Texas Mutual Insurance Company & Gloria Williams v. Palmer, Jeff ( 2014 )

Reversed and Rendered and Opinion Filed August 29, 2014
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-12-00893-CV
TEXAS MUTUAL INSURANCE COMPANY & GLORIA WILLIAMS, Appellants
V.
JEFF PALMER, Appellee
On Appeal from the 95th Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-07-08017-D
MEMORANDUM OPINION
Before Justices Bridges, Lang, and Fillmore
Opinion by Justice Bridges
Texas Mutual Insurance Company (TMIC) and Gloria Williams appeal the trial court’s
judgment awarding Jeff Palmer damages under Texas Insurance Code § 541.061. In three points
of error, TMIC and Williams argue the trial court erred in entering judgment for Palmer because
(1) an extent of injury dispute is not a misrepresentation of a workers’ compensation insurance
policy, (2) the section 541.061 cause of action was not pleaded or tried by consent, and (3) no
damages are recoverable. We reverse and render judgment that Palmer take nothing on his
claims.
This is a workers’ compensation insurance bad-faith lawsuit brought by Palmer against
TMIC and Williams, a claims adjuster for TMIC. Palmer was a former employee of Barsh
Company, where he was a carpenter. On January 5, 2006, Palmer was at work, delivering
playground equipment and putting concrete into the ground, when he felt a catch in his back and
left work early for the day. On the night of the incident, Palmer went to the Province Health
Center emergency room and complained of lower back pain. Palmer was told he had a slipped
disc in his back. The injury was timely reported and referred for workers’ compensation benefits
to TMIC, the insurance carrier holding the policy of workers’ compensation insurance covering
Palmer’s claim. The claim was then assigned to licensed claim adjuster Williams. Williams’s
job was to manage the claim until Palmer could return to work. She also had an obligation to
investigate other areas of the claim and pay his benefits.
On January 11, 2006, Palmer met with Dr. Hatley, who took some x-rays. Several days
later, an MRI was performed which showed disc herniations and nerve impingement at L4-5 and
L5-S1. The report also showed a history of back pain and mild disc bulges at L3-4 and L2-3.
On January 17, 2006, it was determined that the claim was compensable, and Palmer began to
receive temporary income and medical benefits. The next day, Dr. Hatley referred Palmer to Dr.
Lewin, a neurosurgeon, who met with Palmer on February 13, 2006. At the meeting, Dr. Lewin
noted he thought Palmer needed surgery at both levels. As a result, he requested
preauthorization for a left L4-5 and L5-S1 laminectomy and discectomy at Province Health
Center.
A few days later, TMIC’s preauthorization department approved the surgery as
reasonable and necessary to treat Palmer’s injuries. However, on the same day, Williams also
filed an “extent of injury” dispute. The notice of the dispute stated “TMIC is disputing
entitlement to the herniated disk as not related to the sprain/strain of the lumbar spine. The
carrier accepts an aggravation to the preexisting degenerative disc disease.” The notice was
faxed to the Division of Workers’ Compensation.
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For the next several months, the parties disputed whether Dr. Lewin would be
compensated by TMIC for the surgery because of the extent of injury dispute. Dr. Lewin noted
that he was not going to perform surgery until the dispute was resolved. Dr. Lewin’s nurse, Joy
Scott, also testified it was the policy of the office that a surgery would not be performed until
disputes were settled unless it was considered an emergency. On the other hand, TMIC argued
Dr. Lewin had an unqualified pre-authorization approval to perform the surgery, and the filing of
the preauthorization preserved Texas Mutual’s right to contest the extent of injury for future
treatment and impairment. During the dispute, the Division of Workers’ Compensation assigned
an independent doctor, Dr. Hilliard, to examine Palmer in order to determine the extent of his
injury. Dr. Hilliard evaluated Palmer and informed TMIC he agreed surgical intervention was
necessary and that, in his opinion, the disc herniation was causally related to the compensable
injury.
Palmer also retained counsel during the dispute to help resolve the situation. Palmer’s
counsel set up a benefit review conference, which was held on May 18, 2006. As a result of the
conference, Palmer’s attorney, Nick Morgan, wrote a letter to Dr. Lewin that stated:
If you will review the pre-authorization from Texas Mutual dated February 17,
2006, you will note that it pre-authorizes the procedures that you requested. You
will also note that there is something ‘missing’ from that pre-authorization: There
is no ‘qualifier’ that this pre-authorization is contingent upon resolution of Mr.
Palmer’s extent of injury/compensability dispute.
In the letter, Morgan also suggested that Dr. Lewin seek an extension of the pre-authorization
that was expired in order to perform the surgery. After receiving the letter, Dr. Lewin’s office
communicated to Morgan that the surgery would still not be performed because of the
uncertainty of the dispute. A second benefit review conference was held on June 21, 2006,
where the parties entered into a benefit dispute agreement. The parties agreed that the
compensable injury on January 5, 2006 extended to the disc involvement at L4-5 and L5-S1 and
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did not extend to L2-3 or L3-4. On July 5, 2006, the surgery was performed. TMIC paid for the
surgery as well as post-surgical care, physical therapy, and pain management. After Palmer
reached his maximum medical improvement, TMIC paid him $267.25 per week for fifteen
weeks.
Palmer filed this case on June 30, 2007 after the payments ended and alleged that TMIC’s
dispute was a breach of the common law duty of good faith and fair dealing, the insurance code,
and the Texas Deceptive Trade Practices Act (DTPA). TMIC filed special exceptions arguing
that all of Palmer’s causes of action under the insurance code should be stricken, relying on
Texas Mutual Insurance Co. v. Ruttiger, 381 S.W.3d 430, (Tex. 2011). In Ruttiger, the Texas
Supreme Court held a dispute over whether a worker’s claim was covered under workers’
compensation does not constitute a misrepresentation under section 541.061 of the insurance
code. In response, the trial court struck Palmer’s claims for violation of the insurance code.
Palmer amended his petition to plead only a breach of the common law duty of good faith and
fair dealing and DTPA unconscionable acts. Even though Palmer did not allege a breach of the
insurance code in his amended petition, he requested and the trial court submitted a jury charge
that included the causes of actions contained in Palmer’s amended petition, as well as questions
on the insurance code sections 541.060 (unfair settlement practices) and 541.061
(misrepresentation of insurance policy). TMIC objected to the jury charge because Ruttiger
precluded the insurance code questions, no evidence supported them, and they were not pleaded
or tried by consent. TMIC’s objections to the questions regarding the insurance code are as
follows:
No evidence supports the submission of Texas Insurance Code Misrepresentation
questions. Tex. Ins. Code § 541.061 concerns “misrepresentation of a policy.”
Plaintiff’s evidence concerns only whether Texas Mutual disputed that all of Mr.
Palmer’s conditions were caused by his on-the-job injury. As a matter of law, this
type of dispute is not a misrepresentation of the policy. Texas Mutual Ins. Co. v.
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Ruttiger, No. 08-0751; __ S.W.3d __; 2011 WL 3796353 at *13 (Tex. Aug 26,
2011, mtn. reh’g granted).
Defendants further object that Question 4A is based on a statute, but does not
track the language of the statute. Question 4A contains language (italicized here
for ease of reference) that is not present in the statute. Specifically, it improperly
states that a misrepresentation can concern “an insurance policy or insurance
coverage.” Tex. Ins. Code § 541.061; PJC 102.19
Defendants further object that Question 4A is not supported by the pleadings and
was not tried by consent.
There is no evidence to support the submission of the issue of causation of any of
Mr. Palmer’s damages.
Defendants object to any question regarding “coverage” as unsupported by the
evidence and inapplicable in a workers’ compensation claims handling case.
TMIC’s objections were overruled. On the causes of action that were pleaded, the jury
found (1) TMIC failed to comply with its duty of good faith and fair dealing, but TMIC’s
conduct was not the proximate cause of injury to Palmer, and (2) TMIC did not engage in
unconscionable actions pursuant to the DTPA in the handling of Palmer’s workers’
compensation claim. On the causes of action that were not pleaded, the Insurance Code
questions, the jury found TMIC did engage in unfair or deceptive acts or practices that were a
producing cause of damages to Palmer by (1) making any misrepresentation of an insurance
policy or insurance coverage (insurance code § 541.061) and (2) engaging in unfair settlement
practice (insurance code § 541.060). However, the jury found that TMIC did not engage in these
practices knowingly. Further, the jury awarded $483,716.69 in damages. In the final judgment,
the trial court awarded Palmer fees and damages pursuant to section 541.061 of the insurance
code for misrepresentation of the insurance policy. This appeal followed.
We first address TMIC’s second point of error in which they argue the trial court erred in
entering judgment for Palmer because the section 541.061 (misrepresentation of insurance
policy) cause of action was not pleaded or tried by consent. Specifically, TMIC argues that,
because the trial court submitted a question on section 541.061 of the insurance code over
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TMIC’s objection and the issue was not pleaded or tried by consent, a take-nothing judgment
must be rendered.
We review claimed error in the court’s charge under an abuse of discretion standard.
Webb v. Glenbrook Owners Ass'n, Inc., 298 S.W.3d 374, 380 (Tex. App.–Dallas 2009, no pet.).
The court abuses its discretion if it acts in an arbitrary or unreasonable manner without reference
to any guiding rules or principles. Hampden Corp. v. Remark, Inc., 331 S.W.3d 489, 495 (Tex.
App.—Dallas 2010, pet. denied). The trial court has broad discretion in determining whether an
unpleaded issue was tried by consent. See Id.
Jury questions must be supported by the pleadings. Webb, 298 S.W.3d at 380. Texas
Rule of Civil Procedure 278 states, “[t]he court shall submit the questions, instructions and
definitions in the form provided by Rule 277, which are raised by the written pleadings and the
evidence.” See TEX. R. CIV. P. 278. An issue is not tried by consent where the complaining party
properly objects to the submission of issues not raised by the pleadings. Webb, 298 S.W.3d at
380. Stated differently, trial by consent is precluded where proper objection is made on the
record before submission to the jury. Id. A clear abuse of discretion exists when the trial court
submits a jury question that is neither supported by the pleadings nor tried by consent. Id. As a
result, absent trial by consent, judgment on an unpled action is void. Webb, 298 S.W.3d at 380;
see also Stoner v. Thompson, 578 S.W.2d 679, 682 (Tex. 1979).
Here, Palmer included the insurance code causes of action in his original petition, but the
causes of actions were abandoned after TMIC filed a motion for special exceptions based on the
Texas Supreme Court’s decision in Ruttiger. As a result, the insurance code jury questions were
not supported by the pleadings because the amended petition only included causes of action for
breach of the duty of good faith and fair dealing and DTPA unconscionable acts. See Webb, 298
S.W.3d at 380. Even though the causes of action were abandoned, the insurance code questions
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were submitted to the jury over TMIC’s objections. Additionally, because TMIC properly
objected to the submission of the insurance code questions, the insurance code questions were
not tried by consent. See id. Thus, the trial court abused its discretion in submitting the
questions to the jury, and the trial court’s judgment on the unpled action is void. See id. Also,
because the damages were awarded based only on section 541.061 of the insurance code,
recovery is void as well. Therefore, we sustain TMIC’s second point of error. Because of our
disposition of TMIC’s second point of error, we need not address TMIC’s remaining points of
error.
We reverse and render judgment that Palmer take nothing on his claims.
120893F.P05 /David L. Bridges/
DAVID L. BRIDGES
JUSTICE
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
TEXAS MUTUAL INSURANCE On Appeal from the 95th Judicial District
COMPANY & GLORIA WILLIAMS, Court, Dallas County, Texas
Appellants Trial Court Cause No. DC-07-08017-D.
Opinion delivered by Justice Bridges.
No. 05-12-00893-CV V. Justices Lang and Fillmore participating.
JEFF PALMER, Appellee
In accordance with this Court’s opinion of this date, the judgment of the trial court is
REVERSED and judgment is RENDERED that:
Jeff Palmer take nothing on his claims.
It is ORDERED that appellants TEXAS MUTUAL INSURANCE COMPANY &
GLORIA WILLIAMS recover their costs of this appeal from appellee JEFF PALMER.
Judgment entered August 29, 2014
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