Workers' Comp. v. TX Mun. League Intergov.

• Decision Date: 14 September 2000
• Citation: 38 S.W.3d 591
• Parties: (Tex.App.-Austin 2000) Texas Workers' Compensation Commission and Subsequent Injury Fund, Appellants v. Texas Municipal League Intergovernmental Risk Pool, Appellee NO. 03-98-00169-CV
• Court: Texas Court of Appeals

Page 591

38 S.W.3d 591 (Tex.App.-Austin 2000)

Texas Workers' Compensation Commission and Subsequent Injury Fund, Appellants v. Texas Municipal League Intergovernmental Risk Pool, Appellee

NO. 03-98-00169-CV

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

September 14, 2000

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 53RD JUDICIAL DISTRICT NO. 97-08011, HONORABLE W. JEANNE MEURER, JUDGE PRESIDING

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Before Chief Justice Aboussie, Justices Jones and B. A. Smith

J. Woodfin Jones, Justice

The opinion and judgment filed herein on June 17, 1999 are withdrawn, and the following opinion is issued in lieu of the earlier one.

Appellee Texas Municipal League Intergovernmental Risk Pool ("Risk Pool") sued appellants Texas Workers' Compensation Commission ("TWCC") and the Subsequent Injury Fund ("Fund") seeking a declaratory judgment that certain provisions of the Texas Workers' Compensation Act¹ and the TWCC rules implementing those statutory provisions² are unconstitutional as applied to Risk Pool members. The trial court held the challenged statutory provisions and TWCC rules to be unconstitutional to the extent they require the Risk Pool to contribute to the Fund. We will reverse the judgment of the trial court and render judgment for appellants.

BACKGROUND

The Statutory Scheme

This case involves the interplay between the Subsequent Injury Fund, administered by TWCC, and the statutory requirement that political subdivisions provide workers' compensation coverage to their employees.

All political subdivisions are required to provide workers' compensation benefits to their employees by (1) becoming a self-insurer, (2) obtaining an insurance policy, or (3) joining with other political subdivisions to self-insure through a "joint insurance fund." See Tex. Lab. Code Ann. §§ 504.011, .016 (West 1996). The Risk Pool is a joint insurance fund consisting of more than 1600 Texas cities that have chosen to collectively self-insure.

The Subsequent Injury Fund is a special fund in the state treasury that is administered by TWCC. See id. § 403.006(a), (c) (West 1996). The Fund is liable for workers' compensation benefit payments whenever an injured employee from anywhere in Texas has suffered a compensable injury that, combined with the effects of a previous injury, results in a condition for which the employee is entitled to lifetime workers' compensation benefits. Id. § 408.162 (West 1996).³ Most states have adopted similar statutes implementing second- or subsequent-injury funds. See 7B John Alan Appleman, Insurance Law & Practice (Berdal ed.), § 4595 (1979). Such funds are meant to encourage employers to hire people with handicaps or pre-existing injuries. See id. If the employee suffers further injury, the employer is charged only with payments due to the employee for the new injury; the Fund covers the cost of the added severity caused by the combined effect of the prior and current injury. See id.

The Subsequent Injury Fund is funded through mandatory contributions from workers' compensation insurance carriers.⁴ See id. §§ 403.007(a), 408.184(c) (West 1996). Simply put, the Fund claims death benefits that are payable to, yet left unclaimed by, a beneficiary. Specifically, if a covered person dies as a result of a compensable injury and has no legal beneficiary at the time of death, the carrier must contribute 364 weeks of death benefits to the Fund. See id. § 403.007(a). Similarly, if a legal beneficiary ceases to exist before the expiration of 364 weeks, the carrier must contribute the difference between the amount paid to the beneficiary and the amount that would have been paid for 364 weeks. See id. § 408.184(c). TWCC has promulgated rules to implement sections 403.007(a) and 408.184(c). See Tex. Admin. Code §§ 132.10-.12 (2000). These mandatory contribution requirements form the basis of the Risk Pool's constitutional challenge.

Procedural Background

In 1997, TWCC ruled that the municipal members of the Risk Pool are required to pay into the Fund any unclaimed death benefits pursuant to sections 403.007(a) and 408.184(c) and the related TWCC rules. In response to that determination, the Risk Pool sought declaratory relief that these statutory provisions and TWCC rules are unconstitutional as applied to the cities participating in the Risk Pool. The trial court agreed, finding that the provisions violated article III, section 52(a) of the Texas Constitution (prohibiting political subdivisions from lending credit or granting public money) and article VIII, section 1-e of the constitution (abolishing state ad valorem property taxes). This appeal followed.

In four issues, TWCC asserts that the statutory provisions and TWCC rules in question do not violate either constitutional provision⁵ and that the Risk Pool lacks associational standing to bring a constitutional challenge on behalf of its members or, alternatively, lacks standing to bring this suit because it has accepted benefits under the very statutory scheme it now challenges.

DISCUSSION

Associational Standing

The Texas Supreme Court has adopted the three-prong test for associational standing set forth by the United States Supreme Court in Hunt v. Washington State Apple Advertising Commission, 432 U.S. 333 (1977). See Texas Ass'n of Bus. v. Texas Air Control Bd., 852 S.W.2d 440, 447 (Tex. 1993). Under that test, an association has standing to sue on behalf of its members when: (1) the members themselves have standing to sue in their own right; (2) the interests the association seeks to protect are germane to the organization's purpose; and (3) participation of the individual members in the lawsuit is not necessary. See id. (citing Hunt, 432 U.S. at 343).

TWCC concedes that prongs one and three are met in the present suit but contends the interests that the Risk Pool seeks to protect are not germane to the organization's purpose. TWCC argues that the Risk Pool has authority only to process and pay or defend claims, not to "crusade for the constitutional rights of municipalities." See Tex. Lab. Code Ann. § 504.016 (West 1996).

Clearly, the purpose of a joint insurance fund at its most basic level is to administer workers' compensation coverage on behalf of its members, i.e., to pay or defend against workers' compensation claims brought by city employees. See id. §§ 504.011, .016. This, however, is the exact interest the Risk Pool seeks to further by its request for a declaratory judgment in this case-a determination whether the Risk Pool must pay workers' compensation death benefits on behalf of a member city.

Further, the bylaws of the Risk Pool show that the interest the Risk Pool seeks to protect is germane to the organization's purpose. The legislature has expressly allowed for a joint insurance pool such as the Risk Pool to be operated under bylaws established by its members. See id. § 504.016(c). The bylaws of the Risk Pool provide that its purpose and objectives are to "formulate, develop and administer a program of self-insurance for the [membership]." The bylaws allow the Risk Pool to hire an attorney to protect the members' funds. We believe that seeking a determination of what payments are required to be made by the Risk Pool on behalf of its members is germane to the organization's purpose as stated in its bylaws.

We conclude that the Risk Pool has met the second prong of Hunt. Accordingly, we hold that the Risk Pool has associational standing to bring this constitutional challenge.

Acceptance of Benefits

TWCC next complains that the Risk Pool lacks standing to bring this declaratory action because it has sought reimbursement benefits pursuant to the same statutory scheme it now challenges. The Risk Pool denies that it has sought reimbursement benefits in the past but argues that, even if it had, such a consideration is irrelevant.

Generally speaking, a court will not pass on the constitutionality of a statute at the request of one who avails himself of its benefits. See, e.g., McElhaney v. City of Tyler, 926 S.W.2d 597, 602 (Tex. App.-Tyler 1996, writ denied); Prudential Health Care Plan, Inc. v. Commissioner of Ins., 626 S.W.2d 822, 832-33 (Tex. App.-Austin 1981, writ ref'd n.r.e.). This Court has previously found, however, that participation in the workers' compensation system does not bar a constitutional challenge to the Act where participation in the system is compulsory. See Ben Robinson Co. v. Texas Workers' Compensation Comm'n, 934 S.W.2d 149, 153 (Tex. App.-Austin 1996, writ denied). The political subdivision members of the Risk Pool are statutorily required to provide workers' compensation coverage to their employees. See Tex. Lab. Code Ann. § 504.011. Therefore, the Risk Pool is not precluded from challenging the constitutionality of a portion of the Act by virtue of having acted on behalf of the member cities in acccepting benefits under the Act.⁶

Having disposed of TWCC's standing arguments, we now turn to the constitutionality of the statutory provisions and TWCC rules at issue.

The Constitutionality Issues

The trial court held that sections 403.007(a) and 408.184(c) of the Labor Code and the related TWCC rules violate the constitutional rights of the Risk Pool members. Article III, section 52(a) of the Texas constitution states that the legislature

shall have no power to authorize any county, city, town or other political corporation or subdivision of the State to lend its credit or to grant public money or thing of value in aid of, or to any individual, association or corporation whatsoever, or to become a stockholder in such corporation, association or company.

Tex. Const. art. III, § 52(a). The Risk Pool contends that the Fund's mandatory contribution scheme unconstitutionally requires member cities to "lend [their] credit or grant public money" because contributions made into the Fund are later distributed throughout the State with no guarantee...