Liberty Mutual Fire Ins. Co. v. McDonough

• Decision Date: 10 June 1987
• Docket Number: No. 08-86-00100-CV,08-86-00100-CV
• Citation: 734 S.W.2d 66
• Parties: LIBERTY MUTUAL FIRE INSURANCE COMPANY, Appellant, v. Roland McDONOUGH, Appellee.
• Court: Texas Court of Appeals

Page 66

734 S.W.2d 66

LIBERTY MUTUAL FIRE INSURANCE COMPANY, Appellant, v. Roland McDONOUGH, Appellee.

No. 08-86-00100-CV.

Court of Appeals of Texas,

El Paso.

June 10, 1987.

John E. Gunter, Rassman, Gunter & Boldrick, Midland, for appellant.

Ruff Ahders, Odessa, Michol O'Connor, Houston, for appellee.

Before OSBORN, C.J., and FULLER and WOODARD, JJ.

OPINION

OSBORN, Chief Justice.

This appeal is from a judgment awarding damages against a workers' compensation carrier for failure to authorize and pay medical expenses in accordance with a compromise settlement agreement within a reasonable time. The judgment is reformed, and as reformed is affirmed.

In March, 1983, these parties entered into a compromise settlement agreement and thereby settled a workers' compensation claim resulting from an accident a year earlier. Although the compromise settlement agreement ¹ does not specifically so provide and was not artfully completed, the parties agree that Liberty Mutual Insurance Company agreed to pay all future hospital and medical expenses resulting from the claimant's injury, to be performed under the direction or referral of Drs. William R. Mims or Stephen E. Driscoll for a period of five years. The agreement expressly provided that the Industrial Accident Board "shall have continuing jurisdiction of all medical benefits provided by this Compromise Settlement Agreement and The Texas Workers' Compensation Act until all obligations described herein are fully discharged."

The claimant had two back operations prior to the settlement agreement and two more operations after the agreement. When a fifth operation was recommended by Dr. Driscoll, the claims supervisor refused to authorize the surgery until he obtained a second opinion that the surgery was necessary. After the surgery was performed in October, 1984, the carrier did not pay the medical bills for the doctor and the hospital until a hearing was set before the Industrial Accident Board in March, 1985. Mr. McDonough filed suit in February, 1985, seeking to recover damages resulting from the unreasonable delay in payment of his medical bills. He alleged a violation of Section 17.46, Tex.Bus. & Com.Code Ann., and sought recovery under Section 16 of Article 21.21, Tex.Ins.Code Ann. He also alleged a breach of the common-law duty of good faith and fair dealing. In answer to special issues, the jury found: (1) Liberty Mutual represented in the compromise settlement agreement that it would provide medical benefits, (2) Liberty Mutual failed to provide medical benefits it promised, (3) that such failure was a producing cause of damages to Roland McDonough, (4) Liberty Mutual engaged in unreasonable delay in paying medical bills submitted to it, (5) that such delay was an unfair act or practice in the business of insurance, (6) that such unfair act or practice was a producing cause of injury to Roland McDonough, (7) that $10,000.00 would reasonably compensate Roland McDonough for past mental anguish and suffering resulting from the actions of Liberty Mutual, (8), (9), (10) "0" damages for inconvenience and loss of time, loss of credit standing and unpaid medical expenses, (11) that the representation as to providing medical benefits was "knowingly" made, (12) $25,000.00 as "additional damages" as a penalty and punishment, (13) Liberty Mutual breached its duty of good faith and fair dealing, (14) such breach was a heedless and reckless disregard of the rights of others, (15) such breach was a proximate cause of the occurrence, (16) "0" for "exemplary damages," and (17) $10,000.00 for reasonable attorney's fees. Judgment was entered awarding Roland McDonough $47,000.00, plus interest and costs.

The Appellant contends in its first point of error that the trial court erred in hearing the case where no subject matter jurisdiction existed. The argument is made that the Industrial Accident Board had continuing jurisdiction over all future medical benefits and that until the Board acted the district court had no jurisdiction of this cause of action. Certainly, that would be true if this were only an attempt to recover the amount of unpaid medical expenses. Smith v. Stephenson, 641 S.W.2d 900 (Tex.1982). But, this is a suit to recover incidental damages resulting from the failure to pay medical expenses and not to recover the amount of those expenses. We do not believe Liberty Mutual had an obligation to pay any incurred medical bills about which there was a dispute until the Board determined that the services rendered were necessary and the amounts of the bills were reasonable. Art. 8307, Sec. 12b, Tex.Rev.Civ.Stat.Ann. That provision of the Act provides that a dispute arises when a written refusal of payment has been filed with the Board. Since only the carrier can refuse payment, it would appear that normally the carrier would invoke the jurisdiction of the Board to make a determination as to whether medical bills which may be disputed are reasonable and for necessary treatment. We conclude that in order to avoid liability for any medical treatment provided by Dr. Driscoll for a period of five years from the date of the compromise settlement agreement, Liberty Mutual had an obligation to file a written notice of refusal to pay specified medical bills with the Board as provided by Section 12b, Article 8307, Tex.Rev.Civ.Stat.Ann. It would then be liable only if the Board approved the disputed bills.

Although the trial court overruled a motion to dismiss, that motion is not a part of the record and we are unable to determine the basis for the motion. We conclude that error has not been preserved. The evidence does reflect that the disputed bills had been filed with the Industrial Accident Board and the matter set for hearing when the carrier made the payments. That payment disposed of any dispute as to those bills. We conclude the trial court had jurisdiction of this suit regardless of any filing or order by the Industrial Accident Board, although the carrier may have had a good defense and no obligation to pay the disputed bills until the entry of the Board's award ordering payment. Point of Error No. One is overruled.

The carrier's next two contentions are that the claimant had no cause of action under Article 21.21, Tex.Ins.Code Ann., and no cause of action for breach of a duty of good faith and fair dealing. In The Aetna Casualty and Surety Company v. Marshall, 30 Tex.Sup.Ct.J. 155, 724 S.W.2d 770 (Jan. 24, 1987), the Court held that Section 16 of Article 21.21 makes actionable any violation of Tex.Bus. & Com.Code Ann. sec. 17.46. It said misrepresentations as to benefits are precisely the sort of conduct which gives rise to a cause of action under Section 17.46. As in the Marshall case, all damages in this case were awarded for the statutory cause of action and the issue as to the duty of good faith and fair dealing becomes immaterial. We note that in Glen Arnold v. National County Mutual Fire Insurance Company, 30 Tex.Sup.Ct.J. 177, 725 S.W.2d 165 (Jan. 31, 1987), the Court recognized a duty on the part of insurers to deal fairly and in good faith with their insureds. But, Roland McDonough is not an insured. We need not decide in this case if the duty extends to a third-party beneficiary. Points of Error Nos. Two and Three are overruled.

Appellant asserts in the next two points that the trial court erred in failing to require proof that the medical bills were reasonable and necessary. First, we note that there was no issue submitted to the jury which inquired if the bills were reasonable and necessary. Second, the bills were paid before the Industrial Accident Board was required to make that determination and either approve or disapprove the bills. Third, there is no dispute about a Board order since the matter became moot when the bills were paid prior to a Board decision. By paying the bills in dispute prior to a Board order, the carrier waived any right to complain and may not litigate an issue it chose to make moot. Points of Error Nos. Four and Five are overruled.

In Point of Error No. Six, Appellant urges that there is no evidence to support either the submission of or the answer to Special Issue No. Thirteen finding a breach of a duty of good faith and fair dealing. Since the jury awarded no damages in answering Special Issue No. Sixteen, all issues on the breach of this alleged common-law cause of action are immaterial. Point of Error No. Six is overruled.

Appellant's next contention is that there is no evidence to support the submission of or the answer to Special Issue No. Eleven where the jury found that Appellant knowingly made false representations in the compromise settlement agreement. The jury was instructed that "knowingly" means "actual awareness by the Defendant of the falsity or deception, if any, of the representations made by Defendant, if any, but actual awareness may be inferred where objective manifestations indicate that a person acted with actual awareness." There is no direct evidence that Liberty Mutual "knowingly" made the representations that it would provide medical benefits. In The Aetna Casualty and Surety Company v. Marshall, supra, the Court noted that the claimant encountered difficulties almost immediately after the settlement in obtaining payments for medical expenses.

In this case, the Appellant testified that some pharmacy bills were not paid and he...