Summary
The Supreme Court of Texas held that workers' compensation carriers owe injured employees a duty of good faith and fair dealing in processing compensation claims. A claimant must allege the absence of a reasonable basis for denying or delaying benefits, the carrier's actual or constructive knowledge of that absence, and an independent injury and damages caused by the carrier's conduct. The court held that the Workers' Compensation Act's exclusivity and penalty provisions did not bar such claims, reversed the court of appeals, and remanded the case.
Holdings
- Workers' compensation carriers owe injured employees a duty to deal fairly and in good faith in processing compensation claims.
- A claimant alleging that a carrier improperly denied or delayed benefits must establish that there was no reasonable basis for the denial or delay and that the carrier knew or should have known that no reasonable basis existed. A pleaded cause of action additionally requires allegations that the carrier's lack of good faith, separate and independent from the original job-related injury, proximately caused damages and that the employee sustained damages.
- The exclusivity provision of the Workers' Compensation Act does not bar a claim against a compensation carrier for breach of the duty of good faith and fair dealing or for intentional misconduct in processing a compensation claim, provided the carrier's conduct is separate from the compensable job-related injury and produces an independent injury.
- The Workers' Compensation Act's penalty provisions do not preclude separate tort claims for bad faith or intentional misconduct in processing compensation claims.
- Aranda pleaded sufficient facts to proceed on his bad-faith and intentional-misconduct claims.
Questions Presented
- Whether a workers' compensation claimant may sue a compensation carrier for breach of a duty of good faith and fair dealing in processing a compensation claim.
- What elements a workers' compensation claimant must plead and prove to state a bad-faith claim based on denial or delay of benefits.
- Whether the exclusivity and penalty provisions of the Texas Workers' Compensation Act bar claims against a compensation carrier for bad faith or intentional misconduct in processing a compensation claim.
- Whether Aranda's pleadings alleged sufficient facts to proceed against the carriers.
Disposition
reversed_and_remanded
Cases Cited (19)
- Montgomery Ward & Co. v. Scharrenbeck, 146 Tex. 153, 204 S.W.2d 508 (1947)(followed)
- Burroughs v. Bunch, 210 S.W.2d 211 (Tex. Civ. App.—El Paso 1948, writ ref'd)(followed)
- American Standard Life Ins. Co. v. Redford, 337 S.W.2d 230 (Tex. Civ. App.—Austin 1960, writ ref'd n.r.e.)(followed)
- Arnold v. National County Mutual Fire Ins. Co., 725 S.W.2d 165 (Tex. 1987)(followed)
- English v. Fischer, 660 S.W.2d 521 (Tex. 1983)(discussed)
- Southern Casualty Co. v. Morgan, 12 S.W.2d 200 (Tex. Comm'n App. 1929, judgm't adopted)(followed)
- Huffman v. Southern Underwriters, 133 Tex. 354, 128 S.W.2d 4 (1939)(followed)
- Texas Employers' Insurance Ass'n v. Wright, 128 Tex. 242, 97 S.W.2d 171 (1936)(followed)
- Fidelity & Casualty Co. of New York v. Shubert, 646 S.W.2d 270 (Tex. App.—Tyler 1983, writ ref'd n.r.e.)(disapproved)
- Cantu v. Western Fire & Casualty Ins. Co., Ltd., 716 S.W.2d 737 (Tex. App.—Corpus Christi 1986), writ ref'd n.r.e. per curiam, 723 S.W.2d 668 (Tex. 1987)(disapproved)
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