Montgomery v. Blue Cross and Blue Shield of Texas, Inc.

• Decision Date: 15 May 1996
• Docket Number: No. 03-95-00416-CV,03-95-00416-CV
• Citation: 923 S.W.2d 147
• Parties: Richard MONTGOMERY, Shirley Montgomery and Stacy Montgomery, Appellants, v. BLUE CROSS AND BLUE SHIELD OF TEXAS, INC., Appellee.
• Court: Texas Court of Appeals

Page 147

923 S.W.2d 147

Richard MONTGOMERY, Shirley Montgomery and Stacy Montgomery, Appellants, v. BLUE CROSS AND BLUE SHIELD OF TEXAS, INC., Appellee.

No. 03-95-00416-CV.

Court of Appeals of Texas,

Austin.

May 15, 1996.

Rehearing Overruled June 26, 1996.

Tim Labadie, Longley & Maxwell, Austin, for Appellants.

Michael S. Hull, Maroney, Crowley & Bankston, Richardson & Hull, L.L.P., Austin, for Appellee.

Before the court en banc.

CARROLL, Chief Justice.

Pursuant to Rule 79 of the Texas Rules of Appellate Procedure, this Court, on its own motion, elected to resubmit this case en banc. Tex.R.App.P. 79.

Appellants, Richard Montgomery, Shirley Montgomery, and their daughter Stacy Montgomery ("the Montgomerys"), appeal an order granting summary judgment in favor of appellee Blue Cross and Blue Shield of Texas, Inc. ("Blue Cross") and denying their motion for partial summary judgment. We will reverse the summary judgment in favor of Blue Cross and remand the case to the trial court for further proceedings consistent with this opinion.

BACKGROUND

Employees Retirement System of Texas ("ERS") was created by statute to offer health insurance to state employees and their dependents. See Tex.Ins.Code Ann. § 3.50-2 (West 1981 & Supp.1996). As a result, ERS established the Uniform Group Insurance Program and Plan ("the Plan"), and Blue Cross was selected to administer the Plan on behalf of ERS. As an employee of the State Comptroller's Office, Richard Montgomery and his family were covered under a group life and health insurance policy through Blue Cross.

In December 1989, Stacy Montgomery underwent a reduction mammaplasty to correct a hereditary congenital disease known as mammary hypertrophy, and Blue Cross recommended only partial payment be made on the claim. In response to the Montgomerys' request for reconsideration of their claim, Blue Cross not only again denied the claim, contending that the surgery was cosmetic, but further requested that the Montgomerys refund the benefits they had already received. The Montgomerys appealed this denial to ERS which upheld the denial but directed that there be no refund of those benefits previously paid. The Montgomerys then appealed to the Board of Trustees of ERS requesting a contested case hearing, but before the hearing took place, Blue Cross agreed to pay the claim and the administrative proceeding was settled.

Because of Blue Cross's conduct in handling their initial insurance claim, the Montgomerys filed suit in March 1992 against Blue Cross in Travis County District Court (cause no. 92-03489). The Montgomerys asserted a breach of a claimed duty of good faith and fair dealing, violation of article 21.21 of the Texas Insurance Code, and violation of the Deceptive Trade Practices-Consumer Protection Act ("extra-contractual claims"). See Tex.Ins.Code Ann. art. 21.21 (West 1981 & Supp.1996); Tex.Bus. & Com.Code Ann. §§ 17.41-17.63 (West 1987 & Supp.1996).

While this suit was pending, the Montgomerys, apparently in an attempt to respond to this Court's opinion in Testoni v. Blue Cross In April 1995, Blue Cross filed a Motion to Dismiss and Motion for Summary Judgment. Blue Cross sought to dismiss that portion of the consolidated proceeding that was a judicial review of the Board of Trustees' denial of the Montgomerys' appeal on the ground that the Montgomerys failed to serve ERS, a state agency, with the petition to initiate judicial review. See Tex.Gov't Code Ann. § 2001.176 (West 1996). Blue Cross also sought summary judgment as to the remaining portion of the proceeding which consisted of the suit for extra-contractual damages filed directly in district court in March 1992. In support of its motion for summary judgment, Blue Cross asserted that the Montgomerys were barred by res judicata from pursuing these claims. The Montgomerys also filed a motion for partial summary judgment claiming that res judicata did not bar their claims since ERS does not have the authority or jurisdiction to adjudicate extra-contractual claims.

                & Blue Shield of Texas, Inc., 861 S.W.2d 387 (Tex.App.--Austin 1992, no writ), asked ERS to consider these extra-contractual claims. 1  ERS denied the request for a hearing, and the Montgomerys appealed this denial.  An administrative law judge heard the appeal and issued a Proposal for Decision in which he recommended denial of the Montgomerys' appeal;  the ERS Board of Trustees adopted the Proposal.  After their motion for rehearing was overruled by operation of law in March 1994, the Montgomerys sought judicial review of the Board's denial of their appeal in Travis County District Court (cause no. 94-06290).  This suit for judicial review was consolidated into the Montgomerys' original suit for extra-contractual damages (cause no. 92-03489)
                

In May 1995, the trial court granted both Blue Cross's motion to dismiss and its motion for summary judgment and denied the Montgomerys' motion for partial summary judgment. On appeal, the Montgomerys do not challenge the trial court's order as to Blue Cross's motion to dismiss.

DISCUSSION

In their sole point of error, the Montgomerys assert that the trial court erred in granting Blue Cross's motion for summary judgment and in denying their motion for partial summary judgment. The standards for reviewing a summary judgment are well established: (1) the movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law; (2) in deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true; and (3) every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor. Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex.1985). The purpose of the summary judgment rule is to eliminate patently unmeritorious claims and defenses, rather than to deprive litigants of the right to a jury trial. Dallas Cent. Appraisal Dist. v. G.T.E. Directories Corp., 905 S.W.2d 318, 319 (Tex.App.--Dallas 1995, writ denied) (citing Gulbenkian v. Penn, 151 Tex. 412, 252 S.W.2d 929, 931 (1952)).

The Montgomerys argue that summary judgment based on res judicata, the sole ground alleged by Blue Cross in its motion, was inappropriate. The Montgomerys claim that the extra-contractual causes of action could not have been finally adjudicated in a prior suit because ERS lacked subject matter jurisdiction over such claims and, therefore, res judicata is inapplicable. The Montgomerys further assert that, because the statute only provides ERS with jurisdiction to adjudicate the question of coverage under the insurance policy, there were no possible administrative remedies to exhaust. In other words, the Montgomerys claim that it would be futile to seek remedies from an administrative agency with no statutory authority to grant those remedies. According to the Montgomerys, the only remedy ERS can grant is the payment of contractual benefits under the policy, and state employees would therefore be left without a remedy if they are In response, Blue Cross contends that, by failing to challenge on appeal the trial court's ruling that it lacked jurisdiction to consider their administrative appeal, the Montgomerys have waived any error by the trial court or by ERS. Blue Cross asserts that, because of this waiver, we are precluded from considering whether ERS has jurisdiction and authority to consider the extra-contractual claims. Even if we were to consider this argument, Blue Cross contends that this Court's opinion in Testoni v. Blue Cross and Blue Shield of Texas, Inc., 861 S.W.2d 387 (Tex.App.--Austin 1992, no writ), is dispositive of this appeal.

forced to submit extra-contractual claims to ERS. The Montgomerys note that article 3.50-2 of the Insurance Code does not provide that its remedies are exclusive of those provided by common law and by other statutes and that the legislature could easily have written in such a provision had it intended such a result.

The district court's order in this case fails to specify on what basis it granted Blue Cross's motion for summary judgment. However, the sole ground in the motion asserts that the Montgomerys are barred by res judicata from asserting their extra-contractual claims, and we must affirm the summary judgment if that theory is meritorious. See State Farm Fire & Casualty Co. v. S.S., 858 S.W.2d 374, 380 (Tex.1993); Rogers v. Ricane Enter. Inc., 772 S.W.2d 76, 79 (Tex.1989).

The doctrine of res judicata, or claims preclusion, prohibits an individual from relitigating, in a second suit, any claims that have been finally adjudicated as well as related matters that, with the use of diligence, should have been litigated. Barr v. Resolution Trust Corp., 837 S.W.2d 627, 628 (Tex.1992). "The policies behind the doctrine reflect the need to bring all litigation to an end, prevent vexatious litigation, maintain stability of court decisions, promote judicial economy, and prevent double recovery." Id. at 629.

Res judicata only applies if there is an existing final judgment by a court of competent jurisdiction. Public Util. Comm'n v. Coalition of Cities for Affordable Util. Rates, 776 S.W.2d 224, 226 (Tex.App.--Austin 1989, no writ [leave denied] ). The doctrine is also applicable to the relitigation of claims previously determined by an administrative agency. See Al-Jazrawi v. Texas Bd. of Land Surveying, 719 S.W.2d 670, 671 (Tex.App.--Austin 1986, writ ref'd n.r.e.); see also Coalition of Cities, 776 S.W.2d at 227. Res judicata does not bar a claim if the court rendering judgment in the initial suit lacked subject-matter jurisdiction over the claim. Browning v. Navarro, 887 F.2d 553, 558-58 (5th Cir.1989) (citing Restatement (Second) of Judgments § 26(1)(C) (1982)). In other words, a claim is not barred by res judicata if it could not have been brought. Holloway v....