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Recent Court Cases
"Bad Faith, Waiver of extent of Inj. Dispute, Dram Shop Liability, and PIP Coverage"
By Kevin McGillicuddy - Parker & Associates

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COURT OF APPEALS REJECTS WC BAD FAITH CLAIM NOT ASSERTING “SEPARATE INJURY”

HULSHOUSER v. TEXAS WORKERS’ COMPENSATION INSURANCE FUND, 139 S.W.3d 789 (Tex.App.―Dallas 2004, no pet)

FACTS – Michael Hulshouser made claim for a low back injury on August 25, 1998. The following day he reported to his treating doctor that he also suffered from a hernia injury. In May of 1999 the Fund denied compensability of the hernia, claiming that it was unrelated to the back injury. After a hearing at the TWCC the Fund agreed to cover the hernia and Hulshouser had surgery for the hernia in November 1999. Thereafter, he claimed that he suffered from chronic depression and sought compensation for medical expenses for depression, alleging that it was related to complications from the aggravated hernia. The Fund denied compensability of the depression, but the TWCC ultimately ordered the Fund to compensate Hulshouser for depression.

CASE HISTORY – Hulshouser sued the Fund for bad faith in handling his claims and for violations of the DTPA and Insurance Code. He alleged that the Fund’s denial and delay were unreasonable, alleging that the one-year delay in surgery resulted in “permanent disability and pain” that would not have occurred had the medical treatment been timely. He alleged that he suffered from severe physical and mental pain, suffering, anguish, impairment and loss of earning capacity, as well as loss of credit. The trial court granted summary judgment for the Fund on the ground that the exclusive remedy provision of the Workers’ Compensation Act barred his claim for common-law damages related to the hernia. The trial court specified that Hulshouser could not recover any damages for the denial or delay in accepting the hernia, including damages for pain and suffering, mental anguish, lost earnings, loss of earning capacity, impairment and disfigurement. The trial court also dismissed all but one of Hulshouser’s claims on the ground that he had failed to exhaust his administrative remedies.

HOLDING – Hulshouser nonsuited the remaining claim and appealed the summary judgment. His sole issue on appeal was as to the trial court’s ruling which stated in part that he could not recover damages for any harm resulting from the Fund’s denial of compensability or delay in accepting the hernia condition because such harm was part of the compensable injury, and the exclusive remedy provision of the Act precluded such claim for damages. The court of appeals holds that where disability or death results from medical treatment intended to cure or relieve the employee from the effects of his injury, such harm is part of the compensable injury. While Hulshouser might be able to pursue claims for damage separate from the compensable injury, in this case, all of the damages he claimed and which were dismissed by the trial court were part of the compensable injury. Therefore, there was no “independent injury” caused by the Fund’s delay in approving treatment, and the court of appeals affirmed the trial court’s summary judgment.

SIGNIFICANCE – Had Hulshouser pursued his claim for loss or credit or other damages separate from his compensable injury, he might have been able to maintain his bad faith suit, but here, the court of appeals rather broadly held that all of his claims were compensable under the Act, and therefore barred. Therefore, in future bad faith cases we can expect that plaintiffs will pursue such separate damages in order to be able to maintain their suits.

COURT OF APPEALS RULES ON WAIVER OF EXTENT OF INJURY DISPUTE

TIG PREMIER INSURANCE COMPANY v. PEMBERTON, 127 S.W.3d 270 (Tex.App.―Waco 2003, review denied)

FACTS – John Pemberton injured his right shoulder and left knee in 1996. Three months after his fall, he was hospitalized and diagnosed with deep vein thrombosis (DVT), or blood clots in his right leg. On April 24, 1998, TIG received a report from Dr. Leslie Bishop, who was appointed by the TWCC as a designated doctor. His 10 % impairment rating included 2% for the DVT. TIG did not dispute the DVT until approximately 6 months later, on October 14, 1998. At that time, TIG asserted that the DVT was not caused by the fall but rather was a result of three prior surgeries on the right knee combined with prolonged convalescence after the fall. After a contested case hearing before the TWCC, the hearing officer ruled that although Pemberton did not show a causal relationship between the fall and the DVT, TIG had waived its right to dispute compensability of the DVT by not contesting the causal relationship of the DVT to his injury within 60 days after learning of Dr. Bishop’s findings. Pemberton did not request review of the hearing officer’s finding of no causal relationship, and therefore that finding became final. TIG appealed the finding relating to the 60-day rule, but the appeals panel affirmed the hearing officer’s finding of waiver.

CASE HISTORY – TIG then filed suit in district court to appeal the waiver finding, and the TWCC and TIG filed competing motions for summary judgment. The trial court granted the TWCC’s motion, affirmed the appeals panel’s decision, and denied TIG’s motion.

HOLDING – TIG appealed the ruling of the trial court, arguing that the 60-day rule does not apply to extent of injury disputes, but only to the carrier’s initial response to a claim. The court of appeals reviews the applicable statutory provisions and holds that TIG is correct. While the court holds that §409.021 is somewhat ambiguous, that section only deals with initiation of benefits and the filing of the carrier’s initial response as to compensability. The court also states that other portions of the statute allow carriers to dispute other aspects of a claim apart from the initial issue of compensability. In addition, the court cites a March 2002 amendment to TWCC Rule 124.3(c), adopted after the events in this case, which states that §409.021 does not apply to disputes of extent of injury. Since the only issue on appeal was whether TIG had waived its right to dispute the DVT and the hearing officer’s finding of non-compensability of the DVT was final, the court of appeals reverses the trial court’s summary judgment for Pemberton and renders judgment for TIG.

SIGNIFICANCE – Although this decision is about as clear as can be, the TWCC continues to attempt to find ways to hold that carriers may waive disputes as to the compensability of extent of injuries. For example in TWCC AP 041097, the appeals panel wrote that a carrier accepted a lumbar strain injury that was initially diagnosed. Although the carrier did dispute lumbar spine herniations within 60 days, those herniations were diagnosed shortly after the initial diagnosis of lumbosacral strain, and the appeals panel held that the carrier had accepted the herniations because it did not timely dispute them and had accepted injury to the lumbar spine The appeals panel distinguished the Pemberton decision by stating that the issue was one of waiver and not extent of injury. In AP 040918, the appeals panel held that a claimant’s neck injury was part of the “overall injury,” and the carrier did not timely dispute that portion of the injury, although it accepted a shoulder injury and explicitly disputed the neck injury outside the initial 7-day period following notice. The appeals panel again distinguished Pemberton by stating that this was not an extent of injury dispute that would not be subject to the reasoning in Pemberton because the claimant had complained of the neck injury from the initial doctor visit. In AP 040150-s, the appeals panel held that a carrier that failed to dispute a condition that was included in an impairment rating before the end of the first SIBs quarter accepted that condition. The appeals panel stated in a footnote to its decision that this was not an “extent of injury” question governed by Rule 124.3. Given the reasoning of these cases, we can probably expect the TWCC to hold as well that a carrier’s failure to dispute a body part by the 45th day after receipt of a medical bill treating that body part will result in carrier liability for that body part.

SUPREME COURT ADDRESSES DRAM SHOP LIABILITY

F.F.P. OPERATING PARTNERS, L.P. v. DUEÑEZ, 2004 WL 1966008 (Tex. 2004)

FACTS – After he consumed a case-and-a-half of beer, Roberto Ruiz drove his truck to a Mr. Cut Rate convenience store owned by F.F.P. and purchased a twelve-pack of beer. Ruiz got back into his truck and opened a beer to drink. He then drove onto a nearby highway and swerved several times into oncoming traffic. Less than a mile from the convenience store, he again swerved across the centerline and hit the Dueñezes’ car head-on. All five members of the Dueñez family sustained injuries, some serious. Ruiz was arrested for drunk driving and pled guilty to intoxication assault.

CASE HISTORY – The Dueñez family sued the convenience store, its clerk, and Ruiz, among others. F.F.P. named Ruiz a responsible third party and filed a cross-action against him. The Dueñez family thereafter nonsuited all defendants except F.F.P. At a pretrial conference, the Dueñezes obtained a partial summary judgment that Texas Civil Practice and Remedies Code Chapter 33’s proportionate responsibility provisions did not apply to this type of case. The trial court severed F.F.P.’s cross-action against Ruiz, leaving F.F.P. as the only defendant. At trial, F.F.P. sought an instruction that if an act or omission of any person not a party to the suit was the sole proximate cause of the occurrence, then no act or omission of any other person could have been a proximate cause. The trial court refused this instruction. The trial court also overruled F.F.P.’s objection that the jury charge omitted any question submitting Ruiz’s negligence as a responsible third party and any comparative responsibility question asking the jury to determine what percentage of negligence was attributable to Ruiz. The jury found that it was apparent to F.F.P. that Ruiz was obviously intoxicated and presented a clear danger to himself and others, and that his intoxication was a proximate cause of the collision. It returned a $35 milling verdict against F.F.P., upon which the trial court rendered judgment. The court of appeals affirmed the trial court’s judgment, holding that in third-party actions under the Dram Shop Act, a provider of alcoholic beverages is vicariously responsible for the damages caused by an intoxicated person, and the provider is not entitled to offset its liability by that of the intoxicated person. The court of appeals distinguished the Texas Supreme Court’s holding in Smith v. Sewell, 858 S.W.2d 350 (Tex.1993), in which the Court held that the comparative responsibility statute applied to dram-shop causes of action. The court of appeals held that Sewell only applied to cases where the intoxicated person sued for his own injuries and did not apply to plaintiffs who are innocent third parties. The court of appeals also held that the trial court properly severed F.F.P.’s cross action against Ruiz and properly refused the requested instruction on sole proximate cause.

HOLDING – F.F.P. appealed, and the Supreme Court holds that Chapter 33 of the Texas Civil Practice and Remedies Code applies to any cause of action based on tort in which a defendant, settling person, or responsible third party is found responsible for a percentage of harm for which relief is sought. This chapter also provides that the trier of fact is to apportion responsibility with respect to each person’s causing or contributing to cause. Although Chapter 33 expressly excludes some types of cases from its coverage, it does not exclude actions brought under the Dram Shop Act. The Court states that it did not except third party claims from the application of Chapter 33 in Sewell. A dram shop’s liability is partially the result of its own conduct and not totally the result of the actions of intoxicate person. Therefore, it is not purely vicarious, and the proportionate responsibility of the intoxicated person must also be considered by the jury. Although the dram shop still liable for the comparative responsibility of the intoxicated person, it may in turn recover from the intoxicated driver based upon the percentage of negligence assigned to the patron. Nonetheless, the Supreme Court holds that the trial court’s error in not submitting an issue to the jury on Ruiz’ proportionate responsibility was harmless error since F.F.P. was jointly liable. The Court also holds that the trial court did not err in severing F.F.P.’s cross action against Ruiz because F.F.P. was vicariously liable for Ruiz’s actions and there is nothing to prevent a subsequent jury from apportioning responsibility between F.F.P. and Ruiz in the severed action, which will be one for indemnity.

SIGNIFICANCE – In effect, this decision imposes vicarious joint and several liability on the provider of alcoholic beverages, not merely proportionate responsibility. Therefore, it does not matter what percentage of liability might be found as to the intoxicated person. The provider is fully liable for the intoxicated person’s actions. This would also be the case if there were more than one provider involved. Each would be jointly liable for the intoxicated person’s actions, even if the intoxicated person were to be found primarily responsible.

TEXAS SUPREME COURT INTERPRETS PIP “MOTOR VEHICLE ACCIDENT” COVERAGE

TEXAS FARM BUREAU v. STURROCK, 2004 WL 1908339 (Tex.2004)

FACTS – Jeff Sturrock drove his truck to work, parked, and turned off the engine. While exiting the truck, he entangled his left foot on the raised portion of the truck’s door facing and injured his neck and shoulder when he attempted to prevent himself from falling. He filed a claim for PIP benefits under his vehicle’s policy with Texas Farm Bureau.

CASE HISTORY – Sturrock sued Texas Farm Bureau for breach of contract and violations of Article 21.21 of the Texas Insurance Code after the carrier denied that his injuries resulted from a “motor vehicle accident” within the policy’s PIP coverage. Both parties filed motions for summary judgment and filed an agreed statement of facts and asked the trial court to apply the law to the facts and to determine whether his injuries resulted from a “motor vehicle accident” within the meaning of the policy. The trial court held that Sturrock’s injuries resulted from a motor vehicle accident and were covered under the policy. The court of appeals affirmed.

HOLDING – Texas Farm Bureau appealed, and the Supreme Court holds that “motor vehicle accident” does not require some involvement between the covered motor vehicle and another vehicle, person or object. The Court concludes that “a motor vehicle accident” occurs when “(1) one or more vehicles are involved with another vehicle, an object, or a person, (2) the vehicle is being used, including exit or entry, as a motor vehicle, and (3) a causal connection exists between the vehicle’s use and the injury-producing event.” If Sturrock had fallen after he had finished exiting the truck, or if he had fallen out of the truck without any involvement of the vehicle, there would be no coverage. But here, the vehicle’s door facing was a causative factor in his fall, and therefore there is coverage.

SIGNIFICANCE – While this is a broad reading of the policy’s coverage, the Court clearly states the elements that must be considered when a determination is made as to PIP coverage for injuries resulting from a “motor vehicle accident.”



Submitted by:

J.T. Parker & Associates, L.L.C.

1341 W. Mockingbird Ln., Suite 300W

Dallas, TX 75247

214.631.1000

214.631.3700 Fax

www.parkerclaims.com

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