Bastian v. Travelers Ins. Co.

• Decision Date: 27 February 1992
• Docket Number: Civ. A. No. 4-91-844-A.
• Citation: 784 F. Supp. 1253
• Parties: James R. BASTIAN, Plaintiff, v. The TRAVELERS INSURANCE COMPANY and the Travelers Indemnity Company of Rhode Island, Defendants.
• Court: U.S. District Court — Northern District of Texas

784 F. Supp. 1253

James R. BASTIAN, Plaintiff, v. The TRAVELERS INSURANCE COMPANY and the Travelers Indemnity Company of Rhode Island, Defendants.

Civ. A. No. 4-91-844-A.

United States District Court, N.D. Texas, Fort Worth Division.

February 27, 1992.

Hartson Dustin Fillmore, III, Law Offices of H. Dustin Fillmore, Ft. Worth, Tex., for plaintiff.

Don Bradley Kizzia, Strasburger & Price, Dallas, Tex., for defendants.

MEMORANDUM OPINION AND ORDER

McBRYDE, District Judge.

Before the court for a decision is the motion of plaintiff, James R. Bastian, for remand. The court has determined that the motion should be denied.

I. Nature of the Action

Plaintiff instituted his action in a state court of Texas by a pleading in which he alleges causes of action based on (a) negligence of defendants, The Travelers Insurance Company and The Travelers Indemnity Company of Rhode Island, in the handling of a workers' compensation claim he had made because of an on-the-job injury, (b) a breach by defendants of their duty of good faith and fair dealing in the handling of his claim, and (c) violation by defendants of Tex.Ins.Code art. 21.21, § 16 because of defendants' conduct in handling the claim. He alleges that defendants are health, disability, workers' compensation and accident insurance corporations; that on or about November 7, 1988, and again on or about December 15, 1988, he was injured while in the course of his employment as an employee of Centex Real Estate Corporation/Fox & Jacobs; that he made a claim for workers' compensation benefits pursuant to Texas law; that for a period of time he received weekly workers' compensation benefits; that in December 1989 defendants suspended his benefits and, at the same time, filed a form with the Texas Industrial Accident Board by which they falsely accused him of being a fraudulent claimant; that, thereafter, defendants wrongfully failed and refused to pay him workers' compensation benefits to which he was entitled under "the policy of insurance and under the laws of the State of Texas" (presumably having reference to a policy of workers' compensation insurance issued by one or both defendants and the workers' compensation laws of Texas); that he was forced to file and prosecute a lawsuit in order to recover the workers' compensation benefits to which he was entitled; and that defendants' refusal to pay workers' compensation benefits to him was without any reasonable basis.

Actual damages sought by plaintiff are alleged by him to have been sustained by reason of mental anguish he suffered and expenses he incurred in obtaining the benefits to which he was entitled. In addition to asking for recovery of actual damages, plaintiff seeks recovery of punitive damages, alleging that the claims handling conduct of defendants amounted to gross negligence and/or malice. There is no allegation that workers' compensation benefits that were owed have not now been paid, nor is there any request for recovery of any benefits of a kind contemplated by the workers' compensation laws of Texas.

II. Removal and Motion to Remand

Defendants removed the action to this court by a timely filed notice that alleged complete diversity of citizenship and an amount in controversy in excess of $50,000.

By order signed January 6, 1992, the court called the attention of the parties to Watson v. Liberty Mut. Fire Ins. Co., 715 F.Supp. 797 (W.D.Tex.1989), and directed the parties to file briefs discussing the court's removal jurisdiction, or lack thereof, and citing relevant authorities in support of their respective positions. On January 10, 1992, plaintiff filed a motion for remand and supporting brief. The ground of the motion was 28 U.S.C. § 1445(c), which provides that "a civil action in any State court arising under the workmen's compensation laws of such State may not be removed to any district court of the United States." As decisional authority for his motion, plaintiff cited Watson v. Liberty Mut. Fire Ins. Co. and Jones v. Roadway Express, Inc., 931 F.2d 1086 (5th Cir.1991).

Defendants' brief came with its response to the motion to remand. The thrust of the response and brief is that § 1445(c) does not apply because plaintiff's "pending common law bad faith claim for damages is `a separate and independent claim' from the prior claims for statutory workers' compensation benefits that were settled."¹

The parties do not discuss plaintiff's negligence or article 21.21 claims in their respective presentations on propriety of removal. The court assumes, as the parties apparently do, that the same considerations that determine whether plaintiff's "breach of the duty of good faith and fair dealing" cause of action is a civil action "arising under the workmen's compensation laws" of Texas will apply as to the issues of whether the negligence or article 21.21 causes of action so arise.

III. Nature of the Texas Version of a Workers' Compensation Insurer's Duty of Good Faith and Fair Dealing

The Texas version of an insurer's duty of good faith and fair dealing came into being via Arnold v. National County Mut. Fire Ins. Co., 725 S.W.2d 165 (Tex.1987). The Texas Supreme Court opined that "in the insurance context a special relationship arises out of the parties' unequal bargaining power and the nature of insurance contracts which would allow unscrupulous insurers to take advantage of their insureds' misfortunes in bargaining or settlement or resolution of claims." 725 S.W.2d at 167. Defining the new cause of action, the Court said:

A cause of action for breach of the duty of good faith and fair dealing is stated when it is alleged that there is no reasonable basis for denial of a claim or delay in payment or a failure on the part of the insurer to determine whether there is any reasonable basis for the denial or delay.

Id. As defined in Arnold, the cause of action sounds in tort, with the consequence that "exemplary damages and mental anguish damages are recoverable for a breach of the duty of good faith and fair dealing under the same principles allowing recovery of those damages in other tort actions." Id. at 168. Emphasizing the separateness of the tort action from an action based on the insurance contract, the Court held "that the statute of limitations does not begin to run on a good faith and fair dealing claim until the underlying insurance contract claims are finally resolved." Id.

The newly found common law duty was put in a workers' compensation context for the first time in Texas in Aranda v. Insurance Co. of North America, 748 S.W.2d 210 (Tex.1988). In Aranda, the Texas Supreme Court reminded that "this duty of good faith and fair dealing arises out of the special trust relationship between the insured and the insurer" and that:

the duty of good faith and fair dealing is thus imposed on the insurer because of the disparity of bargaining power and the exclusive control that the insurer exercises over the processing of claims.

748 S.W.2d at 212. The Court pointed out that the Texas Workers' Compensation Act "sets forth a compensation scheme that is based on a three-party agreement entered into by the employer, the employee, and the compensation carrier." Id. From that premise, the Court reasoned:

As between the compensation carrier and the employee, there is a promise for a promise: the carrier agrees to compensate the employee for injuries sustained in the course of employment, and the employee agrees to relinquish his common law rights against his employer. Southern Casualty Co. v. Morgan, 12 S.W.2d 200 at 201 (Tex.Comm'n App. 1929). The employee is thus a party to the contract and therefore entitled to recover in that capacity.

The contract between a compensation carrier and an employee creates the same type of special relationship that arises under other insurance contracts.

Id.

The elements of the cause of action recognized in Aranda were defined as follows:

A workers' compensation claimant who asserts that a carrier has breached the duty of good faith and fair dealing by refusing to pay or delaying payment of a claim must establish (1) the absence of a reasonable basis for denying or delaying payment of the benefits of the policy and (2) that the carrier knew or should have known that there was not a reasonable basis for denying the claim or delaying payment of the claim....

Id. at 213.

In Aranda, the Court again emphasized the separateness of the common law cause of action from the cause of action based on the insurance contract. After first noting the exclusivity of the provisions of the Workers' Compensation Act as to an on-the-job injury of a kind contemplated by the Act, the Court pointed out that the Act was not intended to shield compensation insurers from the entire field of tort law. The Court then explained the difference between a claim under the Act and a claim based on breach of the common law duty, saying:

Liability as a result of a carrier's breach of the duty of good faith and fair dealing or intentional misconduct in the processing of a compensation claim is distinct from the liability for the injury arising in the course of employment. Injury from the carrier's conduct arises out of the contractual relationship between the carrier and the employee and is sustained after the job-related injury. Travelers Ins. Co. v. Savio, 706 P.2d 1258 at 1265 (Colo.1985). This court has recognized that an employee may have one claim against his employer under the Act and another claim at common law for an intentional tort. Massey v. Armco Steel Co., 652 S.W.2d 932, 933 (Tex.1983), rev'g 635 S.W.2d 596 (Tex. App. — Houston 14th Dist. 1982).

Accordingly, we hold that the exclusivity provision of the Workers' Compensation Act does not bar a claim against a carrier for breach of the duty of good faith and fair dealing or intentional misconduct in the processing of a compensation claim. A claimant is permitted to recover when he shows that the carrier's breach of the duty

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