There is a conflict of authority as to whether an insurer's improper processing of workers' claims is actionable or is barred by the exclusivity provision of the workers' compensation statute. An insurer's good faith and reasonably grounded denial of workers' compensation benefits is not actionable. On the other hand, an insurers' fraudulent conduct in processing a workers' compensation claim is actionable and is not barred by the exclusive remedy provisions of the workers' compensation statutes.

Under the typical workers' compensation statute, the employers' workers' compensation insurer stands in the shoes of the employer and enjoys the employers' immunity from liability outside the workers' compensation system.

The courts that have addressed the issue are divided over whether the workers' compensation insurer may invoke the employers' immunity from suits as a defense against a charge that the insurer committed bad faith in its handling of an employee's compensation claim. A majority of jurisdictions have considered the question and have concluded that the tort action is barred and the exclusive remedy applies.

The rationale of these cases has typically been that the legislature, anticipating a potential bad faith delay of payment of benefits, provided a quick, simple and readily accessible method of resolving disputes.

The minority view that a common-law action may be brought advances the idea that the injury complained of is not covered by the workers' compensation remedy because it does not arise in the course of the employment, because it was intended rather than accidental; or because the penalty sections of the compensation act, unlike the tort, do not allow recovery when the defendant relies on responsible medical testimony in delaying payment. Other cases have allowed plaintiffs to circumvent the workers' compensation remedy where the defendant's conduct went far beyond the bounds of mere delay and the emotional distress for which relief was sought arise from the atrocious nature of the conduct itself rather than from any delay in payment that resulted. The employee's exclusive workers' compensation remedy does not bar an employer from suing its own workers' compensation carrier for bad faith in handling employee claims.

Texas and New York are exceptions. In Texas, an employee can reject the workers' compensation system, but they are then subject to tort liability with no exclusive remedy defense.

In New York, the workers' compensation insurance policy employers' liability part (as distinguished from workers' compensation statutory coverage) has no dollar limit on employers' liability insurance coverage.

Examples of tort actions that are not barred in some states include: actions under federal and state antidiscrimination laws; trespass; invasion of privacy; sexual harassment; dual capacity; comparative negligence states and related actions for contribution; and intentional torts.

It appears that with few exceptions, the workers' compensation exclusive remedy has been upheld since inception of the first constitutionally enacted workers' compensation in Wisconsin in 1911. What has not been measured is the threat of using a lawsuit by the claimant's lawyers as leverage in the workers' compensation case settlements.

It can be expected that attacks on the exclusive remedy will continue and it is hoped that this widely used defense for the most heinous of crimes by insurers and employers will be redefined in the future.