Can an employer's insurer be held liable for denying an undisputed valid workers' compensation claim?

Although one may view an insurer's act of denying an undisputably valid claim as reprehensible, extensive case precedent flatly holds even an insurer's allegedly bad faith refusal to pay a workers' compensation claim is not conduct outside the exclusive remedy provisions of the workers' compensation system. Since this holding has been uncontradicted and reiterated for several years, we feel it is appropriate to apply this appellate precedent to the case before us. (See Arentz v. Blackshere (1967) 248 Cal.App.2d 638, 640, 56 Cal.Rptr. 809.)

We do so reluctantly, however. There are substantial policy reasons for allowing civil actions when an insurer engages in intentional misconduct such as denying an undisputably valid claim. Certainly, the fiduciary obligation of a workers' compensation insurer is no less than one insuring a homeowner interest. We perceive no reason to exclude workers' compensation carriers from the facially all-inclusive provisions of Insurance Code section 790.03, except for case precedent. We believe it would be more equitable to treat all insurers equally when they intentionally ignore fiduciary duties to the detriment of a beneficiary. Further, unlike the bargain struck with the employer which justifies the exclusive remedy rule (see Cole v. Fair Oaks Fire Protection Dist. (1987) 43 Cal.3d 148, 158, 223 Cal.Rptr. 308, 729 P.2d 743), the employer's insurer is not subject to "no-fault" liability under the workers' compensation system. The insurer is subject to a de minimus 10 percent penalty for refusal to pay only if it acts unreasonably; i.e. with fault. ( 5814.) Since the workers' compensation scheme does not give the employee certain compensation for delayed payments regardless of fault, there is no apparent justification for depriving him of his right to an action at law for the insurer's intentional misconduct. Moreover, the 10 percent penalty is based on the amount of the workers' compensation award, and is unrelated to the degree of culpability of the insurance carrier or the actual damage the

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