Failure to pay worker's benefits spells trouble for employer

An employer acts in bad faith when it knowingly or recklessly refuses to pay a claim without a reasonable basis, fraud, malice, oppression, or reckless disregard of the rights of a party.

Case name: Hernandez v. Dillards, Inc., No. 30,278 (N.M. Ct. App. 07/26/10, unpublished).

Ruling: In an unpublished opinion, the New Mexico Court of Appeals held that an employer acted in bad faith when it discontinued payments of a worker's benefits. The court increased the worker's benefits by 25 percent.

What it means: An employer acts in bad faith when it knowingly or recklessly refuses to pay a claim without a reasonable basis, fraud, malice, oppression, or reckless disregard of the rights of a party. When an employer knows a worker suffered from an aggravation of a preexisting injury due to a work-related incident and it refuses to pay benefits, the employer is acting in bad faith.

Summary: A dock worker fell while working and landed on his left side. He had a preexisting condition of severe osteoarthritis of his left hip. The fall aggravated this condition. The employer paid his medical bills and indemnity benefits for a period, but then ceased all payments. The worker filed an unfair claim practices and bad-faith claim against the employer. The New Mexico Court of Appeals held that the employer acted in bad faith, and it increased the worker's benefits by 25 percent.

Evidence showed that the employer was aware that the worker had been diagnosed with an aggravation of a preexisting condition as a result of his fall at work. The employer argued that the law requiring an employer to pay for the aggravation of a long-standing preexisting condition should be overturned. The court mentioned that it was bound by precedent. The court stated that the employer could have filed a claim to resolve the dispute while paying benefits under protest.

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