Fidelity & Guar. Ins. Underwriters, Inc. v. Saenz

• Decision Date: 29 July 1993
• Docket Number: No. 13-91-029-CV,13-91-029-CV
• Citation: 865 S.W.2d 103
• Parties: FIDELITY & GUARANTY INSURANCE UNDERWRITERS, INC. and Gisela Armstrong, Appellants, v. Corina SAENZ and Felipe Saenz, Jr., Appellees.
• Court: Texas Court of Appeals

Page 103

865 S.W.2d 103

FIDELITY & GUARANTY INSURANCE UNDERWRITERS, INC. and Gisela Armstrong, Appellants, v. Corina SAENZ and Felipe Saenz, Jr., Appellees.

No. 13-91-029-CV.

Court of Appeals of Texas Corpus Christi.

July 29, 1993.

Rehearing Overruled Nov. 30, 1993.

W. Wendell Hall, Fulbright & Jaworski, San Antonio, Ben Taylor, Fulbright & Jaworski, Houston, for appellants.

W. Charles Campbell, James P. Wallace, Thomas Black, Soules & Wallace, Austin, Dalinda G. Quintana, Ramon Garcia, Law Office of Ramon Garcia, Edinburg, for appellees.

Before the court en banc.

OPINION

KENNEDY, Justice.

Appellants, Fidelity & Guaranty Insurance Underwriters, Inc. and Gisela Armstrong, appeal from a judgment in favor of appellee, Corina Saenz, in a lawsuit arising from appellants' actions during settlement of Saenz's claim for workers' compensation. By the lawsuit, Saenz claimed that Fidelity, when settling her workers' compensation claim, breached its duty of good faith and fair dealing, committed fraud, and violated the Insurance Code and the Deceptive Trade Practices Act. We affirm in part, reverse and render in part, and reverse and remand in part.

On February 3, 1986, while working at Phillips Properties, Corina Saenz fell over backwards in a chair and hit her head on the floor. Following the incident, she suffered nausea, headaches, and seizures. Saenz filed a claim for compensation benefits under the Texas Workers' Compensation Act. ¹ Fidelity was Phillips Properties' workers' compensation carrier. Fidelity immediately began paying weekly benefits to Saenz. Gisela Armstrong was Fidelity's "telephone adjuster" in charge of Saenz's case.

In February 1987, while continuing to pay Saenz weekly benefits, Fidelity requested a prehearing conference before the Industrial Accident Board (IAB) and a meeting was scheduled for April 8, 1987. A week before the conference, Saenz telephoned the IAB and stated that Fidelity made a settlement offer to her of $64,000 plus five years future medical expenses but that she wanted more future medical benefits. The IAB representative advised Saenz to attend the scheduled conference and told Saenz that her appearance at the conference would not obligate her to take the offer. Saenz appeared at the prehearing conference without an attorney. The conference resulted in Saenz and Fidelity executing an IAB Form 13, Compromise Settlement Agreement (CSA). The CSA resolved Saenz's claims for weekly compensation indemnity benefits as well as future medical benefits. The agreement provided that Fidelity would pay Saenz $65,000 in a lump sum and would pay reasonable and necessary medical expenses limited to Dr. J.A. Zavaleta or at his referral until April 8, 1992. Just above Saenz's signature was the following statement:

The undersigned agrees that the liability of the above insurance company or self insured or the extent of the injury is uncertain, indefinite or incapable of being satisfactorily established.

The IAB approved the CSA on April 14, 1987. In its approval order, the IAB made the express finding:

The Board finds the liability of the insurance company or self insured or the extent of the injuries of the employee, is uncertain, indefinite, and incapable of being satisfactorily established. It is ordered that the compromise agreement be, and same is hereby, approved.

Following her acceptance of the settlement, Saenz sued Fidelity claiming breach of the duty of good faith and fair dealing in settlement practices, and violations of the Insurance Code and the Deceptive Trade Practices Act. Later, Saenz amended her petition alleging fraudulent misrepresentation. On May 30, 1990, Saenz again amended her petition to include Armstrong, in her individual capacity, as a defendant. Saenz contended that Fidelity, through its agent, Armstrong, represented to her that five years was the maximum future medical benefits she could receive under the law, and claimed that Armstrong discouraged her from consulting with an attorney. Saenz contends that at the time Armstrong made the offer to her, Armstrong was aware that Saenz was entitled to greater medical benefits than the five years offered.

At trial, the jury found that Fidelity ratified Armstrong's malicious, knowing, and fraudulent misrepresentation of the workers' compensation policy benefits to Saenz which the jury found proximately caused Saenz's damages. The jury also found that Fidelity breached its duty of good faith and fair dealing in handling Saenz's claim and the breach was the proximate cause of damages to Saenz. The trial court rendered judgment on the verdict and Saenz recovered actual and punitive damages against Armstrong and Fidelity.

Fraudulent Misrepresentation

Saenz contends that Fidelity committed common law fraud when negotiating the CSA. Specifically, Saenz contends that Fidelity acted fraudulently when Armstrong represented to her that, under the law, the maximum medical benefits she could receive was five years of medical costs for all reasonable and necessary expenses. Saenz explained that she signed the CSA, in which she agreed that the extent of her injury was uncertain, only because Armstrong told her that five years of medical expenses was the maximum she could receive under the law. The jury agreed and found that Armstrong fraudulently misrepresented the benefits provided under the workers' compensation insurance policy which proximately caused Saenz damages.

By points four and seven, Fidelity asserts that the court's jury charge was erroneous. Fidelity asserts that the only remedy available on a cause of action based on fraud in negotiating a workers' compensation CSA is a suit to rescind the CSA. Fidelity continues its argument by contending that because rescission is the only remedy available to Saenz, the court reversibly erred by submitting a charge which failed to properly submit the necessary elements to set aside a CSA approved by the IAB. By point seven, Fidelity contends that Saenz waived her rescission remedy by failing to seek the rescission remedy in the trial court's judgment.

Fidelity argues that since Saenz's fraud action is raised regarding the negotiation of a CSA approved by the IAB, Saenz must first file suit to set aside the agreement. Fidelity cites as authority for its proposition Brannon v. Pacific Employers Ins. Co., 148 Tex. 289, 224 S.W.2d 466, 469 (1949) (citing Commercial Casualty Ins. Co. v. Hilton, 126 Tex. 497, 87 S.W.2d 1081 (Comm'n App.1935), rehearing denied with opinion, 126 Tex. 497, 89 S.W.2d 1116 (Comm'n App.1936)). Fidelity contends that once a CSA is approved, it is binding on all parties until legally set aside in a court of competent jurisdiction by an independent affirmative action. Rodriguez v. American Gen. Fire & Casualty, 788 S.W.2d 583, 585 (Tex.App.--El Paso 1990, writ denied); Gayler v. Renfro, 576 S.W.2d 911, 913 (Tex.Civ.App.--Amarillo 1979, no writ). Fidelity asserts that before setting aside a CSA, a claimant must show that misrepresentations about injuries were made by the employer or compensation carrier; that the claimant relied on those misrepresentations in making the settlement; and that there was a meritorious claim for more compensation than was paid. Rodriguez v. American Home Assurance Co., 735 S.W.2d 241, 242 (Tex.1987) (citing Brannon, 224 S.W.2d at 468 (Tex.1949)).

Fidelity continues its argument that in a Brannon-based suit, the court does not have jurisdiction to grant judgment for the claimant for additional compensation, but rather, can only grant the worker relief by canceling the CSA. Brannon, 224 S.W.2d at 469. Fidelity asserts that after filing an action for rescission, Saenz must then go back to the IAB and argue her claim, and then if either party is dissatisfied with the Board's award, Saenz could appeal the CSA to the district court. Id. Although this results in trying the case by piecemeal, a suit for rescission, must be tried that way or not at all. Id.

Saenz contends on appeal that her claim is entirely distinguishable from Brannon and Hilton and that rescission is an inappropriate remedy. Saenz argues that unlike Brannon, her claim is for damages separate and distinct from her work-related injury. Saenz posits that Brannon only addresses claims whereby the plaintiff seeks to increase its compensation for work-related injuries. Saenz argues that she is not urging the Brannon-type of rescission claim. She stresses that she is not seeking to increase compensation for her work-related injury, but rather, is seeking to recover damages for injuries unrelated to the head injury addressed by her compensation claim.

We agree that this is not an action for additional workers' compensation benefits. Rather, it is a suit filed asking for recovery of damages completely unrelated to the workers' compensation injury. The actionable injury complained about here results from Fidelity's alleged misrepresentation of recoverable medical benefits. We conclude that the court was not required to submit issues to the jury about rescission of the IAB-approved CSA. Therefore, we overrule appellants' fourth and seventh points of error.

Evidence of Fraud

Question 1 of the court's charge to the jury asked:

Did Gisela Armstrong misrepresent the benefits provided under the workers' compensation insurance policy carried by Corina Saenz' employer?

Your are instructed that the terms "misrepresent" or "misrepresentation" are defined as any of the following acts of omissions:

1. Any untrue statement or a material fact; or

2. Any omission to state a material fact necessary to make the statements made (considered in light of the circumstances under which they are made) not misleading; or

3. The making of any statement in such a manner or order as to mislead a reasonably prudent person to a false conclusion of a material fact; or

4. Any misstatement of future medical benefits claimant would be entitled to under the Texas Workers' Compensation Act.

The...