No Bad Faith in the Workers’ Compensation Context
Two recent decisions from the Texas Supreme Court establish that there is no common law bad faith in Texas regarding workers’ compensation claims.
The Texas Supreme Court in Texas Mut. Ins. Co. v. Ruttiger, 381 S.W.3d 430 (Tex. 2012),held that a claimant could not recover damages under Texas’ Unfair Claims Settlement Practices Act (Ins. Code § 541.060) from a workers’ compensation insurer for unfair claims settlement practices. Ruttiger, 381 S.W.3d at 445.
In the Ruttiger decision the Court found that a cause of action under § 541.061 for misrepresentation of an insurance policy was not necessarily incompatible with the workers’ compensation system and might possibly be permitted. The worker had alleged misrepresentation on the part of the insurer. The insurer argued that the basis for the worker’s claim for misrepresentation was that the insurer disputed the reopening of the claim based on a lack of causal relationship between the injury received in 2000 and the recently discovered disc herniations and therefore the dispute did not involve a misrepresentation of its policy. The worker did not contest this position or point to any statements or actions by the insurer that the worker contended constituted untrue statements about or failure to disclose something about the insurance policy. Therefore, the Texas Supreme Court in Ruttiger found that the dispute involved the extent of the worker’s injury and not what the policy said or whether it covered the disc problems if they were related to the back strain. There was no evidence that the insurer misrepresented the policy.
The case of Texas Mut. Ins. Co. v. Morris, 383 S.W.3d 146 (Tex. 2012) was pending before the Court when Ruttiger was decided.
The claimant in Morris argued that a private cause of action existed because the claim being asserted was for misrepresentation.
The facts involved a worker who injured his back while working for his employer. The workers’ compensation insurer accepted the injury as compensable. Three years later when it was discovered that the employee had herniated lumbar intervertebral discs, the workers’ compensation insurer disputed whether the herniated discs were causally related to the original injury.
The Texas Division of Workers’ Compensation determined that the disc herniations were related to the original injury and ordered the insurer to pay medical benefits, which it did. Then the employee sued the insurer for damages caused by its delay in paying benefits. The trial court rendered judgment for the worker, which was affirmed by the Texas Court of Appeals. However, based upon its recently decided Ruttiger decision, the Texas Supreme Court reversed and rendered judgment in favor of the insurer.
Because the employee’s claims depended on the validity of the insurance code claim and, under Ruttiger, because the insurance code claim failed, the Texas Supreme Court reaffirmed its prior holding that there was no private right of action for an insurer’s unfair claims settlement practices in the workers’ compensation context.