Nevada Supreme Court Recognized Bad-Faith Tort Claims Against Self-Insured Employers in Falline v. GNLV Corp.

Norman Falline was twenty-five years old and working as a maintenance laborer at the Golden Nugget Hotel and Casino in Las Vegas when he hurt his back on the job. The injury eventually required surgery. While recovering from that procedure, he experienced severe lower-back pain when rising from a seated position, and his treating physician concluded the new pain traced directly to his original workplace injury.

The Golden Nugget was self-insured, meaning it administered its own workers' compensation plan through a third-party administrator, Gibbens Company, Inc. Despite the physician's conclusion, GNLV Corp. refused to cover the additional treatment and disability benefits. It contended that the post-surgical pain stemmed from a separate, intervening injury rather than the covered work accident. Falline and his wife Sharon were left without compensation for an injury the medical evidence tied to the original incident.

Falline retained Greenman, Goldberg, Raby and Martinez to sue both GNLV Corp. and Gibbens Company for negligence and bad faith in the handling of his claim, along with claims for intentional and negligent infliction of emotional distress and unfair insurance practices. The lower court dismissed the case on the theory that workers' compensation law provided the exclusive remedy. The Fallines appealed.

On December 30, 1991, the Nevada Supreme Court issued its ruling in Falline v. GNLV Corp., 107 Nev. 1004, 823 P.2d 888. The court held that Nevada's then-existing system of statutory fines was insufficient to compensate injured workers whose claims were denied or delayed because of negligence or bad faith. It recognized limited tort actions against self-insured employers and their administrators for that misconduct, and it noted that if the legislature wanted to make the statutory fine scheme the exclusive remedy, it was free to enact legislation saying so.

The legislature accepted that invitation. In 1993 it enacted NRS 616D.030, which barred injured workers from bringing the kind of independent tort action the Fallines had pursued and made the statutory administrative fines the exclusive remedy for insurer and third-party-administrator misconduct. The practical effect was to replace the broader common-law exposure the Falline decision had opened with a more narrowly defined administrative remedy.

The case is routinely cited in Nevada workers' compensation litigation. The 1998 Nevada Supreme Court decision in Madera v. State Industrial Insurance System, 114 Nev. 253, confirmed that 'NRS 616D.030 was enacted in response to our ruling in Falline,' recognizing the direct line between the 1991 decision and the 1995 statute.