Argonaut Insurance Co. v. Baker

87 S.W.3d 526, 45 Tex. Sup. Ct. J. 866, 2002 Tex. LEXIS 89, 2002 WL 1338077

• Court: Texas Supreme Court
• Decided: June 20, 2002
• Docket: 01-0287
• Status: Published

Opinions

Justice RODRIGUEZ

delivered the opinion of the Court,

in which Chief Justice PHILLIPS, Justice HECHT, Justice ENOCH, Justice OWEN, Justice BAKER, and Justice JEFFERSON join.

In 1989, the Texas Legislature required every workers’ compensation carrier to offer optional deductible plans to allow policyholders to “self-insure” for the deductible amount. Tex. Ins.Code art. 5.55C(a). Under such a policy, the carrier must make all payments for benefits to an injured employee, including those payable from the deductible amount. Id. art. 5.55C(d), (e). When a third-party tortfea-sor causes the employee’s injuries, the carrier is subrogated to the injured employee’s rights against the tortfeasor, and the net amount recovered in a third-party action shall be used to reimburse the carrier for benefits that have been paid. Tex. Lab.Code §§ 417.001, 417.002. The issue presented is whether allowing the carrier to be reimbursed for benefits paid from the deductible violates Insurance Code article 5.55C section (f), which provides that an employee “may not be required to pay any of the deductible amount.” Tex. Ins. Code art. 5.55C(f). The court of appeals held that it does. 36 S.W.3d 587. Because we hold that it does not, we reverse the court of appeals’ judgment in part and remand to the trial court for further proceedings consistent with this opinion.

I. Facts

Anthony Baker, an employee of Flowers Construction Company, was injured in a collision with a truck driven by an employee of Rocha Trucking. Because he was injured in the course and scope of his employment, Baker filed a claim for workers’ compensation benefits with Argonaut Insurance Company, Flowers’ workers’ compensation insurance carrier. At the time, Flowers had a deductible plan that provided for Flowers to self-insure the first $250,000 of loss arising from each work-related injury suffered by its employees. Under the policy, Argonaut would first apply any recovery from a liable third party to benefit payments made by Argonaut in excess of the $250,000 deductible, and the remainder of any recovery would be applied to reduce the deductible amount Flowers owed.

Insurance Code article 5.55C governs optional deductible plans such as the one Flowers purchased. Flowers’ deductible plan provided for Argonaut to pay the full amount of each covered claim submitted by an employee, including any portion payable from Flowers’ deductible, as mandated by article 5.55C: “A deductible policy must provide that the [carrier] will make all payments for benefits that are payable from the deductible amount and that reimbursement by the policyholder shall be made periodically, rather than at the time claim costs are incurred.” Tex. Ins.Code art. 5.55C(d). Argonaut paid a total of $352,596.13 in workers’ compensation benefits to and on behalf of Baker, including the $250,000 paid from the deductible.

Baker’s wife sued Rocha Trucking and the truck driver on Baker’s behalf for damages arising from the accident. Soon after, Argonaut intervened to assert its subrogation right, under the Labor Code, to recover from the defendants the $352,596.13 in benefits it had paid. The Bakers disputed Argonaut’s entitlement to reimbursement for the $250,000 in benefits paid from Baker’s deductible, arguing that it was forbidden by article 5.55C(f)’s mandate that an injured employee “may not be required to pay any of the deductible amount.” Id. art. 5.550(f). Rocha Trucking and its driver ultimately agreed to pay $882,000 to settle all claims asserted against them in the lawsuit, including Argonaut’s claim as Baker’s subrogee. Under the settlement, $529,403.87 was paid to the Bakers and the remaining $352,596.13 was submitted to the Bakers’ counsel to be held in trust pending resolution of the Bakers’ challenge to Argonaut’s reimbursement claim for the $250,000.

Argonaut moved the trial court for an order to distribute its workers’ compensation lien on the $352,596.13. The parties then filed cross motions for summary judgment, each asserting their entitlement to the $250,000 in dispute. After a hearing, the trial court granted Argonaut’s motions, denied the Bakers’ motion for summary judgment, and awarded Argonaut the full $352,596.13, less attorneys’ fees and expenses awarded to the Bakers’ counsel for their role in achieving the settlement. The court of appeals modified the trial court’s judgment and reduced Argonaut’s recovery by $250,000. The court of appeals reversed the remainder of the trial court’s judgment, which awarded the Bakers’ counsel attorney’s fees and expenses incurred in connection with the recovery of the settlement, and remanded to the trial court for further proceedings. Argonaut filed this petition for review asking us to reinstate the trial court’s judgment awarding it full reimbursement. No one petitioned this Court for review of the court of appeals’ judgment remanding the issues of attorney’s fees and expenses to the trial court.

II. Analysis

When both parties move for summary judgment and one motion is granted and one denied, the appellate court should determine all questions presented and render the judgment that the trial court should have rendered. City of Garland v. Dallas Morning News, 22 S.W.3d 351, 356 (Tex.2000). Here, both parties rely on statutory provisions to support their entitlement to summary judgment. In general, matters of statutory construction are questions of law. Id. at 357.

A.

Argonaut relies on sections 417.001 and 417.002 of the Labor Code for its right to reimbursement for the full $352,596.13. Those sections provide that “[i]f a benefit is claimed by an injured employee or the legal beneficiary of the employee, the insurance carrier is subrogated to the rights of the injured employee” and “[t]he net amount recovered by [an employee] in a third-party action shall be used to reimburse the insurance carrier for benefits, including medical benefits, that have been paid for the compensable injury.” Tex. Lab.Code §§ 417.001, 417.002. Thus, according to Argonaut, because it paid $352,596.13 in benefits for the compensable injury, section 417.002 requires reimbursement from the settlement funds for the full $352,596.13 paid.

On the other hand, the Bakers contend that allowing Argonaut to recover the $250,000 from the settlement funds effectively passes the cost of the deductible from the employer to the employee, a result article 5.55C prohibits. Article 5.55C, which governs optional deductible plans, provides that employers must reimburse the insurance carrier periodically to cover benefit payments that are payable from the deductible amount and expressly forbids the employee from having to pay the deductible. Tex. Ins.Code art. 5.55C(d), (f). Thus, the Bakers argue, an insurance carrier that has paid benefits to an injured employee may obtain reimbursement of any amounts in excess of the deductible from the employee’s recovery, but must then look to the employer for reimbursement of the deductible amount under those provisions. Otherwise, they contend, employers will receive a statutorily forbidden windfall by being allowed to pass on to their employees the cost of the deductible. The court of appeals agreed with the Bakers, concluding that article 5.55C’s prohibition on the employee being made to pay the deductible, coupled with its requirement that the employer reimburse the carrier for benefits paid to the extent of the deductible amount, precludes Argonaut from obtaining reimbursement from the settlement funds for the $250,000 paid from the deductible.

B.

Because this case turns on the construction of several statutory provisions, we start with the provisions themselves. We construe a statute, “first, by looking to the plain and common meaning of the statute’s words.” Fitzgerald v. Advanced Spine Fixation Sys., Inc., 996 S.W.2d 864, 865 (Tex.1999). Under article 5.55C section (e), a carrier offering a deductible plan is statutorily obligated to “service all claims that arise during the policy period, including those claims payable, in whole or in part, from the deductible amount.” Tex. Ins.Code art. 5.550(e). Likewise, section (d) provides that the carrier must “make all payments for benefits that are payable from the deductible.” Id. art. 5.550(d). Thus, benefits payable from the deductible are included in the amount of workers’ compensation benefits paid by the carrier to or on behalf of the injured employee. Further, section 417.002 of the Labor Code plainly states that the net amount recovered by a claimant in a third-party action shall be used to reimburse the insurance carrier “for benefits ... that have been paid for the compensable injury.” Tex. Lab.Code § 417.002 (emphasis added). Section 417.002 does not limit the carrier’s right to reimbursement to those payments made in excess of the deductible amount. Thus, taken together, these provisions establish the carrier’s right to reimbursement to the total amount of benefits it has paid, including those benefits payable from the deductible.

The Bakers contend, however, that allowing the full reimbursement required by section 417.002 conflicts with article 5.55C’s mandate that the employee may not be required to pay any part of the deductible. They further argue that their construction, which limits the carrier’s recovery to benefits paid in excess of the deductible, effectively harmonizes article 5.55C with section 417.002. To the contrary, their construction conflicts with the plain language of section 417.002, which, under the payment scheme established by article 5.55C, allows the carrier reimbursement of benefits paid, including benefits payable from the deductible, from any third-party recovery.

Rather than conflicting with section 417.002, Argonaut’s position is consistent with its plain language. Moreover, allowing Argonaut reimbursement of the total $352,596.13 does not contravene article 5.55C. For decades, the law has been that, under the Workers’ Compensation Act’s subrogation provision, “the first money paid [to] or recovered by the employee, or his representatives, belongs to the compensation carrier paying the compensation, and until it is paid in full, the employee, or his representatives, have no right to any funds.” Fort Worth Lloyds v. Haygood, 151 Tex. 149, 246 S.W.2d 865, 869 (1952). The carrier’s right to reimbursement from the first money recovered is statutory. See Tex. Lab.Code § 417.001(b) (providing that the carrier shall reimburse itself first from the amount recovered, and then pay the remainder to the injured employee or the legal beneficiary). Under this longstanding principle, any recovery from a third party by the injured employee is burdened by the carrier’s subrogation rights to the extent of any payments made. Tex. Ins.Code § 417.001(a), (b); Tex. Workers’ Comp. Ins. Fund v. Serrano, 962 S.W.2d 536, 538 (Tex.1998). Thus, rather than the employee owning the money and being forced to disgorge it, the carrier is first entitled to the money up to the total amount of benefits it has paid, including from the deductible, under section 417.002. When the carrier is fully reimbursed from the recovery from a liable third party, as in this case, the money is being paid to the carrier by that responsible third party, not by the employee, pursuant to the carrier’s statutory right. Accordingly, the employee is not being made to pay the employer’s deductible in violation of article 5.55C(f). Similarly, allowing the insurance carrier reimbursement for the total amount of benefits paid does not violate section 415.006 of the Labor Code, which bars an employer from “collect[ing] from an employee, directly or indirectly, a premium or other fee paid by the employer to obtain workers’ compensation insurance.” Tex. Lab.Code § 415.006.

Presumably, when the Legislature enacted article 5.55C in 1989, it was aware of section 417.002 and similar prior statutes¹ establishing the carrier’s right to subrogation for benefits paid. See Acker v. Tex. Water Comm’n, 790 S.W.2d 299, 301 (Tex.1990) (“A statute is presumed to have been enacted by the legislature with complete knowledge of the existing law and with reference to it.”). There is no indication in article 5.55C that the Legislature intended to change existing law regarding subrogation and third-party recovery. Accordingly, article 5.55C should be construed in a manner that harmonizes rather than conflicts with that law. See Tex. Gov’t Code § 311.026(a) (“If a general provision conflicts with a special or local provision, the provisions shall be construed, if possible, so that effect is given to both.”).

Thus, section 417.002 applies equally to all subrogation claims to allow the carrier to be reimbursed from a third-party recovery for all benefits it has paid, regardless of whether a deductible is involved. Under the Bakers’ and the dissent’s construction, which would prohibit the carrier’s reimbursement from a third-party recovery for payments made from the deductible amount, an injured employee’s recovery would vary depending on whether his employer had a deductible plan and on the size of that deductible. In fact, under such an approach, if an employer chose to forego a deductible plan and pay higher premiums, its injured employee would receive less money out of a third-party recovery than if the employer chose a deductible plan and paid lower premiums. We think it unlikely that the Legislature intended that result. Instead, section 5.55C(f) does not apply when the recovery from a third-party tortfeasor is sufficient to reimburse the carrier for all benefits it has paid, including from the deductible. But its inclusion in Article 5.55C was necessary to prevent employers from requiring employees to pay the deductible amount when there is no third-party recovery or when the third-party recovery is insufficient to fully reimburse the carrier. Because the employer must then reimburse the carrier for all or part of the deductible amount because it is not being paid by a third-party tortfeasor, section 5.550(f) prohibits the employer from requiring the injured employee to pay that deductible.

Our construction is consistent with the Texas Department of Insurance’s position. The Department is the agency legislatively charged with “regulat[ing] the business of insurance in' this state” and “ensur[ing] that [the Insurance Code] and other laws regarding insurance and insurance companies are executed.” Tex. Ins.Code § 31.002. Rule XIX of the Department’s publication Texas Basic Manual of Rules, Classifications and Experience Rating Plan for Workers’ Compensation and Employers’ Liability Insurance (2nd Reprint) provides that “[i]n the event the insurer makes a recovery from a third party through subrogation, the amount recovered shall first be applied to the amount paid on the claim by the insurer and then to the amount of the deductible paid by the insured, with reimbursement being made to the insured, if necessary.” Id. at R-l. This construction is reasonable and consistent with the statute’s plain language, and is therefore entitled to “serious consideration.” Tarrant Appraisal Dist. v. Moore, 845 S.W.2d 820, 823 (Tex.1993).

III. Conclusion

In sum, we conclude that Argonaut must be reimbursed from the settlement proceeds for the benefits it has paid to and on behalf of Baker, including those paid from the deductible. Accordingly, we reverse the court of' appeals’ judgment in part and remand to the trial court for further proceedings consistent with this opinion.

Justice O’NEILL concurred in the judgment only. Justice HANKINSON filed a dissenting opinion.

1 . See Xex.Rev.Civ. Stat. art. 8307, § 6a, repealed. by Act of Dec. 12, 1989, 71st Leg., 2d C.S., ch. 1, § 16.01(10), 1989 Tex. Gen. Laws 1, 114.