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Zenith Ins. Co. v. Ayala
December 3, 2010
325 S.W.3d 176
Texas Supreme Court
Published Opinion

Zenith Ins. Co. v. Ayala

Supreme Court of Texas.



Carmen AYALA, Respondent.

No. 09–0292.


June 11, 2010.


Rehearing Denied Dec. 3, 2010.

Attorneys & Firms

*176 Jane Lipscomb Stone, Stone Loughlin & Swanson, LLP, Austin, for Petitioner.

Richard Pena, Law Offices of Richard Pena, P.C., Austin, for Respondent.



In this workers’ compensation case, the court of appeals concluded that the carrier waived its right to dispute the extent of the claimant’s compensable injury by failing to adhere to Lawton, we reverse the court of appeals’ judgment and remand this case to the trial court for further proceedings.

On January 23, 2006, Carmen Ayala injured her lower back when a window fell on her at work. Ayala was originally diagnosed with a spondylolisthesis.1 To treat Ayala, physicians recommended an epidural steroid injection, a procedure requiring Zenith’s preauthorization. On April 27, Zenith preauthorized the treatment, and the injection was performed. On July 28, Zenith notified Ayala that it was disputing her entitlement to benefits for the lumbar condition because the condition was degenerative and not the result of the January 23 injury.

The Texas Department of Insurance, Division of Workers’ Compensation (the Division), held a contested case hearing to determine whether Ayala’s compensable injury included the lumbar condition and whether Zenith had waived its right to contest compensability by not complying with Labor Code section 409.021(c)’s deadline. The parties stipulated that: (1) Ayala sustained a compensable injury; (2) Zenith received notice of Ayala’s injury on March 1; (3) Zenith was not contesting compensability; and (4) Zenith did not dispute that the compensable injury included the lumbar condition until July 28. The hearing officer concluded that, although Ayala failed to prove the compensable injury event was a producing cause of the lumbar condition, it was nevertheless compensable because Zenith failed to dispute compensability within sixty days after it received notice of Ayala’s initial injury. The Division appeals panel affirmed, and Zenith sought judicial review.

On competing motions for summary judgment, the trial court held Zenith waived its right to contest compensability by not timely disputing the lumbar condition diagnosis in accordance with 325 S.W.3d 209. We reverse.

In Id. at 650.

Ayala argues that Lawton is inapplicable because this is not an extent of injury dispute, but rather a compensability case. We disagree. As the Division explains:

When a carrier disputes the extent of an injury, it is not denying the compensability of the claim as a whole, it is disputing an aspect of the claim.... [A] dispute involving extent of injury is a dispute over the amount or type of benefits, specifically, medical benefits, to which the employee is entitled (i.e. what body areas/systems, injuries, conditions, or symptoms for which the employee is entitled to treatment); it is not a denial of the employee’s entitlement to benefits in general.

25 Tex. Reg. 2096, 2097 (2000)(quoted in Lawton4:

[A]n employee may have injured his arm and then several months later the doctor begins to treat the shoulder as well and the carrier does not believe that the shoulder is part of the compensable injury. In this situation, [a carrier is required] to ... file the notice of dispute of extent of injury not later than the date that the carrier is required to either pay or deny the medical bill which included the treatment for the shoulder (45 days from the date the complete bill was received by the carrier).

25 Tex. Reg. at 2097. Thus, unlike compensability, extent of injury disputes arise when the carrier believes additional conditions are unrelated to the compensable injury. Because this is an extent of injury dispute, Lawton, 295 S.W.3d at 650.

Ayala also asserts that this case is distinguishable from 28 TEX. ADMIN.CODE § 134.600(d). As the Division explains:

Preauthorization decisions are to be made entirely based upon medical necessity of the treatment of the condition proposed to be treated. Issues associated with extent of injury, compensability of the injury, or liability for the claim are separate from the issue of whether a given treatment or service is medically necessary. That is why approval of a preauthorization request does not make a carrier liable for payment if the carrier successfully challenges the extent of injury/compensability/liability issue.

25 Tex. Reg. at 2101. Thus, Zenith’s preauthorization does not preclude Zenith from disputing extent of injury in this case.

Because this dispute involves extent of injury, rather than compensability, 60.2(d).



The diagnoses of lumbar radicular syndrome and lumbar spondylolisthesis will collectively be referred to as the “lumbar condition.”


Labor Code section 409.021(c) provides, in pertinent part:

If an insurance carrier does not contest the compensability of an injury on or before the 60th day after the date on which the insurance carrier is notified of the injury, the insurance carrier waives its right to contest compensability.

TEX. LAB.CODE § 409.021(c).


In doing so, we relied on Administrative Rule 124.3(e) and the Division’s own “reasoned justification” for the Rule. See 28 TEX. ADMIN.CODE § 124.3(e).


In Lawton, 295 S.W.3d at 647, 649.

End of Document