Morales v. Liberty Mut. Ins. Co.

• Decision Date: 07 December 2007
• Docket Number: No. 05-0754.,05-0754.
• Citation: 241 S.W.3d 514
• Parties: Margarita MORALES, Individually and as Next Friend of Paulette Morales and Laura Morales, Minor Children of Guadalupe D. Morales, Deceased, Petitioner, v. LIBERTY MUTUAL INSURANCE COMPANY and Continental Casualty Company, Respondents.
• Court: Texas Supreme Court

241 S.W.3d 514

Margarita MORALES, Individually and as Next Friend of Paulette Morales and Laura Morales, Minor Children of Guadalupe D. Morales, Deceased, Petitioner, v. LIBERTY MUTUAL INSURANCE COMPANY and Continental Casualty Company, Respondents.

No. 05-0754.

Supreme Court of Texas.

Argued November 16, 2006.

Decided December 7, 2007.

Gerald J. Smith, The Law Office of Gerald J. Smith, John E. Keithly, Keithly & English, Anthony, NM, Marc S. Tabolsky, Yetter & Warden, L.L.P., Austin, TX, for Petitioner.

David P. Boyce, Wright & Greenhill, David L. Brenner, Amanda Lewis, Burns Anderson Jury & Brenner, L.L.P., Austin, TX, for Respondents.

R. Scott Placek, Arnold & Placek, P.C., Round Rock, Jane Lipscomb Stone, Stone Loughlin & Swanson, LLP, Austin, TX, for Amicus Curiae.

Justice O'NEILL delivered the opinion of the Court.

The Texas Workers' Compensation Act provides alternative avenues for judicial review of a Texas Workers' Compensation Commission appeals panel decision depending upon whether the nature of the dispute regards "compensability or eligibility for . . . benefits" or something else. See TEX. LAB.CODE §§ 410.252, 410.301, 410.255; TEX. GOV'T CODE §§ 2001.171-178. In this case, Margarita Morales seeks review of an appeals panel's decision that her deceased husband was an independent contractor rather than an employee of one of three companies, two of which were workers' compensation insurance subscribers and one of which was not. We hold that the question of a worker's employment status is one of compensability governed by section 410.301(a) of the Texas Labor Code, and reverse and remand the case to the El Paso district court for further proceedings.

I. Background

Guadalupe Morales sustained fatal head injuries when he fell from a ladder while repairing the roof of a motel. Contending Guadalupe's injuries were sustained while in the course and scope of his employment with Turnkey Services, Inc. (insured by Liberty Mutual Insurance Company), State National Bank (insured by Continental Casualty Company) and PGD, Inc. (a nonsubscriber), his wife, Margarita, filed a claim for workers' compensation insurance benefits. A benefit-review conference was held to attempt to mediate the dispute between Margarita and the insurance carriers, but the parties were unable to reach an agreement and proceeded to a contested-case hearing. The hearing examiner determined that Guadalupe's employment status at the time of his injury was that of an independent contractor rather than an employee of any of the three named companies, and thus he was not entitled to benefits. The Texas Workers' Compensation Commission (TWCC) appeals panel affirmed the hearing examiner's decision, holding that Guadalupe was an independent contractor, not an employee, and therefore he had not suffered a "compensable injury."

Margarita sought judicial review of the TWCC's decision by filing two lawsuits, this one in El Paso County and another in Travis County. Among other things, Margarita sought review of the appeals panel's determination that her husband was not an employee under the Texas Workers' Compensation Act. Liberty Mutual filed a plea to the jurisdiction in the El Paso proceedings, which the trial court granted. Following dismissal of her suit in El Paso County, Margarita voluntarily nonsuited the Travis County suit. The court of appeals affirmed the trial court's dismissal of the El Paso case for want of jurisdiction, holding that "the status of being an employee of an insured for which a carrier is liable is an issue of `coverage,' not compensability." 169 S.W.3d 485, 488.¹ We granted Margarita's petition for review to consider the appropriate avenue for judicial review of a TWCC appeals panel's decision regarding a worker's employment status.

II. Discussion

A. Avenues of Judicial Review

The Texas Workers' Compensation Act provides exclusive compensation benefits for the work-related injuries of a subscribing employer's employees. TEX. LAB.CODE § 408.001(a). At the administrative level, disputed claims for benefits proceed through a three-step process: a benefit-review conference, a contested-case hearing, and an administrative appeal. Tex. Workers' Comp. Comm'n v. Garcia, 893 S.W.2d 504, 514 (Tex.1995); TEX. LAB.CODE §§ 410.021-034, 410.151-169, 410.201-209. A claimant may appeal a TWCC appeals panel's decision by filing suit in the district court. Id. § 410.251.

The Act divides judicial review of workers' compensation appeals by drawing a distinction between issues that concern compensability and those that do not. Id. §§ 410.301(a), § 410.255(a). Section 410.301(a) of the Texas Labor Code provides that "[j]udicial review of a final decision of the appeals panel regarding compensability or eligibility for or the amount of income or death benefits shall be conducted as provided by this subchapter." Id. § 410.301(a). Appeals from decisions regarding compensability or benefits eligibility must generally be filed in the county where the employee resided at the time of the injury or death. Id. § 410.252(b)(1). In a section 410.301 appeal, the issues that the TWCC appeals panel decided are tried to the court or a jury, and the appealing party bears the burden of proof by a preponderance of the evidence. Id. § 410.304. The factfinder may consider, but is not bound by, the appeals panel's decision. Id.; see Garcia, 893 S.W.2d at 515. The method of review that section 410.301 provides is known as modified de novo review. Id.

Section 410.255 of the Texas Labor Code governs review of issues that section 410.301(a) does not cover, and provides for judicial review in the manner provided for a contested case under Subchapter G, Chapter 2001, of the Government Code. TEX. LAB.CODE § 410.255(a). Under Subchapter G, the trial court sits without a jury and its review is generally confined to the agency record under a substantial-evidence standard. Id. § 410.255(b); TEX. GOV'T CODE § 2001.175(e). An appeal from a decision that does not concern compensability must be filed in Travis County. TEX. LAB.CODE § 410.255(a); TEX. GOV'T CODE § 2001.176(b)(1).

Accordingly, the appropriate judicial review mechanism depends upon the nature of the issue in dispute. Margarita claims that the question of who Guadalupe was working for when he was injured falls under section 410.301 because a worker's employment status is a necessary component of any compensability inquiry.² The insurers, on the other hand, contend that when one or more potential employers of an injured worker is a nonsubscriber to workers' compensation insurance, a threshold determination must be made as to who employed the worker and whether or not that employer was a subscriber. The insurers claim that only once it is determined that the employer for whom the employee worked was a subscriber does the compensability issue, i.e. whether the injury occurred in the course and scope of employment, arise. Thus, in the insurers' view, the question presented when a nonsubscriber is a potential employer is one of coverage, not compensability. Our analysis of the parties' respective positions turns on construction of sections 410.301 and 410.255 of the Labor Code. But first, we address a preliminary issue.

B. Preservation of Employment-Status Issue

As a threshold matter, Liberty Mutual contends the compensability issue is not properly before us because Margarita failed to specifically identify the issue of Guadalupe's employment status in her original petition to the district court. See TEX. LAB.CODE § 410.302(b). Thus, according to Liberty Mutual, the district court never had jurisdiction to decide that issue. Id. We disagree. In her First Amended Original Petition, Margarita alleged that her husband suffered a compensable injury and that she was aggrieved by each of the issues the hearing officer decided, which included his decision regarding Guadalupe's employment status. Liberally construing her allegations in favor of jurisdiction as we must, see Cont'l Coffee Prods. Co. v. Cazarez, 937 S.W.2d 444, 449 (Tex. 1996), the district court properly exercised jurisdiction over all of the appeals panel's determinations, including its decision regarding Guadalupe's employment status.

C. Compensability

Our objective in construing a statute is to determine and give effect to the Legislature's intent. See Cont'l Cas. Ins. Co. v. Functional Restoration Assoc., 19 S.W.3d 393, 398 (Tex.1999) (citing Liberty Mut. Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d 482, 484 (Tex.1998)). In discerning that intent, we must give effect to the statute's plain meaning. See Tex. Dep't of Protective & Regulatory Servs. v. Mega Child Care, Inc., 145 S.W.3d 170, 177 (Tex.2004). We also consider each provision in the context of the entire statute, not merely those portions that are in dispute. See Cont'l Cas., 19 S.W.3d at 398 (citing Bridgestone/Firestone, Inc. v. Glyn-Jones, 878 S.W.2d 132, 133 (Tex.1994) (stating "[o]nly in the context of the remainder of the statute can the true meaning of a single provision be made clear")).

Section 410.301 of the Labor Code governs judicial review of appeals panel decisions "regarding compensability or eligibility for or the amount of income or death benefits." TEX. LAB.CODE § 410.301(a). While the Act does not define "compensability or eligibility" or enumerate which issues these concepts concern, it does define other terms that shed light on their meaning. "Benefit" is defined as "a medical benefit, an income benefit, a death benefit, or a burial benefit based on compensable injury." Id. § 401.011(5). A "compensable injury" is defined as one that "arises out of and in the course and scope of employment for which compensation is payable under [the Act]." Id. § 401.011(10). "Course and scope of employment" is defined as "an activity . . . that is performed by an employee while engaged in or about the furtherance of the affairs or business of the employer." Id. §...