Opinion

Violanda Soledad v. Texas Farm Bureau Mutual Insurance Company

Court: Texas Court of Appeals, 3rd District (Austin)
Filed: Nov 16, 2016
Status: Published
Cited by: 0 cases
Authority: More cited than 3.3%

“There is nothing discretionary about this statute; a carrier's right to reimbursement is mandatory.”

How later courts described this case

“There is nothing discretionary about this statute; a carrier's right to reimbursement is mandatory.”
construction of statute is reviewed de novo
“Ms. Kesterson is barred from suing Mr. Wallut due to his immunity under workers' compensation law, which is a substantive limitation on her right to sue him. So ... she was not ‘legally entitled to collect’ from Mr. Wallut under the State Farm uninsured motorist policies.”
“[T]he Workers' Compensation Act precludes Appellant from recovering damages from Mr. Olander. Thus, pursuant to the plain language of the policy, Appellant [sic] is not required to provide to Appellant UM or UIM coverage.”

Written by the judges who cited it.

The opinion

ACCEPTED

03-16-00203-CV

13816645

THIRD COURT OF APPEALS

AUSTIN, TEXAS

11/16/2016 9:25:40 AM

JEFFREY D. KYLE

CLERK

CASE NO. 03-16-00203-CV

THE COURT OF APPEALS FILED IN

3rd COURT OF APPEALS

THIRD COURT OF APPEALS DISTRICT AUSTIN, TEXAS

AUSTIN, TEXAS 11/16/2016 9:25:40 AM

JEFFREY D. KYLE

Clerk

VIOLANDA SOLEDAD,

Appellant

vs.

TEXAS FARM BUREAU MUTUAL INSURANCE COMPANY,

Appellee

**************************************

On Appeal from the Burnet County Court

Burnet County, Texas

Trial Court Cause No. C4358

**************************************

Appellant’s Motion for Rehearing

**************************************

CHRIS JACKSON JIM RODMAN

ATTORNEY AT LAW ATTORNEY AT LAW

State Bar No. 10454600 State Bar No. 17139525

1812 Center Creek Dr., Suite 275 1515 W. 35th St., Suite C

Austin, Texas 78754 Austin, Texas 78703

c_jackson@sbcglobal.net jimrodman@rodmanlawoffice.com

512-478-1699 - Phone 512-481-0400 - Phone

512-821-2943 - Facsimile 512-481-0500 - Facsimile

Counsel for Violanda Soledad

Table of Contents

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Arguments and Authorities

A. The Purpose of Relevant Statutes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1. The Exclusive Remedy Provision.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

2. The UM Statute.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

3. Additional Guides for Interpreting Insurance Policies. . . . . . . . . . . . 6

B. The Appellant is Legally Entitled to Recover Damages from

her Employer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

C. Valentine is not Controlling Precedent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Prayer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Certificate of Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Certificate of Service.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Appendix

Table of Authorities

Cases

Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663 (Tex. 1987). . . . . . . . . . . . . . . . 6, 8

Briones v. State Farm Mut. Auto. Ins. Co.,

790 S.W.2d 70 (Tex. App. — San Antonio 1990, writ denied). . . . . . . 12, 13

Casualty Reciprocal Exch. v. Demock,

130 S.W.3d 74 (Tex. App. — El Paso 2002, no pet.).. . . . . . . . . . . . . . . . 7-8

City of Corpus Christi v. Gomez,

141 S.W.3d 767 (Tex. App. — Corpus Christi 2004, no pet.). . . . . . . . . . . . 7

Employers Cas. Co. v. Dyess,

957 S.W. 2d 884 (Tex. App. — Amarillo 1997, pet. denied). . . . . . . . . . . 12

Forbau v. Aetna Life Insurance Company, 876 S.W.2d 132 (Tex 1994).. . . . . . 6, 7

Liberty Mut. v. Kinser,

82 S.W.3d 71 (Tex. App. — San Antonio 2002, pet. w’drawn). . . . . . . . . . 8

RSUI Indem. Co. v. The Lynd Co., 466 S.W.3d 113 (Tex. 2015).. . . . . . . . . . . . . . 6

Resolution Oversight Corp. v. Garza,

03-08-00481-CV, 2009 WL 1981424 (Tex. App. — Austin,

July 10 2009, no pet.) (mem. op.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-11

Soledad v. Texas Farm Bureau Mut. Ins. Co.,

03-16-00203-CV, 2016 WL 6575233 (Tex. App. — Austin Nov.

2, 2016, n.p.h.) (not yet released for publication). . . . . . . . . . . . . . . . . . . . . 1

Southern County Mut. Ins. Co. v. Smith,

529 S.W.2d 618 (Tex. Civ. App. — Tyler 1975, no writ). . . . . . . . . . . . . 6, 7

iii

Valentine vs Safeco Lloyds Ins. Co.,

928 S.W. 2d 639 (Tex. App. — Houston [1st Dist.] 1996,

writ denied). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 11

Western Indem. Ins. Co. v. American Physicians Ins. Exch.,

950 S.W.2d 185 (Tex. App. — Austin 1997, no pet.). . . . . . . . . . . . . . . . . . 6

Statutes

Tex. Ins. Code §§ 1952.101, et seq.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Tex. Labor Code §§ 408.001, et seq.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Rules of Appellate Procedure

Tex. R. App. Pro. 9.4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Now comes the Appellant, Violanda Soledad, and in support of her Motion for

Rehearing, would respectfully show the Court as follows:

Introduction

In an opinion issued on November 2, 2016, this Court denied the relief sought

by the Appellant in this matter, ruling she was not entitled to assert a claim against

the Uninsured/Underinsured Motorist coverage contained in her personal auto policy.

Soledad v. Texas Farm Bureau Mut. Ins. Co., 03-16-00203-CV, 2016 WL 6575233

(Tex. App. — Austin Nov. 2, 2016, n.p.h.) (not yet released for publication). The

basis of this decision was the Court’s determination that the Appellant was not

entitled to recover damages from her employer an/or a co-employee because such

a recovery was precluded by the Exclusive Remedy Provision of the Workers

Compensation Act. Appellant respectfully submits that this determination was in

error for the reasons hereinafter enumerated.

Arguments and Authorities

A. The Purpose of Relevant Statutes

This case requires an interpretation of two statutes: the Workers’ Compensation

Act, Tex. Labor Code §§ 408.001, et seq. and the Uninsured Motorist Statute, Tex.

Ins. Code §§ 1952.101, et seq. It is well established that a statue is to be interpreted

by the Courts so as to achieve the purpose intended by the Legislature.

1. The Exclusive Remedy Provision

In the case of the Exclusive Remedy Provision of the Workers’ Compensation

Act, the intended purpose was to limit an injured employee’s recovery from his or

her employer (and co-employees) to those remedies provided by the Worker’s

Compensation Act. This provision would reduce the financial exposure of the

employer and the workers’ compensation insurance carrier, reducing the cost of doing

business for each, and thus ultimately benefitting the consumer.

A secondary purpose of the Exclusive Remedy Provision is to prevent a

windfall recovery by the employee by preventing the employee from recovering the

same damages twice. Nowhere in the Workers’ Compensation Act, however, is there

any indication that an intended purpose of the Exclusive Remedy Provision was to

protect the Uninsured Motorist coverage carrier from its own customers or to deprive

the injured employee of a remedy against the UM coverage purchased at his or her

own expense. The Court’s invocation of the Exclusive Remedy Provision to bar

Appellant’s recovery from her own UM carrier is clearly not a purpose intended by

the Legislature because the UM carrier was not an intended beneficiary of this

legislation. The application of the Exclusive Remedy Provision to this claim is to

extend its effect beyond the purpose intended by the Legislature. It should also be

noted that permitting the Appellant to recover from her personal auto policy’s UM

coverage would not result windfall or a double recovery for the Appellant, because

the language of the UM provision limits the insured driver’s recovery to damages not

covered by workers’ compensation.

Similarly, the Exclusive Remedy Provision does not bar claims against all

parties. It bars only claims against an employer, an employer’s agent and/or a co-

employee, while preserving claims against third parties. Appellant’s successful

assertion of such a claim would not cost her employer or its worker’s compensation

carrier a single penny. Appellant’s claim against her UM carrier is not a claim against

her employer, employer’s agent or a co-employee and it is not barred by a careful

reading of the Exclusive Remedy Provision. It is well settled law that an injured

employee can recover from his employer’s UM coverage, subject to the subrogation

claim of the employer’s workers compensation carrier. If a claim against an

employer’s own UM coverage is a claim against a third party and thus not barred by

the Exclusive Remedy Provision, then clearly an employee’s claim against his or her

own UM coverage must also be a third party claim and thus not barred by the

Exclusive Remedy Provision. It is wholly inconsistent to permit such a claim against

an employer’s UM coverage and not to permit the same claim against an employee’s

own UM coverage when the coverage is purchased with the employee’s own money.

Clearly, the Exclusive Remedy Provision was designed to protect only a finite

and well-defined class of persons — the employer, co-employees, and agents of the

employer — from the assertion of a claim for damages or benefits in excess of those

provided by the Workers’ Compensation Act. Any claim against any other person or

entity (such as the Appellant’s UM carrier) is a claim against a “third party,” and is

not barred by the Exclusive Remedy Provision. The purpose of the Exclusive Remedy

Provision is not affected, reduced, or frustrated by permitting an injured worker to

recover damages on a claim against his own UM coverage. In the context of the

purpose of the Exclusive Remedy Provision, there is no reason to distinguish between

a UM claim based on the negligence of a co-employee and a UM claim based on the

negligence of someone outside the employment relationship, since neither claim

adversely affects an employer, co-employee or workers’ compensation carrier.

2. The UM Statute

The intended purpose of the UM Statute is to permit a thoughtful and prudent

motorist to protect himself or herself from other motorists who have no insurance

or who have too little coverage. Such prudence is to be encouraged, because many

times a person badly injured by an at-fault and uninsured motorist would become a

burden on the State. The purpose of such coverage should consequently be

encouraged by the State.

In this case, the Appellant was a prudent person and a truck driver with a good

income. She realized: (1) her occupation put her at high risk for being injured in a

motor vehicle accident while she was on the job; and (2) Workers’ Compensation

remedies were inadequate to protect her if she sustained a serious injury in such an

accident. She purchased $100,000 in UM coverage to guard against precisely such

an event. In making this purchase, she relied on her auto policy carrier’s promise to

pay all damages not covered by workers compensation.

The policy, of course, contains many exclusions from this coverage, among

them: accidents caused intentionally, accidents occurring while committing a felony,

injuries sustained while evading apprehension by law enforcement officials, etc. The

policy does not contain an exception from coverage relating to injures caused by a

co-employee. Thus, the UM carrier in this case, while admitting its policy promises

to pay all damages not covered by workers’ compensation, and while further

admitting that the injury sustained by the Appellant does not fall within any exclusion

contained in its policy, seeks to deny coverage because the accident was caused by

the negligence of a co-employee.

This contention should not be permitted to prevail under the established rules

for interpreting the scope of UM/UIM coverage. Stated simply, because the UM

statute is remedial in nature, it is to be given a liberal interpretation in furtherance of

its public policy aims, which aim is to protect a prudent motorist who purchases the

coverage. If the policy is given such a reading, the loss sustained by the Appellant

will be determined a loss covered by Appellee’s policy.

In summary, the interpretations of the two statues above considered urged by

the Appellee are at cross purposes to the intended legislative purpose of each

statute. The intended interpretations advanced by the Appellant are completely

consistent with these intended purposes and Appellant’s proposed interpretations

should by adopted by this court.

3. Additional Guides for Interpreting Insurance Policies

There are 3 additional recognized guides for interpreting insurance policies

which are widely applied by Texas Courts:

— the Forbau rule: the policy should be interpreted so as to give effect to

the intention of the parties, Forbau v. Aetna Life Insurance Company,

876 S.W.2d 132 (Tex 1994), accord, RSUI Indem. Co. v. The Lynd Co.,

466 S.W.3d 113 (Tex. 2015);

— the Southern County Mutual rule: the expression of one thing is the

exclusion of another, Southern County Mut. Ins. Co. v. Smith, 529

S.W.2d 618 (Tex. Civ. App. — Tyler 1975, no writ); and

— the Barnett rule concerning ambiguity: any ambiguity in the insurance

contract is construed against the insurance company that wrote the

policy. Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663 (Tex. 1987);

accord, Western Indem. Ins. Co. v. American Physicians Ins. Exch., 950

S.W.2d 185 (Tex. App. — Austin 1997, no pet.).

The Forbau rule requires the Court to interpret the policy so as to give effect

to the intention of the parties. In this case, it was clearly the Appellant’s intention to

protect herself from the negligent acts or omissions of an uninsured or underinsured

driver. This was a particular concern to her because her occupation put her at high

risk for such an event, which is why she purchased UM/UIM coverage from the

Appellee. Presumably it was the intention of the Appellant to protect her from such

acts and omissions in exchange for her payment of premiums. If the Forbau rule is

applied by the Court it will give effect to the intention of the parties by concluding

that the UM/UIM coverage is applicable to this loss.

The Southern County Mutual rule provided that the expression of one thing or

category is the exclusion of another. The policy enumerates several exclusions from

UM/coverage. Its failure to exclude injuries sustained because of a co-workers’

negligence along with the other policy exclusions is an indication that the policy was

not written to exclude such injuries, and, in fact, other courts have recognized both

the right to recover from personal UM coverage and that workers compensation

insurance carriers have no right of subrogation from such recovery. See, e.g., City of

Corpus Christi v. Gomez, 141 S.W.3d 767, 773 (Tex. App. — Corpus Christi 2004,

no pet.); Casualty Reciprocal Exch. v. Demock, 130 S.W.3d 74, 76 (Tex. App. — El

Paso 2002, no pet.); Liberty Mut. v. Kinser, 82 S.W.3d 71, 78 (Tex. App. — San

Antonio 2002, pet. w’drawn).

Finally, the Barnett rule says an ambiguity in a contract (including but not

limited to an insurance contract) is construed against the party who drafted the

contract. Although the language of an auto policy is, to some extent, uniform and

governed by law, the Texas courts have attributed policy language to the insurance

company and not to the consumer purchasing insurance. The policy provides

unequivocally that it will pay “all covered damages not paid or payable under any

workers’ compensation law”. Appellee, however contends the Appellant’s damages

exceeding the damages paid by workers’ compensation are not covered by the policy.

Appellant urges this Court to determine the Appellee is not “legally entitled to

recover damages from her employer” because she can only recover from the

employer’s workers’ compensation policy. To reach this conclusion, the Court must

find that the term “damages” (as it is used in Part (C) Insuring Agreement (A) of the

policy) does not include payments from a workers’ compensation policy, while the

term “damages” as the term is used in Part C, Limit of Liability (B) (“all covered

damages not paid or payable by any workers’ compensation law”) does include

payments from workers’ compensation.

In order to find that the same term has different meanings in different parts of

the same policy, the Court must first find the meaning of the term within the policy

is ambiguous, that is susceptible to more than one interpretation or definition.

Although Appellant does not believe the policy is ambiguous because term

“damages” should have the same meaning throughout the policy, any ambiguity

should be construed against the insurance carrier and the carrier should be required

to pay Appellant all of her damages not paid by workers’ compensation.

B. The Appellant is Legally Entitled to Recover Damages from her Employer

Appellant respectfully submits that this Court was in error in determining that

she is not “legally entitled to recover damages” from her employer and her co-

employee as a result of this accident. In reaching this conclusion, the Court overlooks

the damages paid and payable to the Appellant under the Workers’ Compensation

Act. The language of Appellant’s auto policy states unequivocally that payments

received from workers’ compensation are “damages”; and, that the Appellee will pay

“all damages not paid or payable” by workers’ compensation. (Part C/ Limit of

Liability /subparagraph B). As noted in this Court’s opinion in Resolution Oversight

Corp. v. Garza, 03-08-00481-CV, 2009 WL 1981424 (Tex. App. — Austin, July 10

2009, no pet.) (mem. op.), it is irrelevant that the damages paid to Appellant by

worker’s compensation were contractual in origin, and also irrelevant that the

damages sought by the Appellant will not paid directly by the tortfeasor, but rather

by another “third party liable to pay damages”.

C. Valentine is Not Controlling Precedent

In denying the relief requested by the Appellant in this matter, the Court relied

on the decision in Valentine vs Safeco Lloyds Ins. Co., 928 S.W. 2d 639 (Tex. App.

— Houston [1st Dist.] 1996, writ denied) as controlling authority. Appellant

respectfully submits that this was in error for the following reasons:

First, the reasoning of the First Court of Appeals in Valentine was rejected by

this Court in Resolution Oversight Corporation. In Valentine, the First Court denied

an injured workers’ compensation claimant’s recovery from his own UM coverage

because the recovery sought from the UM coverage was not owed by the tortfeasor,

who was the claimant’s employer, and thus immune from any claim except workers’

compensation. In a case with similar facts, this Court held in Resolution Oversight

Corporation that the Subrogation provision of the Act preserved claims against any

third party liable to pay damages and that such viable claims were not limited to

claims against a tortfeasor. Consequently, even though a claim against the employer,

except for a workers’ compensation claim, was barred by the Exclusive Remedy

Provision, the injured worker did have a valid claim against his own UM

carrier, because this carrier was a “third party liable to pay damages” within the

meaning of the Subrogation provision of the Workers’ Compensation Act. Also in

the Resolution Oversight Corporation opinion, this Court rejected, as irrelevant,

distinctions between damages of contractual origin and damages grounded in tort.

If the reasoning of Resolution Oversight Corporation is applied to the facts of this

case, the Appellant will be permitted to assert her claim against her own UM

coverage.

Second, in the case at bar, this Court also adopted Valentine’s conclusion that,

because a majority of jurisdictions outside of Texas barred a UM recovery under

similar circumstances, Texas courts should deny such claims also. These opinions

fail to consider three factors of overriding relevance: First, there is no showing that

the language of the policies in other jurisdictions is identical to the polices in Texas;

Second, there is no showing that the UM statutes in these other jurisdictions are

identical to the Texas statue or that the purposes of the UM statues in those

jurisdictions are identical to the purpose of the Texas UM statute; Third, there is no

showing the Exclusive Remedy and Subrogation Provisions of the Workers’

Compensation Act in these other jurisdictions are identical to the Texas statue in

wording or in intent.

The degree of uniformity of auto insurance policies is now much less than

when Valentine was written in 1996, but even more importantly, Workers’

Compensation laws and the intentions of the laws vary tremendously from one State

to another. For instance, in Wisconsin, the Workers’ Compensation Act provides for

a maximum of 1,000 weeks compensation for temporary disability, while Texas only

allows 106 weeks. In Georgia, the compensation carrier’s right of subrogation is

subject to the injured employee’s right to be made whole from the third party

recovery, which is not the case in Texas. Applying the standards of other jurisdiction

to Texas is an approach which even Procrustes would have found inhumane and this

approach should not be taken by this Court. The fallacy of the unexamined

application of the standards other jurisdictions to Texas in this same context was

explained by Justice Boyd in his opinion in Employers Cas. Co. v. Dyess, 957

S.W.2d 884 (Tex. App. — Amarillo 1997, pet. denied).

Finally, Valentine is not the only Texas case to consider this issue. In Briones,

Mr. Briones was injured in a one vehicle accident as a result of his co-employee’s

negligence while he slept in the sleeping compartment of a tractor-trailer, almost

exactly as Appellant was injured in this case. Briones v. State Farm Mut. Auto. Ins.

Co., 790 S.W.2d 70 (Tex. App. — San Antonio 1990, writ denied). The case is silent

on whether Mr. Briones’ employer was a subscriber to the Workers’ Compensation

Act but, as in our case, the UM carrier sought to avoid payment of his injury

claim. In refusing to permit the denial of coverage, the San Antonio court observed:

... we conclude that under the facts of this case and the uncontroverted

evidence that to deny Briones recovery under the uninsured motorist

clause of his family policy frustrate the intent the legislature to provide

protection for conscientious motorists from “financial loss caused by a

negligent financially irresponsible motorists” as is mandated by the

inclusion of uninsured and underinsured motorist coverage in the Texas

Insurance Code.

Briones, 790 S.W.2d at 74.

In evaluating the applicability of the Briones case to the one at bar, we would

ask that this Court take into account that in reaching its decision, it assumed that the

vehicle in which the Appellant was riding was an “uninsured motor vehicle”.

WHEREFORE, premises considered, Appellant requests a rehearing in this

matter and such other relief to which she may be entitled at law or equity.

Respectfully submitted,

/s/James Rodman /s/Chris Jackson

JAMES RODMAN CHRIS JACKSON

ATTORNEY AT LAW ATTORNEY AT LAW

State Bar No. 17139525 State Bar No. 10454600

1515 W. 35th Street, #C 1812 Centre Creek Drive, #275

Austin, TX 78703 Austin, Texas 78754

jimrodman@rodmanlawoffice.com c_jackson@sbcglobal.net

512-481-0400 - Phone 512-478-1699 - Phone

512-481-0500 - Facsimile 512-821-2943 - Facsimile

Attorneys for Violanda Soledad

Certificate of Compliance

I, Chris Jackson and Jim Rodman, the undersigned counsel for the Appellant,

hereby certify that the total number of words in the portions of the document that are

counted is 2,829, and that the text thereof is in 14 point Times New Roman font. In

making this representation, we are relying on the accuracy of the computer program

used to prepare the document as provided in Rule 9.4 TRAP.

/s/Jim Rodman /s/ Chris Jackson

JIM RODMAN CHRIS JACKSON

Certificate of Service

By my signature above, I certify that a true and correct copy of the foregoing

has been delivered electronically on the 16th day of November, 2016, to the

following:

Wade C. Crosnoe VIA: ProDoc-Efile

Sara B. Churchin VIA: ProDoc-Efile

Thompson, Coe, Cousins & Irons, LLP

701 Brazos Street, Suite 1500

Austin, TX 78701

wcrosnoe@thompsoncoe.com

schurchin@thompsoncoe.com

888-708-8200 - Phone

512-708-8777 - Fax No.

Attorneys for Appellee Texas Farm Bureau Mutual Insurance Company

David Deaderick VIA: ProDoc-Efile

707 W. 34th Street

Austin, TX 78705

WDDlaw@aol.com

512-499-8866 - Phone

512-466-8933 - Fax No.

Attorney for Defendant

By: s/James Rodman By: s/Chris Jackson

JAMES RODMAN CHRIS JACKSON

CASE NO. 03-16-00203-CV

THE COURT OF APPEALS

THIRD COURT OF APPEALS DISTRICT

AUSTIN, TEXAS

VIOLANDA SOLEDAD,

Appellant

vs.

TEXAS FARM BUREAU MUTUAL INSURANCE COMPANY,

Appellee

**************************************

On Appeal from the Burnet County Court

Burnet County, Texas

Trial Court Cause No. C4358

**************************************

Appellant’s Appendix

**************************************

Appendix Table of Contents

Barnett v. Aetna Life Ins. Co.

Briones v. State Farm Mut. Auto. Ins. Co.

Casualty Reciprocal Exch. v. Demock

City of Corpus Christi v. Gomez

Employers Cas. Co. v. Dyess

Forbau v. Aetna Life Insurance Company

Liberty Mut. v. Kinser

RSUI Indem. Co. v. The Lynd Co.

Resolution Oversight Corp. v. Garza

Soledad v. Texas Farm Bureau Mut. Ins. Co.

Southern County Mut. Ins. Co. v. Smith

Valentine vs Safeco Lloyds Ins. Co.

Western Indem. Ins. Co. v. American Physicians Ins. Exch.

Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663 (1987)

723 S.W.2d 663

Supreme Court of Texas.

Lacy D. BARNETT, Petitioner,

AETNA LIFE INSURANCE COMPANY, Respondent.

No. C–5414.

Feb. 4, 1987.

Insured brought action challenging insurer's right to offset his Veterans Administration benefits against his long-term

disability payments. The 164th District Court, Harris County, Peter S. Solito, J., rendered take nothing judgment for

insurer. Insured appealed. The Houston Court of Appeals, First Supreme Judicial District, 708 S.W.2d 911, Cohen,

J., affirmed. On appeal, the Supreme Court, Robertson, J., held that insurer could not offset benefits payable under

Veteran's Benefits Act from long-term disability insurance payments under either contract construction rule of ejusdem

generis, or rule which requires insurance policies to be construed strictly against drafter of document.

Reversed and remanded.

West Headnotes (5)

[1] Insurance Credits, Deductions and Offsets

Contract construction rule of ejusdem generis did not control so as to exclude benefits payable under Veteran's

Benefits Act from those which may be deducted from long-term disability insurance payments, where policy

made explicit examples, as benefits which could be offset, of benefits under Social Security Act Railroad

Retirement Act, but also stated “or any similar act.” 38 U.S.C.A. § 101 et seq.; Social Security Act, § 1 et seq.,

42 U.S.C.A. § 301 et seq.; Railroad Retirement Act of 1974, § 1 et seq., 45 U.S.C.A. § 231 et seq.

22 Cases that cite this headnote

[2] Insurance Ambiguity, Uncertainty or Conflict

When language chosen by insurer in policy is susceptible of more than one construction, policy should be

construed strictly against insurer and liberally in favor of insured.

214 Cases that cite this headnote

[3] Insurance Exceptions, Exclusions or Limitations

Where clause of insurance policy subject to dispute involves exception or limitation on insurer's liability under

policy, even more stringent construction than usual is required.

111 Cases that cite this headnote

[4] Insurance Credits, Deductions and Offsets

Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663 (1987)

Veterans Administration Act was not sufficiently similar to Social Security Act or Railroad Retirement Act,

which were enumerated in long-term disability insurance policy as acts, benefits payable under which were

subject to offset from long-term disability insurance payments, so as to include Veterans Administration Act

within general language of offset provision; enumerated acts were both based on employment, whereas Veterans

Administration Act benefits are completely unrelated to length of service, rank, or amount of pay. 38 U.S.C.A.

§ 101 et seq.; Social Security Act, § 1 et seq., 42 U.S.C.A. § 301 et seq.; Railroad Retirement Act of 1974, § 1

et seq., 45 U.S.C.A. § 231 et seq.

9 Cases that cite this headnote

[5] Workers' Compensation Purpose of Legislation

Avowed purpose of workers' compensation is to compensate injured individuals for their loss of earning

capacity, and act was not designed to compensate employee for his lost earnings or for injury itself; thus, in

order to be eligible for workers' compensation benefits, claimant must be able to show not only disability, but

also employment when injured and corresponding loss of earning capacity. Vernon's Ann.Texas Civ.St. art.

8306 et seq.

3 Cases that cite this headnote

Attorneys and Law Firms

*664 Maurice Amidei, Houston, for petitioner.

Larry D. Carlson, Baker & Botts, Dallas, for respondent.

Opinion

ROBERTSON, Justice.

This case involves whether an insurance company may offset benefits payable under the Veteran's Benefits Act from long

term disability insurance payments. In response to issues submitted, the jury found that Barnett's date of disability under

the VA did not begin until after the effective date of the Aetna policy, despite the fact that the actual injury occurred long

before; that Aetna acted in good faith in taking the deductions; and, that Aetna's actions were not unconscionable. On

the basis of these answers, the trial court entered judgment that Barnett take nothing. The court of appeals, 708 S.W.2d

911, affirmed, holding that the VA benefits were deductible under the policy.

In 1943, Lacy D. Barnett broke his right heel bone while serving aboard a U.S. naval vessel in the South Pacific. By virtue

of the fact that his injury occurred during service, he became eligible for Veteran's Administration benefits. According

to his testimony, he experienced pain and discomfort, and attempted on several occasions to apply for VA disability

benefits. In 1946 his application was not processed because he did not have time to wait in line and could not afford

to take time off for the mandatory hospital stay. On another occasion, he was told disability was unavailable because

his files could not be located.

Through a succession of jobs, Barnett eventually ended up working for Amoco Oil Company. In 1967, Amoco began

providing its employees with a noncontributory long-term disability insurance policy (i.e., employees were not required

to contribute). In October 1977, Barnett suffered a permanently disabling injury to his right knee *665 while operating

some heavy machinery. He underwent knee surgery in November of 1977 and began receiving long-term disability

payments from Aetna each month. Due to the realignment of the leg, however, his prior heel injury became debilitating.

Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663 (1987)

Thereafter, he again applied for VA benefits and this time the agency approved him for a 10 percent disability, which

was later raised to 20 percent. This entitled him to $82 per month in disability payments from the VA to go along with

his Aetna payments of $835.93. When Aetna learned that Barnett was receiving VA benefits, it began to offset those

payments. Barnett challenged Aetna's right to reduce the benefits in question and sued Aetna for breach of contract,

alleging illegal and unconscionable conduct.

The insurance policy in question provides (in pertinent parts) that Aetna may deduct:

Any payment for a disability which commenced on or after the effective date of the employee's

insurance under this policy, under the Federal Social Security Act or Railroad Retirement Act, or

any similar act of any national government, or by any federal, state, provincial, municipal or other

governmental agency or pursuant to any workmen's compensation law, compulsory benefit act or

law, occupational disease law or any other legislation of similar purpose, or the maritime doctrine

of maintenance, wages and cure.

To interpret the contract in question it is first necessary to determine exactly what is expressed in the provision. Here, the

language provides that if disability occurs after the effective date of the policy, and such disability results in any payment

of benefits, Aetna can make deductions from its monthly payment in the amount of those other benefits. Aetna can only

deduct this “other income” if the benefits come from the following sources:

(1) Benefits under the Federal Social Security Act, Railroad Retirement Act, or any similar act of any national

government or any federal, state, provincial, municipal or other governmental agency; or

(2) Benefits pursuant to any workmen's compensation law, compulsory benefit act or law, occupational disease law,

or any other legislation of similar purpose; or

(3) Benefits under the Maritime Doctrine of Maintenance, Wages and Cure.

It is apparent that the policy does not specifically mention VA benefits, thus, if such deductions are to be allowed, it must

be shown that VA benefits are included under the general language of the document. Barnett argues that the benefits

are not included within the general language due to the contract construction rule of ejusdem generis, and the rule which

requires insurance policies to be construed strictly against the drafter of the document. Aetna counters by asserting that

rules of construction are not applicable when there is no ambiguity in the language used. While we agree with Aetna

that ejusdem generis is not controlling, we hold that an ambiguity exists and that the clauses must therefore be construed

against Aetna.

It is a fundamental rule of law that insurance policies are contracts and as such are controlled by rules of construction

which are applicable to contracts generally. See, e.g., General American Indem. Co. v. Pepper, 161 Tex. 263, 339 S.W.2d

660, 661 (1960); Iowa Mut. Ins. Co. v. Faulkner, 157 Tex. 183, 300 S.W.2d 639, 642 (1957); Brown v. Palatine Ins. Co.,

89 Tex. 590, 35 S.W. 1060, 1060 (1896). As pointed out by Aetna, however, if the insurance contract is expressed in

plain and unambiguous language, a court cannot resort to the various rules of construction. Puckett v. U.S. Fire Ins.

Co., 678 S.W.2d 936, 938 (Tex.1984). Aetna argues that the general language clearly includes VA benefits, while Barnett

argues that it manifestly does not. Although we agree that the language used is definite, the meaning and scope of the

language is ambiguous. It has long been the law in this State that when language in a policy is susceptible to more than

one reasonable construction, it is patently ambiguous. Glover v. National Ins. Underwriters, *666 545 S.W.2d 755,

761 (Tex.1977). Both parties' interpretations are reasonable; therefore, we must resort to rules of construction to decide

whether VA benefits are properly included under the general language in the policy.

The first rule of construction raised by Barnett is ejusdem generis. As said by this court:

Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663 (1987)

Where specific and particular enumerations of persons or things ... are followed by general words,

the general words are not to be construed in their widest meaning or extent but are to be treated

as limited and applying only to persons or things of the same kind or class as those expressly

mentioned.

Stanford v. Butler, 142 Tex. 692, 181 S.W.2d 269, 272 (1944);

[1] Barnett contends that since Aetna explicitly mentioned the Social Security Act and the Railroad Retirement Act,

those specific acts will provide the only possible offsets under the above theory. This argument, however, is without merit

for several reasons. First, the provision in question does not seem to offend the general rule. Aetna did make specific

examples of the Social Security Act and the Railroad Retirement Act in (1), but the general language in the provision

reveals that such language applies only to that class of statutes which is similar to the specified examples. This is all that

is required under ejusdem generis. The same reasoning applies to the general language contained in (2) of the provision

as well. Furthermore, to adopt Barnett's reasoning on this issue would basically require us to ignore the general language

clause completely. This is against the fundamental rule that each part of the contract should be given effect when it will

not do violence to rules of law or construction. General American Indem. Co. v. Pepper, 161 Tex. 263, 339 S.W.2d 660,

661 (1960); National Security Life and Cas. Co. v. Davis, 152 Tex. 316, 257 S.W.2d 943, 944 (1953); see also First Nat.

Bank v. Protective Life Ins. Co., 511 F.2d 731, 734 (5th Cir.1975) (Court must avoid construction of policy which does

not give all portions of policy meaning and effect).

[2] [3] [4] The second rule of construction urged by Barnett is the necessity of strictly interpreting the provision in his

favor. Under normal circumstances, language and terms of an insurance policy are chosen by the insurance company.

This being so, when the language chosen is susceptible of more than one construction, such policies should be construed

strictly against the insurer and liberally in favor of the insured. Glover v. National Ins. Underwriters, 545 S.W.2d 755,

761 (Tex.1977); Ramsay v. Maryland American General Ins. Co., 533 S.W.2d 344, 349 (Tex.1976); Royal Indem. Co.

v. Marshall, 388 S.W.2d 176, 180 (Tex.1965). Furthermore, because this case involves an exception or limitation on

Aetna's liability under the policy, an even more stringent construction is required. Glover, 545 S.W.2d at 761. Indeed,

“we must adopt the construction of an exclusionary clause urged by the insured as long as that construction is not itself

unreasonable, even if the construction urged by the insurer appears to be more reasonable or a more accurate reflection

of the parties intent.” Glover, 545 S.W.2d at 761; Continental Casualty Co. v. Warren, 152 Tex. 164, 254 S.W.2d 762,

763 (1953). Keeping these rules of construction in mind, we turn to what must be considered the crucial question in this

case: Is the VA Act sufficiently similar to any of the enumerated acts to be included within the general language of the

offset provisions?

There is no doubt that similar features exist between the Social Security Act, the Workers' Compensation Act and the

Veterans Benefits Act. For example, all are (1) governmental or legislative plans providing for (2) periodic payment (3)

to qualified individuals (4) who have suffered a physical disability (5) without regard to fault. In addition, all provide

death benefits, have anti-assignment clauses, and are administered by independent agencies. But the similarity of features

of the acts are not the key ingredient, rather it is the objectives *667 for which they were created and the manner in

which the acts are implemented.

The Social Security Act and Railroad Retirement Act are both based on employment, and were formed to deal with

problems inherent to that area. The Veterans Benefits Act was created to help veterans who were disabled during

active military service, and in no way relates to the employment of the claimant. The Social Security Act and Railroad

Retirement Act benefits are an earned property right necessarily based on many factors including the amount of time

one has worked, the amount of pay received and the amount contributed to the system. The VA benefits, on the other

hand, are not an earned property right, require only that the claimant has been disabled while serving, and are completely

unrelated to length of service, rank, or amount of pay. See Ex parte Johnson, 591 S.W.2d 453, 455 (Tex.1979). Under

certain circumstances, both the Social Security Act and the Railroad Retirement Act systems do pay disability benefits

Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663 (1987)

to individuals, but that does not make them inherently similar to the VA Act, for the dissimilarities greatly outweigh the

resemblances. This is particularly true when we must construe the provisions strictly against Aetna.

[5] A much more difficult determination is whether the VA benefits are sufficiently similar to workers' compensation

benefits. The avowed purpose of workers' compensation is to compensate injured individuals for their loss of earning

capacity. Bennight v. Western Auto Supply, 670 S.W.2d 373, 379 (Tex.App.—Austin 1984, writ ref'd n.r.e.); St. Paul

Ins. Co. v. McPeak, 641 S.W.2d 284, 286 (Tex.App.—Houston [14th Dist.] 1982, writ ref'd n.r.e.). It was not designed

to compensate an employee for his lost earnings or for the injury itself. See McPeak at 286. Thus, it follows that in

order to be eligible for workers' compensation benefits, the claimant must be able to show not only a disability, but also

employment when injured and a corresponding loss of earning capacity. This is dissimilar to the situation in VA cases

because the VA applicant need only show the disability, not that it is affecting his earning capacity, nor that he was

employed on the day of the injury. These differences, when added to the rules which require strict construction against

Aetna, mandate the holding that the VA Act is not sufficiently similar to Workers' Compensation Acts either.

We also point out that common sense supports such a holding. Millions of American citizens have served in the armed

forces, and VA benefits are a vital and necessary service to thousands upon thousands of disabled veterans. We are not

dealing with some obscure act against which no insurance company could reasonably provide. Benefits under the VA

appear to be unique in character and scope, certainly important enough to warrant specific mention in an insurance

policy if they are sought to be offset. This is especially true when the insurance company saw fit to explicitly mention the

Railroad Retirement Act, which affects far fewer people on a day-to-day basis.

This decision is not to be construed to stand for the principle that VA benefits may never be offset under a long-term

disability policy. For an insurance company to be authorized to deduct such benefits, it must plainly and unambiguously

provide for such in the insurance contract.

With this decision made, we need only turn to Barnett's request for attorney's fees. The TEXAS CIVIL PRACTICE

& REMEDIES CODE § 38.001 (Vernon 1986) (formerly art. 2226) provides that a person may recover reasonable

attorney's fees if the claim is for an oral or written contract. Suits on insurance policies have been held to support the

recovery of attorney's fees under this provision. Texas Farmers Ins. Co. v. Hernandez, 649 S.W.2d 121, 124 (Tex.App.

—Amarillo 1983, writ ref'd n.r.e.). Thus, the only question is to determine a reasonable fee for Barnett's attorney. This

is easily done, as both parties entered into a stipulation which agreed that $14,500 would be a reasonable fee for taking

this case through the entire judicial process.

*668 Therefore, we reverse the judgment of the court of appeals and remand to the trial court for a determination of

the amount due Barnett consistent with this opinion.

All Citations

723 S.W.2d 663

Briones v. State Farm Mut. Auto. Ins. Co., 790 S.W.2d 70 (1990)

790 S.W.2d 70

Court of Appeals of Texas,

San Antonio.

Ruben L. BRIONES, Appellant,

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee.

No. 04–89–00359–CV.

April 30, 1990.

Rehearing Denied June 18, 1990.

Insured brought action against insurer seeking recovery on family automobile policy under uninsured motorist clause.

The 224th District Court, Bexar County, Carol Haberman, J., granted summary judgment for insurer, and insured

appealed. The Court of Appeals, Stephens, J., (Retired), held that insured could recover for injuries which occurred while

insured was passenger in uninsured truck owned by employer and driven by uninsured coemployee, even if insured's

policy contained exclusion for vehicles regularly provided for insured's use.

Reversed and remanded.

West Headnotes (2)

[1] Insurance Persons Covered

Insurance Uninsured Motorists or Vehicles

Insured who was involved in accident while passenger in uninsured motor vehicle owned by his employer and

driven by uninsured coemployee was entitled to recover from insurer under his uninsured motorist policy,

even though policy contained exclusion for vehicles “furnished for regular use” of insured; denying recovery

under uninsured motorist clause of family policy would frustrate intent of legislature to provide protection for

conscientious motorists from financial loss caused by negligent financially irresponsible motorists. V.A.T.S.

Insurance Code, arts. 1.01 et seq., 5.06–1.

21 Cases that cite this headnote

[2] Insurance Regular or frequent use

Insurance Uninsured Motorists or Vehicles

Policy exclusion of vehicles regularly furnished for use of insured is not necessarily condemned in all cases

under uninsured motorist policies; determination will be made on case-to-case basis whether invocation of

exclusion would, under circumstances of particular case, operate to deprive insured of protection required by

state uninsured motorists statute. V.A.T.S. Insurance Code, arts. 1.01 et seq., 5.06–1.

18 Cases that cite this headnote

Briones v. State Farm Mut. Auto. Ins. Co., 790 S.W.2d 70 (1990)

Attorneys and Law Firms

*71 David M. Adkisson, Southers & Lyons, Phil Watkins, Watkins & Brock, San Antonio, for appellant.

Richard W. Hunnicutt, III, Plunkett, Gibson & Allen, San Antonio, for appellee.

Before BUTTS, CARR and STEPHENS, 1 JJ.

OPINION

STEPHENS, Justice (Retired).

Ruben L. Briones appeals a take nothing summary judgment granted in his suit against State Farm Mutual Automobile

Insurance Company seeking recovery on his family automobile insurance policy under the uninsured motorists clause,

for bodily injuries suffered in a one vehicle automobile accident. In one point of error Briones contends that:

The Trial Court erred in granting Defendant's Motion for Summary Judgment because there is a

genuine issue as to material facts regarding the one remaining issue to be litigated by the parties,

namely whether the tractor-trailer in which Briones was a passenger at the time of his bodily injuries

was furnished or available for his regular use.

On or about November 5, 1985, Briones was a passenger in the sleeping compartment of a tractor-trailer owned by his

employer, Cervantes Trucking Company, which, at the time of the accident, was being driven by another employee of

Cervantes Trucking, one Mr. Juan Barbosa. The accident occurred in Arizona and involved only the one vehicle in which

Briones was riding. Neither the truck nor its driver was covered by liability insurance at the time of the accident. Briones

sought to recover under the uninsured clause of his family automobile insurance policy.

In the trial court the parties stipulated to all evidence and specifically that the only portion of the insurance contract

applicable was the uninsured motorist clause which reads:

Uninsured motor vehicle does not include any vehicle or equipment:

... owned by or furnished or available for the regular use of you or any family member.

The parties further stipulated:

The only question that will be litigated between us, whether it be by summary judgment or trial, will be whether the

facts show that, at the time of the accident, the vehicle in which Mr. Briones was riding was one which was “furnished

or available for the regular use of” Mr. Briones.

[1] [2] Briones argues that the summary judgment evidence at trial creates a genuine issue as to the material facts

regarding whether or not the truck in which Briones was riding was furnished or available for his regular use. He relies

upon general propositions of law to support his contentions. First he points out that the summary judgment proof must

establish as a matter of law that there is no genuine issue of fact as to any of the essential elements of Plaintiff's cause of

action, Gibbs v. General Motors Corporation, 450 S.W.2d 827, 828 (Tex.1970); and that summary judgment is only proper

if the pleadings, depositions, and admissions on file show that there is no genuine issue as to any material fact and that

the moving party is entitled to judgment as a matter of law. Gibbs, supra; TEX.R.CIV.P. 166–A. Briones further argues

that a fact is not considered established as a matter of law unless the evidence is such that the minds of reasonable men

would not differ on the issues, citing *72 North River Insurance Company v. O'Neal, 521 S.W.2d 647, 650 (Tex.Civ.App.

Briones v. State Farm Mut. Auto. Ins. Co., 790 S.W.2d 70 (1990)

—Tyler 1975, no writ); and that when a given set of facts is such that reasonable men may fairly differ upon the question,

the determination of the matter is for the jury and hence summary judgment is inappropriate. Cartwright v. Canode, 106

Tex. 502, 171 S.W. 696, 697–98 (1914).

Other cases hold that questions as to exclusions in insurance policies are generally questions of fact, not matters of law.

See, e.g., Farmer's Mutual Protective Association of Texas v. Wright, 702 S.W.2d 295, 298 (Tex.App.—Eastland 1985,

no writ); Brown v. Tucker, 652 S.W.2d 492, 496 (Tex.App.—Houston [1st Dist.] 1983, writ ref'd n.r.e.); Miles v. Royal

Indemnity Co., 589 S.W.2d 725, 730 (Tex.Civ.App.—Corpus Christi 1979, writ ref'd n.r.e.).

A review of the proof shows that Briones was an employee of Cervantes Trucking Company, the owner of the truck in

question. His principal duty was to drive trucks assigned to him. He customarily used any one of the five vehicles owned

by Cervantes, as and when assigned to him by Cervantes. He had driven the truck in question regularly for a period of

four years, from 1981 to 1985. During the trip in question, as on other trips, Briones and his co-employee would take

turns driving and sleeping.

In Hall v. Southern Farm Bureau Casualty Insurance Co., 670 S.W.2d 775 (Tex.App.—Fort Worth 1984, no writ), it was

shown that the plaintiff drove a truck for her employer. Her employer had a number of trucks which it used for several

routes. The plaintiff was injured in an accident in a truck that was usually assigned to another employee, but on the date

of the accident had been assigned to her. She brought suit against the carrier of her personal automobile insurance policy

to recover medical expenses. The policy covered certain “owned” and “non-owned” vehicles. The court held:

If an employee regularly drives a vehicle in his or her employment, and if the driving of such a

motor vehicle constitutes the principal duty of the employment, and if a number of vehicles in

a pool are available to that employee, subject either to random assignment or assignment based

upon the nature of the job involved, or selection by the employee, then all vehicles in the pool are

considered as a matter of law to be vehicles furnished for the employee's regular use. [emphasis

added] 670 S.W.2d at 777.

In another Texas case with similar facts, International Service Insurance Co. v. Walther, 463 S.W.2d 774 (Tex.Civ.App.

—Austin 1971, no writ), the plaintiff sought recovery under his medical payment insurance policy. The case was tried to

a jury on the theory that his employer's vehicle was not furnished for his regular use. The jury found that the employer's

vehicle was not furnished for his regular use. The proof showed that plaintiff was employed as a delivery man. His

employer owned three trucks, which were randomly assigned to the drivers, governed by the load. The drivers were not

permitted to use the trucks for personal use. The Court of Appeals, in reversing the trial court, held that the phrase

“furnished for regular use” in the definition of non-owned automobiles was not limited to one specific vehicle. The court

explained:

It is the regular use of other automobiles which is excluded by the term, and if an employer assigns

an employee a specific automobile or assigns him a number of automobiles, any one of which he

may use for a particular trip, in either event that automobile is furnished “for regular use.” 463

S.W.2d at 776.

From these cases it appears that Briones was occupying a vehicle regularly furnished for his use, however, we conclude

that this case is governed by the recent case of Stracener v. United Serv. Auto. Ass'n., 777 S.W.2d 378 (Tex.1989), in which

The Texas Supreme Court wrote at length on the uninsured and underinsured exclusions in insurance policies and their

relationship to the Insurance Code, and its interpretation. We find the Court's language to be not only persuasive, but

controlling in this case. The Court wrote:

Article 5.06–1 of the Texas Insurance Code mandates the inclusion of uninsured *73 and underinsured motorist

coverage in automobile liability insurance coverage....

Briones v. State Farm Mut. Auto. Ins. Co., 790 S.W.2d 70 (1990)

.... The purpose of the statute as stated therein, is “the protection of persons insured thereunder who are legally entitled

to recover damages from owners or operators of uninsured or underinsured motor vehicles....” TEX.INS.CODE

ANN. art. 5.06–1(1) (Vernon 1981)....

.... The legislature had as its initial objective the protection of conscientious motorists from “financial loss caused by

negligent financially irresponsible motorists....” Act of Oct. 1, 1967, ch. 202 sec. 3, 1967 Tex. Gen. Laws 448, 449....

This court construed the policy statement of article 5.06–1(1), as originally enacted, in American Liberty Insurance Co.

v. Ranzau, 481 S.W.2d 793 (Tex.1972)...

The Texas statute states its purposes to be the “protection of persons insured thereunder who are legally entitled

to recover damages from owners or operators of uninsured motor vehicles.” These are its key words.... This was a

contractual benefit for which premiums, presumably computed in the light of the respective risk exposures, were paid

by the insureds in each instance; and to permit one policy, or the other, to be reduced or rendered ineffective by a

liability limiting clause would be to frustrate the insurance benefits which the statute sought to guarantee and which

were purchased by the respective insureds. Ranzau, 481 S.W.2d at 797 (emphasis in original and added).

******

Moreover, under the misinterpretation of the statute by some courts of appeals, insureds can never ascertain what,

if anything, they have purchased. The availability of underinsured motorist insurance would be contingent upon

numerous uncertainties including not only the limits of the coverage but also the limits of the tort-feasor's liability

insurance, the extent of damages suffered by any other persons who may have been involved in the same accident

and the amount of any settlements made with the liability insurance carrier. We doubt whether most Texas motorists

understand that the amount of the coverage for which they are paying is only recoverable depending upon the limits

of the liability coverage carried by the negligent driver and the peculiar facts of the particular accident. Even if they

did, we believe this is not the coverage mandated by statute.

By purchasing this coverage along with basic liability coverage, the insured has expressed an intent not only to protect

others from his or her own negligence but also to protect that person's own family and guests from the negligence of

others. This intent and the purpose of the statute are frustrated under the courts of appeals' construction of article

5.06–1. Accordingly, we disapprove of those decisions which have construed article 5.06–1(2)(b) and (5) in a manner

inconsistent with this opinion. Those clauses in insurance policies which are not consistent with and do not further

the purpose of article 5.06–1 are invalid. 777 S.W.2d at 381–84.

In Stracener, the Court consolidated two cases and although the question was primarily protection from underinsured

motorists, it covered uninsured motorists as well. We believe that the language in the case:

We doubt whether most Texas motorists understand that the amount of the coverage for which

they are paying is only recoverable depending upon the limits of the liability coverage carried by

the negligent driver and the peculiar facts of the particular accident. Even if they did, we believe

this is not the coverage mandated by statute.

is particularly applicable in this case. It is doubtful that when the uninsured provision was purchased, Briones believed

that he would not be protected if involved in an accident while a passenger in an uninsured motor vehicle owned by his

employer, and driven by an uninsured co-employee.

We are further persuaded by the language of the federal court in Stephens v. State Farm Mutual Automobile Ins. Co.,

508 F.2d 1363 (5th Cir.1975):

Briones v. State Farm Mut. Auto. Ins. Co., 790 S.W.2d 70 (1990)

*74 As we read Texas cases, there is one key to determining whether a particular exclusionary provision in an

uninsured motorist policy is valid or invalid. This is whether the invocation of the exclusion would, under the

circumstances of the particular case under consideration, operate to deprive an insured of the protection required

by the Texas Uninsured Motorists Statute, TEX.INS.CODE art. 506–1, V.A.T.S. (Supp.1974). Westchester Fire

Insurance Co. v. Tucker, 512 S.W.2d 679, 685 (Tex.1974).

******

... In our view Tucker and [American Motorists Ins. Co. v.] Briggs [514 S.W.2d 233 (Tex.1974) ] quite clearly hold

that exclusionary clauses are invalid restrictions on coverage when they excuse the policy for which a premium has

been paid from providing the minimum coverage required by the Texas Uninsured Motorist Statute. It is immaterial

whether the Stephens were covered by the Royal policy. The question is whether the exclusion in the State Farm policy,

if invoked, would cause the coverage of that policy to be less than the minimum $10,000/$20,000. Here it clearly would.

508 F.2d at 1367 and 1368.

Finally, we consider the earlier case of Bilbrey v. American Automobile Insurance Company, 495 S.W.2d 375

(Tex.Civ.App.—Eastland 1973, no writ), on which Briones places much emphasis. In that case, the facts are similar.

Bilbrey was an employee of the City of Abilene. At the time of the accident, he was occupying a vehicle regularly

furnished him by the City. The defense interposed by the insurance carrier was very similar to the one in this case;

that the automobile which Bilbrey was occupying at the time of the accident was furnished for his regular use and thus

the exclusion, set out in the definition of “insured automobile” in the uninsured motorists clause prevailed. Summary

judgment was granted by the trial court and reversed by the Court of Appeals, holding:

Bilbrey paid a premium for the uninsured motorists endorsement. The exclusions and other

provisions of the policy do not limit or abridge his coverage. 495 S.W.2d at 376.

It appears to us that although earlier Texas courts of appeal have upheld the exclusion of coverage when persons are

injured in vehicles regularly furnished the insured by third parties from the uninsured motorists coverage, the case of

Stracener, supra, has placed serious doubts on their validity. We are not prepared to condemn the exclusion of vehicles

regularly furnished for the use of the insured in all cases, but believe the better posture is to adopt the position taken

by the federal court in Stephens v. State Farm Mutual Automobile Ins. Co., 508 F.2d 1363 (5th Cir.1975), taken from

Westchester Fire Insurance Co. v. Tucker, 512 S.W.2d 679, 685 (Tex.1974), and determine on a case to case basis whether

the invocation of the exclusion would, under the circumstances of the particular case under consideration, operate to

deprive an insured of the protection required by the Texas Uninsured Motorists Statute.

Having taken this position, we conclude that under the facts of this case and the uncontroverted evidence, that to

deny Briones recovery under the uninsured motorist clause of his family policy would be to frustrate the intent of

the legislature to provide protection for conscientious motorists from “financial loss caused by negligent financially

irresponsible motorists” as is mandated by the inclusion of uninsured and underinsured motorist coverage in the Texas

Insurance Code.

The judgment of the trial court is reversed and this cause is remanded for judgment to be entered in favor of recovery

by Briones in accordance with the stipulated evidence of damages.

All Citations

790 S.W.2d 70

Briones v. State Farm Mut. Auto. Ins. Co., 790 S.W.2d 70 (1990)

Footnotes

1 The Honorable Bill J. Stephens, retired, Court of Appeals, Fifth District of Texas at Dallas, sitting by assignment.

Casualty Reciprocal Exchange v. Demock, 130 S.W.3d 74 (2002)

130 S.W.3d 74

Court of Appeals of Texas,

El Paso.

CASUALTY RECIPROCAL EXCHANGE, Appellant,

Julie Angela DEMOCK, Appellee.

No. 08–00–00206–CV.

Feb. 21, 2002.

Synopsis

Background: Employee's uninsured/underinsured motorist (UIM) insurance carrier filed interpleader action, and

employee and employer's workers' compensation carrier filed cross-actions against each other. The 327th District Court

of El Paso County, Philip R. Martinez, J., entered summary judgment in favor of employee, and workers' compensation

carrier appealed.

Holding: The Court of Appeals, David Wellington Chew, J., held that carrier did not have statutory subrogation right

against employee's UIM carrier.

Affirmed.

West Headnotes (1)

[1] Workers' Compensation Subrogation of or Assignment to Insurer

Employer's workers' compensation carrier did not have statutory subrogation right against employee's

uninsured/underinsured motorist (UIM) insurance carrier after having recovered damages from third-party

tortfeasor. V.T.C.A., Labor Code § 417.001.

6 Cases that cite this headnote

Attorneys and Law Firms

*74 Peter R. Meeker, Austin, for appellant.

Robert L. Lovett, Lovett Law Firm, El Paso, for appellee.

Before Panel No. 2 BARAJAS, C.J., McCLURE, and CHEW, JJ.

OPINION

Casualty Reciprocal Exchange v. Demock, 130 S.W.3d 74 (2002)

DAVID WELLINGTON CHEW, Justice.

Appellant Casualty Reciprocal Exchange (“Casualty”) appeals from a grant of summary judgment in favor of Appellee

Julie Angela Demock (“Demock”). The issue here is: Does a workers' compensation carrier have a statutory subrogation

right against the employee's uninsured/underinsured motorist insurance carrier after having recovered damages from the

third-party tortfeasor?

The facts are undisputed and taken from Casualty's brief. In the course and scope of her employment, Demock

suffered severe injuries to her knee in a collision with *75 Enriqueta Adame. Demock elected to claim workers'

compensation from Casualty, her employer's workers' compensation carrier, which paid her $41,182.68. Exercising its

right of subrogation under TEX.LABOR CODE ANN. § 417.001(a), Casualty brought suit against Adame. Demock

intervened in that suit. The parties settled the suit when Adame tendered her $20,000 insurance policy limit. The court

in that suit ordered Demock receive $6,729.67 for attorney's fees and the remaining $13,270.33 to Casualty to offset the

workers' compensation benefits paid to Demock.

Demock also had her own personal underinsured motorist insurance with Texas Farmers Insurance Company with a

policy limit of $20,000. Texas Farmers filed a petition in interpleader to the 327th Judicial District Court of El Paso

County because of Demock and Casualty's rival claim on Demock's $20,000 policy limit. Demock and Casualty filed

cross-actions against each other. After Texas Farmers deposited the contested $20,000 into the court's registry, the trial

court dismissed it from the suit. Demock and Casualty both moved for summary judgment, claiming entitlement to the

$20,000, and the trial court granted summary judgment for Demock, awarding the entire $20,000 to “Demock and her

attorney.”

Under both the former and present law, a carrier like Casualty in this case has the right to reimbursement from benefits

paid to the injured employee by a third-party tortfeasor, up to the amount of compensation paid, or recover the

amount from the employee or the third-party tortfeasor. TEX.LAB.CODE ANN. § 417.001 (Vernon 1996 and Vernon

Supp.2002); Tex. Workers' Comp. Ins. Fund v. Serrano, 962 S.W.2d 536, 538 (Tex.1998); Watson v. Glens Falls Ins. Co.,

505 S.W.2d 793, 795 (Tex.1974). Recently, however, the Texas Supreme Court has stated that “any third-party recovery

is ‘burdened by the right of the insurance carrier to recoup itself for compensation paid,’ ” without distinguishing recovery

from a third-party tortfeasor. [Emphasis in orig.]. Serrano, 962 S.W.2d at 538 (Tex.1998), citing Guillot v. Hix, 838

S.W.2d 230, 232 (Tex.1992).

The emphasis of the interpretation of Section 417.001 of the Texas Labor Code is not only on a third-party's liability

to an injured employee but the right of subrogation of a compensation carrier who has paid benefits to that employee.

TEX.LAB.CODE ANN. § 417.001(b). The purpose is to “ ‘prevent overcompensation to the employee and to reduce

the burden of insurance to the employer and to the public.’ ” Granite State Ins. Co. v. Firebaugh, 558 S.W.2d 550, 551

(Tex.Civ.App.-Eastland 1977, writ ref'd n.r.e.), citing Capitol Aggregates, Inc. v. Great American Ins. Co., 408 S.W.2d

922 (Tex.1966). Although most cases interpreting the statute involve a third-party tortfeasor, the Amarillo Court of

Appeals has held that the definition of “third-party” was not limited to third-party tortfeasors and could include an

employer's uninsured motorist insurer. Employers Cas. Co. v. Dyess, 957 S.W.2d 884, 890–91 (Tex.App.-Amarillo 1997,

writ denied). The Houston Court of Appeals followed Dyess's reasoning that if legislators meant to limit the definition

of “third-party” to third-party tortfeasors, then they would have done so. Tex. Workers' Comp. Ins. Facility v. Aetna

Cas. & Sur. Co., 994 S.W.2d 923, 925–26 (Tex.App.-Houston [1st Dist.] 1999, no pet.). Both Courts found it important

that the injured employee could have a double recovery of benefits. See Dyess, 957 S.W.2d at 890; Aetna Cas. & Sur.

Co., 994 S.W.2d at 926. Casualty primarily relies upon Dyess and Aetna.

We find, however, that Dyess and Aetna are factually distinguishable. In Dyess *76 and Aetna, the subrogated policies

belonged to the employer, but here, the underinsured motorist (“UIM”) policy was purchased by and belonged to

Demock, the significance of which is that we have two competing public policies. The Legislature declared it to be the

Casualty Reciprocal Exchange v. Demock, 130 S.W.3d 74 (2002)

public policy of this state to make uninsured motorist coverage a part of every liability insurance policy issued, with

certain limited exceptions. Francis v. Int'l Serv. Ins. Co., 533 S.W.2d 408, 410–11 (Tex.Civ.App.-Texarkana), aff'd, 546

S.W.2d 57 (Tex.1976). The purpose of the Uninsured or Underinsured Motorist Coverage Act is to protect an insured

against negligent, financially irresponsible motorists by allowing the insured to collect damages for bodily injury. Francis

v. International Service Ins. Co., 546 S.W.2d 57, 60–1 (Tex.1976).

We fail to see how Demock's prudence in maintaining UIM coverage, which insurers are statutorily required to provide

for the insured's benefit and for which she had paid a premium can be trumped by the subrogation provision. Indeed,

construing the subrogation provision as if it stood alone would thwart the legislative intent and mandate that requires

insurers to provide UIM motorist protection for persons such as Demock. We decline to do so.

We overrule the single issue and affirm the judgment of the trial court.

All Citations

130 S.W.3d 74

City of Corpus Christi v. Gomez, 141 S.W.3d 767 (2004)

141 S.W.3d 767

Court of Appeals of Texas,

Corpus Christi–Edinburg.

CITY OF CORPUS CHRISTI, Appellant,

Norberta GOMEZ, Appellee.

No. 13–02–198–CV.

July 22, 2004.

Synopsis

Background: City employee sought review of administrative decision of Workers' Compensation Commission that found

that city had subrogation right to benefits paid to employee under employee's personal uninsured/underinsured motorist

(UIM) insurance coverage. The 148th District Court, Nueces County, Rose Vela, J., granted summary judgment for

employee and city appealed.

[Holding:] The Court of Appeals, Yañez, J., held that city, as self-insured entity that provided workers' compensation

benefits to employee, did not have subrogation right to benefits paid to employee under employee's UIM coverage.

Affirmed.

West Headnotes (10)

[1] Trial Submission of Cause on Stipulation or Agreed Statement

Strict compliance with civil procedure rule on agreed cases is not prerequisite for agreed case. Vernon's

Ann.Texas Rules Civ.Proc., Rule 263.

Cases that cite this headnote

[2] Appeal and Error Cases Submitted Below on Agreed Case or Statement

When case was submitted to trial court upon stipulated facts, Court of Appeals reviews trial court's order to

determine whether trial court correctly applied law to stipulated facts. Vernon's Ann.Texas Rules Civ.Proc.,

Rule 263.

1 Cases that cite this headnote

[3] Appeal and Error Cases Submitted Below on Agreed Case or Statement

When reviewing case that was submitted to trial court upon stipulated facts, Court of Appeals limits its review

to stipulated facts, unless other facts are necessarily implied from stipulated facts. Vernon's Ann.Texas Rules

Civ.Proc., Rule 263.

City of Corpus Christi v. Gomez, 141 S.W.3d 767 (2004)

1 Cases that cite this headnote

[4] Appeal and Error Cases Triable in Appellate Court

In appeal from agreed case, Court of Appeals reviews de novo whether trial court correctly applied law to

admitted facts. Vernon's Ann.Texas Rules Civ.Proc., Rule 263.

1 Cases that cite this headnote

[5] Appeal and Error Cases Submitted Below on Agreed Case or Statement

Because trial court has no discretion in deciding law or its proper application, Court of Appeals defers less to

trial court in appeal from agreed case than in ordinary reviews. Vernon's Ann.Texas Rules Civ.Proc., Rule 263.

Cases that cite this headnote

[6] Appeal and Error Cases Submitted Below on Agreed Case or Statement

In appeal of agreed case, there are no presumed findings in favor of judgment, and pleadings are immaterial.

Vernon's Ann.Texas Rules Civ.Proc., Rule 263.

Cases that cite this headnote

[7] Workers' Compensation Subrogation of or Assignment to Insurer

Statute on workers' compensation carrier's subrogation rights was adopted to prevent overcompensation to

employee, and to reduce burden of insurance to employers and public. V.T.C.A., Labor Code § 417.001.

2 Cases that cite this headnote

[8] Workers' Compensation Subrogation or Assignment in General

City, as self-insured entity that provided workers' compensation benefits to employee, did not have subrogation

right to benefits paid to employee under employee's personal uninsured/underinsured motorist (UIM) coverage,

where employee had paid for UIM coverage herself and collected benefits under UIM policy as first-party

beneficiary, so that amounts paid by insurer under UIM policy were insurance benefits, and not “damages,”

within meaning of subrogation provision of Workers' Compensation Act. V.T.C.A., Labor Code § 417.001(a).

1 Cases that cite this headnote

[9] Insurance Third-Party Beneficiaries

Insurance Uninsured or Underinsured Motorist Coverage

Employer's uninsured/underinsured motorist (UIM) insurance coverage is intended to recoup those damages, as

that term is used in Workers' Compensation Act, recoverable from third party who is liable to injured employee

because third party committed tortious act against injured employee; such UIM coverage is result of insurance

contract between employer and insurance company, and relationship of injured employee to that contract is

that of third-party beneficiary. V.T.C.A., Labor Code § 417.001(a).

Cases that cite this headnote

City of Corpus Christi v. Gomez, 141 S.W.3d 767 (2004)

[10] Insurance Relations Between Parties; Implied Terms

Insurance Uninsured or Underinsured Motorist Coverage

Relationship between insured who purchases personal uninsured/underinsured motorist (UIM) insurance

coverage and insurer is that of contracting parties and, in such relationship, insurer is obligated to pay insured

benefits, not damages, when insured is entitled to them.

Cases that cite this headnote

Attorneys and Law Firms

*768 David Neblett, Todd A. Hunter, Hunter & Handel, Corpus Christi, for appellant.

Daniel F. Horne, Stone & Stone, Corpus Christi, for appellee.

Before Justices HINOJOSA, YÃNEZ, and CASTILLO.

OPINION

Opinion by Justice YÃNEZ.

Appellant, the City of Corpus Christi (“the City”), appeals from a summary judgment in favor of appellee, Norberta

Gomez (“Gomez”). The sole issue is whether the City, a self-insured entity that provides workers' compensation benefits

to its employees, has a subrogation right to benefits paid to an injured employee under the employee's personal uninsured/

underinsured (“UIM”) insurance coverage. Because we hold the City has no subrogation right in such circumstances,

we affirm.

Background

Gomez was struck and injured by a motor vehicle while engaged in the course and scope of her employment with the

City as a school crossing guard. The City, a self-insured political subdivision of the State, paid in excess of $78,513.13 in

medical and indemnity benefits to Gomez. Gomez later settled a UIM claim with her personal insurance company and

received $20,000. The City contends it has a subrogation right to the benefits paid to Gomez under her personal UIM

insurance coverage pursuant to section 417.001(b) of the Labor Code. 1

*769 The Texas Workers' Compensation Commission issued an administrative decision in the City's favor and

Gomez appealed to the trial court. See TEX. LAB.CODE ANN. § 410.251 (Vernon 1996) (party that has exhausted

administrative remedies under statutory scheme entitled to judicial review). The parties agreed to submit the matter to

the trial court on cross-motions for summary judgment based on an agreed statement of facts. 2 Gomez's motion for

summary judgment contends there is “no support” for the City's position that it is entitled to subrogation. The trial court

granted summary judgment in Gomez's favor.

We have summarized the following relevant facts included in the agreed statement of facts:

1) The City, as a political subdivision of the State of Texas, is self-insured and provides workers' compensation benefits

to its employees through a third-party administrator.

City of Corpus Christi v. Gomez, 141 S.W.3d 767 (2004)

2) While engaged in the course and scope of her employment with the City as a school crossing guard, Gomez suffered

a compensable injury when she was struck by a motor vehicle driven by Manuel Garcia, Jr.

3) The City paid Gomez in excess of $73,513.13 in medical and indemnity benefits for her injuries as of the time of

the trial.

4) Pursuant to chapter 417 of the labor code, as the worker's compensation carrier, the City is subrogated to the rights

of its injured employee up to the amount of the benefits paid. This statutory lien may be enforced against the liability

of a third party in the name of the injured employee. See TEX. LAB.CODE ANN. § 417.001 (Vernon Supp.2004).

5) Geico, Garcia's liability insurance carrier, settled Gomez's claim for $25,000 and those funds were paid over to the

City.

6) For ten years prior to the accident, Gomez had maintained, at her personal expense, UIM motorist protection with

State Farm Insurance Company, by paying an additional premium of $16.00 a month for such coverage.

7) Without informing the City, Gomez settled her UIM claim with State Farm for the sum of $20,000 and kept the

money.

8) The City claims a subrogation interest in the $20,000 State Farm paid Gomez, contending it is a third-party recovery

pursuant to section 417.001(b) of the labor code.

9) Gomez contends the UIM settlement is a benefit derived from her own private insurance, and thus constitutes a

first-party recovery not subject to the provisions of section 417.001(b).

[1] Although the agreed statement of facts in the record is neither signed nor certified by the trial court as correct, we

have previously held that strict compliance with rule 263 is not a prerequisite for an agreed case. See Reed v. Valley

Fed. Sav. & Loan Co., 655 S.W.2d 259, 264 (Tex.App.-Corpus Christi 1983, writ ref'd n.r.e.) (if parties stipulate all facts,

case may be treated as a submission on agreed statement and strict compliance with rule 263 is not required); see also

Abbott v. Blue Cross & Blue Shield of Tex., Inc., 113 S.W.3d 753, 758 (Tex.App.-Austin 2003, pet. filed) (same) (citing

Lambda Constr. Co. v. Chamberlin Waterproofing & Roofing Sys., Inc., 784 S.W.2d 122, 125 (Tex.App.-Austin 1990, writ

denied)); State *770 Farm Lloyds v. Kessler, 932 S.W.2d 732, 735 (Tex.App.-Fort Worth 1996, writ denied) (same).

Standard of Review

[2] [3] [4] [5] [6] This case was submitted to the trial court upon stipulated facts. Accordingly, we review the trial

court's order to determine whether the trial court correctly applied the law to the stipulated facts. See City of Harlingen

v. Avila, 942 S.W.2d 49, 51 (Tex.App.-Corpus Christi 1997, writ denied); accord Thompson v. Cont'l Airlines, 18 S.W.3d

701, 705 (Tex.App.-San Antonio 2000, no pet.); Port Arthur I.S.D. v. Port Arthur Teachers Ass'n, 990 S.W.2d 955,

957 (Tex.App.-Beaumont 1999, pet. denied); Stewart v. Hardie, 978 S.W.2d 203, 206 (Tex.App.-Fort Worth 1998, pet.

denied). We limit our review to the stipulated facts unless other facts are necessarily implied from the stipulated facts.

Highlands Ins. Co. v. Kelley–Coppedge, Inc., 950 S.W.2d 415, 417 (Tex.App.-Fort Worth 1997), rev'd on other grounds,

980 S.W.2d 462 (Tex.1998). We review de novo whether the trial court correctly applied the law to the admitted facts. Id.;

see also Orange Cty. Appraisal Dist. v. Agape Neighborhood Improvement, Inc., 57 S.W.3d 597, 601 (Tex.App.-Beaumont

2001, pet. denied). Because a trial court has no discretion in deciding the law or its proper application, we defer less to

the trial court than in ordinary reviews. Highlands, 950 S.W.2d at 417. In an appeal of an “agreed” case, there are no

presumed findings in favor of the judgment, and the pleadings are immaterial. Id.; Kessler, 932 S.W.2d at 735.

City of Corpus Christi v. Gomez, 141 S.W.3d 767 (2004)

Applicable Law

A workers' compensation carrier's rights to subrogation are set out in section 417.001 of the Labor Code. The statute

provides, in pertinent part, as follows:

(a) An employee or legal beneficiary may seek damages from a third party who is or becomes liable to pay damages

for an injury or death that is compensable under this subtitle and may also pursue a claim for workers' compensation

benefits under this subtitle.

(b) If a benefit is claimed by an injured employee or a legal beneficiary of the employee, 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 (Vernon Supp.2004).

[7] The subrogation statute was adopted to prevent overcompensation to an employee and to reduce the burden of

insurance to employers and the public. See Capitol Aggregates, Inc. v. Great Am. Ins. Co., 408 S.W.2d 922, 924 (Tex.1966)

(stating purpose of the predecessor statute to section 417.001). The City argues that a workers' compensation carrier is

entitled to subrogation, regardless of whether a UIM claim brought by its employee is made against a policy paid for

by the employer or a policy paid for by the employee.

In support, the City relies primarily on Texas Workers' Comp. Ins. Facility v. Aetna Cas. & Sur. Co., 994 S.W.2d 923, 926

(Tex.App.-Houston [1st Dist.] 1999, no pet.) and Employers Cas. Co. v. Dyess, 957 S.W.2d 884, 890 (Tex.App.-Amarillo

1998, writ denied). Unlike the present case, however, Aetna and Dyess both involved UIM claims brought against policies

paid for and maintained by the injured employee's employer. See Aetna, 994 S.W.2d at 925; Dyess, 957 S.W.2d at 885.

Here, Gomez brought her claim against a personal *771 UIM policy that she paid for and maintained for ten years.

The issue before us was first addressed by the Fifth Circuit in Bogart v. Twin City Fire Ins. Co., 473 F.2d 619 (5th

Cir.1973). In that case, TransAmerica Insurance Company, the workers' compensation carrier and intervenor in the suit,

argued that because it had paid benefits to an employee, it had a right of subrogation to the judgment, or any part of it,

that the employee might obtain against the employee's own UIM insurance carrier. See Bogart, 473 F.2d at 627.

TransAmerica based its argument on former article 8307, section 6a, 3 which essentially provided a workers'

compensation carrier a subrogation right “in any recovery the employee may obtain against the third person who,

because of the circumstances under which the accident occurred, has a legal liability to pay damages.” Id. TransAmerica

argued that the statute's reference to a person with a “legal liability” implied a class larger than only tortfeasors and

therefore included uninsured motorists insurance carriers. Id. at 628.

The Bogart court disagreed, noting that the workers' compensation insurance carrier's rights were derived solely from

the subrogation statute and had been recognized only in actions involving a tortfeasor. See id. (citing Consolidated

Underwriters v. Kirby Lumber Co., 267 S.W. 703, 706 (Tex.Com.App.1924)). The Bogart court cited several Texas cases

limiting the statutory subrogation provisions to actual tortfeasors and noted that Bogart's recovery was not against a

third-party tortfeasor. See id. at 629. In denying TransAmerica's claim, the court stated it recognized that the theory

behind the subrogation statute is to reduce the burden of insurance to employers and the public, but noted that such a

theory could not be used to create a subrogation right where none was available under the statute. See id.

The Dyess and Aetna courts disagreed with the holding of Bogart. See Dyess, 957 S.W.2d at 890; Aetna, 994 S.W.2d at

926. The Dyess court pointed out that although the Texas cases cited in Bogart involved subrogation claims by workers'

compensation carriers against third-party tortfeasors, none of the cited cases specifically address whether subrogation

City of Corpus Christi v. Gomez, 141 S.W.3d 767 (2004)

rights are limited to third-party tortfeasors. See Dyess, 957 S.W.2d at 890. In declining to follow Bogart, the Dyess court

stated it was unaware of any Texas cases expressly holding that subrogation rights are effective only as to third-party

tortfeasors, and not to other third parties. See id.

In Dyess, the employer's UIM carrier also asserted that the workers' compensation carrier had no subrogation rights

*772 against it because of a provision in the UIM carrier's policy providing that coverage did “not apply directly or

indirectly to benefit [ ] any insurer or self-insurer under any workers' compensation, disability benefits or similar law.”

See id. (omission in original). The Dyess court held the clause invalid because it attempted to “contractually abrogate [the

workers' compensation carrier's] statutory right.” See id. at 891. The Dyess court concluded that the right of subrogation

applied to any parties liable for Dyess's injury, regardless of whether the liability arose in tort or contract. See id.

The question before the court in Aetna was whether a workers' compensation carrier, after paying benefits to an injured

employee, had a subrogation right when the employee subsequently sued and collected from the employer's UIM

insurance carrier. See Aetna, 994 S.W.2d at 925. The parties disagreed about the scope of the statutory term “third party.”

See id. Like the Dyess court, the Aetna court declined to follow Bogart's holding that third-party subrogation rights are

limited to claims against third-party tortfeasors. See id. at 926. The Aetna court found Bogart's holding to be in conflict

with the Texas statute. 4 The compensation carrier contended that the plain language of the statute with respect to the

term “third party” extended its subrogation rights against any third person potentially liable to the benefits recipient.

Id. at 925. Aetna (the employer's UIM carrier) argued, however, that subrogation rights were limited to claims against

third party tortfeasors. Id. (emphasis in original). The Aetna court concluded that the purpose of the subrogation statute

favors an expansive reading of “third party” and therefore held that a workers' compensation carrier's subrogation right

extends to claims against a UIM carrier. Id. at 926.

The issue before this Court was recently addressed by the San Antonio Court of Appeals in Liberty Mut. v. Kinser, 82

S.W.3d 71, 72 (Tex.App.-San Antonio 2002, pet. withdrawn). 5 In a well-reasoned opinion by Chief Justice Hardberger,

the Kinser court held that a workers' compensation carrier does not have a subrogation right to benefits paid to an injured

employee under the employee's UIM coverage. See id. at 79. The Kinser court reasoned that extending subrogation

rights to a workers' compensation carrier in such circumstances results in the injured employee subsidizing the insurance

company. See id. The court concluded that neither law nor equity would be satisfied by such a result. See id. We agree.

*773 The facts in Kinser are similar to the present case. In Kinser, the workers' compensation carrier asserted a

subrogation right to the UIM benefits payable to the employee under the employee's personal UIM insurance policy.

See id. at 72.

The Kinser court noted that most jurisdictions resolve the issue of whether a workers' compensation carrier's rights extend

to UIM benefits against the carrier. See id. at 76. The court also noted that the Texas Supreme Court has distinguished

between damages awarded by a jury and benefits payable under a UIM policy. See id. at 79 (citing Henson v. Southern

Farm Bureau Cas. Ins. Co., 17 S.W.3d 652, 654 (Tex.2000)). In rejecting the workers' compensation carrier's right to

subrogation benefits, the Kinser court held that “damages” as used in section 417.001(a) do not include UIM benefits

under the claimant's personal insurance policy; rather, the term is limited to damages recovered from a third party who

is liable to the injured employee because the third party breached a contract or committed a tortious act against the

injured employee. See id. at 78.

[8] [9] In the present case, Gomez argues that unlike the circumstances in Aetna and Dyess, she collected benefits under

her personal UIM policy and is therefore a first-party beneficiary. Gomez reasons that a person collecting under his or

her employer's UIM insurance coverage is a third-party beneficiary because the employer pays the insurance premium.

We agree. An employer's UIM coverage is intended to recoup those damages, as that term is used in section 417.001(a),

recoverable from a third party who is liable to an injured employee because the third party committed a tortious act

City of Corpus Christi v. Gomez, 141 S.W.3d 767 (2004)

against the injured employee. Such UIM coverage is the result of an insurance contract between the employer and the

insurance company, and the relationship of the injured employee to that contract is that of a third-party beneficiary.

[10] Persons who are conscientious and thoughtful purchase their own UIM coverage to protect themselves against

losses caused by negligent financially irresponsible motorists. See Francis v. Int'l Serv. Ins. Co., 546 S.W.2d 57, 61

(Tex.1976) (purpose of the [UIM] Act is ... to protect the conscientious and thoughtful motorist against losses caused

by negligent financially irresponsible motorists.) The relationship between an insured who purchases personal UIM

insurance coverage and the insurer is that of contracting parties. See Henson, 17 S.W.3d at 653. In such a relationship,

the insurer is obligated to pay the insured benefits, not damages, when the insured is entitled to them. See id. at 654.

We agree with the reasoning of our sister court in Kinser. See Kinser, 82 S.W.3d at 78–79. We hold that a workers'

compensation insurance carrier does not have a subrogation right to benefits paid to an injured employee under the

employee's UIM insurance policy. Accordingly, we hold that the trial court did not err in its interpretation of the statute.

The JUDGMENT of the trial court is AFFIRMED.

All Citations

141 S.W.3d 767

Footnotes

1 See TEX. LAB.CODE ANN. § 417.001 (Vernon Supp.2004). Although section 417.001 was amended in 2003, see Act of May

22, 1993, 73rd Leg., R.S. ch. 269 § 1, 1993 Tex. Sess. Law Serv. 1235 (amended 1997 and 2003) (current version at TEX.

LAB.CODE ANN. § 417.001 (Vernon Supp.2004)), the amendments are unrelated to the issue here. Thus, we cite to the

current version of the statute.

2 See TEX.R. CIV. P. 263.

3 Former article 8307 § 6a provided, in pertinent part:

Where the injury for which compensation is payable under this law was caused under circumstances creating a legal

liability in some person other than the subscriber to pay damages in respect thereto, the employee may proceed either at

law against that person to recover damages or against the association for compensation under this law....

If compensation be claimed under this law by the injured employee ... then the association shall be subrogated to the

rights of the injured employee, and may enforce in the name of the injured employee ... the liability of said other person,

and in case the recovery is for a sum greater than that paid or assumed by the association to the employee or his legal

beneficiaries, then out of the sum so recovered the association shall reimburse itself and pay said costs and the excess so

recovered shall be paid to the injured employee or his beneficiaries ....

See Act of May 15, 1973, 63rd Leg., R.S., ch. 88, § 10, 1973 Tex. Gen. Laws 193, repealed by Act of Dec. 13, 1989, 71st

Leg., 2nd C.S. ch. 1, § 16.01(1), 1989 Tex. Gen. Laws 114 (current version at TEX. LAB.CODE ANN. § 417.001 (Vernon

Supp.2004)).

4 The subrogation statute at issue in Aetna stated, in pertinent part:

(a) If a third party is or becomes liable to pay damages for an injury or death which is compensable under this Act, the

employee or legal beneficiary may seek damages from the third party ...

(b) If compensation is claimed under this Act by the injured employee or the employee's legal beneficiaries, the insurance

carrier is subrogated to the rights of the injured employee and may enforce in the name of the injured employee or the

legal beneficiaries the liability of that other person ...

(emphasis added)

Act of December 11, 1989, 71st Leg., 2d C. S., ch. 1, § 4.05, 1989 Tex. Gen. Laws 122, repealed by Act of May 12, 1993,

73rd Leg., R.S., ch. 269, § 1, sec. 417.001, 1993 Tex. Gen. Laws 1234 (current version at TEX. LAB.CODE ANN. § 417.001

(Vernon Supp.2004)).

City of Corpus Christi v. Gomez, 141 S.W.3d 767 (2004)

5 The Kinser court noted that the El Paso court reached a similar decision in Cas. Reciprocal Exch. v. Demock, 130 S.W.3d 74

(Tex.App.-El Paso 2002, no pet.) (not designated for publication). See Liberty Mut. v. Kinser, 82 S.W.3d 71, 79 n. 1 (Tex.App.-

San Antonio 2002, pet. withdrawn). The Kinser court did not rely on Demock as authority, and neither do we. See id.

Employers Cas. Co. v. Dyess, 957 S.W.2d 884 (1997)

957 S.W.2d 884

Court of Appeals of Texas,

Amarillo.

EMPLOYERS CASUALTY COMPANY, Appellant,

Carl L. DYESS, Jr., Northbrook Property and Casualty Insurance Company

and Northbrook Indemnity Company and Felipe Mendoza, Appellees.

No. 07–96–0365–CV.

Nov. 7, 1997.

Workers' compensation insurer brought action against employee, employer's uninsured motorist (UM) carrier, and tort-

feasor to recover subrogation. The 11th District Court, Harris County, Mark Davidson, J., entered summary judgment

against insurer, and it appealed. The Court of Appeals, Boyd, C.J., held that: (1) insurer's statutory right of subrogation

applied to carrier, and (2) exclusion of UM benefits for injuries covered by workers' compensation was invalid.

Reversed and remanded.

West Headnotes (7)

[1] Workers' Compensation Subrogation of or Assignment to Insurer

Separate, equitable right of subrogation by workers' compensation insurer is unnecessary since insurer has

statutory right. Vernon's Ann.Texas Civ.St. art. 8307, § 6a (Repealed).

Cases that cite this headnote

[2] Workers' Compensation Subrogation of or Assignment to Insurer

Workers' compensation insurer's statutory right to subrogation against some person other than subscriber

who has legal liability for the injury was not limited to third-party tort-feasors, but included employer's

uninsured motorist (UM) carrier; injured employee received double recovery from insurer and carrier. Vernon's

Ann.Texas Civ.St. art. 8307, §§ 6a, 6a(c) (Repealed).

8 Cases that cite this headnote

[3] Workers' Compensation Subrogation of or Assignment to Insurer

Avoiding double recovery is one purpose of workers' compensation insurer's statutory right of subrogation

against some person other than subscriber who has legal liability for the injury. Vernon's Ann.Texas Civ.St.

art. 8307, § 6a (Repealed).

2 Cases that cite this headnote

[4] Insurance Workers' Compensation

Workers' Compensation Subrogation of or Assignment to Insurer

Employers Cas. Co. v. Dyess, 957 S.W.2d 884 (1997)

Exclusion stating the uninsured motorist (UM) coverage was inapplicable directly or indirectly to benefit

any insurer or self-insurer under any workers' compensation, disability benefits, or similar law was invalid as

conflicting with workers' compensation insurer's statutory right of subrogation against UM carrier. Vernon's

Ann.Texas Civ.St. art. 8307, § 6a (Repealed).

5 Cases that cite this headnote

[5] Workers' Compensation Waiver or Loss by Employer or Insurer of Right to Sue

Although workers' compensation insurer may by contract waive statutory right to subrogation, it is not bound

by contracts of others. Vernon's Ann.Texas Civ.St. art. 8307, § 6a (Repealed).

Cases that cite this headnote

[6] Workers' Compensation Subrogation of or Assignment to Insurer

Workers' compensation insurer's statutory right of subrogation against person other than subscriber who has

legal liability for injury can apply to any parties liable for employee's injury, regardless of whether that liability

arose in tort or contract. Vernon's Ann.Texas Civ.St. art. 8307, § 6a (Repealed).

1 Cases that cite this headnote

[7] Insurance Uninsured or Underinsured Motorist Coverage

Workers' Compensation Subrogation or Assignment in General

Workers' Compensation Subrogation of or Assignment to Insurer

Uninsured motorist (UM) carrier for employer was not bound by any contractual right of subrogation created

between employer, employee, and workers' compensation insurer. Vernon's Ann.Texas Civ.St. art. 8307, § 6a

(Repealed).

6 Cases that cite this headnote

Attorneys and Law Firms

*885 Hughes, Watters & Askanase, Loren R. Smith, Houston, for appellant.

Daniel B. Nelson & Associates, Daniel B. Nelson, Thomas B.“ Tody” DuPont, Houston, for appellees.

Before BOYD, C.J., and QUINN and REAVIS, JJ.

Opinion

BOYD, Chief Justice.

In this case, we are asked to address the subrogation rights of a workers' compensation carrier as they might apply to

the employer's uninsured motorist coverage. Appellant, Employers Casualty Co. (Employers), challenges the granting of

summary judgment in favor of appellees Carl L. Dyess, Jr. (Dyess), Northbrook Property and Casualty Co., Northbrook

Indemnity Co. (collectively referred to as Northbrook), and Felipe Mendoza (Mendoza) denying Employers' subrogation

claims. For reasons we later discuss, we reverse the judgment of the trial court.

Employers Cas. Co. v. Dyess, 957 S.W.2d 884 (1997)

A proper discussion of the question before us requires us to discuss in some detail the factual and procedural history

of the proceeding. In 1990, appellee Dyess was an employee of Winn–Lange Electric, Inc. Employers was the workers'

compensation carrier for Winn–Lange. Winn–Lange's automobile insurance policy, which included uninsured motorist

coverage, was with Northbrook. On August 14, 1990, Dyess was driving a truck belonging to Winn–Lange in the course

of his employment when he was struck by a vehicle operated by Mendoza. Mendoza was uninsured. Dyess sought and

obtained workers' compensation benefits totaling $107,385.40 from Employers.

Some time before August 1991, Dyess brought a negligence suit against Mendoza. Employers filed a plea in intervention

in February 1992, asserting its subrogation rights under Tex.Rev.Civ. Stat. Ann. Art. 8307, § 6a (repealed by Acts

of December 13, 1989, 71st Leg., 2nd C.S., ch. 1, § 16.01(10), 1989 Tex.Gen.Laws 1, 114, effective January 1, 1991).

In its plea, Employers named Mendoza's employer, Toni Martin, as an additional defendant, asserting that Mendoza

was acting in the course and scope of his employment at the time of the collision. Dyess then added Northbrook as a

defendant seeking to recover under the uninsured motorist coverage of Winn–Lange's automobile insurance policy with

Northbrook. On May 11, 1992, the trial court rendered a no-answer default judgment against Mendoza on the issue of

liability. Employers then amended its plea in intervention asserting a right of subrogation for any recovery Dyess might

obtain from Northbrook. Northbrook answered, asserting it was entitled to an offset for any workers' compensation

payments made to Dyess and specially excepted to Employers' plea in intervention. Northbrook also brought cross-

claims against Mendoza and Martin.

On February 12, 1993, Northbrook moved for summary judgment against Employers on the basis that Employers lacked

any subrogation right against Northbrook. On March 1, 1993, Dyess filed his own motion for summary judgment against

Employers, asserting the same grounds urged by Northbrook. Both motions relied on a provision of the insurance

contract which provided that uninsured motorist coverage “shall not apply directly or indirectly to benefit [ ] any insurer

or selfinsurer under any workers' compensation, disability benefits or similar law.” The movants also relied on Bogart v.

Twin City Fire Ins. Co., 473 F.2d 619 (5th Cir.1973), for the proposition that workers' compensation carrier's subrogation

rights do not extend to uninsured motorist coverage. The trial court granted Northbrook's motion on March 30, 1993,

and Dyess's motion the following September. The trial court also granted another motion for summary judgment by

Dyess that Northbrook was not entitled to an offset for the payments made by Employers to Dyess.

After the trial court granted these motions, Dyess and Northbrook settled for $150,000, prompting Dyess's dismissal of

his claims against Northbrook. Employers objected to the dismissal because the settlement agreement did not reflect its

subrogation rights. The parties stipulated to the amount of workers' compensation benefits *886 Employers had paid

to Dyess and the action proceeded to trial on July 10, 1995. At the conclusion of the trial, the jury found Mendoza was

solely responsible for the accident, but that he was not acting in the course and scope of his employment with Martin

and found Dyess's damages were $400 for medical care. In its judgment, the trial court denied Employers' request for

subrogation, and ordered that Dyess recover $400 from Mendoza but take nothing from Martin. It also taxed costs

against Dyess and Employers.

In this appeal, Employers presents five points of asserted error. In its first three points, it claims the summary judgments

were erroneous because they violate Employers' 1) statutory right of subrogation, 2) its contractual subrogation right,

and 3) its equitable subrogation right. In its fourth point, Employers challenges the trial court's failure to award it

recovery of the amount for which the jury found Mendoza liable to Dyess. In its fifth point, it assigns error to the trial

court's refusal to charge the court costs to Mendoza.

STANDARD OF REVIEW

A summary judgment is only proper when a movant establishes there is no genuine issue of material fact and it is entitled

to judgment as a matter of law. Randall's Food Markets, Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex.1995); Tex.R. Civ. P.

Employers Cas. Co. v. Dyess, 957 S.W.2d 884 (1997)

166a(c). In deciding whether there is a material fact issue precluding summary judgment, evidence favorable to the non-

movant will be taken as true and every reasonable inference resolved in its favor. Nixon v. Mr. Property Management

Co., 690 S.W.2d 546, 548–49 (Tex.1985). Where, as here, the trial court's order granting summary judgment does not

specify the ground or grounds relied upon, the judgment is to be affirmed if any of the theories advanced by the movant

are meritorious. Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 625 (Tex.1996); State Farm Fire & Cas. Co. v. S.S. &

G.W., 858 S.W.2d 374, 380 (Tex.1993); Carr v. Brasher, 776 S.W.2d 567, 569 (Tex.1989). Parenthetically, we have not

failed to note the changes made in the summary judgment practice by the rather extensive amendments to the Rules of

Civil Procedure effective September 1, 1997. However, not only was this appeal perfected prior to the effective date of

those changes, with regard to the questions before us, the summary judgment requirements would be the same.

Subrogation has been defined as the right of one who has paid an obligation which another should have paid to be

indemnified by the other. BLACK'S LAW DICTIONARY, 1427 (6th ed.1990). The legislature first provided for a

workers' compensation carrier's subrogation rights in 1917. Act of March 28, 1917, 35th Leg., R.S., ch. 103, 1917 Tex.

Gen. Laws 268, 285. As initially written, and in relevant part, the subrogation statute provided:

Where the injury for which compensation is payable under this law was caused under circumstances

creating a legal liability in some person other than the subscriber to pay damages in respect thereof,

the employee may at his option proceed either at law against that person to recover damages or

against the association for compensation under this law, but not against both, and if he elects

to proceed at law against the person other than the subscriber, then he shall not be entitled to

compensation under this law. If compensation be claimed under this law by the injured employee

or his legal beneficiaries, then the association shall be subrogated to the rights of the injured

employee....

Id. Under this language, our courts held that an employee's action against a third party tortfeasor precluded subsequent

recovery of workers' compensation benefits, but receipt of workers' compensation payments would not necessarily

prevent the employee's subsequent action against the third party tortfeasor. Hart v. Traders & General Ins. Co., 144

Tex. 146, 189 S.W.2d 493, 494 (1945) (citing Employers' Indemnity Corp. v. Felter, 277 S.W. 376 (Tex.Com.App.1925)).

The court subsequently held that an injured employee has standing to pursue a third-party claim after obtaining a

compensation award whether or not the compensation carrier refuses to do so. Watson v. Glens Falls Ins. Co., 505 S.W.2d

793, 796 (Tex.1974).

In Campbell v. Sonford Chem. Co., 486 S.W.2d 932 (Tex.1972), the court noted a circumstance in which this statute

would *887 leave an injured employee with no remedy. This would occur when the employee sought compensation

benefits, but the claim was denied more than two years after his cause of action accrued. In that event, the employee's

claim against the third party would be barred by limitations. If the employee filed suit before the running of limitations,

section 6a would preclude recovery of compensation benefits. Id. at 934. In 1973, and in apparent response to Campbell,

the legislature amended the subrogation statute 1 to provide that an employee's action against a third party would not

preclude recovery of workers' compensation benefits. The statute in effect at the time of Dyess's injury provided:

If the injury for which compensation is payable under this law was caused under circumstances creating a legal liability

in some person other than the subscriber to pay damages in respect thereof, the employee may proceed either at law

against that person to recover damages or against the association for compensation under this law, and if he proceeds

at law against the person other than the subscriber, then he shall not be held to have waived his rights to compensation

under this law. [ ] If compensation be claimed under this law by the injured employee or his legal beneficiaries, then

the association shall be subrogated to the rights of the injured employee, and may enforce in the name of the injured

employee or of his legal beneficiaries the liability of said other person, and in case the recovery is for a sum greater than

that paid or assumed by the association to the employee or his legal beneficiaries, then out of the sum so recovered the

Employers Cas. Co. v. Dyess, 957 S.W.2d 884 (1997)

association shall reimburse itself and pay said costs and the excess so recovered shall be paid to the injured employee

or his beneficiaries. [ ]

Repealed and recodified as Tex. Labor Code Ann. § 417.001, by Act of December 13, 1989, 71st Leg., 2nd C.S., ch.

1, § 16.01(10), 1989 Tex. Gen. Laws 1, 114, effective January 1, 1991. 2

From this history, it appears clear that the 1973 amendment changed the law applicable when an injured employee seeks

compensation benefits after bringing an action against a third party. However, that is not the issue presented by this case.

The question before us is the subrogation right of a workers' compensation carrier after it paid benefits to an injured

employee who subsequently brought suit against potentially liable third parties. Our courts have recognized an injured

employee's ability to bring such suits, at least as to third party tortfeasors, since 1925. See Employers' Indemnity Corp.,

supra.

In considering the effect of a compensation carrier's right of subrogation on an injured employee's claim against others,

our courts have used a variety of descriptions. Most have held that after compensation benefits have been paid, the

employee has a cause of action against the third party, but it is subject to, or burdened by, the workers' compensation

carrier's right of reimbursement. See, e.g., Guillot v. Hix, 838 S.W.2d 230, 232 (Tex.1992); Traders & General Ins. Co.

v. West Texas Utilities, 140 Tex. 57, 165 S.W.2d 713, 716 (1942); Travelers Ins. v. Seidel, 705 S.W.2d 278 (Tex.App.

—San Antonio 1986, writ dism's w.o.j.). In Fort Worth Lloyds v. Haygood, 151 Tex. 149, 246 S.W.2d 865 (1952), our

supreme court held that an injured employee has no cause of action against a third party except to the degree his damages

exceed the workers' compensation recovery. Id. 246 S.W.2d at 868, 869. In *888 Yeary v. Hinojosa, 307 S.W.2d 325

(Tex.Civ.App.—Houston 1957, writ ref'd n.r.e.), the court held that the cause of action against the third party was “in

effect” owned jointly by the employee and the compensation carrier. Id. at 331. In Capitol Aggregates, Inc. v. Great Am.

Ins. Co., 408 S.W.2d 922 (Tex.1966), the court reaffirmed a workers' compensation carrier's right to the first money

recovered by the employee from a third person for the injuries for which the compensation was paid. Id. at 923. See also

Autry v. Dearman, 933 S.W.2d 182, 188 (Tex.App.—Houston [14th Dist.] 1996, writ denied).

When an injured employee, or their representative, has attempted to enter into a settlement agreement with the third

party, without providing for reimbursement of the workers' compensation carrier, our courts have declared such

agreements unlawful as contrary to the purpose of the subrogation statute. See Travelers Ins. v. Seidel, 705 S.W.2d at

281; Capitol Aggregates, 408 S.W.2d at 924. In Capitol Aggregates, the court went on to hold that Section 6a of Article

8307 was adopted to prevent overcompensation to the employee and to reduce the burden of insurance to the employer

and to the public which purposes would be frustrated if the employee were permitted to retain both the compensation

benefits and the settlement proceeds. Id. at 922 (citing Consolidated Underwriters v. Kirby Lumber Co., 267 S.W. 703

(Tex. Comm'n App.1924)).

Subsection c of section 6a provides that an employee's recovery from a third person shall be applied to reimburse the

compensation carrier. See e.g., Travelers Ins. v. Seidel, 705 S.W.2d at 281 (carrier entitled to recover from employee's

heir); Home Indemnity Co. v. Thompson, 407 S.W.2d 530 (Tex.Civ.App.—Texarkana 1966, no writ). This is so even when

the carrier did not participate in the employee's suit against the third party. Houston Gas & Fuel v. Perry, 127 Tex. 102, 91

S.W.2d 1052 (1936). On at least one occasion, an appellate court held that a workers' compensation carrier could recover

payments from a third party tortfeasor even though the payment had been made before any workers' compensation

payments had been made. See Home Indemnity Co., 407 S.W.2d at 530.

As we have noted, both motions for summary judgment contained the same two grounds: first, that Northbrook's

contractual liability expressly precluded recovery by a workers' compensation carrier, and second, that the statutory

right of subrogation was inapplicable to uninsured motorist coverage. Thus, the motions did not involve any equitable

right of subrogation that might be possessed by Employers. Therefore, if such a right exists, the summary judgments

were improper. For this reason, we initially address Employers' third point.

Employers Cas. Co. v. Dyess, 957 S.W.2d 884 (1997)

Employers cites American Centennial Ins. Co. v. Canal Ins. Co., 843 S.W.2d 480 (Tex.1992), and Ortiz v. Great Southern

Fire & Cas. Ins. Co., 597 S.W.2d 342 (Tex.1980), as support for its position that it has an equitable right of subrogation.

However, neither case concerned the subrogation rights of a workers' compensation carrier. In American, the court was

presented with the question of an excess liability carrier's equitable subrogation rights against a primary insurer. The

court held that an excess carrier liable for claims is subrogated to the rights of the insured as against the primary insurer.

American Centennial Ins. Co. v. Canal Ins. Co., 843 S.W.2d at 482. See G.A. Stowers Furniture Co. v. American Indemnity

Co., 15 S.W.2d 544 (Tex.Com.App.1929) (recognizing insurer's duty to insured in settlement of claims). In doing so, the

court reasoned that without such a remedy, the primary insurer would have little incentive to settle within the primary

policy's limits. American Centennial Ins. Co. v. Canal Ins. Co., 843 S.W.2d at 483.

Ortiz involved the intervention of a homeowner's insurance carrier in an action by the homeowner against a third party

tortfeasor responsible for a fire. It was undisputed that the homeowner had suffered $15,000 in damages to the home and

its contents as a result of the fire. Because the policy did not cover the home's contents, the insurance company paid only

$4,000 for damage to the structure. The insured settled with the third party for $10,000. The trial court granted summary

judgment in favor of the insurance company for $4,000 and was affirmed by the court of appeals. When appealed to the

supreme *889 court, with the observation that “the right of equitable subrogation is granted to an insurer [is] to prevent

the insured from receiving a double recovery,” that court recognized the existence of an equitable right of subrogation.

However, even so, the supreme court held summary judgment should not have been granted in favor of the insurance

company because the record did not show “if any portion of the $10,000 settlement was intended as compensation for

damage to the insured real property in that particular case” thus, “there is no indication that the Ortizes have to any

extent received a double recovery.” Ortiz v. Great Southern Fire & Cas. Ins. Co., 597 S.W.2d at 343, 344.

[1] In this case, as we have noted, the question before us is the effect of Article 8307, section 6a establishing a statutory

right of subrogation in workers' compensation cases. American and Ortiz are distinguishable because that question was

not before either court. With the existence of a statutory right, there is no need for courts to recognize a separate, equitable

right of subrogation. For example, in Johnson v. Second Injury Fund, 688 S.W.2d 107, 108 (Tex.1985), our supreme court

noted and cited with approval cases holding that a workers' compensation carrier's subrogation rights arise solely from

the statute. That rationale, in part at least, springs from Fidelity Union v. Texas Power, 35 S.W.2d 782 (Tex.Civ.App.

—Dallas 1931, writ ref'd), in which the court observed that prior to section 6a, our courts had held that a workers'

compensation carrier had no equitable right of subrogation. Id. at 783. See also Evans v. Venglar, 429 S.W.2d 673, 675

(Tex.Civ.App.—Corpus Christi 1968, no writ). Because these authorities are relevant and dispositive of the point, we

overrule Employers' third point.

[2] In its first point, Employers argues the trial court erred in granting summary judgment in favor of Dyess and

Northbrook on its statutory subrogation claims. In responding to this argument, Northbrook acknowledges Employers'

general right of statutory subrogation but posits that 1) the right of subrogation only applies to third party tortfeasors,

not to one whose potential liability is only contractual, and 2) even if Employers' subrogation rights extended to it,

Northbrook could have no liability to Employers under the terms of the insurance contract.

As noted above, section 6a provides a compensation carrier subrogation rights against “some person other than the

subscriber” who has a “legal liability” for the injury. In support of its first proposition, Northbrook argues the phrase

“some person” in the statute applies only to third party tortfeasors. Because resolution of this argument requires that

we determine the meaning of statutory language, we must apply the standards applicable to statutory construction.

Section 311.023 of the Government Code provides that in construing a statute, a court may, but is not required to,

consider several factors including 1) the object sought to be obtained; 2) circumstances under which the statute was

enacted; 3) legislative history; 4) common law or previous statutes; and 5) consequences of particular construction.

Tex. Govt.Code Ann. § 311.023 (Vernon 1988). However, when the statutory language is clear and unambiguous, such

extrinsic aids and rules of statutory construction are unnecessary and the statute should be given its plain meaning. Clark

Employers Cas. Co. v. Dyess, 957 S.W.2d 884 (1997)

v. Texas Home Health Inc., 940 S.W.2d 835, 841 (Tex.App.—Amarillo 1997, writ granted); City of Dallas v. Cornerstone

Bank, 879 S.W.2d 264, 270 (Tex.App.—Dallas 1994, no writ). Here, neither party argues that the language is ambiguous

and we find no ambiguity in the statute. The statute does not limit the scope of persons with legal liability for the

injury against whom a compensation carriers' subrogation interest is effective. That being true, the clear wording of the

statute does not support Northbrook's position that Employers is only subrogated to Dyess's rights against third party

tortfeasors.

Even so, Northbrook cites and primarily relies upon Bogart v. Twin City Fire Ins. Co., 473 F.2d at 619 as definitive

authority for its proposition that Employers' subrogation rights are limited to third party tortfeasors. In that case, an

employee was covered by workers' compensation insurance as well as uninsured motorist insurance he purchased on his

own automobile. While traveling in his car, and in the scope of his employment, he was killed by an uninsured driver.

*890 The compensation carrier paid $16,150.30 in benefits to the Bogarts and they subsequently brought suit against

Twin City to recover under the uninsured motorist coverage issued by it. The compensation carrier intervened in the

suit seeking subrogation rights because of its compensation payments. Id. at 627. Because of a provision in the Twin

City policy that uninsured motorist benefits could not inure to the benefits of any workers' compensation carrier, the

trial court denied Twin City's intervention. In doing so, it reasoned the subrogation statute only applied to third party

tortfeasors. Id.

In affirming the trial court's judgment, the appellate court wrote: “Under this section the right [of subrogation] has

been recognized only in actions involving tort-feasors.” Id. at 628. The court then goes on to say, “[t]his limitation of

the section (6a) to actions against the actual tort-feasor has been followed by other Texas courts.” It then cites several

Texas cases which it says establish such a limitation. However, while each of the Texas cases which the Bogart court

cites in reaching that conclusion do involve subrogation claims by workers' compensation carriers against third party

tortfeasors and recognize that right, in none of them was the question actually presented as to whether that right of

subrogation was limited to third party tortfeasors. 3 Consequently, we do not believe the typical references in those

cases to third party tortfeasors amount to holdings that workers' compensation subrogation actions are limited to such

parties. 4 Northbrook additionally cites Watson, 505 S.W.2d at 795, and Tolar v. Caterpillar Tractor Co., 793 F.2d 654

(5th Cir.1986) in support of its contention. Again, Watson, Tolar, as well as other cases not cited by Northbrook, use the

third party tortfeasors language phrase without any discussion of subrogation rights against third parties whose liability

is contractual or vicarious.

In sum, Employers has not cited, and our research has failed to disclose, any Texas case expressly holding that the only

third parties against whom a compensation carriers' subrogation rights are effective are tortfeasors. Because we find it

in conflict with the plain language of the statute, we decline to follow the holding in Bogart.

[3] Both parties have cited numerous opinions from courts of other jurisdictions in support of their respective positions.

However, because the issue before us turns on the construction of a Texas statute, the decisions of courts of other states

applying different statutes are not relevant to resolution of that question. Parenthetically, many of the cases cited by

appellees, including Bogart, cited the absence of a double recovery as a factor supporting their decision. Here, in contrast,

the evidence shows Dyess has received a double recovery. Avoidance of double recoveries is one of the purposes for which

the subrogation statute was created. Capitol Aggregates, Inc., 408 S.W.2d at 924; Hartford Cas. Ins. Co. v. Albertsons

Grocery Stores, 931 S.W.2d 729, 734 (Tex.App.—Fort Worth 1996, no writ).

[4] Northbrook additionally argues that, even if Employers' statutory subrogation rights extend to non-tortfeasors, as

to Employers, Northbrook has no liability. This is so, it urges, because of a clause in the policy providing that coverage

under the policy “shall not apply directly or indirectly to benefit [ ] any insurer or self-insurer under any workers'

compensation, disability benefits or similar law.” Employers responds that this provision is void as contrary to the

subrogation statute and public policy.

Employers Cas. Co. v. Dyess, 957 S.W.2d 884 (1997)

*891 In American Liberty Insurance Company v. Ranzau, 481 S.W.2d 793 (Tex.1972), our supreme court examined the

validity of an insurance policy clause that limited uninsured/underinsured motorist coverage based on the applicability

of other insurance. The court held the “other insurance” clause invalid because it conflicted with Article 5.06–1 of the

Insurance Code prescribing the minimum uninsured/underinsured motorist coverage for policies issued in this state. In

reaching its conclusion, the court held that it was irrelevant that the policy form was promulgated by the State Board of

Insurance “because the board may not act contrary to but only consistent with” the statute. Id. at 796–97. The court has

reaffirmed this holding on more than one occasion. See also Stracener v. United Services Automobile Assoc., 777 S.W.2d

378 (Tex.1989); Westchester Fire Insurance Company v. Tucker, 512 S.W.2d 679 (Tex.1974).

At least two cases have applied Ranzau to invalidate clauses designed to reduce coverage based on receipt of workers'

compensation benefits. Hamaker v. American States Ins. Co., 493 S.W.2d 893, 898 (Tex.Civ.App.—Houston [1st Dist.]

1973, writ ref'd n.r.e.); Fidelity & Casualty Company of New York v. McMahon, 487 S.W.2d 371 (Tex.Civ.App.—

Beaumont 1972, writ ref'd n.r.e.). McMahon had received $3,930 in workers' compensation benefits for injuries arising

out of an automobile accident caused by an uninsured driver. He then obtained a judgment for $1,500 and sought to

recover under the uninsured motorist coverage applicable to the vehicle he was driving. The policy contained a provision

reducing coverage under the policy by any workers' compensation benefits. Id. at 371. Although the form containing this

limitation was promulgated by the State Board of Insurance, the court refused to give effect to the provision, noting the

holding in Ranzau and commenting that “[t]he language and logic of this decision (Ranzau) clearly seem determinative

of the question here presented.” Id. at 372.

In Huse v. Fidelity Interstate Life Ins. Co., 605 S.W.2d 351, 352 (Tex.Civ.App.—Eastland 1980, no writ), the court was

presented with a challenge to a clause in a life insurance policy excluding coverage for “injury for which compensation is

payable under any Workmen's Compensation Law.” Id. at 352, fn. 1. The court upheld the provision and distinguished

the Ranzau line of cases with the comment that “[i] n this case, there is no statute prohibiting the exclusion, and the

parties are free to contract for an accidental injury policy which excludes coverage for accidents, fatal or nonfatal, caused

by an injury for which worker's compensation benefits are payable.” Id. at 352. The issue of breadth of the workers'

compensation carrier's right of subrogation was not presented nor addressed in that case. Huse is also distinguishable

on the ground that the challenged clause was in a life insurance policy and did not involve statutory subrogation rights.

[5] The parties do not argue that the clause at issue reduced the coverage afforded to Dyess. Consequently, it does

not violate article 5.06–1 of the Insurance Code as did the provision in the Ranzau line of cases. Even so, because

Northbrook was liable within the meaning of section 6a, the clause had the effect of limiting Employers' right of

subrogation established by that statute. As a result, the clause is an attempt to contractually abrogate a statutory right.

Although Employers could waive its statutory right by contract, with an exception not applicable here, it is not bound

by the contracts of others. Standard Oil Co. of Tex. v. Donald, 321 S.W.2d 602, 606 (Tex.Civ.App.—Fort Worth 1959,

writ ref'd n.r.e.). Because it conflicts with Employers' statutory right of subrogation, the clause is invalid.

[6] Finding that Employers' right of subrogation can apply to any parties liable for Dyess's injury, regardless of whether

that liability arose in tort or contract, and further finding the clause in Northbrook's uninsured motorist policy ineffective

to bar Employers' recovery, we sustain Employers' first point of error. We therefore reverse the summary judgments

granted in favor of Northbrook and Dyess denying Employers' rights of subrogation.

[7] Employers' second point assigns error to the trial court's orders as violative of its contractual right of subrogation.

Our disposition of its first point obviates the necessity *892 to address this point. It is worth noting, however, that just

as Employers' rights cannot be altered by the contract between Winn–Lange and Northbrook, Northbrook is not bound

by any contractual right of subrogation created between Employers, Winn–Lange, and Dyess.

By its fourth point, Employers assigns error to the trial court's failure to provide for its subrogation rights in the final

judgment granting Dyess's recovery against Mendoza. The court's judgment reflects the existence of a stipulation of the

Employers Cas. Co. v. Dyess, 957 S.W.2d 884 (1997)

amount of Employers' “workers' compensation lien.” Dyess presents no response to Employers' fourth point. We find

the supreme court's discussion in Capitol Aggregates dispositive of this point. There the court wrote:

Under the terms of this statute, the compensation carrier is entitled to the first money paid to or

recovered by the employee [ ] by reason of the asserted liability of a third person for his injuries,

and the employee or his representatives have no right to any of such funds until the carrier is paid

in full. See Fort Worth Lloyds v. Haygood, 151 Tex. 149, 246 S.W.2d 865; Traders & General Ins.

Co. v. West Texas Utilities Co., 140 Tex. 57, 165 S.W.2d 713.

Capitol Aggregates, Inc., 408 S.W.2d at 923. In conformity with our disposition of Employers' first point and the quoted

portion of Capitol Aggregates, we sustain Employers' fourth point.

In its fifth and final point, Employers challenges the trial court's failure to award costs against Mendoza and failed to

state on the record good cause for not so awarding costs. However, our disposition of Employers' first and fourth points

requires reversal of the trial court's judgment and remand of this cause to that court for further proceedings. Because

remand is required, resolution of Employers' fifth point is not necessary to disposition of this appeal.

For the reasons discussed above, the judgment of the trial court is reversed and the cause remanded to that court for

further proceedings consistent with this opinion.

All Citations

957 S.W.2d 884

Footnotes

1 Act of May 10, 1973, 63rd Leg. R.S., ch. 88, § 10, 1973 Tex. Gen. Laws 187, 193 (repealed 1989).

2 Currently the subrogation statute is codified as Sections 417.001 and .002 of the Labor Code. Section 417.001 provides:

(a) An employee or legal beneficiary may seek damages from a third party who is or becomes liable to pay damages for

an injury or death that is compensable under this subtitle and may also pursue a claim for workers' compensation benefits

under this subtitle.

(b) If a benefit is claimed by an injured employee or a legal beneficiary of the employee, 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. [ ] Section 417.002 provides:

(a) The net amount recovered by a claimant in a third-party action shall be used to reimburse the insurance carrier for

benefits, including medical benefits, that have been paid for the compensable injury.

3 The case most factually similar to the one before us is Foster v. Truck Ins. Exchange, 933 S.W.2d 207 (Tex.App.—Dallas

1996, writ denied). However the compensation carrier's rights of subrogation against the employer-purchased underinsured

motorist coverage was not at issue there.

4 Those cases are: Fort Worth Lloyds, 246 S.W.2d at 868 (compensation carrier intervened in suit by employee against

tortfeasor); Traders & General Ins. Co., 165 S.W.2d at 714 (compensation carrier intervened in suit by employee against

tortfeasor); Evans (employee's failure to assert mandatory counterclaim against asserted third party tortfeasor barred

employee and compensation carrier from bringing separate action); Yeary (after carrier brought action against tortfeasor,

employee was substituted as plaintiff. Carrier then asserted subrogation rights to portion of employee's judgment against

tortfeasor).

Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132 (1994)

17 Employee Benefits Cas. 2163

876 S.W.2d 132

Supreme Court of Texas.

Edwadine FORBAU, as Next Friend of Amy Miller, Petitioner,

AETNA LIFE INSURANCE COMPANY, Respondent.

No. D–1235.

Jan. 5, 1994.

Supplemental Dissenting Opinion on Motion for Rehearing Jan. 5, 1994.

Dissenting Opinion on Motion for Rehearing May 5, 1993. *

Insured under group health policy brought action against insurer, alleging posttermination coverage. The 140th Judicial

District Court, Lubbock County, William R. Shaver, J., held for insured, and cross appeals were taken. The Amarillo

Court of Appeals, 808 S.W.2d 664, Poff, J., reversed and rendered, and insured sought writ of error. The Supreme Court,

Cornyn, J., held that, under group health policy, expenses “incurred” and thus covered were limited to medical supplies

for services furnished before policy was terminated.

Affirmed.

Doggett, J., dissented and filed both opinion and supplemental opinion in which Hightower and Gammage, JJ., joined.

West Headnotes (6)

[1] Labor and Employment Damages

ERISA remedies are exclusive, and do not include extracontractual compensatory or punitive damages.

Employee Retirement Income Security Act of 1974, § 502(a)(3), as amended, 29 U.S.C.A. § 1132(a)(3).

5 Cases that cite this headnote

[2] Insurance Application of rules of contract construction

Interpretation of insurance contracts in Texas is governed by same rules as interpretation of other contracts.

134 Cases that cite this headnote

[3] Contracts Intention of Parties

Contracts Construing whole contract together

When construing contract, court's primary concern is to give effect to written expression of parties' intent;

contract must be considered as a whole and each part of contract should be given effect.

200 Cases that cite this headnote

Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132 (1994)

17 Employee Benefits Cas. 2163

[4] Contracts General and specific words and clauses

When contract provision makes general statement of coverage, and another provision specifically states time

limit for such coverage, more specific provision will control.

76 Cases that cite this headnote

[5] Insurance Group Insurance

Under group health policy, expenses “incurred” and thus covered were limited to medical supplies for services

furnished before policy was terminated; policy was devoid of any language which obligated insurer to pay

medical expenses incurred after termination of policy for injuries sustained prior to termination.

3 Cases that cite this headnote

[6] Contracts Existence of ambiguity

Insurance Ambiguity in general

Not every difference in interpretation of contract or insurance policy amounts to ambiguity.

238 Cases that cite this headnote

Attorneys and Law Firms

*132 Alton R. Griffin, Ralph H. Brock, Lubbock, C.L. Ray, Charles B. Lord, Law Offices of C.L. Ray, Austin, for

petitioner.

John P. LeVick, Jeffrey B. Jones, Jones Flygare Galey Brown & Wharton, Lubbock, for respondent.

Opinion

CORNYN, Justice, delivered the opinion of the Court, in which PHILLIPS, Chief Justice, and GONZALEZ, HECHT,

ENOCH, and SPECTOR, Justices, join.

Petitioner's motion for rehearing is overruled. We withdraw our opinion of May 5, 1993, and substitute the following

opinion in its place.

[1] In this case we are called upon to determine whether the insurance policy at issue created a vested right in unlimited

lifetime benefits, or restricted benefits to the recovery of medical expenses incurred while the policy was in effect. The

trial court rendered judgment on a jury's verdict in *133 favor of Petitioner, Edwadine Forbau, as next friend of Amy

Miller. The court of appeals reversed the trial court's judgment, holding that under the unambiguous terms of the policy,

Petitioner's recovery was limited to those medical expenses incurred while Aetna's policy was in effect. 808 S.W.2d 664.

We agree that Aetna's policy is unambiguous and does not afford the coverage claimed by Petitioner. We thus affirm

the judgment of the court of appeals. 1

Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132 (1994)

17 Employee Benefits Cas. 2163

In March of 1983 fourteen-year old Amy Miller suffered serious, permanent, and disabling injuries as a result of a motor

vehicle accident. At the time, Amy's father, Mike Miller, was insured under an Aetna group insurance policy (Group

Policy) issued to Affiliated Foods, Inc., a cooperative of grocery stores of which his employer, E Triple M, Inc., was a

member. Miller's premiums and those of his dependents, including Amy's, were paid by E Triple M. Miller was eligible

as an “individual” under the plan, defined as an “employee of any store owner who is a participant under this plan;”

Amy was eligible for dependent coverage as an “individual's unmarried child under nineteen years of age.” Group Policy

at 1500, 1550.

After Amy's accident, Aetna paid her medical expenses as incurred until April 30, 1985, when Affiliated terminated the

group contract with Aetna. Aetna continued to pay benefits until May 1, 1986, under the policy's one-year extension

of benefits clause. After that date, Petitioner submitted claims to Safeco Life Insurance Company as Aetna's successor

insurer for Affiliated's members. A dispute eventually arose between Petitioner and Safeco, which resulted in a lawsuit

and settlement.

After settling with Safeco, Petitioner filed this lawsuit against Aetna, alleging breach of contract and of fiduciary duty,

and violations of the Texas Deceptive Trade Practices–Consumer Protection Act and the Insurance Code. Only the

breach of contract claims were submitted to the jury. In accordance with the jury's verdict, the trial court awarded Amy

$238,000 in past damages, $2.5 million in future damages, and $500,000 in attorneys' fees.

II.

[2] Interpretation of insurance contracts in Texas is governed by the same rules as interpretation of other contracts.

Upshaw v. Trinity Cos., 842 S.W.2d 631, 633 (Tex.1992); Western Reserve Life Ins. Co. v. Meadows, 152 Tex. 559, 261

S.W.2d 554, 557 (1953).

[3] [4] When construing a contract, the court's primary concern is to give effect to the written expression of the parties'

intent. Ideal Lease Serv., Inc. v. Amoco Prod. Co., 662 S.W.2d 951, 953 (Tex.1983); R & P Enterprises v. LaGuarta,

Gavrel & Kirk, 596 S.W.2d 517, 518 (Tex.1980). This court is bound to read all parts of a contract together to ascertain

the agreement of the parties. See Royal Indem. Co. v. Marshall, 388 S.W.2d 176, 180 (Tex.1965); Pan Am. Life Ins.

Co. v. Andrews, 161 Tex. 391, 340 S.W.2d 787 (1960). The contract must be considered as a whole. Reilly v. Rangers

Management, Inc., 727 S.W.2d 527, 529 (Tex.1987); Coker v. Coker, 650 S.W.2d 391, 393 (Tex.1983). Moreover, each part

of the contract should be given effect. See Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663, 666 (Tex.1987). For example,

when a contract provision makes a general statement of coverage, and another provision specifically *134 states the

time limit for such coverage, the more specific provision will control. See 3 ARTHUR L. CORBIN, CONTRACTS

§§ 545–54 (1960). This is but an application of our long-established rule that “[n]o one phrase, sentence, or section [of

a contract] should be isolated from its setting and considered apart from the other provisions.” Guardian Trust Co. v.

Bauereisen, 132 Tex. 396, 121 S.W.2d 579, 583 (1938); see also Wynnewood State Bank v. Embrey, 451 S.W.2d 930, 932

(Tex.Civ.App.—Dallas 1970, writ ref'd n.r.e.).

III.

[5] The operative language in this policy states that Aetna will pay for “covered medical expenses incurred during a

calendar year for treatment of a covered family member.” Group Policy at 6210 (emphasis added). Under the contract,

Aetna is obligated only to a covered family member, that is, a covered individual or dependent. A person ceases to be a

covered individual when the policy has been discontinued or the individual is no longer employed by the policy's sponsor.

When this occurs, dependent coverage also terminates. 2

Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132 (1994)

17 Employee Benefits Cas. 2163

The policy also states that “[t]his policy does not provide insurance for any of the following: Charges incurred while he

is not a covered family member.” Under the unambiguous language of the contract, Aetna's obligation to pay benefits

under the contract terminated upon the discontinuance of Affiliated's policy, unless some other provision of the policy

extended coverage. As the contract contains such a provision, 3 which extended Petitioner's benefits for one additional

year, she was entitled to the additional benefits Aetna paid for this time period only. 4 Under basic tenets of contract

law, these provisions must be read together with the other sections of the contract to comprehensively address the rights

and obligations of all parties to the insurance contract.

[6] Petitioner urges that the policy afforded her a right to receive payment for all future medical services related to any

accident occurring during the policy period. That interpretation is based on the following clause:

If any benefit ceases to apply to an individual or a dependent, coverage for that benefit will cease

immediately but without prejudice to any rights under the benefit established by this person while

the coverage was in force.

Group Policy at 1850. Petitioner further urges that even if this clause does not explicitly provide her with coverage,

it at least creates an ambiguity which must be interpreted in favor of coverage. However, not every difference in the

interpretation of a contract or an insurance policy amounts to an ambiguity. Both the insured and the insurer are likely to

take conflicting views of coverage, but neither conflicting expectations nor disputation is sufficient to create an ambiguity.

See Preston Ridge Fin. Servs. v. Tyler, 796 S.W.2d 772, 777 (Tex.App.—Dallas 1990, writ denied); Medical Towers v. St.

Luke's Epis. Hosp., 750 S.W.2d 820, 822 (Tex.App.—Houston [14th Dist.] 1988, writ denied). The “without prejudice”

clause by its own terms preserves the right to benefits “established ... while the coverage was in force.” It does not create

new rights or benefits beyond those afforded by the other provisions of the policy. And it is undisputed that Aetna paid

the benefits to which Petitioner was entitled—payment of charges incurred while she was a covered dependent and for

the one-year extension.

*135 Accordingly, we affirm the judgment of the court of appeals.

DOGGETT, Justice, joined by HIGHTOWER and GAMMAGE, Justices, delivered this Supplemental Dissenting

Opinion on Petitioner's Motion for Rehearing.

[January 5, 1994]

In again rejecting Amy's plea for relief, the majority leaves all Texans without the security that should be at very core

of health insurance.

At least today's substituted opinion has abandoned footnote five of the majority's prior writing, which suggested that

ambiguities are not to be resolved against the insurer in an ERISA plan. See 36 Tex.Sup.Ct.J. 860, 864 n. 5. I have

previously explained the reasons for rejecting this regressive rule. See 36 Tex.Sup.Ct.J. 860, 865–66, 869 (Doggett, J.,

dissenting).

However, the decision announced today remains wrong now for the other reasons it was wrong before, specifically the

same “sweeping anti-consumer alteration of our longstanding method for interpreting insurance policies.” Id. at 866.

For this reason, I continue to dissent.

Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132 (1994)

17 Employee Benefits Cas. 2163

DISSENTING OPINION ON MOTION FOR REHEARING

[May 5, 1993. * ]

DOGGETT, Justice, dissenting.

With the switch of a vote on rehearing, the law announced in this case a short while ago is no longer the law. Continuing

to believe that this court's prior decision was correct, I incorporate it fully in this opinion. 1 See Appendix A.

The new majority opinion rejects our recent determination in Gorman v. Life Ins. Co. of North Am., 811 S.W.2d 542,

547–48 (Tex.1991), and a substantial body of federal law 2 in refusing to treat Amy Miller's breach of contract pleading

as a claim for benefits due under ERISA. See 36 Tex.Sup.Ct.J. 860, 863–864. This misapplication of the doctrine of

federal preemption 3 is sufficient to achieve an Aetna victory and to create considerable injustice for Amy and others

like her who have already secured judgments based on determinations that they have been illegally denied health care

benefits. Unfortunately this is not enough for the majority when even more mischief can be accomplished by reaching

out to address state law issues totally unnecessary to this judgment. First, in dicta it embraces the minority view that

ambiguities in ERISA plans are not construed in favor of coverage. See id. at 864–865 n. 5. Despite then having two

independent bases upon which to render judgment for Aetna, the majority then moves on to enact a sweeping anti-

consumer alteration of our longstanding method for interpreting insurance policies.

Contrary to the repeated writings of this court in Balderama v. Western Casualty Life Ins. Co., 825 S.W.2d 432, 434

(Tex.1991); National Union Fire Ins. Co. v. Hudson Energy Co., 811 S.W.2d 552, 555 (Tex.1991); *136 Barnett v. Aetna

Life Ins. Co., 723 S.W.2d 663, 666 (Tex.1987); and many others, ambiguities will now be construed against the insurer

only after the court attempts to remove any ambiguity through manipulation of general rules of contract interpretation.

36 Tex.Sup.Ct.J. at 864–865 n. 5. While it has never been, nor should it be, the law of Texas that an insured creates

an ambiguity merely by filing suit, any policy subject to reasonable, conflicting interpretations had, until today, been

considered ambiguous. But now the majority declares that, if the insurer creates an ambiguity by taking away in specific

fine print most of the rights accorded the policyholder in the big print, the fine print will control. If courts always look

to the whole document and must read even directly conflicting provisions together “to ascertain the agreement between

the parties,” 36 Tex.Sup.Ct.J. at 864, no insurance policy will ever be held ambiguous, and individual provisions that

could reasonably be read to provide coverage will be uniformly ignored.

Amy Miller, a young quadriplegic, now leaves this court with nothing—without any of the means that a judge and jury

in Lubbock, Texas thought essential to meeting her lifetime medical needs over the course of her now bleak future. But

even more far-reaching is today's evisceration of previously well established state law designed to provide reasonable

protection to insurance policyholders. The impact of today's opinion is potentially devastating to the rights of Texans

who rightly expect their premiums to pay for more than the paper on which their policies are written. I dissent.

HIGHTOWER, GAMMAGE and SPECTOR, JJ., join in this opinion.

APPENDIX A **

We consider whether cancellation of a comprehensive group accident and health insurance policy, subject to the federal

Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001–1461 (1988), terminates a plan

participant's right to obtain payment of particular medical expenses resulting from a permanently disabling injury

Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132 (1994)

17 Employee Benefits Cas. 2163

suffered during the policy term. Under the policy provisions applicable here, the insurer remains obligated to cover

medical expenses resulting from that injury that are already being provided at the time of termination.

In March 1985, fourteen year-old Amy Miller suffered serious accidental injuries that required exte

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