Producers Assistance Corp. v. Employers Ins. of Wausau

• Decision Date: 17 October 1996
• Docket Number: No. 01-95-1103-CV,01-95-1103-CV
• Citation: 934 S.W.2d 796
• Parties: PRODUCERS ASSISTANCE CORPORATION, Mitchell Fralick, and Jonathan Knapp, Appellants, v. EMPLOYERS INSURANCE OF WAUSAU d/b/a Wausau Insurance Companies, Appellee. (1st Dist.)
• Court: Texas Court of Appeals

Page 796

934 S.W.2d 796

PRODUCERS ASSISTANCE CORPORATION, Mitchell Fralick, and Jonathan Knapp, Appellants, v. EMPLOYERS INSURANCE OF WAUSAU d/b/a Wausau Insurance

Companies, Appellee.

No. 01-95-1103-CV.

Court of Appeals of Texas,

Houston (1st Dist.).

Oct. 17, 1996.

William V. Wade, Nelson T. Hensley, Houston, for appellants.

Evelyn T. Ailts, Gary E. Hill, Victor L. Harris, Houston, for appellee.

Before TAFT, HUTSON-DUNN and O'CONNOR, JJ.

OPINION

TAFT, Justice.

Appellants, Producers Assistance Corporation, Mitchell Fralick, and Jonathan Knapp (collectively, Producers) appeal from the trial court's dismissal for lack of subject matter jurisdiction. Appellee, Employers Insurance of Wausau d/b/a Wausau Insurance Company (Wausau), moved for dismissal on the basis of Producers' failure to exhaust administrative remedies. We address the extent to which failing to exhaust administrative remedies deprives a court of subject matter jurisdiction over various contractual and tort claims growing out of a denial of high-risk workers' compensation insurance coverage. We affirm.

Facts

In the Fall of 1988, Producers applied for workers' compensation insurance through the Texas Workers' Compensation Assigned Risk Pool (the Risk Pool). ¹ The Risk Pool designated Wausau as its servicing agent to administer a standard Texas policy of workers' compensation insurance. Shortly thereafter, a personal injury claim was asserted against Producers by Ricky LeBlanc, an employee of Producers.

By letter dated February 8, 1989, Wausau denied coverage or responsibility with respect to LeBlanc's claim because the injury occurred approximately 500 miles outside policy territory. No administrative appeal was taken by Producers from this denial of coverage. Instead, two years later, Producers filed suit in Harris County, asserting claims for breach of the duty of good faith and fair dealing, negligence, gross negligence, intentional infliction of emotional distress, breach of contract, fraud, violations of the Texas Insurance Code and regulations of the Texas Board of Insurance, and violations of the Texas Deceptive Trade Practices and Consumer Protection Act (DTPA).

Subject-Matter Jurisdiction

In its sole point of error, Producers contends the trial court erred in dismissing all of its causes of action (except for breach of the covenant of good faith and fair dealing) ² pursuant to Wausau's plea to the jurisdiction by totally and completely ignoring the controlling Texas law established in Maintenance, Inc. v. ITT Hartford Group, Inc., 895 S.W.2d 816 (Tex.App.--Texarkana 1995, writ denied). Wausau argues that Producers have wholly failed to challenge the basis of the trial court's dismissal, i.e., failure to exhaust administrative remedies. Wausau contends that Producers' failure to exhaust administrative remedies deprived the trial court of subject matter jurisdiction over any cause of action arising from the denial of the insurance claim.

A. Threshold Issues

1. Waiver

In reply point one, Wausau argues that Producers waived any complaint by failure to brief or assail the basis of the trial court's dismissal. The sole basis expressed in the trial court's order is Producers' failure to exhaust administrative remedies. Producers' point of error and brief rely solely on Maintenance, Inc. v. ITT Hartford Group, Inc. ³

We have carefully examined Producers' brief and Maintenance, upon which it relies. We agree with Wausau that Producers have failed to join issue in regard to its failure to exhaust administrative remedies. In Maintenance, the court of appeals reviewed a trial court's decision granting summary judgment, but the opinion explicitly avoided the issue of jurisdiction and did not even mention exhaustion of administrative remedies. 895 S.W.2d at 820. The only issue Maintenance addressed directly is what causes of actions for which a member of the pool can be sued, as opposed to those which must be brought against the insurer. Id. While it is difficult to understand how Maintenance did not reach the question of jurisdiction as to those causes of action against the pool member in its individual capacity, it nevertheless did not. Id.

However, we are reluctant to find waiver under these circumstances. Wausau has not cited any case directly on point calling for waiver. Furthermore, subject-matter jurisdiction is an issue that must be decided as a matter of law whenever raised. North Alamo Water Supply Corp. v. Texas Dep't. of Health, 839 S.W.2d 455, 457 (Tex.App.--Austin 1992, writ denied). Therefore, we overrule Wausau's reply point one.

2. Timely Appeal

Wausau contends in reply point five that this Court lacks jurisdiction to entertain this appeal because Producers failed to timely appeal. ⁴ Wausau cites WISD Taxpayers Ass'n. v. Waco Indep. Sch. Dist., 912 S.W.2d 392 (Tex.App.--Waco 1995, n.w.h.), for the proposition that the request for findings of fact and conclusions of law does not extend the time for appealing an order dismissing a suit. Wausau argues that neither should filing a motion for new trial when the dismissal is based on the pleadings such as in this case.

We know of no rule precluding Producers from seeking reconsideration by motion for new trial of the trial court's dismissal. The supreme court has held that a party may file a motion for new trial just to extend the appellate deadlines. Old Republic Ins. Co. v. Scott, 846 S.W.2d 832, 833 (Tex.1993).

Producers filed a motion for new trial within 30 days from the dismissal order and filed their appeal within 90 days from the dismissal order. Therefore, Producers properly perfected their appeal. See TEX.R.APP.P. 40(a), 41(a), 46.

Accordingly, we overrule Wausau's reply point five and proceed to determine the jurisdictional issue on its merits.

B. Standard of Review

When a plaintiff appeals from a dismissal for want of subject-matter jurisdiction, we must accept as true the allegations in the plaintiff's pleadings. Texas Ass'n of Business v. Texas Air Control Bd., 852 S.W.2d 440, 446 (Tex.1993). A court lacking jurisdiction over a claim has no discretion but to dismiss it. See Lane v. Baxter Healthcare Corp., 905 S.W.2d 39, 42 (Tex.App.--Houston [1st Dist.] 1995, no writ).

C. Administrative Scheme

Producers' insurance policy was issued in 1988. We look to the statutory rules in effect at that time to determine the outcome of this case. ⁵

Before its repeal, article 5.76 provided that:

An applicant for insurance, insured, or insurer aggrieved by any act of the pool may appeal to the Board not later than the 30th day after the day the act occurred.... The Board shall hear the pool or the appeal from an act of the pool, not later than the 30th day after the receipt of the request or appeal. The Board shall notify the pool or appellant in writing of the time and place of the hearing not later than the 10th day before the date of the hearing. Not later than the 30th day after the last day of the hearing, the Board shall affirm, reverse, or modify its previous action or the act appealed to the Board.... The pool or the aggrieved party may appeal as provided by Section (f) of article 1.04 of this code.

TEX.INS.CODE ANN. art. 5.76(j). ⁶

Furthermore, article 1.04, section (f) of the Insurance Code provided:

If any insurance company or other party at interest be dissatisfied with any decision, regulation, order, rate, rule, act or administrative ruling adopted by the State Board of Insurance, such dissatisfied company or party at interest after failing to get relief from the State Board of Insurance, may file a petition setting forth the particular objection to such decision, regulation, order, rate, rule, act or administrative ruling, or to either or all of them, in the District Court of Travis County, Texas, and not elsewhere, against the State Board of Insurance.

TEX.INS.CODE ANN. art. 1.04(f) (Vernon 1981) (current version at TEX.INS.CODE ANN. art. 1.04(a) (Vernon Supp.1996)).

Wausau contends, in reply points two and three, that regardless of whether Producers must exhaust all administrative remedies, Wausau cannot be held liable for any cause of action arising out of, or in connection with, the performance of the powers and duties under article 5.76-2, section 2.12 of the current Insurance Code. However, this article was not in existence at the time the cause of action arose. As stated above, only the statutes in effect at the time of issuance of Producers' Risk Pool insurance policy shall determine the outcome of this case. The statutes at that time did not provide such an absolute shield from liability.

D. Exhaustion of Administrative Remedies

This case presents the 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 risk pool. There are important legal and policy considerations on both sides of the question.

The substance of Producers' grievance against Wausau is that Wausau had been paying similar claims both before and after refusing the claim on behalf of Producers' employee. As a result of Wausau refusing the claim, Producers claimed damages including: (1) having to come up with the money (more than $50,000) to handle the employee's claim at a time when the company was just getting started, thereby pushing the company to the brink of bankruptcy; and (2) having to face possible criminal charges for failing to have the proper insurance coverage.

At the outset, we find no help from Producers' position that Maintenance controls. In Maintenance, the Texarkana Court of Appeals explicitly did not address jurisdiction. 895 S.W.2d at 820. ⁷ All that Maintenance determined is that the servicing agent was not the proper defendant for claims of breach of a duty of good faith and fair dealing. Id. The only other authority relied upon by Producers is Northwinds Abatement, Inc. v....