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At a Glance:
Argonaut Ins. Co. v. Baker
June 20, 2002
87 S.W.3d 526
Published Opinion

Argonaut Ins. Co. v. Baker

Supreme Court of Texas.



Debbie BAKER, individually and as next friend of Anthony Baker, an incapacitated person, and as next friend of M.B., a minor, and Leighla Baker, and Rockey Baker, Respondents.

No. 01–0287.


Argued on March 20, 2002.


Decided June 20, 2002.

Attorneys & Firms

*527 James W. Grau, Grau Ashley & Koen PC, Dallas, for Petitioner.

Thomas B. Cowart, Law Offices of Windle Turley, Dallas, for Respondent.


Justice RODRIGUEZ delivered the opinion of the Court, in which Chief Justice PHILLIPS, Justice JEFFERSON join.

In 1989, the Texas Legislature required every workers’ compensation carrier to offer optional deductible plans to allow policyholders to “self-insure” for the deductible amount. 36 S.W.3d 587. Because we hold that it does not, we reverse the court of appeals’ judgment in part and remand to the trial court for further proceedings consistent with this opinion.

I. Facts

Anthony Baker, an employee of Flowers Construction Company, was injured in a collision with a truck driven by an employee of Rocha Trucking. Because he was injured in the course and scope of his employment, Baker filed a claim for workers’ compensation benefits with Argonaut Insurance Company, Flowers’ workers’ compensation insurance carrier. At the time, Flowers had a deductible plan that provided for Flowers to self-insure the first $250,000 of loss arising from each work-related injury suffered by its employees. Under the policy, Argonaut would first apply any recovery from a liable third party to benefit payments made by Argonaut in excess of the $250,000 deductible, and the remainder of any recovery would be applied to reduce the deductible amount Flowers owed.

TEX. INS.CODE art. 5.55C(d). Argonaut paid a total of $352,596.13 in workers’ compensation benefits to and on behalf of Baker, including the $250,000 paid from the deductible.

Baker’s wife sued Rocha Trucking and the truck driver on Baker’s behalf for damages arising from the accident. Soon after, Argonaut intervened to assert its subrogation right, under the Labor Code, to recover from the defendants the $352,596.13 in benefits it had paid. The Bakers disputed Argonaut’s entitlement to reimbursement for the $250,000 in benefits paid from Baker’s deductible, arguing that it was forbidden by Id. art. 5.55C(f). Rocha Trucking and its driver ultimately agreed to pay $882,000 to settle all claims asserted against them in the lawsuit, including Argonaut’s claim as Baker’s subrogee. Under the settlement, $529,403.87 was paid to the Bakers and the remaining $352,596.13 was submitted to the Bakers’ counsel to be held in trust pending resolution of the Bakers’ challenge to Argonaut’s reimbursement claim for the $250,000.

Argonaut moved the trial court for an order to distribute its workers’ compensation lien on the $352,596.13. The parties then filed cross motions for summary judgment, each asserting their entitlement to the $250,000 in dispute. After a hearing, the trial court granted Argonaut’s motions, denied the Bakers’ motion for summary judgment, and awarded Argonaut the full $352,596.13, less attorneys’ fees and expenses awarded to the Bakers’ counsel for their role in achieving the settlement. The court of appeals modified the trial court’s judgment and reduced Argonaut’s recovery by $250,000. The court of appeals reversed the remainder of the trial court’s judgment, which awarded the Bakers’ counsel attorney’s fees and expenses incurred in connection with the recovery of the settlement, and remanded to the trial court for further proceedings. Argonaut filed this petition for review asking us to reinstate the trial court’s judgment awarding *529 it full reimbursement. No one petitioned this Court for review of the court of appeals’ judgment remanding the issues of attorney’s fees and expenses to the trial court.

II. Analysis

When both parties move for summary judgment and one motion is granted and one denied, the appellate court should determine all questions presented and render the judgment that the trial court should have rendered. Id. at 357.


Argonaut relies on section 417.002 requires reimbursement from the settlement funds for the full $352,596.13 paid.

On the other hand, the Bakers contend that allowing Argonaut to recover the $250,000 from the settlement funds effectively passes the cost of the deductible from the employer to the employee, a result article 5.55C’s prohibition on the employee being made to pay the deductible, coupled with its requirement that the employer reimburse the carrier for benefits paid to the extent of the deductible amount, precludes Argonaut from obtaining reimbursement from the settlement funds for the $250,000 paid from the deductible.


Because this case turns on the construction of several statutory provisions, we start with the provisions themselves. We construe a statute, “first, by looking to the plain and common meaning of the statute’s words.” Section 417.002 does not limit the carrier’s right to reimbursement to those payments made in excess of the deductible amount. Thus, taken together, these provisions establish the carrier’s right to reimbursement to the total amount of benefits it has paid, including those benefits payable from the deductible.

The Bakers contend, however, that allowing the full reimbursement required by article 5.55C, allows the carrier reimbursement of benefits paid, including benefits payable from the deductible, from any third-party recovery.

Rather than conflicting with TEX. LAB.CODE § 415.006.

Presumably, when the Legislature enacted TEX. GOV’T CODE § 311.026(a) (“If a general provision conflicts with a special or local provision, the provisions shall be construed, if possible, so that effect is given to both.”).

Thus, Article 5.55C was necessary to prevent employers from requiring employees to pay the deductible amount when there is no third-party recovery or when the third-party recovery is insufficient to fully reimburse the carrier. Because the employer must then reimburse the carrier for all or part of the deductible amount because it is not being paid by a third-party tortfeasor, section 5.55C(f) prohibits the employer from requiring the injured employee to pay that deductible.

Our construction is consistent with the Texas Department of Insurance’s position. The Department is the agency legislatively charged with “regulat [ing] the business of insurance in this state” and “ensur[ing] that [the Insurance Code] and other laws regarding insurance and insurance companies are executed.” TEX. Tarrant Appraisal Dist. v. Moore, 845 S.W.2d 820, 823 (Tex.1993).

III. Conclusion

In sum, we conclude that Argonaut must be reimbursed from the settlement proceeds for the benefits it has paid to and on *532 behalf of Baker, including those paid from the deductible. Accordingly, we reverse the court of appeals’ judgment in part and remand to the trial court for further proceedings consistent with this opinion.

Justice O’NEILL concurred in the judgment only.

Justice HANKINSON filed a dissenting opinion.

Justice HANKINSON, dissenting.

The facts of this case are perhaps no different than any other case in which a third party injures someone covered by worker’s compensation insurance, and in accord with its statutory subrogation rights, the worker’s compensation insurer seeks to recoup benefits paid. But there is one essential difference in this case that the Court discusses but then disregards—that is, that Anthony Baker’s employer, Flowers Construction Company, chose an insurance plan with an optional self-insured deductible of $250,000, but then did not pay any part of that deductible to its workers’ compensation carrier, Argonaut Insurance Company. By choosing a deductible plan, Flowers received a substantial premium discount of over $400,000. But also by choosing a deductible plan, Flowers bound itself to pay the deductible amount to Argonaut under TEX. INS.CODE art. 5.55C(d).

The Court, however, permits Argonaut to recover the amount of the deductible from Anthony’s settlement, instead of from Flowers, even though Flowers is legally responsible under the Insurance Code for paying the deductible, and has not done so. In so holding, the Court accepts Argonaut’s contention that the deductible is not relevant, and treats this case as if 401.011(27). Thus, the Court has shifted the risk represented by the employer’s choice of a deductible policy from the employer to the employee, which the Legislature has plainly forbidden, and created statutory subrogation rights in favor of the employer, which the Legislature has plainly not provided. Accordingly, I respectfully dissent.

In its 1989 overhaul of the worker’s compensation system, one of the Legislature’s primary goals was to reduce the cost of worker’s compensation insurance and bring more employers into the system. See Ashcraft & Alessandra, A Review of the New Texas Workers’ Compensation System, 21 TEX. TECH. L.REV. 609, 610 (1990); 1 MONTFORD ET AL., A GUIDE TO TEXAS WORKERS’ COMP REFORM, at 1–2 (1991). As part of its efforts to achieve that goal, the Legislature amended the Insurance Code to authorize, among other reforms, premium incentives for small employers, group insurance, certified self-insurance, and certain loss-sensitive insurance arrangements, including retrospectively rated policies and optional deductible plans. Act of Dec. 11, 1989, 71st Leg., 2nd C.S., ch. 1, § 13.08, 1989 Tex. Gen. Laws 85; 2 MONTFORD, supra, at 13–8. A deductible plan allows an employer to reduce its premium by agreeing to reimburse the insurer for benefits the insurer pays to injured employees up to the deductible amount. See TEX. INS.CODE art. 5.55C(c), (d). This kind of plan effectively shifts the risk of having to pay the amount of the deductible away from the *533 insurer and to the employer in exchange for a reduction of the insurance premium.

Deductible plans are governed by the detailed provisions of TEX. LAB.CODE § 415.006(a) (“An employer may not collect from an employee, directly or indirectly, a premium or other fee paid by the employer to obtain workers’ compensation insurance coverage,” except under certain circumstances concerning general contractors, subcontractors, and motor carriers).

The Bakers’ argument is simple—that under TEX. LAB.CODE § 415.006(a) (“[a]n employer may not collect from an employee, directly or indirectly, a premium or other fee paid by the employer to obtain workers’ compensation insurance coverage”).

We can harmonize the specific provisions governing deductible plans with an insurer’s general statutory right to subrogation under article 5.55C can be reconciled with a carrier’s general statutory right to subrogation by reimbursing the carrier from an employee’s settlement or damages recovery for benefits paid over the deductible amount. But because the Legislature has mandated that an employee cannot be required to pay any part of the deductible, the carrier must seek reimbursement for the deductible from the party statutorily and contractually responsible to pay it—the employer.

Thus my interpretation of the relevant sections of the Insurance Code and the Labor Code provides for full reimbursement *534 to the insurer of all benefits it has paid, while at the same time preventing it from shifting payment of the deductible from the employer to the employee. An insurer that has paid benefits to an injured employee may recoup any amounts in excess of the deductible from the employee’s settlement or damages recovery, thereby giving effect to Insurance Code art. 5.55C. This ensures that the employer bears the financial risk it assumed when it opted for a lower premium in exchange for a higher deductible, without defeating the insurer’s right to subrogation for the benefits it has paid.

Moreover, to permit Argonaut to recoup the deductible owed by Flowers means that Argonaut is actually asserting subrogation rights on Flowers’ behalf. Argonaut’s counsel agreed as much in briefing and at oral argument of this cause: “[T]he insurer in this case is actually also pursuing the employer’s subrogation rights to the extent of the employer’s deductible.” (Brief on the Merits at 9); “[I]n a sense Argonaut stands here today also in the shoes of Flowers Construction under the contract.” (Oral Argument Transcript at 3). But an employer who chooses a deductible plan does not have subrogation rights under the Labor Code. Subrogation rights under id. §§ 401.011(6) (defining “certified self-insurer”), 401.011(28) (defining “insurance company”).

The carrier simply does not have a subrogation right with regard to the deductible. Permitting the carrier to recover the deductible in this case is possible only if one accepts Argonaut’s proffered fiction that it is asserting its own subrogation right, when it is actually asserting the employer’s putative subrogation right. But by accepting this fiction, the Court extends subrogation rights to employers with deductible plans, notwithstanding: (1) the absence of such rights in the Labor Code; (2) that the Insurance Code requires the employer to pay the deductible; and (3) that the claim against the third party belongs to the employee. See article 5.55C applies only when there is no recovery from a third party, or when the recovery is less than the deductible amount. But the Court’s effort to treat Argonaut’s subrogation claim on Flowers’ behalf as if it were Argonaut’s own subrogation claim effectively amends the statutes in the Legislature’s stead.

Nor is Anthony receiving a double recovery, as Argonaut contends. Anthony suffered severe permanent injuries, including brain damage, when an eighteen-wheel tractor-trailer going the wrong way on a divided highway slammed into the van he was riding in while on the job. His wife sued the driver and trucking company on behalf of Anthony and their children. The trucking company’s insurer tendered policy limits, and shortly after the Bakers filed suit the parties settled for $657,000 in cash and $225,000 in an annuity. Although Anthony’s *535 family members each claimed loss of consortium, the parties allocated the full settlement amount to Anthony. There is no dispute that Anthony’s ongoing medical expenses will likely exceed the amount of the settlement and his worker’s compensation benefits. Thus Anthony has yet to be made whole, and so Argonaut’s contention that he is receiving a double recovery in this case is incorrect. Furthermore, this argument is beside the point.

The specialized statutory subrogation rule in worker’s compensation—that first money goes to the insurer—exists because we have a no-fault worker’s compensation system. And under that no-fault system, for public policy reasons, we permit the insurer to recoup what it has paid ahead of anyone else’s interest, sometimes in derogation of the employee’s right to be made whole, a right that would be superior under equitable subrogation principles. Compare Continental Casualty Co. v. Downs, 81 S.W.3d 803, 805 (Tex.2002). That construction is at odds with the Legislature’s plain language forbidding an employee from paying the deductible and excluding employers from those entitled to statutory subrogation rights.

This cause presents a simple question: As between the employer and the employee, who should reimburse the carrier for the deductible? I agree with the court of appeals’ answer that “[r]egardless of how it is characterized, reimbursement of the deductible amount out of an employee’s recovery from a third-party amounts to payment of the deductible by the employee instead of the employer. This is statutorily forbidden.” article 5.55C(f)’s prohibition on requiring employees to pay any of the deductible amount. It also creates statutory subrogation rights in favor of employers, when the Labor Code does not provide them. Accordingly, I respectfully dissent.



See TEX.REV.CIV. STAT. art. 8307, § 6a, repealed by Act of Dec. 12, 1989, 71st Leg., 2d C.S., ch. 1, § 16.01(10), 1989 Tex. Gen. Laws 1, 114.

End of Document