Court Rejects Old Law Bad Faith Claim After Ruttiger/Crawford
The Houston Court of Appeals [14th District] has ordered the dismissal of a bad faith claim that arose out of the handling of an “old law” workers’ compensation claim. In In re Illinois Employers Insurance of Wausau, (No. 14-16-00032-CV, June 2, 2016), the insurance carrier sought a writ of mandamus ordering the dismissal of an old law claimant’s allegations of common law bad faith and violations of the Texas Insurance Code in connection with the handling of his claims. He alleged that Wausau failed in July 2015 to pay $30,650.04 in medical benefits for treatment of his heart condition on grounds that this treatment was not related to his “covered work related injury.”
Wood F. Jones cut his finger in March 1978 in the course of his employment. He was diagnosed with “staphylococcal aureus” and treated with antibiotics. In June 1978, Jones was diagnosed with bacterial endocarditis and underwent surgery for the replacement of an aortic valve. Jones sought workers’ compensation benefits. In 1979, the Texas Industrial Accident Board determined that Jones had suffered a compensable injury and ordered Wausau, the workers’ compensation carrier, to pay Jones for disability and medical expenses including those related to his care under his cardiologist. Wausau did not appeal the Board’s order.
In 1993 Jones submitted additional medical expenses related to his heart condition to the Texas Workers’ Compensation Commission, the Board’s successor. The Commission ordered Wausau to pay for medical expenses Jones had incurred since the Board’s awards in 1979. Wausau appealed the Commission’s orders to the 270th District Court in Harris County, which signed a final judgment in favor of Jones on the basis that the Board’s prior awards had preclusive effect.
Between 1997 and 2001, the Commission entered seven orders for Wausau to pay Jones’s medical expenses. Wausau appealed each award and all appeals eventually were consolidated in the 25th District Court of Colorado County. That court agreed with Wausau and determined that Jones’s bacterial heart condition was not compensable because it was not related to the cut finger. The Texarkana Court of Appeals reversed after concluding that (1) the 1979 Board had determined that Jones’s heart infection was a compensable injury caused by the infection to his finger; and (2) the “1979 Board awards are final and entitled to the same full faith and credit as the judgment of a court.” Jones v. Ill. Emp’r Ins. of Wausau, 136 S.W.3d 729, 738 (Tex. App.— Texarkana 2004, no pet.).
In August 2015, Jones filed his third amended counterclaim against Wausau, which included allegations of common law bad faith and violations of the Texas Insurance Code in connection with the handling of his claims. Wausau filed a plea to the jurisdiction, arguing that the trial court did not have the authority to hear the claim in light of the Texas Supreme Court’s decisions in Texas Mutual Insurance Company v. Ruttiger, 381 S.W.3d 430 (Tex. 2012) and In re Crawford & Co., 458 S.W.3d 920, 928–29 (Tex. 2015). The trial court denied Wausau’s plea. The carrier filed a petition for writ of mandamus with the 14th Court of Appeals.
The court of appeals granted the petition and ordered the dismissal of Jones’ bad faith claims.
The pre-1989 workers’ compensation statute governs the determination of benefits due to Jones in connection with his 1978 injury. See Jones, 136 S.W.3d at 736 (“Because Jones seeks benefits for an injury that occurred in 1978, this case is governed by the Workers’ Compensation Act in effect at the time of his injury.”); see also Tex. Dep’t of Ins.-Div. of Workers’ Comp. v. Mensch, 457 S.W.3d 163, 164 (Tex. App.—San Antonio 2015, pet. denied) (workers’ compensation act in effect at time of 1980 injury governed benefits claim). We must decide a separate question: Are common law or statutory bad faith claims still available to Jones after Ruttiger based upon a denial of benefits in 2015?
The parties frame the issue as whether Ruttiger applies retroactively to bar Jones’s bad faith claims. Jones contends that applying Ruttiger retroactively to foreclose common law or statutory bad faith claims here would violate constitutional protections by contravening (1) the prohibition against ex post facto laws; (2) the open courts provision; and (3) the due process clause. We do not reach these contentions because their resolution is not necessary to the disposition of this mandamus.
Jones sued Wausau in 2015 for common law bad faith and Insurance Code violations because Wausau refused in 2015 to pay for heart treatment that, according to Wausau, is not related to Jones’s compensable 1978 work injury. Jones says this denial constitutes bad faith because Wausau impermissibly is attempting to relitigate the Board’s prior determination and a final judgment of the 270th District Court establishing that Jones suffered a compensable injury. Wausau is collaterally estopped to contest whether Jones’s heart condition is a compensable injury caused by 1978 injury. See Jones, 138 S.W.3d 744–45.
Wausau’s asserted bad faith conduct—refusing to pay Jones’s $30,650.04 claim for medical treatment—occurred after Ruttiger was decided. These common law and statutory bad faith claims no longer are available after Ruttiger. See Crawford & Co., 458 S.W.3d at 923–924. Because Jones’s claims are predicated on Wausau’s 2015 conduct, Jones cannot maintain his common law and statutory claims in light of Ruttiger’s 2012 reversal of Aranda and Marshall. Therefore, we conclude that the trial court abused its discretion by not dismissing Jones’s claims for common law bad faith and violations of the Insurance Code.
The court concluded that the trial court had abused its discretion by denying Wausau’s plea to the jurisdiction as to Jones’s bad faith claims. The court also permitted the carrier to challenge the refusal of the trial court to dismissal the case because it concluded that the carrier did not have an adequate remedy by appeal. Therefore, the court conditionally granted the petition for writ of mandamus and ordered the trial court to set aside the order denying Wausau’s plea to the jurisdiction as to Jones’s bad faith claims and to dismiss those claims.
FOLIO
