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Texas Supreme Court Weekly Update April 20, 2018

On Behalf of | Apr 20, 2018 | Texas Supreme Court Weekly Update

In the last few weeks, the Supreme Court of Texas has released a number of opinions, and quite a few are of particular interest

First, USAA Texas Lloyds Co. v. Gail Menchaca is an insurance dispute case coming out of the Corpus Christi/Edinburg Court of Appeals. Menchaca’s home was damaged by Hurricane Ike. However, USAA refused to pay for damages since it was determined that her home’s damages did not exceed the policy’s deductible. A second adjuster confirmed USAA’s determination. Menchaca sued for breach of contract and for unfair settlement practices. At trial, the jury concluded that USAA did not fail to comply with their terms of the policy. However, the jury also found that USAA failed to pay a claim without a reasonable investigation to the claim and awarded Menchaca $11,350. USAA appealed arguing that since the jury concluded that they did not fail to comply with the terms of the policy then Ms. Menchaca should not recover for bad faith or extra-contractual liability. The court of appeals affirmed the lower court’s judgment.

On appeal, the Supreme Court examined whether an insured can recover policy benefits as actual damages caused by an insurer’s statutory violation absent a finding that the insured had a contractual right to the benefits under the insurance policy.

According to the Court, generally, the rule is no – the Court affirmed both that an insured cannot recover actual damages if he or she had no rights under the benefits of the policy and that an insured who establishes a right to receive benefits under an insurance policy can recover those benefits as actual damages under the statute if the insurer’s statutory violation causes the loss of the benefits.

Additionally, the Court recognized that an insured can recover benefits as actual damages even if the insured has no right to those benefits under the policy, if the insurer’s conduct caused the insured to lose that contractual right. The Court also held that an insurer’s extra-contractual liability is “distinct” from its liability for benefits under the insurance policy. Finally, the Court acknowledged that an insured cannot recover any damages based on an insurer’s statutory violation unless the insured establishes a right to receive benefits under the policy or an injury independent of a right to benefits. In this case, the Court agreed that the jury finding that USAA did not fail to comply with the terms of the policy directly conflicts with the finding that USAA did fail to pay a claim; therefore, as a matter of clarification and in the interest of justice, the judgment was reversed and remanded.

Second, in Schlumberger Technology Corp. v. Michael Pasko and Peggy Pasko from the Corpus Christi-Edinburg Court of Appeals the court focused on the effects of the discovery rule and the latent-occupational-disease rule on the statute of limitations in a personal injury case. In this case, Michael Pasko was badly injured when he was burned by caustic chemicals while working at an oil well site on May 6, 2013. Pasko claims a Schlumberger employee-a separate contractor on the site-instructed him to clean up a chemical spill. The Schlumberger employee did not provide Pasko with protective equipment, and Pasko suffered severe burns and intense pain after coming in contact with the spilled chemicals. Additionally, about four months after the incident, he was diagnosed with cancer.

On May 5, 2015, Pasko sued several entities but notably did not name Schlumberger as a defendant in the suit until August 13, 2015. Pasko claimed Schlumberger negligently asked him to clean the chemical spill without proper equipment and sought to recover for the cancer which developed as a new injury and illness because of his exposure to the chemicals. Schlumberger filed a motion for summary judgement stating that the two-year statute of limitations had already passed since the injury occurred over two years ago. Pasko argued the discovery rule tolled the statute of limitations until at least August 6, 2015 because the cancer was inherently undiscoverable. The trial court granted Schlumberger’s motion for summary judgement. But the court of appeals overturned the trail court claiming that Schlumberger did not disprove each element of the discovery rule. Applying the latent-occupational-disease rule to the discovery rule, the court concluded that Schlumberger failed to prove that Pasko knew or should have known about the cancer before May 6, 2013, and that Pasko was aware of Schlumberger’s wrongful conduct before he was diagnosed with cancer.

However, the Texas Supreme Court reinstated the opinion of the trial court and granted the motion for summary judgment. Specifically, the Court determined that the appellate court erred in their application of the discovery rule and latent-occupational-disease rule. The Court clarified that whether the discovery rule applies depends on whether the injured person is aware that they are injured and aware that the injury was likely caused by the acts of another. In this case, Pasko certainly knew that he was injured as a result of the wrongful acts of others as soon as the injury occurred because he was badly burned and had not been given proper equipment by the Schlumberger employee. Additionally, the Court held that the latent-occupational-disease rule did not apply in this case, because Pasko immediately knew that he was burned and injured by the chemicals. In this case, the cancer should not be classified as a latent disease simply because it was discovered roughly four months after the initial injury. According to the Court, the important factor was that Pasko immediately knew he was injured, regardless of his knowledge of the nature or scope of his injuries-thus the limitations period began to run on the date of the injury.

Third, In re Carolina Garza from the San Antonio Court of appeals addresses abuse of discretion in the context of sanctions imposed on a plaintiff in a personal injury case whose medical providers withheld her medical records during discovery and sought protective orders. In this case, Garza was injured after a collision with a truck owned by UV, Logistics, LLC. Garza received medical treatment from Dr. Michael Leonard in San Antonio as a result of injuries related to the accident. Garza later sued Logistics in Jim Wells County. Logistics had subpoenas issued to Dr. Leonard and two custodians of records requesting production of the medical and billing records pertaining to Garza. Logistics wanted to show that Dr. Leonard was financially connected with the Henry Law Firm-who was representing Garza, discredit Dr. Leonard as an expert, and show that he performed unnecessary medical procedures and charged unreasonable amounts.

Neither Dr. Leonard nor the custodians of record produced the subpoenaed records, and a court order was entered subsequently compelling them to produce the requested records. When served with reissued subpoenas, the custodians of record both sought and were granted protective orders in Bexar County. The trial court then granted Logistics motion requesting exclusion of Dr. Leonard as a witness and all records and testimony relating to Dr. Leonard and the medical institutions where Garza received treatment. Garza sought mandamus relief, and the Court of Appeals issued a non-substantive denial.

On appeal to the Texas Supreme Court, the Court over turned both the trial court’s ruling and the appellate court’s denial of mandamus relief after finding that the sanctions imposed were an abuse of discretion and that appeal was an inadequate remedy. Specifically, the Court found that the sanctions were arbitrary and unreasonable, because: (1) Garza herself was not the offending party-she did not fail to produce the medical records, (2) the custodians of record were the ones who failed to produce the medical records, and (3) the custodians of record were permitted to withhold records after seeking and obtaining protection under rule 176.6(e) and 192.6 of the Texas Civil Rules of Procedure. Further, the Court determined that appeal could not serve as an adequate remedy because Garza’s damage claims are based on the cause and extent of her injuries. In other words, prohibiting the testimony of Dr. Leonard-who performed the surgeries-would cripple Garza’s case. Likewise, excluding the testimony of the custodians of record would have a similar effect on her claims for hospital expenses.

Finally, in Steven Painter et al. v. Amerimex Drilling Ltd. the Supreme Court addressed the issue of vicarious liability for an employee’s negligence when the employee was being paid to give rides to fellow employees after hours. In this case, several Amerimex employees were injured when a truck driven by Burchett, a fellow Amerimex employee, struck another vehicle. Burchett was driving the other employees to a job site and was being paid to do so. The injured employees sued for negligence but Amerimex prevailed on a motion of summary judgment arguing that the vicarious liability claims fail because no evidence shows Amerimex controlled the details of Burchett’s work during the accident.

On appeal, the Texas Supreme Court pointed out several issues with the lower court’s acceptance of the argument that Amerimex did not control the details of Burchett’s driving and therefore had no liability. The Court emphasized that this argument suggests that vicarious liability issues need to be evaluated based on the isolated task the worker was performing at the time of the incident and based on the employer’s level of control of that specific task. However, such a focus would effectively transition workers from employees to independent contractors multiple times a day depending on the specific task being performed and the varying levels of control exerted by the employer. Additionally, in this case, the Court determined that Amerimex’s argument that driving was outside the course and scope of his employment failed, because Amerimex was contractually obligated to pay the driver-in this instance Burchett-a bonus for driving fellow employees to and from the work site. It was part of Burchett’s “job” to drive the other employees to and from the worksite every day. Thus, the Court determined that Burchett was clearly acting with the employer’s authority and for the employer’s benefit.

While the coming-and-going rule might have allowed relief from vicarious liability, the Supreme Court recognized an exception to this rule in cases where such travel involves the performance of a specifically assigned duty to benefit the employer. For these reasons, the Court overturned the lower court’s ruling on Amerimex’s summary judgment motion.


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