Texas Workers' Compensation: A Model of Stability Now on the Verge of Possible Change

Entering 2014, the Texas workers’ compensation system seemed to be a model of stability; something that would have been impossible to imagine only ten years ago. There was little controversy in the system and no major administrative rule changes were needed. In fact, other states began to look at Texas as a model for a workers’ compensation system that “works”. But, of course, Texas workers’ compensation can never stay quiet for too long.

In June 2014, Commissioner Rod Bordelon announced his upcoming retirement effective August 1, 2014. On July 28, 2014, Texas Governor Rick Perry announced the appointment of Ryan Brannan as the next Commissioner of Workers’ Compensation. Commissioner Brannan assumed office on August 1, 2014. Norman Darwin, Employee Counsel for the Office of Injured Employee Counsel also retired as of July 31, 2014. On October 31, 2014, the Governor appointed Jessica Corna as the new employee counsel.

During the summer of 2014, a series of news articles proclaimed that the Texas workers’ compensation system was not working for some injured workers and alleged problems for workers employed by non-subscribers. In particular, the articles proclaimed that nearly half of all claims were being disputed by insurance carriers. Data from the Department of Insurance’s Workers’ Compensation Research and Evaluation Group (WCREG) did not support the articles’ conclusions. According to data from the WCREG, the number of whole claim denials is down 43% since 2003, and the number and percentage of claims with dispute proceedings is at the lowest level since 2008. Also, according to the same data, for 2013, approximately 12% of reportable claims are initially denied/disputed by insurance carriers.

In April, a legislative committee raised questions about the number of Texas workers without workers’ compensation insurance, estimated to be approximately 500,000, and heard from interested labor and worker groups about the need for increased scrutiny of non-subscriber employers. Expect this issue to continue to be a topic of discussion going into the 2015 Texas legislative session.

Updates and Enhancements to the Texas Workers' Compensation Handbook, 2015 Edition

There were several court decisions of note in 2014. These cases and others are summarized in Texas Workers' Compensation Handbook, Part II, Case Summaries, and covered in Ch. 14, § 14.06, and Ch. 15, §§ 15.02-15.04. In separate decisions, Tillman v. Memorial Hermann Southwest Hospital and West Houston Medical Center v. Shelley, Texas appellate courts clarified that certain workplace injury claims against non-subscriber hospitals are subject to the Texas Medical Liability Act. The decision in Davis v. Texas Mutual Insurance dissected the nuances of whether certain activities while traveling could be considered to be within the course of scope of one’s employment. In that case, walking and being hit by a bike the day before a scheduled work meeting was not considered to be within the course and scope of employment.

The courts also settled a question in the subrogation arena involving how the carrier can treat a recovery by multiple beneficiaries for purposes of the carrier’s right to recovery. In State Office of Risk Management v. Carty, the Texas Supreme Court held that a carrier’s right to treat a third-party recovery as an advance against future benefits in a case involving multiple beneficiaries of the same covered employee should be determined on a collective-recovery basis.

Texas courts, in Davis v. American Casualty Co. of Reading, PA., and Hopper v. Argonaut Insurance Co., continued to uphold the Ruttiger decision, making it clear that bad faith claims brought under the Insurance Code, and at common law, are no longer part of the workers’ compensation system. In response, many plaintiffs’ lawyers have pushed for reinstatement of bad faith as a cause of action in workers’ compensation. This has led to speculation that the issue may be brought up for consideration in the 2015 legislative session as a new statutory cause of action. Others will likely be watching the Division of Workers’ Compensation’s response to allegations of carrier wrongdoing in claims handling decisions.

The law regarding challenging the first certification of MMI/IR changed dramatically causing an uproar and a change in practices for practitioners on both sides. In the past, successfully challenging a certification was as easy as alleging a new body part (or proving a body part was not included). Years of Appeals Panel precedent were overturned in two decisions that held the Rule 130.1 defenses no longer as a matter of due course render the first certification invalid. Failing to rate a sprain/strain does not meet the statutory definition of compelling medical evidence of significant error. The Appeals Panel clarified later that a herniated disc did meet the definition. More precedent will be forthcoming. See Texas Workers' Compensation Handbook, Part I, Ch. 5, § 5.05[8].

The former commissioner stated the biggest challenge left to his predecessor was the dispute resolution process. DWC leaders met with stakeholders including practitioners on both sides. New changes include the scheduling order now used by BROs if a second BRC is scheduled. DWC is placing even greater emphasis on making sure the parties are prepared and ready to resolve their disputes at these hearings. And the most common CCH issue by far is the extent, MMI, and IR. See Texas Workers' Compensation Handbook, Part I, Ch. 11, § 11.01[3].

For the first time, the Texas Workers' Compensation Handbook includes a bench bar book. The bench bar book provides guidance on what the hearing officer finds effective in pre-hearing motions, documentary evidence, examination of witnesses and argument. Although each hearing officer employs a different style, hearing officers are consistent when demanding polite, courteous, and professional behavior from the attorneys that practice before them. Hearing officers also seek more efficient presentation of cases (both evidentiary and testimonial) repeating a refrain given by many post-jury verdict interviews: “We got it the first, second, and third time.” Practitioners would be well advised to read the bench bar book before trying a case in front of a hearing officer. See Texas Workers' Compensation Handbook, Part VI, Bench Bar Book.

The Road Ahead

And finally, in November 2014, the state elections resulted in a new Governor and Lieutenant Governor, along with a new Attorney General, and numerous other statewide elected officials. It is unknown what effect these new office holders will have on the Department of Insurance and the Division of Workers’ Compensation, in terms of appointment of both commissioners, legislative initiatives, and the overall direction of Texas government. As evidence of potential changes, in early December 2014, new Texas Governor-elect Greg Abbott, announced that the insurance commissioner, Julia Rathgeber, would be resigning effective January 20, 2015, and joining his staff.  A new insurance commissioner has not been announced.

Texas continues to make progress in its workers’ compensation system but changes in leadership, and ongoing discussion of contentious policy issues by interested stakeholders, means that observers, and system participants, should stay abreast of issues and events happening in the Texas system.

Albert Betts, Jr.
Stuart D. Colburn

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