In re Crawford & Co.

• Decision Date: 27 February 2015
• Docket Number: No. 14–0256,14–0256
• Citation: 458 S.W.3d 920
• Parties: In re Crawford & Company, Crawford & Company Healthcare Management, Inc., Patsy Hogan and Old Republic Insurance Company, Relators
• Court: Texas Supreme Court

458 S.W.3d 920

In re Crawford & Company, Crawford & Company Healthcare Management, Inc., Patsy Hogan and Old Republic Insurance Company, Relators

No. 14–0256

Supreme Court of Texas.

Opinion Delivered: February 27, 2015

Rehearing Denied June 5, 2015

Richard Lee ‘Rick’ Smith Jr., Greg K. Winslett, Quilling Selander Lownds Winslett & Moser, P.C., Dallas, for Relators Crawford & Company, Patsy Hogan, Crawford & Company Healthcare Management, Inc.

Kristi R. Weaber, Tod Mayfield, Mayfield Law Firm, LLP. Amarillo, Robert D. Stokes, Flahive Ogden & Latson PC, Austin, for Relator Old Republic Insurance Company.

Bradley Dean McClellan, Law Offices of Richard Pena, PC, Austin, Casey Alcantar, Hilliard Energy, Ltd., Midland, Michael Keith Bradley, Bradley Law Firm, Cleburn, for Real Parties in Interest Edward Glenn Johnson, Natalie Johnson.

Opinion

PER CURIAM

Relators in this mandamus proceeding contend that the trial court abused its discretion when it refused to dismiss claims over which the Division of Workers' Compensation has exclusive jurisdiction. Because all of the claims arise out of relators' investigation, handling, and settling of claims for workers' compensation benefits, we agree.

In 1998, Glenn Johnson suffered traumatic and debilitating injuries while working for ASARCO. The parties do not dispute that Johnson was severely injured or that he is entitled to receive lifetime workers' compensation benefits. Disputes over the details and amounts of those benefits, however, led Johnson to request a benefit review conference in 2008, which led to a contested case hearing the following year. It appears from the parties' briefs that the suit for judicial review of that decision remains pending in the district court.

Meanwhile, separate from the administrative proceedings, Johnson and his wife, Natalie, filed the underlying suit against ASARCO's workers' compensation insurance provider Old Republic Insurance Company; its claims services contractors Crawford & Company and Crawford & Company Healthcare Management, Inc.; and their employee Patsy Hogan (collectively, Crawford). The Johnsons allege that, over a period of nearly ten years, Crawford engaged in “a battle plan to delay, discourage and deny” benefits that the Johnsons were entitled to receive. Specifically, the Johnsons contend that Crawford (a) wrongfully disputed, denied, and delayed medical benefits, (b) misrepresented which benefits were and were not covered, (c) failed to provide required notices and other information, (d) repeatedly agreed to pay for benefits and services but then refused to do so, (e) performed inadequate and misleading investigations into the Johnsons' claim for benefits, and (f) falsely accused the Johnsons of insurance fraud, leading to their wrongful arrests and a two-year prosecution that ultimately terminated in the Johnsons' favor. In short, the Johnsons allege that, “[r]ather than manage the claim” and adjust it “in a fair and reasonable manner,” Crawford “resorted to combat tactics to wreak havoc on Glenn's and Natalie's lives.”

Based on these allegations, the Johnsons pled numerous causes of action, some sounding in tort (negligence; gross negligence; negligent, fraudulent, and intentional misrepresentation; fraud; fraud by non-disclosure; fraudulent inducement; intentional infliction of emotional distress; malicious prosecution; and conspiracy); some sounding in contract (breach of contract; quantum meruit; and breach of the common law duty of good faith and fair dealing); and some alleging violations of statutory duties (under the Texas Insurance Code and the Texas Deceptive Trade Practices Act). The Johnsons sought relief in the form of actual damages for physical injuries, mental injuries, loss of income, and loss of reputation; exemplary damages; statutory damages; and injunctive relief prohibiting Crawford from continuing to engage in such “extreme and outrageous” conduct.

The Johnsons specifically pled that the Texas Workers' Compensation Act does not require them to pursue their claims through its administrative procedures or otherwise exhaust administrative remedies because (1) the Act's administrative procedures do not apply to some of their claims; (2) Crawford's “subterfuge” of the workers' compensation system relieves the Johnsons from any duties under that system; and (3) the Johnsons are seeking to recover for “independent injuries ... that are unrelated to [Glenn's] workers['] compensation injuries and the benefits that he is entitled to under that system.” While the Johnsons agree that they must pursue their claims for workers' compensation benefits through the administrative process, they contend that they can pursue these claims for additional, independent, and “unrelated” damages in the courts.

Crawford disagreed and filed a plea to the jurisdiction and motion for summary judgment. Relying primarily on our decision in Texas Mutual Insurance Co. v. Ruttiger, 381 S.W.3d 430 (Tex.2012), Crawford argued that the Texas Department of Insurance Division of Workers' Compensation has exclusive jurisdiction over all of the Johnsons' claims because they arise out of the workers' compensation claims-handling process. Conceding that the claims for malicious prosecution and for intentional infliction of emotional distress could “arguably survive the landmark decision in Ruttiger, ” Crawford alternatively asserted that no evidence supported those claims. The trial court dismissed the Johnsons' claims for breach of the common law duty of good faith and fair dealing and for violations of the Texas Insurance Code but refused to dismiss any of the other claims. The court of appeals denied Crawford's petition for mandamus relief.¹

We conclude that the Division of Workers' Compensation has exclusive jurisdiction over the Johnsons' claims and the Workers' Compensation Act provides their exclusive remedies. The Act designates the Department of Insurance as the administrative agency responsible “[for overseeing] the workers' compensation system of this state” and establishes the Division of Workers' Compensation within the Department to “administer and operate” that system. Tex. Lab. Code § 402.001. It is the Division's duty to “(1) regulate and administer the business of workers' compensation in this state; and (2) ensure that [the Act] and other laws regarding workers' compensation are executed.” Id . § 402.00114. The Division must monitor insurance carriers, employers, and others “for compliance with commissioner rules, this subtitle, and other laws relating to workers' compensation.” Id. § 414.002(a). The Division or its commissioner may impose an array of sanctions against those who fail to comply, including a cease-and-desist order and administrative penalties up to $25,000 per day per occurrence. Id. § 415.021(a). As we explained in Ruttiger, the Act, as substantially revised in 1989, “prescribes detailed, [Division]-supervised, time-compressed processes for carriers to handle claims and for dispute resolution” and “has multiple, sometimes redundant but sometimes additive, penalty and sanction provisions for enforcing compliance with its requirements.” 381 S.W.3d at 443.

In light of the Act's comprehensive system for resolving workers' compensation claims² and the Division's role in that process, we concluded in Ruttiger that the Act provides the exclusive procedures and remedies for claims alleging that a workers' compensation carrier has improperly investigated, handled, or settled a workers' claim for benefits. Specifically, we held that the worker in that case could not recover against the carrier for violations of section 541.060 of the Texas Insurance Code, which prohibits all insurance carriers generally (not just workers' compensation carriers) from engaging in “unfair settlement practices with respect to a claim by an insured.” Tex. Ins. Code § 541.060(a). “Permitting a workers' compensation claimant to additionally recover by simply suing under general provisions of Insurance Code section 541.060,” we explained, “would be inconsistent with the structure and detailed processes of the Act.” Ruttiger, 381 S.W.3d at 443. We concluded that the Act's “provisions for dispute resolution and remedies for failing to comply with those provisions in the workers' compensation context are exclusive of those in section 541.060.” Id . at 444.³

We also held that the claimant in Ruttiger could not recover on his claims under section 542.003(a)(3) of the Insurance Code, which requires insurers to “adopt and implement reasonable standards for the prompt investigation of claims arising under the insurer's policies.” Tex. Ins. Code § 542.003(a)(3). “[I]n light of the specific substantive and procedural requirements built into the Act,” we concluded, “and the detrimental effects on carriers flowing from penalties that can be imposed for failing to comply with those requirements, the Legislature did not intend for workers' compensation claimants to have a cause of action against the carrier under the general provision of section 542.003.” Ruttiger, 381 S.W.3d at 445.

For the same reasons, we also overruled our precedent that pre-dated the current version of the Act and held that “an injured employee may not assert a common-law claim for breach of the duty of good faith and fair dealing against a workers' compensation carrier.” Id . at 433 (overruling Aranda v. Ins. Co. of N. Am., 748 S.W.2d 210 (Tex.1988) ). We reasoned that allowing the carrier to risk common law liability in addition to liability under the Act “distorts the balances struck in the Act and frustrates the Legislature's intent to have disputes resolved quickly and objectively.” Id . at 451. “Recognizing and respecting the Legislature's prime position in enacting, studying, analyzing, and reforming the system, and its efforts in having done that,” we concluded that “[t]he Act effectively eliminates the need for a judicially imposed cause of action outside the administrative...