Court of Appeals of Texas, Houston (14th Dist.).

CURLEE MANUFACTURING COMPANY, INC., Appellant

v.

THE CHARTER OAK FIRE INSURANCE COMPANY, INC. and THE TRAVELERS INSURANCE COMPANY, INC., Appellees

No. B14-92-01298-CV.

|

May 26, 1994.

OPINION ON MOTION FOR REHEARING

MORSE, Justice.

*1 This is an appeal from a dismissal for want of jurisdiction and a summary judgment granted in favor of The Charter Oak Fire Insurance Company, Inc. (Charter) and The Travelers Insurance Company, Inc. (Travelers), appellees. Curlee Manufacturing Company, Inc. (Curlee) brought suit against appellees for breach of contract, breach of the duty of good faith and fair dealing, and alleged that appellees’ wrongful acts, omissions, and misrepresentations violated the article 21.21 § 16 of the Texas Insurance Code. In its judgment, the trial court first dismissed Curlee’s claim requesting reimbursement of medical expenses, i.e., breach of contract, for want of jurisdiction because the court found the it constituted a claim for statutory workers’ compensation benefits and was never presented to the Texas Workers’ Compensation Commission (the Commission).¹ Alternatively, the court held that appellees were entitled to summary judgment on this claim because Curlee lacked standing and any other legal basis to assert the claim. The trial court also granted summary judgment on Curlee’s claim for breach of the duty of good faith and fair dealing and violations of the Texas Insurance Code because: (1) appellees had a reasonable basis to deny Curlee’s claim under the policy; and (2) appellees owed no duty of good faith and fair dealing to Curlee as a matter of law in connection with Curlee’s claim for reimbursement of medical expenses. Moreover, the trial court granted summary judgment to appellees on all of Curlee’s claims finding that they were preempted by ERISA as a matter of law. Lastly, the court held that Travelers was entitled to summary judgment as to all of Curlee’s claims because Travelers did not issue the workers’ compensation policy in question to Curlee. The trial court signed this judgment on August 11, 1992. Curlee brings twelve points of error challenging the trial court’s judgment.

Thermon Industries is a holding company which owns all of Thermon Manufacturing. Thermon Manufacturing, in turn, owns ninety percent (90%) of Curlee. Thermon Industries purchased a group health insurance plan for its employees from Aetna Life Insurance Company, Inc. (Aetna). Under this health plan, Thermon Industries was “self-insured” for the first $25,000.00 of medical expenses incurred by an employee. In other words, the company had a $25,000.00 per occurrence deductible or was self-insured for the first $25,000.00 in medical expenses. Curlee admits that its employees were insured under this plan.

Curlee purchased a workers’ compensation policy (the Policy) from Charter. The Policy was issued by Charter and was in effect from February 19, 1988, through February 18, 1989. It was administered by employees of Travelers on Charter’s behalf. The Policy covered reasonable and necessary medical expenses that might be incurred by an employee who suffered a work-related injury. While this Policy and the Aetna policy were in effect, Larry Graham, a Curlee employee, allegedly suffered a non-work related injury. Graham told Curlee on or about July 15, 1988, that he had been injured and that injury was not work related. Based on this, Graham’s medical bills were paid pursuant to the Aetna policy. Aetna then sent a bill to Thermon Industries. The bill asked Thermon Industries to pay Aetna $25,000.00 pursuant to the terms of the policy. Thermon Industries paid the bill and was reimbursed by Thermon Manufacturing who was in turn, reimbursed by Curlee.

*2 Less than six months after the alleged non-work related injury, Graham filed a workers’ compensation claim with Charter claiming that the same injury was, in fact, work-related. Curlee notified Charter, at least by February 13, 1989, that it had paid the first $25,000.00 of Graham’s medical bills under its group health insurance policy. Charter controverted Graham’s claim on two grounds. First, that Graham had failed to provide the proper notice of his injury; and second, that his alleged injury did not occur in the course and scope of his employment with Curlee. Nevertheless, Charter compromised and settled Graham’s claim for $27,000.00 on December 21, 1989. Curlee was not a party to the agreement between Charter and Graham, nor was Curlee notified of the Compromise and Settlement Agreement (CSA) before its execution. The settlement was approved by the Texas Industrial Accident Board, now the Texas Workers’ Compensation Commission, which found Graham’s claim to be uncertain, indefinite, and incapable of being satisfactorily established.

The record reflects that prior to this settlement, an executive administrator for Curlee, Lisha Witt-Mahler, told employees of Travelers that Curlee had paid the $25,000.00 deductible. Once Curlee learned that Charter had paid Graham $27,000.00 in settlement of his workers’ compensation claim, Curlee demanded that Charter reimburse it for the $25,000.00 in medical bills paid by Curlee. Charter denied Curlee’s claim for reimbursement. Curlee then brought suit to compel payment and asserted various bad faith claims. The trial court found in favor of Charter and Travelers on all claims. Curlee brings an appeal from that judgment.

In its first point of error, Curlee claims the trial court erred in dismissing its claims for want of jurisdiction on the ground that they were not presented to or considered by the Texas Workers’ Compensation Commission. Curlee argues under this point of error that the trial court’s judgment dismissed all of its claims on this basis. Curlee has misread the trial court’s final judgment. In the first part of its judgment, the trial court dismissed Curlee’s claim for “reimbursement of medical expenses,” i.e. its breach of contract claim. It did not dismiss Curlee’s claim that appellees breached their duty of good faith and fair dealing or Curlee’s claim under the Texas Insurance Code.² Therefore, we will review this point only as it relates to the trial court’s dismissal of the breach of contract claim.

Curlee argues that the trial court erred because its claim did not arise under the Texas Workers’ Compensation Act and therefore, Curlee had no duty to present the claim to the Commission. Further, Curlee claims it would have been pointless to do so because the Commission did not have jurisdiction. Citing article 8307, section five of the Texas Workers’ Compensation Act, which was in effect at the time of the parties’ dispute, appellees argue that Curlee’s claim for reimbursement derived from Graham’s claim, and therefore, had to be presented to the Commission before suit was filed. See Act approved March 28, 1917, 35th Leg., R.S., ch. 103, part II, § 5, 1917 Tex. Gen. Laws 269, 283-84, repealed by Act approved December 13, 1989, 71st Leg., 2nd C.S., ch. 1, § 6.61, 1989 Tex. Gen. Laws 1, 60-61, repealed by Act approved May 22, 1993, 73rd Leg., R.S., ch. 269, § 5(2), 1993 Tex. Gen. Laws 987, 1273. Section five states that “[A]ll questions arising under this law, if not settled by agreement of the parties interested therein and within the provisions of this law, shall, except as otherwise provided, be determined by the Board.” Id.

*3 In determining subject matter jurisdiction, the trial court is to look only to the allegations in the plaintiff’s pleading, and the allegations must be taken as true. See Texas Ass’n of Business v. Texas Air Control Bd., 852 S.W.2d 440, 446 (Tex.1993). Unless the petition affirmatively demonstrates an absence of jurisdiction, the trial court must construe the petition liberally in favor of jurisdiction. Peek v. Equipment Serv. Co., 779 S.W.2d 802, 804 (Tex.1989); W. Wendell Hall, Revisiting Standards of Review in Civil Appeals, 21 ST. MARY’S L.J. 1045, 1058-59 (1993). Whether the trial court has jurisdiction is a question of law. North Alamo Water Supply Corp. v. Texas Dept. of Health, 839 S.W.2d 455, 457 (Tex.App.-Austin 1992, writ denied). If the trial court determines it does not have subject matter jurisdiction, it has no discretion and must dismiss the case. Qwest Microwave, Inc. v. Bedard, 756 S.W.2d 426, 440 (Tex.App.-Dallas 1987, orig. proceeding). In other words, when a court lacks subject matter jurisdiction, dismissal is a purely ministerial act; no adjudicative act is involved, and all discretion is extinguished. Id.

When an appellate court reviews a trial court’s order dismissing a case or a claim for want of jurisdiction, it too must construe the pleadings in the light most favorable to the pleader in an attempt to determine the pleader’s intent. Texas Ass’n of Business, 852 S.W.2d at 446; Paradissis v. Royal Indem. Co., 496 S.W.2d 146, 148 (Tex.Civ.App.-Houston [14th Dist.] 1973), aff’d, 507 S.W.2d 526 (Tex.1974).

The Texas Workers’ Compensation Act sets forth a compensation scheme that is based on a three-party agreement entered into by the employer, the employee, and the compensation carrier. Aranda v. Insurance Co. of North Am., 748 S.W.2d 210, 212 (Tex.1988)(citing Southern Casualty Co. v. Morgan, 12 S.W.2d 200, 201 (Tex. Comm’n App.1929, judgm’t adopted)). The employer subscribes to the insurance provided by the compensation carrier and the two parties enter a contract. See Aranda, 748 S.W.2d at 212. As a result of the contract between the employer and the compensation carrier, the carrier agrees to compensate the employee for injuries sustained by the employee in the course and scope of his employment, and the employee agrees to relinquish his common law rights against the employer. 748 S.W.2d at 212 (citing Morgan, 12 S.W.2d at 201). For this benefit, the employer pays for or contributes to the coverage provided by the carrier.

The Texas Workers’ Compensation Act provides a compensation scheme for “personal injuries sustained by an employee in the course of his employment.” 748 S.W.2d at 214 (quoting Act approved March 28, 1917, 35th Leg., R.S., ch. 103, part I, § 1, 1917 Tex. Gen. Laws, 269, 270, repealed by Act approved December 13, 1989, 71st Leg., 2nd C.S., ch. 1, § 3.01, 1989 Tex. Gen. Laws 1, 14, repealed by Act approved May 22, 1993, 73rd Leg., R.S., ch. 269, § 5(2), 1993 Tex. Gen. Laws 987, 1273. The Act’s purpose is to provided “speedy, equitable relief to an employee injured in the course of his employment.” 748 S.W.2d at 212. Thus, the remedies afforded by the statute are exclusive only if the injury complained of is an injury contemplated by the Act, i.e., a personal injury sustained in the course of employment, 748 S.W.2d at 214. [emphasis added]

*4 Appellees argue that Curlee’s claim for medical expenses derived from the employee’s claim. Thus, it constituted a claim for statutory workers’ compensation benefits and arose under the Act, therefore, pursuant to article 8307, section five, Curlee was required to present the claim to the Texas Workers’ Compensation Commission first. In support of this position, appellees cite Smith v. Stephenson, 641 S.W.2d 900 (Tex.1982). In Smith, the supreme court held that a chiropractor could not pursue a claim for medical expenses against a patient covered under the Texas Workers’ Compensation Act until he pursued his administrative remedy through the Industrial Accident Board. 641 S.W.2d at 901. In making this decision, the court relied not only on article 8307, section five, but on the portion of the Act which stated that if the chiropractor was not satisfied with the Board’s determination, the chiropractor was “entitled to appeal [the] Board’s determination as if it were a party to the action.” Id. The issue in Smith was not the same as the one before this court. In Smith, the issue was whether the employee’s obligation to pay a medical provider was secondary to that of the insurance carrier. Id. at 902. [emphasis added] It had nothing to do with an employer’s claim that the insurance carrier had breached its contract with the employer. Because the court found that the employee’s obligation to the medical provider was secondary to the carrier’s obligation, the court held that the provider could not pursue a private claim against the employee until the Board determined whether the carrier was obligated and for what. Id. After that determination, the chiropractor could appeal the decision based on the specific provisions in the Act. Id. at 901.

Here, while Curlee requested a reimbursement of the medical expenses it paid on the employee’s behalf, its second amended petition clearly shows that “reimbursement” was not its cause of action. The cause of action was for breach of the insurance contract between Curlee and Charter. Curlee alleged in its petition that Charter was obligated under the terms of the contract to reimburse Curlee in this situation, and that its failure to do so constituted a breach. Thus, contrary to appellees’ position, the breach of contract claim did not arise under the Texas Workers’ Compensation Act and therefore, Curlee was not obligated to present its breach of contract claim to the Texas Workers’ Compensation Commission. Curlee was not an employee covered under the Act, nor was it a health care provider making a claim under the Act; rather, it was a named insured suing under the contract it executed with the carrier. Thus, as pled by Curlee in its second amended petition, the cause of action arose out of the contract between the parties; it did not arise out of the Act. The purpose of the Act was not to govern the relationship between a subscriber, i.e., an employer, and insurance carrier because the insurance contract does that. The breach of contract claim raised by Curlee in its second amended petition is independent of the Act and stands on its own. Therefore, the trial court erred in dismissing Curlee’s breach of contract claim for want of jurisdiction. When Curlee’s second amended petition is viewed in the light most favorable to Curlee, it is clear that Curlee’s intent was to state a cause of action based on its contract with Charter and outside of the Texas Workers’ Compensation Act. Curlee’s first point of error is sustained.

*5 In points of error two through twelve, Curlee complains that the trial court erred in granting summary judgment for appellees. When an appellate court reviews a summary judgment, the judgment is not entitled to the same deference given a judgment following a trial on the merits. See Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex.1985). The appellate court does not view the evidence in the light most favorable to the trial court’s judgment; rather, it must indulge every reasonable inference in favor of the non-movant. Id. The issue is not whether the non-movant raised a material fact issue sufficient to defeat the motion for summary judgment, but whether the movant has proved it is entitled to judgment as a matter of law. Gibbs v. General Motors Corp., 450 S.W.2d 827, 828-29 (Tex.1970); TEX. R. CIV. P. 166a(c). If the movant does not meet its burden, the appellate court must reverse and remand the case to the trial court for further proceedings. Gibbs, 450 S.W.2d at 828-29. The appropriate standard of review has been clearly delineated by the Texas Supreme Court:

1. The movant for summary judgment has the burden of showing there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.

2. In deciding whether there is a disputed material issue of fact that would preclude summary judgment, evidence favorable to the non-movant must be taken as true.

3. Every reasonable inference must be indulged in favor of the non-movant and any doubt resolved in its favor.

Nixon, 690 S.W.2d at 548-49; Montgomery v. Kennedy, 669 S.W.2d 309, 310-11 (Tex.1984).

Curlee, in its second point of error, contends the trial court erred in granting summary judgment in favor of appellees on the basis that Curlee had not presented its breach of contract claim to the Texas Workers’ Compensation Commission. Curlee has once again misread the trial court’s judgment. The trial court did not grant summary judgment to appellees on this basis. The trial court dismissed Curlee’s breach of contract claim for want of jurisdiction on this basis, but when it granted summary judgment for appellees on the breach of contract claim, this was not a basis for the judgment. Thus, it is unnecessary to review this point of error.

In points of error three through six, Curlee claims the trial court erred in granting summary judgment in favor of appellees on its breach of contract claim.³ In this portion of the trial court’s judgment, the court stated that appellees were entitled to summary judgment on Curlee’s breach of contract claim because Curlee lacked standing and any statutory, contractual, or other legal basis to recover. The court further ruled that appellees had no legal obligation to reimburse Curlee.

As we stated above, while Curlee was seeking to recover the costs it paid on behalf of its employee, its claim was based on its contract with Charter. A party to an insurance contract has standing to sue for its breach. Aranda, 748 S.W.2d at 212. Because Curlee was a named insured under the contract in question, Curlee obviously had standing to sue on the contract. As to Travelers, it is possible, pursuant to the terms of the contract, that Curlee could sue Travelers as well. The record clearly shows that the policy, i.e ., the contract, was administered by, and Curlee’s claim was denied by, representatives for Travelers. Once Curlee made its claim, Travelers, according to the document in the record before this court, took over. Thus, it is possible that certain provisions in the contract specifically provided that Travelers would undertake these actions. Perhaps the contract even included Travelers as a party. Since the contract is not in the record before this court, there is an issue of fact as to whether Travelers is liable for any breach based on provisions in the insurance contract. Appellees argue that the ruling was appropriate because Curlee did not demonstrate any contractual right to reimbursement. This is irrelevant as it relates to the issue of standing. Whether Curlee is entitled to recover is not the issue, the issue is whether Curlee can bring suit. Because Curlee and Charter had a contract, and because there is a fact issue as to whether Travelers was a party to the contract, the trial court erred in ruling Curlee did not have standing to bring a breach of contract claim.

*6 The trial court also ruled appellees were entitled to summary judgment because Curlee had no “statutory, contractual, or other legal basis to assert or recover on such claim from Defendants.” As we stated in our discussion under point of error number one, Curlee’s breach of contract claim did not arise under the Texas Workers’ Compensation Act. Curlee’s claim was based on its contract with Charter as administered by Travelers. Thus, Curlee did have a legal right to bring suit against Charter based on this contractual relationship. Further, as we stated above, there is a fact question as to whether Curlee could bring suit against Travelers based on the contract. Curlee did not need an assignment from the employee or Aetna, as suggested by appellees, because its claim is outside of the Act, based on its own contract with Charter and perhaps, the provisions in the contract relating to Travelers. As to recovery under the contract, Curlee alleged the contract provided for reimbursement under the circumstances presented in this case. Appellees dispute this and point to the fact that only a portion of the insurance contract is in the record, and that portion proves that appellees were not required to reimburse Curlee under the circumstances. In support of this position, appellees point to an admission by Curlee which stated as follows:

REQUEST FOR ADMISSION NO. 86 :

The worker’s [sic] compensation policy in question expressly states as follows: “Do not voluntarily make payment, assume obligations or incur expenses, except at your own cost.”

RESPONSE : Curlee admits that Policy No. UDO-UB-473J018-6-88 contains the quoted words. Curlee denies, however, that the quoted words are an effective part of the policy because endorsement WC 42 03 01(A)-001 attached to the policy supersedes the quoted words. Curlee further denies that any payments it made before being notified of a compensable injury are prohibited or affected in any way by the quoted words. Except as specifically admitted above, denied.

This summary judgment proof does nothing more than raise a fact issue concerning the language in the policy. Is there an endorsement that supersedes this language? We do not know because the entire policy is not in the record. It was appellees’ burden to prove its case as a matter of law, and we must indulge reasonable inferences in favor of Curlee. Nixon, 690 S.W.2d at 548-49; Montgomery, 669 S.W.2d at 310-11. Further, in their responses to Curlee’s requests for admission, Charter admitted that the policy contained the following: “[W]e are directly and primarily liable to any person entitled to the benefits payable by this insurance.”⁴ While admitting this language was in the policy, Charter denied that it was liable to Curlee and that the language in the request had to be considered along with other provisions in the policy.

This swearing match over the terms of the policy and what they did nor did not mean, what was in effect, and what was superseded raises numerous fact issues over Curlee’s right to recover under the insurance contract. Because the entire policy is not in the record, it is impossible to make this determination. Appellees had the burden to prove they were entitled to judgment as a matter of law. Contrary to appellees’ contention, it was not Curlee’s burden to produce proof that it was entitled to recover under the contract or to “demonstrate that it has a right arising from a contract, an assignment, or other source to force Charter Oak or Travelers to reimburse it;” rather, it was appellees’ burden to prove as a matter of law that Curlee had no such right. Because Curlee obviously had standing to sue Charter and perhaps Travelers, under the provisions in the contract, and there are fact issues as to whether Curlee had a right to recover on its breach of contract claim, the trial court erred in ruling appellees had no obligation to reimburse Curlee. For all the record shows, Charter and Travelers could very well be obligated to reimburse Curlee. These issues can only be determined by an examination of the entire insurance contract. Curlee’s third through sixth points of error are sustained.

*7 After granting summary judgment for appellees on Curlee’s contract claim, the trial court also granted summary judgment on Curlee’s claim that appellees had breached the duty of good faith and fair dealing and violated the Texas Insurance Code. The trial court based its ruling on the fact that appellees had a reasonable basis to deny Curlee’s claim under the policy, and that appellees did not owe Curlee a duty of good faith and fair dealing in connection with its claim for reimbursement. Curlee challenges these rulings in points of error seven through ten.

In point of error eight, Curlee claims the trial court erred in ruling that Charter owed no duty of good faith and fair dealing to Curlee because the undisputed proof established that an insurer/insured relationship existed between Charter and Curlee and therefore, Charter owed Curlee the duty of good faith and fair dealing as a matter of law.

In its judgment, the trial court stated: … Defendants [Charter and Travelers] owed no duty of good faith and fair dealing to Plaintiff [Curlee] in connection with Plaintiff’s claim for reimbursement of medical expenses.

As we stated earlier, while Curlee requested a reimbursement of the medical expenses it paid on the employee’s behalf, its second amended petition clearly shows that “reimbursement” was not its cause of action. The cause of action was for breach of the insurance contract between Curlee and Charter. Curlee alleged in its petition that Charter was obligated under the terms of the contract to reimburse Curlee in this situation, and that its failure to do so constituted a breach. Thus, the question is whether Charter was required to act fairly and in good faith based on its contract with Curlee.

In Texas, there are three recognized claims of breach of good faith and fair dealing. Charter Roofing Co., Inc. v. Tri-State Ins ., 841 S.W.2d 903, 905 (Tex.App.-Houston [14th Dist.] 1992, writ denied). This extra-contractual liability has been developed through case-law. Id.

The first type of liability occurs when an insurer fails to accept an offer of settlement after being given a reasonable time to do so and the insured then suffers a judgment in excess of the policy limits. Id. (citing G.A. Stowers Furniture Co. v. American Indem. Co., 15 S.W.2d 544 (Tex. Comm’n App.1929, holding approved); Highway Ins. Underwriters v. Lufkin-Beaumont Motor Coaches, Inc., 215 S.W.2d 904 (Tex.Civ.App.-Beaumont 1948, writ ref’d n.r.e.)). Texas courts have also recognized that an extra-contractual claim for liability arises from the handling of workers’ claims for benefits under a workers’ compensation policy. Id. (citing Aranda v. Insurance Co. of North Am., 748 S.W.2d 210 (Tex.1988).

Lastly, in Arnold v. National County Mut. Fire Ins. Co., 725 S.W.2d 165 (Tex.1987), the Texas Supreme Court recognized the extra-contractual liability in first party insurance cases. Id. In Arnold, the supreme court recognized a duty on the part of the insurer to deal fairly and in good faith with its insured in the processing and payment of claims. 725 S.W.2d at 167. The court stated that a duty of good faith and fair dealing may arise as a result of a special relationship between the parties governed or created by a contract. Id. [emphasis added] In the insurance context, this special relationship arises out of the parties’ unequal bargaining power and the nature of insurance contracts which would allow “unscrupulous insurers to take advantage of the insureds’ misfortunes in bargaining for settlement or resolution of claims.” Id. Thus, if there is unequal bargaining power between the parties, the insurer owes a duty of good faith and fair dealing to its insured. See id. So far, Texas courts have only recognized that such a disparity exists when the case involves an individual and an insurance company. See, e.g., Arnold, 725 S.W.2d at 167.⁵

*8 It is undisputed that Charter, as the workers’ compensation insurer, and Curlee, as the insured, entered into an insurance contract. However, because the contract is not in the record, there is nothing to suggest there was a special relationship between the parties arising out of the contract, nor is there any summary judgment proof to show whether there was or was not any disparity in bargaining power. See id. Charter failed to prove as a matter of law that there was no special relationship between the parties or that there was equal bargaining power. Thus, on the basis of the record before us, there is an essential fact question as to the contractual relationship between the parties, the determination of which is a prerequisite for deciding whether a duty of good faith and fair dealing was owed to Curlee. Appellees lack of proof in this regard is fatal to the summary judgment on this point. We therefore hold that the trial court erred in ruling as a matter of law that Charter did not owe this duty to Curlee. Curlee’s eighth point of error is sustained.

In point of error number nine, Curlee contends the trial court erred in ruling that Travelers did not owe a duty of good faith and fair dealing to Curlee because genuine issues of material fact exist as to whether Travelers, as the administrator of the policy, owed such a duty to Curlee. This point of error is related to Curlee’s tenth point of error. In that point, Curlee argues the trial court erred in ruling that Travelers could not be liable to Curlee because it did not issue the insurance policy in question. These two points will be discussed together.

The summary judgment proof shows that Charter issued the policy to Curlee, however, the day to day administration of the policy and the claims made under it was handled by Travelers’ employees. Thus, appellees assumed different roles that combined to cover all aspects concerning the issuance and administration of the insurance policy. The record also reflects that Charter and Travelers shared offices and employees. For example, Denise Elliot, an employee of the Travelers Company, was the claims analyst who wrote the letter denying Curlee’s claim. Ms. Elliot, by Charter’s own admission, had authority to deny Curlee’s claim.

From this and other proof in the record, it is clear that Charter and Travelers acted together as far as Curlee’s insurance policy was concerned. They simply divided up areas of responsibility in regard to the policy, i.e., Charter issued the policy and Travelers administered it. Because the entire insurance contract is not in the record, we have no way of knowing whether the contract specifically delineated certain areas of responsibility to Travelers; and because the entire insurance contract is not in the record, it is impossible to know whether these duties were undertaken by Travelers as required by provisions in the contract. We have already held that there are fact issues as to whether Travelers is a party to the contract. If Travelers is a party to the contract, then the duty to act in good faith and deal fairly with Curlee, if such a duty exists in this case, applies to it. If Travelers is not a party to the contract, then no such duty exists. Natividad v. Alexsis, 37 Tex. Sup.Ct. J. 722, 723 (April 28, 1994). We also note that there is correspondence in the record from the attorney for Travelers, Mr. Kizzia, which states that “Travelers” entered into the CSA with Graham. The fact that Travelers entered into the CSA is further proof that there are fact issues as to whether Travelers was a party to the contract.

*9 Appellees argue that because there was no contract between Travelers and Curlee, Travelers did not have any duty to Curlee to act in good faith and cannot be liable as to any of Curlee’s other claims. This contention simply keys the real summary judgment issue: whether Travelers was a party to the contract. As we have stated, fact issues exist as to whether Travelers was a party to the contract. Thus, until it is determined, by proper proof, whether Travelers was a party to the contract, it is impossible to determine whether they owed a duty of good faith and fair dealing to Curlee. See id. Curlee’s ninth and tenth points of error are sustained.

Curlee argues, under point of error seven, that the trial court erred in ruling that appellees had a reasonable basis to deny Curlee’s claim for reimbursement. Appellees argue that under the supreme court’s holding in Aranda, Curlee had the burden of introducing sufficient proof to support a finding that there was no reasonable basis for the denial and that appellees knew or should have known that they had no reasonable basis to support the denial. Aranda, 758 S.W.2d at 213. Because Curlee did not prove this, appellees argue that the summary judgment was proper. Generally the burden is on the plaintiff, however, in this summary judgment context, the burden is on appellees, the movants, to prove as a matter of law that the denial was reasonable and that they did not or could not have known there was no reasonable basis for the denial. See Gibbs, 450 S.W.2d at 828-29; TEX. R. CIV. P. 166a(c). Curlee, the non-movant, did not have to prove anything. Id.

After Curlee made it claim for reimbursement, its attorney received a letter from Denise Elliot. The letter, dated June 11, 1990, stated:

In response to your telephone call, I am enclosing a copy of the Compromise Settlement Agreement. As you can see, Mr. Graham, with the advice of his attorney, agreed to pay all past and future medical expenses related to the above captioned claim in an exchange for a settlement of $27,000.00. Please look to Mr. Graham for payment of the bills in question.

Appellees claim that on its face, this letter is “clearly not a denial.” We disagree. Though in her affidavit Ms. Elliot denies that she stated or intended to state that the CSA was the sole ground for the denial of Curlee’s claim, she does not dispute that the letter is a denial, and the letter itself clearly tells Curlee to look elsewhere for payment. Further, in Charter’s response to requests for admissions, it admitted that it denied Curlee’s claim on or about June 11, 1990. This is the date of the letter written by Ms. Elliot. The record shows no other correspondence from appellees on that date concerning Curlee’s claim. The summary judgment proof also shows that appellees always deny claims in writing. The only other correspondence in the record concerning the denial of Curlee’s claim was approximately a month later. Appellees thus admitted that the claim was denied on or about June 11, 1990.

*10 Because appellees admitted that June 11, 1990, was the point at which appellees denied Curlee’s claim, we must now determine what information appellees had at the time to support the denial and what steps they took to investigate Curlee’s claim. There is very little proof in the record concerning any investigation by the appellees. In fact, they admit in their brief that the investigation by Ms. Elliot was “small.” It appears that she looked at Graham’s file and the CSA and decided that the claim should be denied. Also, it appears the only information that appellees had at the time the letter was written was their belief that the CSA precluded recovery by Curlee.

Lastly, we have held that Curlee’s claims did not arise under the Texas Workers’ Compensation Act, but instead derived from its insurance contract with Curlee. We have noted that the parties disagree on the terms of the contract and whether it entitles Curlee to recover in this instance and that it is impossible to make this determination because the policy is not in the record. Thus, whether the CSA is sufficient to preclude Curlee from making any claims under the policy is an issue that can only be dealt with after it is determined what the terms of the contract are. Because there is a fact issue as to whether the June 11th letter constitutes a denial based on the CSA and there is insufficient proof in the record to show what the contract provides, there are material issues of fact that prevent a finding that appellees’ denial was reasonable. Therefore, Curlee’s seventh point of error is sustained.

In points of error eleven and twelve, Curlee complains the trial court erred in granting summary judgment in favor of appellees on the basis that all of Curlee’s claims were preempted by ERISA. We agree.

ERISA preempts those cases relating to employee benefit plans. Texas Employers Ins. Ass’n v. Puckett, 822 S.W.2d 133, 141 (Tex.App.-Houston [1st Dist.] 1991, writ denied); 29 U.S.C. § 1003 (1990). A close examination of ERISA reveals that it excepts from coverage a state workers’ compensation plan if: :

(3) such plan is maintained solely for the purpose of complying with applicable workmen’s compensation laws or unemployment compensation or disability insurance laws….

29 U.S.C. § 1003(b)(3) (1990); Puckett, 822 S.W.2d at 141; Smith v. American Economy Ins. Co., 794 S.W.2d 574, 576 (Tex.App.-Fort Worth 1990, writ denied), cert. denied, __ U.S. __, 112 S.Ct. 374, 116 L.Ed.2d 326 (1991). This provision is generally intended to exempt state workers’ compensation plans from preemption by ERISA. Smith, 794 S.W.2d at 576. Texas law gives an employer two choices: (1) comply with the Texas Workers’ Compensation Act and limit liability; or (2) not comply and face unlimited liability in the event of fault. Smith, 794 S.W.2d at 576. Because the employer has a choice, it might appear that the workers’ compensation program is never purchased and maintained solely to comply with state law as required by section 1003(b)(3). However, any argument that section 1003(b)(3) applies only when state law requires the employer to provide workers’ compensation insurance is fundamentally flawed. Puckett, 822 S.W.2d at 141. [emphasis in the original] First, the statute itself states that ERISA shall not apply to any employee benefit plan if the plan is maintained solely to comply with “applicable workmen’s compensation laws.” Id. [emphasis in the original] It does not say mandatory workmen’s compensation laws. Id. [emphasis in the original] In other words, the statute does not require that it be mandatory under the state law to maintain a workers’ compensation program in order to meet the standards of section 1003(b)(3). Puckett, 822 S.W.2d at 141. If an employer buys workers’ compensation insurance, it purchases it to comply with state law, i.e., the Texas Workers’ Compensation Act, in order to limit its liability under state law. See Smith, 794 S.W.2d at 576. Thus, when Curlee purchased and maintained the workers’ compensation insurance policy, it did so solely to comply with state law.

*11 Second, under the interpretation that section 1003(b)(3) applies only if the state law requires an employer to purchase workers’ compensation insurance, the exemption would never apply to Texas cases because Texas gives the employer the choice to purchase the insurance. This would lead to the ridiculous proposition that Texas courts could never review or rule on any claim involving its own workers’ compensation laws whether they be statutory or based on Texas common law.

Also, section 1003(b)(3) exempts any claim under a workers’ compensation plan from preemption by ERISA. The exemption does not state that it is limited to claims by employees and therefore, pursuant to the terms of the section, a claim made by an employer that arises from its workers’ compensation policy is not preempted by ERISA. Therefore, Curlee’s claims are not preempted by ERISA.

Appellees argue that the medical expenses Curlee sought to recover were paid under a group/health medical plan provided to its employees and therefore, the plan is an ERISA plan and Curlee’s claims are preempted. It is imperative determining whether a claim is preempted that the court focus on the basis of the claim asserted. Scott v. Gulf Oil Corp., 754 F.2d 1499, 1504 (9th Cir.1985). [emphasis added] The preemption of a particular claim by ERISA depends on the conduct to which the law is applied. Id. We wish to reiterate again that Curlee’s claims are based on its allegation that its contract with Charter requires appellees to reimburse Curlee under the facts of this case. The conduct at issue involves the question of appellees’ duty under a workers’ compensation policy to its insured. The fact that the expenses for which Curlee seeks reimbursement were paid under an ERISA plan, if the Aetna plan is an ERISA plan, is irrelevant. The expenses paid under the Aetna plan simply represent Curlee’s damages; the claims are based on the provisions of a workers’ compensation insurance policy. Thus, only state law causes of action relating to an alleged breach of a workers’ compensation insurance policy are involved. Curlee’s eleventh and twelfth point of error are sustained.

The trial court’s judgment dismissing Curlee’s breach of contract claim for want of jurisdiction and granting summary judgment in favor of appellees on all of Curlee’s claims is reversed and the cause is remanded to the trial court for further proceedings.

Panel consists of Justices MURPHY, DRAUGHN, and MORSE (sitting by designation).

	Footnotes
1		Section 17.01 of the act repealing article 8307 changed the name of the Industrial Accident Board to the Texas Workers’ Compensation Commission. Act approved March 28, 1917, 35th Leg., R.S ., ch. 103, part II, § 1, 1917 Tex. Gen. Laws 269, 281-82, repealed by Act approved December 13, 1989, 71st Leg., 2nd C.S., ch. 1, § 17.01, 1989 Tex. Gen. Laws 1, 115. Thus, any reference in statutes or cases to the Industrial Accident Board now means the Texas Workers’ Compensation Commission. Id.
2		Specifically, this part of the trial court’s judgment read as follows: IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Plaintiff’s claim for reimbursement of medical expenses constitutes a claims for statutory worker’s [sic] compensation benefits and is, therefore, dismissed for want of jurisdiction since it was never presented to or considered by the Texas Workers’ Compensation Commission.
3		In these three points of error, Curlee argues the trial court erred in granting summary judgment in favor of appellees on all of Curlee’s claims based on the fact that the trial court found Curlee had no standing or any other legal basis for its suit. Once again, Curlee has misinterpreted the trial court’s judgment. Just like the trial court’s decision to dismiss Curlee’s claim for want of jurisdiction, the trial court granted summary judgment to appellees on Curlee’s claim for reimbursement of medical expenses, i .e., breach of contract. The court did not grant summary judgment to appellees on Curlee’s other claims on the basis that Curlee has no standing or other legal basis to bring suit. Thus, again, we will review Curlee’s complaint only in the context of the breach of contract claim.
4		We wish to note the use of the term “we” in this provision of the contract. Does this language refer only to Charter, or does it refer to Charter and Travelers? This supports our determination that there is a fact question as to whether under the provisions of the contract, Travelers was a party and could be sued for breach of contract.
5		Thus, it seems that the supreme court recognizes that an individual would be at a disadvantage in bargaining with an insurance company; however, this may also be true of corporate plaintiffs.