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Trial allowed against employer, Zurich in obstructing workers comp benefits

Trial allowed against employer, Zurich in obstructing workers comp benefits

ST. PAUL, Minn.—A federal lawsuit alleging that Zurich American Insurance Co. and an employer it insured deliberately obstructed a restaurant supervisor from receiving workers compensation benefits may proceed to trial, a federal appeals court has ruled.

The Thursday ruling by the 8th U.S. Court of Appeals in Heather A. Nunn vs. Noodles & Co. hinged on a Minnesota law that allows workers to sue entities that obstruct their right to benefits in “a manner that is outrageous and extreme, or egregiously cruel or venal.”

The underlying workers compensation case involves Ms. Nunn, whose boss directed her in 2007 to attend a meeting at his home after she had clocked out from her shift at work. Ms. Nunn asked if the meeting could be rescheduled as she had other after-work plans, but Raymond Gibson directed her to attend the meeting, court records state.

While riding a motorcycle on the way to his house, Ms. Nunn ran a red light and was struck when she made a left turn in front of an oncoming car. Her injuries generated more than $250,000 in medical bills.

Early in her workers comp case, a Zurich attorney told Mr. Gibson and another Noodles supervisor the importance of characterizing the meeting as a social gathering, according to testimony in the case. Otherwise, the accident would be compensable.

Mr. Gibson told Noodles executives that the meeting was not work-related, but he also told a Zurich claims representative that the meeting was called to discuss work issues, court records state.

Despite Mr. Gibson's statements, Zurich denied Ms. Nunn's claim and stated that she “may have been traveling to a social function” that she had not been ordered to attend. Zurich's denial also stated that all Noodles business meetings are held on-site with employees clocked in.

But when Mr. Gibson and another supervisor were deposed before a workers comp trial, Mr. Gibson said the agenda for the meeting at his home included business-related issues he planned to discuss with Ms. Nunn.

Still, a Zurich attorney argued before an administrative law judge that Ms. Nunn was injured on her way to an off-site happy hour.

But the judge found that her injury arose out of and in the course of her employment, making her injuries compensable.

Ms. Nunn later sued in federal court, alleging that Noodles and the insurer obstructed her efforts to obtain more than $300,000 in benefits and attorney fees.

While a federal judge dismissed that case last year, the 4th Circuit on Thursday allowed her assertions to go to trial.

The appeals court found there are genuine issues of material fact “whether Noodles, through Gibson and (another supervisor) knowingly offered false testimony in support of a baseless defense.”

“According to the evidence, Gibson had an unworthy motive to lie about the purpose of the meeting with Nunn because he faced punishment for holding mandatory meetings off-site and off the clock,” the appeals court ruled.

Noodles had argued that even if Mr. Gibson intended to lie, he did not intend to obstruct Ms. Nunn's benefits.

As for the insurer, the court also ruled that issues of material fact remain “whether Zurich intentionally obstructed her receipt of workers compensation benefits by concealing Gibson's first statement about the purposes of the meeting, filing a factually inaccurate claim denial and continuing to deny the claim through trial.”

The appeals court remanded the case for further proceedings consistent with its opinion.

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