Simply put, workers' comp is a deal between employer and employee. An employer who buys workers' comp protects himself with limits on liability and the threat of being sued for negligence with potentially huge jury awards. The trade-off is that workers' comp coverage is supposed to be for a lifetime if needed and again, pre-existing conditions don't necessarily preclude coverage. The system is supposed to work toward returning the worker to a productive work life as soon as possible.
In most cases, workers' comp claims are filed in jobs requiring a lot of physical labor, such as truck driving, construction or in oil and gas field and plant work.
When an insurance carrier denies a claim, a worker has the right to be heard through the state's workers' comp complaint system, a progression of mediations and hearings that can last for months or years before and if a claimant ever emerges with a favorable ruling. But winning at this level can sometimes be a false victory.
Insurance carriers can elect to carry their appeal to a civil court, which generally means the worker must hire a lawyer. Even if the worker wins in civil district court, insurance companies can continue to appeal the case up to and including the Texas Supreme Court.
At issue in all these cases is whether the insurance carrier should pay lost wages and medical benefits.
Bad faith cases take it to the next level. In those cases, the worker has finally gotten his benefits but is arguing that because his coverage was delayed so long, he has been made to unfairly suffer additional damage. In some cases, attorneys argue, delayed medical treatment has meant a permanent worsening of the injured worker's condition. In others, he and his family have had to go through the grief of not being able to pay their bills and suffered mental anguish.
Nichols hates being in this arena and calls it unfair. Texas Mutual has the right and responsibility to defend itself against fraud and should not be punished for raising reasonable questions, she says. An adjuster can make a wrong decision, she acknowledges, but that doesn't mean his actions rise to the legal test of committing a knowing wrong with damages assessed.
"Even if an adjuster does a less than Hall of Fame job on the adjusting, there's lots of ways to rectify it and the Texas Supreme Court doesn't want that to be open field running for the plaintiff's bar."
One danger of juries in bad faith cases is that instead of sticking to the facts of the bad faith case, they may look back into the original benefits case and award some more money for that, Nichols says.
"If we get popped for a big extracontractual amount, a big payday for additional damages every time an adjuster gets it wrong, that's really not good for the employers of Texas or in the long run the employees of Texas, either one," she says. Employers can just decide not to provide coverage, or it will be as it was in the late 1980s, when many workers' comp carriers left the state, Nichols says.
According to Doyle, who sees things very differently than Nichols, Texas Mutual coverage is fine as long as it's a minor, low-cost injury. "But if it costs serious money...bad head injuries or somebody is killed so there's a lot of money at stake, all of a sudden the number of denials and refusals to pay just multiplies."
Nichols vehemently denies this.
"The vast majority of claims are simply paid here. We have people who've been burned over their bodies who are going to be million-dollar claims. We have paraplegics, people get really badly hurt out there, and we're taught to be good stewards of the reserves we have because we do have to pay many, many injuries, and we have a lifetime medical obligation to people, so everybody has to be careful in this system."
This isn't the first time the matter of bad faith cases has been challenged. In fact, in Aranda v. Insurance Co. of North America, the original 1988 Texas Supreme Court decision allowing bad faith cases in Texas, then-Chief Justice Tom Phillips wrote a dissenting opinion, saying that he thought that any disputes should remain within the workers' comp system. Workers' comp is so heavily governed by statutes that the "negotiation" between parties in other types of insurance doesn't occur here, he wrote. Allowing additional civil remedy just "invites the proliferation of lawsuits and the possibility of double recoveries and inconsistent findings of fact," Phillips said.