Texas Mut. Ins. Co. v. Ruttiger

• Decision Date: 22 June 2012
• Docket Number: No. 08-0751,08-0751
• Parties: TEXAS MUTUAL INSURANCE COMPANY, PETITIONER, v. TIMOTHY J. RUTTIGER, RESPONDENT
• Court: Texas Supreme Court

TEXAS MUTUAL INSURANCE COMPANY, PETITIONER,

v.TIMOTHY J. RUTTIGER, RESPONDENT

No. 08-0751

SUPREME COURT OF TEXAS

Argued April 14, 2010

Rehearing Granted February 17, 2012

OPINION DELIVERED: June 22, 2012

ON PETITION FOR REVIEW FROM THE

COURT OF APPEALS FOR THE FIRST DISTRICT OF TEXAS

JUSTICE JOHNSON delivered the opinion of the Court, in which JUSTICE HECHT, JUSTICE WAINWRIGHT, JUSTICE WILLETT, and JUSTICE GUZMAN joined.

JUSTICE WILLETT filed a concurring opinion.

CHIEF JUSTICE JEFFERSON filed a dissenting opinion, in which JUSTICE MEDINA, JUSTICE GREEN, and JUSTICE LEHRMANN joined.

We grant the parties' motions for rehearing. We withdraw our opinion of August 26, 2011, and substitute the following in its place.

In 1989 the Legislature enacted major amendments to the Workers' Compensation Act (Act). TEX. LAB. CODE §§ 401.001-506.002. The amendments included significant reforms, among which were changes in how to calculate income benefits for injured workers, the amount of income benefits workers could recover, the dispute resolution process, the addition of an ombudsman program toprovide assistance for injured workers who had disputes with insurers, and increasing sanctions for violations of the Act. In this case, the issues presented involve, among other matters, (1) the interaction of the current Act with the Insurance Code and the Deceptive Trade Practices Act (DTPA), and (2) whether the 1989 restructuring of the Act and subsequent amendments obviate the need we found in Aranda v. Insurance Co. of North America, 748 S.W.2d 210 (Tex. 1988) to engraft an extra-statutory cause of action for breach of the duty of good faith and fair dealing onto the workers' compensation system.

We conclude that (1) claims against workers' compensation insurers for unfair settlement practices may not be made under the Insurance Code, but (2) claims under the Insurance Code may be made against those insurers for misrepresenting provisions of their policies, although in this case there was no evidence the insurer did so.

We also overrule Aranda, 748 S.W.2d 210. We hold that an injured employee may not assert a common-law claim for breach of the duty of good faith and fair dealing against a workers' compensation carrier.

We reverse the judgment of the court of appeals and render judgment for Texas Mutual Insurance Company.

I. Background

On June 21, 2004, Timothy Ruttiger was working for A&H Electric in Galveston when he reported to his supervisor that he was injured while carrying pipe. He went to the university of Texas Medical Branch at Galveston where he was diagnosed as having bilateral inguinal hernias. Later that day he went to A&H's office and filled out a TWCC-1 form, reporting that he had beeninjured on the job. See TEX. LAB. CODE § 409.001. Ruttiger was scheduled for hernia repair surgery to be performed on July 14, 2004.

When A&H's workers' compensation carrier, Texas Mutual Insurance Company (TMIC), received written notice that Ruttiger was claiming an injury, it initiated temporary income benefit payments and began investigating. As part of the investigation process, TMIC's adjuster, Audie Culbert, interviewed A&H employees. One employee told Culbert that Ruttiger had been at a softball tournament the weekend before the alleged injury and had come to work on the morning of the incident with a limp. She later reported that one of Ruttiger's co-workers informed her Ruttiger was injured at the softball game and "bragged about getting it paid by workers' comp." The vice president of A&H said that Ruttiger "wasn't 100 percent" when he arrived at work on the day of the incident and he "never got a straight story" on how Ruttiger was injured. Culbert testified at trial that he attempted to contact Ruttiger by telephone and by mail, but was unable to do so. Ruttiger denied receiving a letter or phone call from TMIC.

On July 11, Ruttiger's doctor notified him that TMIC refused to pay for the hernia surgery. Ruttiger testified that he then called Culbert who told him the claim was denied because the hernias resulted from Ruttiger's playing softball and were not work related.

On July 12, 2004, TMIC filed a "Notice of Refused or Disputed Claim" with the Texas Workers' Compensation Commission¹ and discontinued temporary income benefit payments afterhaving sent one check. See id. § 409.021 (providing that a carrier commits an administrative violation if it does not, no later than the 15th day after the carrier receives written notice of an injury, either begin paying benefits or notify the WCD and the employee of its refusal to pay as well as notifying the employee of (1) his right to request a benefit review conference and (2) the means to obtain further information).² In its notice, TMIC stated that its investigation revealed Ruttiger sustained the hernias while he was playing softball and that it "disput[ed] this claim in its entirety." See id. § 409.022 (providing that an insurer's notice of refusal to pay benefits must specify the grounds for the refusal, that absent new evidence such grounds are the only basis on which the carrier may dispute compensability in a later proceeding, and failure to comply with such requirements is an administrative violation). The notice included the WCD's telephone number and a statement that an injured worker whose claim was denied had the right to contact the Division to request a benefit review conference (BRC). See id. § 409.021(a)(2).

Two days after he was notified that TMIC refused to pay for his surgery, Ruttiger hired a lawyer to help with his claim. Approximately two months later, in September, Ruttiger's lawyercontacted TMIC and asked for a copy of the notice of disputed claim. After another month, on October 22, 2004, Ruttiger's lawyer requested the WCD to set a BRC. See id. § 410.021 (providing that a BRC is a non-adversarial, informal dispute resolution proceeding designed, among other things, to mediate and resolve disputed issues). The BRC was set for December 2, 2004. See id. § 410.025(a); 28 TEX. ADMIN. CODE § 141.1 (providing that a BRC must be set within forty days after the request is received, but in cases warranting expedited processing, the BRC must be set within twenty days). The WCD failed to notify TMIC of the setting so the conference was rescheduled for January 6, 2005. At the January conference, Ruttiger and TMIC entered into a benefit dispute agreement. They agreed that (1) Ruttiger suffered a compensable injury on June 21, 2004; (2) he did not have disability from June 22, 2004 through August 22, 2004; and (3) he had disability from August 23, 2004 "to the present." The WCD approved the agreement. Following the BRC, TMIC paid temporary income benefits for the agreed period of past disability and re-initiated weekly benefits. See TEX. LAB. CODE § 408.101. TMIC also paid for Ruttiger's surgery and other medical expenses related to his hernias. Ruttiger reached maximum medical improvement on August 1, 2005, and was assigned a 1% impairment rating. See id. §§ 408.121-.122.

On June 16, 2005, while his claim was still pending before the WCD and before he had reached maximum medical improvement, Ruttiger sued TMIC and Culbert (generally referred to collectively as TMIC) for violations of article 21.21 of the Insurance Code,³ breach of the common law duty of good faith and fair dealing, and violations of the DTPA. TEX. BUS. & COMM. CODE §§17.41-.63. Ruttiger did not claim that TMIC failed to fulfill the agreement it entered into at the BRC or that TMIC did not properly pay income and medical benefits after the BRC. Rather, he claimed that TMIC's delay in paying temporary income benefits and agreeing to pay for surgery until January 2005 damaged his credit, worsened his hernias, and caused mental anguish, physical impairment, and pain and suffering over and above what he would have suffered if TMIC had timely accepted liability and provided benefits. His allegations as to Insurance Code violations were that TMIC (1) failed to adopt and implement reasonable standards for promptly investigating claims, (2) refused to pay Ruttiger's claim without having conducted a reasonable investigation, (3) failed to promptly provide a reasonable explanation for denying his claim, (4) failed to attempt to promptly and fairly settle the claim when liability was reasonably clear, and (5) misrepresented the insurance policy to him. He also asserted that TMIC's Insurance Code violations authorized recovery under the DTPA. Ruttiger's common law claim was that TMIC breached its duty to properly investigate his claim and denied necessary medical care and other benefits.

The case was tried to a jury, which found that TMIC (1) breached its duty of good faith and fair dealing, (2) committed unfair and deceptive acts or practices that were a producing cause of damages to Ruttiger, and (3) engaged in the unfair and deceptive acts knowingly. The jury found damages for past physical impairment, past and future pain and suffering, past and future loss of credit, past mental anguish, "additional" damages, and attorneys' fees. The trial court rendered judgment based on the Insurance Code findings, but also provided in its judgment that if the Insurance Code theory of liability failed on appeal, Ruttiger was entitled to recover for TMIC's breach of the duty of good faith and fair dealing and under the DTPA.

The court of appeals held that there was no evidence of credit reputation damages, but otherwise affirmed the trial court's judgment allowing recovery under the Insurance Code. 265 S.W.3d 651, 672. The appeals court did not reach the issues of whether Ruttiger could recover under his DTPA or common law claims. We granted TMIC's petition for review. 53 TEX. SUP. CT. J. 388 (Mar. 15, 2010).

TMIC makes several arguments for reversing the court of appeals' judgment: (1) Ruttiger is not entitled to recover for aggravation of his hernias due to delay in surgery because a worker may only recover for a common...