In a highly anticipated decision, the Texas Supreme Court emphasized its commitment to the exclusive jurisdiction of the Texas Division of Workers’ Compensation Act (Act) to deal with and respond to claims arising out of the investigation, handling and settling of workers’ compensation claims. In In re Crawford & Company, decided February 27, 2015, even allegations that appear at first blush to exist outside the system, as agreed by the parties in oral argument, were held to be exclusively within the province of the Act.

Claim Facts

Glenn Johnson suffered traumatic and serious injuries in a workplace accident in 1998. Over the years, disputes arose between Johnson and Crawford & Company (Crawford), the third-party administrator handling his workers ’ compensation claims, regarding the scope of and rights to certain benefits. Those disputes were the subject of administrative activity and subsequent judicial review. Apart from the administrative proceedings, however, Johnson and his wife sued Crawford and others asserting they had “engaged in a battle plan to delay, discourage and deny benefits” over a ten-year period. The suit alleged multiple wrongful denials or delays of benefits; misrepresentation of benefits coverage; failure to provide notices and other information; performance of inadequate and misleading investigations; and accusations of insurance fraud against the Johnsons “leading to their wrongful arrests and a two-year prosecution that ultimately terminated in the Johnsons’ favor.” The menu of causes of action included, in part, negligence; gross negligence; negligent, fraudulent and intentional misrepresentation; fraud; intentional infliction of emotional distress; malicious prosecution; breach of contract; deceptive trade practices; and violations of the Texas Insurance Code.

Texas Supreme Court Decision

The Johnsons asserted they could bring claims outside the exclusive jurisdiction of the Act because, in part, certain of the claims were “independent injuries” not related to the benefits Mr. Johnson could recover under the Act. The Texas Supreme Court reiterated its landmark decision in Texas Mutual Insurance Co. v. Ruttiger, 381 S.W.3d 430 (Tex. 2012) in which the Court concluded that “for claims arising out of the claims-settlement process ‘the current Act with its definitions, detailed procedures, and dispute resolution process demonstrate[s] legislative intent for there to be no alternative remedies.’” Id. at 444, 456.

In Crawford, the Court made certain that Ruttiger was meant to be read expansively. Whether the Act applies “does not depend on the label of the cause of action asserted”; rather, “courts must look at the substance of the claim.” Moreover, the nature of the relief also does not bar the Act’s exclusive jurisdiction. Thus, purported damages allegedly “unrelated” to workers’ compensation benefits based on alleged injuries “independent” of the Act face the same focused analysis if the claim touches the claims-settlement process of the Act.

The Johnsons’ malicious prosecution and intentional infliction of emotional distress claims were based on Crawford’s report to a district attorney of suspected insurance fraud. The Act’s exclusive jurisdiction also applied to this report because the alleged fraudulent conduct, seeking mileage reimbursement for trips not taken, was based on an available medical benefit under the Act. Moreover, Johnson’s wife’s claims also arose out of Crawford’s handling of the husband’s workers’ compensation claims, and as a matter of law she had no right to separate action under the Act.

Takeaway

This Crawford decision underscores the primacy of the Act for handling claims of Texas’s injured workers. Going forward, a party subject to the Act in Texas will find little traction in the state courts for any claim where he or she cannot first show invocation of the Act’s administrative procedures to resolve claims and disputes for medical and income benefits. Attorneys representing injured Texas workers are stunned by this decision – predicting at a minimum the malicious prosecution claims would have survived dismissal. What made the difference here was the conduct of the claims-handling unit in following the statutory obligations imposed on them to prevent insurance fraud.

How likely is it that courts in other jurisdictions will follow the rationale of the Crawford court? Did the Texas Supreme Court’s decision turn on certain unique elements of the Act or is the Crawford court’s rationale one that, in theory, could be exported to and applied in other jurisdictions?