Northwinds Abatement, Inc. v. Employers Insurance of Wausau

70 F. Supp. 2d 699, 1999 U.S. Dist. LEXIS 15093, 1999 WL 795539
CourtDistrict Court, S.D. Texas
DecidedSeptember 28, 1999
DocketNo. Civ.A. H-93-1776
StatusPublished
Cited by2 cases

This text of 70 F. Supp. 2d 699 (Northwinds Abatement, Inc. v. Employers Insurance of Wausau) is published on Counsel Stack Legal Research, covering District Court, S.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Northwinds Abatement, Inc. v. Employers Insurance of Wausau, 70 F. Supp. 2d 699, 1999 U.S. Dist. LEXIS 15093, 1999 WL 795539 (S.D. Tex. 1999).

Opinion

MEMORANDUM AND ORDER

CRONE, United States Magistrate Judge.

Pending before the court are Plaintiff Northwinds Abatement, Inc.’s (“North-winds”) Motion for Partial Summary Judgment (# 194) and Motion for Ruling on Completion of State Court Review (# 201). The latter motion incorporates North-winds’ prior motion for partial summary judgment. Having reviewed the motions, the submissions of the parties, the pleadings, and the applicable law, the court is of the opinion that Northwinds’ Motion for Ruling on Completion of State Court Review should be granted, rendering its Motion for Partial Summary Judgment moot.

I. Background

This action arises out of a dispute concerning the payment of workers’ compensation benefits to six former employees of Northwinds — Jose Ochoa (“Ochoa”), Emig-dio Perez (“Perez”), Oscar Martinez (“Martinez”), Francisco Rocha (“Rocha”), Auscencion Hernandez (“Hernandez”), and Elijah Mitchell (“Mitchell”). Northwinds purchased workers’ compensation insurance through the Texas Workers’ Compensation Insurance Facility (“the Facility”) for annual terms commencing in April 1989 and ending in April 1993. Defendant Employers Insurance of Wausau (‘Wau-sau”) was the servicing agent on those policies, with responsibility for investigating, reporting, and paying claims, inspecting risks for classification purposes, and conducting legal support as required by the policy. See Tex.Ins.Code ANN. § 4.08(c) (West 1992). Northwinds contends that Wausau failed to investigate the legitimacy of these employees’ claims, which would have revealed their fraudulent nature, resulting in the wrongful payment of workers’ compensation benefits.to the six employees. Northwinds maintains that Wausau’s payment of these claims caused its Experience Modifier Rating (“EMR”) to be improperly inflated such that it was unable to compete for asbestos removal jobs.

Through the establishment of a detailed administrative process, the Texas Legislature has committed the resolution of disputes related to workers’ compensation, including the determination of the [702]*702merits of an employee’s claim for benefits, to the Texas Workers’ Compensation Commission (“TWCC”). See Tex.Lab.Code Ann. §§ 410.001-.258 (formerly Tex.Rev. Civ.Stat.Ann. arts. 8808-1.01-11.10 (West 1992)); Bray v. Utica Mut. Ins. Co., No. Civ.A. 3:98-CV-0544-G, 1998 WL 574768, at *2 (N.D.Tex. Aug.26, 1998); Golden v. Employers Ins. of Wausau, 981 F.Supp. 467, 474 (S.D.Tex.1997). The TWCC routinely makes decisions regarding the com-pensability of alleged workplace injuries and investigates allegations of fraud with respect to such claims, thereby developing specialized expertise in areas central to this dispute. See Tex.Lab.Code Ann. §§ 410.021-.034, 410.151-.169, 410.201-.208 (formerly Tex.Rev.Cw.Stat.Ann. art. 8308-6.11 — .15, 8308-6.31-.34, 8308-6.41-.45 (West 1992)); Tex.Ins.Code Ann. art. 5.76-2, § 2.05(d) (West 1992); Northwinds Abatement, Inc. v. Employers Ins. of Wausau, 69 F.3d 1304, 1311 (5th Cir.1995); Bray, 1998 WL 574768, at *2; Golden, 981 F.Supp. at 474. Because the TWCC is uniquely qualified to make determinations on the questions of compensability and fraudulent claims, the doctrine of primary jurisdiction comes into play. See North-winds Abatement, Inc., 69 F.3d at 1311; Bray, 1998 WL 574768, at *2; Golden, 981 F.Supp. at 474-76; see also Storebrand Ins. Co., U.K., Ltd. v. Employers Ins. of Wausau, 139 F.3d 1052, 1055 (5th Cir.1998). Under the doctrine of primary jurisdiction, a court may refrain from exercising its jurisdiction until after an administrative agency has determined threshold questions raised in the lawsuit. See Penny v. Southwestern Bell Tel. Co., 906 F.2d 183, 187 (5th Cir.1990); Bray, 1998 WL 574768, at *2; Golden, 981 F.Supp. at 475.

“[T]he primary jurisdiction doctrine ... applies where: (1) the court has original jurisdiction over the claim before it; (2) the adjudication of that claim requires the resolution of predicate issues or the making of preliminary findings; and (3) the legislature has established a regulatory scheme whereby it has committed the resolution of those issues or the making of those findings to an administrative body.” Northwinds Abatement, Inc., 69 F.3d at 1311 (citing Penny, 906 F.2d at 187). Texas courts also recognize the doctrine. “Primary jurisdiction is a judicially created doctrine of abstention, whereby a court that has jurisdiction over a matter nonetheless defers to an administrative agency for an initial decision on questions of fact or law within the peculiar competence of the agency.” In re Luby’s Cafeterias, Inc., 979 S.W.2d 813, 816 (Tex.App.—Houston [14th Dist.] 1998, no pet.) (citing State Bar v. McGee, 972 S.W.2d 770, 772 (Tex.App.—Corpus Christi 1998, no pet.)). “The purpose behind primary jurisdiction is to assure that the administrative agency will not be bypassed in a matter which has been especially committed to it by the legislature.” In re Luby’s Cafeterias, Inc., 979 S.W.2d at 816 (citing American Pawn & Jewelry, Inc. v. Kayal, 923 S.W.2d 670, 673 (Tex.App.—Corpus Christi 1996, writ denied)). Deference to an administrative proceeding is particularly appropriate in situations where the resolution of the case would be aided by an initial determination of the preliminary questions by the administrative agency. See Northwinds Abatement, Inc., 69 F.3d at 1311; Penny, 906 F.2d at 187; Bray, 1998 WL 574768, at *2.

On appeal of this court’s prior decision granting summary judgment to Wausau, the Fifth Circuit, on December 5, 1995, held that, pursuant to the doctrine of primary jurisdiction, the court:

should have abstained from resolving the damages claims asserted by North-winds until the administrative and judicial review procedures prescribed by the Texas Insurance Code had yielded final determinations on the issue of whether Wausau improperly paid the contested workers’ compensation claims.

Northwinds Abatement, Inc., 69 F.3d at 1311 (citing Penny, 906 F.2d at 187-89). The Fifth Circuit remanded the case for further proceedings with instructions that this court “hold the case in abeyance until [703]*703the administrative and judicial review of the payment of the contested workers’ compensation claims is complete.” Id. at 1312.

In accordance with the Fifth Circuit’s directive, the court issued orders on May I, 1997, and November 10, 1998, requiring the parties to pursue the administrative and judicial review procedures prescribed by the Texas Insurance Code and the Texas Labor Code to obtain final determinations on the issues of whether the contested workers’ compensation claims were fraudulent and whether Wausau improperly paid the claims.

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