Negligent Misrepresentation As a Weapon For the Defense–Texas Insurance Defense Attorneys

THE BASICS OF NEGLIGENT MISREPRESENTATION

Negligent misrepresentation claims in Texas are something we see arise both in the insurance defense context and in business disputes. Sometimes, we have asserted negligent misrepresentation claims in a defensive manner as we represent defendants businesses who have been sued in personal injury, transactional or workers compensation retaliation lawsuits. Negligent misrepresentation is a tort, but frequently it arises in a business related way. That is because such actions only lie when the target defendant has a pecuniary interest in the transaction. The theory of negligent misrepresentation basically allows plaintiffs or third party plaintiffs who are not parties to a contract for professional services to recover from the contracting professionals.

The tort of negligent misrepresentation in Texas is not in any required respect based on a breach of duty of professional to a client, but rather is based on an independent duty owed to non-clients arising when a professional knows a non-client will rely on the representation and the professional intends for the non-client to rely on the representation. The tort of negligent misrepresentation permits plaintiffs and counter plaintiffs who are not parties to a contract for professional services to recover from the contracting professionals. McCamish, Martin, Brown & Loeffler v. FE Appling Interest, 991 S.W.2d 787, 792-793 (Tex. 1999).

The representation in question is not absolutely required to be in writing. The Court of Appeals in Houston, in Hagans v. Woodruff, 830 S.W.2d 732, 733 (Tex – App. Houston [14 Dist.], 1992, no writ), has held that such a representation can be either written or oral.

The Texas Supreme Court has adopted the tort of negligent misrepresentation as described by the RESTATEMENT (SECOND) OF TORTS § 552.  It was expressly stated in the case of Federal Land Bank Ass’n of Tyler v. Sloane, 825 S.W.2d 439, 442 (Tex. 1991) that the Court would look to section 552 for guidance.  In that case, the Texas Supreme Court referenced section 552 to define the scope of a lender’s duty to avoid negligent misrepresentations to prospective borrowers.  Section 552(1) provides:

One who, in the course of his business, profession or employment, or in any transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.

NEGLIGENT MISREPRESENTATION HAS BEEN APPLIED TO NUMEROUS TYPES OF PROFESSIONALS    

The tort of negligent misrepresentation casts a wider net than one would expect. Texas courts a section 522 cause of action against numerous professionals, and it can be anticipated that the list of professionals may be expanding.  The list of professionals includes banks, auditors, doctors, real estate brokers and agents, securities agents and brokers, surveyors, lawyers, title agents and title insurers, C.P.A.’s, druggists  and mortgage lenders. It is foreseeable that engineers, computer programmers, information technology specialists and software engineers could be added to the lists.

THERE IS NO PRIVITY REQUIRED

It must be remembered that a negligent misrepresentation claim is not really at all equivalent to a legal malpractice claim. Under the tort of negligent misrepresentation, liability is not based on the breach of duty a professional owes clients or others in privity. Rather there exists an independent duty to the non-client based on the professional’s awareness of the non-client’s reliance on the misrepresentation and the professional’s intention that the non-client so rely.  (Eisenberg v. Gagnon, 766 F. 2d 770 (3d Circ. 1985).  Therefore, a professional can be subject to a negligent misrepresentation claim in a case in which he is not subject to a professional malpractice claim.  Kirkland Construction Co. v. James, 39 Mass.App. 559, 658 N.E.2d 699, 700-02 (1995). The practical reality is that section 552 imposes a duty to avoid negligent misrepresentation, irregardless of privity.

SHOULD THE PARTY HAVE KNOWN THE INFORMATION WOULD BE RECEIVED BY PLAINTIFF OR COUNTER PLAINTIFF?

A party may establish that it is entitled to maintain an action for negligent misrepresentation when the party shows that it is within a class of persons whom the Defendant knew or should have known would receive the information. Transgulf Corporation v. Performance Aircraft Services, 82 S.W.3d 691, 696 (Tex. App. – Eastland 2002, no pet.).

To prove negligent misrepresentation, a party must establish that the Defendant gave false information for the guidance of others in their business.  Federal Land Bank Association v. Sloane 825 S.W.2d 439, 442 (Tex. 1991) Assurances about coverage to healthcare providers made by insurance companies is an example of information provided for the guidance of others.

TO BE NEGLIGENT, THE MISREPRESENTATION IS ONLY REQUIRED TO BE FALSE BY ACCIDENT

The supplier of the information must exercise reasonable care and competence to ascertain the facts on which the information is based.  RESTATEMENT (2d) of Torts Section 552 & Comment f.  To prove an action for negligent misrepresentation, a party must establish that the Defendant did not use reasonable care in obtaining or communicating information and, as always, what is reasonable will depend on the circumstances of each case.  RESTATEMENT (2d) of Torts Section 552 & Comment e.

The standard is negligence and oversight, not intent. Honesty or good faith is not a defense to a claim of negligent misrepresentation.  DSA, Inc. v. Hillsboro ISD, 793 S.W.2d 662, 664 (Tex. 1998).  To be actionable,a defendant’s negligent  representation need only be false by accident.  Milestone Props v. Federated Metals, 867 S.W. 2d 113, 119 (Tex. App – Austin 1993, no writ).

We have found that the defensive use of a negligent misrepresentation cause of action is an underutilized tool in the tool belt of the Insurance Defense attorney or Business Litigation attorney in Texas looking to adequately protect his or her insured client or business defendant. The intervening cause of someone else’s professional negligence, may just be the theory that protects the client, and so third party claims against these seemingly uninvolved entities or persons should not be overlooked as possibilities.

Williams, McClure & Parmelee is dedicated to high quality legal representation of businesses and insurance companies in a variety of matters. We are experienced Fort Worth, Texas insurance defense attorneys in Tarrant County who know Texas courts and Texas law. For more information, please contact the law firm at 817-335-8800. The firm’s office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112.

Martindale AVtexas[2]

Collections and Foreign Judgments, Contracts and Commercial Litigation, Employment Law Defense, Insurance Defense Litigation

When Workers’ Compensation Claims and Child Support Orders Meet–Fort Worth, Texas Workers’ Compensation Defense Attorneys

Texas employers and insurance carriers who write in Texas are often confronted with child support orders directing them to withhold earnings from an employee’s income. But what happens when that employee is still employed but receiving workers’ compensation benefits instead of wages?

Workers’ compensation payments are not regarded as “income” for purposes of federal income taxes. However, they are regarded as “income” for purposes of calculating an employee’s child support obligations in Texas.

As an employer, it is important not to disregard such an order. If an employee is receiving workers’ compensation benefits and not receiving wages, unless the employer is self-insured, the employer must send a copy of the order to the workers compensation insurance carrier with whom the claim has been filed. If the employee is not expected to be returning to work, the employer must notify the court and obligee of the termination of employment within seven days and provide the employee’s last known address, and the name and address of the new employer, if known. [TFC §158.206 and §158.213]. If the employee returns to work after receiving income benefits for lost time, the employer should resume income withholding according to the order.

Relevant statutes that employers and workers compensation insurance carriers should consult when a child support order hits your desk are as follows:

Texas Family Code – Section 158.206

§ 158.206. LIABILITY AND OBLIGATION OF EMPLOYER;

WORKERS’ COMPENSATION CLAIMS.

(a) An employer receiving an order or a writ of withholding under this chapter, including an order or writ directing that health insurance be provided to a child, who complies with the order or writ is not liable to the obligor for the amount of income withheld and paid as required by the order or writ.

(b)  An employer receiving an order or writ of withholding who does not comply with the order or writ is liable:

(1)  to the obligee for the amount not paid in compliance with the order or writ, including the amount the obligor is required to pay for health insurance under Chapter 154;

(2)  to the obligor for:

(A)  the amount withheld and not paid as required by the order or writ;  and

(B)  an amount equal to the interest that accrues under Section 157.265 on the amount withheld and not paid;  and

(3)  for reasonable attorney’s fees and court costs.

(c)  If an obligor has filed a claim for workers’ compensation, the obligor’s employer shall send a copy of the income withholding order or writ to the insurance carrier with whom the claim has been filed in order to continue the ordered withholding of income.

Texas Family Code – Section 158.213

§ 158.213. WITHHOLDING FROM WORKERS’ COMPENSATION BENEFITS.

(a) An insurance carrier that receives an order or writ of withholding under Section 158.206 for workers’ compensation benefits payable to an obligor shall withhold an amount not to exceed the maximum amount allowed to be withheld from income under Section 158.009 regardless of whether the benefits payable to the obligor for lost income are paid as lump sum amounts or as periodic payments.

(b)  An insurance carrier subject to this section shall send the amount withheld for child support to the place of payment designated in the order or writ of withholding.

Texas Family Code – Section 158.009

§ 158.009. MAXIMUM AMOUNT WITHHELD FROM EARNINGS.  An order or writ of withholding shall direct that any employer of the obligor withhold from the obligor’s disposable earnings the amount specified up to a maximum amount of 50 percent of the obligor’s disposable earnings.

Williams, McClure & Parmelee is dedicated to high quality legal representation of businesses and insurance companies in a variety of matters. We are experienced Texas civil litigation attorneys based in Fort Worth who know Texas courts and Texas law. For more information, please contact the law firm at 817-335-8800. The firm’s office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112.

Martindale AVtexas[2]

 

Employment Law Defense, Workers' Compensation Defense

Defending Against Retaliation Claims Under Title VII–Fort Worth, Texas Employment Attorneys

As employment law defense attorneys who represent employers and businesses in Texas, we have helped employers attempting to defend and prevent retaliation claims under Title VII.  Retaliation claims against employers are on the rise in Texas. Over a third off all EEOC complaints these days include some form of retaliation allegation.

Title VII of the Civil Rights Act of 1964 prohibits employers from discriminating against employees based on their personal characteristics, including their race, color, religion, sex, and national origin, as set forth in 42 U.S.C. § 2000e-2, referred to by the Court as “status discrimination.” Title VII also prohibits employers from retaliating against employees based on an employee’s opposition to employment discrimination or complaint of discrimination. See 42 U.S.C. § 2000e-3(a).

Before 2006, the Fifth Circuit, which includes Texas, used the standard of retaliation established in Mattern v. Eastman Kodak Company, 104 F.3d 702 (5 Cir. 1997). That case defined retaliation as an “ultimate employment decision” in response to an employee’s charge or participation in a charge. The effect of cases like Mattern was that unless an employee was actually fired, demoted, received a pay cut, or was not hired or promoted because of a discrimination charge, employees had difficulty prevailing on retaliation cases.

The Mattern court held that alleged action directed against an employee, such as hostility from fellow employees, theft of tools, a visit by supervisors to the employee’s private home, and placing the employee on final warning were not sufficient to constitute “adverse employment actions” for purposes of Title VII retaliation action.  Such alleged actions were not the kinds of “ultimate employment decisions” which Title VII was intended to remedy, per the Mattern court.

In the same era that Mattern was decided, the Fifth Circuit also held in another case that an employer’s criticism of an employee without more does not constitute an actionable adverse employment action.  The court stated that criticism contained in an evaluation is not an adverse employment action standing alone.  A dean’s failure to award the professors certain merit pay increases did not constitute an actionable adverse employment action. Harrington v. Harris, 118 F.3d 359 (5th Cir. 1997)

But in a June 2006 decision, the United States Supreme Court broadened the definition of the term “retaliation” in Title VII of the Civil Rights Act of 1964. Burlington Northern & Santa Fe (BNSF) Railway Co. v. White, 548 U.S. 53 (2006). In that case, the employee filed a sexual discrimination complaint with the Equal Employment Opportunity Commission. After she filed the complaint, she was reassigned from operating a forklift to doing more menial tasks and was suspended without pay for over thirty days.

In finding that the employer’s conduct towards the employee was retaliation, the Burlington decision had the effect of then overruling the retaliation standards of several federal jurisdictions, including the Fifth Circuit. The Burlington court essentially stated that retaliation can take the form of any negative action that would effectively discourage a reasonable employee from making a discrimination charge. Retaliation would then no longer be confined to concrete decisions about hiring, firing, promotion, or pay, or even be limited to decisions that were related to the employment. An action that causes harm to an employee outside the workplace also seemed to fall under the broad umbrella of the Burlington court’s definition of retaliation.

While the Fifth Circuit Mattern standard was limited in its protection of employees, the U.S. Supreme Court standard in Burlington was so broad that it seemed to make employers uncertain about whether the slightest corrective action, criticism or discipline would invite a lawsuit for retaliation.

Following Burlington, often, the most common method employees used to try to prove that retaliation was the reason for an adverse action is through circumstantial evidence.  The EEOC considered that a violation is established if there is circumstantial evidence raising an inference of retaliation and if the employer fails to produce evidence of a legitimate, non-retaliatory reason for the challenged action, or if the reason put forth by the employer is a pretext to hide true the retaliatory motive.

But more recent United States Supreme Court treatment of the subject of retaliation suggests that the pendulum has swung back to where it is not so favorable to employees. In June, 2013, the United States Supreme Court determined that an employee in a Title VII retaliation case must prove that the retaliation was the “but for” cause of the employer’s adverse action. University of Texas S.W. Med. Ctr. v. Nassar, No. 12-484 (June 24, 2013). In a narrow vote, by this decision, the Court rejected a decision of the U.S. Court of Appeals for the Fifth Circuit which had applied a significantly less burdensome standard which required that the employee only show that retaliation was one “motivating factor,” among others, that resulted in the adverse action in question. The Court stated that the “motivating factor” test applied only to status-based discrimination (discrimination on the basis of race, color, religion, sex, national origin, promotion etc.), not retaliation claims. In arriving at this perspective, the Court relied on its earlier decision in Gross v. FBL Fin. Serv., Inc., 557 U.S. 167 (2009), which had held that the Age Discrimination in Employment Act requires proof that age is “the but for cause” of an adverse employment decision.

Thus, according to the Nassar decision, different causation standards now apply to retaliation claims and status-based discrimination claims. The effect of Nassar is that employees have to prove that the alleged retaliation by the employer actually caused the harm that is alleged. The more lenient standard of “motivating factor”, which was rejected by the Court, would allow employees to prove liability even if the allegedly conduct were just one motivating factor for the adverse employment action, not the actual reason.

While this “new” approach is helpful to employers, retaliation is an area of law that remains fluid and ever changing.  We advise employers to consult with counsel if confronted with even a hint of an allegation of   retaliation, because the repercussions can be severe for employers who are not adequately protected. It is also a good idea to educate your supervisory and management level employees as to what may constitute retaliation under Texas and Federal  law.

Williams, McClure & Parmelee is dedicated to high quality legal representation of businesses and insurance companies in a variety of matters. We are experienced Fort Worth, Texas employment law attorneys in Tarrant County who know Texas courts and Texas law. For more information, please contact the law firm at 817-335-8800. The firm’s office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112.

Martindale AVtexas[2]

 

Employment Law Defense

When Texans Pierce the Corporate Veil–Fort Worth, Texas Collections Attorneys

Particularly in commercial litigation and collections lawsuits in Texas, situations often arise when an attempt is made to “pierce the corporate veil”.  As attorneys who represent businesses on both sides of commercial disputes, we have had to offensively use corporate fiction arguments and defend against them. We have sued corporate personnel in an individual capacity, sued corporate entities, and defended against claims of corporate veil.

“Piercing the corporate veil” is a legal term that means that the owners of a corporation lose the limited liability that having a corporation provides them, thus the piercing of the veil. When this happens, personal assets can be used to satisfy business debts and liabilities, not just corporate assets.  The result is that individuals start getting named in lawsuits, in addition to the corporate entities they are affiliated with. However, this concept doesn’t apply just to corporations. Any business organization that provides limited liability to its owners is at risk of an offensive piercing of the corporate veil if the owners don’t take important to assure this protection from liability remains in place.

In order to impose liability upon a parent corporation for the obligations of a subsidiary corporation, important factors that Texas courts will consider include:

(1) common stock ownership between parent corporation and subsidiary;

(2) common directors and officers between parent and subsidiary;

(w) common business departments between parent and

subsidiary;

(3) the parent’s incorporation of the subsidiary;

(4) consolidated financial statements and tax returns filed by

parent and subsidiary;

(5) the parent’s financing of the subsidiary;

(6) undercapitalization of the subsidiary;

(7) parent’s payment of salaries and other expenses of subsidiary;

(8) whether parent is subsidiary’s sole source of business;

(9) parent’s use of subsidiary’s property as its own;

(10) the combination of corporations’ daily operations;

(11) lack of corporate formalities by the subsidiary;

(12) whether directors and officers of subsidiary are acting

independently or in the best interests of the parent; and

(13) whether the parent’s employee, officer or director was connected

to the subsidiary’s action that was the basis of the suit.

The history of Texas law in this area is of commercial litigation is exemplified by the 5th Circuit case of Rimade Ltd. v. Hubbard Enterprises, 388 F.3d 138 (5th Cir. 2004), and the pivotal Texas Supreme Court case of Castleberry v. Branscum, 721 S.W.2d 270 (Tex. 1986). The Rimade court stated, “Under Texas law, there are three broad categories in which a court may pierce the corporate veil: (1) the corporation is the alter ego of its owners and/or shareholders; (2) the corporation is used for illegal purposes; and (3) the corporation is used a sham to perpetrate a fraud.” 388 F.3d at 143.

After the Rimade decision was handed down, the Texas legislature enacted section 101.114 of the Texas Business Organizations Code, which had the effect of limiting corporate piercing by codifying the law in this area of law. That seminal section reads as follows:

§ 101.114. Liability for Obligation

Except as and to the extent the company agreement specifically provides otherwise, a member or manager is not liable for a debt, obligation, or liability of a limited liability company, including a debt, obligation, or liability under a judgment, decree, or order of a court.

Section 21.223 of the Texas Business Organizations Code further clarifies and limits the exposure of shareholders and members:

§ 21.223. Limitation of Liability for Obligations

(a) A holder of shares, an owner of any beneficial interest in shares, or a subscriber for shares whose subscription has been accepted, or any affiliate of such a holder, owner, or subscriber of the corporation, may not be held liable to the corporation or its obligees with respect to:

(1) the shares, other than the obligation to pay to the corporation the full amount of consideration, fixed in compliance with sections 21.157-21.162, for which the shares were or are to be issued;

(2) any contractual obligation of the corporation or any matter relating to or arising from the obligation on the basis that the holder, beneficial owner, subscriber, or affiliate is or was the alter ego of the corporation or on the basis of actual or constructive fraud, a sham to perpetrate a fraud, or other similar theory; or

(3) any obligation of the corporation on the basis of the failure of the corporation to observe any corporate formality, including the failure to:

(A) comply with this code or the articles of incorporation or bylaws of the corporation; or

(B) observe any requirement prescribed by this code or the articles of incorporation or bylaws of the corporation for acts to be taken by the corporation or its directors or shareholders.

(b) Subsection (a)(2) does not prevent or limit the liability of a holder, beneficial owner, subscriber, or affiliate if the obligee demonstrates that the holder, beneficial owner, subscriber, or affiliate caused the corporation to be used for the purpose of perpetrating and did perpetrate an actual fraud on the obligee primarily for the direct personal benefit of the holder, beneficial owner, subscriber, or affiliate.

The fact that a defendant must “perpetrate an actual fraud …primarily for the direct personal benefit of the holder, beneficial owner, subscriber, or affiliate?” has had the effect of greatly limiting the success of corporate veil piercing arguments. Actual fraud committed primarily for the “direct personal benefit” of the shareholder or member is arguably required for piercing in Texas, as pertains to contract-related claims.

In the case of In re JNC Aviation, LLC, 376 B.R. 500, 527 (Bankr. N.D. Tex. 2007), aff’d, 418 B.R. 898 (Bankr. N.D. Tex.2009), the court stated that to “to determine if the members of an LLC are liable under the asserted veil-piercing theories, the Court must analyze both the question of whether the facts satisfy any of the asserted veil-piercing strands and the question of whether any of the members caused the LLC to be used for the purpose of perpetrating and did perpetrate an actual fraud on the plaintiff primarily for the direct personal benefit of the considered defendant.”

Therefore, merely alleging “alter ego” is by itself probably insufficient as a matter of law, when the courts are talking in terms of actual fraud. Texas courts recognize the “strict restrictions on a contract claimant’s ability to pierce the corporate veil.” Ocram, Inc. v. Bartosh, No. 01-11-00793-CV2012, WL 4740859, at *2-3 (Tex. App.–Houston [1st Dist.] 2012, no pet.).

While piercing may have lost some traction in Texas commercial disputes, nonetheless, it is always important for owners to undertake necessary formalities and document their business actions. Be sure to provide for adequate business capitalization and don’t comingle personal and business assets. Also, any contracts, leases and legal documents an owner signs should always be in the company name.

Williams, McClure & Parmelee is dedicated to high quality legal representation of businesses and insurance companies in a variety of matters. We are experienced Fort Worth, Texas collections attorneys in Tarrant County who know Texas courts and Texas law. For more information, please contact the law firm at 817-335-8800. The firm’s office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112.

Martindale AVtexas[2]

Collections and Foreign Judgments, Construction Law, Contracts and Commercial Litigation, Employment Law Defense, Insurance Defense Litigation, Nonsubscriber Law

Important Texas Workers’ Compensation Website Links–Texas Workers’ Compensation Attorneys

The 1917 workers compensation law provided the basic framework for the Texas Workers’ Compensation system for the next seven decades. In 1989, after much debate, a new Texas Workers’ Compensation law was enacted, becoming effective during 1991. Provisions of this law formulated specific billing and reporting requirements for physicians treating injured workers and enacted a new income benefit and administrative dispute systems.  During the 2001 Texas legislative session, lawmakers passed House Bill 2600 (HB 2600), which again significantly changed the delivery of health care and workers compensation benefits to injured Texas workers. Since that time, the changes have just kept coming.

Texas, unlike other states, does not require an employer to have workers’ compensation coverage. The Texas system of workers’ compensation is essentially elective, meaning that employers can choose between providing worker’s compensation coverage to its employees or being subject to a civil lawsuit in the event of an employee’s death or injury by opting to be a non-subscriber. Workers’ compensation insurance may be provided through a private insurance company or employers may self-insure.

Because Texas workers compensation law is ever evolving, and due to the rapid changes in the current business climate, the below links are often useful to consult on a regular basis to make sure the latest information is at your finger tips:

Texas Department of Insurance:

http://www.tdi.texas.gov/

TDI-Division of Workers’ Compensation:

http://www.tdi.texas.gov/wc/index.html

Advisories and bulletins:

http://www.tdi.texas.gov/wc/news/advisories/index.html

Appeals Panel Decision Manuel:

http://www.tdi.texas.gov/wc/idr/apdmtoc.html

Medical Contested Case Hearing Manuel:

http://www.tdi.texas.gov/wc/idr/mddmtoc.html

Medical Fee Dispute Resolution:

http://www.tdi.texas.gov/wc/mfdr/

Workers’ compensation forms:

http://www.tdi.texas.gov/forms/form20.html

Informal Working Drafts:

http://www.tdi.texas.gov/wc/rules/drafts.html

Requests for a Letter of Clarification (LOC) of a Designated Doctor’s Report:

http://www.tdi.texas.gov/wc/loc/index.html

SIBs Work Requirements per County:

http://www.tdi.texas.gov/wc/employee/sibs.html

Proposed Rules:

http://www.tdi.texas.gov/wc/rules/proposedrules/index.html

Rule book supplements:

http://www.tdi.texas.gov/wc/rules/supplements.html

Administrative decisions including AP decisions and medical contested case decisions:

http://www.tdi.texas.gov/wc/admindecisions.html

TxComp:

https://txcomp.tdi.state.tx.us/twccprovidersolution/homehtml

TDI Search for Company’s Attorney for Service:

https://wwwapps.tdi.state.tx.us/inter/perlroot/consumer/attorney/attorney.html

Information on Networks:

http://www.tdi.texas.gov/wc/wcnet/indexinjured.html

Williams, McClure & Parmelee is dedicated to high quality legal representation of businesses and insurance companies in a variety of matters. We are experienced Fort Worth, Texas workers’ compensation defense attorneys in Tarrant County who know Texas courts and Texas law. For more information, please contact the law firm at 817-335-8800. The firm’s office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112.

Martindale AVtexas[2]

Employment Law Defense, Workers' Compensation Defense

Federal Motor Carrier Safety Regulations and the Texas Transportation Code: Some Key Sections–Fort Worth, Texas Trucking Defense Attorneys

The Texas trucking industry is highly regulated. Safety measures used by the trucking industry have improved greatly in recent years. The Federal Motor Carrier Safety Regulations and the Texas Transportation Code are the starting points for much of the 18 wheeler accident litigation that takes place here in our Texas courts. As insurance defense lawyers who defend trucking accident cases on behalf of insurance companies and trucking companies, we have seen numerous attempts by Plaintiffs lawyers to utilize many of the regulations below in an attempt to establish the negligence of the truck driver, the trucking company or both.  The breadth of these regulations is large and beyond the broad scope of the entire list of regulations that apply to the trucking industry in general, however some of the key items that trucking companies must be aware of are below:

FEDERAL MOTOR CARRIER SAFETY REGULATIONS:
PART 382 – Controlled Substances and Alcohol Use and Testing –Describes how and when a truck driver should be tested for illegal substances before during and after an accident involving a commercial vehicle.

PART 383 – Commercial Driver’s License Standards – Determines if the driver of a commercial vehicle was qualified to operate the vehicle in use at the time of the accident.

PART 387 – Minimum Levels of Financial Responsibility for Motor Carriers – Establishes the amount and nature of insurance requirements

PART 399 – Employee Safety and Health Standards – Determines if safety and health precautions were taken by the truck driver and the trucking company to keep the roads safe.

PART 397 – Transportation of Hazardous Materials – Determines if any other health risks to the public at large as well as the injured party are present .

TEXAS TRANSPORTATION CODE:
644.152 and 644.052 – Safety Standards – Outlines the safety requirements that must be followed when using a commercial vehicle.

522.101-106 – Alcohol and Drug Use – Describes the methods used to insure that truck drivers are not intoxicated while traveling the roadways in Texas.

545.062 – Following Distance – Following too closely is frequently an alleged contributing cause to a collision and is the subject of a great deal of litigation. It is usually fairly argued by Plaintiffs’ lawyers that 18 wheelers in particular are more difficult to maneuver than automobiles. Great care should be taken by our trucking company clients to train their drivers thoroughly regarding safe stopping and safe following distances.

545.351 – Maximum Speed Requirement – this section is one that Plaintiff attorneys use often to try to prove that a collision was caused by a speeding tractor trailer rig driver. The truth is that frequently it is the cars and other vehicles around our drivers that present the greater danger to the public roads. Most trucking companies, and certainly the ones we represent, do not tolerate speeding by their drivers. Again, the utmost effort should be taken by our trucking company clients to train their drivers thoroughly regarding safe stopping and safe following distances.

550.023 – Duty to Give Information and Render Aid – A person who was involved in an accident should not leave the scene of the accident without offering assistance. Although this seems obvious, it is also the law, and there can be serious consequences in trucking accident litigation cases in Texas for failure to stick around, post-accident.

Our trucking company defense law firm in Fort Worth is familiar with the laws and statutes that affect our truck driver clients, and we will be happy to assist your trucking company with safety training and guidance, with an eye towards accident prevention as well as lawsuit prevention.

Williams, McClure & Parmelee is dedicated to high quality legal representation of businesses and insurance companies in a variety of matters. We are experienced Fort Worth, Texas trucking defense attorneys in Tarrant County who know Texas courts and Texas law. For more information, please contact the law firm at 817-335-8800. The firm’s office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112.

Martindale AVtexas[2]

 

Employment Law Defense, Insurance Defense Litigation, Nonsubscriber Law

Indemnity Agreements and the Scope of the Duty to Defend per 5th Circuit Court–Texas Insurance Defense Attorneys

In Weeks Marine, Inc. v. Standard Concrete Products, Inc., 737 F.3d 365 (2013), the U.S. Fifth Circuit Court of Appeals addressed issues relating to indemnity agreements and  the scope of the duty to defend. The court discussed the  applicability of the “eight corners” rule, and concluded that there was no duty to indemnify where “the same reasons that negate the duty to defend likewise negate any possibility that the [indemnitor] will ever have a duty to indemnify”.

The court reviewed an Agreement, stating that the requirement under Texas law obligating the subcontractor to indemnify the general contractor only with respect to claims related to workmanship of the subcontractor’s product did not require the subcontractor to defend the general contractor in the underlying action brought by an employee of the subcontractor under the circumstances of this case.  Here, the action attributed the accident to the construction process used by the employee and his crew and, alternatively, the action alleged defects in certain steel modules that were a component that subcontractor used to make its product, but were not the subcontractor’s product itself.

The court stated that, unlike the duty to defend, the duty to indemnify “is triggered by the actual facts that establish liability in the underlying lawsuit.” Guar. Nat’l Ins. Co., 211 F.3d at 243. As a result, the court may consider facts outside of those alleged in the complaint to determine the scope of the duty to indemnify. Gilbane Bldg. Co., 664 F.3d at 594.

Under Texas law, the duties to defend and indemnify “are distinct and separate duties” and “enjoy a degree of independence from each other.” D.R. Horton–

Texas, Ltd. v. Markel Int’l Ins. Co., 300 S.W.3d 740, 743–44 (Tex.2009). The “duty to defend” is the broader of the two. Northfield Ins. Co. v. Loving Home Care, Inc., 363 F.3d 523, 528 (5th Cir.2004).

The duty to defend is “circumscribed by the eight-corners doctrine,” so that it is determined solely by the language of the indemnity provision and the allegations in the third-party pleadings. Gilbane Bldg. Co. v. Admiral Ins. Co., 664 F.3d 589, 594 (5th Cir.2011). Moreover, the court must review the third-party pleadings “without regard to the truth or falsity of those allegations.” GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 308 (Tex.2006). The duty to indemnify, by contrast, “is triggered by the actual facts that establish liability in the underlying lawsuit.” Guar. Nat’l Ins. Co. v. Azrock Indus. Inc., 211 F.3d 239, 243 (5th Cir.2000).

Williams, McClure & Parmelee is dedicated to high quality legal representation of businesses and insurance companies in a variety of matters. We are experienced Fort Worth, Texas insurance defense lawyers in Tarrant County who know Texas courts and Texas law. For more information, please contact the law firm at 817-335-8800. The firm’s office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112.

Martindale AVtexas[2]

 

Construction Law, Employment Law Defense, Insurance Defense Litigation, Nonsubscriber Law

Insurance Coverage for Exemplary Damages in Texas Nonsubscriber Cases–Fort Worth, Texas Non Subscriber Attorneys

An issue that has received a great deal of attention over the past few years is whether punitive/exemplary damage awards can be covered by insurance policies under Texas law.

Texas is not one of the eight states which expressly prohibit insurance coverage for exemplary damages. The Texas Supreme Court sets forth a method of analysis which calls for an examination of the insurance policy first. If it is determined that the policy provides coverage for exemplary damages, a determination must be made whether the public policy of Texas allows or prohibits coverage in the circumstances of the underlying suit.  Fairfield Ins. Co. v Stephens Martins Paving, 246 S.W.3d 653 (Tex. 2008).  The Fairfield matter involved a worker’s compensation policy (which provided both worker’s compensation insurance and employer’s liability insurance) which was approved by the Texas Department of Insurance.  The policy in question in the Stephens Martins matter included “all sums” language in the employer’s liability portion of the policy, and the Court points to this as indicative of the Legislature’s intent not to prohibit coverage for claims based on gross negligence (the policy also had language explicitly excluding coverage for intentional acts).

In an extensive survey of the law nationwide, the Texas Supreme Court summarized the public policy of practically every jurisdiction that has addressed the insurability of punitive damages, finding that 45 states’ highest courts or legislatures have spoken to the issue. Of those jurisdictions:

  • 25 states have generally indicated their public policy does not prohibit coverage for punitive damages;
  • Eight states prohibit coverage for exemplary damages;
  • Seven states permit coverage for such damages, but only when the insured’s liability is vicarious;
  • Three states allow insurance coverage of punitive damages in the uninsured motorist context but have not addressed the issue under other circumstances; and
  • Two states prohibit insurance coverage of punitive damages in the context of uninsured motorists but have not addressed the issue with respect to other forms of coverage.

Of the five remaining jurisdictions, four of them (which until Stephens Martin included Texas) have yet to address the insurability of punitive damages, and one state (Nebraska) prohibits the imposition of punitive damages.

In Stephens Martin, the Texas Supreme Court observed that in light of the foregoing statistics, “the majority of states that have considered whether public policy prohibits insurance coverage of exemplary damages for gross negligence, either by legislation or under the common law, have decided that it does not.”

Given insurers’ ability to exercise freedom of contract by expressly excluding punitive damages, agents should certainly carefully scrutinize liability policies for such exclusions, particularly if their clients have expressed an interest in procuring such coverage, or are in parts of the State where punitive damages are commonly awarded. Employers should verify with their insurance agent exactly what is covered, and excluded, with regard to exemplary damages.

Previous Texas cases had reached varying results as to the insurability of punitive damages.  For example, in The Philadelphia Indemnity Insurance Company v. Stebbins Five Companies, No. 3:02-CV-1279-M, 2004 U.S. Dist. LEXIS 6374 (N.D. Tex. Jan. 27, 2004), the United States District Court for the Northern District of Texas held that punitive damages are covered under Commercial General Liability (“CGL”) and Professional Liability policies.  The court used a two-prong test to find that punitive damages are covered.  First, the court asked whether the policy’s terms provided for, and failed to exclude coverage of, punitive damages.  Second, the court inquired whether Texas public policy prohibits coverage for punitive damage awards.  As to the first inquiry, the court concluded that because the policy’s terms failed to expressly exclude punitive damages, and the insuring clause provided coverage of “all sums” or “those sums” “that the insured becomes legally obligated to pay,” the liability policy was broad enough to encompass punitive damages.  Similarly, the court held that a finding of malice and a determination of grossly negligent conduct against the insured in the underlying case does not automatically trigger the intentional or expected injury exclusion.  As to the second inquiry, the court determined that insuring punitive damages was not contrary to the public policy of Texas.

On the other hand, in Comsys Information Technology Services, Inc. v. Twin City Fire Insurance Company, 130 S.W.3d 181 (Tex. App. – Houston [14th Dist.] 2003, pet. denied), the Houston Appeals Court determined that punitive damages were excluded from an Excess Temporary Employment Contractors Errors or Omissions Liability Policy.  The relevant portions of the policy excluded coverage for:
a. Intentional acts, errors or omissions by or at the direction of the insured.
. . .

b. Any injury or damage arising out of willful, dishonest, fraudulent, criminal or malicious acts, errors or omissions by or at the direction of the insured.

 

The court determined that because the policy excluded intentional acts, damages for actions committed with malice were excluded under section I.2.a of the policy, and that punitive damages supported by a finding of malice were excluded by section I.2.c.   The court also concluded coverage for DTPA violations was similarly excluded as dishonest, fraudulent, or criminal acts under Section I.2.c of the policy.

This Supreme Court decision  in Fairfield Ins. Co. v Stephens Martins Paving has substantial impact for nonsubscriber employers with insurance. For example, one employer’s liability plan obtained by one of our Texas nonsubscriber employer clients provides for coverage for “Bodily Injury Damages” which includes “all reasonable amounts paid to obtain a release of liability, settle a claim or pay a judgment based on an action for workplace injury brought against you by an employee.”  The policy also excludes coverage for intentional acts. This language is similar to or virtually the same as much of the policy language we see.

Texas courts tend to interpret such a policy to include coverage for gross negligence including any exemplary damages which could be assessed. If you are a nonsubscriber Texas employer and would like us to take a look at your non-subscriber insurance policy, it would probably be useful to your risk management and risk forecasting model for us to do so.

If in our preliminary determination, if we conclude that coverage for exemplary damages is available under the policy, we would then proceed to an analysis of the facts and circumstances in a specific case, on a case by case basis, to determine whether provision of coverage in each particular instance would run afoul of public policy concerns, which will be an important consideration in determining the likelihood of punitive damages coverage.   We will be pleased to discuss with you any matters which have prompted concern regarding potential exposure for punitive damages, in order that we may help you complete your nonsubscriber company’s risk management analysis.

Williams, McClure & Parmelee is dedicated to high quality legal representation of businesses and insurance companies in a variety of matters. We are experienced Fort Worth, Texas nonsubscriber defense attorneys in Tarrant County who know Texas courts and Texas law. For more information, please contact the law firm at 817-335-8800. The firm’s office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112.

Martindale AVtexas[2]

Employment Law Defense, Insurance Defense Litigation, Nonsubscriber Law

ERISA Does Not Preempt State Law Negligence in Texas Nonsubscriber Cases–Fort Worth, Texas Non Subscriber Defense Attorneys

In McAteer v. Silverleaf Resorts, Inc., 514 F.3d 411 (5th Cir. 2008) the United States Court of Appeals, 5th Circuit , rejected arguments by a Nonsubscriber to Texas workers’ compensation that the Employee Retirement Income Security Act (ERISA) preempts state law on the issue of liability in a negligence claim.

The Plaintiff in that case alleged that she suffered a job-related injury when she tripped over a parking block while using a landscape trimmer in July 2005.  She fell on her back and was later diagnosed with a herniated disc that required surgery. She allegedly did not report the on the job injury to her employer and left employment with the company in August 2005. She did not notify the employer of the injury until September 2005, some two months after the alleged injury.

The Plaintiff’s claim was denied by her employer. The reasons offered by the employer for the denial included the following:  because she did not report the injury in a timely manner, because did not she seek advance approval for her medical treatment and because she did not use a plan-approved medical provider.

Plaintiff filed suit against her employer in Texas state court alleging that the employer’s failure to provide a safe place to work caused her injuries. Her employer was a Nonsubscriber under Texas workers’ compensation law. The employer removed the suit to federal court asserting that federal subject matter jurisdiction existed because ERISA preempted Plaintiff’s causes of action. Plaintiff filed a motion to remand. Plaintiff put forth the argument that ERISA did not preempt her causes of action because she was alleging state law negligence claims only.

The district court ruled that ERISA barred Plaintiff’s injury claims and dismissed her case.

On appeal, the U.S. Circuit Judge’s opinion stated that state law negligence claims for failing to maintain a safe workplace are independent of ERISA.

In the court’s opinion, the judge stated that Plaintiff’s claim under Texas law was preserved despite the fact that she added an ERISA claim to her action after it was dismissed by the district court. The judge ruled that Plaintiff’s “state law negligence claims in this case are not pre-empted by ERISA and must be remanded,” and that “she did not make her argument moot by adding an ERISA claim,” thereby reversing and remanding the district court decision.

The long range impact of McAteer will likely include keeping nonsubscriber cases in Texas, based in allegations of negligence, largely within the purview of our Texas state courts.

Williams, McClure & Parmelee is dedicated to high quality legal representation of businesses and insurance companies in a variety of matters. We are experienced Fort Worth, Texas nonsubscriber attorneys in Tarrant County who know Texas courts and Texas law. For more information, please contact the law firm at 817-335-8800. The firm’s office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112.

Martindale AVtexas[2]

 

Employment Law Defense, Nonsubscriber Law

Texas Venue Rules–Fort Worth, Texas Civil Litigation Attorneys

The “venue” of a lawsuit can potentially have a significant impact on insurance and business litigation. Venue is simply concerned with the proper place (which county) to litigate the lawsuit. In Texas state courts, the proper venue can be established in more than one county based on rules regarding venue. Typically, the plaintiff chooses where to file the lawsuit initially, but a defendant might have reasons to transfer the lawsuit to another venue. In some situations, the convenience of the parties might dictate that venue is proper in one particular county. There may also be a strategic advantage in transferring a lawsuit to another venue because some venues are more favorable to a defendant than others. Texas lays out three rules for determining venue: general venue rules, permissive venue rules, and mandatory venue rules. The mandatory venue rules override the general rules in certain suits while the permissive rules provide more venue options than the general rules.

Unless a mandatory or permissive provision applies, the general rules say that a lawsuit should be brought in either the county in which “all or a substantial part or part of the events or omissions giving rise to the claim occurred,” or the county in which the defendant resides (if the defendant is a “natural born person”), or in the county of the defendant’s principal office in Texas, if the defendant is not a natural person. If none of the options are available, however, a plaintiff may file his suit in the county where he resided when the loss occurred. Thus, there are potentially four different counties where a plaintiff can file his lawsuit under Texas’s general venue rule.

Texas affords more flexibility in venue options to a defendant in certain circumstances through its permissive venue rules. The permissive venue rules allow some defendants the choice of being sued in a particular county. Some examples of permissive provisions include: (i) suits involving property coverages disputes against insurance carriers; (ii) suits against an estate; and (iii) suits alleging breach of warranty by a manufacturer of consumer goods.

Under the mandatory venue rules, there is only one place where a lawsuit can be filed. The Texas Codes provide several mandatory venue provisions. Some examples of lawsuits that have mandatory venue provisions include: (i) suits involving uninsured or underinsured motorist coverage; (ii) suits reviewing a workers’ compensation decision; and (iii) suits for the recovery of damages to real property.

A motion to transfer venue is the most common way to obtain a proper or more favorable venue but the timing is critical when moving to transfer venue. A defendant must file its motion before its answer or risk waiving its venue challenge.
If you need help navigating the intricacies of the Texas venue rules, contact Williams, Lacy, McClure & Parmelee. With over 90 years of combined experience, Williams, Lacy, McClure & Parmelee is prepared to discuss the options available to you.

James L. Williams, Jr.
Williams, Lacy, McClure & Parmelee
May, 2012

Williams, McClure & Parmelee is dedicated to high quality legal representation of businesses and insurance companies in a variety of matters. We are experienced Texas civil litigation attorneys based in Fort Worth who know Texas courts and Texas law. For more information, please contact the law firm at 817-335-8800. The firm’s new office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112.

Martindale AVtexas[2]

Collections and Foreign Judgments, Construction Law, Contracts and Commercial Litigation, Employment Law Defense, Insurance Defense Litigation, Nonsubscriber Law, Workers' Compensation Defense