County Files Supreme Court Appeal in Subrogation Dispute

Fort Bend County has filed a petition for review with the Texas Supreme Court in a dispute over a trial court’s order that it continue to pay workers’ comp death benefits to one legal beneficiary even though two other legal beneficiaries had received a third party recovery that exceeded the amount of all past benefits paid by the County. The petition was filed with the Supreme Court May 30, 2019.

The Houston Court of Appeals [14th District] previously affirmed a judgment which held that a surviving spouse was entitled to continue to receive death benefits under the Workers’ Compensation Act in spite of a third party settlement of $1.7 million she signed in her capacity as administrator of her deceased husband’s estate. The case, Fort Bend County v. Norsworthy, (No. 14-17-00520-CV) was decided March 21, 2019. The court affirmed the judgment of the trial court, which found that the surviving spouse had not made a third party recovery in her individual capacity and that, therefore, she was entitled to continue to receive death benefits under the Act for the remainder of her life.

One justice filed a dissenting opinion. The existence of a dissenting opinion is one ground authorizing review by the Texas Supreme Court.

The case arose after John Norsworthy died in a work-related accident while working as a Fort Bend County Deputy Sheriff. The County initiated death benefit to John’s surviving spouse, Melissa, individually and as guardian of her minor son Jacob and minor daughter Katlyn. Because John was a first responder, Melissa will receive death benefits for the remainder of her life.

In 2014 Jacob filed a wrongful death suit against a third party, Bison. In Jacob’s second amended petition, he purported to bring his wrongful death claim on behalf of himself and all beneficiaries who have a wrongful death and survival cause of action. The case was referred to mediation where Katlyn presented a claim as a potential intervenor in the lawsuit and Melissa presented a potential claim from the estate of John. Jacob and Katlyn agreed to settle with Bison for $1.7 million dollars ($849,000.00 each) and agreed to allocate $2,000.00 to John’s estate. Melissa did not participate in or sign the mediated settlement agreement in her individual capacity. Melissa’s portion of the recovery was made in her capacity as executor of her deceased husband’s estate. The settlement exceeded the County’s statutory lien for past benefits paid to Jacob, Katlyn, and Melissa.

The county learned of the settlement and intervened seeking to enforce its statutory subrogation rights. The County and Jacob settled “the part of FBC’s lien applicable to Jacob’s half of the collective third-party recovery from Bison.”

The County filed a motion for summary judgment against Katlyn and Melissa seeking to recover the remaining half of its statutory worker’s compensation lien on the collective third-party recovery. Katlyn and Melissa opposed the County with a cross-motion for summary judgment.

The trial court denied the County’s motion and granted summary judgment as to Melissa on the basis that she had settled solely in her capacity as independent administratrix of the estate and received no settlement funds individually. The trial court ordered the County “to continue to pay worker’s compensation benefits to Melissa Norsworthy as long as she remains eligible under the statute.”

The County argued to the court of appeals that the third-party recovery by Melissa’s adult children is imputed to Melissa and, as a result, the trial court erred in ordering it to continue paying Melissa weekly benefits and not suspending Melissa’s future benefits. According to the County, the trial court’s order effectively applied a beneficiary-by-beneficiary standard rather than a collective recovery standard to its worker’s compensation reimbursement and future credit in contravention of Carty v. State Office of Risk Mgmt., 733 F.3d 550 (5th Cir. 2013), certified question answered, 436 S.W.3d 298, 302 (Tex. 2014).

In Carty, the Supreme Court held that when multiple beneficiaries recover compensation benefits through the same covered employee, the carrier’s rights to a third-party settlement are determined by treating it as a single, collective-recovery rather than separate recoveries by each beneficiary. If this rule applies, the County is entitled to reimbursement and to apply a future credit to Melissa’s entitlement to future death benefits.

The court of appeals held that Carty did not apply.

It is undisputed that Melissa, in her individual capacity, did not seek recovery from Bison. Her son, Jacob, filed a wrongful death suit against Bison purportedly on behalf of all beneficiaries. Jacob, however, did not name Melissa in the petition. Melissa did not participate in the prosecution of the case or mediated settlement agreement with Bison or sign a release in her individual capacity. No portion of her adult children’s settlement was allocated for Melissa’s individual benefit. If [the County] chose to object to apportionment of the mediated settlement on the basis that Melissa, a necessary party, was not included in the settlement, that issue is not before this court on appeal. [the County’s] appeal is limited to the trial court’s order granting Melissa’s summary judgment motion and ordering continued death benefit payments.

For the above reasons, the trial court correctly found Melissa made no third party recovery and [the County] was required to continue to pay her death benefits. Because Melissa did not make a recovery from the third-party, her continued receipt of death benefits from [the County] does not amount to a “double recovery.”

One justice at the court of appeals would have decided the case differently and filed a dissenting opinion.

Under Carty, if there are two beneficiaries entitled to future benefits, and one secures a net recovery of $1,000,000 against a third party while the other secures a net recovery of $1,000 against the third party, without any deduction based on the workers’ compensation lien, then neither beneficiary gets any future workers’ compensation benefits until the aggregate of the past benefits paid to each beneficiary and the amount of future benefits not paid to each beneficiary under section 417.002(b) equals $1,001,000. The Carty court’s analysis and pronouncements on the meaning of section 417.002 do not provide any basis for concluding that the result should be different if the second beneficiary has a net recovery of zero rather than a net recovery of $1,000. Though some might view this result as unfair, the high court has instructed that the remedy lies in the legislative branch of Texas government rather than in the judicial branch.

Under the Carty’s court’s construction of section 417.002(b) as implementing a collective-recovery rule, the trial court erred in granting summary judgment, ordering Fort Bend County to pay Melissa workers’ compensation benefits, and failing to give Fort Bend County any advance under section 417.002(b) against Melissa’s future benefits. Because the majority reaches the opposite conclusion, I respectfully dissent.

The County also argues a jurisdictional point. It contends that the trial court was without jurisdiction to order the continued payment of death benefits until the surviving spouse had exhausted her administrative remedies.

The Act vests the power to award compensation benefits solely in the DWC, subject to judicial review. The DWC has original jurisdiction of disputes over all types of income benefits and reimbursement of medical expenses. Jurisdiction may never be waived and may be raised for the first time on appeal.

There is no statutory deadline for the Supreme Court to decide the case. Review of a judgment by the Texas Supreme Court is generally discretionary. The court can request a response from the surviving spouse as the next step in the proceedings.