Bad Faith and Texas Mutual Insurance

It was June 12, 2000, and Lance Morris, a volunteer firefighter for the small town of Justin in north Texas, was in a ditch, eight or ten feet below road level. He remembers six or seven firefighters handling the backboard with him, bringing out one of the 19 men who'd flipped a van down the middle of the highway near Texas Motor Speedway where they worked. Bodies were everywhere.

"We go to take this guy out of the ditch; we're going up the ditch and my back just went out. I had to let go," he says today.

Morris went for some medical treatment and then went back to work. In his bill-paying life, he variously worked for Peterbilt Motors and a hazmat firm, and after he got married to Karen in February 2003, he moved to Houston, which is where his back suddenly got worse.

In March 2003, Morris went to the emergency room with severe back pain. He was referred to a doctor who said he needed emergency surgery for a herniated disc. "He couldn't feel his legs; he couldn't urinate," his wife says. Morris called his workers' comp carrier, Texas Mutual ­Insurance Company, and it issued its approval of the surgery in writing.

Morris had the back surgery and was discharged, but had to return when he developed a dangerous staph infection from the operation. Karen Morris says the hospital called her down to its financial office, where she was told Texas Mutual had denied her husband's claim. A new adjuster had been assigned to his case, and this one concluded Morris's claim was bogus after a brief conversation with the Justin fire chief about the injury in 2000. The adjuster never spoke to Morris or his doctor before disputing the claim — which she did on the same day she first looked at Morris's file. In later trial testimony, the fire chief said he never would have told her Morris returned to work with no problems in 2000.

Doctors Hospital sent Morris home, where for six weeks he gave himself IVs twice a day and the drugs his doctor was able to get donated for him. Bill collectors started calling. Morris couldn't pay the medical bills on his own, and his personal insurance did not cover his back surgery.

Morris appealed, working his way through the state's workers' comp complaints process. He went to two benefit reviews and a contested case hearing, and he won every time. Texas Mutual did finally pay his medical bills in August 2004, after the contested case hearing. But that was no longer enough for Morris.

Houston attorney Mike Doyle filed a bad faith lawsuit on Morris's behalf, seeking damages, saying that Texas Mutual had no reason to deny his client coverage to begin with and that its so-called "investigation" failed to meet anything approaching industry standards. It failed to settle when its liability had become reasonably clear. It had treated his client badly and should be punished.

Morris won his bad faith case — repeatedly. In fact, on August 26 of this year, more than five years since Morris first went in for emergency back surgery, the 14th Court of Appeals rejected Texas Mutual's claims once again and ruled that a 2006 jury had been right when it found that "TMI engaged in unfair and deceptive acts or practices in violation of the Texas Insurance Code." In addition, the Appeals Court agreed that Texas Mutual had done this knowingly. The court affirmed the award of $75,000 for mental anguish and $250,000 for its knowing violation of the insurance code. The only thing reversed was an award of $75,000 for loss of credit reputation.

As far as Texas Mutual and its lead in-house attorney Mary Nichols are concerned, it's outrageous that this case has gone as far as it has. She believes the courts have gotten it completely wrong, and in October filed a motion for rehearing to the 14th Appeals Court. If it is denied, they will appeal to the Texas Supreme Court.

She points to the fact that Morris did not mention a previous injury he had from 1998, something Texas Mutual didn't discover until it was sued for bad faith. Nichols says Morris clearly lied in testimony; he and his attorney say he forgot, and anyway Morris wasn't really hiding it because it was on the medical records he gave TMI. In fact, Doyle says, however much Texas Mutual might wish it otherwise, coverage for workers' comp does not bar pre-existing conditions unless they were the sole cause of the current complaint. If an accident on the job aggravates a prior condition, it's covered.

Doyle wants to know why Texas Mutual repeatedly failed to forward a key part of Morris's records to the TMI medical expert testifying in the case. The documents, which eventually surfaced in 2006, showed him receiving 25 to 30 treatments for his back between the 2000 injury and the 2003 flare-up — the connect-the-dots evidence linking the events. Nichols says the records were merely wrongly coded and thereby misplaced. She also contends they showed sporadic treatment at best and actually undermined Morris's ­argument.