When you make a claim for insurance benefits, you trust that the insurance company will be fair and reasonable when it determines whether your claim is covered. Because of this special relationship between you and your insurance company, Texas law recognizes a “duty of good faith and fair dealing.”Arnold v. Nat’l Cnty. Mut. Fire Ins. Co., 725 S.W.2d 165, 167 (Tex.1987). An insurance company breaches the duty of good faith and fair dealing if it denies or delays paying a covered claim even though the company knows that it has no reasonable basis for denying or delaying the payment.
When you are injured at work and covered by workers’ compensation insurance—just like other folks making a claim for insurance benefits—you are forced to trust and hope that the insurance company will not deny or delay your claim unless the company has a reasonable basis to do so. For example, you may need back surgery as a result of the injury. According to our workers’ compensation system, you must wait to see if and when the insurance company will approve your surgery. The insurance company may have no reason to deny or delay other than it wants to save money. Meanwhile, you not only continue to suffer, but your back might even be further deteriorating. Not surprisingly, almost 25 years ago, the Texas Supreme Court recognized that workers’ compensation insurance companies owe a duty to handle claims for workers’ compensation benefits fairly and in good faith. Aranda v. Insurance Co. of North America, 748 S.W.2d 210 (Tex.1988),
A while back, I represented a worker in exactly the situation I have just described. He needed surgery and the workers’ compensation insurance company refused to authorize it. Unfortunately, as a result of the delay, his condition got considerably worse. We sued the insurance company for breach of the duty of good faith and fair dealing. The jury agreed with us that the insurance company had no reasonable basis for denying and delaying the claim. The jury awarded $545,000 in actual damages to compensate him for the fact that he had suffered and his back had deteriorated as a result of the delay in treatment and also awarded $900,000 in punitive damages—hoping to teach the company to treat the next worker better.
The Texas Supreme Court has just held that Texas workers—like my client—have NO CLAIM against the workers compensation carrier even if the carrier denies or delays payment without any reasonable basis. As a practical matter, if the insurance company denies a claim, the worst that will happen to them is that—if the worker has the resources to fight the insurance company— a state agency might ultimately order the carrier to pay the claim. In other words, the penalty for delaying a covered claim is now: NOTHING.
Over the last decade or so, several national news outlets have labeled the Texas Supreme Court the most conservative state supreme court in the United States. Thus, it is perhaps worth noting that, though all nine justices are Republicans and all frequently described as conservatives, four of them refused to join this 5-4 decision. Chief Justice Jefferson wrote a well-reasoned dissent, and I recommend it as an excellent starting point for anyone interested in learning more about the damage done to rights of all Texans (who don’t own an insurance company). You can read the dissent here:
You can read the majority opinion in Texas Mut. Ins. Co. v. Ruttiger, NO. 08-0751, — S.W.3d —- (Tex. Sup. Ct. June 22, 2012), here: http://www.supreme.courts.state.tx.us/historical/2012/jun/080751_rh.pdf