This case is about an unambiguous endorsement to a workers' compensation insurance policy. The Court concludes that the endorsement not only waived Wausau Underwriters Insurance Company's (Wausau) right of subrogation
I agree that the endorsement waived the statutory subrogation right afforded Wausau by section 417.001 of the Workers' Compensation Act (Act).See TEX. LAB. CODE § 417.001. But I disagree that the endorsement waived the separate statutory right to reimbursement afforded by section 417.002.
There are several problems with the Court's position. First, the Act expressly distinguishes between a carrier's right of subrogation and its right of reimbursement, as demonstrated in part by their being addressed in separate sections of the statute. See
I respectfully dissent.
Texas enacted its first workers' compensation legislation in 1913. See Act of April 16, 1913, 33rd Leg., R.S., ch. 179,
In 1993, the Legislature adopted the current Act. TEX. LAB. CODE tit. 5. Section 417.001 of the Act (1) expressly authorizes an injured employee to pursue both workers' compensation benefits and an action against third parties who caused the injury; (2) expressly provides a right of subrogation to the carrier and gives the carrier the right to enforce its subrogation right in the name of the employee; and (3) provides that if the carrier recovers an amount greater than its subrogation interest from a third party, then after the carrier reimburses itself and pays its costs from the amount recovered, it is to pay the remainder to the employee:
(a) An employee or legal beneficiary may seek damages from a third party who is or becomes liable to pay damages for an injury or death that is compensable under this subtitle and may also pursue a claim for workers' compensation benefits under this subtitle.
(b) If a benefit is claimed by an injured employee or a legal beneficiary of the employee, the insurance carrier is subrogated to the rights of the injured employee and may enforce the liability of the third party in the name of the injured employee or the legal beneficiary.... If the recovery is for an amount greater than the amount of the insurance carrier's subrogation interest, the insurance carrier shall:
(1) reimburse itself and pay the costs from the amount recovered; and
(2) pay the remainder of the amount recovered to the injured employee or the legal beneficiary ....
(a) The net amount recovered by a claimant in a third-party action shall be used to reimburse the insurance carrier for benefits, including medical benefits, that have been paid for the compensable injury.
(b) Any amount recovered that exceeds the amount of the reimbursement required under Subsection (a) shall be treated as an advance against future benefits, including medical benefits, that the claimant is entitled to receive under this subtitle.
(c) If the advance under Subsection (b) is adequate to cover all future benefits, the insurance carrier is not required to resume the payment of benefits. If the advance is insufficient, the insurance carrier shall resume the payment of benefits when the advance is exhausted.
Manifestly, the Act distinguishes between the carrier's right of subrogation and its right of reimbursement-and those are two different rights. See Fortis Benefits ,
Section 417.002, on the other hand, separately and expressly gives carriers only the right to receive reimbursement in the event the employee recovers from a third party. See TEX. LAB. CODE § 417.002. Section 417.002 does not empower the carrier to proceed, or even to make claims, against, third parties in order to enforce rights the carrier might have pursuant to the carrier's payments to and for the employee's benefit in the past or as to those which the Act would require it to pay in the future.
In sum, where the carrier has subrogation rights under section 417.001, it is entitled to directly bring and directly participate in suits against third parties. Under that section, the subrogated carrier is in charge of its own destiny as to prosecuting a third-party claim to recoup payments it has made to the injured employee, obtaining credit for those it is obligated to make in the future, and recovering its costs, including attorney's fees, in addition to reimbursement. When the carrier has only reimbursement rights pursuant to section 417.002, it is neither in charge of its own destiny vis-a-vis prosecuting a third-party claim nor statutorily entitled to recover its costs in addition to the amount it paid, or will pay, to the employee from the amount received from the third party.
So when does the statutory language matter? That is, in which situations does a carrier not have subrogation rights but has only reimbursement rights? As explained below, under the clear, plain language of sections 417.001 and 417.002, this is one such situation.
II. The Terminal Agreement and the Policy Endorsement
Western and Cactus entered into an "Asphalt Terminal Access Agreement" (Terminal Agreement) that required Cactus to carry insurance, including workers' compensation insurance. As related to this matter, the Terminal Agreement contains the following provision regarding Cactus's workers' compensation insurance:
The insurance ... shall be ENDORSED to contain a waiver of subrogation against the WESTERN ENTITIES ....
(Emphasis added).
Wausau was the workers' compensation carrier for Cactus. Pursuant to the Terminal Agreement, Cactus purchased an endorsement to its policy entitled "Texas Waiver of Our Right to Recover from Others Endorsement." The endorsement provides as follows:
We have the right to recover our payments from anyone liable for an injury covered by this policy. We will not enforce our right against the person or organization named in the Schedule , but this waiver applies only with respect to bodily injury arising out of the operations described in the Schedule where you are required by written contract to obtain this waiver from us.
This endorsement shall not operate directly or indirectly to benefit anyone not named in the Schedule.
The premium for this endorsement is shown in the Schedule.
(Emphasis added). In the Schedule, the endorsement specified that it applied as follows:
(X) Blanket Waiver
Any person or organization for whom the Named Insured has agreed by written contract to furnish this waiver.
As the Court notes, the endorsement is a standard form promulgated by the Texas Department of Insurance (TDI). See TEX. DEP'T OF INS., TEXAS WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY MANUAL : WC 42 03 04 A (2d reprt. 2011). There is no dispute that Western and its affiliates (the Western entities) were the entities for which Cactus agreed, by written contract, to obtain an endorsement waiving the insurer's subrogation rights.
There is also no dispute that Wedel is not listed in the "Schedule" section of the policy. Accordingly, the endorsement expressly excludes him from being benefitted by the endorsement "directly or indirectly."
The Court says that the actual intent of the parties when entering into workers' compensation contracts in Texas is immaterial because the policy forms are mandated by a state agency. Ante at 557 (citing Progressive Cty. Mut. Ins. Co. v. Sink ,
As related to this controversy, the Terminal Agreement was simple and clear. It required Cactus to maintain workers' compensation insurance that contained a "waiver of subrogation against the Western Entities," with "Western Entities" being defined as "Western, its parent, subsidiary and affiliated companies, and their respective officers, agents and employees." What the contract did not require was waiver of the carrier's statutory right of reimbursement, as is provided for by section 417.002 of the Act.
The endorsement to Cactus's policy began by reiterating Wausau's statutory right to recover payments it made under the policy "from anyone liable for an injury covered by this policy." In the next sentence, Wausau agreed that it would "not enforce our right against the person or organization named in the Schedule, but this waiver applies only ... where you are required by a written contract to obtain this waiver from us." The endorsement contained no additional language waiving rights as to any other person or entity. And the written contract between Cactus and Western required only that the workers' compensation policy be endorsed "to contain a waiver of subrogation against the WESTERN ENTITIES."
The Court concludes that "the waiver of a carrier's 'right to recover' from a third party named in the schedule includes both a direct recovery from [Western] and an indirect recovery from proceeds paid by [Western] to an injured employee," such as Wedel. Ante at 558. It further posits that "[t]here is no meaningful difference between the two." Ante at 558. I disagree with both conclusions.
As to the first statement, the policy waives only Wausau's right to recover from Western. Recovery by Wausau from Wedel, regardless of whether those funds originated with Western, is not waived by the policy language because under these facts, Wedel is not a person "liable for an injury covered by this policy." The Court asserts that a reading of the language to waive only subrogation rights against third parties instead of waiving both subrogation rights as well as reimbursement rights, as referenced in section 417.002, "undermines the rationale for having such a waiver in the first place." Ante at 559. The response to that statement is four-fold. First, the endorsement language specifies that it precludes Wausau from exercising its rights "against the person or organization named in the Schedule," which is just what Western contracted for. Second, the endorsement unambiguously and simply specifies that the endorsement "shall not operate directly or indirectly to benefit anyone not named in the Schedule." Wedel is not named in the schedule, yet the Court's interpretation manifestly benefits him both directly and indirectly. And there is no evidence or contention that Western's contractual requirement for waiver of subrogation by the carrier was intended to benefit Cactus or its employees who might be injured. Third, the Act specifies that carriers have rights of both subrogation as
As to the Court's second statement, a brief review of the previous discussion regarding subrogation and reimbursement, as addressed by sections 417.001 and 417.002, demonstrates that there indeed is a meaningful difference in how the two are treated by the Act. First, the Act addresses the two in different sections. TEX. LAB. CODE §§ 417.001, .002. Second, an insurer who is subrogated to the rights of another-such as Wausau is, or would be except for the waiver, subrogated to the rights of Wedel-steps into the shoes of the party to whose rights it is subrogated and obtains all the rights of that party related to recovery of amounts paid to it. See Guillot v. Hix ,
Further, the Court goes beyond the language of the endorsement and talks about the "rationale for having such a waiver." Ante at 559. But "rationale" does not trump the express language of the endorsement in context of the statutory provisions. By implying that it does, the Court second-guesses and encroaches on the Legislature's exercise of its policy-making function when it enacted sections 417.001 and 417.002 and their clear, separate treatment of subrogation and reimbursement. See Town of Flower Mound v. Stafford Estates Ltd. ,
Further, the endorsement to Wausau's policy states that "[w]e will not enforce our right against the person or organization
Noticeably absent from the contract between Western and Cactus, as well as from the endorsement, is any indication that Cactus or Western intended for Wedel or any other Cactus employee who was injured on the job to receive a double recovery in the nature of both workers' compensation benefits and recovery from Western on a third-party claim. Further, permitting Wedel to receive both workers' compensation benefits and a recovery from Western free of Wausau's right to reimbursement amounts to a clear benefit in violation of the endorsement's explicit provision stating that "[t]his endorsement shall not operate directly or indirectly to benefit anyone not named in the Schedule." To reiterate, Wedel is not named in the schedule.
The Court discusses the practicalities of the carrier's subrogation and reimbursement rights under the statute and the endorsement, and says that those rights cause problems in settling claims like those Wedel made against Western. Ante at 557. But such problems have existed since the Legislature enacted workers' compensation statutes and created the need to balance the interests of injured workers, carriers, and employers who pay premiums for insurance and whose premiums are affected by losses. There simply is unavoidable tension where multiple parties, with differing interests and motivations, are contesting liability for injuries, liquidating claims based on alleged liability for injuries, and allocating proceeds in settlement of claims. But those practicalities should not be the basis for interpreting language of an insurance policy endorsement. The language itself should be the basis. Nor should courts simply substitute their idea of a preferred settlement process for the unambiguous language of a binding contract. Fiess v. State Farm Lloyds ,
The Court states that its decision "stand[s] on over twenty years of unanimous case law" and notes that it "glean[s] insight" from TDI's inaction in light of those decisions. Ante at 555. However, the case law stems from various courts of appeals and a federal district court. See Liberty Ins. Corp. v. SM Energy , No. H-12-3092,
Wausau asserts that while the Buckland decision is the foundation for the courts of appeals' opinions that follow, the case does not actually support a conclusion that the policy waiver encompasses subrogation as well as reimbursement. I agree. The Court is correct that the Buckland opinion quotes a TDI waiver that is substantively the same as the one at issue in this case. Ante at 559 (citing Buckland ,
The Court also notes that SM Energy addressed the same TDI waiver language and the issue was the same as presented here. Ante at 557-59 (citing SM Energy ,
At the end of the day, while persuasive, the referenced opinions are not binding on this Court pursuant to our constitutional charge. TEX. CONST. art. IV, § 3 (stating that the Court's appellate jurisdiction shall be final). And the legislative acceptance doctrine-which the Court substantively references and which comes into play where interpretations of statutory law such as the sections of the Act involved here, are concerned-applies only where the relevant provisions have "been interpreted by a court of last resort or given a longstanding construction by a proper administrative officer." Tex. Dep't of Protective & Regulatory Servs. v. Mega Child Care, Inc. ,
The Court builds on its references and concludes that they "are consistent with the waiver's plain language." Ante at 560. But, as explained, neither the language of the endorsement nor that of sections 417.001 and 417.002 support the conclusion that subrogation and reimbursement are treated as one and the same. Authorities concluding otherwise are simply not consistent with language of the waiver and the relevant statutory provisions. Neither is the Court's conclusion.
Finally, while the "decades of settled and unanimous" case law the Court references does not serve as valid, binding precedent, even if it did, the doctrine of stare decisis is not absolute. See Sw. Bell Tel. Co. v. Mitchell ,
V. Conclusion
Insurance policies and their endorsements are to be construed according to their plain language. Here, the endorsement did just what Cactus and Western contracted for: it waived Wausau's right to sue or make a claim against Western for the payments it made to and for the benefit of Wedel. If, as the Court says, the "rationale" for Wausau's endorsement requires waiver of both the carrier's right of subrogation and its right of reimbursement, ante at 559, then the rationale should be effected by the parties, who contract for the waiver, and TDI, which prescribes the language for such waivers. But the solution is not for the Court to construe an unambiguous insurance policy endorsement to say something it does not say. I would reverse the judgment of the court of appeals and remand the case for further proceedings.
Notes
Wausau argues that the endorsement did not waive its statutory right to subrogation, only its right to recover for payments it made. In my view, the distinction, if any, is not determinative of the issue before us and need not be addressed because the endorsement did not waive Wausau's reimbursement right. The Court refers to the rights in question as Wausau's rights of subrogation and reimbursement. I will do likewise to avoid confusion.
Both James Wedel and his wife, Michelle, were parties to the suit filed against Western. James died while this matter was pending in the court of appeals. Any references to "Wedel" will encompass James, both James and Michelle, or Michelle, depending on the context. Wausau asserts, and Wedel does not dispute, that as of August 15, 2014, Wausau had paid over $1,548,822 in medical and income benefits to and for Wedel's benefit.
The Fortis Benefits policy provided:
Subrogation Right. Upon payment of benefits, We will be subrogated to all rights of recovery a Covered Person may have against any person or organization . This includes but is not limited to recoveries against such third party, against any liability coverage for such third party or against automobile insurance in the event a claim is made under the uninsured or underinsured motorist coverages. Such right extends to the proceeds of any settlement or judgment; but is limited to the amount of benefits We have paid. You must 1) do nothing to prejudice any right of recovery; 2) execute and deliver any required instruments or papers; and 3) do whatever else is necessary to secure such rights.
If We are precluded from exercising Our Subrogation Right, We may exercise Our Right of Reimbursement.
Right of Reimbursement. If benefits are paid under this plan, and any Covered Person recovers against any person or organization by settlement, judgment or otherwise, We have a right to recover from that Covered Person an amount equal to the amount We have paid. This includes but is not limited to recoveries against such third party, against any liability coverage for such third party or against automobile insurance in the event a claim is made under n.11 the uninsured or underinsured motorist coverages.
Fortis Benefits ,
The Act fairly consistently uses the phrase "the injured employee or the employee's beneficiaries," or a variation of that language. For convenience, I will simply refer to "the employee." When appropriate, the reference is intended to include both the employee and the employee's beneficiaries under the Act.