Am. Zurich Ins. Co. v. Samudio

Decision Date29 June 2012
Docket NumberNo. 10–0554.,10–0554.
Citation55 Tex. Sup. Ct. J. 1028,370 S.W.3d 363
PartiesAMERICAN ZURICH INSURANCE COMPANY, Petitioner, v. Daniel SAMUDIO, Respondent.
CourtTexas Supreme Court


Robert D. Stokes, Gregory D. Solcher, Flahive, Ogden & Latson PC, Austin TX, for American Zurich Insurance Company.

Byron C. Keeling, Ruth B. Downes, Keeling & Downes, P.C., Michael P. Doyle, Doyle Raizner LLP, David Q. Haag II, Blackwell & Haag, P.C., Houston TX, for Daniel Samudio.

Nicholas Canaday III, Office of the Attorney General, Austin, TX, for Amicus Curiae Texas Department of Insurance Division of Workers' Compensation.

Marcos Benjamin Guerra, Assistant Attorney General, for Amicus Curiae State Office Risk Management.

Justice LEHRMANN delivered the opinion of the Court.

Under the Texas Workers' Compensation Act, an injured worker's impairment income benefits are determined in part by the impairment rating assigned by the Texas Department of Insurance's Division of Workers' Compensation. Tex. Lab.Code § 408.121(a)(1). In an appeal to the district court of the Division's impairment rating determination, unless there is evidence of a substantial change in the worker's condition, the court may consider only evidence of impairment that was presented to the agency, and may only adopt an impairment rating assigned by a doctor in the administrative proceedings. Tex. Lab.Code § 410.306(c). We must decide whether a reviewing court lacks subject matter jurisdiction to resolve an impairment rating appeal if the only rating presented to the agency was invalid. We hold that the absence of a valid impairment rating does not deprive the court of jurisdiction. Consequently, we reverse the court of appeals' judgment and remand to the trial court.

I. Background

Daniel Samudio suffered a back injury during the course of his employment that was compensable under the Texas Workers' Compensation Act. SeeTex. Lab.Code § 401.11. He eventually had four surgeries to rectify the injury, including a spinal fusion and a laminectomy. His physicians did not order preoperative flexion or extension x-rays, which would have provided evidence of any loss of motion segment integrity, a factor in determining the level of impairment. See Am. Home Assur. Co. v. Poehler, 323 S.W.3d 626, 631 (Tex.App.-Tyler 2010, pet. pending). Petitioner Zurich American Insurance Company provided workers' compensation coverage to Samudio's employer.

After Samudio filed a claim for medical benefits under the Act, the Division appointed Dr. Gaston Machado as the designated doctor in the case to determine the date Samudio reached maximum medical improvement and his impairment rating under section 408.123 of the Act. An injured worker who suffers a permanent functional or anatomical impairment after reaching maximum medical improvement is entitled to impairment income benefits, the duration of which depend on the assigned impairment rating. Tex. Lab.Code §§ 408.123, 408.121(a)(1). The impairment rating represents “the percentage of permanent impairment of the whole body resulting from a compensable injury.” Id. § 401.011(24). Impairment income benefits equal seventy percent of the worker's average weekly wages; the benefits are paid for three weeks for each percentage point of impairment. Id. §§ 408.121(a)(1); 408.126. An impairment rating of more than fifteen percent may entitle the worker to supplemental income benefits after impairment income benefits would otherwise expire. Id. § 408.142(a)(1).

Section 408.123 of the Act provides that an impairment rating “must be based” upon the fourth edition of the Guides to the Evaluation of Permanent Impairment, published by the American Medical Association.1 The methodology for determining impairment ratings recognized in that edition of the Guides used objectively verifiable evidence to place injured workers into one of eight diagnosis-related estimate (DRE) categories. In cases where spinal fusion surgery like Samudio's had been performed, the Guides called for the impairment rating to be based upon pre-operative flexion and extension x-rays. At the time of the administrative proceedings to determine Samudio's impairment rating, however, the Division had implemented two advisories, Advisory 2003–10 and Advisory 2003–10B, which attempted to provide an alternative standard for establishing an impairment rating when no preoperative flexion or extension x-rays had been performed. Under the advisories, a physician could consider evidence of spinal fusionsurgery of the type Samudio had in assigning a DRE. In his initial report to the Division, Dr. Machado concluded that Samudio's impairment rating was twenty percent based on a Category IV DRE. He initially asserted that the rating was based upon the Guides, but later submitted a letter clarifying that he had relied on the advisories in light of the absence of the pre-operative flexion or extension x-rays called for in the Guides. Under the advisories, Machado included Samudio's spinal fusion surgery as a factor in calculating the impairment rating.

American Zurich disputed the impairment rating, and the Division commenced a contested case hearing. At the hearing, the carrier submitted a letter from Dr. John Obermiller. Although he opined that Samudio's impairment rating would be properly calculated at ten percent, Obermiller never examined Samudio, and expressly stated that he was not providing an impairment rating. Instead, he explained that his purpose was to show that Machado's analysis did not conform to the Guides. After the close of the hearing, the hearing examiner issued a decision finding that Samudio had an impairment rating of twenty percent. The examiner also specifically found that only one impairment rating was offered during the contested case proceeding. American Zurich appealed the examiner's decision to the appeals panel. In February 2006, the Division notified the parties that the hearing officer's decision was final.

American Zurich then appealed to the district court. It contended that the impairment rating the Division assigned was invalid, and that Samudio had either no impairment rating, or that the correct rating was ten. While the appeal was pending, the Austin court of appeals decided Texas Department of Insurance Workers Compensation Division v. Lumbermens Mutual Casualty Co., 212 S.W.3d 870 (Tex.App.-Austin 2006, pet. denied). In that case, the court ruled that the advisories were inconsistent with the Guides and thus invalid, and enjoined their further use. Id. at 876–77.2 After the Lumbermens decision, Samudio filed a plea to the jurisdiction contending that the trial court lacked subject matter jurisdiction because the trial court was not empowered to provide the relief American Zurich sought. Samudio argued that American Zurich's petition presented no justiciable controversy because the trial court was only empowered to award an impairment rating that was presented to the agency, and the only rating before the agency was the twenty percent rating advocated by Machado. The trial court granted Samudio's plea and dismissed the case, awarding Samudio $29,246.40 in attorney's fees under section 408.221(c) of the Act. The court of appeals affirmed. 317 S.W.3d 336, 348.

II. Jurisdiction

In an appeal of an injured worker's entitlement to impairment income benefits, the Legislature has provided for a modified trial de novo. Tex. Workers' Comp. Comm'n v. Garcia, 893 S.W.2d 504, 515 (Tex.1995); Tex. Lab.Code § 410.306(c). Under that standard, the trier of fact is informed of the impairment rating assigned by the Division. Tex. Lab.Code § 410.304. Unless there has been a substantial change in the worker's condition, id.§§ 410.306(c), 410.307, evidence of the extent of impairment is limited to that presented to the Division, and the trier of fact “shall adopt one of the impairment ratings under Subchapter G, Chapter 408.” Id.§ 410.306(c). In affirming the trial court's dismissal for lack of subject matter jurisdiction, the court of appeals reasoned that only one impairment rating, Machado's, had been presented to the Division. 317 S.W.3d at 348. The court concluded that the trial court could not, therefore, grant American Zurich any relief, even assuming that the rating presented to the agency was invalid under Lumbermens.Id. at 348–49.

A. Section 410.306(c) is not a jurisdictional limit

In Garcia, we rejected the contention that section 410.306(c) of the Act violated injured workers' right to trial by jury. 893 S.W.2d at 528–30 (Tex.1995). We equated the provision with procedural rules barring the presentation of witnesses or information that was not timely disclosed in a civil trial. Id. at 528 (citing Tex.R. Civ. P. 215.5). Section 410.306(c) shaped the manner of submitting the impairment issue to the jury and the scope of the permissible remedy. Id. at 528–529. But because the provision still left the determination of impairment within the jury's hands, it did not violate the right to trial by jury. Id. at 530. At no point did we suggest that section 410.306(c) could be seen as a limit on trial courts' subject matter jurisdiction.

Subject matter jurisdiction limits speak to the power of courts to decide a particular type of controversy, not to the evidence that courts may consider or the scope of the remedy they can afford in a particular case. See Dubai Petroleum Co. v. Kazi, 12 S.W.3d 71, 74–75 (Tex.2000). In the case the court of appeals primarily relied upon, for example, State Bar of Texas v. Gomez, 891 S.W.2d 243 (Tex.1994), we concluded that the district court lacked subject matter jurisdiction in a case in which the plaintiffs sought to require Texas attorneys to provide pro bono legal services. Id. at 246. We noted that the case fell within our exclusive administrative power to regulate the bar. Id. The district court could not grant relief because it “would ... be cast in the impermissible role of effectively promulgating...

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