Texas Justices Say Workers’ Comp Deals Must Follow Formula
The Texas Supreme Court on Friday dismantled a workers’ compensation settlement American Home Assurance Co. had reached, saying the insurer’s agreement to pay an injured worker supplemental income benefits didn’t comply with strict statutory formulas.
In an 8-1 ruling, the court held a trial court and lower appellate court had both wrongly approved of a “noncompliant” insurance settlement for worker Bonnie Jones that paid her a partial award of supplemental income benefits in spite of a finding by the Texas Department of Insurance’s Division of Workers Compensation that Jones hadn’t fulfilled mandatory work search requirements for the entire pay period at issue. The court said the Texas Workers’ Compensation Act does not provide partial eligibility for supplemental income benefits and said Jones must have met every minimum requirement to qualify for the benefits, even in a settlement.
Justice Don Willett, writing for the majority, said an agreement to pay partial benefits “flouts the statutory formula’s edict to calculate the monetary entitlement in a precise way” and thus conflicts with the policy decision made by state lawmakers to discourage judicial review of the TDI workers’ compensation findings. Allowing Jones and American Home Assurance to reach a settlement that deviates from the statutory formula “unsettles” the stability state lawmakers tried to create in mandating administrative certainty, the court said.
“Eligibility for benefits requires satisfaction of detailed and particular conditions, and courts do not have carte blanche to approve settlements awarding benefits that clash with these criteria,” the court held. “Where supplemental income benefits are concerned, settlements cannot bypass a statutory formula, nor can they facilitate benefits where none were due as a matter of law.”
In a dissent, Justice Jeff Boyd drew a distinction between benefit awards under the Act and settlements that award supplemental income benefits. He said the Act generally encourages parties to settle their claims — with some restrictions like barring lump-sum payments and barring any agreement to limit an employee’s right to medical benefits — and that the majority went too far in requiring every settlement strictly adhere to the statutory guidelines.
“The result of this construction, of course, is that the court must take evidence and, in essence, try the case despite the parties’ settlement to ensure that the parties have not agreed to an award that the employee is not entitled to receive or to an award amount that does not match the statutory formula,” Justice Boyd said. “In effect, there can be no settlements at all.”
A TDI spokesperson said the agency’s counsel is reviewing the court’s decision, and declined further comment.
Randy Johnson of The Casaubon Firm LLP, who represents Jones, said Friday he expects to file a motion for rehearing, saying Justice Boyd’s opinion is better reasoned and consistent with the Act.
“I think in the long run it is going to preclude settlements both at the administrative level and judicial review level,” Johnson said. “It’s going to make cases harder to resolve by settlement unless it’s an all-or-nothing agreement and I think it’s going to result in more litigation, not less litigation.”
Johnson said he thinks benefits disputes that go to judicial review after an administrative finding will have to be tried to a verdict, with settlements off the table, and said injured workers typically can’t afford to try cases.
And he said the ruling potentially opens a door to invalidate existing settlements, if a party argues an agreement shouldn’t have been approved by a court because it deviated from a statutory formula.
Counsel for American Home did not immediately respond to a request for comment.
Jones, injured on the job in 2005, had sought supplemental income benefits to cover a period from May 2011 to August 2011, which American Home opposed. After an administrative hearing, the workers’ compensation division denied the claim and Jones sued.
The partial settlement agreement would have paid Jones $1,572.90 for the period at issue. Under the statutory formula, Jones would have been paid $2,797.56 for the same period if she had met all eligibility requirements.
The Texas Department of Insurance, Division of Workers’ Compensation, is represented by James Edward Davis, Andrew John Lutostanski, David C. Mattax, Charles Roy and David A. Talbot Jr. of the Texas Attorney General’s Office.
Bonnie Jones is represented by Wm. Randell Johnson and Leslie R. Casaubon of The Casaubon Firm LLP. American Home Assurance Co. is represented by John V. Fundis of Downs Stanford PC.
The case is Texas Department of Insurance v. Jones et al. case number 15-0025, in the Supreme Court of the State of Texas.
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