Supreme Court Ponders Whether to Hear Exclusive Remedy Challenge Brought by Employer

An interesting case that would address whether an insured is entitled to a Division hearing to challenge a carrier’s decision that denied the compensability of a claimed injury is percolating at the briefing stage of the Texas Supreme Court. The case, Berry Contracting v. Mann, (No. 18-0610), presents substantive and procedural issues for the Court to consider.

The case involves an accident where an employee of Bay LTD, Gernal Mann, was injured after he had clocked in to work at a refinery in South Texas. As Mann walked across the road that separated the refinery and the parking lot, he was struck by a vehicle driven by Juan Tomas Hernandez Alvarez, also an employee of Bay.

Bay alleged that Mann was covered by two separate, complementary workers’ compensation policies. One policy was a “rolling owner controlled insurance program” that covered the refinery and was designed to provide blanket workers’ compensation coverage to contractors (such as Bay) who worked on ROCIP-related projects, as well as their employees (such as Mann). The other “ standard policy” was procured by Bay for the general protection of its employees. Both carriers denied that Mann had been injured while in the course and scope of his employment for work covered by their policies.

Mann and his wife filed suit against Bay and Alvarez claiming that they negligently injured him. Bay asserted that there was workers’ compensation coverage for Mann’s injury and that the Manns’ suit was barred by the exclusive-remedy defense or “comp bar.” The trial court granted partial summary judgment in favor of the Manns, disposing of Bay’s exclusive-remedy defense. The case was appealed to the Court of Appeals under a rule that allows “permissive” interlocutory appeals.

The Manns and the comp carriers each contend that Mann’s injuries were not incurred in the course and scope of his employment. Bay, the employer, claims that Mann was in the course and scope of his employment and that they were entitled to a Division-determination regarding the compensability of the claim.

The Texas Workers’ Compensation Act affords an employer the right to “contest the compensability” of a claim that a carrier has otherwise accepted as compensable. It does not expressly authorize an employer to “contest the non-compensability” of a claim in the manner in which Bay seeks. Bay argues that it has paid “substantial medical bills” on behalf of Mann for which it is entitled to reimbursement as a subclaimant under TEX. LABOR CODE § 409.009.

The Court of Appeals, with one justice dissenting, held that neither Bay nor the Manns conclusively proved their case with regard to the exclusive-remedy defense. Accordingly, the court reversed the trial court’s summary judgment disposing of Bay’s exclusive-remedy defense and remanded the matter to the trial court for further proceedings consistent with its opinion.

Bay asserts that the ROCIP carrier’s denial of coverage does not prevent Bay from asserting the exclusive-remedy defense. In the trial court, the Manns argued that the workers’ compensation insurance carrier was Bay’s agent. The Manns reasoned that the carrier’s denial of coverage therefore binds Bay, preventing Bay from contesting the issue of coverage on appeal. Based on related reasoning, the Manns asserted that the carrier’s denial of coverage estops Bay from taking a contrary position.

This argument was squarely rejected in Port Elevator-Brownsville v. Casados. 358 S.W.3d 238, 244 (Tex. 2012). There, the plaintiff similarly argued that “Texas Mutual’s denial of coverage means that [the plaintiff] was not covered” and therefore the employer could not assert the exclusive-remedy defense. Id. The Port Elevator court disagreed, holding that the insurance carrier’s denial of coverage did not prevent the defendant-employer from asserting the exclusive-remedy defense. Id. The implication of this holding is that in such circumstances, agency and estoppel do not bind the insured to the insurer’s denial of coverage. See id. Accordingly, we agree with Bay that neither theory can serve as a basis for affirming summary judgment in the Manns’ favor.

The court, therefore, permitted Bay to assert the exclusive remedy defense in the lawsuit without first exhausting this issue at the Division of Workers’ Compensation.

The dissenting justice would have dismissed the appeal based on his view that the granting of the petition for permissive appeal in the case was improper under TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(d), and that the petition for such an appeal should have been denied.

If the Texas Supreme Court were to agree to hear the case, the result could turn on any of several different theories that would impact day-to-day comp practice. These include whether a permissive interlocutory appeal was proper under the facts of this case, whether the evidence demonstrated that Mann was or was not in the course and scope of his employment when he crossed the road from the refinery to the parking lot, whether Bay was entitled to a hearing at the Division of Workers’ Compensation on its contest of the carriers’ denials of the claim, or whether Bay was entitled to assert the exclusive remedy defense without first seeking to resolve that issue at the Division of Workers’ Comp.

The parties are currently filing full briefs with the Supreme Court. We do not expect the Court to rule on the petition for review until early Spring 2019.