Texas Workers’ Compensation Legal Trends for 2016

By Joe Anderson, Albert Betts, Jr. and Stuart Colburn

The following provides a brief overview of some of the events and decisions impacting the Texas workers’ compensation system.

Legislative Issues

Unlike many other states, Texas’ legislature meets biennially and 2017 is a session year. Since the last session, there have been hearings before the House Business and Industry Committee discussing the designated doctor program in Texas, including the Division of Workers’ Compensation’s oversight of designated doctors. In addition, the legislature heard testimony and comments on the adequacy of lifetime income benefits and death benefits for surviving spouses.

In a second hearing the legislature heard various workers’ compensation attorneys, who represent injured workers, testify as to perceived inadequacies of the Texas system to address allegations of inappropriate carrier denials of benefits. In short, they alleged that without the ability to sue insurance carriers for “bad faith” in claims handling, that injured workers lacked an appropriate remedy outside the Division’s ability to issue fines and penalties. For 2017, the legislature will likely hear more on the issue of the Division’s enforcement efforts and attempts to revive some form of recovery for injured workers when a carrier has acted in “bad faith” when handling a claim.

The legislature will likely address how to better define qualifications for lifetime income benefits in cases involving traumatic head injuries. The current statute uses the outdated term “imbecility” as a qualification for the benefits. A recent court decision, Chamul v. Amerisure Mutual Insurance Company, held that the Division’s definition of “imbecility” was outdated and wrong, but the court did not offer a new definition. Stakeholders are working on an updated qualification in preparation for the 2017 session.

Workers’ compensation fraud and how to structure and fund an office dedicated to fraud prosecution will likely be an issue for the 2017 session. As background, since late 2015, the Department of Insurance and Division have been working with stakeholders and legislators to revise the program for prosecuting workers’ compensation fraud cases.

And despite prior unsuccessful attempts to make Texas a mandatory workers’ compensation state, or at least mandatory for construction workers, the issue could be raised again. Texas’ model has been cited in other states which are considering alternatives to mandatory workers’ compensation coverage. Oklahoma, for example, adopted an “opt-out” program for employers. Although this is different than Texas’ system, wherein employers “opt-in” to be subscribers to the workers’ compensation system, the Oklahoma approach is also being contemplated in other states. Note that in September 2016, the Oklahoma Supreme Court ruled that the Oklahoma system was unconstitutional and it remains to be seen what impact, if any, this will have on other states.

Regulatory Compliance

The Division has recently reorganized its enforcement program and named a new director of enforcement. Enforcement staff, which, since late 2008, had reported to the insurance commissioner, now reports to the workers’ compensation commissioner. At the present time, it is unclear if these changes would mean any change in enforcement focus, but stakeholders should be sure to keep up-to-date on benefit payment and claims handling rules.

In public remarks, the commissioner has continued to stress that the Division continues to be concerned about the accuracy of benefit payments for injured workers or their beneficiaries, particularly lifetime income benefits and death benefits. Carriers and their claims administrators are again advised to pay close attention to making accurate and timely benefit payments.

Legal Issues

There were numerous cases addressing under what situations a co-employer or subcontractor would be considered the statutory employer for purposes of the Texas Workers’ Compensation Act. For example, in Kershner v. Samsung Austin Semiconductor, and TIC Energy & Chem., Inc. v. Martin, courts dealt with an alleged conflict between the Labor Code provisions defining independent contractors and those permitting general contractors to provide coverage for its subcontractors.

Further, courts dealt with disputes among parties on large construction projects over indemnification and waiver of liability contract language. Generally, the courts in N.H. Ins. Co. v. Mora, and Ins. Co. of the Pa. v. Roberts, focused on the specific language of the waiver of liability provisions and the insurance contract agreement between the parties.

Also, the Division intervened in a court case involving a dispute over entitlement to supplemental income benefits. The parties in Tex. Dep't of Ins. v. Jones, had settled on an amount that was a portion of contested benefits but the Division argued that the settlement amount was inconsistent with the law’s requirements for entitlement and amount of supplemental income benefits. The Texas Supreme Court agreed with the Division that any settlement had to comply with all provisions of the Workers’ Compensation Act.

© Copyright 2016 LexisNexis. All rights reserved. Excerpted from the upcoming Texas Workers’ Compensation Handbook, 2017 Edition, on sale in January 2017.