Mark Pickett and Barbara Pickett v. Texas Mutual Insurance Co., F/K/A Texas Workers' Compensation Insurance Fund

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-04-00374-CV
Mark Pickett and Barbara Pickett,
Appellants
v.
Texas Mutual Insurance Co., f/k/a Texas Workers’ Compensation Insurance Fund,
Appellee
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 345TH JUDICIAL DISTRICT
NO. 99-15029, HONORABLE PATRICK O. KEEL, JUDGE PRESIDING
OPINION
This appeal concerns the requirement that a party seeking damages for a workers’
compensation insurance carrier’s alleged delay or denial of medical benefits in bad faith must
exhaust administrative remedies at the Texas Workers’ Compensation Commission before filing suit.
See American Motorists Ins. Co. v. Fodge, 63 S.W.3d 801, 804-05 (Tex. 2001). Appellants Mark
Pickett and Barbara Pickett sued Texas Mutual Insurance Company for allegedly delaying or denying
medical benefits to Barbara Pickett in bad faith. The trial court dismissed most of the Picketts’
claims for want of jurisdiction for failure to exhaust their administrative remedies at the Commission
and granted a take-nothing summary judgment against the Picketts on their claims arising from three
medical disputes for which the administrative remedies had been exhausted. We affirm.
In December 1995, Barbara Pickett suffered a back injury while performing her job
duties for Molly Maid, a home cleaning service. She claims that her back injury resulted in
depression and chronic pain in her neck, arms, lower back, and legs. Since 1995, Ms. Pickett has
been repeatedly hospitalized for attempted suicide and self-mutilation. She contends that her work-
related injury aggravated preexisting psychological conditions.
Texas Mutual is the workers’ compensation insurance carrier for Molly Maid. It has
paid income and disability benefits to Ms. Pickett for her work-related injury as well as hundreds of
thousands of dollars for her healthcare. Beginning in 1997, Texas Mutual denied preauthorization
for certain chronic pain management services related to Ms. Pickett’s psychological disorders on the
basis that those medical services were not related to her compensable injuries or were not reasonable
and medically necessary. Under the Texas Workers’ Compensation Act, Ms. Pickett was entitled
to contest those denied preauthorization requests through an administrative dispute resolution
procedure conducted by the Commission’s Medical Review Division. See Tex. Lab. Code Ann.
§ 413.031 (West 2006). Ms. Pickett did not, however, submit any disputes concerning the denied
preauthorization requests for administrative review at the Commission.
Beginning in 1999, Dr. Sanford Kiser, one of Ms. Pickett’s healthcare providers,
submitted several billing disputes to the Commission for administrative review. These disputes
concerned medical services that Ms. Pickett had already received and for which Texas Mutual had
denied reimbursement to Dr. Kiser. The Picketts were not involved in or parties to the billing
disputes between Dr. Kiser and Texas Mutual. As a result of the billing disputes, Dr. Kiser obtained
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three final orders—two from the Commission and one from the State Office of Administrative
Hearings—directing Texas Mutual to reimburse him.1
In October 1999, Texas Mutual and Ms. Pickett entered into a Benefit Dispute
Agreement. The purpose of the Agreement was to determine which of Ms. Pickett’s psychological
disorders were causally related to her compensable back injury. Texas Mutual and Ms. Pickett
agreed that her diagnosis of major depressive disorder and pain disorder were causally related to the
compensable back injury, but that her diagnosis of post-traumatic stress disorder, mixed personality
disorder, and dissociative disorder were not related to the compensable back injury. The Agreement
did not address or determine what medical treatments were related to Ms. Pickett’s compensable
psychological conditions, what treatments would be medically necessary and reasonable for those
conditions, or what fees should be paid under the Commission’s rules for treating those conditions.
1
The trial court’s findings of fact provide the following information about the final
administrative orders obtained by Dr. Kiser:
a. In MDR Tracking No. M5-00-0165-01, decided March 5, 2001, MRD
determined that Texas Mutual incorrectly denied Dr. R. Sanford Kiser’s
$48.00 bill for preparation of Barbara Pickett’s hospital discharge report on
October 26, 1998.
b. In SOAH Docket No. XXX-XX-XXXX.M4, an administrative law judge found
Texas Mutual responsible for paying Dr. Kiser’s inpatient encounters with
Barbara Pickett during three periods of her hospitalization (July 29, 1997 to
August 15, 1997; September 15, 1997 to September 22, 1997, and from
January 1, 1998 to February 6, 1998); and
c. In MDR Tracking No. M4-99-5645-01, decided April 11, 2000, MRD found
that Texas Mutual owed Dr. Kiser $700.00 for Barbara Pickett’s seven
psychotherapy sessions during her hospitalization from January 5, 1998 to
February 6, 1998.
3
Therefore, Texas Mutual remained responsible for reviewing all of Ms. Pickett’s submitted medical
bills and preauthorization requests to determine whether a medical treatment related to her
compensable injuries or her non-compensable injuries. The Agreement did not relieve Ms. Pickett
or her healthcare providers of their obligations to exhaust administrative remedies regarding any
disputes over specific medical benefits.
Two months after entering into the Agreement, the Picketts sued Texas Mutual
asserting violations of the Texas Insurance Code and the Deceptive Trade Practices Act, breach of
fiduciary duty and duty of good faith and fair dealing, intentional infliction of emotional distress,
negligence, and negligent misrepresentation. They alleged that Texas Mutual wrongfully delayed
or denied preauthorization for certain medical services and prescriptions related to Ms. Pickett’s
chronic pain condition, causing physical and psychological injury to Ms. Pickett beyond the extent
of her work-related injury.2
In 2001, the Texas Supreme Court decided American Motorists Insurance Co.
v. Fodge, which held that a trial court does not have subject matter jurisdiction over bad faith claims
arising from allegedly delayed or denied workers’ compensation benefits unless and until the worker
obtains a timely, final administrative decision from the Texas Workers’ Compensation Commission
that the worker is entitled to the medical benefits in dispute. 63 S.W.3d at 804-05. Although Texas
Mutual filed a motion to dismiss before Fodge was decided, the suit was abated by agreement of the
parties until the issuance of that opinion. After Fodge was decided, the trial court held a hearing and
2
The trial court entered a finding of fact that “Texas Mutual did not prospectively deny
responsibility for any medication prescribed to Ms. Pickett.” The Picketts do not dispute this finding
of fact on appeal.
4
initially denied the motion. Texas Mutual then filed a motion for reconsideration, a motion for
partial summary judgment, a no evidence motion for summary judgment, and a traditional motion
for summary judgment. The trial court granted the motion to reconsider, the motion to dismiss, and
the motion for summary judgment. Because the Picketts did not obtain administrative orders from
the Commission that Ms. Pickett was entitled to any of the medical benefits they claim were
improperly delayed or denied, the trial court dismissed most of the Picketts’ claims for want of
jurisdiction. The trial court also granted a take-nothing summary judgment against the Picketts on
their claims arising from the only final administrative orders in the record—the three orders directing
Texas Mutual to reimburse Dr. Kiser for medical services that Ms. Pickett had already received. The
court entered findings of fact and conclusions of law in support of the order of dismissal.
On appeal, the Picketts assert that (1) the application of the Fodge opinion to their
case is unconstitutional; (2) their tort and statutory claims seeking damages other than the payment
of workers’ compensation benefits do not require administrative exhaustion; (3) claims subject to
the Benefit Dispute Agreement do not require administrative exhaustion; (4) Texas Mutual waived
the requirement that the Picketts exhaust their administrative remedies or, alternatively, that they
exhausted their administrative remedies; (5) the futility exception to the exhaustion requirement
applies; (6) the trial court erred in admitting certain evidence; (7) summary judgment is improper
on claims over which the trial court had jurisdiction; and (8) the trial court’s summary judgment is
not a final judgment.
5
The Constitutional Application of Fodge
The Picketts assert numerous violations of their constitutional rights from the trial
court’s application of the Fodge opinion to their claims. First, they contend that the Fodge opinion
established a new rule of law and, as such, cannot be applied retroactively to their claims arising
before the issuance of that opinion.
Prior to the issuance of Fodge, it was well established that the Texas Workers’
Compensation Act vested the power to award compensation benefits solely in the Commission,
subject to judicial review. Saenz v. Fidelity & Guar. Ins. Underwriters, 925 S.W.2d 607, 612
(Tex. 1996) (citing Brannon v. Pacific Employers Ins. Co., 224 S.W.2d 466, 468 (Tex. 1949);
Traders & Gen. Ins. Co. v. Bailey, 94 S.W.2d 134, 135 (Tex. 1936); Commercial Casualty Ins. Co.
v. Hilton, 87 S.W.2d 1081, 1083 (Tex. 1935)). In Saenz, the Texas Supreme Court stated that
“[a]llowing courts to award damages for wrongful deprivation of benefits would circumvent the
Commission’s jurisdiction.” 925 S.W.2d at 612. Relying on Saenz, the Fodge court held that “just
as a court cannot award compensation benefits, except on appeal from a Commission ruling, neither
can it award damages for a denial in payment of compensation benefits without a determination by
the Commission that such benefits were due.” 63 S.W.3d at 804. Thus, the Fodge opinion
interpreted existing law concerning exhaustion of administrative remedies in the workers’
compensation context and did not, as the Picketts contend, establish a new rule of law.
Additionally, there are no constitutional prohibitions against applying the Fodge
opinion to the Picketts’ claims that arose prior to the issuance of that opinion in 2001. Instead, the
general rule is that decisions of the supreme court apply retrospectively. Bowen v. Aetna Cas. & Sur.
6
Co., 837 S.W.2d 99, 100 (Tex. 1992); Elbaor v. Smith, 845 S.W.2d 240, 250 (Tex. 1992). The
decision of whether a supreme court case applies only prospectively lies within the discretion of the
supreme court. See Lohec v. Galveston County Comm’rs Court, 841 S.W.2d 361, 366 (Tex. 1992).
In Lohec, the supreme court stated:
Our decisions operate retroactively unless this court exercises its discretion to modify
that application. When determining whether to exercise our discretion to modify
retroactive application, this court weighs, among other things, considerations of
fairness, equity and policy including whether the decision involves an issue of first
impression and whether retroactive application could produce substantial inequitable
results.
Id. (citations omitted). Because the Fodge opinion does not contain language indicating an intent
to apply only prospectively, we conclude that the supreme court intended Fodge to apply
retrospectively. See Camacho v. Samaniego, 954 S.W.2d 811, 825 (Tex. App.—El Paso 1997,
writ denied).
The Picketts also assert that the administrative exhaustion process required by Fodge
violates their constitutional rights. In particular, they challenge the trial court’s application of an
administrative rule that limits the time in which a party can seek a review of a medical dispute with
the Commission to one year from the date(s) of the medical service in dispute. See 28 Tex. Admin.
Code § 133.307(d)(1) (2004).3 The Fodge court considered the effect of such a rule:
American Motorists argues that the time for Fodge to assert claims for medical
benefits in the Commission has expired. If that be true, and she can no longer obtain
3
We cite to the version of the Texas Administrative Code that was in effect at the time of
the trial court’s final judgment in March 2004.
7
the benefits she says she should have had, then her damage claims related to
American Motorists’ refusal to provide her such benefits would no longer be viable
and should be dismissed.
63 S.W.3d at 804. Similarly, the trial court in this case issued a conclusion of law that “the time for
Barbara Pickett or her healthcare providers to pursue adjudication of the medical benefits that Pickett
identified in her discovery responses in this case has expired because more than one year has passed
from the date of service.”
The Picketts first contend that the application of the Commission’s one-year rule
violates the constitutional prohibition against retroactive laws. See Tex. Const. art. I. § 16 (“No bill
of attainder, ex post facto law, retroactive law, or any law impairing the obligation of contracts, shall
be made.”). “‘While statutory retroactivity has long been disfavored, deciding when a statute
operates ‘retroactively’ is not always a simple or mechanical task.’” Quick v. City of Austin,
7 S.W.3d 109, 132 (Tex. 1999) (quoting Landgraf v. USI Film Prods., 511 U.S. 244, 280 (1994)).
In Quick, the Texas Supreme Court took particular note of the following language from the U.S.
Supreme Court’s opinion in Landgraf :
A statute does not operate “retrospectively” merely because it is applied in a case
arising from conduct antedating the statute’s enactment, or upsets expectations based
in prior law. Rather, the court must ask whether the new provision attaches new
legal consequences to events completed before its enactment. The conclusion that
a particular rule operates “retroactively” comes at the end of a process of judgment
concerning the nature and extent of the change in the law and the degree of
connection between the operation of the new rule and a relevant past event.
8
Id. (quoting Langraf, 511 U.S. at 269-70) (citations and footnote omitted). Applying these
principles, this Court has held that a statute is not retroactive merely because it draws upon
antecedent facts for its operation. Board of Med. Examiners for Tex. v. Nzedu, No. 03-05-00032-CV,
2007 Tex. App. LEXIS 3419, at *17-18 (Tex. App.—Austin May 4, 2007, no pet.); General
Dynamics Corp. v. Sharp, 919 S.W.2d 861, 866 (Tex. App.—Austin 1996, writ denied); see
also Southwestern Bell Tel. Co. v. Public Util. Comm’n, 31 S.W.3d 631, 639 (Tex. App.—Austin
2000), aff’d, 92 S.W.3d 434 (Tex. 2002); Upjohn Co. v. Rylander, 38 S.W.3d 600, 612
(Tex. App.—Austin 2000, pet. denied); American Home Assur. v. Texas Dep’t of Ins., 907 S.W.2d
90, 94 (Tex. App.—Austin 1995, writ denied) (quoting Lewis v. Fidelity & Deposit Co., 292 U.S.
559, 571 (1933)).
The Commission’s one-year rule was adopted in 1991 and has been in effect at
all times relevant to the Picketts’ lawsuit. See 16 Tex. Reg. 2830 (1991) (originally codified at 28
Tex. Admin. Code § 133.305) (proposed May 21, 1991). The record reflects that the Picketts’ claims
began to accrue in 1997, almost six years after the rule’s effective date. Thus, the rule is only
retrospective in the sense that it looks back to the original date(s) of the medical service(s) in
question to determine whether the Picketts could timely file any of their disputes at the Commission,
which, in turn, governs the appropriate remedy for the trial court’s lack of jurisdiction—abatement
or dismissal. See Fodge, 63 S.W.3d at 805. Such a look-back feature in the application of the
Commission’s one-year rule to the Picketts’ claims does not violate the constitutional prohibition
against retroactivity. See Nzedu, No. 03-05-00032-CV, 2007 Tex. App. LEXIS 3419, at *17-18;
General Dynamics Corp., 919 S.W.2d at 866.
9
The Picketts also contend that the administrative exhaustion process required by
Fodge, including the application of the Commission’s one-year rule, violates their due process rights.
The due-course-of-law provision in article I, section 19 of the Texas Constitution, similar to the
federal Due Process Clause, contains both procedural and substantive components. Tex. Const. art.
I, § 19; see Rylander v. Palais Royal, 81 S.W.3d 909, 916 (Tex. App.—Austin 2002, pet. denied).
Due process at a minimum requires notice and an opportunity to be heard at a meaningful time and
in a meaningful manner. Texas Workers’ Comp. Comm’n v. Patient Advocates, 136 S.W.3d 643,
658 (Tex. 2004) (citing Mathews v. Eldridge, 424 U.S. 319, 333 (1976); Perry v. Del Rio, 67 S.W.3d
85, 92 (Tex. 2001)).
Pursuant to section 413.031 of the Workers’ Compensation Act, a party, including
a healthcare provider, may submit disputes regarding medical services that have been provided or
for which authorization is sought for review at the Commission. See Tex. Lab. Code Ann.
§ 413.031(a); Continental Cas. Ins. Co. v. Functional Restoration Assocs., 19 S.W.3d 393, 396
(Tex. 2000). The Commission’s one-year rule operates within this dispute resolution scheme to
prospectively limit the amount of time a party may take to file a dispute at the Commission to one
year from the date of the disputed medical service. See 28 Tex. Admin. Code § 133.307(d)(1).
Under Fodge, once a claimant receives a determination from the Commission that a claimant is
entitled to a disputed benefit, the trial court will have subject matter jurisdiction over bad-faith
claims arising from the alleged delay or denial of that benefit. See 63 S.W.3d at 804-05.
Requiring a party seeking damages for a workers’ compensation insurance carrier’s
alleged delay or denial of medical benefits in bad faith to exhaust administrative remedies at the
10
Commission before filing suit does not deprive that party an opportunity to be heard at a meaningful
time and in a meaningful manner. Rather, the exhaustion process provides automatic access to the
Commission’s dispute resolution procedures and subsequent access to the courts if the Commission
determines that a claimant is entitled to a disputed benefit. Accordingly, we hold that requiring the
Picketts to exhaust their administrative remedies at the Commission did not violate their due process
rights. Our holding also applies to the Picketts’ arguments alleging violations of the Due Process
Clause of the Fourteenth Amendment to the United States Constitution. U.S. Const. amend. XIV,
§ 1; Palais Royal, 81 S.W.3d at 916 (citing Norris v State, 788 S.W.2d 65, 72 (Tex. App.—Dallas
1990, writ ref’d.) (stating that courts have historically equated due-course-of-law provision of Texas
Constitution with Due Process Clause of United States Constitution)).
Lastly, the Picketts contend that the exhaustion process required by Fodge violates
the open courts provision of the Texas Constitution. The Texas open courts provision prohibits the
legislature from abrogating well established, common law causes of action unless the reason for
doing so outweighs a litigant’s constitutional right of redress. See Tex. Const. art 1, §13; Subaru Inc.
v. David McDavid Nissan, Inc., 84 S.W.3d 212, 227 (Tex. 2002). The Texas Supreme Court
has consistently declined to construe statutes to deprive citizens of common law rights unless
the legislature clearly expressed that intent. Cash Am. Int’l, Inc. v. Bennett, 35 S.W.3d 12, 16
(Tex. 2000). The Fodge court recognized that the legislature had not called for the complete removal
of bad faith liability in the context of workers’ compensation:
The Texas Workers’ Compensation Insurance Fund argues as amicus curiae that the
highly regulated nature of the compensation process should preclude liability for bad
faith under any circumstances. While we need not go so far here, we do conclude
11
that the process precludes bad faith liability for denying benefits to which the
claimant is not entitled.
63 S.W.3d at 804. Thus, the Fodge exhaustion requirement does not violate the open courts
provision because a workers’ compensation claimant who has received a final administrative
decision from the Commission that he is entitled to a disputed benefit is not precluded from pursuing
a bad faith claim against a workers’ compensation insurance carrier in a court of law.
The Exclusive Jurisdiction of the Commission
The Picketts contend that the trial court had jurisdiction over their tort and statutory
claims for damages other than the payment of workers’ compensation benefits. They argue
that because these claims are “not predicated on a denial of benefits,” the Commission does not have
exclusive jurisdiction over them. We disagree. The determination of whether any type of claim
is within the exclusive jurisdiction of the Commission depends on whether the claim is based on
a claimant’s entitlement to benefits. See In re Texas Mut. Ins. Co., 157 S.W.3d 75, 81
(Tex. App.—Austin 2004, no pet.) (citing Fodge, 63 S.W.3d at 805). The issue is not whether a
particular type of claim, such as a tort or statutory claim, is within the exclusive jurisdiction of the
Commission. Rather, the determination of whether any type of claim is within the exclusive
jurisdiction of the Commission depends on whether the claim is based on an alleged delay or denial
of a workers’ compensation benefit.
The Fodge court recognized that the Commission’s exclusive jurisdiction may extend
to tort claims and statutory violations: “[Fodge’s] claim for damages from denied medical treatment
is made no more viable simply by restating it under the other legal authorities she asserted—
12
negligence, fraud, and statutory violations.” 63 S.W.3d at 804. Similarly, in this case, the Picketts’
tort and statutory claims are based on alleged denials, delays, interruptions, and premature
terminations of medical treatment. The Picketts also alleged that Texas Mutual “represent[ed]
certain benefits existed when they apparently did not, and delay[ed] or refus[ed] to allow
[Ms. Pickett] to obtain her medications.” On this record, it is difficult to see how any of the Picketts’
claims are “not predicated on the denial of benefits.”
The Picketts also argue that these claims do not fall within the exclusive jurisdiction
of the Commission because they seek damages other than denied medical benefits. However, the
Fodge court explained:
[t]o award damages equal to the cost of denied medical care is tantamount to ordering
that the care be paid for and would, as we said in Saenz, circumvent the
Commission’s exclusive authority to decide that issue. The same is true for Fodge’s
other claims for damages based on a denial of benefits.
63 S.W.3d at 804. These “other claims for damages” included statutory damages, mental anguish,
past and future loss of wages, impairment of credit reputation, and attorney’s fees. Id. at 803.
Similarly, because all of the Picketts’ claimed damages concern an alleged delay or denial of
benefits, exhaustion of remedies is required.
The Picketts also assert that their claims premised on delay, as opposed to denial, in
the payment or preauthorization of medical benefits do not require exhaustion at the Commission.
However, the holding of Fodge does not except from exhaustion claims premised on an insurance
carrier’s alleged bad faith delay in paying or preauthorizing benefits. Ms. Fodge was allowed to seek
judicial review of one claim based on the carrier’s bad faith delay in handling her claim and paying
13
her compensation benefits. Id. The court distinguished this claim from other “claims for benefits
on which [Fodge] has never prevailed.” Id. at 804-05. This distinction suggests that the court
determined that Ms. Fodge had exhausted her administrative remedies on this one claim, not that
exhaustion was excused for all claims based on an alleged delay in the payment of benefits.
Furthermore, the Fort Worth Court of Appeals has held that the process described in Fodge applies
to claims based on an alleged delay in payment of benefits. See Malish v. Pacific Employers Ins.
Co., 106 S.W.3d 744, 746-47 (Tex. App.—Fort Worth 2003, no pet.). Therefore, the Picketts’
claims based on alleged delays in the payment or preauthorization of medical benefits are not exempt
from exhaustion at the Commission.
Lastly, the Picketts argue that Texas Mutual waived its right to demand exhaustion
by not filing certain required notices contesting the compensability or relatedness of Ms. Pickett’s
medical services. We disagree. The Commission’s exclusive jurisdiction affects a trial court’s
subject matter jurisdiction over the controversy. Subaru, 84 S.W.3d at 221. Subject matter
jurisdiction is an issue that may be raised for the first time on appeal, and it may not be waived by
the parties. Waco Indep. Sch. Dist. v. Gibson, 22 S.W.3d 849, 850 (Tex. 2000) (citing Texas Ass’n
of Bus. v. Texas Air Control Bd., 852 S.W.2d 440, 445 (Tex. 1993)). Therefore, the Picketts’
argument that Texas Mutual waived its right to contest the compensability or relatedness of the
Picketts’ claims is not a basis for defeating jurisdiction but merely identifies one of the issues that
the Commission would consider when determining Ms. Pickett’s benefits claims. In re Texas Mut.
Ins. Co., 157 S.W.3d at 81.
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The Benefit Dispute Agreement
The Picketts contend that any claims that were subject to the October 1999 Benefit
Dispute Agreement do not require exhaustion at the Commission. However, the Agreement between
Texas Mutual and Ms. Pickett only determined which of Ms. Pickett’s psychological disorders
were causally related to her compensable back injury. The Agreement did not determine which
medical treatments were appropriate for those psychological disorders or address Ms. Pickett’s
entitlement to medical benefits in any way. We believe that Fodge is dispositive in situations where,
as here, the parties have only agreed as to the extent of the claimant’s compensable injuries.
Ms. Fodge and her insurance carrier had a dispute over the compensability of the injury in question
and went through the benefit review process. See 63 S.W.3d at 802. The benefit review officer
found that Ms. Fodge’s injury, was, in fact, compensable. Id. Nevertheless, the court held that Ms.
Fodge’s claims arising from denied medical benefits were subject to the exhaustion requirement
because “[n]ever in the proceedings at the Commission did Fodge claim medical benefits or
complain that American Motorists had denied medical benefits, nor did any medical provider claim
payment for medical services provided to Fodge.” Id.
In this case, the record shows that the parties agreed that Ms. Pickett’s diagnosis of
major depressive disorder and pain disorder were causally related to the compensable back injury,
but that Ms. Pickett’s diagnosis of post-traumatic stress disorder, mixed personality disorder, and
dissociative disorder were not related to the compensable back injury. Because this Agreement did
not resolve any issues concerning Ms. Pickett’s entitlement to medical benefits, the Picketts were
15
required to exhaust their administrative remedies and obtain a favorable determination from the
Commission before proceeding to court.
The Picketts argue that their case is controlled by Gregson v. Zurich American
Insurance Co., 322 F.3d 883 (5th Cir. 2003). The insurance carrier in Gregson found the plaintiff’s
injury compensable and agreed to provide coverage for back surgery. Id. at 886. The carrier then
refused payment for the medication prescribed to the plaintiff following surgery. Id. at 884. The
plaintiff sued the carrier seeking to recover damages for bad faith. Id. The Gregson court
recognized Fodge, but held that the plaintiff was not required to exhaust his administrative remedies
because the insurance carrier had agreed to provide coverage for Gregson’s back surgery and all
other reasonable and necessary benefits incident to the treatment, including the post-surgery
prescription. Id. at 886. Unlike the insurance carrier in Gregson, Texas Mutual never agreed to
provide coverage to Ms. Pickett for any specific kind of medical treatment. Instead, Texas Mutual
was, at all times, required to approve or deny requests for preauthorization for Ms. Pickett’s various
medical treatments based solely upon the reasonable and necessary medical health care required to
treat her compensable injury. See 28 Tex. Admin. Code § 134.600 (2004). Texas Mutual was also
required to retrospectively review all complete medical bills and pay for or deny payment in
accordance with the Act, rules, and the appropriate Commission fee and treatment guidelines. Id.
§ 133.301 (2004). Thus, Gregson does not control here.
Exhaustion of Administrative Remedies
The Picketts contend that because of the large number of medical charges or claims
in dispute, they should be excused from the requirement that they exhaust their administrative
16
remedies because such exhaustion would be impractical. The requirement of exhaustion of
administrative remedies does have a number of exceptions. Cases in which exhaustion of
administrative remedies will cause irreparable harm, instances where administrative remedies are
inadequate, and cases which involve a claim that the agency is acting beyond its jurisdiction or is
applying an unconstitutional statute are examples of circumstances under which the requirement of
exhaustion will be relaxed. See Central Power & Light Co. v. Sharp, 960 S.W.2d 617, 618
(Tex. 1997); Jones v. Dallas Indep. Sch. Dist., 872 S.W.2d 294, 296 (Tex. App.—Dallas 1994,
writ denied); Texas State Bd. of Pharmacy v. Walgreen Texas Co., 520 S.W.2d 845, 848
(Tex. App.—Austin 1975, writ ref’d n.r.e.). However, the Picketts do not cite, and we have not
found, any authority for the proposition that exhaustion will be or should be excused simply due to
the number of medical charges or claims in dispute. Indeed, such an exception for claims subject
to the Texas Workers’ Compensation Commission’s jurisdiction would be in direct conflict with the
supreme court’s decision in Fodge. Consequently, we decline to adopt such an exception here.
The Picketts also contend that they should be excused from exhausting their
administrative remedies because the Commission does not have the statutory authority to grant
the damages they seek for physical pain and suffering they claim is the result of Texas Mutual’s
denial of coverage. However, as noted in Fodge, claims for extracontractual damages based on a
failure to pay or delay in paying medical benefits cannot relieve a claimant from exhausting
administrative remedies before the Commission when the entitlement to the medical benefits is in
dispute. See 63 S.W.3d at 804-05. Instead, under Fodge, the Picketts can only bring their claims
for extracontractual damages based on an alleged delay or denial of medical benefits to court after
17
obtaining a determination from the Commission that Ms. Pickett was entitled to the medical benefits
in question. Id.
Lastly, the Picketts argue that the trial court’s delay in deciding Texas Mutual’s
motion to dismiss should excuse their failure to exhaust administrative remedies. The record shows
that after Texas Mutual filed its motion to dismiss in January 2000, the lawsuit was abated by
agreement of the parties for three reasons: to discuss settlement, because of the Picketts’ counsel’s
illness, and to await the supreme court’s decision in Fodge. Because the Picketts agreed to abate
their lawsuit, they cannot complain on appeal about the ensuing delay in deciding Texas Mutual’s
motion to dismiss. Throughout the period of abatement, the Picketts were entitled to exhaust their
remedies at the Commission. They were also on notice that Texas Mutual’s motion to dismiss was
based on their failure to exhaust administrative remedies. Therefore, we are not persuaded that the
Picketts’ failure to exhaust their claims at the Commission should be excused.
Alternatively, the Picketts contend that the trial court should not have dismissed their
claims because they “submitted” certain claims to the Commission and “orally requested” that the
Commission reconsider certain claims. They assert that these actions constitute exhaustion.
However, under Fodge, claims arising from an insurance carrier’s alleged delay or denial of medical
benefits are exhausted only when the claimant receives a final determination from the Commission
that he was actually entitled to the medical benefits in dispute. 63 S.W.3d at 804. Aside from the
three Commission orders concerning the billing disputes between Texas Mutual and Dr. Kiser, there
is no evidence in the record that the Picketts received a final order from the Commission on any of
their claims in this lawsuit. Assertions by the Picketts that they submitted certain claims to the
18
Commission or made oral requests for the Commission to reconsider certain claims are not evidence
that the Commission actually reviewed the Picketts’ benefit disputes or issued orders that Ms. Pickett
was actually entitled to medical benefits. Therefore, we overrule the Picketts’ assertion that they had
exhausted certain claims.
Evidentiary Rulings
The Picketts made the following evidentiary objections at the hearing on Texas
Mutual’s motion for reconsideration of the motion to dismiss, which they re-assert on appeal: (1) an
objection to the introduction of oral testimony;4 (2) an objection to the testimony of Texas Mutual’s
witnesses, Rick Ball, on the grounds that he was allegedly not disclosed as a witness in response to
the Picketts’ requests for disclosure or interrogatories; and (3) an objection to a chart documenting
the requests for preauthorization of Ms. Pickett’s medical care and Texas Mutual’s responses, on the
grounds that the underlying documents had not been produced. “To obtain reversal of a judgment
based upon error of the trial court in admission or exclusion of evidence, the following must be
shown: (1) that the trial court did in fact commit error; and (2) that the error was reasonably
calculated to cause and probably did cause rendition of an improper judgment.” See Tex. R. App.
P. 44.1; Gee v. Liberty Mut. Fire Ins. Co., 765 S.W.2d 394, 396 (Tex. 1989).
First, the trial court did not abuse its discretion by permitting live testimony at the
hearing on the motion for reconsideration of the motion to dismiss. A motion to dismiss is the
4
In their brief, the Picketts allege that the trial court allowed oral testimony at the hearing
on Texas Mutual’s motion for summary judgment. However, the record reflects that the disputed
testimony was heard at the February 24, 2004 hearing on Texas Mutual’s motion for reconsideration
of its motion to dismiss.
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functional equivalent of a plea to the jurisdiction challenging the trial court’s authority to determine
the subject matter of a cause of action. Lacy v. Bassett, 132 S.W.3d 119, 122 (Tex. App.—Houston
[14th Dist.] 2004, no pet.) (citing Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 554 (Tex. 2000)).
The Texas Supreme Court has held that “a court deciding a plea to the jurisdiction is not required
to look solely to the pleadings but may consider other evidence and must do so when necessary to
resolve the jurisdictional issues raised.” Blue, 34 S.W.3d at 555. Because the record shows that the
disputed testimony in this case went to the issue of the trial court’s jurisdiction to hear the Picketts’
claims, we conclude that the trial court did not abuse its discretion by allowing the disputed
testimony at the hearing.
As for the Picketts’ second objection, Texas Mutual’s responses to the Picketts’
requests for disclosure or interrogatories are not included in the record. The record does include two
affidavits from Mr. Ball in support of Texas Mutual’s motion for summary judgment and motion to
dismiss. Additionally, Texas Mutual attempted to call Mr. Ball to testify at the first hearing on the
motion to dismiss in July 2003. On this record, we conclude that the Picketts were not harmed or
surprised when Mr. Ball was called to present testimony at the February 2004 hearing on the motion
for reconsideration of the motion to dismiss, and that his testimony did not lead to the rendition of
an improper judgment.
With respect to the Picketts’ third objection, we conclude that the trial court’s
admission of the chart documenting the requests for preauthorization of Ms. Pickett’s medical care
and Texas Mutual’s responses, if error, was harmless error. The Picketts contend that the chart
should not have been admitted because the underlying documents were not produced. The record
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shows that counsel for the parties disagreed on whether another judge had denied the requested
discovery or simply had not ruled on this issue. Whether or not this chart is a part of the evidentiary
record, under Fodge, the trial court had jurisdiction only over claims arising from the three final
Commission orders adverse to Texas Mutual concerning medical services that Ms. Pickett had
already received from Dr. Kiser. We conclude that this chart documenting Ms. Pickett’s
preauthorization requests did not have any bearing on the trial court’s lack of jurisdiction over the
Picketts’ unexhausted claims and did not lead to the rendition of an improper judgment.
The Picketts also contend that they were unable to adequately respond to Texas
Mutual’s motion for summary judgment and motion to dismiss due to an alleged lack of discovery.
Under Texas law, when a party contends that it has not had an adequate opportunity for discovery
before a summary judgment hearing, it must file in the trial court either an affidavit explaining the
need for further discovery or a verified motion for continuance. Tenneco, Inc. v. Enterprise Prods.
Co., 925 S.W.2d 640, 647 (Tex. 1996). The record shows that the Picketts filed two motions for
continuance that were granted. However, the substance of these motions did not allege a need for
further discovery to respond to Texas Mutual’s motion for summary judgment. Therefore, we
conclude that they have not preserved this point of error on appeal. See Tex. R. App. P. 33.1.
Summary Judgment
We review the district court’s summary judgment de novo. Valence Operating Co.
v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). When the trial court does not specify the basis for its
summary judgment, the appealing party must show it is error to base it on any ground asserted in the
motion. Star-Telegram, Inc. v. Doe, 915 S.W.2d 471, 473 (Tex. 1995). We must affirm the
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summary judgment if any of the grounds presented to the district court are meritorious. Provident
Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 216 (Tex. 2003); Sheshunoff v. Sheshunoff,
172 S.W.3d 686, 692 (Tex. App.—Austin 2005, pet. denied).
Pursuant to Fodge, the trial court had jurisdiction over and granted summary
judgment on the Picketts’ claims associated with the only three final Commission orders in
the record: (1) a $48 bill for a hospital discharge report prepared by Dr. Kiser; (2) several bills for
Dr. Kiser’s inpatient encounters with Ms. Pickett during three periods of hospitalization; and (3) a
$700 bill for psychotherapy services provided by Dr. Kiser. These three orders were entered in
proceedings between Dr. Kiser and Texas Mutual and were not appealed by either party. The
Picketts were not parties to these proceedings. In its motion for summary judgment, Texas Mutual
asserted, among other things, that it is not legally responsible to the Picketts for the results of the
Commission’s denial of payment to Dr. Kiser in those disputes. We agree.
The Texas Workers’ Compensation Act makes the employee’s obligation to pay
medical bills secondary to that of the insurer. Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 25
(Tex. 1994) (citing Smith v. Stephenson, 641 S.W.2d 900, 902 (Tex. 1982)). Moreover, it prohibits
healthcare providers from trying to collect from the employee unless and until the Commission rules
that the carrier is not responsible for payment. See id. As a result, the Texas Supreme Court will
not hold an insurance carrier legally accountable to a claimant if the claimant is subjected to
collection efforts by her healthcare providers before the Commission has determined that the carrier
is not responsible for payment. See id.
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The Picketts contend that they have incurred damages connected with Texas Mutual’s
denial of payment for these three benefits because they have “received numerous collection notices
from healthcare providers for the medical expenses that have not been paid.” However, there is no
evidence in the record that the Commission ruled that Texas Mutual was not responsible for payment
for any of these three benefits. Instead, the evidence is conclusive that the Commission ordered
Texas Mutual to pay Dr. Kiser for these services. Accordingly, Texas Mutual is not liable to
the Picketts for whatever damages they may have incurred as a result of receiving collection notices
from Dr. Kiser for these medical treatments. See id. Any dispute regarding the collection efforts by
Dr. Kiser against the Picketts is between the Picketts and Dr. Kiser under these circumstances.
Finality of Judgment
The Picketts argue that the trial court’s judgment is not final because the trial court
should not have dismissed some of their claims. The general rule, with a few exceptions not
implicated here, is that an appeal may be taken only from a final judgment—that is, a judgment
disposing of all pending parties and claims. Lehmann v. Har-Con Corp., 39 S.W.3d 191, 195
(Tex. 2001). Here, the judgment, which is labeled “final judgment,” dismissed without prejudice
the claims over which the trial court lacked jurisdiction and granted a take-nothing summary
judgment on the claims over which it had jurisdiction. Because this judgment appears final on its
face and disposes of all of the Picketts’ claims, we conclude that it is a final judgment. Id. at 200.
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Conclusion
The exhaustion process required by Fodge is constitutional and applies to all of the
Picketts’ claims, including tort and statutory claims for damages other than workers’ compensation
benefits, arising from an alleged delay or denial of benefits. The trial court correctly dismissed the
Picketts’ claims concerning alleged delays or denials of medical benefits for which the Picketts did
not obtain a timely final determination from the Commission that Ms. Pickett was entitled to
the benefits in dispute. The trial court had jurisdiction over the Picketts’ claims arising from
the billing disputes between Dr. Kiser and Texas Mutual, which resulted in three final Commission
orders adverse to Texas Mutual. However, because Texas Mutual is not liable to the Picketts for any
alleged damage the Picketts may have incurred as a result of receiving additional collection notices
from Dr. Kiser regarding the benefits that were the subject of the three billing disputes that were
heard before the Commission, we conclude that the trial court correctly granted summary judgment
against the Picketts on those claims.
Affirmed.
___________________________________________
G. Alan Waldrop, Justice
Before Justices Puryear, Waldrop and Henson
Affirmed
Filed: July 26, 2007
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