*1 ARANDA, Miguel Petitioner,
INSURANCE CO. OF NORTH
AMERICA, al., et
Respondents.
No. C-6216.
Supreme Texas. Court of
March 1988.
Rehearing April Denied
sсope and poli- Uni-Mineral. INA carried a cy compensation of workers’ AMF on Tubo- scope, policy and Lumbermans carried compensation workers’ on Uni-Mineral. Aranda claim compen- filed a for workers’ benefits, naming employers sation both and both compensation INA carriers. and investigated Lumbermans and de- employed by termined that Aranda was Tuboscope Uni-Mineral; both AMF and injuries that his were the result of his work at either or of his employers; both and that injuries compensable. were INA and Lumbermans, however, were unable to agree between as to themselves carrier primary responsibility. bore Conse- quently, pay weekly each carrier refused to Charlton, Lerner, Michael B. A. Karen disability expenses benefits medical until Houston, petitioner. claim could be resolved Industri- Wham, Joe Guyton, Weitinger, L. Mark al Accident Board. Tucker, Groten, & Steelhammer Kurt Fun- brought Aranda suit INA and Funderburk, Houston, Royal derburk & H. alleging Lumbermans that both carriers Brin, Jr., Price, Dallas, Strasburger & had breached respondents. failing tо settle his claim equitably liability when the SPEARS, Justice. of each carrier was clear. also He claimed The issue in this case is whether a work- intentional misconduct on the of both compensation ers’ claimant is entitled to spe- carriers. INA Lumbermans filed seek damages for the insurance carrier’s exceptions, asserting cial that Aranda’s al- breach faith and fair legations that carriers had breached dealing. Miguel Petitioner Aranda became the duty unable to work and filed claima They failed to state cause of action. also each of employers. his two He later sued contended Aranda’s that causes action Respondents, Company Insurance of North for intentional misconduct were barred (INA) America and Lumbermans Mutual exclusivity provision of the Workers’ Casualty (Lumbermans), Company the com- Act, Tex.Rev.Civ.Stat.Ann. pensation carriers for employers. the two (Vernon 1967). seq. art. 8306 et The trial He that had breached carriers exceptions special court sustained dealing by faith аnd fair dismissed the cause after Aranda failed to failing pay promptly his claim work- pleadings. amend his ers’ The trial benefits. dismissed the case for failure state a appeals court of affirmed trial cause appeals of action. The court of af- judgment, holding allega- court’s judgment firmed the court. 722 trial tions that INA and had Lumbermans judgment 755. We reverse the breached the common law appeals court of remand cause did not state cause to the proceedings. trial court for further appeals court of also held action. The causes of action for inten- Miguel began experience Aranda tional were because the misconduct barred symptoms first repetitious traumatic injured to an worker are injury remedies available on March March 1982. On expressly limited he became unable At to those enumerated to work. time, employed by he was AMF Act. both Tubo- Duty Good Faith and constitutionality Compen- Dealing Fair sation Act rests contractual nature Id.; agreement. Huffman It is well estаblished under Texas law Underwriters, 354, 359, Southern 133 Tex. “accompanying every contract is a As between the care, perform common law employee, skill, expedience and reasonable faithful *3 promise promise: there is for a the carri- done, thing agreed the to and a ness agrees compensate employee er to the for negligent any of failure to observe these injuries in the employ- sustained course of a tort is as conditions well as breach ment, employee agrees the to relin- Montgomery & Co. v. Ward contract.” quish rights against his common law his
Scharrenbeck,
157,
153,
146 Tex.
204 S.W.
Co.,
Casualty
Southern
employer.
12
(1947)
added).
508,
(emphasis
510
The
2d
at 201. The
is
employee
S.W.2d
thus a
duty of care and faithfulness
same
party to
contract
therefore entitled
applies
law
arises under common
contracts
in
capacity.
to recover
Burroughs
equally
to insurance contracts.
Bunch,
(Tex.Civ.
211,
v.
210
214-15
S.W.2d
compensa
The contract between a
ref’d);
American
writ
App.
Paso
— El
tion
creates
carrier and an
Redford,
Standard
Ins. Co. v.
337
Life
type
special
relationship
same
(Tex.Civ.App.
S.W.2d
— Austin
under
arises
other
insurance contracts.
n.r.e.).
1960, writ ref’d
purpose
The
recognized
Specifically, this court has
equitable
provide speedy,
Act
relief
is to
to
fairly
to
duty of an insurer
deal
employee injured
course
process-
faith with its insured
Employers’
Texas
Insur
employment.
of claims. Arnold v.
payment
ing and
Wright,
Ass’n v.
ance
128 Tex.
Ins.
County Mutual Fire
National
injured
S.W.2d
The
em
(Tex.1987);
English
v.
725 S.W.2d
disability,
ployee, from the date of his
re
Fischer,
(Tex.1983)
S.W.2d
weekly
fоr
lies on the
J., concurring).
(Spears,
This
payment of medical
disability benefits and
and fair
arises out of the
expenses.
dependent
He
the carrier
is
on
relationship
in-
special trust
between the
calamity
protection
for
from the economic
sured and the insurer. As this
stated
disabling injuries.
arbitrary
An
decision
in Arnold:
pay
to
to
valid claim
by the carrier
refuse
special
In the insurance context a
rela-
injured em
delay payment
leaves the
parties’
tionship
out of the
un-
arises
ployee
no immediаte recourse. Con
equal bargaining power
the nature
of INA and Lum
trary to the contentions
which would
of the insurance contracts
bermans,
provided by
mechanisms
unscrupulous
allow
insurers
take ad-
do not afford
vantage of
their insured’s misfortunes
injured employee
relief
immediate
bargaining
or resolution
for settlement
While the
compensation.
denied
who is
ultimately
of the claims....
Board
Industrial Accident
failure to
rectify the carrier’s unreasonable
Id. good faith and fair
compensable injuries, the
pаy
benefits
imposed
thus
on the insurer because
incur
injured employee may in the interim
bargaining
disparity
power and the
inability
damages because of
substantial
exclusive control that the insurer exercises
pay
living expenses or
basic
to meet
processing
of claims.
over
the Indus
existence of
medical care. The
Compensation Act sets
The Workers’
negate
does not
trial Accident Board
based
forth
scheme
the carri
special
trust
agreement
into
three-party
on a
enterеd
er and the insured.
employer,
employee, and the com-
therefore,
is a
We,
hold that there
Casualty Co.
carrier. Southern
pensation
compensation carri-
(Tex.
of workers’
Morgan, v.
faith with
adopted).
fairly
ers to deal
App.
judgm’t
Comm’n
injured
employees
dealing,
com
and fair
bewill
disap
Accordingly,
liability
we
tortious conduct.
prove
appellate
of those
decisions that re
sustaining
The trial court’s action in
duty, Fidelity
Casualty
ject
&
Co.
such a
special exceptions
carriers’
to Aranda’s
Shubert,
New York
cause of action for
breach
n.r.e.)
(Tex.App. Tyler
writ
ref’d
—
was tantamount
Casualty
Cantu v. Western Fire &
to a dismissal of Aranda’s cause of action.
Co., Ltd.,
(Tex.App.—
S.W.2d 737
reviewing
action,
the trial court’s
as
1986),
Corpus
per
Christi
writ ref’d n.r.e.
appeals,
affirmed
the court of
we accept
curiam,
(Tex.1987).
all
allegations
as true
of the factual
set
forth in Aranda’s pleadings. Jones v. Sun
issue
The next
to be addressed is
353, 356, 153
Oil
137 Tex.
applies
the standard of care that
claims
(1941). A
plead
review of Aranda’s
*4
compensation
that the
carrier breached its
ings
that
reveals
there is a factual basis to
duty
dealing.
good
faith and
A
fair
support his claim that the carriers breached
compensation
workers’
who
claimant
as
duty
the
dealing.
faith
fair
and
duty
serts that a
has
the
carrier
breached
alleged
Aranda
that he suffered
refusing
faith
by
and
repetitious
injury.
from a
traumatic
To
to pay
delaying payment
or
must
of a claim
compensation benefits,
recover workers’
he
(1)
establish
the absence of a reasonable
prove
required
was
to
causation
activi
denying
delaying payment
basis for
or
occurring
job;
ties
on a
he was not re
(2)
the
the policy
benefits of
that the
prove
quired to
that
injury
the
was caused
carrier knew or should have known that
occurring
an event
at a definite time
there
deny
was not a reasonable
for
basis
Employers
Davis v.
place.
Ins. of
ing the
delaying payment
claim or
Wausau, 105,
(Tex.App.—
Savio,
claim. See Travelers Ins. Co. v.
1985,
n.r.e.);
Houston
ref’d
writ
[14th Dist.]
(Colo.1985);
P.2d
Anderson v.
Ratcliff,
Standard Fire Ins. Cо. v.
Continental
Wis.2d
(Tex.Civ.App.
— Waco
(1978).
See also Com
N.W.2d
writ). Upon proof
job-related
no
that
activ
ment, Bad Faith Claims
in Tex
Practices
ity
injury,
carrying
the
caused
the insurer
as—Do They Exist?:
Extending
Bad
compensation policy
the
on the date that
Faith Cause Action to Texas Workers’
disability
required
pay
the
occurred
to
Claimants,
Insurance
compensation benefits. Tex.Rev.Civ.Stat.
St. Mary’s
L.J.
701-03
(Vernon Supp.1988).
Ann. art.
20§
first
requires
objec
element of
test
alleged
pleadings,
his
Aranda
that he
tive determination of whether a reasonable
proved
employed by
he was
both AMF Tu
insurer under similar
would
circumstances
boscope
Uni-Mineral on March
delayed
have
or denied the
bene
claimant’s
disability.
date of
He further
the
fits. The second element
the
balances
provided
alleged
proof
he
of the causal
that
right
reject
of an insurer to
invalid
by presenting
connection to work
both
investigate
carrier to
report
with the
Dr. William
carriers
pay
compensable claims.
element
This
which indicated
Aranda’s
Donovan
will
by еstablishing
be met
carrier
that the
condition, carpal
syndrome,
tunnel
resulted
actually knew there was no
ba
reasonable
facts,
from
work.
INA
his
Under these
deny
sis to
claim or
or
delay payment,
fully
to
and Lumbermans were each
liable
carrier,
establishing that
based on
These
Aranda for
benefits.
investigate,
its
should
known
have
allegations provide a
factual ba
sufficient
deni
there was no reasonable basis for
nor Lum
sis for
claim that neither INA
test,
al or delay.
will
Under
carriers
had a
basis for re
bermans
reasonable
right
ques
deny
maintain the
invalid
pay
fusing
compensable
claim.
tionable
and will
claims
not be
liability
alleged
adjust-
a claim.
further
an erroneous denial of
Aranda
Carriers
Lumbermans
employed
that breach the
ers
INA and
Liability
determined that Aranda’s claim was com-
as a result of a carrier’s
pensable
pay
breach of the
and advised
carriers to
dealing or
super-
intentional misconduct
claim. He also
that the
claim is
carrier,
dis
visory personnel for each
with ac-
liability
injury
tinct from
arising
for the
knowledge
employment
tual
of Aranda’s
employment.
Injury
in the course of
from
companies
knowledge
both
actual
carrier’s conduct arises out of
con
originated
injury
employ-
out of his
his
tractual
ment, made the conscious decision not to
and the
and is sustained after the
pay
allegations present
claim. These
Savio,
job-related injury.
rate and from the (Tex.Comm’n App. job-related proximately injury, nal (insurance damages; opinion adopted) company’s caused attempting parties, in to exercise settle tween the but rather the terms ment). especially аre Such duties common of the statute itself. See Florida Erection parties already in fiduciary Services, McDonald, where the are a v. Inc. 395 So.2d See, relationship. e.g., 1981). v. Peck Johnson (Fla.App. bargaining Whatever 148, 152, ham, 132 Tex. there over terms and remedies for (1938) (partner’s obligation to exercise Legislature. breach occurs high duty dealings partners); other with statute, Legislature enacting In Hull, 39, 54, Fitz-Gerald v. 150 Tex. expressly addressed each the con- (1951) (joint S.W.2d adventurer’s identified in cerns Arnold. The Workers’ duty to deal each other with “utmost provides that within faith”); Kinzbach Tool Co. v. Cor days receipt of a claimant’s written no- Corp., 138 Tex. bett-Wallace injury, tice of the carrier must either initi- (1942) (agent’s duty compensation payments ate file or a state- exercise “fair faith” all ment of controversion with the Industrial behalf). principal’s transactions on his Accident Board. Tex.Rev.Civ.Stat. art. recently, Most has found a 18a(a). If the insurer files state- a § fairly on the of insurers to deal controversion, ment of the Board must faith with their insureds. Ar- prehearing for a set matter County Mut. Fire Ins. nold National If a nei- conference on merits. (Tex.1987). Co., 725 In exam- ther initiates nor files ining parties, between the controversion, it is statement we said: penalty past payments due 15% special In the insurance context a rela- paid to be to the claimant. Id. parties' tionship arises un- out suffering he financially, If a claimant equal power bargaining and the nature hardship file an she affidavit of insurance contracts would allow with the Texas Industrial Accident Board. unscrupulous advantage insurers to take Rule 61.11.00.012. In the event Board bargain- misfortunes in insureds’ hardship determines that financial Board ing for resolution of settlement or no advanced or tender of exists addition, such without made with- payments has been accelerated action, abritrarily cause insurers can days filing of affi- claimant’s ten deny coverage payment of delay hardship, must schedule davit of the Board penalty no than interest claim with more Tex- expedited prehearing conference. com- on the amount owed. An insurance Rule Board 61.11.- as Industrial Accident pany over the eval- has exclusive control *7 uation, processing and denial of claims. 00.020. suspends payment
725
at
None of the factors
stops
If a carrier
cases,
benefits,
governed
it
which
these
weekly compensation or medical
present here.
a
to the Board within
must file
statement
such action.
days stating
10
its reasons for
The
is theo
requirement
comply
Failure to
with
retically
three-party
a
contrac
premised on
penalty to be
carrier to a
subjects the
15%
agreement
employer, the
tual
between the
art.
paid
Tex.Rev.Civ.Stat.
claimant.
compensation carrier.
and the
18a(b).
con-
If
carrier does not
8306
a
Underwriters,
§
133
v. Southern
Huffman
ruling, it
by a final Board
sent to abide
359, 128
4, 6
Such
Tex.
days
20
notify
within
the Board
course,
must
agreement,
is es
a contractual
suit in the
filing.
then file
It must
sentially
legal
The actual terms
fiction.
days
giving no-
20
worker,
court within
district
of the
contract between
procedures
to follow these
tice. Failure
are
employer and
the insurance
penalty plus
carrier to
subjects the
12%
wholly
rights
The
dictated
statute.
fees,
paid
again
are
attorney’s
obligations
parties
different
are not
5a.
8307
art.
negotiation be-
claimant. Tex.Rev.Civ.Stat.
by any
§
determined
actual
Co.,
American Mut. Ins.
Finally,
appears
if it
to the
Board that
63 N.Y.2d
is,
general
practice,
insurer
as a
business
(1984);
482 N.Y.S.2d
certain view,
my this court’s insertion common
law proliferation of lawsuits and the
invites
possibility of and incon- double recoveries permit findings of To a tort
sistent fact.
remedy provid- to the remedies addition betrays bargain implicit
ed statute impairs func- necessarily Act and system.
tion
Therefore, I dissent.
CULVER, J., joins in this dissent. Justice,
WALLACE, dissenting. I would not fore- respectfully dissent. a workers’
close a suit for bad
compensation insurer.
However, case, re- in this the insurers Board to Industrial Accident
sorted i.e., legal dispute, which of
resolve a for Aranda’s primarily liable
insurers were man-
compensation. procedure This is the Act, the Workers’
dated
thus, fol- they penalized should
lowing the law.
GONZALEZ, J., joins in this dissent.