Texas Mutual Insurance to Appeal 14th Court's Decision to Texas Supreme Court

AUSTIN, Texas, Aug. 27 /PRNewswire/ -- Texas Mutual Insurance Company
(TMIC) said it would appeal to the Supreme Court a decision handed down today
by the 14th Court of Appeals.
The 14th Court rejected Texas Mutual's appeal of a jury verdict from a
district court in Harris County found TMIC acted in bad faith and that the
company had knowingly violated the insurance code. The jury also had found
that plaintiff P. Lance Morris had mental anguish and loss of credit
reputation damages because of TMIC's actions.
The 14th Court of Appeals today held that the evidence was sufficient to
support the jury's entire verdict, with the exception of the loss of credit
reputation damages.
"In Texas Mutual's opinion, the court did not correctly apply the law to
the facts of this case," Mary Nichols, Texas Mutual's general counsel, said.
"We feel strongly that allegations of negligence in claims handling or the
fact that the insurance carrier has a difference of an opinion with an injured
worker regarding the extent of his work-related injury does not rise to the
level of bad faith. Texas Mutual intends to appeal this decision to the Texas
Supreme Court. The facts of this case speak for themselves," Nichols said.
Texas Mutual Insurance Company
Texas Mutual Insurance Company (TMIC) is the state's leading provider of
workers' compensation insurance, with offices in Austin, Dallas, Houston and
Lubbock. TMIC has been serving Texas since 1991 when the Texas Legislature
first chartered the Texas Workers' Compensation Insurance Fund and gave it the
task of stabilizing the workers' compensation system. In 2001, the Legislature
redesigned the charter and changed its name to Texas Mutual Insurance Company.
http://www.texasmutual.com
Background on Case
On June 12, 2000, Morris reported an injury to his lower back while
working for Justin Volunteer Fire Department, a TMIC policyholder. Morris
claimed that he injured his lower back after lifting an accident victim. Texas
Mutual accepted the claim and paid for several visits to a chiropractor for
treatment. Morris missed only a brief period of time from work as a result of
this injury.
On March 23, 2003, almost three years after the injury, Morris went to an
emergency room complaining of severe back pain. The hospital referred him to a
surgeon who said Morris required surgery for a herniated disc in his lower
back. The surgeon requested preauthorization to perform the surgery, and after
finding that the surgery was medically reasonable and necessary, Texas Mutual
granted the request and approved surgery. Morris had the surgery shortly
thereafter. On April 3, 2003, a TMIC adjuster reviewed the new medical records
pertaining to Morris' back condition and called the Justin fire chief to
inquire about Morris' ability to return to work after his initial injury. The
fire chief said Morris had returned to work full duty after only a brief
period off. The adjuster then filed a notice with the Texas Workers'
Compensation Commission stating that Texas Mutual disputed that the June 2000
compensable injury extended to and included the new disc herniation.
During a benefit review conference at the Commission, Morris agreed to
attend a required medical examination with Stephen DeYoung, M.D., a
board-certified orthopedic surgeon. Dr. DeYoung reported that he could not
determine whether the June 2000 injury aggravated Morris' pre-existing
degenerative lower-back condition, which led to the disc herniation, or
whether the disc herniation was simply a part of the aging process. The
physician also said that if Morris had no history of lower back problems
before June 2000, and if the medical records showed that Morris continued to
have problems with his lower back between June 2000 and March 2003, the
physician would give him the benefit of the doubt and say that the disc
herniation was causally related to the June 2000 work-related injury. The
dispute continued on to a contested case hearing where a hearing officer
determined that the disc herniation was causally related to the June 2000
work-related injury. Texas Mutual did not appeal, though it had the right to
agency appeals panel and judicial review. Texas Mutual paid for the surgery.
After the favorable agency decision, Morris sued Texas Mutual for bad
faith. He alleged that TMIC failed to conduct a reasonable investigation
before disputing that the disc herniation was related to the June 2000 minor
back injury. Morris further alleged that TMIC's adjuster failed to send
pertinent medical records to Dr. DeYoung before the medical exam, which would
have proven Morris' claim. In fact, the medical records in question were
erroneously identified in the claim file as a different document type and were
inadvertently omitted from the records TMIC sent to Dr. DeYoung before the
exam.
During the discovery phase of the bad faith lawsuit, TMIC learned that
Morris sustained an injury to his lower back in 1998 and obtained treatment
from the same chiropractor he saw for the June 2000 work-related injury.
Morris had never disclosed the 1998 injury and in fact testified during the
contested case hearing that he had not injured his lower back before June
2000. Because of this revelation, Texas Mutual filed a counterclaim against
Morris for fraud.
The bad faith case went to trial in March, 2006, in the 11th District
Court in Harris County. In a 10-2 verdict, the jury found that TMIC violated
its duty of good faith and fair dealing in disputing the causal connection
between the June 2000 injury and the 2003 disc herniation that required
surgery. The jury awarded Morris $50,000 for past mental anguish; $25,000 for
past damage to his credit reputation; $50,000 for future damage to his credit
reputation; and $120,000 in attorneys fees. The jury further awarded Morris
$500,000 in additional damages because it found that TMIC knowingly violated
the insurance code, an amount that the trial judge reduced to $250,000. The
jury declined to find that Morris defrauded TMIC. The Court of Appeals
eliminated the credit reputation damages from Morris' award.
Media Contact:
Elizabeth Christian
echristian@echristianpr.com
Elizabeth Christian & Associates Public Relations, (512) 472-9599

SOURCE Texas Mutual Insurance Company

Elizabeth Christian of Elizabeth Christian & Associates Public Relations,
+1-512-472-9599, echristian@echristianpr.com, for Texas Mutual Insurance
Company