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No common law recourse against insurers in workers comp case: Texas high court

Posted On: Jun. 25, 2012 12:00 AM CST

AUSTIN, Texas—The Texas Supreme Court has ruled that workers cannot use common law claims to sue workers compensation insurers for bad faith handling of a worker's case.

The 5-4 decision Friday in Texas Mutual Insurance Co. vs. Timothy J. Ruttiger was a rehearing of a decision issued last August by the state high court. Both rulings said injured workers cannot sue insurers for unfair settlement practices under the state's insurance code, but also said that insurers can be sued for misrepresenting provisions of their insurance policies.

In its ruling Friday, the Texas high court considered whether Texas' workers comp reforms in 1989 eliminated the common law ability for workers to sue insurers for bad faith based on a 1988 decision in Miguel Aranda vs. Insurance Co. of North America et al.

In overruling Aranda, the majority opinion said that workers comp reforms in the state had established “meaningful, binding administrative dispute resolution procedures” that eliminated the need for common law recourse against insurers who act in bad faith.

“One of the legislature's unquestioned goals was to make decisions about benefits as objective as possible, and thereby reduce disputes and litigation over them,” the majority ruled. “The Aranda cause of action with its subjective standards for damages is antithetical to such a system, and it has no dispute resolution process other than litigation with its associated delays and expense.”

The court's minority opinion rejected the idea that Texas lawmakers meant to eliminate the state's common law bad faith remedy when they enacted workers comp reforms.

"The 1989 act...did not repudiate, but rather acknowledged, the viability of extra-contractual claims against workers' compensation insurance carriers,” the opinion reads. “This is enough to decide the case before us.”