Texas Mutual Insurance Company v. Sara Care Child Care Inc. and Martha Martinez ( 2010 )

COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
TEXAS MUTUAL INSURANCE §
COMPANY, No. 08-08-00192-CV
§
Appellant, Appeal from the
§
v. County Court at Law No. 3
§
of El Paso County, Texas
SARA CARE CHILD CARE CENTER, §
INC. AND MARTHA MARTINEZ, (TC# 2004-2112)
§
Appellees.
OPINION
Texas Mutual Insurance Company appeals from two summary judgment orders, and a
final judgment following a bench trial, all in favor of its insured, Sara Care Child Care Center,
Inc. (“Sara Care”), and the insured’s employee, Martha Martinez. The insurer argues the first
summary judgment, affirming the Texas Workers’ Compensation Commission Appeals Panel
decision in the claimant’s favor was in error, due to the panel’s reliance on Texas Labor Code
Section 406.008. Texas Mutual continues by challenging the trial court’s partial summary
judgment on the issue of its liability to Sara Care for the insured’s extra-contractual claims for
affirmative relief. The insurer concludes that the trial court’s final judgment, including
attorney’s fees, and statutory additional damages must be reversed, and judgment rendered in its
favor, due primarily to errors in the summary judgments. In support of its request for reversal,
Texas Mutual also raises an issue challenging the trial court’s rulings on Sara Care’s objections
to the carrier’s summary judgment evidence. We reverse and remand in part and affirmed in
part.
Sara Care Child Care Center, Inc. operated the child care center at the University of Texas
at El Paso. In July 2001, Sara Care purchased a one year workers’ compensation insurance
policy from Texas Mutual Insurance Company (“TMI”). The policy provided Sara Care with
coverage for workers’ compensation claims August 4, 2001 to August 4, 2002. By letter dated
June 6, 2002, TMI notified Sara Care that its policy was scheduled to expire on August 4. The
letter specifically stated, in bold typeface, that it was “not a cancellation,” and that the insurer
“look[ed] forward to continuing to serve as [Sara Care’s] worker’s compensation carrier” in the
next policy term. TMI’s agent, The Treiber Group, sent Sara Care a premium quote for the 2002-
2003 policy year sometime prior to the 2001-2002 policy’s expiration. However, due to a mis-
communication with the insurance agent, Sara Care failed to pay its 2002-2003 premium until
August 24, 2002.
In 2002, Martha Martinez was one of Sara Care’s employees. She suffered a work-
related injury on August 20, 2002. TMI denied that Sara Care was covered on the date of the
injury, and refused to cover Ms. Martinez’s claim. Sara Care paid Ms. Martinez’s medical bills
in the amount of $30,020.48. On May 13, 2004, Sara Care filed suit against TMI, alleging the
insurer wrongfully denied coverage for Ms. Marinez’s injuries. The employer asserted causes of
action for breach of contract, negligence, violations of the Texas Insurance Code, the Texas
Deceptive Trade Practices Act, and promissory estoppel. Following TMI’s original answer, in
which it asserted the trial court lacked jurisdiction over the case due to Sara Care’s failure to
exhaust its administrative remedies, the parties entered into a Rule 11 agreement, in which they
agreed to abate the case in the trial court pending a final decision from the Texas Workers’
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Compensation Commission (“the Commission”).
The Commission held a contested case hearing on April 8, 2005. The hearing officer
determined: (1) that TMI did not provide workers’ compensation coverage for Sara Care on
August 20, 2002; (2) that TMI did not waive its right to contest compensability of the claimed
injury; and (3) that Ms. Martinez did not sustain a compensable injury. Sara Care appealed the
hearing officer’s decision to the Commission appeals panel. The appeals panel reversed the
hearing officer’s decision, finding that due to TMI’s failure to comply with the cancellation or
nonrenewal notice requirements of Section 406.008 of the Texas Labor Code, Sara Care’s
workers’ compensation coverage under the 2001-2002 policy was extended, and provided
coverage on the date Ms. Martinez was injured. The panel noted that on June 6, 2002, the
Commission received a notice of intent to cancel or non-renew Sara Care’s policy, and that it was
unclear whether this notice was included with TMI’s June 5 letter to Sara Care. Based on this
evidence, the panel determined that TMI had not complied with the notice requirements for
policy cancellation, and concluded Sara Care’s policy was statutorily extended due to that failure.
The appeals panel also determined that TMI waived its right to contest the compensability of
Ms. Martinez’s injury by failing to notify the Commission and the claimant of its refusal to
provide coverage within the seven-day limitations period of Labor Code Section 409.021.
Accordingly, the appeals panel reversed the hearing officer’s decision, and rendered a new
decision in Sara Care’s favor.
On July 22, 2005, TMI filed a Petition for Judicial Review of the appeals panel decision
in the trial court where the parties had previously agreed to abate the case. In the petition, TMI
contested the appeals panel’s findings that Sara Care was covered by its policy on August 20,
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2002, and that it waived its right to contest compensability. The parties proceeded with
discovery on both Sara Care’s original petition, and TMI’s petition for judicial review until
March 2006.
On March 21, 2006, Sara Care filed a hybrid motion for summary judgment, seeking an
affirmance of the appeals panel’s decision on both contested issues. In large part, the motion
relied on the policy extension provision of Section 406.008, and the lack of evidence that TMI
complied with the notice requirements for policy cancellation or nonrenewal. TMI responded
primarily, and for the first time, that summary judgment was improper because the basis of the
appeals panel decision, Section 406.008 was inapplicable in this case. In the alternative, TMI
argued that a fact issue remained regarding its compliance with the statute. Sara Care replied to
TMI’s response with numerous objections to the insurer’s summary judgment evidence, and by
arguing that TMI had waived the argument that Section 406.008 was not applicable, because the
issue was not raised in the administrative proceedings. The trial court sustained Sara Care’s
evidentiary objections, and granted Sara Care’s motion on June 13, 2006 (“the preliminary” or
“judicial review” summary judgment).
Approximately a month after the trial court’s judicial review summary judgment, Sara
Care filed another hybrid summary judgment motion, requesting summary judgment as to TMI’s
liability to the employer for the causes of action raised in its original petition.1 TMI responded
1
Ms. Martinez filed an Original Answer to TMI’s Petition for Judicial Review on
September 9, 2005. She also filed an individual motion for summary judgment on July 21, 2006,
in which she sought attorney’s fees and argued: “[t]here is no evidence that Martha Martinez
DID NOT sustain an injury in the course and scope of her employment with Sara Care on or
about August 20, 2002.” [Emphasis in original]. The court denied Ms. Martinez’s motion on
January 24, 2007.
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with its own hybrid motion for summary judgment, arguing that Sara Care could not establish
TMI’s liability as a matter of law. The insurer also moved for summary judgment on the basis
that Sara Care’s request for attorney’s fees was legally unsupported. The trial court granted Sara
Care’s second motion for summary judgment as to TMI’s liability for breach of contract,
violations of the Texas Insurance Code, violations of the Texas DTPA, and promissory estoppel
on December 12, 2006.2 The court also noted that the only fact issues remaining in the case
were: (1) whether TMI acted knowingly with respect to its statutory violations; and (2) the
amount of attorney’s fees due to the claimants.
The parties proceeded to a bench trial on November 19, 2007. On March 3, 2008, the
trial court entered its final judgment in favor of Sara Care. The court determined that TMI did
act “knowingly” in its violations of the Insurance Code and the DTPA, and concluded Sara Care
was entitled to treble damages pursuant to the statutes. The court awarded Sara Care $90,061.44
in damages, less a $28,000 credit for Sara Care’s prior settlement with its insurance agent, plus
pre- and post-judgment interest and attorney’s fees. The court also entered an attorney’s fee
award for Ms. Martinez. Following the denial of its motion for new trial by operation of law,
TMI timely filed its notice of appeal to this Court.
2
As the parties explained during oral argument, the negligence cause of action was
related to Sara Care’s allegations against the Treiber Group, the insurance agent who handled the
policy. Although the Treiber Group was originally named as a defendant in the case, Sara Care
ultimately entered into a settlement agreement with the agent. Although the negligence cause of
action was never formally stricken from the case, there is no further reference to the cause of
action in the record, and it appears Sara Care abandoned the claim following the settlement. As
the parties have not addressed the claim further, either in the trial court or in their briefing to this
Court, there is no need to address the claim further in our consideration of this case.
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TMI raises six issues for our review.3 In Issue One, TMI challenges the trial court’s
judicial review summary judgment. In Issues Two and Three, respectively, TMI contends the
trial court erred by granting Sara Care’s motion for partial summary judgment on the insurer’s
liability for its additional causes of action, and also erred by denying TMI’s cross-motion for
summary judgment on those claims. In Issue Four, TMI contends the trial court’s “knowingly”
finding is unsupported by the evidence. In Issue Five, TMI challenges the court’s attorney’s fee
awards to both Sara Care and Ms. Martinez. In Issue Six, TMI contends the trial court abused its
discretion by sustaining Sara Care’s objections to its summary judgment evidence, as reflected in
the trial court’s judicial review summary judgment. Because it affects our analysis of Issue One,
we will address TMI’s evidentiary challenge first. We will address the remaining issues in the
order they are presented.
In Issue Six, TMI challenges the trial court’s rulings sustaining Sara Care’s objections to
several exhibits included in the carrier’s response to Sara Care’s preliminary motion for summary
judgment. To be considered by the trial court, or the reviewing court, summary judgment
evidence must be admissible under the same standards required of evidence introduced at trial.
See United Blood Services v. Longoria, 938 S.W.2d 29, 30 (Tex. 1997). We review a trial
court’s evidentiary rulings for an abuse of discretion. Riddle v. Unifund CCR Partners, 298
S.W.3d 780, 782 (Tex.App.--El Paso 2009, no pet.). A trial court abuses its discretion if it
makes a decision which is arbitrary, unreasonable, or without reference to guiding rules and
principles of law. See Riddle, 298 S.W.3d at 782. Moreover, a judgment will not be reversed
3
With the exception of Issue Five, TMI makes no distinction between Sara Care and
Ms. Martinez. As such, for the purposes of our discussion of the other issues, references to “Sara
Care” include both Appellees when necessary.
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due to an erroneous evidentiary ruling unless the error probably caused the rendition of an
improper judgment. See id.
In its judicial review summary judgment response, TMI included nine exhibits.4 Sara
Care objected to Exhibits One, Two, Five, and Seven on the grounds that the documents were
improper summary judgment evidence because they were inadmissible pursuant to Texas Labor
Code Section 410.161. The trial court granted Sara Care’s objections and excluded the evidence
in its written summary judgment order. Those excluded exhibits were:
Exhibit 1: an affidavit by Ms. Carolyn Howell
Exhibit 2: a copy of Sara Care’s worker’s compensation policy with
TMI from August 4, 2001 though August 4, 2002
Exhibit 5: a copy of a letter dated June 20, 2002, from TMI to its
insurance agent John Treiber, indicating the insurer had
reviewed Sara Care’s account, was “pleased to offer the
enclosed quotation for Workers’ Compensation coverage.”
Exhibit 7: a copy of Sara Care’s workers’ compensation policy from
August 2002 through August 2003
Section 410.161 prohibits the use of any documents which a party fails to disclose as
required by the Labor Code, from being introduced as evidence in any subsequent proceeding,
including the trial court, absent a demonstration of good cause by the proponent of the evidence.
See TEX .LAB.CODE ANN . § 410.161 (Vernon 2006). Section 410.161 required TMI to
demonstrate: (1) the documents were not in the carrier’s possession custody or control at the
time they were required to be disclosed; (2) that the documents were timely and properly
4
The exhibit stickers marking TMI’s summary judgment exhibits are not legible as they
appear in the appellate record. Because the parties have not clarified the proper identification for
the exhibits, and for ease of reference, we will refer to the exhibits in numerical order as they
appear in the record.
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disclosed; or (3) that there was good cause to admit the documents despite the fact that they had
not been disclosed in the administrative proceedings. See State Office of Risk Management v.
Trujillo, 267 S.W.3d 349, 352-53 (Tex.App.--Corpus Christi 2008, no pet.).
It is not disputed that the documents at issue here were within the carrier’s possession,
custody, or control at the time they were required to be disclosed. However, TMI argues the trial
court abused its discretion by sustaining Sara Care’s objections because there is evidence that the
documents had been disclosed in the commission proceedings, or because TMI was not given an
opportunity to demonstrate “good cause” existed to make the documents admissible.
With regard to TMI’s first argument, the carrier relies heavily on an exchange between
the trial court and its attorney during a hearing on its own motion to compel evidence held on
April 20, 2006. According to the transcript, during the hearing, TMI offered documentation to
the trial court indicating the summary judgment evidence was produced prior to the
administrative proceedings. It is not clear what those documents were, or whether they are
included in the record before us. At the close of the hearing, the trial court did not rule on the
objections, but asked the parties to continue with discovery, and instructed the parties to
supplement their motions on the evidentiary issues before the court would rule on the summary
judgment. Neither party filed any further documents on this issue prior to the court’s judgment
on June 13, 2006.
To the extent, this exchange can be considered as evidence related to the trial court’s
ruling on TMI’s summary judgment evidence, it is evidence of a request for more information
from the parties. Neither party filed any documentation related to the preliminary summary
judgment until after the court issued its order sustaining Sara Care’s objections and granting Sara
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Care’s motion on June 13, 2006. Approximately one month later, TMI filed a motion to
reconsider, urging the same admissibility arguments it has included in its brief to this Court.
While the motion to reconsider did contain a new exhibit, an affidavit by TMI employee
Ms. Susan Perkins, the carrier failed to explain how this new affidavit either demonstrated its
compliance with Section 410.161, or established good cause.
We are also unpersuaded by TMI’s argument that it was not given an opportunity to cure
the alleged deficiencies. Based on the same conversation between TMI’s counsel and the trial
court, it seems TMI was invited to supplement the summary judgment record with evidence
demonstrating the admissibility of its evidence. In its brief to this Court, TMI asserts that it did
not file any supplemental summary judgment documents because the trial court had instructed
the parties to take several depositions before the court made its decision, and that those
depositions were never scheduled, or were not scheduled prior to the court entering its summary
judgment order. TMI fails to explain, however, how these depositions would have changed its
response or provided a basis for the admissibility of the evidence. Therefore, based on the record
before us, the trial court did not abuse its discretion by sustaining Sara Care’s objections. Issue
Six is overruled.
Issues One, Two, and Three challenge the trial court’s two summary judgments in favor
of Sara Care. These issues address Sara Care’s preliminary and liability-only motions, and
TMI’s cross-motion for liability-only summary judgment. All three motions were hybrid
motions, presenting both traditional and no-evidence grounds for summary judgment.
A no-evidence motion for summary judgment is essentially a pretrial motion for directed
verdict, and we apply the same legal sufficiency standard of review. Gray v. Woodville Health
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Care Center, 225 S.W.3d 613, 616 (Tex.App.--El Paso 2006, pet. denied). A no-evidence
summary judgment movant must specify which essential elements are devoid of evidentiary
support. Aguilar v. Morales, 162 S.W.3d 825, 834 (Tex.App.--El Paso 2005, pet. denied). The
burden then shifts to the non-movant to produce summary judgment evidence raising a genuine
issue of material fact regarding each challenged element. Aguilar, 162 S.W.3d at 834. The non-
movant meets this burden, by producing more than a mere scintilla of evidence in support of each
challenged element. See Gray, 225 S.W.3d at 616. When, as here, the trial court fails to specify
which no-evidence ground served as the basis for its ruling, we must review each ground raised
in the motion, and the judgment will be affirmed if any of the theories prove meritorious. Id. at
616-17.
As with any summary judgment ruling, a traditional summary judgment is subject to de
novo review. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). To
succeed on a traditional motion for summary judgment, the movant must establish that there is no
genuine issue of material fact so that judgment should be granted as a matter of law. Diversicare
Gen. Partner., Inc. v. Rubio, 185 S.W.3d 842, 846 (Tex. 2005). Summary judgment is therefore
properly granted if the defendant disproves at least one essential element of the plaintiff’s cause
of action, or establishes all essential elements of an affirmative defense. See D. Houston, Inc. v.
Love, 92 S.W.3d 450, 454 (Tex. 2002); Shah v. Moss, 67 S.W.3d 836, 842 (Tex. 2001). If the
movant is successful in establishing its right to judgment as a matter of law, the burden then
shifts to the non-movant to produce evidence raising a genuine issue of material fact. City of
Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678-79 (Tex. 1979). Similar to review
under the no-evidence standard, in a traditional summary judgment, the reviewing court will take
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as true all competent evidence favorable to the non-movant, indulge every reasonable inference,
and resolve any doubts in the non-movant’s favor. See Southwestern Elec. Power Co. v. Grant,
73 S.W.3d 211, 215 (Tex. 2002). Unlike a no-evidence motion however, a traditional motion for
summary judgment must stand or fall on its own merit, there is no right to a traditional summary
judgment by default. See City of Houston, 589 S.W.2d at 678. When there are multiple grounds
for summary judgment, and the trial court’s order does not specify on which ground the judgment
was rendered, the appealing party must negate all grounds on appeal. Ellis v. Precision Engine
Rebuilders, Inc., 68 S.W.3d 894, 898 (Tex.App.--Houston [1st Dist.] 2002, no pet.), citing State
Farm Fire & Cas. Co. v. S.S., 858 S.W.2d 374, 381 (Tex. 1993). If summary judgment may have
been granted on a ground not challenged, regardless of the propriety if such a ruling, the
judgment must be affirmed. Ellis, 68 S.W.3d at 898.
In Issue One, TMI challenged the trial court’s summary judgment on its petition for
judicial review. TMI’s petition requested reversal of the Appeals Panel decision on both
coverage and compensability. On the issue of coverage, TMI challenged the panel’s decision that
its failure to comply with Section 406.008 of the Texas Labor Code resulted in an extension of
coverage for Sara Care. On the issue of carrier waiver, TMI sought review of the panel’s
decision that the carrier waived its right to dispute compensability by failing to contest the case
within the statutory seven-day limitations period.
Sara Care’s motion for summary judgment on TMI’s petition included two grounds.
First, it argued there was no-evidence that TMI provided proper notice of its intent to cancel the
policy in accordance with Texas Labor Code Section 406.008. Under the traditional summary
judgment standard, Sara Care argued that the record demonstrated as a matter of law that TMI
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failed to give proper cancellation notice, thereby extending the term of the policy.
An appeals panel’s decision on issues of compensability are reviewed under a modified
de novo standard. Fireman’s Fund Ins. Co. v. Weeks, 259 S.W.3d 335, 339 (Tex.App.--El Paso
2008, pet. denied). The party who appeals the administrative decision bears the burden of proof
by a preponderance of the evidence. TEX .LAB.CODE ANN . § 410.303 (Vernon 2006). In the case
of a bench trial, the court “shall consider” the Appeals Panel decision. TEX .LAB.CODE ANN .
§ 410.304(b). However, the court is not required to accord the administrative decision any
particular weight. Weeks, 259 S.W.3d at 339.
TMI argues the trial court erred by granting the preliminary summary judgment because:
(1) the policy expired prior to the date of Ms. Martinez’s injury due to Sara Care’s failure to
timely renew the policy; and (2) Texas Labor Code Section 406.008, does not apply to extend
Sara Care’s coverage in this instance because this is not a nonrenewal, or a cancellation case.
TMI continues by arguing that if Section 406.008 is applicable, there is an issue of material fact
as to its compliance with the notice requirements. In response, Sara Care contends that TMI
waived judicial review of the applicability of Section 406.008 by failing to raise the issue during
the administrative proceedings, as required by Section 410.302. See TEX .LAB.CODE ANN .
§ 410.302(b).
The relationship between Sections 406.008 and 410.302(b) of the Labor Code is a legal
issue requiring an analysis under the cannons of statutory construction. See City of Rockwall v.
Hughes, 246 S.W.3d 621, 625 (Tex. 2008)(noting that statutory construction is a legal question
subject to de novo review). Because the preliminary summary judgment turns on a purely legal
issue, and Sara Care’s motion does not challenged an essential element of a cause of action or
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affirmative defense raised by TMI, we will conduct our review under the traditional summary
judgment standard only. See Amouri v. Southwest Toyota, Inc., 20 S.W.3d 165, 168 (Tex.App.--
Texarkana 2000, pet. denied); see also TEX .R.CIV .P. 166a(i)(providing that a party may move for
no-evidence summary judgment, “on the ground that there is no evidence of one or more
essential elements of a claim or defense . . .” on which the opposing party would bear the burden
of proof at trial).
When addressing an issue of statutory construction, our primary objective is to determine
the Legislature’s intent in enacting a particular provision, and to give that provision its intended
effect. McIntyre v. Ramirez, 109 S.W.3d 741, 745 (Tex. 2003). We must interpret the statute
according to the plain meaning of the language used, and must read the statute as a whole
without giving effect to certain provisions at the expense of others. See City of San Antonio v.
City of Boerne, 111 S.W.3d 22, 25 (Tex. 2003); In the Interest of J.I.M., 281 S.W.3d 504, 507
(Tex.App.--El Paso 2008, pet. denied). Each word, phrase, or expression must be read as if it
were deliberately chosen, and we will presume that words excluded from a provision were
excluded purposefully. Gables Realty Ltd. P’ship v. Travis Cent. Appraisal Dist., 81 S.W.3d
869, 873 (Tex.App.--Austin 2002, pet. denied). “Construction of a statute by the administrative
agency charged with its enforcement is entitled to serious consideration, so long as the
construction is reasonable and does not contradict the plain language of the statute.” Tarrant
Appraisal Dist. v. Moore, 845 S.W.2d 820, 823 (Tex. 1993).
The TWCC Appeals Panel determined Sara Care was covered by the policy at the time of
Ms. Martinez’s injury based on the policy extension provision of Section 406.008. This
provision, titled “Cancellation or Nonrenewal of Coverage Insurance Company; Notice,”
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provides in relevant part:
(a) An insurance company that cancels a policy of workers’ compensation
insurance or that does not renew the policy by the anniversary date of the
policy shall deliver notice of the cancellation or nonrenewal by certified
mail or in person to the employer and the division no later than:
(1) the 30th day before the date on which the cancellation or
nonrenewal takes effect; or
(2) the 10th day before the date on which the cancellation or
nonrenewal takes effect if the insurance company cancels or does
not renew because of :
. . .
(C) failure to pay a premium when due;
. . .
(b) The notice required under this section shall be filed with the division.
(c) Failure of the insurance company to give notice as required by this section
extends the policy until the date on which the required notice is provided
to the employer and the division.
TEX .LAB.CODE ANN . § 406.008.
In its decision, the appeals panel determined that TMI failed to carry its burden to
establish compliance with paragraphs (a) and (b). According to the panel’s decision there was
neither evidence of TMI’s timely notice to the Commission; nor was there evidence that Sara
Care received timely or properly delivered, notice of nonrenewal/cancellation under either the
thirty, or ten-day notice provisions. Therefore, based on paragraph (c), and the Commission’s
prior decisions regarding carriers’ failure to comply with Section 406.008(a), the panel held, “the
policy was extended pursuant to Section 406.008(c) and the employer did have workers’
compensation coverage with the carrier on August 20, 2002.” By simply applying Section
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406.008 without discussing whether or not the provision was applicable, the appeals panel’s
decision indicates the issue was not raised in the administrative proceedings.5 We are left to
determine, as Sara Care argues, whether TMI was prohibited from raising the applicability issue
in the trial court by Section 410.302(b) of the Labor Code.
Labor Code Section 410.302(b) limits judicial review of an appeals panel decision, “to
issues decided by the appeals panel and on which judicial review is sought.” TEX .LAB.CODE
ANN . § 410.302(b). According to the statute’s plain language, the scope of judicial review is
limited to the issues decided by the appeals panel. See Alexander v. Lockheed Martin Corp., 188
S.W.3d 348, 353 (Tex.App.--Fort Worth 2006, pet. denied). Issues not raised before the appeals
panel and identified in the petition for judicial review are waived. See id. Because there is no
indication from the record that TMI questioned the applicability of Section 406.008 to the
appeals panel, we agree that Section 410.302(b) barred TMI from raising this argument on
judicial review.
However, TMI continues to urge the consideration of its Section 406.008 applicability
argument on the basis that the modified de novo standard of review permits judicial consideration
of the issue based on its request for review of the appeals panel’s coverage decision.6 We are not
persuaded by this argument. TMI fails to cite any authority for the proposition that the plain
5
The only other issue addressed in the panel’s decision was TMI’s alleged Downs waiver
due to the carrier’s failure to begin payment of benefits, or notify the Commission and the
employee in writing of its refusal to pay no later than seven days after receipt of notice of the
injury. See Continental Cas. Co. v. Downs, 81 S.W.3d 803, 805 (Tex. 2002), citing former
TEX .LAB.CODE ANN . § 409.021(a)(current version at TEX .LAB.CODE ANN . § 409.021 (Vernon
2006)).
6
TMI does not dispute Sara Care’s assertion that the question of Section 406.008’s
applicability was not an issue raised or addressed in the administrative proceedings.
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language of Section 410.302(b) can be overridden by the standard of review. In addition, if we
were to accept TMI’s argument, we would be violating the cannon of statutory construction that
demands we give effect to the legislature’s enactments. See City of Boerne, 111 S.W.3d at 25.7
Furthermore, while a modified de novo review permits the admission of evidence in the
trial court which was not presented in the administrative proceeding, see State Office of Risk
Mgmt. v. Escalante, 162 S.W.3d 619, 626 (Tex.App.--El Paso 2005, pet. dism’d), TMI’s
argument is not for the admission of new evidence. Instead the insurer contends the
administrative decision can be reversed based on an argument that was never presented to that
body. Based on our analysis of the plan language of the provision, we conclude Section
410.302(b) prohibits TMI from raising this argument at this stage in the proceedings. See
TEX .LAB.CODE ANN . § 410.302(b).
We now turn to whether there is a genuine issue of material fact regarding TMI’s
compliance with Section 406.008(a) and (b). To support its argument that a fact issue remains as
to its compliance. TMI relies on “Exhibit D-1(B)” as evidence that it complied with Section
406.008(a)(1)(requiring a notice of nonrenewal or cancellation be provided to the insured by
7
While we agree that the modified de novo standard does not bind the judicial review to
the result rendered administrative decision, it also does not permit the parties to a new trial,
independent of the case presented to the Commission. See Escalante, 162 S.W.3d at 626. By its
terms, to conduct a “modified de novo review” contemplates a review, “from the beginning,” that
which has been previously considered. Which in this instance are the issues and arguments
presented to the appeals panel. See TEX .R.APP .P. 33.1(a)(providing that a complaint is not
preserved for appeal absent a demonstration that the complaint was made to the trial court);
TEX .R.CIV .P. 166a(c)(generally limiting review of a summary judgment to those issues presented
to the trial court); Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 626 (Tex. 1996)(noting that
a de novo review in the summary judgment context is limited to the grounds presented to the trial
court); Kurtner v. Russell, 658 S.W.2d 585, 590 (Tex.Crim.App. 1983)(en banc)(noting several
translations of the Latin phrase “de novo”).
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certified mail, or in person, no later that thirty days before the nonrenewal or cancellation takes
effect). TMI does not reference a page in the summary judgment record where this document
appears, but states that the document “was delivered to Sara Care by certified mail more than 30
days before expiration of the policy and that it informed Sara Care that its policy would expire on
August 4, 2002.”
Assuming for argument’s sake that a reference to a trial exhibit is sufficient to
demonstrate that a genuine issue of material fact exists for summary judgment purposes, we
disagree that the document referenced raises such a fact issue. Based on the description of the
document as provided in TMI’s brief, the description seems to refer to the insurer’s June 6, 2002,
letter to Sara Care which was included in TMI’s summary judgment response as Exhibit 3. The
letter was sent via certified mail, and stated:
Dear Policyholder:
It has been our privilege to serve as your workers’ compensation carrier. Our
records indicate your policy will expire on 8/04/2002. Please note: this is only a
notice of your upcoming expiration, not a cancellation.
Texas Mutual Insurance Company greatly values your business and looks forward
to continuing to serve as your workers’ compensation carrier. As Texas’ model
provider of workers’ compensation insurance in the state, we strive to set the
benchmark for service, communication, and ease of doing business.
We have notified your agent of the upcoming expiration date and will be working
with him/her to obtain the necessary information to provide you with your renewal
quotation. In the meantime, if you have any questions, please contact your agent,
or call us at . . . .
Thank you again for allowing us to be your workers’ compensation carrier. We
look forward to continuing this relationship with you and your agent during the
next policy term. [Emphasis in original].
TMI contends this letter, in the least, raises a genuine issue of material fact that it
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satisfied the statutory notice requirements because the letter was: (1) sent by certified mail to the
insured; and (2) notified the policyholder of the upcoming expiration, giving the insured “ample
time to secure replacement coverage.” See TEX .LAB.CODE ANN . § 406.008(a)(1). TMI also
notes that the summary judgment record demonstrates its compliance with the Commission’s
notice receipt requirement, as the appeals panel decision notes that the Commission received a
“Notice of Nonrenewal or Cancellation” on June 6, 2002. See TEX .LAB.CODE ANN .
§ 406.008(b).
We express no opinion on whether this letter constituted sufficient notice of nonrenewal
or cancellation to the policyholder under Section 406.008(a)(1). Instead, we turn to the issue of
TMI’s compliance with Section 406.008(a)(2)(C). Subparagraph (a)(2)(C), which was also
addressed as a basis for its coverage decision by the appeals panel, requires an insurer to provide
notice, in the same form and to the same recipients as required under (a)(1), no later than “the
10th day before the date on which the cancellation or nonrenewal takes effect if the insurance
company cancels or does not renew . . .” due to a policyholder’s failure to pay a premium when
due. See TEX .LAB.CODE ANN . § 406.008(a). Whatever the due date for Sara Care’s 2002-2003
policy payment, there is no evidence in the record before us of any notice to either Sara Care, or
the Commission of TMI’s intent not to renew Sara Care’s policy for non-payment as required by
the statute. TMI does not point to any other evidence in support of its contention that a fact issue
remains regarding its compliance with Section 406.008. Therefore, having previously concluded
that TMI did not preserve its argument that Section 406.008 was not applicable to extend Sara
Care’s coverage, we overrule Issue One, and affirm the trial court’s summary judgment on TMI’s
petition for judicial review.
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Issues Two and Three address the trial court’s denial of TMI’s motion for summary
judgment, and simultaneous grant of Sara Care’s motion as to liability on its breach of contract,
Insurance Code, DTPA, and promissory estoppel claims. In the face of cross-motions for
summary judgment, we apply the same standards of de novo review as when reviewing a trial
court’s ruling on a singular motion. See Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661
(Tex. 2005). When the trial court grants one motion and denied the other, we must consider all
the grounds presented by both sides, and in the case of an improper judgment, render the
judgment the trial court should have rendered. Id.
In Issue Three, TMI’s argument that the trial court erred by not granting its motion for
summary judgment is based entirely on its argument that Sara Care was not covered by the policy
at the time of Ms. Martinez’s injury. Given our conclusion affirming the trial court’s summary
judgment on TMI’s petition for judicial review, TMI’s argument that it was entitled to summary
judgment due to lack of coverage must also fail. As the insurer has not presented any additional
or alternative grounds for summary judgment in its favor, Issue Three is overruled. See Ellis, 68
S.W.3d at 898. The trial court’s ruling denying TMI’s motion for summary judgment will be
affirmed.
In Issue Two, TMI argues the trial court erred by granting Sara Care’s motion for partial
summary judgment as to liability on the affirmative claims contained in Sara Care’s Original
Petition because there was no coverage, and therefore no basis for liability; or because the issue
of coverage was not sufficiently clear to serve as a basis for summary judgment. TMI’s first
argument fails, again, based on our decision affirming the appeals panel decision regarding its
coverage liability. TMI’s remaining arguments in Issue Two, are limited to Sara Care’s statutory
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causes of action. TMI does not present any alternative arguments to demonstrate the partial
summary judgment on these claims was entered in error. Accordingly, the trial court’s liability
summary judgment on Sara Care’s common law causes of action (breach of contract, breach of
the duty of good faith and fair dealing, and the relief granted under the doctrine of promissory
estoppel) will be affirmed. See Ellis, 68 S.W.3d at 898.
The only point remaining in Issue Two, is TMI’s challenge to the trial court’s summary
judgment on Sara Care’s statutory claims under the Texas Insurance Code, and the Texas
Deceptive Trade Practices Act. TMI argues its liability for these claims could not be determined
as a matter of law because Sara Care cannot establish the insurer’s coverage liability was
“reasonably clear” as a matter of law.
An insurer’s liability under former Article 21.21 of the Texas Insurance Code, and the
Texas Deceptive Trade Practices Act, incorporate the common-law bad faith standard developed
as part of the elements of a claim for breach of the duty of good faith and fair dealing.8 See
Progressive County Mut. Ins. Co. v. Boyd, 177 S.W.3d 919, 922-23 (Tex. 2005)(per curium).
Unless the facts of a case are such that there is no conflict in the evidence on the issue, whether
coverage of a claim is “reasonably clear” is a question of fact. See Universe Life Ins. Co. v.
Giles, 950 S.W.2d 48, 56 (Tex. 1997). It was Sara Care’s burden to establish coverage was
reasonably clear as part of its case for liability under the Insurance Code and the DTPA. See
Boyd, 177 S.W.3d at 922-23.
Sara Care argues that the appeals panel decision determining coverage negates the any
8
Article 21.21 is now codified as Chapter 541 of the Texas Insurance Code titled “Unfair
Methods Of Competition And Unfair Or Deceptive Acts Or Practices.” See TEX .INS.CODE ANN .
§§ 541.001, 541.003 (Vernon 2009).
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fact issue on this element. However, Sara Care has failed to cite, and we have been unable to
locate legal authority establishing an exception to the Texas Supreme Court’s statement in Giles.
Sara Care relies on the appeals panel decision as conclusive proof of coverage. We are
unpersuaded by this argument. Although the appeals panel decision could be introduced as
evidence to demonstrate TMI’s coverage liability was reasonably clear for the purposes of the
Insurance Code and DTPA claims, it is merely persuasive evidence, not binding on the fact
finder. See Weeks, 259 S.W.3d at 339. As such, the administrative decision alone cannot serve
as a basis for summary judgment on the issue of liability.
In its alternative, no-evidence, ground for summary judgment, Sara Care argues that TMI
presented “no evidence” that the appeals panel erroneously determined the coverage issue in its
favor. The burden of proof on Sara Care’s claims for affirmative relief under the Insurance Code
and DTPA fell on Sara Care. See TEX .INS.CODE ANN . § 541.003 (Vernon 2009); TEX .BUS.&
COM .CODE ANN . §§ 17.43, 17.50 (Vernon 2002 and Vernon Supp. 2009). A no-evidence
summary judgment motion can only be addressed to a claim or defense for which the non-
movant would have the burden of proof at trial. See TEX .R.CIV .P. 166a(i). Because Sara Care
moved for no-evidence summary judgment on a claim for which it would have the burden of
proof, the no-evidence ground was not a proper basis for summary judgment.
In summary, the trial court’s partial summary judgment on Sara Care’s common-law
claims will be affirmed, and Issue Two is overruled as to those claims. However, because a fact
issue remains regarding whether TMI’s coverage liability was reasonably clear for purposes of
Sara Care’s Insurance Code and DTPA claims, Issue Two is sustained as to the statutory claims.
Our dispositions of Issue Two also impacts TMI’s contention, in Issue Four that the
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evidence was legally and factually insufficient to support the trial court’s fact finding that TMI
acted “knowingly” in its alleged deceptive practices. A claimant who successfully establishes
liability under Chapter 541 of the Insurance Code, and simultaneously the DTPA, may be entitled
to “additional damages” if the claimant can also establish the insurer committed the statutory
violations “knowingly.” See TEX .INS.CODE ANN . § 541.152(b)(Vernon 2009);
TEX .BUS.&COM .CODE ANN . § 17.50 (Vernon Supp. 2009); see also Texas Mut. Ins. Co. v.
Morris, 287 S.W.3d 401, 433-34 (Tex.App.--Houston [14th Dist.] 2009, pet. filed)(comparing
the provisions for “additional damages” in light of a finding that an insurer acted knowingly
under the Insurance Code and the DTPA).
In this case, the “knowingly” question was tried to the bench. The court ultimately
determined the insurer did act “knowingly,” entitling Sara Care to treble damages in accordance
with the Insurance Code and the DTPA. This finding was expressly predicated, however, on the
court’s summary judgment decision holding TMI liable for violations of the Insurance Code and
the DTPA as a matter of law. Given our conclusion that the court’s decision to grant Sara Care’s
liability-only summary judgment on its statutory claims was in error, there is no longer a legal
basis for the court’s determination that the insurer acted “knowingly” in its alleged statutory
violations. See TEX .INS.CODE ANN . § 541.152(b); TEX .BUS.&COM .CODE ANN . § 17.50.
Accordingly, further discussion of TMI’s legal and factual sufficiency challenges is not
necessary, and Issue Four is sustained.
In Issue Five, TMI challenges the trial court’s attorneys’ fees award. In the final
judgment, the trial court awarded Sara Care $26,711.51, plus post judgment interest; and
awarded Ms. Martinez $22,400, plus post judgment interest. The court also made contingent
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awards in the case of appeals to this Court, and the Texas Supreme Court.
An attorney’s fees award will not be disturbed absent an abuse of discretion. Ragsdale v.
Progressive Voters League, 801 S.W.2d 880, 881 (Tex. 1990). In the attorney’s fees context,
whether a particular award constitutes an abuse of discretion is determined by a two-step
analysis: (1) did the trial court have sufficient information upon which to exercise its discretion;
and, if so (2) did the court err in the exercise of its discretion? Alford v. Johnston, 224 S.W.3d
291, 298 (Tex.App.--El Paso 2005, pet. denied). A court exercises its discretion erroneously
when it acts without reference to guiding rules and principles. See F-Star Socorro, L.P. v. City of
El Paso, 281 S.W.3d 103, 106 (Tex.App.--El Paso 2008, no pet.).
In its Original Petition, Sara Care requested attorney’s fees pursuant to the Texas
Insurance Code and the DTPA. In the preliminary motion for summary judgment, Sara Care
petitioned for attorney’s fees under Section 408.221(c) of the Texas Labor Code, and 38.001 of
the Civil Practice and Remedies Code. In its liability-only motion for summary judgment, Sara
Care requested attorney’s fees, again, under Section 408.221(c), and 38.001. Ms. Martinez relied
on Section 408.221(c) for her attorney’s fee request in her Original Answer to TMI’s Petition for
Judicial Review.
TMI argues that neither Sara Care nor Ms. Martinez are entitled to recovery attorney’s
fees under any of the asserted bases, rendering the trial court’s award an abuse of discretion.
Primarily, TMI contends the cited Labor Code provision cannot support the awards because
Section 408.221(c), limits recovery of attorney’s fees to the “prevailing party” in Insurance Code
and DTPA violations cases.
Labor Code Section 408.221(c) provides in relevant part, that an insurer who seeks
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judicial review of a final decision of the appeals panel is liable for the reasonable and necessary
attorney’s fees the claimant incurs defending the appeal, “[i]f the claimant prevails on an issue on
which judicial review is sought by the insurance carrier . . . .” TEX .LAB.CODE ANN .
§ 408.221(c). Sara Care has successfully defended the appeals panel decision through the
judicial review process and therefore meets the “prevailing party” requirement of Section
408.221. TMI’s argument that the claimants’ status as a “prevailing party” is dependant on Sara
Care’s success on its statutory claims is not supported by the plain language of the statute, and
fails to demonstrate the trial court abused its discretion by awarding attorneys’ fees based on this
statute.
TMI’s alternative arguments: (1) that Section 408.221 cannot support Sara Care’s award
because the employer is a “subclaimant,” not a “claimant;” and (2) that the trial court’s findings
of fact regarding Sara Care and Ms. Martinez’s right to recover attorney’s fees are nothing more
than conclusory statements, unsupported by citation to proper authority. Because TMI has failed
to provide this Court with adequate briefing in support of these arguments they are waived. See
TEX .R.APP .P. 38.1(i). Therefore, TMI has failed to demonstrate the trial court abused its
discretion in its attorney’s fee award, and we overrule Issue Five.
In conclusion, we affirm the trial court’s judgment as to Appellant’s petition for judicial
review, Appellant’s liability for Appellees’ common law causes of action, and the court’s
attorney’s fee award. The trial court’s judgment in Appellees’ favor on Appellees’ statutory
claims is reversed and the case is remanded for proceedings consistent with this opinion.
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September 15, 2010
DAVID WELLINGTON CHEW, Chief Justice
Before Chew, C.J., Rivera, J., and Larsen, J.
Larsen, J. (Sitting by Assignment)
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