a requirement for an employee to file a bad-

faith lawsuit, it is not a prerequisite for a carrier to act in bad faith. Therefore, it was error

to exclude all evidence of the employer’s and insurance carrier’s actions before April 2002.

¶3.    This error was harmless as far as the employer, Franklin Corporation, is concerned.

Walls concedes she has absolutely no evidence her employer acted in bad faith, even before

April 2002. But this error was reversible as to the insurance carrier, Employers Insurance

of Wausau, since Walls’s bad-faith claim centered on Wausau’s alleged bad-faith conduct

prior to April 2002.

¶4.    We affirm the judgment dismissing the bad-faith claim against Franklin. But we must

reverse the judgment dismissing the bad-faith claim against Wausau and remand this claim


       1
           Walls v. Franklin Corp. (Walls I), 797 So. 2d 973, 977 (¶18) (Miss. 2001) (emphasis
added).
       2
           Id.

                                                2
for a new trial.

                       Background Facts and Procedural History

       I.      First Lawsuit: Walls I

¶5.    To understand this case, one must go back three decades to 1984. That is when Walls

injured her back while working for Franklin. She filed a workers’ compensation claim. And

in 1992, the administrative judge (AJ) ordered Franklin’s insurance carrier, Wausau, to pay

for Walls’s injury-related medical treatment. For several years, Wausau did pay her. Walls

would submit her medical costs to Wausau, and Wausau would reimburse her.

¶6.     But there were two particular expenses Wausau refused to reimburse—(1) the cost

of Nike Air shoes she claims she was prescribed, and (2) the cost of a whirlpool bath. She

had the bath installed in her home after her doctor prescribed that she take whirlpool baths

several times a week. Because these expenses were not paid, in 1997, Walls sued Franklin

and Wausau in the Chickasaw County Circuit Court for bad-faith refusal to pay medical

benefits. Walls v. Franklin Corp. (Walls I), 797 So. 2d 973, 975 (¶8) (Miss. 2001).

¶7.    While that action was pending, Franklin and Wausau filed a motion with the

Mississippi Workers’ Compensation Commission. They asked the Commission to decide if

the two medical expenses were reasonable and necessary. But the Commission opted to hold

off answering until the circuit-court matter was resolved. Id.

¶8.    The circuit court, however, eyeing the unresolved question in the Commission about

whether the expenses were reasonable and necessary, dismissed Walls’s bad-faith action for

failure to first exhaust her administrative remedies. Id. at (¶9). And the Mississippi Supreme



                                              3
Court affirmed the dismissal.

¶9.    In doing so, the high court noted Walls’s particular bad-faith claim hinged on whether

the shoes and whirlpool bath were “reasonable and necessary medical services and supplies,”

which Franklin and Wausau were required to pay, not only under the AJ’s 1992 order, but

also by statute. Id. at 976 (¶17) (citing Miss. Code Ann. § 71-3-15 (Rev. 2000)). The

supreme court looked to section 71-3-15 of the Workers’ Compensation Law, which

“requires that disputes over what is reasonable and necessary should be resolved through the

Commission’s procedures.” Walls I, 797 So. 2d at 976 (¶18). It also considered section 71-

3-53, which “adds that the Commission has continuing jurisdiction to ‘review a

compensation case, issue a new compensation order which may terminate, continue, reinstate,

increase, or decrease such compensation, or award compensation.’” Walls I, 797 So. 2d at

976 (¶18) (quoting Miss. Code Ann. § 71-3-53 (Rev. 2000)). Based on these two statutes,

as well as the court’s precedent, the supreme court determined “Walls could not maintain a

bad faith action for refusal to pay for disputed medical services and supplies absent the

Commission’s prior determination that those services and supplies were reasonable and

necessary.” Id. at 977 (¶18) (emphasis added).

¶10.   With that case finally resolved, the Commission took up Franklin and Wausau’s

motion to determine if the expenses for the shoes and whirlpool bath were reasonable and

necessary. The AJ determined they were. And in April 2002, he ordered Franklin and

Wausau “to pay for the shoes, the whirlpool bath, and any other unpaid medical expenses in

this matter.”



                                             4
       II.    Present Lawsuit

              A.      2002 Complaint

¶11.   Three months later, in July 2002, Walls again sued Franklin and Wausau. In her

second action, Walls claimed Franklin and Wausau had acted in bad faith by not paying the

expenses of the shoes and whirlpool bath in a reasonable time. Her complaint sought

$2,433.18—the cost of the shoes and bath—in compensatory damages. It also prayed for an

unspecified amount of punitive damages.

¶12.   Around seven months later, in February 2003, Wausau finally reimbursed Walls for

the shoes and bath.

              B.      2008 Amended Complaint

¶13.   After lying dormant,3 this case heated up again in January 2008 when Walls amended

her complaint. The changes to her complaint were substantial. The original complaint based

the bad-faith claim on the delayed payment for the shoes and whirlpool bath, which Wausau

had been ordered to pay in 2002. But the foundation for the amended complaint was far

more expansive in scope and time.4 Reaching all the way back to 1992, the second amended

complaint chronicled two decades worth of allegedly unpaid medical expenses and bad-faith

actions by Wausau. Walls’s claim for actual damages soared to $600,000. And she

requested $5.4 million in punitive damages, as well as $100,000 in attorney’s fees.


       3
         In July 2006, all record action had ceased. After more than a year had passed, the
circuit clerk, in October 2007, moved to dismiss for failure to prosecute. See M.R.C.P.
41(d). Walls took the necessary record action, and her lawsuit was permitted to proceed.
       4
          Walls had actually amended her complaint once before. The allegations and prayer
for relief in her first amended complaint were very similar to her original complaint.

                                            5
               C.    Trial Court’s Three Rulings

¶14.   Walls’s amended complaint prompted three rulings relevant to this appeal.

                     1.      Motion for Partial Summary Judgment

¶15.   The first ruling was the trial court’s grant of Franklin and Wausau’s motion for partial

summary judgment. Franklin and Wausau challenged the viability of Walls’s new claims.

They asserted all of Walls’s additional claimed expenses—save one submitted in 2009—had

been incurred over a decade earlier. Thus, these claims were barred by the statute of

limitations. Further, Walls had failed to exhaust her administrative remedies for the 2009

expense. The trial court agreed and granted Franklin and Walls’s request to dismiss “all

claims other than those relating to the tennis shoes and whirlpool bath addressed in the AJ’s

2002 order.”

                     2.      Motion in Limine

¶16.   The next ruling was the trial court’s grant of Franklin and Wausau’s motion in limine.

Walls’s counsel still wanted to put on expansive evidence of Wausau’s actions from 1992

to present day. In response, Franklin and Wausau filed a motion in limine aimed at keeping

Walls from mentioning the dismissed claims. While Walls claimed this evidence was

admissible under Mississippi Rule of Evidence 406 to establish “habit” or “routine practice,”

Franklin and Walls argued Rule 406 could not be used to backdoor procedurally barred

claims. The trial court agreed with Franklin and Walls. Admitting evidence of Wausau’s

actions under the guise of “habit” evidence could create a high risk of confusion that was

likely not curable with a limiting instruction. While the judge admitted the time-barred



                                              6
claims had “some probative value,” he found “the risk was great” that any value would “be

outweighed by unfair prejudice to allow proof of [what the judge had already decided] are

time-barred claims.” So the court ordered “that evidence of claims other than those relating

to the tennis shoes and whirlpool bath addressed in the AJ’s April 2002 Order should be

excluded at the trial of this matter.”

                        3.     Clarification of Evidentiary Ruling

¶17.      The last significant ruling was the trial court’s “clarification” of this evidentiary

ruling.

¶18.      On the eve of trial—finally scheduled for August 2010—confusion erupted over the

scope of the granted motion in limine. Both sides agreed the granted motion for partial

summary judgment and related motion in limine confined Walls’s claims to the shoes and

whirlpool bath. But the two factions had decidedly different views of what the remaining

claims entailed, in light of the supreme court’s ruling in Walls I.

¶19.      According to Franklin and Wausau, the upshot of Walls I was that Walls’s bad-faith

claim did not begin until Walls exhausted her administrative remedies in April 2002. Thus,

as Franklin and Wausau pitched it, anything that happened before April 2002, though

relevant, could not form the basis for Walls’s current bad-faith claim. So they wanted

evidence of those refusals excluded. They felt the only question at issue was if Wausau’s

ten-month delay between the AJ’s April 2002 order to pay and Wausau’s later payment of

$2,433.18 amounted to the independent tort of bad faith.

¶20.      Walls vehemently disagreed with this interpretation. She argued Walls I merely held



                                                7
that she could not “maintain a bad faith action” until she exhausted her administrative

remedies. Walls I, 797 So. 2d at 977 (¶18). So what really began in April 2002 was her

ability to file a bad-faith action—not the underlying claim itself. Walls argued Wausau’s

actions between the 1992 AJ order awarding her medical benefits and the 2002 AJ order to

pay for the shoes, the bath, and any unpaid medical services was not just the relevant back-

story—it was the heart of her bad-faith claim.

¶21.   Though reluctant to draw a bright evidentiary line, the trial court ultimately sided with

Franklin and Wausau’s view. The judge reasoned that—since the supreme court affirmed

the dismissal of Walls’s first action for failure to exhaust administrative remedies—“the life

of this case” began the day Walls exhausted her administrative remedies. The court entered

a “clarification” of its previous order granting the motion in limine. This clarification was

unequivocal that “[n]o evidence of acts by [Franklin and Wausau] prior to [April 2002] may

be considered as a tort or as part of the tort of bad faith in this case.”

               D.     Trial and Verdict

¶22.   Trial finally commenced in January 2013.5 The evidence was strictly limited to

Wausau’s ten-month delay in payment following the April 2002 AJ order. Even the AJ order

itself was not introduced in full, as it contained the AJ’s discussion of pre-2002 events. At

the close of the evidence, the judge granted Franklin’s motion for a directed verdict. The

jury was instructed to deliberate whether the remaining defendant, Wausau, had acted in bad

       5
         The previously scheduled trial had been postponed to permit Walls to file an
interlocutory appeal. But because Walls had appealed the judge’s months-later clarification
order and not the underlying order containing the initial evidentiary ruling, the supreme
court dismissed Walls’s interlocutory appeal as untimely.

                                                8
faith by delaying payment for the shoes and whirlpool bath between April 2002 and February

2003. The jury found in Wausau’s favor, and Walls’s action was dismissed with prejudice.

Following the denial of her post-trial motions, Walls timely appealed.

                                          Discussion

¶23.   On appeal, we focus on the third ruling—the “clarification” that excluded any

evidence of events before the April 2002 AJ order, including the evidence the AJ considered

in his order. Generally, we defer to a trial court’s evidentiary rulings. Ware v. Entergy Miss.,

Inc., 887 So. 2d 763, 766 (¶6) (Miss. 2003). But this ruling rested on a question of

law—What effect did Walls I have on Walls’s ability to litigate her bad-faith claim? And we

review questions of law de novo. Ware, 887 So. 2d at 766 (¶6).

       I.     Effect of Walls I

¶24.   Our de novo review leads us to the critical question of how to interpret the holding

of Walls I. What did the supreme court mean when it held “Walls could not maintain a bad

faith action for refusal to pay for disputed medical services and supplies absent the

Commission’s prior determination that those services and supplies were reasonable and

necessary”? Walls I, 979 So. 2d at 977 (¶18). Was the court saying Wausau could not have

acted in bad faith in how it handled Walls’s claim for the shoes and bath unless and until the

Commission ruled these items were reasonable and necessary medical expenses? Or was the

court ruling that Walls could not sue based on how Wausau handled her claims for these

items unless and until she had obtained a declaration from the Commission that these items

were reasonable and necessary medical expenses?



                                               9
¶25.   According to Franklin and Wausau, the supreme court meant the former. They insist

there was no duty to reimburse Walls until the AJ ordered them to do so. So there could not

be any bad-faith conduct before April 2002. But after careful review, we disagree. Instead,

we find Wausau’s duty to pay arose under its contract with Franklin and controlling workers’

compensation statutes. And what the AJ’s order did was merely confirm Wausau’s duty to

pay these expenses—not “create” its duty to pay these expenses.

¶26.   In discussing the then newly recognized independent tort for bad-faith denial of

workers’ compensation benefits, the supreme court held that “[t]he same rules applicable to

health, fire, casualty, accident, and other insurance policies are likewise applicable to

workers’ compensation insurance carriers.” McCain v. Nw. Nat’l Ins., 484 So. 2d 1001, 1002

(Miss. 1986). As with any other dispute over insurance coverage, a carrier may be liable for

punitive damages for its actions taken before a final adjudication of the underlying coverage

dispute. So to say Franklin and Wausau could not have acted in bad faith at any time before

Walls exhausted her administrative remedies stretches Walls I too far.

¶27.   We instead understand Walls I to mean just what the supreme court said—that Walls

could not “maintain,” that is, could not file “a bad-faith action” prior to exhausting her

administrative remedies. Walls I, 797 So. 2d at 977 (¶18). So in short, a final AJ order is a

prerequisite for an employee to file a bad-faith lawsuit, not a prerequisite for a carrier to act

in bad faith.

       II.      Intervening Opinions

¶28.   Our position is reinforced by how the supreme court and the Fifth Circuit have used



                                               10
Walls I in two intervening opinions. See Patrick v. Wal-Mart, Inc.–Store No. 155, 681 F.3d

614, 619-20 (5th Cir. 2012); Bullock v. AIU Ins., 995 So. 2d 717, 723 (¶21) (Miss. 2008).

In both Patrick and Bullock, all the alleged bad-faith conduct occurred before the

administrative remedies were exhausted.6 Patrick, 681 F.3d at 616-18; Bullock, 995 So. 2d

at 719 (¶6). And in both, exhaustion of remedies was seen as the last necessary event before

a bad-faith claim could be filed—not the first necessary event before an employer or carrier

could have acted in bad faith. Patrick, 681 F.3d at 618-21; Bullock, 995 So. 2d at 722-23

(¶¶18-21). Put a bit differently, since Walls I, the exhaustion of administrative remedies has

been viewed as the culmination of an actionable bad-faith claim, not its inception.

       III.   Question Walls I Resolved

¶29.   Statutory workers’ compensation benefits are the exclusive remedy for on-the-job

injuries.7 But this “exclusive remedy provision does not bar [filing] a common law tort

action against an insurance carrier if the carrier commits an intentional tort independent of

the compensable accident.” AmFed Cos. v. Jordan, 34 So. 3d 1177, 1183 (¶21) (Miss. Ct.

App. 2009) (citations omitted).

¶30.   The elements of this action are: (1) an insurance contract between the employer and


       6
        In fact, in Patrick, Judge Leslie H. Southwick, writing for the Fifth Circuit, framed
the question presented as: Once the AJ awarded temporary benefits and the time to
challenge that award passed, “did the three-year period begin in which to bring a civil suit
alleging the prior bad faith denial of those benefits”? Patrick, 681 F.3d at 618 (emphasis
added).
       7
        To use more precise language, workers’ compensation exclusively covers “disability
or death of an employee from injury or occupational disease arising out of and in the course
of employment, without regard to fault as to the cause of the injury or occupational disease.”
Miss. Code Ann. § 71-3-7 (Supp. 2014); see also Miss. Code Ann. § 71-3-9 (Rev. 2011).

                                             11
carrier, (2) the carrier’s denial of a compensable claim without an arguable or legitimate

reason, and (3) the denial of which rises to the level of an independent tort. Id. at (¶22). So

in order for a there to be bad faith, there must be a “compensable claim.” See McCain, 484

So. 2d at 1002 (“A prerequisite to the award of punitive damage is the determination that the

plaintiff is entitled to contractual damages.”). The question raised in Walls I was who gets

to decide an employer’s claim was compensable—a circuit-court jury or the Commission?

¶31.   Even before our supreme court reached this question in Walls I, federal district courts

in Mississippi had been answering that, since the Commission “is vested [with] exclusive

jurisdiction of claims for benefits,” it must be the Commission that determines that a claim

is compensable. Powers v. Travelers Ins., 664 F. Supp. 252, 254 (S.D. Miss. 1987); see also

Kitchens v. Liberty Mut. Ins., 659 F. Supp. 467, 469 (S.D. Miss. 1987). Those courts,

therefore, required a plaintiff first exhaust her administrative remedies with the Commission

before pursuing a bad-faith claim. Id. Otherwise, it would be “frighteningly conceivable”

that a jury could find the employer’s claim was compensable and award punitive damages

for bad-faith conduct, even though the Commission—vested with exclusive

jurisdiction—later found the claim was not compensable. Kitchens, 659 F. Supp. at 469.

¶32.   Walls I put any such fears to rest. Because the Commission had exclusive and

“continuing jurisdiction to review a compensation case,” the Commission, not the circuit-

court jury, had to first decide if Walls’s claims for the shoes and bath were reasonable and

necessary medical expenses. Walls I, 797 So. 2d at 976 (¶18). If the Commission

determined they were, then Walls could try the remaining issues—including whether Wausau



                                              12
had a legitimate reason to deny reimbursement—in circuit court. It is certainly possible

Wausau may have had very good reason why it disputed these expenses before April 2002,

but that was a jury question.

¶33.   Put simply, the requirement to exhaust administrative remedies before filing a lawsuit

for bad faith ensures the proper body—the Commission—adjudicates whether the claimed

medical expense was reasonable and necessary. Id. It also marks when the statute of

limitations begins to run. Patrick, 681 F.3d at 620; Bullock, 995 So. 2d at 723 (¶21). But

this requirement does not deem, as a matter of law, that a carrier’s conduct prior to the

exhaustion of administrative remedies cannot form the basis for a bad-faith lawsuit.

       IV.    Effect of This Ruling

¶34.   For this reason, we find the judge erred by strictly limiting Walls’s evidence, and thus

Walls’s bad-faith action, to how Franklin and Wausau handled her claims for the shoes and

bath after the AJ’s April 2002 order. To be clear, we do not disturb the trial court’s first

ruling. Walls has not appealed the order granting partial summary judgment, which

dismissed all other bad-faith claims not based on the shoes or tub as procedurally barred by

either the running of the statute of limitation or not exhausting administrative remedies. So

in remanding this case back to the trial court, we leave this ruling intact. Rather, our decision

to reverse and remand is based on the trial judge’s evidentiary rulings.

¶35.    “For a case to be reversed based on the admission or exclusion of evidence, a party

must be actually prejudiced, harmed, or have a substantial right adversely affected.” Ill.

Cent. R.R. v. Brent, 133 So. 3d 760, 779 (¶42) (Miss. 2013) (citing Bower v. Bower, 758 So.



                                               13
2d 405, 413 (¶38) (Miss. 2000)). Walls has conceded that she has no evidence her employer,

Franklin, acted in bad faith before April 2002. So Walls suffered no actual prejudice from

limiting her evidence against Franklin to events after April 2002. We thus affirm the

judgment dismissing the bad-faith claim against Franklin by a directed verdict.

¶36.   Walls did, however, have evidence of Wausau’s alleged bad-faith conduct before

April 2002. So she was prejudiced by not being able to present this evidence against Wausau

at trial. For this reason, we have no option but to reverse the judgment dismissing the bad-

faith claim against Wausau. On remand, the trial judge should reconsider Wausau’s motion

in limine, taking into account this court’s decision when evaluating what evidence is

admissible to support Walls’s claim.

¶37.   While this appeal certainly begs to be affirmed due to the amount of time that has

passed, any impulse toward finality must give way to the precedent set out in Walls I and

later cases. We remand Walls’s bad-faith claim against Wausau back to the trial court, with

hope for a speedy resolution of this old dispute.

¶38. THE JUDGMENT OF THE CHICKASAW COUNTY CIRCUIT COURT IS
AFFIRMED IN PART AND REVERSED AND REMANDED IN PART FOR
FURTHER PROCEEDINGS CONSISTENT WITH THIS OPINION. ALL COSTS OF
THIS APPEAL ARE DIVIDED EQUALLY BETWEEN APPELLANT CINDY
WALLS AND APPELLEE EMPLOYERS INSURANCE OF WAUSAU.

    LEE, C.J., IRVING AND GRIFFIS, P.JJ., BARNES, ISHEE, ROBERTS,
CARLTON, FAIR AND JAMES, JJ., CONCUR.




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