Texas Mutual Gains Legal Ground in Oklahoma, Tennessee Cases

January 26, 2009

Texas Mutual Insurance Company reported it has secured legal victories in two workers’ compensation cases that originated in Oklahoma and Tennessee.

In a statement released by the company, Texas Mutual Insurance said on Jan. 16, 2009, it received a favorable ruling from U.S. Magistrate Andy Austin. This case involves a worker who was injured in Texas but sought benefits in the Oklahoma Workers’ Compensation Court, which ultimately ordered the payment of benefits to the worker.

Wood Energy Group, the worker’s employer, then requested a defense and indemnification from Texas Mutual. When Texas Mutual declined, Wood Energy threatened a bad-faith action. In this dispute, Judge Austin ruled that the policy covers Texas benefits only and that Texas Mutual is not liable for defense or indemnity. Judge Austin also recommended dismissal of all of Wood Energy’s counterclaims.

Judge Austin’s ruling is in the form of a recommendation to Judge Lee Yeakel of the U.S. District Court, Western District of Texas. If Judge Yeakel accepts the recommendation, Wood Energy can appeal the decision to the Fifth Circuit Court of Appeals.

Judge Austin’s recommendation is particularly significant because it takes a different look at worker’s compensation policies.

Judge Austin held that because it is a standard form mandated by a state regulatory agency, a workers’ compensation policy should be interpreted through the “ordinary, everyday meaning of the words to the general public.” Typically, insurance policy language is interpreted in a way that’s most favorable to the insured.

“This court recognizes the significance of a state-mandated insurance form in a way that will be helpful in other policy coverage cases,” Mary Nichols, senior vice president and general counsel of Texas Mutual, said.

In the Tennessee case, that state’s Supreme Court dismissed Texas Mutual from a lawsuit involving the payment of benefits to an injured worker. This case involves an employee of a subcontractor of Texas Mutual policyholder Broadband Specialists Inc.

Lower courts in Tennessee had held that, under Tennessee law, Broadband Specialists was the “statutory employer” of the injured worker. Texas Mutual was ordered to pay part of the $127,190 that the worker was awarded for treatment of on-the-job injuries.

In its appeal, Texas Mutual argued that the trial court lacked personal jurisdiction over the insurance company, that the trial court erred in applying Tennessee’s “statutory employer” rule to the Texas Mutual policy, and that Texas Mutual’s policy did not cover subcontractors of Broadband Specialists.

In its Jan. 12, 2009, decision, the Tennessee Supreme Court ruled that the fact that Texas Mutual insures employees who may temporarily work out of state and the fact that Texas Mutual offers online insurance quotes were not enough to support general jurisdiction. The court ordered dismissal of all claims against Texas Mutual.

“This victory is important for this case, which had been a lengthy, expensive and pointless trip through the Tennessee courts,” Nichols said. “The Tennessee Supreme Court has established a clear, solid precedent regarding jurisdiction over workers’ compensation claims.”

Source: Texas Mutual Insurance Company, www.texasmutual.com

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