Timely Contest by Insurance Carrier in Texas Workers’ Compensation Claims–Fort Worth, Texas Workers’ Compensation Attorneys

Timely Contest by Insurance Carrier 

Overview

In Continental Casualty Company v. Downs, 81 S.W.3d 803 (Tex. 2002), the Texas Supreme Court held that taking some action within seven days is what entitles the IC to a 60-day period to investigate or deny compensability. In Southwestern Bell Telephone Company L.P. v. Mitchell, 276 S.W.3d 443 (Tex. 2008), the Texas Supreme Court noted that less than nine months after Downs was decided the Legislature amended the statute to make clear that an IC who failed to comply with Section 409.021(a) did not waive the right to contest the compensability of the injury, and overruled the Downs case. Therefore, the determination of IC wavier based on a seven-day waiver period is error and must be reversed. Prior APDs applying the seven-day waiver period have been overruled by the Mitchell case. Any APDs cited within this manual that discuss a seven-day waiver period are not cited for that proposition.

An IC is liable for accrued benefits if it fails to dispute compensability of the injury within 15 days after receiving written notice of the claimed injury. Section 409.021; Section 124.3(a)(1). If the IC disputes compensability of the claimed injury after 15 days, but within 60 days of receiving written notice of the claimed injury, the IC is liable for all accrued benefits up until the time of dispute. Section 124.3(a)(2). Once the IC files a dispute with the Division, before the 60th day after receiving written notice of the injury, the IC is no longer liable for further benefits unless the Division determines that the injury is in fact compensable.

If the IC fails to dispute compensability of the claimed injury within 15 days of receiving written notice, but does successfully dispute compensability within 60 days of receiving written notice, and if the IW is being treated in a network as provided for in House Bill 7, Section 8.016, the IC’s maximum liability for accrued medical benefits prior to the dispute is limited to $7,000.00. Texas Insurance Code Section 1305.153. The $7,000.00 limit is effective for claims with a DOI on and after the date of the contract establishing the certified network.

If the IC does not dispute the claimed injury within 60 days after it received written notice of the claimed injury, the IC waives the right to dispute the compensability of the claimed injury unless the IC can prove that there is newly discovered evidence that could not have reasonably been discovered earlier. Section 409.021(d). An IC that contests compensability of the claimed injury after 60 days on the basis of newly discovered evidence is liable for, and must continue to pay, all benefits due until the Division has made a finding that the evidence could not have been reasonably discovered earlier. Section 124.3(c)(2).

Defense Waived. If the IC waives the right to contest compensability of the claimed injury due to its failure to take the action required by Section 409.021, at a minimum the IC waives:

1. The exceptions (IC defenses) listed in Section 406.032. These include:

(A) The right to assert that the injury occurred while the IW was in a state of intoxication. APD 030663-s.
(B) The right to assert that the injury occurred by the IW’s willful attempt to injure himself or to unlawfully injure another person. APD 992365.
(C) The right to assert that the injury was caused by a third person due to personal animosity. APD 992365.
(D) The right to assert that the injury arose out of voluntary participation in an off-duty recreational, social, or athletic activity that did not constitute part of the IW’s work-related duties.
(E) The right to assert that the injury arose out of an act of God.
(F) The right to assert the IW’s horseplay was a producing cause of the injury.

2. The right to assert that no injury occurred in the course and scope of employment. Cont’l Cas. Ins. Co. v. Williamson, 971 S.W.2d 108 (Tex. App.-Tyler 1998, no pet.); Zurich Am. Ins. Co. v. Gill, 173 S.W.3d 878 (Tex. App.-Fort Worth 2005, pet. denied); Alexander v. Lockheed Martin Corp., 188 S.W.3d 348 (Tex. App.-Forth Worth 2006, pet. denied); Lopez v. Zenith Ins. Co., 229 S.W.3d 775 (Tex. App.-Eastland 2007, pet. denied); State Office of Risk Mgmt. v. Peeples, No. 07-04-0408-CV, 2006 Tex. App. LEXIS 6511 (Amarillo July 25, 2006, pet. denied)(mem. op.); APD 041065; APD 032610. However, Williamson held that if the HO finds there was no injury and that finding is not against the great weight and preponderance of the evidence, the IC’s waiver cannot create an injury as a matter of law.

In Zurich American Insurance Company v. Gill, 173 S.W.3d 878 (Tex. App.-Fort Worth 2005, pet. denied), the IW had suffered from allergy problems since childhood; however, in June 2000 she began suffering increased problems. The IW discovered tiles in the office she worked in contained stachybotrys mold, and the IW was medically diagnosed with allergic rhinitis and maxillary sinusitis. She filed a worker’s compensation claim, and although the IC received notice of the IW’s claim in May 2001 it did not contest compensability of the alleged injury until January 8, 2002. The HO found, among other things, that the IW sustained injuries that were ordinary diseases of life – specifically, chronic allergic rhinitis and maxillary sinusitis – and that these injuries were not an occupational disease. The court noted that Continental Casualty Insurance Company v. Williamson, 971 S.W.2d 108 (Tex. App.-Tyler 1998, no pet.), which held that if the IW does not have an injury the IC’s failure to contest compensability cannot create an injury, did not apply to the facts of this case because the HO found that the IW sustained an injury. Williamson is limited to situations where there is a determination that the IW did not have an injury as opposed to cases where there is an injury that was determined by the HO not to have been causally related to the employment. Here the IW’s condition met the definition of “injury”, so she did sustain an injury, a key finding in the determination of whether the IC was liable for benefits when it did not meet the deadline for contesting compensability. The court held that although the IW’s condition was an ordinary disease of life, not incident to a compensable injury or occupational disease, her condition was an “injury” under Section 401.011(26). The court concluded that the IW had an injury, the IC did not contest the compensability of the injury, and thus the IC owes medical benefits to the IW.

In Alexander v. Lockheed Martin Corporation, 188 S.W.3d 348 (Tex. App.-Forth Worth 2006, pet. denied) the IW had a pre-existing condition but filed a workers’ compensation claim asserting an injury occurred on October 17, 2002. The IC paid benefits within the seven-day waiver period but did not contest the compensability of the claimed injury within the 60-day waiver period set forth in Section 409.021(c). The IC later filed a dispute claiming that it should be able to reopen the issue of compensability because it had newly discovered evidence of a pre-existing condition which the IC did not receive until after the 60-day waiver period. The HO found that the IW had an injury but that the injury did not occur in the course and scope of employment. The HO also determined that the IC waived its right to contest compensability. The IC only appealed the waiver and disability determinations. The court held that the IC waived its right to contest compensability of the injury despite the HO’s finding that the injury did not occur in the course and scope of employment.

In Lopez v. Zenith Insurance Company, 229 S.W.3d 775 (Tex. App.-Eastland 2007, pet. denied) the HO held that the IW did not sustain a compensable injury in the course and scope of employment on March 21, 2003, and that the IC did not waive the right to contest compensability because the IW did not have a compensable injury. The AP reversed because Continental Casualty Insurance Company v. Williamson, 971 S.W.2d 108 (Tex. App.-Tyler 1998, no pet.) applies when there is a finding of no injury but not when there is a finding of no compensable injury. Medical records showed the IW had an injury. The court agreed with the interpretation that there is a distinction between an injury and a compensable injury, at least in part to effectuate the legislative intent behind Section 409.021. The court pointed out that the statute requires an IC to make a prompt initial decision and creates an incentive for ICs to initially pay benefits if there is any question about the compensability of a claim. The court stated that pre-existing conditions are not normally compensable and the effect of a waiver holding is to require an IC to pay benefits for an injury that may be a non-compensable, pre-existing condition, however, the court noted that in Alexander v. Lockheed Martin Corporation, 188 S.W.3d 348 (Tex. App.-Forth Worth 2006, pet. denied) and Zurich American Insurance Company v. Gill, 173 S.W.3d 878 (Tex. App.-Fort Worth 2005, pet. denied) and in this case the medical records indicated that the IW had an injury, whereas in Williamson a doctor noted that there was no injury. The court further noted that the language of Section 409.021 does not support a construction that exempts medical issues from this process. The appeals court held that the trial court erred when it held that as a matter of law the HO’s finding of no injury in the course and scope of employment prohibited the application of the waiver provision.

In State Office of Risk Management v. Peeples, No. 07-04-0408-CV, 2006 Tex. App. LEXIS 6511 (Amarillo, July 25, 2006, pet. denied)(mem. op.), the court noted that the IW had been medicated for pre-existing back problems at the time of the April 1, 2002 incident. The court stated that the HO made reference to his medications and to a diagnosis of a degenerative disc made by the IW’s TD. The TD’s report described the IW’s “history of chronic low back pain” and commented that he exhibited all the classical findings of spinal stenosis. The court disagreed with the IC that the HO’s finding that on April 1, 2002, during the course and scope of employment the IW did not injure himself or cause harm to his body was a determination that the IW had no injury. The court agreed with the AP that Continental Casualty Insurance Company v. Williamson, 971 S.W.2d 108 (Tex. App.-Tyler 1998, no pet.) did not apply.

3. The right to assert that the IW failed to give timely notice of the claimed injury in accordance with Section 409.002. Zurich Am. Ins. Co. v. Gill 173 S.W.3d 878 (Tex. App.-Fort Worth 2005, pet. denied); APD 022027-s.

4. The right to assert that the IW failed to timely file a claim for compensation in accordance with Section 409.004. Southern Ins. Co. v. Brewster, 249 S.W.3d 6 (Tex. App.-Houston [1st Dist.] 2007, pet. denied); APD 022091-s.

5. The right to assert that the IW has made an election of remedies. APD 030793-s.

Determination of Waiver. [Cross reference. Issue Not Previously Raised (P01)]. Whether an IC has waived the right to contest compensability pursuant to Section 409.021 is a distinct issue which must be properly raised. In evaluating a Section 409.021 waiver case, the fact finder must consider and resolve the following:

1. Was the issue timely and properly raised, and if not, does good cause exist to add the issue:

a. The IW raised the issue of IC waiver for the first time in his appeal of the HO’s CCH decision. There was no evidence that the issue of IC waiver was raised at the BRC, or that the parties consented to adding the issue, or that good cause existed for not properly raising the issue. The AP refused to consider the issue because it was raised for the first time on appeal. APD 011436.

b. The HO resolved the disputed issues by determining that the IC did not waive the right to contest compensability of the claimed injury, but further determined that the IW sustained a compensable injury and had resulting disability. The IC appealed the injury and disability determinations to the AP. The IW did not file a response to the appeal, nor did she appeal the HO’s waiver determination. The AP reversed the HO’s injury and disability determinations, and rendered a decision that the IW did not sustain a compensable injury and, therefore, did not have disability. The IW filed a petition in district court seeking judicial review and asserted that the IC had waived the right to contest compensability. The IC filed a motion for summary judgment asserting that the IW was barred from raising the waiver issue because she failed to raise it before the AP. The district court granted summary judgment in favor of the IC. The IW appealed and the court of appeals affirmed the district court’s ruling. Judicial review is limited to the issues decided by the AP. A party may not raise an issue in the trial court which was not raised before the AP. Krueger v. Atascosa County, 155 S.W.3d 614 (Tex. App.-San Antonio 2004, no pet.).

c. At the CCH on remand the issues before the HO were (1) who is the correct IC for the DOI and (2) does the IC have liability for benefits prior to the date the IC filed notice of denial pursuant to Section 124.3. The IW requested to add an issue of IC waiver of the claimed injury but the attorney representing both ICs at the CCH objected on the grounds that an IC waiver issue had not previously been raised. The HO declined to add the issue, and determined the correct IC and that the correct IC waived the right to contest compensability of or liability for the claimed injury because the IC failed to file a denial within 60 days of receiving first written notice of the injury. The IC appealed and argued that the HO decided an issue not before her by incorporating IC waiver in her decision. The AP disagreed, noting that Section 124.3 covers both IC liability for accrued benefits for failure to dispute by the 15th day after receiving first written notice of the claimed injury as well as IC waiver of the right to contest compensability of the claimed injury if not disputed on or before the 60th day after receiving first written notice of the claimed injury pursuant to Section 124.3(b). APD 081665-s. [Cross-reference: Other Procedural Issues (P00)]

2. When did the IC receive its first written notice of the claimed injury, thereby triggering the start of the period of time to contest compensability of the claimed injury:

a. When an IW asserts that the IC has waived the right to contest compensability, the IW has the burden to prove when the IC received the first written notice of injury; once that is done, the burden shifts to the IC to prove that it timely filed a dispute. APD 051656.

i. Self-insured. For a claim for workers’ compensation benefits based on a compensable injury that occurs on or after September 1, 2003, written notice to a certified self-insured occurs only on written notice to the qualified claims servicing contractor designated by the certified self insurer under Section 407.061(c). Section 409.021(f) (added by Acts 2003, 78th Leg., ch. 939, Section 1). See also Section 409.021(f)(1) (added by Acts 2003, 78th Leg., ch. 1100, Section 1)

ii. Political subdivision self-insured individually or collectively. For a claim for workers’ compensation benefits based on a compensable injury that occurs on or after September 1, 2003, written notice to a political subdivision that self-insures, either individually or collectively through an interlocal agreement as described by Section 504.011, occurs only on written notice to the intergovernmental risk pool or other entity responsible for administering the claim. Section 504.002(d); APD 070912. See also Section 409.021(f)(2) (added by Acts 2003, 78th Leg., ch. 1100, Section 1).

b. Written notice to the IC does not have to be contained on an Employer’s First Report of Injury. Written notice can be established by showing that the IC received any communication, regardless of its source, that fairly informs the IC of the IW’s name, DOI, identity of the employer, and information asserting the injury was work related. Section 124.1(a); APD 032668.

c. If the IC receives an unwritten notice of injury which contains all of the information required by Section 124.1(a), the IC must immediately create a written record. Section 124.1(d).

3. On what date did the IC properly dispute compensability of the claimed injury:

a. Once it is established when the IC received the first written notice of injury, the IC has the burden to prove that it timely filed a proper dispute. APD 051656.

b. A dispute must be filed with the Division and the IW, and must contain the following information:

i. The IC must use plain language notices with language and content prescribed by the Division;

ii. Notice that the IW has the right to request a BRC and include the means for the IW to obtain additional information from the Division regarding the IW’s claim;

iii. The notice must contain a full and complete statement describing the IC’s actions and its reasons for such actions; and

iv. The statement must contain sufficient claim-specific information to enable the IW to understand the IC’s position or action taken. Sections 409.022, 124.2, and 124.3.

c. To determine whether the IC’s dispute is specific enough to comply with Sections 409.022 and 124.2(f), the AP will look at a fair reading of the reasoning listed to determine if the contest is sufficient. No magic words are required. The key point to be determined is whether, when read as a whole, any of the reasons listed by the IC would be a defense to compensability that could prevail in a subsequent proceeding and whether the grounds listed, when considered together, encompass a controversion or dispute on the basic issue that an injury was not suffered within the course and scope of employment. APD 022145. Whether an IC’s dispute is sufficiently specific is a question of fact for the HO to resolve. APD 971404.

d. The grounds for denial of the claim specified in the IC’s dispute constitute the only basis for the IC’s defense on the issue of compensability in a subsequent proceeding, unless the defense is based on newly discovered evidence that could not reasonably have been discovered at an earlier date. Section 409.022(b).

An issue at the CCH was whether the IC is relieved of liability because the IW failed to file a claim within one year after the DOI as required by Section 409.003. The IC denied benefits in a Notice of Denial of Compensability/Liability and Refusal to Pay Benefits (PLN-1); however, the IC did not contest compensability of the claim based on the IW’s failure to file a claim within one year. The HO found that although the IW contended at the CCH the IC had waived the defense of the IW’s untimely filing by not raising that defense in its PLN-1, that issue was not contained in the BRC report, was not requested in a response to the BRC report to be added as an issue at the CCH, and was not actually litigated at the CCH. The AP found evidence that the issue had been actually litigated by the parties and therefore addressed it. The HO determined that the IC is relieved of liability under Section 409.004 because the IW failed to file a claim within one year of the DOI. The AP reversed the HO’s determination and rendered a decision that the IC is not relieved of liability under Section 409.004 because, under Section 409.022(b), the IC waived the right to contest based on failure to file a claim within one year. APD 060631-s.

For injuries occurring on or after September 1, 2003, an IC may file as many disputes as it wishes within the initial 15-day period, and does not have to prove that there was newly discovered evidence for the additional filings within that time period.

e. A dispute of benefit entitlement is not a dispute of compensability/liability.

The IC filed a Notice of Disputed Issue(s) and Refusal to Pay Benefits (PLN-11) within 15 days of receiving written notice of injury disputing entitlement to TIBs. The IC filed a Notice of Denial of Compensability/Liability and Refusal to Pay Benefits (PLN-1) after the 15th day but before the 60th day after receipt of written notice of the injury. The HO held that the IC’s defense on compensability was limited to the disability defense listed on the PLN-11 filed within 15 days of receiving written notice of injury. The AP reversed and rendered a new decision that the IC’s defense on compensability is not limited to the disability defense listed on the PLN-11 filed with the Division within 15 days of written notice. The dispute of benefit entitlement is not a dispute of compensability/liability, and in filing a dispute of benefit entitlement, the IC retains the right to contest compensability and liability of a claim within the 60-day period, subject to Section 124.3. APD 072002-s.

4. If the IC did not dispute compensability of the claimed injury within the waiver period, did the IC present newly discovered evidence that could not reasonably have been discovered earlier, which would allow the IC to reopen the issue of compensability?

a. An IC that has accepted an IW’s claimed injury, either expressly or, for injuries that occurred on or after September 1, 2003, by failure to dispute within the 60-day time period, may still dispute compensability of the claim if the IC can prove that the dispute is based on evidence that could not reasonably have been discovered earlier with the exercise of due diligence. Section 409.021(d); APD 94224.

b. A two-prong test is used to determine whether an IC may reopen the issue of compensability. First it must be determined whether the IC exercised due diligence in obtaining the evidence. Second it must be determined whether the IC exercised due diligence in contesting compensability upon discovering the new evidence. Whether the IC should be allowed to re-open the issue of compensability pursuant to Section 409.021(d) is a question of fact for the HO to resolve. APD 002920.

5. Extent of injury disputes:

In State Office of Risk Management v. Lawton, 2009 Tex. LEXIS 629 (Tex. August 28, 2009), the Texas Supreme Court held that the 60-day period for challenging compensability of an injury does not apply to a dispute over the extent of injury if the basis for the extent of injury dispute could have been discovered by a reasonable investigation within the 60-day waiver period. Therefore, a determination that an IC has waived an extent of injury because that injury or condition was reasonably discoverable within the 60-day waiver period is error and must be reversed. Any prior APDs ruling that an IC has waived an extent of injury because the IC could have discovered that injury or condition by a reasonable investigation during the 60-day waiver period are overruled by the Lawton case, and future decisions will apply Lawton.