Iowa Supreme Court Holds Insurance Carriers Immune to Liability for Inspections

Posted on: June 25th, 2019

Six current or former employees of TPI Iowa, LLC, a wind blade manufacturing company located in Newton, Iowa, sued TPI’s workers’ compensation carrier, Insurance Company of the State of Pennsylvania (ICSOP), for failing to conduct, or negligently conducting, an insurance inspection at the company’s facility, which caused serious health problems.

ICSOP resisted the Plaintiffs’ claims, relying on Iowa Code § 517.5, which provides:

No inspection of any place of employment made by insurance company inspectors or other inspectors inspecting for group self-insurance purposes shall be the basis for the imposition of civil liability upon the inspector or upon the insurance company employing the inspector . . . .

Plaintiffs alleged that Iowa Code section 517.5 violates the equal protection and privileges and immunities provisions of the Iowa Constitution, the inalienable rights clause of the Iowa Constitution and the due process clause of the Iowa Constitution. Plaintiffs argued that absolute immunity to insurance carriers restricted their access to the courts, which is a fundamental right. Thus, Plaintiffs urged the Courts to adopt a strict scrutiny standard of review. Alternatively, Plaintiffs argued that even under a rational basis test Iowa Code section 517.5 fails because, if encouraging inspections is the goal, the rational way to accomplish it is not to immunize insurance company inspections but to require inspections.

ICSOP resists Plaintiffs’ arguments in the main by arguing that the statutory framework, including Iowa Code 517.5, is all apart of the legislature’s “grand design” or “quid pro quo” of the workers’ compensation scheme in Iowa and thus, section 517.5 is rationally related to accomplishing the goals of that framework. See Opinion, p. 13 (“Workers gave up their common law right to seek a full range of compensatory and punitive damages available at common law and instead became eligible for limited statutorily-based compensation. [citation omitted]. In return, however, the employee was no longer required to show the employer’s fault, but only needed to show that the injury arose in the course of employment.”)

Ultimately, the Iowa Supreme Court agreed with ICSOP, affirmed the district and ruled “that the legislature may reasonably provide immunity for inspections performed by a workers’ compensation carrier as part of the grand bargain.”

Clark, et al. v. Insurance Company State of Pennsylvania, No. 17-2068 (Iowa May 3, 2019)

Read more news articles »