Texas Mutual Insurance Company v. Maria Garcia and Anthony Garcia ( 2019 )

COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
TEXAS MUTUAL INSURANCE §
COMPANY, No. 08-15-00075-CV
§
Appellant, Appeal from the
§
v. 34th District Court
§
MARIA GARCIA and ANTHONY of El Paso County, Texas
GARCIA, §
(TC# 2005-6345)
Appellees. §
OPINION
In this administrative appeal, Texas Mutual Insurance Company challenges a trial court’s
modified de novo determination that the insurance company improperly suspended the payment of
death benefits to a claimant before a purported settlement agreement between the claimant and an
alleged third-party tortfeasor could be fully funded.
We will affirm the judgment of the trial court.
BACKGROUND
In October 2000, Manny Garcia suffered a fatal on-the-job injury and died. His employer,
Alamito Construction Company, was a worker’s compensation subscriber. Following Manny
Garcia’s death, Alamito’s carrier, Texas Mutual, began paying death benefits to Garcia’s widow
and then-minor child.
Later, the Garcias (including Manny’s two adult sons who were not entitled to death
benefits from Texas Mutual) filed a third-party action against Hansen Construction Company,
alleging Hansen was responsible for Manny’s death (the Hansen Suit). On August 16, 2004,
Hansen’s counsel sent counsel for the Garcias the following letter:
Dear Mr. Scherr:
I write to confirm our telephone conversation of August 16, 2004, wherein
your clients have agreed to accept a settlement offer in the following amounts in
exchange for a full end final release of all claims in the above-referenced case:
Maria Garcia $35,000.00
Anthony Garcia $15,000.00
Jorge Garcia $375,000.00
Juan Manuel Garcia $375,000.00
Further, the plaintiffs must satisfy and my client must be fully and
completely indemnified from any and all medical expenses, third party claims, or
other liens or claims arising from this incident. This letter will serve as our interim
agreement until we can execute a formal release and dismissal. Once I receive the
settlement checks, I will forward them to your attention along with the appropriate
settlement documents for your clients’ signatures.
If my understanding is correct, please sign in the space provided below and
return to me. If my understanding is incorrect, please advise me immediately.
Counsel for the Garcias signed the letter. But before the interim agreement could be funded
or paid, Texas Mutual suspended the payment of death benefits to the eligible Garcias and
intervened in the Hansen Suit to assert a right to reimbursement from any third-party settlement
funds. Litigation in the Hansen Suit continued; Texas Mutual, Hansen, and the Garcias entered
mediation; the Garcias made concessions to Texas Mutual regarding amounts to be assigned to
Texas Mutual for reimbursement purposes and future credits; and eventually Hansen distributed
funds to Texas Mutual and the Garcias on August 19, 2005. All parties agree that the offset was
exhausted in November 2011, and that Texas Mutual has resumed paying some benefits.
However, while the Hansen Suit was still pending, the Garcias challenged Texas Mutual’s
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suspension of death benefits in an administrative proceeding before the Division of Worker’s
Compensation (DWC). The DWC addressed four questions, with the final three questions being
added at the request of Texas Mutual:
• Is the Carrier entitled to suspend the beneficiaries’ benefits to offset a third-
party recovery?
• On what date did Maria Garcia and Anthony Garcia recover a third party
settlement?
• What were the correct accrued benefits paid by Texas Mutual on the date of the
third party settlement per Texas Labor Code Section 417.002(a)?
• Because of the third party settlement recovery, if any, what is the correct
amount of the advance on future benefits per Texas Labor Code Section
417.002(b)?
DWC sided with Texas Mutual, holding that the insurance company properly suspended
death benefit payments beginning on the date the Garcias signed the interim agreement with
Hansen. The district court sitting on appeal disagreed, finding that Texas Mutual could not have
properly suspended payment of death benefits until a later date when the Hansen litigation
settlement was actually paid and rendering summary judgment accordingly.
This appeal followed.
DISCUSSION
In Issues One and Two, Texas Mutual asks this Court to determine whether the Garcias
“recovered” from a third party on August 16, 2004 (the date the Garcias signed the purported
settlement agreement with Hansen) or on August 19, 2005 (the date Texas Mutual and the Garcias
received their checks from Hansen). In Issue Three, Texas Mutual asserts in the alternative that
the district court lacked jurisdiction or authority to render a judgment awarding the Garcias
damages and interest.
We agree with the district court’s decision. Texas Mutual had a duty to continue paying
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death benefits unless and until the Garcias recovered money in the Hansen Suit. Nothing barred
the district court from awarding damages and interest based on its calculation of the correct date
of recovery.
Standard of Review
A district court reviews a DWC appeal under a modified de novo standard of review. Tex.
Builders Ins. Co v. Molder, 311 S.W.3d 513, 518 (Tex.App.—El Paso 2009, no pet.). A district
court trial from a DWC decision is “limited to issues decided by the appeals panel and on which
judicial review is sought.” TEX.LAB.CODE ANN. § 410.302. The appealing party has the burden
of proof by a preponderance of the evidence. TEX.LAB.CODE ANN. § 410.303.
Date of Third-Party Recovery
We begin by determining when the third-party recovery occurred for purposes of the
Section 417.002 suspension provision.
Under the Worker’s Compensation Act, injured workers and their statutory beneficiaries
may recover money for compensable injuries from either their employer’s worker’s compensation
carrier or from a third-party tortfeasor. TEX.LAB.CODE ANN. § 417.001(a). However, if an injured
worker accepts worker’s compensation benefits from the carrier and then elects to recover money
from a third-party tortfeasor, “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.” TEX.LAB.CODE ANN. § 417.001(b). “If the recovery” against a third party
exceeds 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.” TEX.LAB.CODE ANN. §§ 417.001(b)(1)-(2).
“Any amount recovered that exceeds the amount of the reimbursement required . . . shall be treated
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as an advance against future benefits, including medical benefits, that the claimant is entitled to
receive under the subtitle.” TEX.LAB.CODE ANN. § 417.002(b).
At issue in this case is one central question: what constitutes a “recovery” sufficient to
suspend benefits under Section 417.002?
Texas Mutual insists that because recovery is undefined in the Labor Code, we must defer
to the DWC’s administrative interpretation of the statute. See TGS-NOPEC Geophysical Co. v.
Combs, 340 S.W.3d 432, 438 (Tex. 2011)(courts defer to agency’s interpretation of a statute when
there is “vagueness, ambiguity, or room for policy determinations” in the statute, unless that
interpretation is “plainly erroneous or inconstant with the language of the statute”). And since the
DWC determined that the Garcias “recovered” an award when they signed the interim agreement
with Hansen even though the agreement was never funded and the terms of that agreement were
never executed, that determination is dispositive in our interpretation of the relevant statutes. But
we need only defer to an agency’s interpretation of a statute if that statute is ambiguous. See id.
Section 417.002, when read in the context of its sister provisions dealing with third-party liability,
is not ambiguous. The statutory scheme is clear. We agree with the Garcias that recovery occurs
for Section 417.002 benefit suspension purposes once monies are obtained from a third-party
tortfeasor.
“We read statutes as cohesive texts; we do not cherry-pick words and phrases, read them
in isolation, and then decide they alone represent the Legislature’s intent while ignoring the proper
context of those words and phrase.” Brazos Elec. Power Coop., Inc. v. Texas Comm’n on Envtl.
Quality, 538 S.W.3d 666, 685 (Tex.App.—El Paso 2017, pet. granted). “Harmonization of all
statutory provisions in a way that is consistent with legislative intent is always our primary goal,
if at all possible.” Id. Particular words or phrases should in general “be interpreted consistently
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in every part of an act.” Id. at 692. As we have previously noted, the separate provisions of
Chapter 417—all dealing with third-party liability—are best understood when read together in
context. See New Hampshire Ins. Co. v. Rodriguez, -- S.W.3d --, No. 08-15-00173-CV, 2019 WL
168482, at *18 (Tex.App.—El Paso Jan. 11, 2019, pet. filed)(“Sections 417.001(b) and 417.002
do no operate in vacuums . . . the two provisions are linked, and we must interpret them in light of
each other.”). When Chapter 417’s provisions are read as a whole, it becomes clear that the
Legislature intended for benefit payments to be suspended only upon the actual disbursement of
sufficient funds from a third-party recovery.
Section 417.001(b), which defines the scope of the carrier’s subrogation interest in a third-
party liability situation, provides that if a “recovery” exceeds the insurance carrier’s subrogation
interest, the insurance carrier shall “reimburse itself and pay the costs from the amount recovered”
and “pay the remainder of the amount recovered to the injured employee or the legal beneficiary.”
TEX.LAB.CODE ANN. § 417.001(b). In this context, it is clear that “recovery” refers to money
actually received in the course of legal proceedings—common sense dictates that one cannot
“reimburse” oneself or pay a “remainder” from uncollected money. Section 417.002 reaffirms
that this is the proper reading of the statute by referring to an “amount recovered” in excess of
reimbursement costs being treated as an advance against future benefits.
Texas Mutual cites several cases in support of its argument that for the purposes of
suspending death benefits, recovery occurs upon the execution of an agreement with the third-
party tortfeasor. Putting aside any potential statutory interpretation disagreements with our sister
courts and accepting those cases’ interpretations as being true for the sake of argument, those other
cases are still distinguishable on their facts.
In City of Garland v. Huston, 702 S.W.2d 697, 700 (Tex.App.--Dallas 1985, writ ref’d
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n.r.e.), minor children objected to the trial court releasing the City of Garland from the payment of
future compensation benefits because they had not recovered actual money at the time of judgment.
The Dallas Court of Appeals, citing Black’s Law Dictionary definition of recovery as involving
“the restoration or vindication of a right existing in a person[] by formal judgment or decree of a
competent court,” held there had been a “recovery” under the statute because the trial court’s
judgment vested the minors with the right to money from the City but delayed payments until a
later date. Id. City of Garland is inapplicable here because that case involved a final judicial
decision releasing the City from prospective future compensation benefits, not the signing of an
interim agreement among parties that went unenforced at an intervenor-carrier’s request combined
with the carrier’s unilateral suspension of current benefits pending a final post hoc administrative
or judicial decision as to benefits status. Likewise, American General Fire & Casualty Company
v. McDonald, 796 S.W.2d 201, 202-03 (Tex.App.--San Antonio 1990, writ denied) involved an
arrangement similar to that in City of Garland: the trial court rendered a final judgment that
provided for a minor child’s future recovery of an amount held in safekeeping by the minor’s
mother. Because the child was vested with a future award by judicial decree, he received a
“recovery” under the statute and the carrier was entitled to a determination of future credit and
readjustment of prospective benefit obligations on remand. Id. at 204-05. Here, there was no final,
enforceable judicial or administrative decree vesting the Garcias with a right of recovery from
Hansen.1 Absent such a formal decree, we rest on our determination that the statute requires actual
disbursement of third-party funds before a carrier may be entitled to suspend payments. The third
case Texas Mutual cites simply holds that when a worker settles a claim with a third party, the
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Texas Mutual maintains that notwithstanding in its intervention in the Hansen Suit in an attempt to defeat
enforcement of the interim agreement as written, the interim agreement signed in the Hansen Suit was a nevertheless
a fully enforceable and irrevocable Rule 11 agreement legally equivalent to a judgment.
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carrier is subrogated to the rights of the worker in that third party litigation. See Travelers Ins. Co.
v. City of West Columbia, 482 S.W.2d 53, 56 (Tex.App.—Houston [1st Dist.] 1972, writ ref’d
n.r.e.).
Finally, Texas Mutual complains that requiring a carrier to continue paying out benefits
when a covered employee attempts to negotiate a third-party settlement that could potentially
prevent the carrier from recovering first money is unjust. But the Labor Code imposes a statutory
duty on carriers to continue paying benefits until the DWC resolves the controversy: “An insurance
carrier shall continue to pay benefits promptly as and when the benefits accrue without a final
decision, order, or other action of the commissioner, except as otherwise provided.”
TEX.LAB.CODE ANN. § 409.023. Additionally, carriers have a defined remedy in such situations.
If the worker does recover from a third party without allowing the carrier to reimburse itself, the
carrier can bring a conversion action directly against the worker. See Tex. Mut. Ins. Co v.
Ledbetter, 251 S.W.3d 31, 38 (Tex. 2008).
We see nothing in the statutes that would prevent a carrier from later recouping benefits it
believed were wrongly paid out pending a final DWC decision. As such, we will not read into the
statutes the extratextual power of a carrier to unilaterally and without DWC pre-approval suspend
benefit payments prior to the actual funding of a third-party recovery. Indeed, such a holding from
this Court would essentially write Section 409.023’s continuous-payment-pending-judicial-
resolution requirement out of the Labor Code. Allowing a carrier to suspend death benefits before
the outcome of third-party litigation is completed and a recovery funded in fact subverts the
purposes of the Act, namely, to ensure both that beneficiaries receive benefits to which they are
entitled from carriers and to allow carriers to mitigate insurance costs when beneficiaries recover
amounts from third parties.
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The DWC erred in determining that recovery occurred when the interim agreement was
signed. We hold that in the absence of a formal judicial or administrative decree, recovery occurs
once third-party funds are actually disbursed, at which point a carrier may suspend benefit
payments if the conditions set out in Section 417.002 are otherwise met, i.e., the worker’s post-
reimbursement remainder recovery is sufficient to cover future expenses in whole (at which point
benefit payments may cease entirely) or in part (at which point the carrier may treat the award as
an advance against future benefits until the amount of the award is exhausted).
Issues One and Two are overruled.
Damages and Interest
In Issue Three, Texas Mutual contends that the trial court lacked jurisdiction to render an
award of damages and prejudgment interest, and that the proper course of action here is remand to
the DWC for re-calculation. The Garcias counter that the trial court could award damages because
that issue was before the DWC. With respect to the interest award, the Garcias argue that the
Texas Rules of Civil Procedure apply in all civil actions involving the Act unless a specific Act
provision conflicts. Since there is no Act provision prohibiting the award of prejudgment interest,
the trial court was within its right to include it in its judgment.
We agree with the Garcias.
Texas Mutual is correct that the trial court sitting on appeal is limited to solely those issues
considered by the DWC Appeals Panel. But remand to the DWC for a calculation of back-owed
benefits is unnecessary here. “[A] court cannot award compensation benefits, except on appeal
from a Commission ruling[.]” Am. Motorists Ins. Co. v. Fodge, 63 S.W.3d 801, 804 (Tex. 2001).
We find that the damages-for-back-owed-benefits issue is sufficiently subsumed within the
question of when a recovery occurred so as to allow the trial court to reach it sitting on modified
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de novo review of the DWC’s decision, especially given that the amount owed is readily calculable
and Texas Mutual does not otherwise assert that the mathematical calculation made by the trial
court using the date of actual monetary disbursement was incorrect. Indeed, the question of the
amount of benefits was an issue squarely before the DWC.
As for the interest issue, Texas Mutual asserts that we must remand to the DWC for
calculation of appropriate interest, given that the trial court ordered five percent recovery when the
Texas Labor Code requires the use of a floating interest rate tied to the one-year treasury bills rate
issued by the United States Treasury. See TEX.LAB.CODE ANN. § 401.023. An appellant must
show it is entitled to reversal by citing to the law, citing to the record, and making argument.
However, Texas Mutual does not provide this Court with any argument that the treasury rate during
the period is not five percent, nor does it point to evidence showing five percent was the incorrect
rate or otherwise explain why remand for re-calculation is more appropriate than rendition. See
TEX.R.APP.P. 43.3 (in reversing a trial court the court of appeals should render judgment the trial
court should have rendered unless remand is necessary for further proceedings or the interest of
justice require remand for a new trial). Absent proof of harm, we cannot reverse on this point.
Issue Three is overruled.
CONCLUSION
The judgment of trial court is affirmed.
April 3, 2019
YVONNE T. RODRIGUEZ, Justice
Before McClure, C.J., Rodriguez, J., and Larsen, Senior Judge
Larsen, Senior Judge (Sitting by Assignment)
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