Allen v. Union Insurance Company

United States District Court, W.D. Texas, Midland-Odessa Division.

Jerry L. ALLEN, Plaintiff,

v.

UNION INSURANCE COMPANY, Defendant.

MO-10-CV-037

|

Signed 08/30/2011

Attorneys & Firms

Kevin B. Miller, Law Offices of Miller & Bicklein, Odessa, TX, for Plaintiff.

Mark D. Tillman, Todd E. Betanzos, Tillman Betanzos LLP, Las Colinas, TX, for Defendant.

ORDER GRANTING DEFENDANT’S MOTION TO DISMISS

ROBERT JUNELL, United States District Judge

*1 Before the Court is the Defendant’s Motion to Dismiss (Doc. No. 33), Plaintiff’s Response to Defendant’s Motion to Dismiss (Doc. No. 37) and Defendant’s Reply to Plaintiff’s Response to Defendant’s Motion to Dismiss (Doc. No. 38). After considering all issues and arguments raised in this motion, response and reply, the Court is of the opinion that the Defendant’s Motion to Dismiss (Doc. No. 33) should be granted.

I. BACKGROUND

This suit arises out of an “Old Law”¹ workers’ compensation claim. On November 12, 1981, Plaintiff sustained injuries during the course and scope of his employment. Am. Compl. ¶ 6, Doc. No. 19. At the time of injury, Plaintiff was covered by a workers’ compensation insurance policy issued by Defendant. Id. On November 13, 1985, the 161st Judicial District Court of Ector County, Texas, determined Plaintiff’s workers’ compensation claim to be compensable. Def.’s Mot. Dismiss Ex. A, Judgment, Doc. No. 33. The court further ordered Defendant to pay Plaintiff’s future medical expenses as provided by the workers’ compensation laws of the State of Texas. Id.

Plaintiff filed the current suit in the 70th Judicial District Court of Ector County, Texas on February 23, 2010. Plaintiff sued alleging Defendant failed to pay his continued medical costs and failed to conduct a reasonable investigation to determine whether there was a reasonable basis for denying Plaintiff’s benefits. Compl. ¶ 6, Doc. No. 1. Plaintiff asserted the following causes of action: 1) statutory bad faith under § 541 of the Texas Insurance Code, 2) common law bad faith (good faith and fair dealing) and 3) fraud. Am. Compl. at ¶ 5. Defendant filed its Notice of Removal on April 9, 2010.

On May 10, 2010, the Court abated the suit until June 1, 2010 to allow Plaintiff to comply with the requirements of § 17.505(a) of the Texas Business and Commerce Code and § 541.154 of the Texas Insurance Code.² Thereafter, the parties filed a joint motion to stay the case, and on December 15, 2010, the Court granted the motion to allow the parties time to conduct an administrative hearing on the compensability issue. On June 16, 2011, Plaintiff filed a Motion to Lift Stay which the Court denied. Defendant filed a Response to Plaintiff’s Motion to Lift Stay and Motion to Dismiss arguing lack of jurisdiction on June 27, 2011. Plaintiff then filed an Amended Motion to Lift Stay on July 22, 2011. The Court, on August 3, 2011, lifted the stay and allowed Plaintiff fifteen days to respond to the Defendant’s Motion to Dismiss.

II. STANDARD OF REVIEW

*2 Determining whether a court has subject matter jurisdiction—including exhaustion of administrative remedies—is treated as a question of law. See Subaru of Am., Inc. v. David McDavid Nissan, Inc., 84 S.W.3d 212, 222 (Tex. 2002); Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 928 (Tex. 1998); Kelly v. Am. Interstate Ins. Co., No. 14-07-00083-CV, 2008 WL 5085138, at *2 (Tex. App.—Houston [14th Dist.] Nov. 25, 2008, pet. filed) (mem. op., not designated for publication) (citing Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004)).

A plea to the jurisdiction challenging exhaustion of administrative remedies under the workers’ compensation scheme can rest on the pleadings, or on evidence. Stinson v. Ins. Co. of the State of Pa., 286 S.W.3d 77, 83 (Tex. App.—Houston [14th Dist.] 2009, pet. denied) (op. on reh’g). When a plea to the jurisdiction challenges the pleadings, the court determines “ ‘if the pleader has alleged facts that affirmatively demonstrate the court’s jurisdiction to hear the case.’ ” Id. (quoting Combined Specialty Ins. Co. v. Deese, 266 S.W.3d 653, 657 (Tex. App.—Dallas 2008, no pet.)). “The reviewing court ‘must look to the allegations in the pleadings, liberally construe them in the plaintiffs favor, and look to the pleader’s intent.’ ” Id. (quoting Kelly v. Am. Interstate Ins. Co., 14-07-00083-CV, 2008 WL 5085138, at (Tex. App.—Houston [14th Dist.] Nov. 25, 2008, pet. filed) (mem. op.)). “ ‘If the pleadings do not contain sufficient facts to affirmatively demonstrate the trial court’s jurisdiction but do not affirmatively demonstrate incurable defects in jurisdiction, the issue is one of pleading sufficiency and the plaintiffs should be afforded the opportunity to amend.’ ” Id. (quoting Kelly, 2008 WL 5085138, at *2). If the pleadings affirmatively negate the existence of jurisdiction, then a plea to the jurisdiction may be granted without allowing the pleader an opportunity to amend. Cnty. of Cameron v. Brown, 80 S.W.3d 549, 555 (Tex. 2002).

When a plea to the jurisdiction challenges the existence of jurisdictional facts, we consider relevant evidence submitted by the parties. Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 555 (Tex. 2000); see also Deese, 266 S.W.3d at 657. The standard of review for a jurisdictional plea based on evidence “ ‘generally mirrors that of a summary judgment under Texas Rule of Civil Procedure 166a(c).’ ” Deese, 266 S.W.3d at 657 (quoting Miranda, 133 S.W.3d at 228). Under this standard, we credit evidence favoring the non-movant and draw all reasonable inferences in the non-movant’s favor. See id. at 659 (citing Miranda, 133 S.W.3d at 228).

III. DISCUSSION

A. Relevant Texas Workers’ Compensation Act

Under the relevant statutory scheme, the Texas Workers’ Compensation Act (the “Act”) vested the authority to award compensation benefits exclusively in the Texas Department of Insurance, Division of Workers’ Compensation (“Division”),³ subject to later judicial review. See Tex. Lab. Code Ann. §§ 410.001-.258 (formerly Tex. Rev. Civ. Stat. Ann. arts. 8308-1.01-11.10); Escajeda v. Cigna Ins. Co. of Tex., 934 S.W.2d 402, 404-05 (Tex. App.—Amarillo 1996, no writ) (citing Saenz v. Fid. & Guar. Ins. Underwriters, 925 S.W.2d 607, 612 (Tex. 1996)). As such, the rights and obligations of the parties to compensation claims are entirely controlled by the Act. Smith v. Stephenson, 641 S.W.2d 900, 902 (Tex. 1982). “The provisions of the statute with respect to the successive steps in the progress and maturity of a claim are mandatory, and the provisions of the statute must be complied with or an action is not maintainable in the courts.” Ankrom v. Dallas Cowboys Football Club, Ltd., 900 S.W.2d 75, 77 (Tex. App.–Dallas 1995, writ denied); Smith, 641 S.W.2d at 902 (“Where the statute directs that action be taken in a certain way it may be performed in no other manner.”); See Escajeda, 934 S.W.2d at 405; Sanchez v. Aetna Cas. & Sur. Co., 543 S.W.2d 888, 889 (Tex. Civ. App.—San Antonio 1976, writ ref’d n.r.e.); Castillo v. Allied Ins. Co., 537 S.W.2d 486, 487 (Tex. Civ. App.—Amarillo 1976, writ ref’d n.r.e.); Truck Ins. Exch. v. Seelbach, 161 Tex. 250, 339 S.W.2d 521, 523 (1960). In other words, the Act requires an employee involved in a workers’ compensation dispute with the insurance carrier to exhaust all administrative remedies before seeking judicial review of the agency’s action. Subaru of Am., Inc. v. David McDavid Nissan, Inc., 84 S.W.3d 212, 221 (Tex. 2002). The exhaustion requirement ensures that the administrative agency has the opportunity to resolve disputed fact issues within its exclusive jurisdiction before a court can address those issues. Stinson v. Ins. Co. of the State of Pa., 286 S.W.3d 77, 83 (Tex. App.—Houston [14th Dist.] 2009, pet. denied) (citing Essenburg v. Dallas Cnty., 988 S.W.2d 188, 189 (Tex. 1998) (per curiam)); see Tex. Rev. Civ. Stat. Ann. art. 8307, § 5 (repealed by Acts 1989, 71st Leg., 2nd C.S., ch. 1, § 16.01(10), eff. Jan. 1, 1991) (requiring all questions arising under the workers’ compensation law to be first determined by the Industrial Accident Board unless otherwise settled by agreement of the parties interested therein). The requirement to exhaust administrative remedies applies to disputes regarding the availability of compensation benefits. Saenz, 925 S.W.2d at 612; Escajeda, 934 S.W.2d at 404-05. For this reason, one seeking benefits or compensation purportedly within the scope of the Act must exhaust his administrative remedies by having the Division first determine his entitlement to same. Id.

B. 161st Judicial District Court Judgment

*3 On November 13, 1985, the 161st Judicial District Court of Ector County, Texas, determined Plaintiff’s workers’ compensation claim to be compensable. Def.’s Mot. Dismiss Ex. A, Judgment. The court further awarded Plaintiff “future medical expenses as provided by the workers’ compensation laws of the State of Texas.” Id. It has been held that Section 7 of former Article 8306 requires the insurer to furnish all medical services as may reasonably be required to cure and relieve the employee from the effects naturally resulting from his injury, but that Section 5 of former Article 8307, prohibits the rendition of an award of judgment for future medical expenses in a workers’ compensation case. Emp’rs Mut. Cas. Co. v. Poorman, 428 S.W.2d 698, 701 (Tex. Civ. App.—San Antonio 1968, writ ref’d n.r.e.); Pearce v. Tex. Emp’rs Ins. Ass’n, 403 S.W.2d 493, 497 (Tex. Civ. App.—Dallas, writ ref’d n.r.e., 412 S.W. 2d 647, Tex. Sup. 1967). Specifically, section 5 states that no award or judgment against an insurer may include any medical cost or expense that has not been actually furnished to and received by the employee prior to the date of the judgment. See Tex. Rev. Civ. Stat. Ann. art. 8306, § 5 (repealed 1989). Section 5 further states the Division has continuing jurisdiction to render successive awards for future medical benefits, and a claimant’s right to recover for future physician and hospital bills paid is dependent on a showing that they were reasonable and necessary. Id.; see also Pearce, 403 S.W.2d at 498. These provisions safeguard the insurer only to the extent that it does not have to provide for future medical expenses until they are incurred and that the insured is required to show those future medical expenses are reasonable and necessary to relieve the worker from the effects naturally resulting from a compensable injury. Jones v. Ill. Emp’rs Ins. of Wausau, 136 S.W.3d 728, 741 (Tex. App.—Texarkana, 2004). This ensures the employee will be able to obtain medical expenses after the final judgment. Id.

C. April 29, 2011 Division Letter

In light of the 161st Judicial District Court’s judgment that Plaintiff’s injury was compensable, Article 8307, Section 5 then provided the Division with the exclusive jurisdiction to determine what, if any, medical services may reasonably be required at any time after Plaintiff’s original injury to cure his injury. See e.g. Escajeda 934 S.W.2d at 404-05; Saenz, 925 S.W.2d at 612; Essenburg, 988 S.W.2d at 189. Plaintiff claims he is entitled to benefits related to his original injury which the Defendant has denied. After this Court issued a stay on December 15, 2010, Plaintiff sought a determination by the Division regarding his benefits. The Division issued a letter to Plaintiff regarding their Pre-Hearing Conference on April 29, 2011 (“Division Letter”). Def.’s Mot. Dismiss Ex. A, Division Letter, Doc. No. 33. The Division acknowledged the 161st Judicial District Court’s judgment and informed Plaintiff of the following matters:

Regarding to the Division’s jurisdiction to act on this claim, Article 8307, Section 5, Texas Civil Statutes (the law in effect on the date of injury and which is continued in effect for processing claims for injuries occurring before January 1, 1991) states in part that “After the first such final award or judgment, the [division] shall have continuing jurisdiction in the same case to render successive awards to determine the liability of the [carrier] for the cost or expense of any such items actually furnished to and received by said employee ...”.

In accordance with Article 8307, Section 5, the Division will have jurisdiction to enter subsequent awards regarding medical benefits after an award has become final or a court issues a final judgment. That jurisdiction would be limited to determining the liability of the workers’ compensation carrier for the cost and expense of medical benefits already incurred.

Accordingly, [Plaintiff] will need to present an itemized bill(s) for medical services that have been provided and for which payment is refused or reduced by the insurance carrier before the Division may act on the claim. The Division does not have the authority to make a determination on the carrier’s liability for any medical treatment that has not already been provided.

Id. With the relevant Act, the 161st Judicial District Court’s judgment and the Division Letter in mind, the Court will now determine whether it has jurisdiction over Plaintiff’s claims.

D. Plaintiff’s Claims—Parties’ Arguments

Plaintiff claims the Division Letter states the Division has no jurisdiction “for future medical that has not been provided to Plaintiff.” Resp. Def.’s Mot. Dismiss ¶ 3, Doc. No. 37. Plaintiff therefore argues the “no jurisdiction” order is final and he has exhausted his administrative remedies. Id. Plaintiff then apparently argues the Defendant’s breach of the duty of good faith and fair dealing and intentional act of fraud are separate from his compensation claim fitting his case squarely within the elements addressed in Aranda v. Insurance Co. of North America, 748 S.W.2d 210 (Tex. 1988).

*4 In Aranda, the Texas Supreme Court held “the exclusivity provision of the Workers’ Compensation Act does not bar a claim against a carrier for breach of the duty of good faith and fair dealing or intentional misconduct in the processing of a compensation claim.” Aranda, 748 S.W.2d at 214. “A claimant is permitted to recover when he shows that the carrier’s breach of the duty of good faith and fair dealing or the carrier’s intentional act is separate from the compensation claim and produced an independent injury.” Id. Further, in Escajeda v. Cigna Insurance Co. of Texas, 934 S.W.2d 402 (Tex. App.—Amarillo 1996, no writ), the Amarillo Appeals Court held to the extent Escajeda “attempts to recover damages related to lost compensation benefits allegedly caused by the misrepresentations or deceptive trade practices, the Act provides the exclusive means of recovery,” and therefore, “the trial court lacked original jurisdiction to address that portion of the controversy relating to lost compensation benefits until the terms of the Act were satisfied.” Escajeda, 934 S.W.2d at 406. To the extent Escajeda tried to recover damages caused by the purported misrepresentations and deceptive conduct that where unrelated to lost compensation benefits, the Act was inapplicable. Id. Escajeda, therefore, did not have to exhaust any administrative remedy before the trial court had jurisdiction to consider that aspect of her suit. Id. On rehearing, however, the court explained if Escajeda’s causes of action were “nothing more than a recharacterization” of the claim regarding recovery of lost compensation benefits, then they would all be under the Act’s exclusive jurisdiction and dismissed for failure to exhaust administrative remedies. Id. at 408.

Defendant argues Plaintiff misrepresents the Division Letter. That is, the Division Letter does not constitute a ruling and, instead, it invites the Plaintiff to submit bills for the Division’s consideration. Relying on the Texas Supreme Court’s decision in American Motorists Insurance Co. v. Fodge, 63 S.W.3d 801(Tex. 2001), Defendant argues there has been no determination by the Division that the benefits about which Plaintiff complains are due him. Without such a determination, Defendant asserts this Court lacks jurisdiction to award Plaintiff damages for the denial of such benefits, since such an award would necessarily require this Court to make an initial determination regarding Plaintiff’s entitlement to workers’ compensation benefits. Fodge, 63 S.W.3d at 804.

In Fodge, an employee filed a claim for Texas workers’ compensation benefits after suffering a back injury. Id. at 802. The carrier denied the claim. Id. A Texas Workers’ Compensation Commission (now “Division”) hearing officer found Fodge had suffered a compensable injury and ordered payment of temporary income benefits. Id. In the Division proceeding, Fodge did not seek medical benefits. Id. Neither Fodge nor the insurance carrier appealed the hearing officer’s decision. Id. Fodge subsequently sued the carrier for breach of the duty of good faith and fair dealing, negligence, fraud, violations of the DTPA, and violations of the Texas Insurance Code. Id. at 802–03. Fodge claimed damages for those due under the workers’ compensation policy, mental anguish, past and future wages, statutory damages and attorney fees. Id. at 803. Holding that Fodge was required to exhaust her administrative remedies regarding the denial of medical benefits, the Texas Supreme Court explained the trial court could not award damages for denial of benefits without a determination by the Division that such benefits were due. Id. at 804. Fodge’s claims for income benefits, which were stipulated, however, were ripe for adjudication and should not have been dismissed. Id. at 805.

The Texas Supreme Court first recognized the act vested the Division with sole power to award compensation benefits, subject to judicial review. Id. at 803. Further, the Division had jurisdiction of disputes over income benefits, preauthorization of medical care, and reimbursement of medical expenses. Id. The Court then stated:

Because only the [Division] can determine a claimant’s entitlement to compensation benefits, ... “[a]llowing courts to award damages for wrongful deprivation of benefits would circumvent the [Division] jurisdiction” and therefore could not be permitted. Thus, just as a court cannot award compensation benefits, except on appeal from a [Division] ruling, neither can it award damages for a denial in payment of compensation benefits without a determination by the [Division] that such benefits were due.

*5 Id. at 804 (citations omitted).

E. Court’s Finding

In Plaintiff’s case, he received a judgment ruling his original 1981 injury to be compensable and was awarded future medical expenses as allowed under the relevant Act. Any costs incurred by Plaintiff after the judgment which related to the original injury, were required to be submitted to the Division for a compensation determination. See Tex. Rev. Civ. Stat. Ann. art. 8306, § 5 (repealed 1989); Poorman, 428 S.W.2d at 701; Pearce, 403 S.W.2d at 497. The Division Letter clearly states the Division retains jurisdiction to act on Plaintiff’s claim for benefits. Although Plaintiff began the administrative process, Plaintiff has not submitted his incurred medical expenses to the Division. According to the Division Letter and “Old Law,” Plaintiff’s administrative remedies have not been exhausted, and cannot be, until he produces some itemized bills for the Division to consider.

In addition, Plaintiff’s pleadings and his Response to Defendant’s Motion to Dismiss show he alleges common law and statutory breach of the duty of good faith and fair dealing and fraud by Defendant. All of Plaintiff’s causes of action, however, are predicated on the same allegations as his compensation claim for his injury, to wit: 1) Defendant failed to pay his continued medical costs and 2) Defendant failed to conduct a reasonable investigation to determine whether there was a reasonable basis for denying Plaintiff’s benefits. Plaintiff’s claims are merely a recharacterization of the claim regarding recovery of compensation benefits. Escajeda, 934 S.W.2d at 408. Likewise, Defendant’s alleged breach of good faith and fair dealing and fraud are not separate from the compensation claim nor do they produce a separate injury. Aranda, 748 S.W.2d at 214.

The Court therefore finds Plaintiff has failed to exhaust his administrative remedies regarding the denial of payment of benefits. Because only the Division can determine Plaintiff’s entitlement to compensation benefits, the Plaintiff’s claims should be dismissed without prejudice. Fodge, 63 S.W.3d at 804.

IV. CONCLUSION

The Court finds the Plaintiff has failed to exhaust his administrative remedies and therefore does not have jurisdiction to rule on Plaintiff’s loss of compensation benefits claim. The Court notes it originally abated this case for 60 days, and subsequently stayed the case for 6 months so Plaintiff could exhaust his administrative remedies. It appears the Plaintiff has begun the administrative process but has stalled the proceedings. Accordingly, the Court ORDERS the following:

The Defendant’s Motion to Dismiss (Doc. No. 33) is GRANTED. The Court however, dismisses all claims asserted by Plaintiff in its Complaint, and brought against the Defendant WITHOUT PREJUDICE.