Jeremy Thornhill v. Walker-Hill Environmental and Zurich American Insurance Company of Illinois

IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI

NO. 2020-CA-01181-COA

JEREMY THORNHILL APPELLANT

v.

WALKER-HILL ENVIRONMENTAL AND APPELLEES
ZURICH AMERICAN INSURANCE COMPANY
OF ILLINOIS

DATE OF JUDGMENT: 09/11/2020
TRIAL JUDGE: HON. ANTHONY ALAN MOZINGO
COURT FROM WHICH APPEALED: MARION COUNTY CIRCUIT COURT
ATTORNEYS FOR APPELLANT: RAYNETRA LASHELL GUSTAVIS
ROGEN K. CHHABRA
DARRYL MOSES GIBBS
ATTORNEYS FOR APPELLEES: OLIVIA YEN TRUONG
DORIS THERESA BOBADILLA
NATHAN L. BURROW
NATURE OF THE CASE: CIVIL - TORTS-OTHER THAN PERSONAL
INJURY AND PROPERTY DAMAGE
DISPOSITION: REVERSED AND REMANDED - 10/19/2021
MOTION FOR REHEARING FILED:
MANDATE ISSUED:

BEFORE WILSON, P.J., McCARTY AND SMITH, JJ.

WILSON, P.J., FOR THE COURT:

¶1. Jeremy Thornhill alleged that he injured his back while working for Walker-Hill

Environmental. He sought workers’ compensation benefits from Walker-Hill and its

insurance carrier, Zurich American Insurance Company of Illinois (collectively, “the

Employer/Carrier”), but the Employer/Carrier denied that Thornhill had sustained a

compensable injury. The parties eventually entered into a compromise settlement, which the

Mississippi Workers’ Compensation Commission approved. After the Commission approved
the settlement, Thornhill sued the Employer/Carrier in circuit court, alleging that they had

denied his claim in bad faith. The Employer/Carrier filed a motion to dismiss, arguing that

Thornhill had not exhausted his administrative remedies—and that the circuit court lacked

jurisdiction—because the Commission never made a factual finding that he was entitled to

workers’ compensation benefits. The circuit court agreed and dismissed the case. On appeal,

Thornhill argues that the Commission’s approval of the compromise settlement exhausted

his administrative remedies and that his bad-faith lawsuit against the Employer/Carrier may

go forward in the circuit court. For the reasons discussed below, we agree and reverse and

remand the case for further proceedings consistent with this opinion.

FACTS AND PROCEDURAL HISTORY

¶2. Thornhill worked at Walker-Hill as a supervisor driller. He alleges that he injured his

back while attempting to move a heavy rig on July 5, 2017. He alleges that he reported his

injury to his supervisor the following day, but Walker-Hill denies this allegation. On July

7, Walker-Hill asked Thornhill to take a drug test. Thornhill went to the testing facility and

provided a sample, but the sample was reportedly “cold” (i.e., below the minimum acceptable

temperature for testing). Thornhill says that he tried to produce a second sample but was

unable to do so, and he left without providing a second sample. Walker-Hill says that

Thornhill did not return to work for several days and was fired for refusing to submit to a

drug screen. Thornhill began seeing a doctor for his back injury, and the doctor eventually

recommended that Thornhill undergo back surgery.

¶3. In October 2017, Thornhill filed a petition to controvert with the Commission. In

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November 2017, the Employer/Carrier filed an answer in which they admitted both that

Thornhill’s injury arose out his employment and that they had received proper notice of the

injury. However, the Employer/Carrier denied that Thornhill was entitled to benefits, citing

his refusal to complete the drug test. In April 2018, the Employer/Carrier filed an amended

answer in which they denied that Thornhill had suffered any work-related injury and denied

that they had received proper notice of the injury.1

¶4. Following a hearing, an administrative judge ordered Thornhill to undergo an

independent medical examination (IME) by Dr. Robert McGuire to “determine [Thornhill’s]

current condition and need for medical treatment.” In his subsequent report, Dr. McGuire

noted that Thornhill had been injured at work in 2015 but was able to return to work and

function normally following conservative treatment. Dr. McGuire concluded that the surgery

recommended by Thornhill’s treating physician was “absolutely appropriate.” Dr. McGuire

concluded that Thornhill needed back surgery because of his injury in July 2017, which had

“substantially aggravated [his] preexisting condition.” Finally, Dr. McGuire concluded that

Thornhill had not reached maximum medical improvement (MMI) and would not reach MMI

until approximately six months post-surgery.

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The Employer/Carrier state that their attorney in the workers’ compensation case
initially believed that the injury occurred on the job and that Walker-Hill received notice
because the attorney thought that Thornhill’s July 7 drug test was a post-accident drug test.
But the Employer/Carrier now assert that “the drug test was not a post-accident drug screen”
and that Thornhill “never reported a work injury . . . prior to filing his [p]etition to
[c]ontrovert.” The Employer/Carrier say that they filed an amended answer in the workers’
compensation case after their attorney was advised of his mistake. However, the
Employer/Carrier’s amended answer continued to assert that Thornhill was not “entitled to
benefits due to his refusal to undergo drug testing.”

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¶5. After receiving Dr. McGuire’s IME report, the parties reached a settlement. In July

2019, Thornhill filed an application, which the Employer/Carried joined, for the Commission

to approve their compromise settlement. The application stated that Thornhill contended that

he was entitled to benefits, while the Employer/Carrier denied that Thornhill had sustained

a compensable injury. However, the Employer/Carrier had agreed to pay Thornhill $145,000

to settle the claim. The application stated that it was made pursuant to Mississippi Code

Annotated section 71-3-29 (Rev. 2011) because the compensability of Thornhill’s injury was

“in issue and [it was] impossible to determine the exact extent of the disability suffered by

[Thornhill], if any.” The Commission found that the settlement was in Thornhill’s best

interest, approved the settlement, and dismissed the case with prejudice.

¶6. Pursuant to the settlement, Thornhill signed a general release that released the

Employer/Carrier from all claims arising out of or connected with his alleged on-the-job

injury. However, the general release included the following carve-out:

[Thornhill] reserves and does not release, however, the right to bring a claim
for bad faith against any party and the parties agree administrative remedies in
[Thornhill’s] workers’ compensation claim have been fully and finally
exhausted.

The Employer/Carrier acknowledge that they drafted the release and included the above-

quoted language at the request of Thornhill’s attorney.

¶7. In January 2020, Thornhill sued the Employer/Carrier in circuit court, alleging bad-

faith denial of his workers’ compensation claim. The Employer/Carrier answered and later

filed a motion to dismiss, arguing that Thornhill had not exhausted his administrative

remedies. Specifically, the Employer/Carrier argued that the compromise settlement did not

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exhaust Thornhill’s administrative remedies because the Commission never made a finding

that Thornhill had a compensable claim or was entitled to benefits. They further argued that

the circuit court lacked “jurisdiction” because the Commission had never made such a

finding. The circuit court agreed and granted the motion to dismiss. The court reasoned that

prior to filing suit for a bad-faith denial of workers’ compensation benefits, a plaintiff must

first obtain a ruling from the Commission that he is entitled to the benefits at issue.

¶8. On appeal, Thornhill raises two issues. First, he argues that the compromise

settlement exhausted his administrative remedies as a matter of law and that he may proceed

on his bad-faith claim in the circuit court. Second, Thornhill argues that the

Employer/Carrier should be estopped from asserting an exhaustion-of-remedies argument

because the Employer/Carrier drafted a release that not only reserved Thornhill’s right to

bring a bad-faith lawsuit but also specifically provided that Thornhill’s “administrative

remedies . . . [had] been fully and finally exhausted.”

¶9. For the reasons explained below, we hold that the Commission’s approval of the

compromise settlement exhausted Thornhill’s administrative remedies and that Thornhill’s

bad-faith lawsuit may go forward in the circuit court. Accordingly, we reverse and remand

for further proceedings consistent with this opinion. Because we reverse on the first issue

raised by Thornhill, it is unnecessary to address his estoppel argument.

ANALYSIS

¶10. We review de novo an order dismissing a complaint for failure to state a claim upon

which relief can be granted. Hardaway v. Howard Indus. Inc., 211 So. 3d 718, 721 (¶15)

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(Miss. Ct. App. 2016). “We accept as true all well-pled factual allegations in the complaint,

and we will affirm only if it appears beyond doubt that the plaintiff would be unable to prove

any set of facts that would support a right of recovery.” Id. (ellipsis and quotation marks

omitted).

¶11. “[T]he independent tort of bad faith refusal to pay compensation is an exception to”

the general rule that workers’ compensation benefits are an employee’s “exclusive remedy”

for an on-the-job injury. Miss. Power & Light Co. v. Cook, 832 So. 2d 474, 479 (¶8) (Miss.

2002) (citing S. Farm Bureau Cas. Ins. Co. v. Holland, 469 So. 2d 55, 59 (Miss. 1984);

Luckett v. Miss. Wood Inc., 481 So. 2d 288, 290 (Miss. 1985); McCain v. Nw. Nat’l Ins. Co.,

484 So. 2d 1001, 1002 (Miss. 1986); Leathers v. Aetna Cas. & Surety Co., 500 So. 2d 451,

453 (Miss. 1986)). A cause of action for bad-faith refusal arises “when an insurance carrier

or self-insured employer denies benefits without a legitimate or arguable basis, commits a

willful or malicious wrong, or acts with gross and reckless disregard for the claimant’s

rights.” Hardaway, 211 So. 3d at 722 (¶16) (citing Cook, 832 So. 2d at 479 (¶¶8-9);

Chapman v. Coca-Cola Bottling Co., 180 So. 3d 676, 681 (¶20) (Miss. Ct. App. 2015); Walls

v. Franklin Corp., 177 So. 3d 1156, 1163 (¶30) (Miss. Ct. App. 2015) (“Walls II”); AmFed

Cos. v. Jordan, 34 So. 3d 1177, 1183 (¶21) (Miss. Ct. App. 2009)).

¶12. “[U]nder Mississippi law, claimants are required to exhaust their administrative

remedies, i.e., obtain a final judgment from the Commission prior to instituting a bad-faith

action for failure to pay benefits pursuant to the Workers’ Compensation Act.” Harper v.

Cal-Maine Foods Inc., 43 So. 3d 401, 403 (¶5) (Miss. 2010) (quotation marks omitted).

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Regarding this requirement, our Supreme Court has stated that “our precedent requires only

a determination that a plaintiff is ‘entitled’ to compensation before a bad-faith action may be

brought.” Bullock v. AIU Ins. Co., 995 So. 2d 717, 723 (¶21) (Miss. 2008). In another case,

the Supreme Court stated that a plaintiff “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 v. Franklin Corp.,

797 So. 2d 973, 977 (¶18) (Miss. 2001) (“Walls I”). In that case, the Court held that the

plaintiff’s bad-faith lawsuit had to be dismissed because her workers’ compensation case and

her claim for reimbursement for the disputed supplies and services remained pending before

the Commission. Id. at 975-77 (¶¶8-9, 18).

¶13. This Court has also addressed the exhaustion requirement. In Hardaway, we held that

a plaintiff “must obtain a final judgment from the Commission that he is entitled to benefits

. . . before instituting an action for the alleged bad faith denial of those benefits.” Hardaway,

211 So. 3d at 722 (¶16). And in Walls II, this Court held that the Commission must

determine whether the plaintiff is entitled to the disputed benefits before she may sue for bad

faith. Walls II, 177 So. 3d at 1163 (¶¶30-33).

¶14. Finally, our Supreme Court has addressed the exhaustion issue in a case that, like this

one, involved a settlement approved by the Commission. Cook, 832 So. 2d at 480 (¶¶14-15).

In Cook, the employer (MP&L) initially provided workers’ compensation benefits to the

injured employee (Cook) but later reconsidered and cut off his benefits. Id. at 477-78 (¶4).

After Cook filed a petition to controvert, he and MP&L settled his claim. Id. at 478 (¶4).

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Under the settlement, which the Commission approved, MP&L agreed to pay Cook $55,000,

and Cook reserved his right to bring a bad-faith claim against MP&L. Id. Cook sued MP&L

for bad faith and prevailed following a jury trial in circuit court. Id. On appeal, the Supreme

Court held that Cook had “[c]learly” exhausted the “administrative remedies available to

him” because “[h]e settled his claim, and the [settlement] was approved by the . . .

Commission along with his reservation of rights to bring a bad faith claim.” Id. at 480 (¶14).

The Court also emphasized that there were no “pending claims before the Commission”

when Cook filed suit. Id. at (¶15). Citing Walls I, the Court acknowledged that it had “held

previously that a claimant could not maintain a bad faith action against an employer 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. But the

Court held that “what distinguishe[d]” Cook’s case from Walls I was that “Cook’s settlement

claim had been approved by the Commission and nothing was left pending before [the

Commission].” Id.

¶15. At first blush, it would appear that Thornhill has also “[c]learly” exhausted all

“administrative remedies available to him.” Id. at (¶14). As in Cook, Thornhill settled his

workers’ compensation claim while reserving his right to bring a bad-faith claim, the

Commission approved the settlement, and “nothing [is] left pending before [the

Commission].” Id. at (¶15).

¶16. However, the Employer/Carrier argue that Cook is factually distinguishable because

Cook settled his claim under Mississippi Code Annotated section 71-3-37(10) (Rev. 2011),

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which provides that the Commission may approve a lump-sum payment “equal to the present

value of future compensation payments” if “the [C]ommission determines that” such a

payment is in “the best interests of a person entitled to compensation.” In contrast, Thornhill

settled his claim under section 71-3-29, which permits the Commission to approve

“compromise” settlements in cases in which the existence or extent of the claimant’s

disability is disputed. The Employer/Carrier point out that section 71-3-37(10) requires the

Commission to find that the claimant is “a person entitled to compensation,” whereas section

71-3-29 requires no such finding. The Employer/Carrier further emphasize that in Cook, the

Supreme Court specifically stated, “Under [section] 71-3-37(10) the Commission is entitled

to approve settlements only when it is in the best interest of a ‘person entitled to

compensation.’ Thus, clearly Cook was entitled to compensation based on the settlement

agreement approved by the Commission.” Cook, 832 So. 2d at 480 (¶14). Based on this

language, the Employer/Carrier argue that Cook’s holding only applies to a lump-sum

settlement approved under section 71-3-37(10).

¶17. Before addressing the Employer/Carrier’s argument or delving further into Cook, it

is helpful to briefly explain the differences between the two types of workers’ compensation

settlements. Thornhill’s case was settled under section 71-3-29. Settlements under that

statute are commonly known as “compromise settlements” or “9(i) settlements.” John R.

Bradley & Linda A. Thompson, Mississippi Workers’ Compensation Law § 6:50, at 362

(2021 ed.). They are called “compromise settlements” because section 71-3-29 permits the

Commission to approve settlements in cases in which an employer/carrier dispute the

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existence of a compensable injury or the extent of the claimant’s disability. Id. They are

referred to as “9(i) settlements” because the provision was section 9(i) of the original

Workmen’s Compensation Law of 1948. Id.

¶18. In contrast, section 71-3-37(10) authorizes the Commission to approve “lump-sum

payments” when an employer/carrier’s liability for compensation has already “been

established by admission . . . or by award.” Id. § 6:49, at 361. These payments are also

known as “13(j) settlements” because this provision was section 13(j) of the Workmen’s

Compensation Law of 1948. Id. at 360. A lump-sum payment does not involve a

compromise of a claim that is still in dispute but is simply the present value of future

compensation payments that the claimant is entitled to receive. Id.

¶19. We now turn back to review the Cook case in more detail. As noted previously, the

Employer/Carrier argue that the critical distinction between this case and Cook is that this

case involves a compromise/9(i) settlement whereas Cook involved a lump-sum/13(j)

settlement. But a review of the record in Cook shows that this is not correct. In fact, the

settlement in Cook was also a compromise/9(i) settlement. In Cook, the Supreme Court was

mistaken when it indicated that the Commission had approved that settlement under section

71-3-37(10).

¶20. In Cook, the Commission entered an “Order Granting Approval of 9(i) Compromise

Settlement.”2 The Commission’s order noted that before MP&L cut off Cook’s benefits,

2
The Commission’s order is part of the record in the Mississippi Supreme Court in
case number 2001-CA-00079-SCT. We may take judicial notice of Supreme Court files.
Crawford v. Fisher, 213 So. 3d 44, 47 (¶10) (Miss. 2016). We have filed a copy of the
Commission’s order as a separate document as part of the record in this case.

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MP&L paid a total of $11,658.14 in temporary disability benefits and $24,999.86 in medical

bills. The Commission’s order then stated,

[Cook] has contended and now contends that he is entitled to substantial
compensation, whereas, [MP&L] has contended, and now contends, that
[Cook] is not entitled to further compensation, and in no event to the amount
thereof demanded by [Cook]. However, in order to fully compromise and
settle the disagreement as to the extent of the disabilities suffered by [Cook],
[MP&L] has agreed to pay, and [Cook] has agreed to accept, the sum of
$55,000.00, of which 50% is being paid in lieu of workers’ compensation
disability benefits, and 50% of which is being paid in lieu of future medical
expenses, as a complete, absolute and full and final settlement of any and all
claims under the Mississippi Workers’ Compensation Act . . . .

. . . [T]his request and application are made pursuant to the provisions of
Section 9(i) of the Workers’ Compensation Act, . . . and this is a case coming
within the purview of said Act for the reason that it is impossible to determine
the exact extent of the disability, loss of use or loss of wage earning capacity
suffered by [Cook], and it would be to the best interests of [Cook] for the
Commission to allow [MP&L] to settle and compromise [its dispute] with
[Cook] . . . .

¶21. Thus, it turns out that the factual distinction that the Employer/Carrier attempt to draw

between this case and Cook does not exist. Just like this case, Cook involved a

compromise/9(i) settlement under section 71-3-29.

¶22. A few months after the Commission approved the settlement in Cook, Cook filed a

complaint in circuit court alleging that MP&L had stopped payment of temporary disability

benefits and refused to pay permanent disability benefits in bad faith. A jury returned a

verdict in favor of Cook. See Cook, 832 So. 3d at 478, 481, 484 (¶¶4, 17, 32).

¶23. On appeal to the Supreme Court, MP&L made the same basic arguments that the

Employer/Carrier make in this case. MP&L argued that Cook had not exhausted his

administrative remedies because he entered into a compromise settlement and never obtained

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a determination from the Commission that he was entitled to the benefits that MP&L had

allegedly denied in bad faith. MP&L also argued that the circuit court and the jury lacked

“jurisdiction” to make that finding because the question whether Cook was entitled to the

disputed benefits was within the “exclusive administrative jurisdiction” of the Commission.

See id. at 479-80 (¶¶8-15); Appellant’s Brief, Cook, No. 2001-CA-00079-SCT, at 18-28 (Jan.

17, 2002). As discussed above, the Supreme Court rejected these arguments and held that

Cook was entitled to pursue his bad-faith claim in the circuit court because the Commission

had approved the parties’ settlement, and “nothing was left pending before [the

Commission].” Cook, 832 So. 2d at 480 (¶15).

¶24. After reviewing the record in Cook, it becomes clear that the only arguably significant

distinction between this case and Cook is that MP&L initially admitted that Cook suffered

a compensable injury and, for a period of time, voluntarily paid temporary disability benefits

and Cook’s medical bills. Here, in contrast, the Employer/Carrier have disputed the

existence of a compensable injury from the outset of the case. However, this factual

distinction is not material or legally significant. The relevant comparison is that both in Cook

and in this case, the employer/carrier refused to pay the benefits that were the subject of the

plaintiff’s bad-faith lawsuit, and the Commission had never made a determination that the

plaintiff was entitled to those disputed benefits. Rather, that dispute was the subject of the

parties’ compromise settlement. Thus, consistent with Cook, we conclude that Thornhill

exhausted his administrative remedies by obtaining the Commission’s approval of a

settlement that left nothing more pending before the Commission. Cook, 832 So. 2d at 480

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(¶¶14-15).

¶25. Finally, as noted above, the Employer/Carrier also argue that the circuit court lacks

jurisdiction to consider Thornhill’s claim. Specifically, they argue that the circuit court lacks

jurisdiction because this Court has stated that

the Commission has exclusive jurisdiction to determine in the first instance
whether [a] claimant is entitled to [workers’ compensation] benefits.
Therefore, the claimant must obtain a final judgment from the Commission
that he is entitled to benefits—i.e., he must exhaust his administrative
remedies—before instituting an action for the alleged bad faith denial of those
benefits.

Hardaway, 211 So. 3d at 722 (¶16) (emphasis added) (collecting cases).

¶26. However, there is no jurisdictional issue in this case. In prior cases in which this

Court or the Supreme Court has referred to the Commission’s jurisdiction to decide claims

for workers’ compensation benefits, we have done so because a claimant was attempting to

litigate his bad-faith claim while his underlying case was still pending before the

Commission. See, e.g., id. at 720-22 (¶¶5, 9, 17); Walls I, 797 So. 2d at 975-77 (¶¶8-9, 18);

Walls II, 177 So. 3d at 1159, 1163 (¶¶7-8, 31-32). In effect, the claimant was attempting to

circumvent the Commission’s “continuing jurisdiction over such cases.” Walls I, 797 So. 2d

at 977 (¶18). The essential concern in that scenario is that “it would be ‘frighteningly

conceivable’ that a jury could find the [underlying workers’ compensation] 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.” Walls II, 177 So. 3d at 1163 (¶31) (quoting Kitchens v. Liberty Mut. Ins., 659

F. Supp. 467, 469 (S.D. Miss. 1987)). That risk is absent when, as in this case, the

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Commission has already approved a full and final settlement of the underlying claim.

Because “nothing [is] left pending before [the Commission],” Cook, 832 So. 2d at 480 (¶15),

there is no risk that a jury will usurp the Commission’s jurisdiction or return a verdict that

conflicts with any finding of the Commission. In such a case, “the circuit court clearly ha[s]

jurisdiction” to hear the claimant’s bad-faith claim. Id. at (¶12).

CONCLUSION

¶27. In summary, we hold that Thornhill exhausted his administrative remedies because

he fully and finally settled his workers’ compensation claim against the Employer/Carrier,

the Commission approved the settlement, and there is nothing left pending before the

Commission. Cook, 832 So. 2d at 480 (¶¶14-15). In addition, because there is nothing left

pending before the Commission, there is no risk of a jury verdict or a judgment that will be

inconsistent with any finding or determination made by the Commission. Accordingly, the

circuit court has jurisdiction to hear Thornhill’s bad-faith claim. Id. at (¶12). Therefore, the

circuit court erred by dismissing the complaint, and we reverse and remand the case so that

Thornhill may proceed on his bad-faith claim in the circuit court.

¶28. REVERSED AND REMANDED.

BARNES, C.J., CARLTON, P.J., GREENLEE, WESTBROOKS, McDONALD,
LAWRENCE, McCARTY, SMITH AND EMFINGER, JJ., CONCUR.

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