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Texas high court disallows unfair settlement claim against workers comp insurer


AUSTIN, Texas—Injured employees cannot sue workers compensation underwriters for violating a portion of Texas’ Insurance Code that addresses unfair claims settlement practices on the part of insurers, the Texas Supreme Court has ruled.

Friday’s decision in Texas Mutual Insurance Co. vs. Timothy J. Ruttiger involved a worker who claimed he was injured while carrying pipe in 2004. But a co-worker testified that Mr. Ruttiger may have been injured playing softball, and a disagreement with Texas Mutual ensued and benefits payments were delayed.

In 2005, while his claim was pending, Mr. Ruttiger sued Texas Mutual on allegations that it violated the state’s Insurance Code and its duty of good faith and fair dealing. He also sued alleging violations of Texas’ Deceptive Trade Practices Act.

He alleged the delay in paying income and medical benefits damaged his credit; worsened his medical condition; and caused mental anguish, physical impairment, and pain and suffering, court records state.

A jury eventually found the insurer engaged in unfair and deceptive practices and acted in bad faith. A state appellate court affirmed much of the trial court’s judgment.

Appeal to state high court

Among its arguments on appeal to the Texas Supreme Court, Texas Mutual argued that the trial court lacked jurisdiction to award bad faith damages, the state Insurance Code’s causes of action did not apply in this case, bad faith claims should not be allowed in workers comp cases, and there was no evidence that Texas Mutual knowingly violated the Insurance Code.

Among other findings in overturning most of the lower courts’ rulings, the state high court ruled that “claims against workers compensation insurers for unfair settlement practices may not be made under the Insurance Code.”

The Texas Supreme Court also ruled that “claims under the Insurance Code may be made against those insurers for misrepresenting provisions of their policies, although in this case there was no evidence the insurer did so.”

Regarding the bad faith allegation, the state Supreme Court remanded the case to the appellate court for further consideration.

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