                    IN THE COURT OF APPEALS OF IOWA

                                  No. 18-1748
                             Filed October 9, 2019


KAREN H. SALTERN,
    Plaintiff-Appellant,

vs.

HNI CORPORATION and GALLAGHER BASSETT SERVICES, INC.,
     Defendants-Appellees.
________________________________________________________________


       Appeal from the Iowa District Court for Muscatine County, John D. Telleen,

Judge.



       An employee who brought a bad-faith claim against her employer appeals

the denial of her motion for partial summary judgment and the grant of the

employer's motion for summary judgment. AFFIRMED.



       Anthony J. Bribriesco, Andrew W. Bribriesco, and William J. Bribriesco,

Bettendorf, for appellant.

       Amanda M. Richards of Betty, Neuman & McMahon, P.L.C., Davenport, for

appellees.



       Considered by Vaitheswaran, P.J., and Tabor and Greer, JJ.
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TABOR, Judge.

       After years of repetitive sewing for a furniture manufacturer, Karen Saltern

developed bilateral carpal tunnel syndrome and asked her employer, HNI

Corporation, to pay workers’ compensation.          HNI and its third-party claims

administrator, Gallagher Bassett Services, disputed the injury rose out of and in

the course of her employment. Several years later, they agreed to pay her claim,

based on medical opinions the carpal tunnel syndrome was a work-related injury.

       Saltern sued HNI and Gallagher for bad faith in denying her claim. On

cross-motions for summary judgment, the district court decided Saltern could not

prove the first bad-faith element—that the employer lacked a reasonable basis for

denying benefits. The court ruled HNI was entitled to judgment as a matter of law.1

Saltern appeals that ruling. Finding no legal error in the court’s conclusions, we

affirm summary judgment dismissing Saltern’s claims against HNI.

    I. Facts and Prior Proceedings

       Saltern worked as a technical sewer for HNI at its furniture manufacturing

plant. HNI is self-insured and contracts with Gallagher to administer its workers’

compensation claims.

       In 2009, Saltern suffered a work-related injury to her neck, which HNI paid.

In March 2011, Saltern saw a medical provider complaining of pain, numbness,

and weakness in her neck, shoulder, and arms. Further testing led to the diagnosis

of bilateral carpal tunnel syndrome. HNI was unaware Saltern went to these

appointments until May, when Saltern requested approval to see a pain specialist.


1
  The district court dismissed Gallagher from the bad-faith case as a third-party
administrator not liable to Saltern. Saltern does not challenge that ruling on appeal.
                                         3


        In June, Saltern filed a new workers’ compensation claim alleging she

experienced injuries on the job. That same month, HNI—through Gallagher—

asked Saltern to provide information on her doctor visits. But after the employer

made many phone calls and propounded discovery requests, the providers still

had sent no medical records. HNI denied the compensability of her claim in July

2011.    But in a letter to Saltern’s counsel, HNI said it was continuing its

investigation, “including hopefully obtaining medical records once we have learned

from you with whom Ms. Saltern has been treating.”

        In September, Saltern saw a pain specialist who diagnosed her with cervical

radiculopathy resulting from the 2009 injury. But the specialist concluded the

carpal tunnel did not stem from the same incident.

        In April 2012, Saltern voluntarily dismissed her claim. HNI continued to

seek proof of Saltern’s injury, including placing eight unanswered calls to her

primary provider, Dr. Calvin Atwell. Six months later, Saltern refiled her claim. HNI

again denied the claim in mid-October 2012.             In her testimony, Saltern

acknowledged she was unaware of any documented medical evidence verifying

the causal connection between her work and the carpal tunnel diagnosis.

        In March 2013, Saltern attended an independent medical examination (IME)

with Dr. Robin Sassman. Dr. Sassman concluded Saltern’s carpal tunnel stemmed

from her employment. In April, Dr. Atwell formed the same opinion. Later that

month, Saltern informed HNI of these new opinions connecting her injury to her

work. HNI asked Saltern to be evaluated by Dr. Ericka Lawler. Saltern complied.

In early September 2013, HNI received Dr. Lawler’s report, which echoed the
                                         4


causation findings of Drs. Sassman and Atwell. HNI then agreed the injury was

compensable and started paying Saltern healing period benefits.

       Following an arbitration hearing, an administrative law judge (ALJ) found

HNI failed to communicate its reasons for denying Saltern’s claims. The ALJ

imposed a penalty against HNI for this failure. The district court affirmed the

penalty on judicial review.

       In May 2016, Saltern filed this derivative lawsuit for the common-law tort of

bad faith. Her suit alleged HNI and Gallagher denied her workers’ compensation

claim in bad faith when they knew her injury was caused by her repetitive work as

a technical sewer.

       Saltern filed a motion for partial summary judgment asking the court to find

as a matter of law that HNI did not have a reasonable basis for denying her

workers’ compensation claim. HNI filed a cross-motion for summary judgment

finding Saltern could not carry her burden to prove HNI did not have a reasonable

basis to deny the claim. The district court denied Saltern’s motion for partial

summary judgment and granted HNI’s cross-motion. Saltern appeals.

   II. Scope and Standard of Review

       We review a summary-judgment ruling for correction of legal error. Albaugh

v. The Reserve, 930 N.W.2d 676, 682 (Iowa 2019). “Summary judgment is proper

when the moving party has shown there is no genuine issue as to any material fact

and the moving party is entitled to judgment as a matter of law.” Id. (quotations

and citations omitted). A genuine issue of material fact exists if “the evidence is

such that a reasonable jury could return a verdict for the nonmoving party.” Fees

v. Mut. Fire & Auto. Ins. Co., 490 N.W.2d 55, 57 (Iowa 1992). “We view the
                                            5

evidence in the light most favorable to the nonmoving party.” UE Local 893/IUP v.

State, 928 N.W.2d 51, 59 (Iowa 2019) (citation omitted).

   III. Analysis

         In granting HNI’s motion for summary judgment the district court found when

HNI first denied Saltern’s claim, it “had not received even a modicum of information

from Saltern, her counsel, or her treating physicians on the subject of how her

carpal tunnel injury was causally related to her employment at HNI.” The court

noted Saltern admitted that when she both filed and refiled her claim, she

“possessed no medical opinion relating her injury to her employment.” Thus, “[a]s

a matter of law, [HNI’s] conduct of Saltern’s case—and [its] initial denial of the

claim—was not unreasonable and cannot constitute bad faith.” The court rejected

Saltern’s argument HNI conducted an inadequate investigation and her attempt to

shift the burden of proving the lack of an objectively reasonable basis onto HNI.

         On appeal, Saltern contends the district court erred in finding HNI had a

reasonable basis to deny the claims. After a denial of workers’ compensation, a

plaintiff asserting the tort of bad faith must prove: (1) “the insurer had no

reasonable basis for denying benefits” and (2) “the insurer knew, or had reason to

know, that its denial was without basis.” McIlravy v. N. River Ins. Co., 653 N.W.2d

323, 329 (Iowa 2002). “The first element is objective, the second subjective.”

United Fire & Cas. Co. v. Shelly Funeral Home, Inc., 642 N.W.2d 648, 657 (Iowa

2002).

         “A reasonable basis exists for denial of policy benefits if the insured’s claim

is fairly debatable either on a matter of fact or law.” Bellville v. Farm Bureau Mut.

Ins. Co., 702 N.W.2d 468, 473 (Iowa 2005) (citations omitted). Fairly debatable
                                         6

means “open to dispute on any logical basis.” Id. (describing “fairly debatable” as

a situation when reasonable minds may differ on the coverage). “Whether a claim

is fairly debatable can generally be decided as a matter of law by the court.” Id.

       In arguing her claim was not fairly debatable, Saltern disputes the district

court’s finding that HNI had not “even a modicum of information” showing her

employment caused her carpal tunnel injury. She argues HNI knew the nature of

her work. In fact, an initial report from a Gallagher adjuster predicted her injury

“will likely be accepted due to Ms. Saltern’s performing repetitive work for HNI.”

She also highlights the ALJ ruling faulting HNI for not communicating its reasoning

for denying the claim. In her view, a reasonable jury could infer from the lack of

communication that HNI knew it had no reasonable basis to deny the claim. For

these reasons, according to Saltern, the district court erred in concluding the claim

was fairly debatable and that HNI was entitled to summary judgment.

       Contrary to Saltern’s view, her claim for benefits was “fairly debatable” when

HNI denied it. When employees seek workers’ compensation, they have the

burden to show the injury arose in the course of their employment. See Lakeside

Casino v. Blue, 743 N.W.2d 169, 175 (Iowa 2007). Without supporting evidence,

the claim remains “open to dispute” on the question of causation.

       HNI knew of her 2009 neck injury. But Saltern did not make HNI aware of

her March 2011 doctor visit until May. HNI denied her requests for benefits in July.

Saltern voluntarily dismissed but refiled her claim in October. HNI again denied

the claim in mid-October 2011. But in neither July nor October did Saltern present

evidence to HNI that her injury related to her work. By her own admission, no such

evidence existed until after the doctors reported on her March and April exams.
                                         7


        Saltern takes the oversimplified position that HNI should have granted

benefits for her carpal-tunnel injury because it knew she performed repetitive tasks

at work. In response, HNI cites McIlravy for the proposition that Saltern had the

duty to present “evidence connecting the injury in some way to the work place

environment.”    653 N.W.2d at 331.      We agree with HNI that Saltern’s claim

remained “fairly debatable” without affirmative evidence connecting her injury to

her work. It is not enough for Saltern to advance a res-ipsa-loquitur-type claim that

the nature of her work excused her from proving causation. Cf. Zarecki v. Nat’l.

R.R. Passenger Corp., 914 F. Supp. 1566, 1575 (N.D. Ill. 1996) (rejecting

application of res ipsa loquitur as defense to motion for summary judgment in

Federal Employers’ Liability Act claim where worker alleged carpal tunnel resulted

from computer keystroke repetitions). The district court was correct in determining

HNI had a reasonable basis for denying Saltern’s claim in July 2011 and October

2012.

        On the timing issue, Saltern contends HNI lost any reasonable basis for its

denial on April 11, 2013. That’s when she served HNI with copies of the diagnostic

reports from Dr. Sassman and Dr. Atwell that linked her carpal tunnel syndrome to

her work.

        HNI argues Saltern did not preserve error on the claim it acted in bad faith

by continuing to deny her claim from mid-April 2013 until early September 2013.

We agree Saltern did not timely raise that precise contention. Saltern did mention

the April 2013 date in her petition: “On or before April 13, 2013, Defendants knew

or should have known it was unreasonable to continue to deny [Saltern] workers’

compensation benefits” because she sent HNI reports from Drs. Atwell and
                                            8


Sassman. But Saltern did not rely on that date as an independent ground for her

motion for partial summary judgment. In that motion, she asserted generally HNI

lacked a reasonable basis to deny her claim. Nor did she cite the April 2013 date

in her resistance to HNI’s motion for summary judgment. After the court’s order

granting summary judgment to HNI, she moved to amend and enlarge under Iowa

Rule of Civil Procedure 1.904 asking the court to consider the reasonableness of

HNI’s denial after April 11, 2013. HNI responded because she failed to raise that

date earlier, she could not seek a modification or expansion of the court’s ruling by

referring to that new timeframe.2

       The district court denied the motion to amend and enlarge “for the reasons

set forth in Defendants’ Resistance.” Given the brevity of the denial, it is not clear

which of HNI’s reasons swayed the district court. But we know the court did not

separately address the merits of the post-April 11, 2013 denial of benefits. So we

decline to consider that argument on appeal. See Meier v. Senecaut, 641 N.W.2d

532, 537 (Iowa 2002) (“It is a fundamental doctrine of appellate review that issues

must ordinarily be both raised and decided by the district court before we will

decide them on appeal.”).

       Saltern next argues HNI did not meet its obligation to investigate under Iowa

Code section 86.13(4)(c) (2011). HNI responds if an insurer has a reasonable

basis to deny the claim, an incomplete investigation, standing alone, will not allow


2
  HNI also argued it had a reasonable basis to continue denying Saltern’s claim from April
to September 2013. Specifically, Dr. Sassman’s report received in April noted Saltern had
a history of diabetes which purportedly can cause carpal tunnel syndrome. Dr. Atwell also
testified to this connection in his deposition. Thus HNI argues it was reasonable to
continue to deny the claim until another IME confirmed causation. We don’t address this
alternative ground because we find Saltern failed to preserve error on HNI’s continued
denial from April to September 2013.
                                           9

recovery for bad faith. See McIlravy, 653 N.W.2d at 331; see also Gardner v.

Hartford Ins. Accident Indem. Co., 659 N.W.2d 198, 206 (Iowa 2003) (“Where an

objectively reasonable basis for denial of [a] claim actually exists, the insurer

cannot be held liable for bad faith as a matter of law.”).

       Saltern points out the legislature amended section 86.13 in 2009, after

McIlravy, imposing a duty on the employer to investigate before determining it will

deny the claim. Section 86.13(4) now provides:

              a. If a denial, a delay in payment, or a termination of benefits
       occurs without reasonable or probable cause or excuse known to the
       employer or insurance carrier at the time of the denial, delay in
       payment, or termination of benefits, the workers’ compensation
       commissioner shall award benefits in addition to those benefits
       payable under this chapter . . . .
              b. The workers’ compensation commissioner shall award
       benefits under this subsection if the commissioner finds both of the
       following facts:
                      (1) The employee has demonstrated a denial,
              delay in payment, or termination of benefits.
                      (2) The employer has failed to prove a
              reasonable or probable cause or excuse for the denial,
              delay in payment, or termination of benefits.
              c. In order to be considered a reasonable or probable cause
       or excuse under paragraph “b”, an excuse shall satisfy all of the
       following criteria:
                      (1) The excuse was preceded by a reasonable
              investigation and evaluation by the employer or
              insurance carrier into whether benefits were owed to
              the employee . . . .

       This amendment, according to Saltern, imposes an affirmative duty on the

employer to possess facts as a result of investigation before denying the claim.3



3
 Saltern cites a decision of the workers’ compensation commissioner assessing penalties
against an insurance company because it did not provide evidence of compliance with
section 86.13(4) at the time of its denial of benefits. See Jenson v. Cummins Filtration-
Lake Mills, File Nos. 5032401/5032402, 2012 WL 4498367, at *3 (Iowa Workers’ Comp.
Comm’n Sept. 25, 2012) (holding defendant has burden to show compliance with this
statutory provision to avoid the mandatory assessment of a penalty).
                                        10


To counter, HNI argues statutory penalties under section 86.13 are distinct from a

bad-faith claim. HNI has the more persuasive position. True, courts can infer bad

faith from a violation of section 86.13. See McIlravy, 653 N.W.2d at 331–32. But

the award of penalty benefits in the workers’ compensation arena does not alone

guarantee a finding of bad faith. Id. HNI tried to investigate Saltern’s claim, but

was stymied by the lack of medical records tying her carpal tunnel syndrome to

her sewing work.

      On the undisputed evidence presented with the cross-motions for summary

judgment—taken in the light most favorable to Saltern—no reasonable jury could

conclude HNI denied Saltern’s claim without a reasonable basis. We find no error

in the district court’s summary judgment rulings. As a result, we affirm.

      AFFIRMED.
