Court of Appeals Affirms Dismissal of Bad Faith Judgment

A Texas court of appeals has affirmed the judgment of a trial court that dismissed a workers’ compensation bad faith suit for want of jurisdiction.

The decision in Freeman v. JI Specialty Services, No. 06-15-00106-CV), decided November 3, 2016, arose from a dispute over entitlement to workers’ compensation medical benefits for a compensably injured law enforcement officer, who later died. Freeman had medically necessary cervical surgery. The bad faith plaintiffs alleged that, by April 2012, Freeman’s condition had deteriorated to the point that he needed a specialized bed in his home to prevent painful bed sores and the accumulation of fluid in his lungs. In an effort to alleviate these problems, Dr. Gregory Stocks prescribed the Hill TOM Total Spo2rt Bed—Model P1917EAI and submitted his request for preauthorization. The plaintiffs argued that several other health-care practitioners who dealt with Freeman requested the specialized bed. They contended that the self-insured governmental entity, through its claims administrator, refused to provide an appropriate bed for Freeman.

Prior to filing this case, in August 2013, the plaintiffs had filed suit against the defendants in the Harrison County District Court alleging that they had failed and refused to adjust, authorize, and pay for certain workers’ compensation medical benefits, including a motorized wheelchair, a wheelchair accessible van, backup wiring for a generator for Freeman’s home, and a Hill ROM Total Spo2rt Bed—Model P1916EA1. In that case, the final causes of action, which were amended after Freeman’s death, included wrongful death and survival claims, intentional infliction of emotional distress, abuse of process, Insurance Code violations, and gross negligence. In response, the defendants filed a motion to dismiss for lack of subject-matter jurisdiction due to the plaintiffs’ alleged failure to exhaust their administrative remedies as required by the Act. The trial court granted their motion to dismiss in December 2014. The plaintiffs filed a motion for rehearing, which the trial court granted; however, before the parties obtained a rehearing, the Texas Supreme Court released In re Crawford. See In re Crawford & Co., 458 S.W.3d 920 (Tex. 2015) (per curiam). The plaintiffs state that they nonsuited their case in order to reassess which claims remained viable in light of the court’s decision in Crawford. In September 2015, the plaintiffs filed their original petition against the defendants in this litigation asserting causes of action for wrongful death and survival claims as well as a claim for gross negligence. They sought to recover actual damages and exemplary damages.

Texas Labor Code § 408.001 sets out the exclusive remedy provisions in the act. The statute has two subparts: (a) and (b), which are relevant to the case. The plaintiffs alleged that their claims for Freeman’s “grossly negligent and intentional death are separate and apart from the administrative remedies afforded them.” They argued that “the Legislature was cognizant of a Constitutionally granted right to bring suit for exemplary damages for grossly negligent and intentional conduct that results in death and therefore set out a specific subpart alongside and apart from the Exclusive Remedy Provision which allows this suit.” The plaintiffs reasoned that § 408.001(a) does not trump § 408.001 (b); instead, “each subpart stands on its own and recovery may be had under either if the facts support it.” Relying completely on subpart (b), Appellants contend that their case falls within the exception to the exclusive remedy provision.

The court rejected the plaintiff’s argument that they were entitled to pursue a bad faith claim against a workers’ compensation carrier based on the gross negligence and intentional tort exception found in subpart (b).

Appellees maintain that the Act remains Appellants’ exclusive remedy because their alleged claims arise out of Appellees’ conduct in the adjusting, handling, or settling of Freeman’s workers’ compensation benefits prior to his death. Moreover, Appellees contend that Appellants ignore the fact that subpart (b) is applicable only in cases involving an employer and that this is not such a case. Appellees point out that the cases cited by Appellants, especially Smith v. Atlantic Richfield¹² and Barnes v. United Parcel Service, Inc.,¹³ are suits involving employers. They emphasize that Smith and Barnes stood for the proposition that, even if a deceased worker had not exhausted his or her administrative remedies under the Act, either by not claiming benefits (as in Smith) or by failing to exhaust administrative remedies (as in Barnes), a suit by a family member against the decedent’s employer for exemplary damages is not prohibited under various legal theories.

While Appellants do not dispute the fact that Appellees were not Freeman’s employers, they argue, without directing us to any cases in support of their argument, that Appellees have construed the exclusive remedy provision too narrowly. We disagree. It is well settled that we are required to follow the plain meaning of a statute. Meno v. Kitchens, 873 S.W.2d 789, 792 (Tex. App.–Austin 1994, writ denied). Courts must presume that every word in a statute has been used for a purpose and that every word excluded was excluded for a purpose. Cameron v. Terrell & Garrett, Inc., 618 S.W.2d 535, 540 (Tex. 1981). Contrary to Appellants’ argument, had the Legislature intended to include insurance companies, risk management pools, third-party administrators, or other agents of employers in subpart (b),¹⁴ it could have easily done so. It plainly chose not to, and we decline to interpret the language of subpart (b) to mean anything other than its plain meaning. Under these circumstances, Section 408.001(b)’s exception to the exclusive remedy provision is of no assistance to Appellants.

The court found that the plaintiffs possessed no claim against an insurance adjuster for intentional conduct or gross negligence resulting in death under Section 408.001(b). It further found that because their claims arose out of the denial of medical benefits under the Act, those claims fell within the exclusive remedy provision of Section 408.001(a). Because the plaintiffs had not alleged facts sufficient to establish that they exhausted their administrative remedies under that section, their petition failed to demonstrate that the trial court had subject-matter jurisdiction to consider their claims. Accordingly, the reasoned that the trial court correctly granted the defendants’ plea to the jurisdiction and dismissed the bad faith petition.