Last Friday, the Texas Supreme Court eliminated the rights of injured workers to sue workers’ compensation insurance carriers that act in bad faith. The 5-4 decision argued that such litigation interferes with the state’s workers’ compensation system.
In this case, Texas Mutual Insurance Company of Austin had initially denied an injured worker’s claim on the basis that the injured worker was hurt playing softball rather than working. The insurance company eventually settled the case with the injured worker. The injured worker, Timothy Ruttiger, later sued the insurance company, claiming the delay in getting his benefits damaged his credit and caused him mental anguish and pain and suffering. At the end of the trial, a Houston jury awarded Ruttiger $173,500, plus attorney fees. The case was eventually appealed up to the Texas Supreme Court, which reversed the Houston trial court’s judgment. This decision eliminated the bad-faith provision that had been the prevailing law for the past 23 years.
The majority held that the continued existence of bad-faith claims undermined the legislature’s workers compensation system, which regulates almost every aspect of how a carrier handles a worker’s claim against their employer.
The dissent based its rationale on legislative intent. The dissent was not that the legislature had considered several studies that purported to detail the negative impact bad-faith claims have on the economy. But the legislature did not accept those studies, and in 1989 refused to abolish bad faith claims. As Chief Justice Jefferson noted in his dissenting opinion, the majority “substitutes its judgment for the [l]egislature’s.”