Texas Property and Casualty Insurance Guaranty Association, as Receiver for Employers' Casualty v. Texas Workers' Compensation Commission, Subsequent Injury Fund

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN NO. 03-00-00467-CV Texas Property and Casualty Insurance Guaranty Association, as Receiver for Employers' Casualty , Appellant v. Texas Workers' Compensation Commission, Subsequent Injury Fund, Appellee FROM THE DISTRICT COURT OF TRAVIS COUNTY, 345TH JUDICIAL DISTRICT NO. 98-13683, HONORABLE MARGARET A. COOPER, JUDGE PRESIDING Appellant Texas Property and Casualty Insurance Guaranty Association (the "Association") appeals from the summary judgment rendered against it in a suit by the Texas Workers' Compensation Commission, Subsequent Injury Fund (the "Fund") to recover death benefits under the Texas Workers' Compensation Act. We will affirm the trial court judgment. Factual and Procedural Background The Fund exists to assist insurance carriers in paying lifetime income benefits to a twice-injured worker so that the insurance carrier is responsible only for that percentage of benefits attributable to the second, or subsequent, injury. Tex. Lab. Code Ann. § 408.162 (West 1996); see State v. Bothe, 231 S.W.2d 453, 458 (Tex. Civ. App.--San Antonio 1950, no writ). The Association is a statutorily created entity whose purpose is to pay covered claims of impaired insurance companies doing business within the state. See generally Tex. Ins. Code Ann. art 21.28-C §§ 1-27 (West Supp. 2001) (the "Guaranty Act").(1) If a compensable injury to an employee results in death, an insurance carrier is obligated to pay death benefits. Tex. Labor Code Ann. § 408.181 (West Supp. 2001). The Labor Code establishes a detailed plan to determine the distribution of death benefits. Tex. Labor Code Ann. § 408.182 (West 1996). If an employee is not survived by any of the natural persons who can qualify as beneficiaries, the death benefits are paid to the subsequent injury fund. Id. at 408.182(e). The statutory scheme always provides for payment of benefits when a qualified death occurs. It is undisputed that John Wesley Proffer's death qualified for benefits under section 408.181. Certain individuals claiming to be Proffer's statutory beneficiaries presented a claim to the Texas Workers' Compensation Commission. The Commission denied those claims. One claimant sought judicial review. Upon the Commission's determination that no other statutory beneficiary existed, it ordered the insurer to pay the weekly death benefits to the Fund. Upon the insurer's impairment, the Association continued to pay those benefits. After the suit for judicial review was dismissed, however, the Association terminated the payments to the Fund. The Fund sued to recover the remaining payments as specified in the Labor Code; the trial court found in favor of the Fund. The Association brings three issues on appeal, contending that no evidence supports a summary judgment for conversion, that it is not an "insurance company" who must make payments to the Fund, and that the Fund did not present a "covered claim" eligible for payment. We begin with the third issue. Discussion The standard for reviewing a motion for summary judgment is well established: (1) the movant has the burden of showing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law; (2) in deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true; and (3) every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor. See Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex. 1985). In this case, the trial court's order does not state the specific grounds upon which summary judgment was granted. When a trial-court order granting summary judgment does not specify the ground or grounds relied on for the ruling, the reviewing court affirms the summary judgment on appeal if any of the theories advanced are meritorious. State Farm Fire & Cas. Co. v. S.S., 858 S.W.2d 374, 380 (Tex. 1993); Rogers v. Ricane Enters. Inc., 772 S.W.2d 76, 79 (Tex. 1989). Covered Claim In its third issue, the Association contends that the Fund has not presented a "covered claim" to the Association, nor can the Fund meet the definition of a "claimant" who can present such a covered claim: A 'covered claim' means an unpaid claim of an insured or third-party liability claimant that arises out of and is within the coverage and not in excess of the applicable limits of an insurance policy to which this Act applies . . . if the third-party claimant or liability claimant or insured is a resident of this state . . . . Guaranty Act § 5(8). A "claimant" is any insured making a first-party claim or any person instituting a liability claim. Id. § 5(5). The Association argues that a workers' compensation insurance policy is not a liability policy; therefore, it asserts there can be no liability claimants, third-party liability claimants, or third-party claimants.(2) Inasmuch as the Fund is not the insured, the Association argues, the Fund cannot meet the definition of a claimant who is eligible to have a covered claim because it cannot be a liability claimant. We need not discuss the nature of workers' compensation insurance nor the exact parameters of the word "liability" as used in the Guaranty Act because the Association's construction of the statute would lead to an unreasonable result. If the deceased worker had been survived by a natural person who qualified as a beneficiary, that beneficiary, under the Association's argument, would not be entitled to death-benefit payments upon an insurer's impairment because that beneficiary would not be the insured or a liability claimant. In other words, under the Association's construction of the Guaranty Act, death benefits cease upon an insurer's impairment and can never be a "covered claim." Many types of insurance and coverages are specifically excluded from the Guaranty Act's scope, for example, title insurance. Guaranty Act § 3(a)(6); see generally id. at (a)(1)-(9). Neither workers' compensation insurance in general nor death benefits under workers' compensation are specifically excluded from the Guaranty Act's scope. If the legislature in the Guaranty Act had intended to do so, the extensively enumerated exclusions suggest that the category of benefits would have been specifically enumerated as well, rather than excluded through the general definition of a covered claim. Further, if a conflict exists between the Guaranty Act and the Texas Workers' Compensation Act, the Workers' Compensation Act controls. Id. § 25(b)(1). The Workers' Compensation Act creates a detailed system to determine the recipients of death benefits, one of which is the Fund. The Fund, for purposes of death benefits, has the same status as other claimants attempting to qualify under the statute. See Industrial Accident Bd. v. Texas Employers Ins. Ass'n, 336 S.W.2d 216, 218-19 (Tex. Civ. App.--Austin 1960), aff'd, 345 S.W.2d 718, 722 (Tex. 1961). Under no circumstances, however, does an insurer simply cease paying benefits before the end of the specified period; there is always a beneficiary. That system would be thwarted by the Association's construction of the Guaranty Act, which would always terminate death benefits upon the impairment of an insurer. Therefore, we conclude that the Association must make these payments in the place of the impaired insurance company for the complete period as specified in the Workers' Compensation Act. We overrule the Association's third issue. Insurance Company In its second issue, the Association argues that it is not an "insurance company" and so not liable to make payments to the Fund. The Association relies on the language in the Guaranty Act that says that it shall not be considered to be in the business of insurance. Guaranty Act § 8(b). However, we have determined that the Fund has a covered claim. That same section states that the Association is considered the insurer to the extent of its obligation on the covered claims and has all rights, duties, and obligations of the impaired insurer as if the insurer had not become impaired. See In re Texas Property & Casualty Ins. Ass'n, 989 S.W.2d 880, 885 (Tex. App.--Austin 1999, orig. proceeding) ("when the Guaranty Association takes on the liability of an insurer pursuant to the mandates of the Guaranty Act, it is entitled to Chapter 110 [charitable care] indemnity under the principles of common-law subrogation in the same manner that indemnity would otherwise flow to the insurer but for the insurer's impaired status"). Accordingly, we conclude that the Association must take on the impaired insurer's obligations to pay death benefits to the Fund under these circumstances. We overrule the Association's second issue. Cause of Action In its first issue, the Association complains that there is no evidence to support a summary judgment that appellant converted the Fund's property. As a preliminary matter, we note that embedded in its argument is a claim of sovereign immunity, presumably immunity from liability as the Insurance Code permits suits against the Association. See Guaranty Act § 8(h)(3) (may sue or be sued); Missouri Pac. R.R. Co. v. Brownsville Navigation Dist., 453 S.W.2d 812, 813-14 (Tex. 1970) ("sue or be sued" language waives immunity from suit; distinction between immunity from suit and immunity from liability). Immunity from liability is an affirmative defense that must be pleaded or is waived. Kinnear v. Texas Comm'n on Human Rights ex rel. Hale, 14 S.W.3d 299, 300 (Tex. 2000); Texas Dep' t of Transp. v. Jones, 8 S.W.3d 636, 638 (Tex. 1999); see Southwest Airlines Co. v. Texas High Speed Rail Authority, 867 S.W.2d 154, 157 n.6 (Tex. App.--Austin 1993, writ denied). The Association did not plead immunity; accordingly, that claim, made for the first time on appeal, is waived. Although the Association frames its issue in terms of "no evidence" its real complaint appears to be that the Fund could not state a cause of action for conversion under the facts of the case. The proper way to raise a complaint for failure to state a cause of action is by special exception. Massey v. Armco Steel, 652 S.W.2d 932, 934 (Tex. 1983); Butler Weldments Corp. v. Liberty Mut. Ins. Co., 3 S.W.3d 654, 658 (Tex. App.--Austin 1999, no pet.). If the trial court sustains special exceptions, it then must give the party against whom exceptions were sustained a chance to replead. Friesenhahn v. Ryan, 960 S.W.2d 656, 658-9 (Tex. 1998). Accordingly, we will consider the issue waived with regard to any matters that could have been raised by special exception. We have already concluded that the Association must pay the Fund's claim for death benefits as a matter of law. We overrule the first issue. Conclusion We overrule the Association's three issues and conclude that it is liable to the Fund for the death benefits that otherwise would have been paid into the Fund by the impaired insurer. We affirm the trial court's judgment. Mack Kidd, Justice Before Justices Kidd, Yeakel and Jones* Affirmed Filed: February 28, 2001 Do Not Publish * Before J. Woodfin Jones, Justice (former), Third Court of Appeals, sitting by assignment. See Tex. Gov't Code Ann. § 75.003(a)(1) (West 1998). 1. Because no changes in the Labor Code or Insurance Code affect the disposition of the case, the current Codes are cited for convenience. 2. The Association states in its brief: It has long been held in Texas that, rather than a liability policy against which an injured worker makes a claim, workers' compensation coverage is a contractual relationship in which the employer, employee, and the insurer are all principal parties, which relationship is purely statutory and is primarily for the benefit of the employee. It cites Maryland Casualty Co. v. Hendrick Memorial Hospital, 169 S.W.2d 969 (Tex. Comm'n App. 1943) for that proposition. That case involved the question whether a medical provider could sue an insurer directly to recover the cost of services provided to an injured worker. Id. at 970-71. The Court stated that there was a contractual relationship between the employer, employee and insurer, and generally contracts are not construed as made for the benefit of non-parties. Id. at 973. However, the court went on to state that the provisions of the Workers' Compensation law were incorporated into that contract and the intent of the Workers' Compensation law was to allow such a recovery; holding that the medical provider could sue the insurer directly to recover those costs. Id. The Association's interpretation of the case may be overbroad. "). Accordingly, we conclude that the Association must take on the impaired insurer's obligations to pay death benefits to the Fund under these circumstances. We overrule the Association's second issue. Cause of Action In its first issue, the Association complains that there is no evidence to support a summary judgment that appellant converted the Fund's property. As a preliminary matter, we note that embedded in its argument is a claim of sovereign immunity, presumably immunity from liability as the Insurance Code permits suits against the Association. See Guaranty Act § 8(h)(3) (may sue or be sued); Missouri Pac. R.R. Co. v. Brownsville Navigation Dist., 453 S.W.2d 812, 813-14 (Tex. 1970) ("sue or be sued" language waives immunity from suit; distinction between immunity from suit and immunity from liability). Immunity from liability is an affirmative defense that must be pleaded or is waived. Kinnear v. Texas Comm'n on Human Rights ex rel. Hale, 14 S.W.3d 299, 300 (Tex. 2000); Texas Dep' t of Transp. v. Jones, 8 S.W.3d 636, 638 (Tex. 1999); see Southwest Airlines Co. v. Texas High Speed Rail Authority, 867 S.W.2d 154, 157 n.6 (Tex. App.--Austin 1993, writ denied). The Association did not plead immunity; accordingly, that claim, made for the first time on appeal, is waived. Although the Association frames its issue in terms of "no evidence" its real complaint appears to be that the Fund could not state a cause of action for conversion under the facts of the case. The proper way to raise a complaint for failure to state a cause of action is by special exception. Massey v. Armco Steel, 652 S.W.2d 932, 934 (Tex. 1983); Butler Weldments Corp. v. Liberty Mut. Ins. Co., 3 S.W.3d 654, 658 (Tex. App.--Austin 1999, no pet.). If the trial court sustains special exceptions, it then must give the party against whom exceptions were sustained a chance to replead. Friesenhahn v. Ryan, 960 S.W.2d 656, 658-9 (Tex. 1998). Accordingly, we will consider the issue waived with regard to any matters that could have been raised by special exception. We have already concluded that the Association must pay the Fund's claim for death benefits as a matter of law. We overrule the first issue. Conclusion We overrule the Association's three issues and conclude that it is liable to the Fund for the death benefits that otherwise would have been paid into the Fund by the impaired insurer. We affirm the trial court's judgment. Mack Kidd, Justice Before Justices Kidd, Yeakel and Jones* Affirmed Filed: February 28, 2001 Do Not Publish * Before J. Woodfin Jones, Justice (former), Third Court of Appeals, sitting by assignment. See Tex. Gov't Code Ann. § 75.003(a)(1) (West 1998). 1. Because no changes in the Labor Code or Insurance Code affect the disposition of the case, the current Codes are cited for convenience. 2. The Association states in its brief: It has long been held in Texas that, rather than a liability policy against which an injured worker makes a claim, workers' compensation coverage is a contractual relationship in which the employer, employee, and the insurer are all principal parties, which relationship is purely statutory and is primarily for the benefit of the employee. It cites Maryland Casualty Co. v. Hendrick Memorial Hospital, 169 S.W.2d 969 (Tex. Comm'n App. 1943) for that proposition. That case involved the question whether a medical provider could sue an insurer directly to recover the cost of services provided to an injured worker. Id. at 970-71. The Court stated that there was a contractual relationship between the employer, employee and insurer, and generally contracts are not construed as made for the benefit of non-parties. Id.