Schwartz v. Insurance Co. of Penn.

• Decision Date: 23 October 2008
• Docket Number: No. 01-07-00193-CV.,01-07-00193-CV.
• Citation: 274 S.W.3d 270
• Parties: Rosa SCHWARTZ, Appellant, v. The INSURANCE COMPANY OF the STATE OF PENNSYLVANIA, Gallagher Basset Services, Inc., and Belinda Ybarra, Appellees.
• Court: Texas Court of Appeals

274 S.W.3d 270

Rosa SCHWARTZ, Appellant, v. The INSURANCE COMPANY OF the STATE OF PENNSYLVANIA, Gallagher Basset Services, Inc., and Belinda Ybarra, Appellees.

No. 01-07-00193-CV.

Court of Appeals of Texas, Houston (1st Dist.).

October 23, 2008.

Byron C. Keeling, Keeling & Downes, P.C., Houston, TX, for Appellant.

Matthew Sean Parish, Tucker, Taunton, Snyder & Slade, Houston, TX, for Appellees.

Panel consists of Justices NUCHIA, HANKS, and HIGLEY.

OPINION

GEORGE C. HANKS, JR., Justice.

We withdraw our opinion issued June 19, 2008 and issue this one in its stead. We deny Rosa Schwartz's motion for rehearing. Our judgment in this case remains unchanged.

Schwartz sued The Insurance Company of the State of Pennsylvania, Gallagher Basset Services, Inc., and Belinda Ybarra (collectively, "Gallagher") for damages arising from Gallagher's alleged unreasonable delay and denial in authorizing her requested foot surgery. The trial court granted Gallagher's plea to the jurisdiction. In two issues, Schwartz contends that the trial court erred in (1) ruling that she failed to exhaust administrative remedies on her claims stemming from Gallagher's refusal to pay for her foot surgery and (2) granting Gallagher's plea with respect to her claims arising from Gallagher's refusal to pay for the care of the neuroma on her foot. We affirm.

Background

On March 24, 2003, Schwartz's foot was injured within the course and scope of her employment. She was referred to Stephen R. Densen, M.D., who diagnosed her with a fractured toe. In July 2003,¹ Dr. Densen submitted a request for preauthorization for surgery with Schwartz's employer's insurance carrier, Gallagher. On July 21, 2003, Gallagher's medical necessity reviewer sent Dr. Densen notice that it was denying preauthorization based on its doctor's recommendation.

Following the denial, Dr. Densen appealed the decision and continued to work with Gallagher and its medical reviewer in order to get the requested surgery approved. In October, Gallagher scheduled an independent medical examination to address the dispute surrounding the surgery's necessity. On March 16, 2004, Anthony Lamarra, M.D. conducted the independent examination of Schwartz's toe and agreed that she should receive the requested surgery. Dr. Lamarra also noted that Schwartz's foot had a neuroma deformity which should be treated, possibly by surgery.

In April, Dr. Densen filed another request for preauthorization for toe surgery. Gallagher's medical necessity reviewer again denied the request, after its reviewing doctor recommended the denial.² However, on April 26, Gallagher overrode the medical necessity reviewer's denial and approved the surgery.

On May 27, Dr. Densen performed the surgery and noted "Unfortunately, [due to] the delay in timely approval for the initial surgery I requested, the injury developed into a more serious condition which required additional treatment including a second surgery." In 2005, Dr. Densen performed this additional surgery to correct Schwartz's neuroma deformity.

Schwartz sued Gallagher on July 11, 2005, alleging claims for violations of the Texas Insurance Code and Deceptive Trade Practices Act, breach of the duty of good faith and fair dealing, and legal malice. Two days later, Gallagher sent Schwartz notice that it was disputing that Schwartz's compensable injury extends to her neuroma deformity. Nevertheless, in September, the parties entered into a benefit dispute agreement, in which they agreed that the neuroma deformity was compensable.

In December 2006, Gallagher filed a plea to the jurisdiction. The trial court granted Gallagher's plea and dismissed Schwartz's suit. Schwartz filed a motion for new trial, which the trial court denied. Schwartz now appeals.

Plea to the Jurisdiction

In both of her issues, Schwartz asserts that the trial court erred in granting Gallagher's plea to the jurisdiction. A plea to the jurisdiction contests a trial court's subject matter jurisdiction. Tex. Dep't of Transp. v. Jones, 8 S.W.3d 636, 638 (Tex.1999). Whether a court has subject matter jurisdiction is a matter of law. Tex. Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex.2004). Accordingly, we review a challenge to the trial court's subject matter jurisdiction de novo. Id. at 228.

When reviewing a plea to the jurisdiction, we must look to the allegations in the pleadings, construe them in the plaintiff's favor, and consider the pleader's intent. See County of Cameron v. Brown, 80 S.W.3d 549, 555 (Tex.2002). In doing so, we consider the facts alleged in the petition, and to the extent relevant to the jurisdictional issue, any evidence submitted by the parties to the trial court. See Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 555 (Tex.2000). The plaintiff bears the burden to allege facts affirmatively demonstrating the trial court's jurisdiction to hear a case. See Tex. Ass'n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 446 (Tex.1993). If a plaintiff pleads facts that affirmatively demonstrate an absence of jurisdiction and the jurisdictional defect is incurable, then the cause is properly dismissed. Peek v. Equip. Serv. Co. of San Antonio, 779 S.W.2d 802, 805 (Tex. 1989). However, when the plaintiff fails to plead facts that establish jurisdiction, but the petition does not affirmatively demonstrate incurable defects in jurisdiction, the issue is one of pleading sufficiency, and the plaintiff should be afforded the opportunity to amend. Brown, 80 S.W.3d at 555.

Failure to Exhaust Administrative Remedies

In her first issue, Schwartz asserts that the trial court erred in granting Gallagher's plea to the jurisdiction and impliedly ruling that she failed to exhaust her administrative remedies on her claims stemming from Gallagher's refusal to pay for her foot surgery. Schwartz contends that the exhaustion of remedies doctrine is inapplicable because she had no administrative remedies to exhaust. In support of this contention, she argues that the Texas Workers' Compensation Commission ("the Commission")³ would have dismissed any attempt she made to exhaust administrative remedies because no dispute as to medical necessity existed in light of Gallagher's ultimate agreement and payment of the requested surgery.⁴

In support of this contention Schwartz relies on two of this court's opinions. See Tex. Mut. Ins. Co. v. Ruttiger, 265 S.W.3d 651 (Tex. App-Houston [1st Dist.] 2008); In re Tex. Workers' Comp. Ins. Fund (TWCIF), 995 S.W.2d 335 (Tex. App.-Houston [1st Dist.] 1999, orig. proceeding). Under these opinions, when the Commission, claimant, and carrier agree on the claimant's entitlement to compensation benefits, their agreement is binding as a final determination that the benefits are owed, precluding the need for the claimant to seek administrative remedies before he can sue for damages arising from the carrier's unreasonable delay or denial of the benefits. Ruttiger, 265 S.W.3d at 657-58; In re TWCIF, 995 S.W.2d at 337; see also TEX. LAB.CODE ANN. §§ 410.029, .030 (Vernon 2006).

Schwartz's claims, however, do not stem from the carrier's delay or denial of benefits owed to Schwartz, but stem from a medical necessity dispute arising from Gallagher's initial denial of preauthorization of her requested surgery-surgery which Gallagher ultimately authorized more than nine months after Schwartz's initial request. "The fact that the ... surgery w[as] ultimately authorized does not constitute any type of determination by the Commission that the initial denial ... [was] improper. Therefore, there does remain a dispute for the Commission to resolve." In re Tex. Mut. Ins. Co., No. 05-05-00944-CV, 2005 WL 1763562, at *2 (Tex.App.-Dallas July 27, 2005, orig. proceeding). Accordingly, Schwartz's reliance on Ruttiger and In re TWCIF is misplaced,⁵ and an unresolved dispute as to the requested surgery's medical necessity in July 2003 still existed when Schwartz filed suit.

The Legislature has given the Commission exclusive jurisdiction of disputes over preauthorization of medical treatment. See Am. Motorists Ins. Co. v. Fodge, 63 S.W.3d 801, 803 (Tex.2001) (citing TEX. LAB.CODE ANN. § 413.031). The Commission must have determined that the medical treatment was entitled to preauthorization before a trial court can adjudicate a claim arising from a carrier's delay or denial of preauthorization for such treatment. See Pickett v. Tex. Mut. Ins. Co., 239 S.W.3d 826, 831, 836-37 (Tex. App.-Austin 2007, no pet.) (relying on Fodge); In re Tex. Mut. Ins. Co., 2005 WL 1763562, at *2 (same); Malish v. Pac. Employers Ins. Co., 106 S.W.3d 744, 746 (Tex. App.-Fort Worth 2003, no pet.) (same). The Commission has promulgated specific administrative remedies for the resolution of medical necessity disputes.⁶ Exhaustion of these administrative remedies is necessary for a claimant to receive a favorable Commission determination on the necessity of the medical treatment. See Pickett, 239 S.W.3d at 837.

Because neither her petition nor the record shows that Schwartz exhausted these administrative remedies and obtained a Commission determination that the surgery was medically necessary when first requested, we hold that the trial court properly granted Gallagher's plea to the jurisdiction.⁷

Having held that the trial court properly granted Gallagher's plea to the jurisdiction, we must determine whether it properly dismissed Schwartz's claims. If a claim is not within a court's jurisdiction and the impediment to jurisdiction cannot be removed, then the claim must be dismissed; but, if the impediment to jurisdiction could be removed, then the court may abate proceedings to allow a reasonable opportunity for the jurisdictional problem to be cured. Fodge, 63 S.W.3d at 805. For Schwartz to remove the impediment to jurisdiction, she would have to be able to pursue the prescribed administrative remedies for determining whether the surgery was medically necessary when Gallagher originally...