Franks v. U.S. Fidelity & Guarantee Co
In Franks v. U.S. Fidelity & Guarantee Co., 149 Ariz. 291, 718 P.2d 193 (App. 1985), the carrier accepted the claim for benefits, but continually changed its position to find a way to avoid paying benefits even after an administrative law judge ordered it to pay and found it acted in bad faith. Id. Franks then sued the carrier in superior court and sought damages for "loss of use of compensation and medical benefits, damages for mental and emotional distress, and for punitive damages." Id. at 293, 718 P.2d at 195.
In reversing the superior court's dismissal, we stated three important precepts. First, the "Workers' Compensation Act does not bar a common law tort action that is independent of the workers' benefit claim process if the conduct does not fall within the coverage of the Act." Id. at 295, 718 P.2d at 197. Second, intentional acts that constitute "bad faith by a carrier in the handling of a workers' compensation claim do not arise out of and in the course of employment," and, as a result, the exclusive remedy of the Workers' Compensation Act could not address Franks' alleged tort injuries. Id. at 296, 718 P.2d at 198.
Finally, the lawsuit could proceed because Franks was only seeking damages due to the carrier's bad faith. Id. at 296-97, 718 P.2d at 198-99.