Golden v. Employers Ins. of Wausau

• Decision Date: 23 October 1997
• Docket Number: No. Civ.A. G-96-467.,Civ.A. G-96-467.
• Citation: 981 F.Supp. 467
• Parties: Sabrina GOLDEN v. EMPLOYERS INSURANCE OF WAUSAU.
• Court: U.S. District Court — Southern District of Texas

981 F.Supp. 467

Sabrina GOLDEN v. EMPLOYERS INSURANCE OF WAUSAU.

No. Civ.A. G-96-467.

United States District Court, S.D. Texas, Galveston Division.

October 23, 1997.

Fritz Barnett, Barnett and Craddock, Houston, TX, for Plaintiff.

Gary E. Hill, Houston, TX, Michael Phillips, Phillips and Akers, Houston, TX, for Defendant.

ORDER

KENT, District Judge.

Plaintiff commenced this action in Galveston County state court on July 18, 1996, and it was timely removed to this Court on August 22, 1996. Now before the Court is Defendant's Motion to Dismiss and Defendant's Motion to Stay. For the reasons set forth below, Defendant's Motion to Dismiss is partially GRANTED, and Plaintiff's claim alleging breach of the common-law duty of good faith and fair dealing is DISMISSED WITH PREJUDICE. Moreover, Defendant's Motion to Stay is GRANTED and the remainder of this case is temporarily STAYED and ADMINISTRATIVELY CLOSED, pending resolution of administrative proceedings pursuant to the Texas Labor Code.

I. FACTUAL SUMMARY

This case ultimately results from a horrific robbery. Plaintiff was working as a cashier for Evans Oil Company at the Little Chief Convenience Store in Dickinson, Texas on the night of July 7, 1991 when that store was robbed. Only Golden, her daughter, and the robber were in the store at the time of the robbery. During the robbery, the assailant grabbed Golden around her neck and held a knife to her throat. The robber also threatened to kill Golden's daughter if Golden did not cooperate. She did so. Despite her cooperation, Golden's neck was forcefully twisted by the robber and she was violently thrown about. After leaving the store with the money from the cash register, the thief was later apprehended by police. As a result of the robbery, Golden suffered superficial cuts, and injuries to her neck, shoulder, and arm. She also suffered continued crying spells and sleeplessness. Golden filed a workers' compensation claim for her injuries allegedly suffered that night.¹ She was eventually diagnosed with post traumatic stress disorder, depression, anxiety with panic attacks, sleep disturbance, and panic disorder. Ongoing psychological therapy and treatment were recommended.

The Texas Workers' Compensation Insurance Facility ("Facility") was the insuring entity for Golden's Employer, Evans Oil Company, at the time Golden filed her workers' compensation claim. At that time, Defendant Employers Insurance of Wausau was the servicing company and agent for the Facility. Plaintiff alleges in her Complaint that Defendant has engaged in a scheme to unfairly and unreasonably deny her workers' compensation benefits. She contends that Defendant, on several occasions, denied coverage after giving pre-authorization for treatment, forcing her to pay for those treatments. Golden also asserts that her condition has steadily worsened and has been exasperated due to Defendant's wrongful refusal to provide funds for consistent treatment.

II. ANALYSIS

In her Original Complaint, Plaintiff alleges breach of contract,² breach of the common-law duty of good faith and fair dealing pursuant to Aranda v. Ins. Co. of North America, 748 S.W.2d 210 (Tex.1988), violations of the Texas Insurance Code, TEX. INS.CODE ANN. arts. 21.21, 21.21-2, violation of the Texas Deceptive Trade Practices Act ("DTPA"), TEX. BUS. COMM.CODE ANN. § 17.46 et seq., and intentional infliction of emotional distress. In her Amended Complaint, she adds claims for negligence, gross negligence, breach of fiduciary duty, unfair settlement practices, negligent misrepresentation, and fraud.

A. Jurisdictional Issues

1. Subject Matter Jurisdiction

Defendant argues that this case should be dismissed because Plaintiff has failed to exhaust her administrative remedies. The exhaustion of remedies doctrine precludes a party's access to the judicial system without first seeking administrative remedy. See Johnson v. American Gen. Ins. Co., 464 S.W.2d 83, 84 (Tex.1971) (holding that failure to obtain an administrative ruling on a workers' compensation claim precluded utilization of the judicial system to resolve the dispute because prior to administrative review, a court lacks subject matter jurisdiction); Hartford Accident & Indemnity Ins. Co. v. Choate, 126 Tex. 368, 372, 89 S.W.2d 205, 207 (1936) ("The district court has no jurisdiction to determine a claim for compensation arising under the Workmen's Compensation Act until and unless the Industrial Accident Board has first passed upon such claim."). Because this argument involves jurisdictional issues, the Court addresses it first. See Silver Star Enters., Inc. v. M/V Saramacca, 19 F.3d 1008, 1013 n. 6 (5th Cir.1994) (declaring that jurisdictional challenges must be addressed upon suggestion).

This case presents the troublesome problem of accommodating the purposes of the high-risk workers' compensation administrative scheme without closing the courts to plaintiffs who have common-law or extra-contractual claims arising out of grievances against the Facility or its agent servicing companies. The core of Plaintiff's Complaint is that Defendant wrongfully denied her workers' compensation claim. In its Motion to Dismiss, Defendant cites as authority § 410.251 of the Texas Labor Code, which provides that a party must exhaust his administrative remedies before he can seek judicial review of a coverage issue. See TEX. LAB.CODE ANN. § 410.251 (Vernon 1997). Defendant, therefore, argues that the Court must dismiss Plaintiff's claims until Plaintiff has exhausted these remedies provided in the Labor Code.³ Assuming one exists, Plaintiff does not deny that she has failed to exhaust her administrative remedy. The Court is unconvinced that it must dismiss this case pending administrative appeal. Instead, the Court finds that the administrative remedy available to Plaintiff is insufficient to resolve Plaintiff's causes of action, and therefore, does not prevent this Court from exercising original jurisdiction over the majority of the claims alleged in this case.

At the outset, assuming any such administrative provision is applicable, the Court must determine what administrative remedy governs Plaintiff's claims. The Court notes that both parties argue their positions while citing as authority provisions found within both the Texas Labor Code and the Texas Insurance Code. Indeed, Plaintiff goes so far as to ask the Court which administrative remedies found in these Codes applies. After a careful review of the administrative remedies found in both Codes, the Court is convinced that the procedures outlined in the Texas Labor Code are more appropriate for resolution of Plaintiff's coverage claims.

The Court, however, understands arguments to the contrary. The policy in question in this case was issued by the Facility to Plaintiff's employer. Defendant was acting as the servicing company for the Facility on that policy of insurance. Because the Defendant servicing company was acting as an agent for the Facility, any decision made by Defendant regarding coverage was a decision on behalf of the Facility. Thus, though not presented this way in either party's brief, it could be argued quite persuasively that the provisions within the Texas Insurance Code regarding Facility decisions applies in this case. Article 5.76-2, § 2.08 of the Texas Insurance Code provides: "An applicant for insurance, an insured, or an insurer aggrieved by an act or decision of the facility may appeal to the board not later than the 30th day after the affected party had actual notice that the act occurred or the decision was made." TEX. INS.CODE ANN. art. 5-76, § 2.08(a) (Vernon 1997) (emphasis added).⁴ Certainly, Defendant's denial of coverage, acting as the Facility's agent, is an "act" or "decision" within the purview of § 2.08. Apparently many courts addressing this issue assume that provisions of the Texas Insurance Code control. See, e.g., Northwinds Abatement, Inc. v. Employers Ins. of Wausau, 69 F.3d 1304, 1310 (5th Cir.1995) (holding that § 2.08 did not provide an adequate remedy for an aggrieved employer) Storebrand Ins. Co. v. Employer's Ins. of Wausau, 974 F.Supp. 1005, 1008-09 (S.D.Tex.1997) (rejecting the defendant's argument that § 2.08 prevented judicial review of a suit against the servicing company); Metro Temps v. Workers' Comp. Ins. Fac., 949 S.W.2d 534, 535-36 (Tex.App. — Austin 1997, no writ) (holding that an employer must exhaust his administrative remedy under § 2.08 before proceeding in a judicial forum); Producers Assistance Corp. v. Employers Ins. of Wausau, 934 S.W.2d 796, 799 (Tex.App. — Houston [1st Dist.] 1996, no writ) (interpreting article 5.76 of the Texas Insurance Code and holding that an employer must first present his claims to the Texas Board of Insurance in the administrative appeals process before seeking judicial review).

Although Plaintiff argues otherwise, the Court finds today that Plaintiff indeed has an administrative remedy; however, that administrative remedy falls within the auspices of the Texas Labor Code and the Texas Administrative Code, not the Texas Insurance Code. In this case, unlike the cases cited by both parties in their briefs and the cases cited above, the dispute is between an agent of the insurance carrier and an employee, not an employer. In that regard, the Texas Labor Code specifically provides for a "benefit review conference" intended to mediate and resolve compensation disputes arising from on-the-job injuries. See TEX. LAB.CODE ANN. § 410.021 (Vernon 1997) ("A benefit review conference is a nonadversarial, informal dispute resolution proceeding...."). According to the Texas Labor Code, following an unsuccessful benefit review conference, only then can a workers' compensation claimant seek a "contested case hearing." See id. § 410.023. At the more formal contested case hearing, the hearing officer receives evidence in order to develop the facts of the controversy. See id. § 410.163. The...