INTERESTING ARTICLE ON BAD FAITH AS IT APPLIES TO WORK COMP IN TEXAS
TEXAS WORKERS’ COMPENSATION COMMISSION 2005 EDUCATIONAL CONFERENCE Consumer Protection:
Bad FaithRoyce V. Bicklein Law Offices of Miller & Bicklein, P.C.
Royce@millerbicklein.com Odessa • Lubbock • San Antonio Royce Bicklein Plaintiff’s /
Claimant’s personal injury attorney practicing in West Texas & South Texas. Board Certified Workers’ Compensation, 2004. Licensed, State Bar of Texas, 1998.
This is a look at Bad Faith from a workers’ compensation Claimant’s attorney perspective. It’s what the average attorney who representsClaimants sees as Bad Faith. Bad Faith is NOT a black and white issue. Its sometimes hard to find and hard to define. The issues of Bad Faith in this article are things that lead to Bad Faith, or at least raise the specter of Bad Faith. I. Bad Faith defined.A. Duty of Good Faith and Fair Dealing. B. Failure to pay a claim when insurer new or should have known liability was reasonably clear. Nice “gray” terms. Not a black & white area. Did the carrier have REASONABLE grounds for denial?
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II. Why discuss Bad Faith?A. It’s making a comeback. B. Becoming more common in general which means it WILL grow in the workers’ compensation arena. C. Because I’m a Claimant’s attorney and Carrier’s should know that my fellow attorneys and I are looking for it. III. Where is Bad Faith from?A. Common Law 1. Duty of good faith and fair dealing 2. A judicially made concept 3. Created out of the traditionally unequal position of the insurer and insured. B. Statutory Provision 1. DTPA §17.01 2. Texas Insurance Code a. Old version §21.21 b. New version Chapter 5 §541.060 IV. Seminal decisionsA. Aranda v. Ins. Co. of North America, 748 S.W .2d, 210 (Tex. 1988). B. American Motorist v. Fodge, 63 S.W. 3d, 801 (Tex. 2001).
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V. Workers’ compensation insurance coverage does not easily lend itself to a Bad Faith claim.A. Claimant must almost always exhaust his administrative remedies. B. TWCC has exclusive jurisdiction over issues involving workers’ compensation benefits. 1) Questions of paying or not paying benefits must first get a final decision from the TWCC before you can pursue a district court option, even if the claim is tangential to the payment of benefits. 2) Failure to exhaust administrative remedies means: a. Abatement pending exhaustion b. Dismissal for lack of jurisdiction C. Medical claims 1) Such as denied surgery or medical care. 2) Must go through MDR first! D. Indemnity claims 1)Such as slow paying benefits or wrongful denials 2) Must go through the BRC/CCH process first! E. If the Claimant loses at the TWCC administrative level it will be hard to pursue a Bad Faith claim. 1) A Commission decision in the Carrier’s favor is POWERFUL evidence that their position is reasonable. F. If the Claimant prevails at the TWCC administrative level she will still have to prove that the payment was denied when the Carrier knew or should have known liability was reasonably clear. G. Workers’ compensation insurance and the TWCC “system” makes Bad Faith hard to pursue, but NOT IMPOSSIBLE!!!
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VI. What are the potential costs to Carriers? Damages!A. Actual damages Mental anguish Loss of earning capacity Loss of credit (watch out for bankruptcy or repossessions) B. Interest C. Court Costs D. ATTORNEY’S FEES 1. This is why a lot of attorney’s are looking at Bad Faith. 2. No matter the amount of the actual damages the Claimant’s attorney can be paid his attorney’s fees for pursuing. E. If deemed to be “Knowing” act Ins. Code calls for Treble Damages F. Common Law Bad Faith allows for Punitive Damages if the Bad Faith was committed in the face of a risk of extraordinary harm. VII. Who gets sued?A. Carrier 1. In Common Law Actions B. Adjuster 1. In. statutory DTPA or Ins. Code actions.
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VIII. Carrier DefensesA. No exhaustion of administrative remedies B. No coverage 1) If no coverage, generally no liability for Bad Faith. 2) Exception to general rule if: a. Extreme conduct causing injuryb. Failure to investigate*Exception to general rule very limited application to workers’ compensation by the Supreme Court decision in Fodge.C. Reliance on an expert 1)MUST be careful that it is an OBJECTIVE report. 2)State Farm Lloyds v. Nicolau, 951 S.W.2d, 444 (Tex. 1997) a. Did expert do lots of work for Carrier? b. Did expert know the effect of his opinion? c. Did expert give same opinion over and over? POINT: If it looks like a “shill” report or that the Carrier “shaped” the opinion then the Court might find reliance on an expert’s report NO DEFENSE AT ALL! 3)Did the Carrier shop for an expert? Liberty Mutual v. Crane, 898 S.W.2d, 944 (Tex. App. – Beaumont 195, no writ). a. Did the treating doctor, RME doctor and peerreviewer say surgery was reasonable? If so, it is unreasonable to rely on yet a fourth doctor. b. Did the Carrier “shop” for a doctor until they got the opinion they wanted?
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4)Did the adjuster set up the expert? a. Did the adjuster send the entire file for review? b. Did the adjuster send only selected and favorable parts of the file? c. Did the adjuster leave out a critical report? d. If the experts opinion is based on incomplete or inaccurate information as “set up” by the Carrier then you may not rely on the expert’s opinion. D. Reliance on Legal Precedent 1) Does case law provide a defense? 2)Make sure the facts are applicable. 3)Use a prior district court decision not an Appeals Panel Decision. a. Courts will often ignore a APD no matter the circumstances. IX. That’s all good, but how do you AVOID committing Bad Faith or being accused of committing Bad Faith?A. Common Sense Use your common sense. B. Common Sense C. Common Sense Ask for a second opinion. D. Investigate You can’t be sued for gathering too E. Investigate much information!!! F. Investigate Unless you ignore it.
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G. The most common problem? 1)Adjusters stop using common since 2) Carrier gets personally involved or attached. 3)Leave your personal feelings at home. 4)Most errors are committed when you get emotionally involved in a case… both for and against the Claimant. H. Avoid digging in your heals. 1)If three people have told you should pay a claim, they are probably right. 2) Did your BRC representative and your Attorney both recommend settlement? I. Listen to your attorney (I know that sounds self-serving) 1)You’re paying your attorney to give you advice. 2)They give you advice. 3) Then Carrier’s ignore it and press on. a. Attorney’s… only loved by God and their mothers Develop a relationship with your counsel so that they are just working for you, they are working with you. Too few carriers take this approach with counsel. J. Do the right thing (I know this sounds condescending) 1) Don’t try to “get away with it.” 2) If you think you should pay the full amount, pay it. Don’t try to “low ball” an un-represented Claimant.
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X. Employers… No, I didn’t forget about Employers.A. Employers help contribute to Carrier’s committing Bad Faith. B. Allow your adjusters to adjust. 1. They are licensed (hopefully) 2. They are schooled 3. They are trained 4. They have experience (again, hopefully) C. Employers should tell the adjusters what they think but DO NOT DICTATE TO THEM WHAT THEIR DECISIONS SHOULD BE!!! XI. Don’t forget… even us lowly little workers’ compensation attorneys are actively looking and pursuing Bad Faith.A. My firm has filed signed more Bad Faith claims in the last year than we did in the prior 3-4 years combined.
Bad FaithRoyce V. Bicklein Law Offices of Miller & Bicklein, P.C.
Royce@millerbicklein.com Odessa • Lubbock • San Antonio Royce Bicklein Plaintiff’s /
Claimant’s personal injury attorney practicing in West Texas & South Texas. Board Certified Workers’ Compensation, 2004. Licensed, State Bar of Texas, 1998.
This is a look at Bad Faith from a workers’ compensation Claimant’s attorney perspective. It’s what the average attorney who representsClaimants sees as Bad Faith. Bad Faith is NOT a black and white issue. Its sometimes hard to find and hard to define. The issues of Bad Faith in this article are things that lead to Bad Faith, or at least raise the specter of Bad Faith. I. Bad Faith defined.A. Duty of Good Faith and Fair Dealing. B. Failure to pay a claim when insurer new or should have known liability was reasonably clear. Nice “gray” terms. Not a black & white area. Did the carrier have REASONABLE grounds for denial?
--------------------------------------------------------------------------------
Page 2
II. Why discuss Bad Faith?A. It’s making a comeback. B. Becoming more common in general which means it WILL grow in the workers’ compensation arena. C. Because I’m a Claimant’s attorney and Carrier’s should know that my fellow attorneys and I are looking for it. III. Where is Bad Faith from?A. Common Law 1. Duty of good faith and fair dealing 2. A judicially made concept 3. Created out of the traditionally unequal position of the insurer and insured. B. Statutory Provision 1. DTPA §17.01 2. Texas Insurance Code a. Old version §21.21 b. New version Chapter 5 §541.060 IV. Seminal decisionsA. Aranda v. Ins. Co. of North America, 748 S.W .2d, 210 (Tex. 1988). B. American Motorist v. Fodge, 63 S.W. 3d, 801 (Tex. 2001).
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V. Workers’ compensation insurance coverage does not easily lend itself to a Bad Faith claim.A. Claimant must almost always exhaust his administrative remedies. B. TWCC has exclusive jurisdiction over issues involving workers’ compensation benefits. 1) Questions of paying or not paying benefits must first get a final decision from the TWCC before you can pursue a district court option, even if the claim is tangential to the payment of benefits. 2) Failure to exhaust administrative remedies means: a. Abatement pending exhaustion b. Dismissal for lack of jurisdiction C. Medical claims 1) Such as denied surgery or medical care. 2) Must go through MDR first! D. Indemnity claims 1)Such as slow paying benefits or wrongful denials 2) Must go through the BRC/CCH process first! E. If the Claimant loses at the TWCC administrative level it will be hard to pursue a Bad Faith claim. 1) A Commission decision in the Carrier’s favor is POWERFUL evidence that their position is reasonable. F. If the Claimant prevails at the TWCC administrative level she will still have to prove that the payment was denied when the Carrier knew or should have known liability was reasonably clear. G. Workers’ compensation insurance and the TWCC “system” makes Bad Faith hard to pursue, but NOT IMPOSSIBLE!!!
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Page 4
VI. What are the potential costs to Carriers? Damages!A. Actual damages Mental anguish Loss of earning capacity Loss of credit (watch out for bankruptcy or repossessions) B. Interest C. Court Costs D. ATTORNEY’S FEES 1. This is why a lot of attorney’s are looking at Bad Faith. 2. No matter the amount of the actual damages the Claimant’s attorney can be paid his attorney’s fees for pursuing. E. If deemed to be “Knowing” act Ins. Code calls for Treble Damages F. Common Law Bad Faith allows for Punitive Damages if the Bad Faith was committed in the face of a risk of extraordinary harm. VII. Who gets sued?A. Carrier 1. In Common Law Actions B. Adjuster 1. In. statutory DTPA or Ins. Code actions.
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VIII. Carrier DefensesA. No exhaustion of administrative remedies B. No coverage 1) If no coverage, generally no liability for Bad Faith. 2) Exception to general rule if: a. Extreme conduct causing injuryb. Failure to investigate*Exception to general rule very limited application to workers’ compensation by the Supreme Court decision in Fodge.C. Reliance on an expert 1)MUST be careful that it is an OBJECTIVE report. 2)State Farm Lloyds v. Nicolau, 951 S.W.2d, 444 (Tex. 1997) a. Did expert do lots of work for Carrier? b. Did expert know the effect of his opinion? c. Did expert give same opinion over and over? POINT: If it looks like a “shill” report or that the Carrier “shaped” the opinion then the Court might find reliance on an expert’s report NO DEFENSE AT ALL! 3)Did the Carrier shop for an expert? Liberty Mutual v. Crane, 898 S.W.2d, 944 (Tex. App. – Beaumont 195, no writ). a. Did the treating doctor, RME doctor and peerreviewer say surgery was reasonable? If so, it is unreasonable to rely on yet a fourth doctor. b. Did the Carrier “shop” for a doctor until they got the opinion they wanted?
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4)Did the adjuster set up the expert? a. Did the adjuster send the entire file for review? b. Did the adjuster send only selected and favorable parts of the file? c. Did the adjuster leave out a critical report? d. If the experts opinion is based on incomplete or inaccurate information as “set up” by the Carrier then you may not rely on the expert’s opinion. D. Reliance on Legal Precedent 1) Does case law provide a defense? 2)Make sure the facts are applicable. 3)Use a prior district court decision not an Appeals Panel Decision. a. Courts will often ignore a APD no matter the circumstances. IX. That’s all good, but how do you AVOID committing Bad Faith or being accused of committing Bad Faith?A. Common Sense Use your common sense. B. Common Sense C. Common Sense Ask for a second opinion. D. Investigate You can’t be sued for gathering too E. Investigate much information!!! F. Investigate Unless you ignore it.
--------------------------------------------------------------------------------
Page 7
G. The most common problem? 1)Adjusters stop using common since 2) Carrier gets personally involved or attached. 3)Leave your personal feelings at home. 4)Most errors are committed when you get emotionally involved in a case… both for and against the Claimant. H. Avoid digging in your heals. 1)If three people have told you should pay a claim, they are probably right. 2) Did your BRC representative and your Attorney both recommend settlement? I. Listen to your attorney (I know that sounds self-serving) 1)You’re paying your attorney to give you advice. 2)They give you advice. 3) Then Carrier’s ignore it and press on. a. Attorney’s… only loved by God and their mothers Develop a relationship with your counsel so that they are just working for you, they are working with you. Too few carriers take this approach with counsel. J. Do the right thing (I know this sounds condescending) 1) Don’t try to “get away with it.” 2) If you think you should pay the full amount, pay it. Don’t try to “low ball” an un-represented Claimant.
--------------------------------------------------------------------------------
Page 8
X. Employers… No, I didn’t forget about Employers.A. Employers help contribute to Carrier’s committing Bad Faith. B. Allow your adjusters to adjust. 1. They are licensed (hopefully) 2. They are schooled 3. They are trained 4. They have experience (again, hopefully) C. Employers should tell the adjusters what they think but DO NOT DICTATE TO THEM WHAT THEIR DECISIONS SHOULD BE!!! XI. Don’t forget… even us lowly little workers’ compensation attorneys are actively looking and pursuing Bad Faith.A. My firm has filed signed more Bad Faith claims in the last year than we did in the prior 3-4 years combined.
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