Transportation Ins. Co. v. Moriel, D-1507

Citation879 S.W.2d 10
Decision Date08 June 1994
Docket NumberNo. D-1507,D-1507
PartiesTRANSPORTATION INSURANCE COMPANY, Petitioner, v. Juan Carlos MORIEL, Respondent.
CourtSupreme Court of Texas

Thomas S. Leatherbury, Vinson & Elkins, Cynthia Keely Timms, Locke Purnell Rain & Harrell, Dallas, Victor F. Poulos, Mayfield & Perrenot, El Paso, Peter G. Thompson, Charles I. Hadden, Ross Dixon & Masback, Washington, DC, for petitioner.

C.R. Kit Bramblett, Coll Bramblett, Bramblett & Bramblett, El Paso, for respondent.

CORNYN, Justice, delivered the opinion of the Court, in which PHILLIPS, Chief Justice, and GONZALEZ, HIGHTOWER, HECHT, ENOCH and SPECTOR, Justices, join.

Respondent's Motion for Rehearing is overruled. We withdraw our prior opinion and substitute the following in its place.

This case requires us to clarify the standards governing the imposition of punitive damages in the context of bad faith insurance litigation. The parties have asked us to address three issues. First, in a bad faith case, how should Texas courts apply the definition of gross negligence from Burk Royalty Co. v. Walls, 616 S.W.2d 911 (Tex.1981), to determine whether punitive damages are appropriate? Second, what constitutes legally sufficient evidence of gross negligence to support an award of punitive damages? Third, what limits do the Due Process clause of the Fourteenth Amendment to the United States Constitution and the Due Course clause of the Texas Constitution, TEX. CONST. art. 1, § 19, place on punitive damages? 1 We hold that Juan Moriel did not present legally sufficient evidence of gross negligence. Therefore, Moriel is not entitled to punitive damages. It necessarily follows that the constitutional issues--whether the size of the punitive damages award or the procedures the trial court followed violated Transportation's due process rights--are questions that must await another day. City of San Antonio v. Schautteet, 706 S.W.2d 103, 105 (Tex.1986) (per curiam) (explaining that constitutional challenges should not be addressed when a case may be decided on nonconstitutional grounds). Because the court has not previously addressed punitive damages in the bad faith context, and because this opinion represents a substantial clarification of the gross negligence standard that will apply in all cases, we remand this case for a new trial in the interest of justice.


On March 15, 1986, Juan Moriel, an employee of Cashway Building Materials in El Paso, was injured when a stack of countertops fell on him. Moriel suffered three broken ribs, a broken wrist, and a fractured pelvis. As a result, he was hospitalized for twelve days. His hospitalization costs were paid by Cashway's workers' compensation carrier, Transportation Insurance Company.

A few days after leaving Providence hospital, Moriel experienced periodic loss of movement in one leg. He returned to Providence to undergo tests for possible nerve damage, but the record does not reveal the results of those tests. Six weeks after the accident, Moriel attempted to resume sexual relations with his wife but discovered he was impotent. He had never before experienced this problem.

Moriel's orthopedist, Dr. Toni Ghiselli, referred him to Dr. Abel Garduno, a urologist. Dr. Garduno ordered tests for Moriel at Pathlab in El Paso. The Pathlab tests, however, revealed no physical cause for his complaint. Dr. Garduno prescribed hormones, but these were no help. Dr. Garduno then referred Moriel to Dr. Gonzalo Diaz at the Sun Towers Sleep Disorder Center in El Paso for further testing. An equipment failure rendered the Sun Towers tests inconclusive and precluded further testing for "months." Therefore, Dr. Diaz recommended that Moriel undergo testing at the Baylor College of Medicine Sleep Disorders and Research Center in Houston.

On August 9, 1986, Moriel asked Less Huss, the adjustor handling his workers' compensation claim, to authorize payment for the Baylor tests in Houston. Huss was an employee of Crawford & Company, an independent adjusting company that handled claims for Transportation. According to Moriel's testimony, Huss required Moriel to obtain an authorization letter from Dr. Ghiselli, which Moriel did within two or three days. Huss then instructed Moriel that he would need a letter from his urologist, Dr. Garduno. Moriel complied with this request within three days. According to Moriel, Huss then instructed him to obtain yet another letter from Dr. Diaz. Moriel again complied. Huss then indicated that he could not personally authorize the Baylor tests, but that he needed approval from his superiors at Transportation's Dallas offices.

On September 10, 1986, Transportation told Moriel's attorney that it would cover the tests but not Moriel's travel expenses to Houston. Moriel's attorney accepted the proposal the same day. Moriel testified that the month that had elapsed between his request and Transportation's approval forced him to reschedule the tests. After a ten-day delay, Moriel underwent testing in Houston on September 25-27. The results of the testing at Baylor indicated that Moriel's impotence problem was at least partially physical. Although no specific treatment for the physical problem was indicated, the Baylor report recommended that Moriel obtain counseling for emotional problems, for which Dr. Garduno referred Moriel to a psychiatrist, Dr. Oscar Perez. Moriel testified that he personally delivered a copy of the Baylor report to Huss, and obtained Huss's authorization for Perez's treatment.

Dr. Perez treated Moriel until April 1987. At trial, Dr. Perez testified that Moriel's impotence had both physical and mental components, and that Moriel was able to overcome the mental component through therapy and resume sexual relations with his wife.

The $3,155.00 bill for Moriel's Baylor tests was presented to Transportation on November 4, 1986. Although Transportation authorized the testing in advance, it delayed payment of this bill for more than two years. Transportation claimed that it initially delayed payment because no medical report accompanied the bill, but Moriel testified that he personally delivered the report to Huss shortly after the tests were completed. Even after the date Transportation conceded receiving the report, though, it continued to deny payment on the ground that Moriel's impotence was unrelated to his on-the-job injury.

Transportation also received bills for Dr. Perez's services totalling $2,075.00, but delayed paying them for more than a year on the ground that it had never received his medical report. Yet Perez testified that he had sent a detailed report promptly at the conclusion of Moriel's treatment.

Transportation also delayed paying a $382.25 bill from Providence Hospital for follow-up outpatient tests. Huss's correspondence indicates he sent the bill to Transportation along with the other Providence bills, which totalled nearly $7000.00, and that Transportation paid the other Providence bills. Transportation also paid the bill for follow-up testing in September 1987, after Providence filed a collection action against Moriel.

Finally, Transportation failed to pay the $238.20 Pathlab bill before the commencement of Moriel's lawsuit. However, the evidence reflects that Pathlab mailed the bill to the wrong address and that Transportation did not receive it before the suit was filed.

While he was being tested and treated, Moriel filed a workers' compensation claim against Transportation, securing a $30,022.77 award from the Industrial Accident Board (IAB) on July 17, 1987. After Transportation appealed that award to district court, Moriel counterclaimed for additional compensation, unpaid medical bills, and bad faith claims practices. In July 1988, Moriel and Transportation settled the workers' compensation claim, leaving the bad faith claim extant.

At the trial of the bad faith claim, the jury found that Transportation delayed paying the medical bills without a reasonable basis, that it knew or should have known that it had no reasonable basis to delay payment, and that it acted "with heedless and reckless disregard" for Moriel's rights. The jury awarded Moriel $1000.00 in actual damages, excluding mental anguish, $100,000.00 in mental anguish damages, and $1,000,000.00 in punitive damages. Moriel also obtained findings that Transportation had engaged in unfair, deceptive or misleading acts or practices prohibited by statute that caused him actual damages, including mental anguish. The trial court entered judgment on the bad faith findings, and overruled Transportation's motions for judgment notwithstanding the verdict, new trial, remittitur, and to disregard the jury findings.

The court of appeals affirmed, 814 S.W.2d 144, with one justice dissenting, 814 S.W.2d at 151 (Koehler, J., dissenting).


We must initially determine whether the settlement of Moriel's workers' compensation claim precludes his recovery of punitive damages. The agreed Partial Judgment setting forth the parties' workers' compensation settlement recited that "it [appears] to the Court that the extent of the injury and liability for compensation or medical expenses are uncertain...." Transportation argues that this judgment recital precludes the later finding of conscious indifference on its part, and thus eliminates Moriel's right to pursue a claim for punitive damages. In support of this position, Transportation cites Izaguirre v. Texas Employers' Ins. Ass'n, 749 S.W.2d 550 (Tex.App.--Corpus Christi 1988, writ denied), and Price v. Texas Employers' Ins. Ass'n, 782 S.W.2d 938 (Tex.App.--Tyler 1989, no writ), which held that similar recitals agreed to by the claimant in settling a workers' compensation claim constituted judicial admissions estopping the claimant from later asserting a bad-faith claim. See also National Union Fire Ins. Co. v. Dominguez, 793 S.W.2d 66 (Tex.App.--El Paso 1990), rev'd on other grounds, 873 S.W.2d 373 (Tex.1994). 2

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