Humana Insurance Company v. Dolores Mueller

ACCEPTED 04-14-00752-CV FOURTH COURT OF APPEALS SAN ANTONIO, TEXAS 2/14/2015 12:45:47 AM KEITH HOTTLE CLERK

NO. 04-14-00752-CV

IN THE COURT OF APPEALS FILED IN FOR THE FOURTH DISTRICT OF TEXAS 4th COURT OF APPEALS AT SAN ANTONIO SAN ANTONIO, TEXAS 2/17/2015 12:00:00 AM KEITH E. HOTTLE Clerk

HUMANA INSURANCE COMPANY, APPELLANT,

V.

DOLORES MUELLER, APPELLEE.

On Appeal from the County Court at Law No. 3, Bexar County, Texas

BRIEF OF APPELLEE DOLORES MUELLER

Stephen G. Nagle State Bar No. 14779400 sgnagle@lawyernagle.com 1002 West Avenue, Suite 100 Austin, TX 78701 (512) 480-0505 - Telephone (512) 480-0571 - Facsimile ATTORNEY FOR APPELLEE DOLORES MUELLER

Oral Argument Not Requested Humana vs. Mueller, Brief of Appellee

IDENTITY OF PARTIES AND COUNSEL HUMANA Insurance Company Appellant

Counsel for Appellant Lisa P. Alcantar State Bar No. 24069284 lalcantar@prdg.com Richard G. Foster State Bar No. 07295100 rfoster@prdg.com Porter, Rogers, Dahlman & Gordon, P.C. 745 E. Mulberry Avenue, Suite 450 San Antonio, Texas 78212 Telephone: (210) 736-3900 Facsimile: (210) 736-1992

Appellee Dolores Mueller Stephen G. Nagle Counsel for Appellee State Bar No. 14779400 sgnagle@lawyernagle.com 1002 West Avenue, Suite 100 Austin, TX 78701 (512) 480-0505 - Telephone (512) 480-0571 - Facsimile

Humana vs. Mueller, Brief of Appellee -i-

TABLE OF CONTENTS ................................................................................ TABLE OF AUTHORITIES . iii

STATEMENT OF THE CASE. ............................................................................... 1 ISSUES PRESENTED. ............................................................................................ 2 I. STATEMENT OF FACTS. ........................................................................... 2 II. SUMMARY OF THE ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 III. ARGUMENTS AND AUTHORITIES. ........................................................ 7

A. This Court has no jurisdiction over an interlocutory appeal by HUMANA because it is neither a government agency nor a government employee.. employee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 7

B. HUMANA has no derivative immunity from either suit or liability for claims arising out of the administration of the SAHA Health Benefits Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 10

C. C. HUMANA has no derivative immunity from either suit or liability for bad faith claims handling. handling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 15

D. HUMANA is not exempt from the Insurance Code and has direct liability for claims arising out of the administration of the SAHA Health Benefits Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 16

IV. CONCLUSION............................................................................................ 18 W. CONCLUSION

PRAYER................................................................................................................. PRAYER 18

CERTIFICATE OF COMPLIANCE...................................................................... COMPLIANCE 20

CERTIFICATE OF SERVICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Humana vs. Mueller, Brief of Appellee -ii-

I. FACTUAL FACTUALBACKGROUND BACKGROUND

Since Since this an interlocutory this is an interlocutory appeal appeal from from an an Order Order denying denying aa Plea Plea to the

Jurisdiction Jurisdiction of of the court below, the court below, the allegations allegations of Plaintiff's Plaintiff’s latest latest Petition Petition are

accepted as true for purposes purposes of of this this appeal. Plaintiff’s Third appeal. Plaintiff's Third Amended Amended Petition in

this case was the live pleading at the time when the Plea Plea to to the the Jurisdiction Jurisdiction was heard,

and contains the following:

2010, DOLORES In 2010, DOLORES MUELLER MUELLER developed developedback back pain pain and and other symptoms that

failed to respond to non-surgical non-surgical treatment. Her treating treatment. Her treating doctors doctors recommended recommended a

“minimally invasive” "minimally invasive" spinal decompression surgery. Two different surgery. Two different neurosurgeons

submitted claims to HUMANA for pre-certification approval of this surgery.

HUMANA denied HUMANA denied pre-certification, pre-certification,and, and,by byaa series series of of at letters at least six letters

spanning the period March 31, 2010, through October 2, 2010, denied coverage for

proposed surgery. the proposed In its surgery. In itsdenials, denials, HUMANA HUMANA relied relied upon upon the the policy policy language language

excluding excluding “Any "Any medical treatment, treatment, procedure, procedure, drug, drug, biological biological product or device

which is experimental, investigational or for research purposes . . .” ."

At the time and and place place when when HUMANA HUMANA denied denied pre-certification pre-certification of the the proposed proposed

thoracic spinal decompression surgery, the proposed procedure was not, and could not reasonably have been considered, experimental, investigational or for research purposes either generally or within the meaning of [the policy] definition.

At the same time, time, HUMANA HUMANA had had [an [aninternal] internal]“Spinal "Spinal Decompression Decompression Surgery Surgery

______________________________________________________________________________ Humana Ins. Co. vs. Mueller, Brief of Appellee - p. 4 of 21

Walker v. Whatley, 318 S.W.3d 541 (Tex. App.—Beaumont 2010, pet. denied) ................................................................ 9

S STATUTES TATUTES

TEX. C TEX. IV. PPRAC. CIV. RAC. & &RREM. EM. CCODE ODE AANN. NN. § 51.014 § 51.014(West (West2015) 2015) . . . . . . . . . . . 6, 7, 8, 9

TEX. C TEX. IV. PPRAC. CIV. RAC. &&RREM. EM. CCODE ODE AANN. NN. § 101.001(2) § 101.001(2)(West (West2015) 2015) . . . . . . . . . . . . . 8

TEX. C TEX. IV. PPRAC. CIV. RAC. & &RREM. EM. CCODE ODE AANN. NN. § 101.0215 § 101.0215(West (West2015) 2015) . . . . . . . . . . . . . . 15

TEX. C TEX. IV. P Cry. RAC. & PRAC. & RREM. EM. CCODE ODE AANN. NN. § § 311.023 311.023(West (West 2015) 2015) . . . . . . . . . . . . . . . 10

TEX. G TEX. OVT. CCODE GOVT. ODE AANN. NN. § § 311.026 311.026(West (West 2015) 2015) . . . . . . . . . . . . . . . . . . . . . . . . . 17

TEX. G TEX. OVT. CCODE GOVT. ODE AANN. NN. § § 2259.037 2259.037(West (West 2015) 2015) . . . . . . . . . . . . . . . . . . . . . 16, 17

TEX. H. TEX. H. & & S. S. C ODE AANN. CODE NN. § §312.007(a) 312.007(a)(West (West 2015) 2015) . . . . . . . . . . . . . . . . . . . . . . . 9

TEX. IINS. TEX. NS. CCODE ODE AANN. NN. § §541.002 541.002(West (West 2015) 2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

TEX. IINs. TEX. NS. C ODE AANN. CODE NN. § §4151.001 4151.001(West (West 2015) 2015) . . . . . . . . . . . . . . . . . . . . . . . . . . 17

TEX. IINS. TEX. NS. CCODE ODE AANN. NN. § § 4151.002 4151.002(West (West 2015) 2015) . . . . . . . . . . . . . . . . . . . . . . . . . . 17

TEX. INS. TEx. INS. C ODE AANN. CODE NN. § §4151.006 4151.006(West (West 2015) 2015) . . . . . . . . . . . . . . . . . . . . . . . . . . 17

TEX. L TEX. OC. GOVT. Loc. GOVT. C ODE AANN. CODE NN. Ch. Ch.172 172(West (West 2015) 2015) . . . . . . . . . . . . . . . . 11, 12, 17

TEX. L TEX. OC. GOVT. Loc. GOVT. CCODE ODE AANN. NN. § §172.002 172.002(West (West 2015) 2015) .. . . . . . . . . . . . . . . . . . . . 12

TEX. L TEX. OC. GOVT. Loc. GOVT. C ODE AANN. CODE NN. Ch. Ch.271 271(West (West 2015) 2015) . . . . . . . . . . . . . . . . . . . . . . . 6

TEX. L TEX. OC. GOVT. Loc. GOVT. C ODE AANN. CODE NN. § §271.152 271.152(West (West 2015) 2015) . . . . . . . . . . . . . . . . . . . . . . 12

______________________________________________________________________________ Humana Ins. Co. vs. Mueller, Brief of Appellee - p. 1 of 21

NO. 04-14-00752-CV

IN THE COURT OF APPEALS FOR THE FOURTH DISTRICT OF TEXAS AT SAN ANTONIO

HUMANA INSURANCE COMPANY,

APPELLANT

V.

DOLORES MUELLER,

APPELLEE

On Appeal from the County Court at Law No. 3, Bexar County, Texas

BRIEF OF APPELLEE DOLORES MUELLER

STATEMENT OF THE CASE

Dolores Mueller works for the San Antonio Housing Authority ("SAHA"), a

local governmental entity that runs subsidized housing programs within the City of San Antonio. Appellant Appellant HUMANA HUMANA administers administers the health insurance benefit program program

which SAHA created for its employees. employees. HUMANA denied certain claims for health benefits presented by Mueller. HUMANA violated the Insurance Code by making Mueller. HUMANA claims decision the claims decision outside outside the terms of the policy, the terms policy, relying on undisclosed undisclosed and

unreasonable limitations on the medical procedures it would cover.

______________________________________________________________________________ Humana Ins. Co. vs. Mueller, Brief of Appellee - p. 2 of 21

PROCEDURAL HISTORY

Mueller filed her Original Petition Mueller against SAHA Petition against SAHA and HUMANA HUMANA on March 30,

2012. (CR 2012. (CR 11-15). 11-15). ItItsought soughtdamages damagesfor fordenial denial of ofclaims claims benefits, benefits, breach breach of

contract, negligence, and violation of provisions of the Texas Texas Insurance Insurance Code. Code. In the

course of discovery, Ms. Mueller found out, for the first time, that HUMANA had

gone outside the terms of the health health benefits benefits policy policy in in order order to to deny deny her herclaims. claims. As

one consequence consequence of that discovery, Ms. Mueller non-suited her claims against SAHA,

and elected to proceed solely against against HUMANA. HUMANA. (CR 43-49).

Plaintiff’s Third Amended Plaintiff's Third Amended Petition Petition was was in place at the time time when when HUMANA’s HUMANA's

Plea to the Jurisdiction was was heard, heard, on on September September19, 19,2014. 2014. (CR (CR 279-285). 279-285). The Plea

sovereign immunity (CR 55-66) claimed sovereign immunity for for HUMANA’s HUMANA's acts administering the

insurance claims process for SAHA and sought sought dismissal dismissal of of the the lawsuit. lawsuit. The Bexar

County Court at Law, the Honorable Honorable Tina Tina Torres Tones presiding, denied the plea to the

jurisdiction on October October 9, 9, 2014. This appeal 2014. (CR 295). This appeal was was timely timely filed.

ISSUES PRESENTED

Does this Court have jurisdiction Does jurisdiction of the appeal appeal of of an an interlocutory interlocutory Order Order

denying a Plea to the Jurisdiction, which is brought by an independent contractor to a political subdivision of the state?

Has HUMANA established that it is entitled to sovereign or official immunity for its claims handling conduct as a Third Party Administrator?

______________________________________________________________________________ Humana Ins. Co. vs. Mueller, Brief of Appellee - p. 3 of 21

I. FACTUAL FACTUALBACKGROUND BACKGROUND

Since Since this an interlocutory this is an interlocutory appeal appeal from from an an Order Order denying denying aa Plea Plea to the

Jurisdiction Jurisdiction of of the court below, the court below, the allegations allegations of Plaintiff's Plaintiff’s latest latest Petition Petition are

accepted as true for purposes purposes of of this this appeal. Plaintiff’s Third appeal. Plaintiff's Third Amended Amended Petition in

this case was the live pleading at the time when the Plea Plea to to the the Jurisdiction Jurisdiction was heard,

and contains the following:

2010, DOLORES In 2010, DOLORES MUELLER MUELLER developed developedback back pain pain and and other symptoms that

failed to respond to non-surgical non-surgical treatment. Her treating treatment. Her treating doctors doctors recommended recommended a

“minimally invasive” "minimally invasive" spinal decompression surgery. Two different surgery. Two different neurosurgeons

submitted claims to HUMANA for pre-certification approval of this surgery.

HUMANA denied HUMANA denied pre-certification, pre-certification,and, and,by byaa series series of of at letters at least six letters

spanning the period March 31, 2010, through October 2, 2010, denied coverage for

proposed surgery. the proposed In its surgery. In itsdenials, denials, HUMANA HUMANA relied relied upon upon the the policy policy language language

excluding excluding “Any "Any medical treatment, treatment, procedure, procedure, drug, drug, biological biological product or device

which is experimental, investigational or for research purposes . . .” ."

At the time and and place place when when HUMANA HUMANA denied denied pre-certification pre-certification of the the proposed proposed

thoracic spinal decompression surgery, the proposed procedure was not, and could not reasonably have been considered, experimental, investigational or for research purposes either generally or within the meaning of [the policy] definition.

At the same time, time, HUMANA HUMANA had had [an [aninternal] internal]“Spinal "Spinal Decompression Decompression Surgery Surgery

______________________________________________________________________________ Humana Ins. Co. vs. Mueller, Brief of Appellee - p. 4 of 21

wesiikw. Westlaw. Page 11

Not Reported in S.W.3d, 1999 WL 1078697 (Tex.App.-Austin) (Cite as: 1999 WL 1078697 (Tex.App.-Austin)) (Tex.App.-Austin»

1998). C Only the Westlaw citation is currently POWERS. available. *1 Gregorio appeals from Gregorio Garza appeals from a sum- mary judgment mary judgment that that he he take take nothing nothing byby his NOTICE: NOT DESIGNATED FOR PUB- actions actions against Blue Cross/ against Blue Blue Shield Cross/ Blue Shield of LICATION. UNDER TX R RAP RULE Texas, Texas, Inc., Inc., and Group Group Life and Health In- 47.7, UNPUBLISHED OPINIONS HAVE surance surance Company Company ("Appellees").FN' ("Appellees").FNl Garza Garza NO PRECEDENTIAL VALUE BUT MAY appeals as well from the trial court's denial of BE CITED WITH THE NOTATION "(not his his opposing opposing motion motion for for partial partial summary summary designated for publication)." judgment. We judgment. We will will reverse reverse the the summary summary judgment recovered by Appellees, affirm the Court of of Appeals of of Texas, Austin. trial court judgment denying Garza's motion Gregorio GARZA, Appellant, for summary for summary judgment, judgment, and and remand remand the the v. cause to the trial court. BLUE CROSS AND BLUE SHIELD OF TEXAS, INC.; and Group Life & & Health FN1. Garza alleged FNI. alleged that Group Group Life Insurance Company, Appellees. and Health Insurance Company is Insurance Company is a "wholly "wholly owned owned and controlled controlled sub- sub- No. 03-98-00706-CV. No.03-98-00706-CV. sidiary of" of Blue BlueCross/ Cross/ Blue Blue Shield Shield of Dec. 2, 1999. Texas, Texas, Inc. Inc. It appears appears that that neither neither Appellee denied Appellee denied the the allegation. allegation. From the From the District District Court of of Travis Travis County, County, Group Group Life Life and and Health Health Insurance Insurance 53rd 53rd Judicial Judicial District, District, No. 95-11137; 95-11137; Peter Peter Company issued the Company issued the group group policy policy M. Lowry, Judge Presiding. involved in the present litigation; and, the the company company administers administers aa part part of Before Before Justices Justices SMITH, SMITH, YEAKEL YEAKEL and and that policy for the Board of of Trustees Trustees POWERS.FN· POWERS.FN* of of the Employees Retirement System of of Texas. Blue Cross/ Blue Shield of FN* Before FN* Before John E. Powers, Powers, Senior Senior Texas, Inc., administers for the Board Justice Justice (retired), Third Court (retired), Third Court of Ap- another part of the policy. another part policy. Garza al- peals, sitting by assignment. See Tex. leged that both insurers, leged insurers, Group Life Gov't Code Ann.Ann. §§ 74.003(b) 74.003(b) (West (West and Health Health Insurance Insurance Company Company and

© 2014 Thomson Reuters. No Claim to Orig. US Gov. Works. Humana vs. Mueller, Brief of Appellee page 23 of 29

participant. The participant. The action actionMueller Muellerhas hasbrought brought against against HUMANA HUMANA is for for extra- extra-

contractual damages which have have resulted resulted from fromHUMANA’s HUMANA's bad faith faith claims claims handling handling

conduct. HUMANA's HUMANA’sconduct conductisisclearly clearlyoutside outside the the scope scope of its delegated authority.

II. SUMMARY SUMMARYOF OFTHE THEARGUMENT ARGUMENT

jurisdiction in this Court, under 51.014 of the TEx. In order to create jurisdiction TEX. C IV. Civ.

P RAC. & PRAC. &RREM. EM. CCODE, ODE, this appeal this must appeal mustbebebased basedupon uponananassertion assertionof ofimmunity immunity by an

individual who is an officer or employee of the state or a political subdivision of the

HUMANA isis neither state. HUMANA neither aa local local government government agency agency nor an employee of such an

entity, and therefore this court has no authority to hear this appeal.

Sovereign immunity is a judicially judicially created created doctrine. doctrine. Sovereign immunity has

been waived for SAHA for both immunity from suit and liability for claims where a suit is brought by its employees seeking to resolve disputes over insurance benefits

Immunity is provided by SAHA. Immunity is waived waived because because these these are are suits suits over over proprietary proprietary

functions functions by by a city or its affiliated affiliated agency. Immunity is waived, as well, because agency. Immunity

these suits arise out of contract claims. Immunity Immunity for for those those claims claims is is specifically specifically

waived Ch. waived Ch.271, 271,TEx. TEX.Loc. LOCGOVT. . GOVT.CODE. CODE.

Even if the functions that HUMANA performs might be cloaked in immunity

if done in good faith, by an an employee employee of of aaSAHA, SAHA, HUMANA HUMANA does does not not have have immunity immunity

for its claims handling actions in this case, because HUMANA did not act in good

faith. Further, Further, specific specific provisions provisions of of the the Texas Insurance Code govern actors such

______________________________________________________________________________ Humana Ins. Co. vs. Mueller, Brief of Appellee - p. 6 of 21

HUMANA who as HUMANA who are are in the "business “business of insurance," insurance,” and acting as Third Third Party

Administrators. Even Administrators. Even if an an employee employee of of the the State State might might be be immune, immune, there there is no

immunity for immunity private, Third Party for private, Party Administrators Administrators whose whose conduct conduct is specifically specifically

regulated by statute.

While the agreement between SAHA and HUMANA provides for indemnity

to HUMANA in connection with HUMANA's exercise of its powers and duties under HUMANA's exercise

the Agreement, the agreement excepts damages that are attributable to fraud, willful

misconduct, or intentional misconduct, intentional disregard disregard on on the part of HUMANA, HUMANA, or HUMANA's HUMANA's failure

Agreement. SAHA to abide by the Agreement. SAHA remains remains liable for plan benefits awarded awarded to a

participant, but participant, but the action Mueller Mueller has brought brought against against HUMANA HUMANA is extra- is for extra-

contractual damages which have resulted from contractual damages from HUMANA’s HUMANA's bad faith claims claims handling handling

conduct. HUMANA's HUMANA’sconduct conductisisclearly clearlyoutside outside the the scope scope of its delegated authority.

III. ARGUMENT ARGUMENTAND AND AUTHORITIES AUTHORITIES

A. THIS THISAPPEAL APPEAL MUST MUST BE BE DISMISSED DISMISSED FOR FOR LACK OF JURISDICTION

“jurisdiction to consider This court has "jurisdiction consider immediate immediate appeals of interlocutory interlocutory

jurisdiction." Texas A. & orders only if a statute explicitly provides such jurisdiction.” & M. M Univ.

System v. Koseoglu, 233 S.W.3d 835, 840 (Tex. 2007).

This appeal has been been taken taken under under Section Section51.014 51.014of ofthe theTEx. TEX.Civ. CIV.PRAC. PRAC. &

R EM. CCODE. REM. ODE. Section Section51.014(a)(5) 51.014(a)(5)provides providesthat thataa “person” "person" may may appeal appeal from an

interlocutory order of a district court, county court at law, or county court denying a

______________________________________________________________________________ Humana Ins. Co. vs. Mueller, Brief of Appellee - p. 7 of 21

motion for summary motion summary judgment judgment “that "that is is based based on an assertion assertion of immunity immunity by an

individual who is an officer or employee of the state or a political political subdivision of

state." [Emphasis added.] the state.”

Accordingly, this Court lacks jurisdiction over interlocutory appeals taken by

any person who is not an officer officer or employee employee of aa qualifying qualifying government entity. TEX. TEX.

C IV. PRAC. Cw. PRAC. & & RREM. EM. CCODE ODE Sec. Sec.101.001(2) 101.001(2)defines defines"employee" "employee"totomean mean “a "a person,

including an officer or agent, who is in the paid service of a governmental unit by competent authority, but does not include an independent contractor, an agent or employee of an independent contractor . . . ”"

In Cen-Tex Child Care, Inc. v Johnson, 339 S.W.3d 734 (Tex. App.—Fort Worth 2011, no pet.), Cen-Tex was a private entity working under contract for a state

agency. ItIt provided provided foster foster home home services services pursuant pursuant to a contract with the Department

of Family and Protective Protective Services. After After aa child child died died while while in a Cen-Tex foster home,

Johnson filed a wrongful death lawsuit lawsuit against against Cen-Tex Cen-Tex and and others. others. Cen-Tex moved

to dismiss, on the ground that itit had had immunity. immunity. The Court of Appeals Appeals determined that

it lacked jurisdiction under 51.014(a)(5), because Cen-Texas was not an officer or

employee employee of the State or any political subdivision subdivision of the State, but an independent

contractor.

Similarly, in Methodist Hospitals of Dallas v. Miller, No. 05-11-00955-CV;

2012 Tex. App. LEXIS 5455; 2012 WL 2782820 (Tex. App.—Dallas July 10, 2012, ______________________________________________________________________________ Humana Ins. Co. vs. Mueller, Brief of Appellee - p. 8 of 21

several police officers who were no pet.), several were employees employees of the Methodist Methodist Hospital Hospital

System appealed the denial of their Motion for Summary Judgment on the ground of

Their appeal immunity. Their appeal was dismissed for lack of jurisdiction, because they failed jurisdiction, because

demonstrate that they were employees to demonstrate employees of a state state or or local local government government entity. entity.

In Walker Walker v. Whatley, 318 S.W.3d 541 (Tex. (Tex. App.—Beaumont App.—Beaumont 2010, 2010, pet.

denied), a private attorney denied), attorney was was sued for actions he had had taken taken as as court-appointed court-appointed

guardian of a person and estate. estate. He sought immunity because of his appointment by

the Court. the Court. The Theappellate appellate Court Court ruled ruled itit did did not nothave havejurisdiction jurisdiction under under §

51.014(a)(5)), because the guardian was not an agent of the State.

The present case is different from Klein v. Hernandez, 315 S.W.3d 1 (Tex.

2010). InInthat thatcase, case,Klein, Klein,was wasaastudent studentat at aa private private medical medical school who worked as

resident physician a resident physician at a public public hospital. hospital. The The Texas Texas Supreme Supreme Court found that,

pursuantto pursuant to Section Section312.007(a) 312.007(a)ofofthe theTEX. TEX.H. H.&& S. S. CODE, CODE, Klein Kleinwas was aastate state employee employee

for purposes purposes of his work at the the public public hospital. hospital. The The section, section, entitled entitled "Individual “Individual

Liability,” Liability," provides: A .. .. .. resident provides: A resident .. .. .. employee employee of a medical medical . . . unit . . . is an

employee of a state agency . . . for for purposes purposes of determining determining the liability, if any, of the

person for the person's person person's acts or or omissions omissions while engaged engaged in the the coordinated coordinated or

cooperative activities of the unit, school, school, or or entity.” entity." He, therefore, was authorized to

take an interlocutory appeal of the denial of an immunity immunity motion motion under under 51.014(a)(5). 51.014(a)(5).

There is no similar statute that would give comfort or immunity to HUMANA. HUMANA.

______________________________________________________________________________ Humana Ins. Co. vs. Mueller, Brief of Appellee - p. 9 of 21

B. HUMANA HAS NO DERIVATIVE IMMUNITY FROM EITHER SUIT OR LIABILITY FOR CLAIMS ARISING OUT OF THE THE ADMINISTRATION ADMINISTRATION OF THE SAHA HEALTH BENEFITS PROGRAM.

Sovereign immunity, in Texas, was historically a judicially created doctrine.

first recognized It was first recognized in in 1847. The Texas 1847. The Texas Supreme Supreme Court Hosner v. Court held, in Hosner

DeYoung, 1 Tex. 764, 769 (1847), that no State can be sued in her own court without

her consent and then only in in the the manner manner indicated indicated by bythat thatconsent consent...” ..." Consent has

been found in a number of ways. The most ways. The most obvious one is a statutory waiver, but it

has not been the only one.

contends that HUMANA essentially contends that SAHA in entirely immune from suit over

claims claims matters, matters, and and that that it has immunity that is derivative derivative of SAHA's SAHA’s immunity. immunity.

However, if SAHA were completely However, completely immune immune from insurance benefits, from suits for insurance benefits,

benefits which benefits which it promised and contracted for with its employees, employees, then then Plaintiff Plaintiff would would

have no remedy at all for denial of her claims for benefits under the health benefits

That is policy. That is an an absurd result. Statutory Statutory construction construction rules rules provide that an absurd

result should result shouldbe beavoided. avoided.TEX. TEX.Civ. CIV.PRAC. PRAC. & REM. CCODE, REM. ODE, Sec. Sec.311.023. 311.023.Courts Courts must must

avoid construction that leads to absurd results. City of Rockwall v. Houston, 246 S.W.3d 621, 625-26 (Tex. 2008).

In order for derivative immunity to apply, there must first be immunity on the

part of the government entity. Local Local Government Government entities are empowered to provide

______________________________________________________________________________ Humana Ins. Co. vs. Mueller, Brief of Appellee - p. 10 of 21

health and other health other insurance insurance benefits benefits to their their employees employees by the the Texas Texas Political Political

Subdivisions Uniform Group Subdivisions Uniform Group Benefits Benefits Program, Program, established established in in Ch. Ch. 172 172of ofthe theTEX. TEX.

LOC.GOVT. Loc. GOVT. CCODE. ODE. ItIt provides provides that:

subdivision .. . . may (a) A political subdivision may provide health health . . . coverage coverage for

political subdivision . . . . employees, . . . .

(b) The types of coverage coverage that may be be provided provided include include group health and

accident, group accident, dental, accidental group dental, accidental death death and and dismemberment, dismemberment, and

hospital, surgical, and medical expense. There is no provision in that Code Chapter which clothes any entity in immunity for payment of benefits contracted for.

It is also true that there is no specific provision in Ch. 172 saying that a local

employee may government employee may sue, sue, in in the event of a dispute, for the benefits which a

political subdivision creates. Nonetheless, Nonetheless,there therecan can be be no no doubt doubt that such a remedy

exists. There There isis aa specific specific provision provision which which waives waives immunity immunity of SAHA for general

contract claims.

WAIVER WAIVER OF IMMUNITY IMMUNITY TO SUIT FOR CERTAIN CLAIMS. A local

governmental entity that is authorized by statute or the constitution to

enter enter into into a contract contract and that enters and that enters into contract subject into a contract subject to to this

subchapter waives subchapter waives sovereign sovereignimmunity immunitytotosuit suit for for the purpose of the purpose

adjudicating a claim for breach of the contract, subject to the terms and

______________________________________________________________________________ Humana Ins. Co. vs. Mueller, Brief of Appellee - p. 11 of 21

conditions of this subchapter.

TEX. LLoc. TEX. OC. GOVT. GOVT. C ODE Sec. CODE Sec.271.152. 271.152.

Supreme Court has The Texas Supreme has specifically specifically held held that that "by “by enacting enacting section section

271.152, the 271.152, the Legislature Legislature intended intended to to loosen loosen the the immunity immunity bar bar so so that local that all local

government entities that have been given or are given the statutory authority to enter

into contracts shall not be immune from from suits suits arising arising from from those contracts." Ben Bolt- those contracts.”

Palito Blanco Consol. Indep. Sch. Dist. Dist. v. v.Tex. Tex.Political PoliticalSubdivisions Subdivisions Prop./Cas. Prop./Cas. Joint

Self-Ins. Fund, 212 S.W.3d 320, 327 327 (Tex. (Tex. 2006) 2006) (internal (internal quotations quotations omitted). omitted). This

authorizes a claim for benefits, a suit against SAHA.

If HUMANA has derivative immunity from suit for violations violations of the Insurance Insurance

Code in this Code in this case, case, itit would would go go against againstthe thepolicy policyenunciated enunciatedininTEx. TEXLoc. . LOCGOVT. . GOVT.CODE CODE

Ch. 172, which authorized the creation of the program that HUMANA HUMANA administered. administered.

Sec. 172.002. PURPOSE. The purpose of this chapter is to: . . .

(2) enable the political subdivisions to attract and retain competent and

able employees by providing them with accident and health benefits

coverages coverages at least equal to those those commonly commonly provided provided in private private industry; industry;

If State, County and Municipal employees are not allowed the same remedies under the Insurance Code as employees in the private sector, they are not equal to

those “provided "provided in private industry.” industry."

______________________________________________________________________________ Humana Ins. Co. vs. Mueller, Brief of Appellee - p. 12 of 21

HUMANA contends HUMANA contendsthat that itit seeks seeks sovereign sovereign immunity. However, what immunity. However, what it

actually seeks actually seeks is the immunity immunity that might apply to an an individual individual employee employee who

performed claims performed claims functions functionsfor foraa local local government governmententity. That is entity. That is "official" “official”

Official immunity immunity. Official immunity applies applies only only to (1) discretionary acts of individuals (2)

within the scope of official duties for the state, (3) performed in good faith. City of

Lancaster v. Chambers, Lancaster Chambers, 883 883 S.W.2d S.W.2d 650, 650, 653 (Tex. 1994). 653 (Tex. 1994). HUMANA HUMANA has has

specifically pleaded specifically pleaded that that itit did not have discretion, discretion, but but only acted to interpret the

terms. Further, policy terms. Further, the the specific specific allegations allegations of Plaintiff Plaintiff are are that the actions actions of

HUMANA were HUMANA were not not taken taken in good faith, because they are violations of the Texas

Insurance Code.

Even if HUMANA Even HUMANA is correct and SAHA has immunity from a lawsuit for

benefits and for violations of the Insurance Code, that immunity does not transfer to

HUMANA. Garza v. Blue Blue Cross Cross & Blue Shield of Tex., Cause No. 03-98-00706-CV; &Blue 03-98-00706-CV;

1997 WL 1997 WL 1078697 1078697 (Tex. (Tex. App.—Austin App.—AustinDec. Dec.2, 2, 1999, 1999, no (mem. op., not no pet.) (mem.

designated for publication). In Garza, the Plaintiff was an employee of the State of for publication).

Texas. Through Texas. Through his hisemployer, employer, he hepurchased purchased Accidental Accidental Death Death and and Disability Disability

coverage from Blue Cross and Blue Shield of Texas (BCBSTX). (AD&D) insurance coverage

He was was injured injured and and lost lost the the sight sight in in one one eye. BCBSTX denied eye. BCBSTX denied the the claim. Garza claim. Garza

appealed, won at the administrative level, and then sued BCBSTX for violations of the Insurance Code.

______________________________________________________________________________ Humana Ins. Co. vs. Mueller, Brief of Appellee - p. 13 of 21

The District Court granted Summary Judgment to BCBSTX on the ground of

immunity. The immunity. The Court Court of Appeals reversed. ItIt wrote, wrote, concerning concerning official official immunity

for a private actor, such as Blue Cross and Blue Shield:

[I]f LIUthe thepurposes purposesof of the the [immunity] [immunity] doctrine doctrine are are not not exposed exposed to

particular function that might be pertinent, injury by reason of a particular

[emphasis added.] See Forrester v. then the exception cannot apply. [emphasis

White, 484 U.S. 219, 227 (1988) ("immunity is justified and defined by

functions itit protects the functions protects and and serves, serves, not not by person to whom by the person whom it

See NF Indust. v. Export-Import Bank, 846 F.2d 998, attaches."). .. .. .. See attaches.").

1000-01 (5th Cir. 1988) (Defendant "has made no showing here that its

duties require duties require the the exercise exercise ofofgovernmental governmental policymaking policymaking as as

distinguished from insurance policy-writing.").

The present case is distinguishable from Foster distinguishable from Foster v. v. Teacher Teacher Retirement Retirement System,

S.W.3d 883 273 S.W.3d 883 (Tex. (Tex. App. App. Austin Austin 2008). First, Foster 2008). First, Foster did not not make make claims claims that

Aetna acted outside the contract contract or or illegally. “Foster does illegally. "Foster does not allege unlawful acts

its employees, by Aetna or its employees, only that Aetna should should have found her claims have found claims to be

covered covered under under the the policy.” policy." Id. at 889. In In contrast, contrast, Ms. Ms. Mueller's Mueller’s claims claims are based

exclusively on the fact that HUMANA violated provisions of the Texas Insurance

Code. Second, Second, Foster Foster sued sued aa State State agency, agency, not not aa local local government government agency agency whose

authority derives from a home rule city. ______________________________________________________________________________ Humana Ins. Co. vs. Mueller, Brief of Appellee - p. 14 of 21

C. HUMANA HUMANAHAS HASNO NODERIVATIVE DERIVATIVEIMMUNITY IMMUNITYFROM FROM EITHER EITHER SUIT

OR LIABILITY FOR BAD FAITH CLAIMS HANDLING.

Ms. Mueller’s Mueller's claim is not one for contract benefits. Rather, it is a claim that benefits. Rather,

HUMANA, as the entity in charge of insurance benefits for SAHA, acted without HUMANA,

authority and contrary to law - ultra vires. The Texas Supreme Court has held that there is no immunity for ultra vires acts, because they are outside the scope of the

official's authority. City of El Paso v. Heinrich, 284 S.W.3d official’s S.W.3d 366 366 (Tex. (Tex. 2009). 2009). If

HUMANA is acting in the stead of the individual who is the Plan Administrator for SAHA, then they may be sued just as he might have been sued, had he done the same.

addition, the provision In addition, provision of insurance insurance benefits benefits is aa proprietary proprietary function. function.

Governmental functionsare Governmental functions aredefined definedin in TEXCiv. TEx. . CIVPRAC. . PRAC& . &REM. REM.CODE CODE SSEC. EC. 101.0215, 101.0215,

which provides which provides that that the the Tort Tort Claims Claims Act Act does does not not apply apply to to the liability of the liability of a

municipality for damages damages arising arising from fromits itsproprietary proprietaryfunctions. functions. Proprietary functions

are those which a municipality may, in its discretion, perform in the interest of the

inhabitants of the municipality. The inhabitants The provision provisionof of insurance insurance to to employees employees of of the a city

or its affiliated affiliated entities entities is is not not listed listed in statute. Therefore in the statute. Therefore the the provision provision of

insurance is a proprietary proprietary function, and HUMANA HUMANA has has no immunity immunity at at all in this

regard.

In Tooke v. City of Mexia, 197 S.W.3d 325 (Tex. 2006), the Texas Supreme

Court recognized that Court recognized that cities cities have have no no immunity immunity for for tortious tortious conduct related related to a

______________________________________________________________________________ Humana Ins. Co. vs. Mueller, Brief of Appellee - p. 15 of 21

proprietary function. Id. Id. at at 343. 343. SAHA SAHAisisaa creation creation of of the the City of San Antonio, and

therefore, logically, therefore, logically, it also has no immunity immunity for for tortious tortious conduct conduct related related to to proprietary proprietary

functions. The Theconduct conductfor for which which Mueller Mueller seeks seeks is is tortious, tortious, in that it violates specific

statutory guidelines.

D. HUMANA IS NOT EXEMPT FROM THE INSURANCE CODE AND HAS DIRECT HAS DIRECT LIABILITY LIABILITY FOR CLAIMS ARISING FOR CLAIMS ARISING OUT OF THE OUT OF THE ADMINISTRATION OF THE SAHA HEALTH BENEFITS PROGRAM.

Plaintiff has sued under Chs. Chs. 541 541 and and 542 542 of of the theInsurance InsuranceCode. Code.TEX. TEX.INS. INS.

C ODE Sec. CODE Sec.541.002 541.002defines defines"Person" "Person"as as“an "anindividual, individual, corporation, corporation, association, . .

other legal . society, or other legal entity engaged insurance . .. ." engaged in the business of insurance .” The

chapter chapter then goes on to define define various various unfair unfair methods methods of competition competition and claims

handling. Plaintiff handling. Plaintiff has has sued sued HUMANA HUMANA as aa person person who who has has violated violated these these

provisions.

HUMANA contends HUMANA contends that that the the Texas Texas Insurance Insurance Code Code does does not not apply apply to the

HUMANA’s actions in this, because HUMANA was acting for a self-funded Plan HUMANA's

created created by aa local local government government entity. entity.HUMANA HUMANAcites citesTEx. TEXGOVT. . GOVT.CODE CODE Sec.

2259.037. ItIt provides provides that that "The "The Insurance Insurance Code Code and other laws of this state relating

to the provision or regulation of insurance do not not apply apply to to (1) (1) an agreement entered

into under this subchapter; the proceeds subchapter; or (2) the proceeds of of public public securities issued under this

However,the subchapter." However, theauthority authorityto to provide provide Group Group Benefits Benefits Plans Plans is is not found in

______________________________________________________________________________ Humana Ins. Co. vs. Mueller, Brief of Appellee - p. 16 of 21

this section, but in Ch. 172, discussed discussed supra. Tex. Tex. Govt. Code Sec. 2259.037 merely

creates another mechanism for accomplishing the end set out in Ch. 172, Tex. Loc.

Govt. Code. Further, Further, while while aa self-funded self-funded Plan Plan might not be subject to the Insurance

Code, there is another, another, more specific provision of the Texas Codes which brings

administrators such as HUMANA administrators HUMANA specifically specifically within within the the provisions provisions of the Insurance

Code. That ThatisisTEX. TEX.INS. INS. C ODE Sec. CODE Sec.4151.001, 4151.001,which which provides: provides:

In this chapter: meansaa person "Administrator"means chapter: (1) "Administrator" person who, in connection

with ... health benefits ... adjusts or settles claims for residents of this

state.

is an There is an exemption exemptionofofsorts, sorts,ininTEX. TEX.INS. INS. CODE CODE Sec. Sec. 4151.002. 4151.002.

A person is not an an administrator administrator ifif the the person person is: is: . . .. (17) a self-insured

political subdivision; ...

There is no exemption for an administrator hired by a self-insured political

subdivision. Rather, subdivision. Rather,there thereare are specific specific provisions provisions that that the Commissioner of Insurance Insurance

rules governing may adopt rules governingAdministrators. Administrators.TEX. TEXINS. . INS.CODE CODE Sec. Sec. 4151.006. 4151.006.

Ordinary principles of statutory construction require this result, as well. TEx. TEX.

GOVT. CCODE GOVT. ODE Sec. Sec.311.026 311.026provides providesthat that“If "Ifaageneral general provision provision conflicts conflicts with with a

special or local provision, the provisions shall be construed, provisions shall construed, if possible, so that effect

is given to both.” In case both." In case of an irreconcilable conflict, "the “the special or local provision

prevails as an exception to the general provision, unless the general provision is the

______________________________________________________________________________ Humana Ins. Co. vs. Mueller, Brief of Appellee - p. 17 of 21

later enactment and the manifest intent intent is is that that the the general general provision provision prevail.” prevail." Here,

it is possible possible to construe the self-funded self-funded Plan as not subject to the Insurance Insurance Code, but

to have the Third Party Administrator Administrator be be subject subject to to the the Code. If, however, Code. If, however, that is

considered considered an irreconcilable conflict, an irreconcilable conflict, the Insurance Code the Insurance Code Section Section governing governing

Administrators is Administrators is more more specific specific than than the section authorizing authorizing the creation creation of self-

funded insurance plans, and should prevail.

VI. CONCLUSION

is undisputed It is undisputed that that HUMANA HUMANA is neither a government is neither government entity entity nor nor an

employee employee of of aa government government entity. Therefore, its entity. Therefore, its interlocutory interlocutory appeal appeal must be

Alternatively, HUMANA dismissed. Alternatively, HUMANA has not conclusively demonstrated demonstrated that it is

entitled to either sovereign or official official immunity. immunity. The County Court's order should

be affirmed, and this case remanded for trial.

PRAYER

WHEREFORE, PREMISES WHEREFORE, PREMISES CONSIDERED, CONSIDERED, Appellee MUELLER respectfully

requests that this Court dismiss HUMANA’s appeal for HUMANA's appeal for lack of jurisdiction, or affirm

the decision of the Court below, and grant Appellee such other and further relief to which she may show herself entitled.

______________________________________________________________________________ Humana Ins. Co. vs. Mueller, Brief of Appellee - p. 18 of 21

Respectfully submitted, Digitally signed by: Stephen Stephe G. Nagle DN: CN = Stephen G. Nagle email = sgnagle@lawyernagle. n G. com C = US O = Nagle Law Firm OU = Attorney Date: 2015.02.14 00:17:29 - Nagle 06'00'

Stephen G. Nagle State Bar No. 14779400 sgnagle@lawyernagle.com 1002 West Avenue, Suite 100 Austin, TX 78701 (512) 480-0505 - Telephone (512) 480-0571 - Facsimile ATTORNEY FOR APPELLEE MUELLER

______________________________________________________________________________ Humana Ins. Co. vs. Mueller, Brief of Appellee - p. 19 of 21

CERTIFICATE OF COMPLIANCE Pursuant Pursuant to to Tex. Tex. R. App. P. 9.4, I certify R. App. certify by by my my signature signature above that this

Appellant's Brief Appellant's contains 4641 words. Brief contains words. This This is is aacomputer-generated computer-generated document document

created in Corel Word Perfect, using 14-point typeface for all text, except for footers

which are in 12-point typeface. In In making making this this certificate certificate of compliance, compliance, I am relying

on the word count provided by the software used to prepare the document.

CERTIFICATE OF SERVICE By my signature above, I certify that a copy of the foregoing instrument was

served upon the attorneys attorneys of record record of all parties to the above cause as indicated indicated

below in accordance accordance with with Rule Rule 9.5(b), 9.5(b), Tex. Tex. R. App. P., on this 13th day of February, 2015.

Via Electronically Filing

Richard G. Foster rfoster@prdg.com Lisa P. Alcantar lalcantar@prdg.com Porter, Rogers, Dahlman & Gordon, P.C. Trinity Plaza II 745 E. Mulberry Ave, Suite 450 San Antonio, Texas 78212

______________________________________________________________________________ Humana Ins. Co. vs. Mueller, Brief of Appellee - p. 20 of 21

NO. 04-14-00752-CV

IN THE COURT OF APPEALS FOR THE FOURTH DISTRICT OF TEXAS AT SAN ANTONIO

HUMANA INSURANCE COMPANY,

APPELLANT,

V.

MUELLER,

APPELLEE.

On Appeal from the County Court at Law No. 3, Bexar County, Texas

Brief of Appellee Mueller

Appendix Table of Contents

1. 1 Indemnity language from the Administrative Services Agreement Agreement. . . . . . 22 22

2. Garza v. Blue Cross and Blue Shield of Texas.. Texas. . . . . . . . . . . . . . . . . . . 23-29 23-29

______________________________________________________________________________ Humana Ins. Co. vs. Mueller, Brief of Appellee - p. 21 of 21

ARTICLE XIII Hold Harmless

13.1 The Client agrees to indemnify indemnify and hold the Plan Manager harmless harmless against against any any and and all loss, liability, or damage (including payment of of reasonable attorney's fees) which the Plan Manager may incur by reason offailure of failure of of the Client or its employees, agents or representatives to abide by the provisions of the Plans or this Agreement Agreement or or to to administer administerthe thePlans Plansororassets assetsand andfunds fundsofofthe the Plans Plans in in a prudent and proper manner; failure of of the Plans or documents describing the Plan prepared prepared or adopted by the Plan sponsor to comply withwith applicable applicable laws; laws; fraud, fraud, embezzlement, embezzlement, willful willful misconduct, misconduct, or intentional intentional disregard on the part of of the the Client Client or or its its employees, employees, agents agents oror representatives; representatives; disputes concerning denials denials of benefits benefits or or benefit benefit payments payments made madeby by or or at at the the direction direction of the Client Client or the the Plan Plan Administrator; Administrator; oror actions actionstaken takenby bythe thePlan PlanManager Manageratatthe thedirection direction of ofthe the Client or the Administrator.

13.2 The Plan Manager Manager agrees agrees to indemnify indemnify and and hold the Client harmless harmless against anyany and all loss, liability, or damage (including (including payment payment of of reasonable reasonable attorney's fees) which the Client may incur by reason of the failure of of the employees, employees, agents agentsororrepresentatives representativesof ofthe the Plan Plan Manager Manager to to abide by this Agreement, or fraud, embezzlement, embezzlement, willful willfulmisconduct misconductororintentional intentionaldisregard disregardononthe thepart part of ofthe Plan Manager or its employees, agents, or representatives. representatives. TheThePlan PlanManager Managerwill willnot beliable notbe liableon on account account of of actions or inaction undertaken by inaction undertaken by itit in good faith faith and and performed performed in accordance accordance with the provisions provisions of this Agreement or for the cost of of benefits under the Plan which are claimed or awarded to a Participant.

13.3 The obligations under under this this Article Article XIII XIII shall shall continue continue beyond beyond the the term term of ofthis this Agreement Agreement as as to to any any act or omission which occurred during the term of of this Agreement.

ARTICLE XIV Taxes and Assessments

14.1 tax or other If a tax other assessment, including a premium tax, with respect to the Plan (other than an income tax with respect to the fees earned by the Plan Manager) is imposed upon the Plan Manager, the Plan Manager Manager willwill provide provide written written notification notificationtotothe theClient Clienttogether togetherwith withaa copy copy of of the the tax tax bill bill or assessment within ten (10) ( l 0) business days of of receipt.

14.2 If the Plan Manager pays the tax or assessment, the Client shall reimburse the Plan Manager for any amounts amounts paid plus reasonable reasonable out-of-pocket out-of-pocket expenses expenses immediately upon notification immediately upon notification by the Plan Manager that the tax has been paid.

ARTICLE XV Defense of Actions

15.1 The Client and the Plan Manager Manager agree to cooperate with respect to (a) the determination, settlement and defense defense of of any and and all all claims claims for for benefits benefits undertaken undertaken by the Plan Manager Manager pursuant pursuant to this Agreement, and (b) the settlement ofof and conduct of of a defense against any claim for benefits which has been denied, denied, which which may may include include attending attending hearings and trials hearings and assisting in securing trials and assisting securing the attendance of of witnesses and giving ofof evidence.

15 HIC 000818 HIC 000818 Humana vs. Mueller, Brief of Appellee 80 page 22 of 29

wesiikw. Westlaw. Page 11

Not Reported in S.W.3d, 1999 WL 1078697 (Tex.App.-Austin) (Cite as: 1999 WL 1078697 (Tex.App.-Austin)) (Tex.App.-Austin»

1998). C Only the Westlaw citation is currently POWERS. available. *1 Gregorio appeals from Gregorio Garza appeals from a sum- mary judgment mary judgment that that he he take take nothing nothing byby his NOTICE: NOT DESIGNATED FOR PUB- actions actions against Blue Cross/ against Blue Blue Shield Cross/ Blue Shield of LICATION. UNDER TX R RAP RULE Texas, Texas, Inc., Inc., and Group Group Life and Health In- 47.7, UNPUBLISHED OPINIONS HAVE surance surance Company Company ("Appellees").FN' ("Appellees").FNl Garza Garza NO PRECEDENTIAL VALUE BUT MAY appeals as well from the trial court's denial of BE CITED WITH THE NOTATION "(not his his opposing opposing motion motion for for partial partial summary summary designated for publication)." judgment. We judgment. We will will reverse reverse the the summary summary judgment recovered by Appellees, affirm the Court of of Appeals of of Texas, Austin. trial court judgment denying Garza's motion Gregorio GARZA, Appellant, for summary for summary judgment, judgment, and and remand remand the the v. cause to the trial court. BLUE CROSS AND BLUE SHIELD OF TEXAS, INC.; and Group Life & & Health FN1. Garza alleged FNI. alleged that Group Group Life Insurance Company, Appellees. and Health Insurance Company is Insurance Company is a "wholly "wholly owned owned and controlled controlled sub- sub- No. 03-98-00706-CV. No.03-98-00706-CV. sidiary of" of Blue BlueCross/ Cross/ Blue Blue Shield Shield of Dec. 2, 1999. Texas, Texas, Inc. Inc. It appears appears that that neither neither Appellee denied Appellee denied the the allegation. allegation. From the From the District District Court of of Travis Travis County, County, Group Group Life Life and and Health Health Insurance Insurance 53rd 53rd Judicial Judicial District, District, No. 95-11137; 95-11137; Peter Peter Company issued the Company issued the group group policy policy M. Lowry, Judge Presiding. involved in the present litigation; and, the the company company administers administers aa part part of Before Before Justices Justices SMITH, SMITH, YEAKEL YEAKEL and and that policy for the Board of of Trustees Trustees POWERS.FN· POWERS.FN* of of the Employees Retirement System of of Texas. Blue Cross/ Blue Shield of FN* Before FN* Before John E. Powers, Powers, Senior Senior Texas, Inc., administers for the Board Justice Justice (retired), Third Court (retired), Third Court of Ap- another part of the policy. another part policy. Garza al- peals, sitting by assignment. See Tex. leged that both insurers, leged insurers, Group Life Gov't Code Ann.Ann. §§ 74.003(b) 74.003(b) (West (West and Health Health Insurance Insurance Company Company and

© 2014 Thomson Reuters. No Claim to Orig. US Gov. Works. Humana vs. Mueller, Brief of Appellee page 23 of 29

Page 2

Not Reported in S.W.3d, 1999 WL 1078697 (Tex.App.-Austin) (Cite as: as: 1999 WL 1078697 (Tex.App.-Austin)) Blue Blue Cross/ Cross! Blue Blue Shield Shield of of Texas, Texas, official official immunity immunity andand moved moved for summary summary Inc., were Inc., were insurance insurance companies companies li- judgment on that ground. judgment ground. Garza moved for censed censed toto do business in Texas. Texas. The partial summary judgment on the ground that allegation was not denied. Because of his his actions were not, actions were not, as as a matter matter ofof law, law, the foregoing foregoing allegations allegations and appar- appar- barred barred by the doctrine doctrine ofof official official immunity. immunity. ent identity of of interests involved, and In a single judgment, the trial court sustained to obtain some clarity in ourour discus- discus- Appellees' motion and Appellees' motion and denied denied Garza's Garza's mo- mo- sion, we will refer to the two insurers tion, ordering that he take nothing based on collectively as "Appellees." the doctrine of of official immunity.

THE CONTROVERSY Garza appeals now Garza appeals now on three issues: issues: (1) Appellees insured Garza, Appellees insured Garza, aa state state em- em- appellees did not establish as a matter of law ployee, under a group ployee, group accidental-death accidental-death and the elements elements ofof official official immunity; immunity; (2) affi- affi- dismemberment dismemberment policy policy administered administered by by davits davits filed in support support ofof Appellees' Appellees' motion motion Appellees Appellees under the provisions provisions of the Texas are incompetent proof because, among other Employees Uniform Group Insurance Bene- things, they do things, they do not not show show the the entirety entirety of a fits Act. See Tex. Tex. Ins.Code Ann.Ann. art. 3.50-2 3.50-2 government contract under which Appellees (West 1981 & Supp.1999) (the "Act"). After 1981 & claim official immunity; and (3) there was no losing his sight in one eye due to an accident, summary judgment "evidence" showing as a Garza made a claim Garza made claim for for benefits benefits under the matter matter of lawlaw that that Appellees' Appellees' conduct conduct in-in- policy. Appellees policy. opposed the claim. Garza Appellees opposed Garza volved volved government government discretion, discretion, an essential essential ultimately prevailed in ultimately prevailed in aacontested-case contested-case element ofof the defense of of official immunity. proceedingunder proceeding under section section5B 5B of of the the Act, Act, conducted conducted by by an administrative administrative law judge judge For reasons that will appear reasons that appear below, below, we employed by the State Office of of Administra- will sustain Garza's position on the first two tive tive Hearings. Hearings. Appellees Appellees paidpaid the benefits benefits issues; consequently, we need not address his claimed. claimed. Garza thereafter sued Appellees in third issue. We will will discuss discuss separately separately Gar- the present cause, seeking additional sums on za's appellate complaint directed at the denial allegations of breach of of contract, negligence of of his motion for partial summary judgment. and gross negligence, and statutory causes of action action authorized authorized byby the the Texas Texas Insurance Insurance DISCUSSION AND HOLDINGS Code and the Texas Business and Commerce The The doctrine doctrine of of official official immunity immunity pro- pro- Code. tects the interests of of government government by protect- ing its officers and employees from suits and Against Garza's causes of of action, Appel- liabilities based on actions taken by them in liabilities based lees interposed lees the affirmative interposed the affirmative defense defense of the good-faith good-faith performance performance of of discretionary discretionary

© 2014 Thomson Reuters. No Claim to Orig. US Gov. Works. Humana vs. Mueller, Brief of Appellee page 24 of 29

Page 3

Not Reported in S.W.3d, 1999 1999 WL 1078697 (Tex.App.-Austin) (Cite as: 1999 WL 1078697 (Tex.App.-Austin)) (Tex.App.-Austin» duties coming within the scope of their offi- independent administrators and managers managers cial authority. authority. See See Kassen Kassen v.v. Hatley, Hatley, 887 of of the programs authorized under this Act. S.W.2d S.W.2d 4, 8 (Tex.1994). (Tex.l994). Where official im- The independent administrator so selected munity protects a government officer or em- by the trustee shall assist the trustee to in- ployee, the government entity for which they sure sure the proper proper administration administration of the Act Act act derives immunity therefrom by operation and the coverages, coverages, services, services, andand benefits benefits of the the respondeat respondeat superior superior principle. See provided for provided for or authorized authorized by the Act and Dewitt v. Dewitt v. Harris Harris County, County, 904 904 S.W.2d S.W.2d 650, 650, shall shall be paid by the trustee trustee ... Also, as an 653 653 54 54 (Tex.1995); City of (Tex.1995); City of Houston Houston v.v. Kil- agency agency of the State State of of Texas, Texas, thethe trustee trustee burn, 849 S.W.2d 810, 812 (Tex.1993). (Tex. 1993). This shall have full power and authority to enter derived immunity is not to be confused with interagency contracts into interagency contracts with with anyany de- de- the government entity's sovereign immunity, partment the State of Texas. The inter- partment of the which which protects protects the the government government entity entity di- di- agency contracts shall ... define the services rectly. See Kassen, 887 S.W.2d at 8. to be performed by the departments for the trustee. The trustee trustee. The trustee shall have full power power *2 The The Board Board of Trustees Trustees of the Em- Em- and authority to promulgate promulgate all rules, reg- ployees Retirement System ployees Retirement System of Texas, Texas, a unit ulations, ulations, plans, plans, procedures, procedures, and and orders orders of state government, acts as "trustee" under government, acts reasonably necessary to reasonably necessary to implement implement and and the Act. See Act § 3(a)(11). 3(a)(II). Section 4 of of the carry out the purposes carry purposes andand provisions provisions of Act provides as follows: follows: this Act in all its particulars,.... particulars, ....

The administration and implementation implementation of Act § 4 (emphasis added). this Act are vested solely in the trustee. As it shall deem necessary to insure the proper Section 4, on its face, Section 4, face, contemplates contemplates that administration administration ofof this Act and the insurance the trustee, an artificial person, shall exercise coverages, coverages, services, services, and benefits provided its exclusive exclusive power power of of administration administration and and for or authorized by this Act, the trustee, as implementation through rulemaking implementation through rulemaking and and an agency ofof the State of of Texas, shall have through through contracts with others, contracts with others, namely: namely: (1) full power and authority to hire employees. contracts contracts with with employees; employees; (2) (2) interagency interagency The The duties duties of such such employees employees and and their their contracts with other departments of of the state; compensation shall be determined compensation shall and as- determined and and (3) (3) competitive-bid competitive-bid contracts with "in- contracts with signed by the trustee. The trustee may, on a dependent dependent administrators administrators and and managers" managers" competitive competitive bidbid basis, basis, contract with with a who who "act for" and "assist the trusteetrustee to in- qualified, experienced firm qualified, experienced firm of of group group in- sure" proper administration administration of of the the Act and and administeringfirm surance specialists or an administering firm the coverages, the coverages, services, services, and and benefits benefits pro- pro- who shall act for for the trustee in a capacity as vided vided thereunder. thereunder. ItIt is undisputed undisputed that Ap- Ap-

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Not Reported in S.W.3d, 1999 WL 1078697 (Tex.App.-Austin) (Cite as: 1999 WL 1078697 (Tex.App.-Austin)) (Tex.App.-Austin» pellees entered into a contract falling within cian cian Services Services Co.,Co. , 977 977 S.W.2d S.W.2d 829,829, 832 832 the the third class class of of contracts, contracts, and and basebase their their (Tex.App.-Fort Worth 1998, (Tex.App.-Fort Worth 1998, pet. pet. denied); denied); claim ofof official immunity on section 4 of of the Knowles v. City of Knowlesv. ofGranbury, 953 S.W.2d 19, Act and the terms of of their their contract contract as inde-inde- 24 (Tex.App.-Fort Worth 1997, pet. denied); pendent pendent administrator. administrator. It It is also also undisputed undisputed and Puthoffv. Puthoff v. Ancrum, 934 S.W.2d 164, 169 that the trustee trustee is aa government government entity entity and and (Tex.App.-Fort Worth 1996, writ denied). FN2 denied).FN2 that Appellees Appellees are private private corporations corporations en- gaged in the business of of insurance in addition FN2. FN2. In In relation relation toto the the doctrine doctrine of to their their work work as as independent independent administrator administrator sovereign immunity, immunity, it has been said under the contract. numerous times that the government's immunity from immunity from suit does not extend extend Because Appellees Because Appellees are are not not themselves themselves to an an independent independent contractor contractor doing doing government officers or employees, it appears work for the state, but a private private per- at first blush that they could not meet the first son contracting contracting with government government to prerequisite forfor invocation invocation of the doctrine of perform services perform services shares shares the govern- govern- official official immunity; immunity; that doctrine is generally generally ment's ment's immunity immunity whenwhen the govern- govern- not available to private persons because liti- ment directs directs and controls the details details gation against them does not have the effect of of his work. See, See, e.g., e.g. , K.D.F. K.D.F. v.. v.. Rex, Rex, of frustrating frustrating or or disrupting disrupting government government 878 S.W.2d 589, 597 878 S.W.2d 589, 597 (Tex.l944);(Tex.1944); functions functions and discouraging discouraging efficient and ef- TRST Corpus TRST Corpus v. v. Financial Financial Center, Center, fective fective public service-the purposes underly- 1999 1999 Tex.App. Tex.App. LEXIS LEXIS 5826 5826 ing the doctrine. See WyattWyatt v. Cole, 504 U.S. (Tex.App.-Houston (Tex.App.-Houston [14th [14th Dist.] Dist.] Au- 158, 158, 168 168 69 69 (1992). (1992). But But itit isissometimes sometimes gust gust 5,5, 1999); Lyons v. 1999); Lyons v. Lindsey Lindsey necessary necessary or convenient for government en- Morden Claims Morden Claims Management, Management, 958 tities tities to contract contract with with private private persons persons to S.W.2d S.W.2d 86, 86, 91 91 (Tex.App.-El (Tex.App.-El Paso Paso perform duties perform duties that the government government entities entities 1998), motion motion forfor rehearing rehearing over- over- are legally legally required required to perform, perform, perhaps by ruled, 985 985 S.W.2d S.W.2d 86 (1999); (l999); Gon- the terms ofof a statute or a court order. In those zales v. zales v. Heard, Heard, Goggan, Goggan, BlairBlair & & exceptional circumstances the exceptional circumstances the private private con- Williams, 923 923 S.W.2d S.W.2d 764, 764, 766766 tracting parties may be entitled to invoke the (Tex.App.-Corpus (Tex.App.-Corpus ChristiChristi 1996, 1996, writ doctrine doctrine of official official immunity. immunity. See See e.g., e.g., Ea- denied); Perser Perser v. v. City City ofofArlington, Arlington, gon v. City ofofElk City, 72 F.3d 1480, 1489 148990 90 738 S.W.2d 783, 784 (Tex.App.-Fort (10th (lOth Cir.1996); Williams v. O'Leary, Cir.1996); Williams O'Leary, 55 Worth 1987, writ denied). Worth denied). One deci- F.3d 320, F.3d 320, 323 323 24 (7th(7th Cir.1955). Cir.l955). This This ex- ex- sion, Bennack Flying Flying Service Service v. v. Bal- ception to the general rule is the basis of de- boa, 1999 1999 Tex.App. Tex.App. LEXISLEXIS 47574757 cision in Guerrero Guerrero v. v. Tarrant County Morti- (Tex.App.-Corpus (Tex.App.-Corpus Christi Christi June June 24,24,

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Not Reported in S.W.3d, 1999 1999 WL 1078697 (Tex.App.-Austin) (Tex.App.·-Austin) (Cite as: 1999 WL 1078697 (Tex.App.-Austin)) (Tex.App.-Austin» 1999), 1999), appears appears to to apply these sover- obligations obligations and and rights rights asas independent independent ad-ad- eign-immunity distinctionsin eign-immunity distinctions in the the ministrator in the resulting contract, contract, he does context context of an an official-immunity official-immunity de- not swear that the attached pages set forth the fense. entirety entirety of Appellees' obligations obligations and rights under the resulting contract, if if we understand *3 We We turn then then toto determine determine whether whether correctly the tenor of of his affidavit. Appellees Appellees established established the the aforesaid aforesaid excep- excep- tion as a matter of of law, which they claim by FN3. FN3. In his his motion motion for for summary summary citation to Guerrero, Guerrero, Knowles, and Puthoff. judgment, Garza judgment, Garza pointed pointed out these these We conclude We conclude the summary summary judgment proof omissions omissions fromfrom the verified verified copies, copies, fails in that regard. stating stating that that the omission omission maymay have have been intentional because the contract Appellees' contract with the trustee is not actually actually arrived arrived at by Appellees Appellees and and found in the found the summary summary judgment judgment record.F" record.FN3 the trustee covered only The record does does include include verified verified fragments fragments health-benefit claims health-benefit claims andand stated that of of two other documents. The first is a copy of Appellees were Appellees were "independent "independent con-con- a "Request for Proposal" issued by the Em- tractors" whose employees would not ployees Retirement ployees Retirement SystemSystem of Texas, Texas, per- per- be considered employees of the State taining taining toto aa proposed proposed contract contract toto provide provide of Texas Texas or or the the Employees Employees Retire- Retire- services services as an anindependent independent administrator administrator ment System of of Texas. Garza did not, under section 4 of the Act. The document is however, file however, file in the summary summary judg- verified verified by by anan affidavit affidavit to to which which itit is is at- at- ment record aa verified ment record verified copy copy of the the tached. The first tached. The first twenty-six pages of the twenty-six pages the entire entire contract, the "Request contract, the "Request forfor document are omitted from the verified copy, Proposal," or Appellees' response. He however, and the affiant's oath extends only however, stated, stated, however, that the contract however, that contract it- to the the pages pages attached attached to his his affidavit. affidavit. The The self document." self was a "public document." record also contains what is represented to be a copy of Appellees' response to the "Request In sum, sum, thethe summary summary judgment judgment record record for Proposal." According According to to the affiant who does not establish directly (by a verified copy verified the attached verified the attached copy, copy, it isis Appellees' Appellees' of the contract itself) nor indirectly indirectly (by ref- response response to to the "Request for Proposal" Proposal" and erence erence to to the the proposal proposal and and response) response) the the was accepted was accepted by by the the System System as as a basis basis for for complete terms terms of the contract made by Ap- their their resulting contract. The resulting contract. The copy copy of thisthis pellees and the trustee whereunder the former document document also also appears appears to to be be only only aa part part of acts as as independent independent administrator. administrator. Because Because Appellees' response. Appellees' response. And And while while the affiant affiant of this deficiency deficiency in the record, record, one one cannot cannot declares that the copy sets declares that sets forth forth Appellees' Appellees' determine determine as as aa matter matter of law the nature nature or

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Not Reported in S.W.3d, 1999 WL 1078697 (Tex.App.-Austin) (Cite as: 1999 WL 1078697 (Tex.App.-Austin)) (Tex.App.-Austin) relevancy relevancy of of Appellees' duties under Appellees' duties under the the that that any any ofof their their functions functions as as independent independent contract, which of them are governmental in administrator administrator are are pertinent pertinent to to these these allega- allega- nature and represent duties that the trustee is tions; much less have they shown that these legally required legally required to to perform, perform, or whether the functions functions are are functions functions thethe trustee trustee was itself trustee retained a duty to perform itself any trustee retained legally required to perform. In these circum- particular duties. stances, cannot be stances, it cannot be said as as a matter of law that Appellees Appellees established established their their affirmative affirmative Given the foregoing foregoing omissions from the defense of of official immunity. See NF Indust. summary judgment record one cannot know v. v. Export Export Import Import Bank, Bank, 846 846 F.2d F.2d 998, 998, whether the purposes of the official immun- 1000-01 1000-01 (5th (5th Cir.1988) Cir.1988) (Defendant (Defendant "has "has ity doctrine are at risk by reason of doctrine are of Garza's Garza's made no showing here that its duties require causes causes of action. action. And if the purposes of the the exercise exercise of of governmental governmental policymaking policymaking doctrine are not exposed to injury by reason as as distinguished distinguished from from insurance insurance poli- poli- of a particular particular function function that might be perti- cy-writing."). cy-writing. "). nent, then the nent, the exception exception cannot cannot apply. apply. See Forrester v. White, White, 484 U.S. 219, 227 (1988) *4 We hold accordingly accordingly and reverse the ( "immunity "immunity is justified and defined defined by the summary judgment that summary judgment that Garza take nothing nothing functions it protects protects andand serves, not by the serves, not by his actions against Appellees. person to whom it attaches."). Moreover, the immunity attaches to immunity attaches to private private persons persons with with There remains the There remains the issue issue of whether whether the respect to only those acts for which the gov- trial court erred trial erred in in denying denying Garza's Garza's motion motion ernment entity would have been immune had for summary judgment. it performed performed themthem directly directly instead instead of con- con- tracting tracting for for their their performance performance by private private The The first first ground urged by ground urged by Garza Garza in his persons. See Eagon, Eagon. 72 F.3d at 1489. motion for summary judgment was was that Ap- pellees were not, as a matter of of law, entitled Notwithstanding any Notwithstanding any deficiency deficiency min the to invoke invoke the the official-immunity official-immunity defense be- summary judgment record, it appears that all cause they were not not government government employees employees of Garza's causes of action pertain, on their or officers. officers. What What we we have have said said above above in in face at least, to Appellees' responsibilities as connection with Appellees' opposing motion Garza's Garza's insurer-that insurer-that Appellees Appellees failed failed is sufficient sufficient to demonstrate demonstrate that Garza was promptly promptly to to payor pay or settle his claim after lia- not entitled to judgment as a matter of of law on bility had become reasonably bility reasonably clear and that this ground. ground. The record simply does not jus- they engaged engaged in unfair or deceptive deceptive acts or tify a determination determination as as a matter of law law that that practices practices inin the business business of of insurance. insurance. Ap- the exception to the general rule does or does pellees have not shown, shown, as a matter matter of oflaw, law, not apply.

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Not Reported in S.W.3d, 1999 1999 WLWL 1078697 1078697 (Tex .App.-Austin) (Tex.App.-Austin) (Cite as: 1999 WL 1078697 (Tex.App.-Austin)) (Tex.App.-Austin) We We hold the trial hold the trial court did not court did not err err in in Garza urged in his Garza urged his second second ground ground that that denying Garza's motion for partial summary there there was "no "no evidence" evidence" that that governmental governmental judgment. discretion, discretion, an an essential element of the offi- essential element cial-immunity defense, defense, "was involved in the For the reasons For reasons given, given, we reverse reverse the the acts acts made made the basisbasis ofof plaintiffs plaintiffs petition, petition, judgment recovered by Appellees, affirm the which involved negligence and other torts in denial of of Garza's motion for partial summary the business of insurance." He contends now judgment, and judgment, and remand remand the the cause cause to the trial that the record contains no such evidence and court. the trial court erred because it was required, in this state state ofof the the record, record, to to grant grant Garza's Garza's Tex.App.-Austin,1999. motion. See Tex.R. Civ. P. 166a(i).166a(i). Garza Garza v.v. Blue Blue Cross Cross and and Blue Blue Shield Shield of Texas, Inc. We are not prepared to say, as a matter of Not Reported in S.W.3d, 1999 1999 WL 1078697 1078697 law, law, that none of the the duties duties evidently evidently re- (Tex.App.-Austin) quired ofof Appellees as independent adminis- trators "involved" acts trators "involved" acts made made the the basis basis of END OF DOCUMENT Garza's causes of action. Garza's causes action. For example, example, the "Request "Request for for Proposal" Proposal" and and Appellees' Appellees' re- sponse thereto, although fragmentary, set out certain certain duties duties Appellees Appellees were were required required to perform in connection perform connection withwith contested-case contested-case proceedings proceedings such such as as that that which which preceded preceded payment of Garza's claim. claim. The verified cop- ies of of these these documents, documents, whilewhile notnot evidence evidence sufficient to establish the entirety of Appel- lees' contract with the trustee, are some evi- dence dence ofof Appellees' Appellees' duties duties as as independent independent administrator. administrator. One cannot say with assurance that that Appellees' Appellees' duties duties inin connection connection withwith Garza's Garza's contested-case contested-case proceeding proceeding had had nothing to do with the delays in payment of which he complains in his petition. Evidence justifying a conclusion conclusion of that that kind kind is not to be found in the summary judgment record.

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