Affirmed as Modified and Opinion filed August 26, 2008.

 

 

In The

 

Fourteenth Court of Appeals

____________

 

NO. 14-06-00651-CV

____________

 

TEXAS MUTUAL INSURANCE COMPANY, Appellant/Cross-Appellee

 

V.

 

P. LANCE MORRIS, Appellee/Cross-Appellant

 

 

On Appeal from the 11th District Court

Harris County, Texas

Trial Court Cause No. 2004-53230

 

 

O P I N I O N

Texas Mutual Insurance Company (ATMI@) appeals from a final judgment in favor of P. Lance Morris following a jury trial.  In six issues, TMI contends that (1) the evidence is legally insufficient to sustain the jury=s finding that it engaged in unfair and deceptive acts or practices in violation of the Texas Insurance Code, (2) the evidence is legally insufficient to sustain the jury=s finding that TMI did so knowingly, (3) the evidence is legally insufficient to support the award of $75,000 in damages for loss of credit reputation, (4) the evidence is legally insufficient to support the award of $50,000 for mental anguish, (5) the trial court erred in submitting broad-form liability questions containing both valid and invalid theories of liability, and (6) the judgment cannot be sustained on the alternative claim of breach of the duty of good faith and fair dealing because no such cause of action exists in the context of a worker=s compensation claim.  In a cross-appeal, Morris requests that this court modify the trial court=s judgment to increase the award of additional damages for TMI=s knowing violation of the Insurance Code from $250,000 to $375,000. 

We conclude that the evidence is legally sufficient to support the jury=s finding that TMI engaged in unfair and deceptive acts or practices in violation of the Texas Insurance Code and sufficient evidence to support the jury=s finding that TMI did so knowingly; that legally sufficient evidence supports the award of mental anguish, and that no Casteel^[1] problem exists in the charge to require reversal.  However, we find no evidence supports the award for loss of credit reputation.  We also conclude that the trial court acted appropriately in reducing the additional damages for the knowing violation from $375,000 to $250,000 and affirm that award.  Finally, we are bound to follow the Texas Supreme Court=s opinion in Aranda v. Insurance Co. of North America, which does apply to workers= compensation cases.  See Aranda v. Ins. Co. of N. Am., 748 S.W.2d 210 (Tex. 1988).  Thus, we affirm the judgment in all respects except for the award of loss to credit reputation.  We therefore modify the judgment to delete that portion of the judgment awarding Morris damages for his loss of credit reputation.

Factual Background

Lance Morris brought this suit against TMI, alleging that it acted in bad faith and violated the Texas Insurance Code because it failed to properly investigate Morris=s claim for workers= compensation benefits, and it delayed paying workers= compensation benefits due him.  Morris alleged that, on June 12, 2000, while working for the Justin Volunteer Fire Department, he received an on-the-job injury to his spine.  Then, in March 2003, Morris required emergency treatment for his back injury.  According to Morris, TMI initially promised to pay for surgery on his back, but only days after the surgery reneged on this promise.  Morris alleged that the requested treatment for his injury was reasonable and necessary, but TMI delayed and denied payment for the previously pre-authorized medical treatment, with significant consequences to him.  Morris also alleged that the Texas Workers= Compensation Commission (ATWCC@)^[2]  had fully adjudicated that TMI wrongfully denied his claim for benefits.  Morris claimed that, as a result of the wrongful denial, TMI violated the Texas Insurance Code, breached its common-law duty of good faith and fair dealing, and violated the Deceptive Trade Practices Act (ADTPA@).^[3] 

TMI answered and later amended its answer to add a counterclaim for fraud.  In the counterclaim, TMI alleged that Morris strained or sprained his back in 1998, two years before the June 12, 2000 injury, and that he falsely represented to the TWCC that he did not have a pre-existing back injury.  TMI claimed that Morris knew this representation was false when he made it, and that TMI relied on it and was injured by having to pay for benefits that would not have been due if the extent of Morris=s back problems had been fully disclosed.

In March 2006, the case was tried to a jury.  The jury returned a 10-2 verdict in Morris=s favor on his claims for bad faith and statutory violations.  The jury awarded Morris $50,000 for past mental anguish; $25,000 for past damage to his credit reputation; $50,000 for future damage to his credit reputation; and $120,000 for attorney=s fees.  The jury also awarded Morris $500,000 in additional damages because it found that TMI knowingly violatED the Texas Insurance Code.  The jury declined to find that TMI acted with malice or that Morris defrauded TMI.  On May 18, 2006, the trial court signed a final judgment for Morris, and awarded the amounts found by the jury, except for the $500,000 in additional damages, which it reduced to $250,000.  This appeal and cross-appeal followed.

Analysis of TMI=s Issues

In its first three issues, TMI contends that there is no evidence to support:

$                   the jury=s finding that TMI engaged in unfair and deceptive acts and practices in violation of the Texas Insurance Code,

$                   the jury=s finding that TMI violated the Insurance Code knowingly, and

$                   the damage awards for mental anguish and lost credit reputation. 

In its fourth issue, TMI contends that the trial court erroneously instructed the jury on both valid and invalid theories of liability.  In its fifth issue, TMI contends that no cause of action exists for breach of the duty of good faith and fair dealing against a workers= compensation carrier, or alternatively, any such cause of action should be abolished.

I.        Legally Sufficient Evidence Supports the Jury=s Finding that TMI Engaged in Unfair and Deceptive Acts or Practices in Violation of the Texas Insurance Code.

In its first issue, TMI contends that no evidence supports the jury=s finding that TMI engaged in unfair and deceptive acts or practices in violation of the Texas Insurance Code because no evidence shows that it misrepresented the policy or failed to explain the basis for the dispute, and no evidence shows that it knew or should have known that coverage was reasonably clear.  TMI also contends that the evidence conclusively shows that it had a reasonable basis to dispute Morris=s claim.

As we explain below, we conclude that sufficient evidence supports the jury=s findings on unfair settlement practices, specifically that TMI failed in good faith to settle when liability became reasonably clear and that it refused to pay a claim without conducting a reasonable investigation.  For reasons explained in more detail in TMI=s fourth issue, we will not address the sufficiency of the evidence to support the misrepresentation claims under the Insurance Code.

A.      Standard of Review.

We will sustain a legal sufficiency or Ano‑evidence@ challenge if the record shows one of the following:  (1) a complete absence of evidence of a vital fact; (2) rules of law or evidence bar the court from giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a mere scintilla; or (4) the evidence establishes conclusively the opposite of the vital fact.  City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005) (citing Robert W. Calvert, ANo Evidence@ and AInsufficient Evidence@ Points of Error, 38 Tex. L. Rev. 361, 362‑63 (1960)).  The evidence is legally sufficient if it would enable reasonable and fair‑minded people to reach the verdict under review.  Id. at 827.  In determining whether there is no evidence of unfair settlement practices under the Insurance Code, we review all the evidence, crediting favorable evidence if reasonable jurors could credit it, and disregarding contrary evidence unless reasonable jurors could not disregard it.  See Minn. Life Ins. Co. v. Vasquez, 192 S.W.3d 774, 777 (Tex. 2006).  We cannot substitute our judgment for that of the jury, so long as the evidence falls within the zone of reasonable disagreement.  See City of Keller, 168 S.W.3d at 822.

B.      The Evidence is Legally Sufficient to Support the Judgment.

The judgment against TMI is predicated on the jury=s affirmative answer to Question No. 2.  That question asked whether TMI engaged in any one or more of eight unfair and deceptive acts or practices under sections 541.060 and 541.061 of the Insurance Code.  It instructed the jury to consider the following ways in which an insurer can engage in an unfair or deceptive act:

Making any misrepresentation of an insurance policy by:

a.       making an untrue statement of fact;^[4] or

b.       failing to state a material fact that is necessary to make other statements made not misleading, considering the circumstances under which the statements were made;^[5] or

c.       making any statement in such manner as to mislead a reasonably prudent person to a false conclusion of a material fact;^[6] or

d.       failing to disclose any matter required by law to be disclosed;^[7] or

Engaging in any of the following unfair settlement practices with respect to a claim by an insured or beneficiary:

a.       misrepresenting to a claimant a material fact or policy provision relating to coverage at issue;^[8] or

b.       failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim with respect to which the insurer=s liability has become reasonably clear;^[9] or

c.       failing to provide promptly to a policyholder a reasonable explanation of the basis of the policy, in relation to the facts or applicable law, for the insurer=s denial of a claim or for the offer of a compromise settlement of a claim;^[10] or

d.       refusing to pay a claim without conducting a reasonable investigation with respect to the claim.^[11]

(emphasis added).  On appeal, TMI contends that no evidence supports any of the acts listed.  However, we need not look at all eight acts to resolve this issue.  We need look only at TMI=s claim that no evidence shows that it (1) failed to attempt in good faith to effectuate a prompt, fair, and equitable settlement when liability was reasonably clear, or (2) failed to conduct a reasonable investigation.  See Tex. Ins. Code ' 541.060(a)(2)(A), 541.060(a)(7).  We have italicized these two acts in the charge question.  As to these two acts, TMI contends that its records showed that Morris had a minor injury that resolved in 2000 and a new and more severe injury in 2003 caused by an unrelated incident, and therefore the evidence conclusively shows that it had a reasonable basis to deny or delay paying Morris=s workers= compensation claim based on the June 12, 2000 injury.

1.       Morris=s burden on a section 541.060(a)(7) claim is the same as for a common-law bad faith claim.

As a preliminary matter, the parties dispute Morris=s exact burden in proving that TMI failed to conduct a reasonable investigation.  TMI claims that the standard for liability under the Insurance Code is the same as that applied to a breach of the duty of good faith and fair dealing.  The dispute centers over whether Morris need only show that TMI failed to conduct a reasonable investigation or if he also must show that the claim was covered and compensable.  See id. ' 541.060(a)(7) (providing that an insurer engages in an unfair settlement practice by Arefusing to pay a claim without conducting a reasonable investigation with respect to the claim@). If the burden includes both factsCi.e., no reasonable investigation plus a covered claimCthe burden is the same as for a common-law bad faith claim.  For the reasons explained below, we agree with TMI that Morris=s burden on this Insurance Code violation is the same as in a common-law bad faith claim.

a.       The state of common-law bad faith post-Giles.

Before 1997, the common law provided that an insurer breached its duty of good faith and fair dealing when it Ahad no reasonable basis for denying or delaying payment of the claim, and that it knew or should have known that fact.@  See, e.g., Transp. Ins. Co. v. Moriel, 879 S.W.2d 10, 18 (Tex. 1994); see also Aranda, 748 S.W.2d at 213.  Then, in Universe Life Ins. Co. v. Giles, eight of the nine justices^[12] on the Texas Supreme Court adopted as the standard of liability for common-law bad faith claims the Insurance Code=s language defining as an unfair settlement practice an insurer=s failure to settle a claim when Athe insurer=s liability has become reasonably clear.@  See 950 S.W.2d 48, 56 (Tex. 1997) (applying standard of former article 21.21, section 4(10)(a)(ii) of the Insurance Code, which prohibited Afailing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim with respect to which the insurer=s liability has become reasonably clear@); see also State Farm Fire & Cas. Co. v. Simmons, 963 S.W.2d 42, 44 (Tex. 1998) (noting that, in Giles, A[t]his Court recently clarified the standard for recovery in bad faith cases@).  The plurality=s stated purpose of recasting the standard in positive terms was to eliminate conflicts between the negative formulation of the common-law standard and the no-evidence standard of review, and to unify the common-law and statutory standards for bad faith.  See Giles, 950 S.W.2d at 50B52, 55B56.^[13]

Thus, post-Giles, an insurer breaches its duty of good faith and fair dealing Aby denying or delaying payment of a claim if the insurer knew or should have known that it was reasonably clear that the claim was covered.@  Id. at 49.  Evidence that merely shows a bona fide dispute about the insurer=s liability on the contract does not rise to the level of bad faith.  State Farm Lloyds v. Nicolau, 951 S.W.2d 444, 448 (Tex. 1997); Moriel, 879 S.W.2d at 17.  Bad faith also is not established if the evidence shows the insurer was merely incorrect about the factual basis for its denial of the claim, or about the proper construction of the policy.  Moriel, 879 S.W.2d at 18.  Further, there can be no claim for bad faith when an insurer has denied a claim that is, in fact, not covered and the insurer has not otherwise breached the contract.  See Republic Ins. Co. v. Stoker, 903 S.W.2d 338, 341 (Tex. 1995); Lundstrom v. United Servs. Auto. Ass=n-CIC, 192 S.W.3d 78, 96 (Tex. App.CHouston [14th Dist.] 2006, pet. denied).

However, an insurer may breach its duty of good faith and fair dealing if it fails to reasonably investigate a claim when determining whether its liability is reasonably clear.  See Provident Am. Ins. Co. v. Castañeda, 988 S.W.2d 189, 197B98 (Tex. 1998); Giles, 950 S.W.2d at 56 n.5; Nicolau, 951 S.W.2d at 448.  An insurer cannot insulate itself from bad faith liability by investigating a claim in a manner calculated to construct a pretextual basis for denial.  See Simmons, 963 S.W.2d at 44; Nicolau, 951 S.W.2d at 448.  Moreover, an insurer=s reliance on an expert report, standing alone, will not necessarily shield the carrier if evidence shows that the report was not objectively prepared or that the insurer=s reliance on the report was unreasonable.  See Nicolau, 951 S.W.2d at 448.  Evidence casting doubt on the reliability of the insurer=s expert=s opinions may support a bad-faith finding.  Id.

Morris argues that the Areasonably clear@ liability standard does not apply to a claim based on the failure to conduct a reasonable investigation, because the duty of good faith and fair dealing may be breached by a showing that the carrier either (1) knew or should have known that it was reasonably clear that the claim was covered, or (2) failed to investigate the claim reasonably.  See Giles, 950 S.W.2d at 56 n.5 (A[A]n insurance company may also breach its duty of good faith and fair dealing by failing to reasonably investigate a claim.@).  Likewise, liability under Insurance Code section 541.060(a)(7) for the failure to reasonably investigate is separate from the liability imposed under section 541.060(a)(2) for the failure to settle a claim when the insurer=s liability has become reasonably clear.  Morris contends that, because the failure to reasonably investigate is a separate standard, the common-law Areasonably clear@ standard does not apply to a failure to conduct a reasonable investigation, under either the common law or Insurance Code section 541.060(7).  The significance of Morris=s construction is that an insurer could be found liable for a deficient investigation even when it had a reasonable basis for denying the claim.  The anomaly we mentioned aboveCthat an insurer could be held liable for the failure to reasonably investigate even when it had a reasonable basis for denying the claimCtroubled the Texas Supreme Court.

b.       The Texas Supreme Court concludes that liability cannot be assessed unless there is both a failure to conduct a reasonable investigation and liability is reasonably clear.

A majority of the Court rejected Morris=s contention in Provident American Insurance Co. v. Castañeda, 988 S.W.2d at 189.  In Castañeda, a jury found the insurer liable for violations of the Insurance Code and the DTPA for failing to pay a medical claim the insurer claimed was excluded under the policy it issued to the plaintiff.  Id. at 192.  No common-law bad faith claim was submitted to the jury.  Id. at 193.  The Court conducted a no-evidence review based on the wording of the jury instructions concerning the insurer=s failure to Aeffectuate a prompt, fair, and equitable settlement of a claim when liability has become reasonably clear@ and a related question.  Id. at 192B93.  Although a jury instruction on the failure to conduct a reasonable investigation was not part of the Court=s analysis, it explained that a plaintiff claiming that its insurer conducted a pretextual investigation to wrongfully deny a claim is still required to show that coverage was reasonably clear:

Castañeda and the dissent contend that because Provident American gave different reasons for denying the claim at different times, there is some evidence that the denial was pretextual, citing Nicolau and Simmons.  In Nicolau, the Court concluded that there was some evidence that the carrier knew that the expert report on which it relied was of questionable validity.  In Simmons, the Court concluded that there was evidence that the investigation was biased and outcome‑oriented because there was evidence that the carrier knowingly and repeatedly ignored evidence that the insureds did not burn down their home and that they had no motive for arson.  Our use of the term Apretextual@ in Nicolau and Simmons did not mean that an insured is relieved from its burden of offering evidence that liability had become reasonably clear or that there was no reasonable basis for denying the claim.  We did not redefine the common‑law tort of bad faith or the legal sufficiency standard of review for article 21.21 cases to include a mechanism by which a factfinder could conclude that the denial was pretextual even though there was a reasonable basis for denying the claim.  The use of the concept Apretextual@ was another way of saying that there must be some evidence that there was no reasonable basis for denying the claim or that liability was reasonably clear.  Here, there is no evidence that Provident American ignored information that would lead a reasonable person to conclude that liability under the policy was reasonably clear or that there was no reasonable basis to deny the claim.

988 S.W.2d at 197B98 (footnotes omitted; emphasis added). 

The Nicolau and Simmons cases cited by the Court involved common-law bad faith claims that may be characterized, either in whole or in part, as based on the failure to conduct a reasonable investigation.  See Simmons, 963 S.W.2d at 44B45 (holding evidence legally sufficient to show insurer breached duty of good faith and fair dealing by denying plaintiffs= claim based on a biased investigation intended to construct a pretextual basis for denial); Nicolau, 951 S.W.2d at 448B49 (upholding finding of bad faith based on evidence insurer knew or should have known it was reasonably clear the claim was covered, when there was evidence that reports prepared by insurer=s expert were not objectively prepared, the insurer was aware of this, its reliance on the reports was pretextual, and there was evidence the insurer did not conduct an adequate investigation).  The Castañeda court clarified that, under either the common law or the Insurance Code, to recover damages resulting from a wrongful denial of a claim, plaintiffs must show more than a mere failure to reasonably investigate the claim; they must also show that liability was reasonably clear.  988 S.W.2d at 198; Tex. Mut. Ins. Co. v. Ruttiger, ___ S.W.3d ___, 2008 WL 2930096, at *5 n.18 (Tex. App.CHouston [1st Dist.] July 31, 2008, no pet. h.) (noting that A[t]he standards for liability under sections 541.060(a)(2) and (a)(7) and for an insurer=s breach of the common law duty of good faith and fair dealing are similar and are frequently discussed together by Texas courts@); see also United Svcs. Auto. Ass=n v. Croft, 175 S.W.3d 457, 469 (Tex. App.CDallas 2005, no pet.) (citing Nicolau for the proposition that A[w]ithin [the duty of good faith and fair dealing] is an insurer=s obligation to conduct an adequate investigation of the claim@).

The alternative that Morris urgesCallowing an insurer to be found liable for conducting a pretextual investigation even though it had a reasonable basis for denying the claimCis plainly inconsistent with the common law duty of good faith and fair dealing as expressed in Casteñeda.^[14]  Moreover, such a result would frustrate not only the goal of unifying the common-law and statutory standards for bad faith, see Giles, 950 S.W.2d at 55, but also the general rule that there can be no claim for bad faith when an insurer has denied a claim that is not covered.  See Stoker, 903 S.W.2d at 341; Lundstrom, 192 S.W.3d at 96.  Therefore, we conclude that a plaintiff   seeking bad faith damages based on a violation of section 541.060(a)(7), which proscribes as an unfair settlement practice an insurer=s refusal to pay a claim Awithout conducting a reasonable investigation with respect to the claim,@ must demonstrate that a proper investigation would have revealed that coverage was reasonably clear. See Casteñeda, 988 S.W.2d at 198; Tex. Ins. Code ' 541.060(a)(7).

We turn next to consider if the evidence is legally sufficient to support the jury=s finding of liability under Texas Insurance Code sections 541.060(a)(2) and 541.060(a)(7).

2.       TMI=s liability was reasonably clear.

TMI claims that no evidence supports the jury=s finding that TMI had Ano reasonable basis@ to question whether the back strain Morris sustained on June 12, 2000 was a cause of his need for back surgery in April 2003.  According to TMI, its records showed that Morris suffered only a minor injury for which he received one month of chiropractic treatment; he returned to work without restrictions after missing only one shift.  In addition, TMI claims, the medical records available from Morris=s surgeon in April 2003 reflected that Morris=s injury requiring surgery occurred when he slipped or fell off a fire truck, not while lifting a patient out of a ditch as occurred on June 12, 2000.  Thus, because TMI=s records indicated a minor injury while lifting a patient out of a ditch, that had fully resolved in 2000, and a Anew and more severe injury in 2003 cause[d] by a different incident,@ it believed it had grounds to dispute whether Morris=s surgery was connected with the 2000 injury. 

The question before us is whether more than a mere scintilla of evidence exists to show a refusal to pay a claim without conducting a reasonable investigation and a failure to settle when liability became reasonably clear. The following evidence presented to the jury supports both findings.

a.       The June 12, 2000 injury and the surgery.

On June 12, 2000, while working for the Justin Volunteer Fire Department, Morris hurt his back while lifting a victim of a motor vehicle accident out of a ditch.  The fire department reported the injury to its worker=s compensation carrier, TMI, which accepted the claim.^[15]  Morris visited a chiropractor, Dr. Waldrop, the day he was injured.  Dr. Waldrop=s initial medical report to the TWCC noted that Morris was injured when he Alifted a patient and felt sharp shooting pain in the lumbar portion of his spine.@   The doctor=s clinical assessment indicated that Morris had Apalpable muscle spasms at the L-4 B L-5 level of his spine.@  Morris received several chiropractic treatments from Dr. Waldrop over the next two weeks.  After that, he saw Dr. Waldrop periodically over the next two and one-half years.  Morris missed only a brief period of work as a result of the injury.

In February 2003, Morris married and moved from Justin to Sugar Land.  After the move, Morris began seeing another chiropractor, Dr. King.  At some point, Morris began experiencing increasing pain in his back, and on March 23, 2003, Morris went to the emergency room at Methodist Sugar Land Hospital.  The hospital referred Morris to a neurosurgeon, Dr. Charles Neblett, who diagnosed Morris with a herniated disc.^[16]  Dr. Neblett requested preauthorization from TMI to perform an AL4-5 L5-S1 lumbar laminectomy.@  TMI granted the request for pre-authorization on April 1, 2003.  Morris=s surgery took place the next day.

b.       The initial inadequate investigation.

On April 3, 2003, TMI transferred Morris=s file from one adjuster to Joy Rodgers.  The first day Rodgers took documented action on the file was April 7.  On that day, she reviewed the file and called Bill Mitchell, the fire chief of the Justin Volunteer Fire Department, to find out about Morris=s injury on June 12, 2000.  According to Rodgers=s claim diary, Mitchell told her that Morris returned Aat full duty without any problems.@   On that same day, April 7, Rodgers prepared and filed a ANotice of Refused or Disputed Claim,@^[17] giving notice that TMI disputed the claim.

By deposition, Rodgers testified that she knew she had a duty to investigate the claim, which included a procedure known as a Athree-point contact.@  A three-point contact means contacting the injured worker, the employer, and the medical provider.  However, Rodgers admitted that she did not complete the three-point contact before disputing the claim. 

Before Rodgers denied the claim, neither she nor anyone else ever spoke to Morris=s surgeon, Dr. Neblett, even though the documentation submitted for preauthorization by Dr. Neblett indicated that the need for surgery arose from the June 2000 injury.  Nor did she talk to any other treating doctor.  Rosalind Thompson, a TMI claims supervisor, agreed that before TMI denied the claim it did not ask a doctor whether Morris=s June 2000 injury was a producing cause of the surgery, even though TMI knew the names of the two doctors who had treated Morris from the time of the 2000 injury to days before his surgery.  And, although Rodgers=s claims diary noted that she called the surgeon, Dr. Neblett, she spoke only with an administrative person in his office to let them know that TMI was disputing the claim.  Morris=s expert testified that Dr. Neblett was the best person for Rodgers to speak with in conducting an investigation because he saw and physically examined Morris.

Rodgers did not even speak with Morris before denying the claim.  And, initially, MitchellCthe only person Rodgers said she did speak withCdid not recall speaking to Rodgers, and Mitchell testified that he would not have told her Morris returned at full duty with no problems.^[18]  And, Rodgers apparently did not inquire into any of the details of Morris=s injury.  At best, the evidence showed that she made only a cursory inquiry with Mitchell into Morris=s status when he returned to duty. 

One fact that seemed to play heavily in Rodgers=s decision to dispute coverage was that the description Morris gave for how he injured himself in 2000 varied from the cause contained in TMI=s records.  Even with this variation, the date Morris gave for his injuryCJune 12, 2000Cwas correct.  Before disputing the claim, Rodgers never asked Morris about this discrepancy.  Although a field investigator was assigned to speak with Morris and apparently did speak with him a week or so after the surgery, the investigator apparently did not ask Morris about the discrepancy and did not ask him for medical records.

Frank Weedon, Morris=s insurance expert, also testified.  He explained that Rodgers=s investigation of the claim was not reasonable because she failed to conduct a Athree point contact@; she did not speak to either Morris or his treating doctors, and at most had only a brief discussion with Bill Mitchell before filing the dispute on April 7, 2003, the same day she first reviewed the file. Although Rodgers testified that she felt she did not need to speak with a doctor to learn more about Morris=s physical condition before she disputed the claim, she knew about the three point contact and agreed that was the proper way to conduct an investigation.  Reasonable jurors could have chosen not to believe Rodgers=s claim that she did not need to speak with a doctor in this particular case.

c.       TMI=s receipt of evidence showing back treatments during the crucial time period of 2001-2003, its failure to forward it because of alleged coding error, and its continuing refusal to settle.

TMI continued to dispute coverage for the next several months.  It said it did not receive an authorization from Morris to obtain medical records; however, Morris faxed an authorization form to TMI no later than mid-April.  The form was signed by his wife because he was back in the hospital at the time.  TMI said that it would not be able to obtain any records with this form because Morris himself did not sign it, but it also appears that TMI did not attempt to obtain any records with the form.  In addition, Morris said that no one at TMI ever asked him for another authorization or for his medical records, which, again, were at his home. 

Morris eventually retained attorneys to represent him in the dispute with TMI.  On August 29, 2003, Morris=s attorneys faxed to TMI some of Morris=s medical records, including a page of treatment notes from Dr. Waldrop, the chiropractor Morris saw after his injury in June 2000.  This page of treatment notes documented that Dr. Waldrop treated Morris between November 2001and January 2003.  Morris=s attorneys specifically sent this page because TMI said it had no record of treatments for Morris between 2001 and 2003.  The notes indicated, among other things, that Morris had AL5/S1 n. root disc radiculopathy.@^[19]  The TMI employee who was responsible for organizing the medicals testified that TMI failed to forward this important page because it was wrongly coded.  She explained that this page was behind another page that was an approval for a new doctor, Dr. King, who saw Morris from February to April just before the surgery.  Seeing the approval letter, she coded the documents following it as relating to the approval letter, apparently without checking to ensure that was accurate.  A TMI employee agreed that no other medical documents were wrongly coded.

In November 2003, Morris and TMI participated in a benefit review conference at the TWCC offices, but the dispute was not resolved at that time.  TMI requested that Morris submit to a medical examination by a doctor of its choice, and Morris agreed.  TMI chose Dr. Stephen DeYoung to examine Morris.  On January 7, 2004, TMI sent Dr. DeYoung a letter asking him to determine, among other things, whether the lumbar herniations that were surgically treated in April 2003 were causally related to the Alumbar strain@ of June 2000.  TMI represented that it had attached Aall of the medical records currently available@ to it for Dr. DeYoung=s review.  However, TMI did not forward any medical records from Dr. Waldrop, stating that it had Ano documentation of medical treatment from the DOI,^[20] to 02/19/03@Ceven though it had received the page of treatment notes from 2001B2003.  In its summary of Morris=s medical condition, TMI also pointed out that Dr. King=s medical records reflected that the Amechanism of injury@ was different than that reported by the employer.  The first report of injury, on June 12, 2000, indicated that Morris strained his back after carrying a patient out of a ditch, while Dr. King reported that he Afell off the fire truck after slipping off tread steps.@  No one from TMI ever asked Morris about this discrepancy.

d.       Dr. DeYoung reaches a tentative opinion in favor of Morris if records show no treatments between the 2000 injury and 2003 and no injury before that time.

On January 22, 2004, Dr. DeYoung examined Morris.  He also obtained both an oral and written medical history from Morris.  Morris told Dr. DeYoung that he was injured on June 12, 2000, when carrying a patient on a backboard out of a ditch to an ambulance, and that he saw Dr. Waldrop for chiropractic treatments until he moved to Sugar Land and began seeing Dr. King in 2003.  Morris did not tell Dr. DeYoung about an earlier injury he sustained in 1998 for which received chiropractic treatments from Dr. Waldrop.  At trial, Morris explained that he recovered fully from that incident and did not consider it an injury, and for that reason did not tell Dr. DeYoung about it.  Morris also explained that he did not fall off a truck; he began to fall and caught himself. The act of catching himself caused the injury.

Dr. DeYoung wrote to TMI explaining that, given the lack of medical records provided, he could not determine whether Morris aggravated and accelerated his pre-existing lumbar disc degeneration and spondylosis, which ultimately led to a herniation, or whether the herniation was secondary to a disease of life.  Therefore, Dr. DeYoung opined that (1) if Morris had no history of lower back difficulty prior to the work injury on June 12, 2000, and (2) if the medical records support ongoing difficulty with the lower back from June 12, 2000 until he sustained the herniations in April 2003, he would give Morris Athe benefit of the doubt and causally relate the disc herniations to the lumbar strain of June 2000 as a result of aggravation and acceleration of the pre-existing lumbar disc degeneration and spondylosis.@  Even though it had medical records from the very years Dr. DeYoung was interested in, and even though it had no records of an earlier injury, TMI continued to dispute the claim.  It advised Morris that he would have to schedule a second benefit review conference to resolve the dispute.

e.       The TWCC Benefit Review Officer rules that Morris=s herniated disc was related to the 2000 injury.

A second benefit review conference was held in June 2004, more than a year after the surgery.  Again the parties were unable to reach an agreement, at least in part because TMI claimed it still had no medical records reflecting continuing chiropractic treatments by Dr. Waldrop for Morris=s June 12, 2000 injury.  According to TWCC documentation, TMI=s position was that Dr. DeYoung=s ability to determine causation was hampered because the records were not available; Morris countered that he had provided the records to TMI several times and had no control over whether TMI forwarded them to Dr. DeYoung.^[21]  The benefit review officer noted the gap in the medical records, but still recommended the payment of benefits to Morris.^[22]  The review officer found the following:

A review of the initial medical records from Dr. Waldrop noted the claimant=s symptoms, which are consistent with the current diagnoses at L4-L5 and at L5-S1.  There are medical records from other doctors in the file supporting a causal connection between the findings on the diagnostic studies performed in 2003 and the original injury.

(emphasis added).  In reaching her conclusion, the benefit review officer also found significant the reference to radiculopathy in Dr. Waldrop=s notes of November 21, 2001.  TMI declined to accept this recommendation, and a benefit contested case hearing was scheduled for July 2004.

f.        TMI again forwards the medical records to its medical expert without including the 2001B2003 notes and loses at the contested case hearing.

On July 1, 2004, in preparation for the contested case hearing, TMI forwarded to Dr. DeYoung medical records showing Morris=s Ainitial treatment@ with Dr. Waldrop, and asked him to review the records and determine whether the April 2003 herniations were the result of a pre-existing condition or the June 2000 injury.  Once again, TMI did not include the page of Dr. Waldrop=s records showing that Morris had a number of chiropractic treatments between 2001 and 2003.  In response, Dr. DeYoung reported that the records were Alimited@ and Adid not provide any detail with respect to his history and examination.@  He also noted that the records showed that Morris Awas last treated by Dr. Waldrop in January 2001.@  This time, Dr. DeYoung opined that if Morris did not receive any medical treatment for his lower back between January 2001 and February 2003 (when he saw Dr. King), he would attribute Morris=s condition Amore to a disease of life than the work related injury.@

At the contested case hearing, the TWCC received sworn testimony and evidence, and ultimately determined that A[t]he herniations in [Morris=s] lumbar spine at levels L4-5 and L5-S1 were caused and/or aggravated by, and naturally resulted from, his June 12, 2000 injury.@  Consistent with the benefit review officer=s recommendation, the TWCC noted that the medical evidence showed that Morris was complaining of an L5-S1 radiculopathy in November 2001 when he was receiving treatment from Dr. Waldrop.  The TWCC=s decision reflected that it was based largely upon Morris=s testimony that he had no prior history of back problems, and that he had required continuous treatment since the June 12, 2000 incidentCtestimony that satisfied the conditions under which Dr. DeYoung would find causation.^[23]  The TWCC ordered TMI to pay medical benefits to Morris.   TMI did not appeal this decision.

g.       TMI learns about the 1998 back strain and points to it or to a new 2003 injury as the cause of the herniated disc.

After Morris filed suit against TMI and discovery ensued, TMI learned that Morris strained or sprained his back in 1998 when he slipped on or fell from the running board of a fire truckCtwo years before the June 12, 2000 injury.  At that time, Morris missed two weeks of work and underwent numerous chiropractic treatments.  TMI counterclaimed for fraud, alleging that Morris fraudulently testified before the TWCC that he had no back injuries before the June 2000 incident.

When Dr. DeYoungCthe doctor who in his first opinion had given Morris the benefit of the doubt in determining that his June 2000 injury was causally related to the 2003 herniated discCwas later deposed, he was asked whether the medical information concerning Morris=s 1998 back injury and the treatments by Dr. Waldrop after the June 2000 incident changed his earlier opinion.  Dr. DeYoung testified that, based on this information, he would conclude that Morris=s June 2000 injury was not causally related to the herniated disc requiring surgery in April 2003.  However, on cross-examination, Dr. DeYoung admitted that Dr. Waldrop=s omitted treatment notes did reflect Aperiodic@ treatment between 2000 and 2003, the specific time frame Dr. DeYoung had indicated to TMI was most important to his evaluation.  He also acknowledged that Morris=s medical records reflected that Morris had between 25 and 30 treatments between June 2000 and March 2003, contrary to TMI=s representation that it had no documentation of treatment in that time frame.  Dr. DeYoung also admitted that, while Morris had received chiropractic treatments before June 2000, he was not receiving treatment from a medical doctor, and he was able to return to work after the 1998 incident.

TMI contends that Dr. DeYoung was not misled about Morris=s treatment with Dr. Waldrop because Morris gave him a verbal medical history that included Dr. Waldrop=s treatment of him between June 12, 2000 and January 1, 2003.  However, Dr. DeYoung testified that if an insurance company wrongly told him they did not have documentation of treatment when they did have it, he would be Aconcerned that I was being a little misled if I didn=t have all of the correct information.@  Dr. DeYoung did not testify that the 1998 injury was the sole cause of the herniated disc; in fact, no doctor at trial testified that the 1998 injury was the sole cause of the herniated disc.  Morris=s expert testified that TMI could refuse the claim only if another event was the sole cause of the herniated disc.  If the 2000 injury was a 1% cause of the herniated disc because it aggravated an earlier condition, it would be compensable and causally related.

Thus, the jury had before it proof that the claims adjuster denied/disputed the claim and refused to pay it the first day she looked at the file and that, in deciding to deny or dispute coverage, she ignored accepted methods of investigating a claim.  One of her alleged reasons for disputing coverage was because the description of the original injury did not match the injury shown on file, but she never asked Morris about this.  The jury had proof that Morris faxed TMI his relevant medical records, and signed a release for TMI, but TMI failed to forward a crucial page to its medical expert and failed to do so on more than one occasion.  TMI said it did not forward the page of notes because it was wrongly coded, but no other page of medical notes was wrongly coded.  Finally, the jury had proof before it that TMI thought either an undisclosed earlier injury or a new injury in 2003 caused Morris=s herniated disc; yet, TMI never proved a new injury and never proved that the earlier injury was the sole cause of the herniation requiring surgery.^[24]  

h.       TMI=s reasons for why the evidence is insufficient.

(i)      The medical history did not show continuing treatment after the 2000 injury.

TMI claims that nothing in its file reflected that Morris was treated after the initial injury on June 12 and that Rodgers confirmed this by speaking with Mitchell, who, according to Rodgers, said that Morris returned to full duty without any problems.  TMI also claims that further investigation of this did not reveal much more.  According to TMI, [a]lthough TMI requested that Morris provide medical records, few of those records were provided.@ 

However, this review of the evidence is one-sided in TMI=s favor, and ignores the conflicting evidence.  First, Mitchell testified he could not remember speaking with Rodgers, and stated that he would not have told her that Morris returned to full duty.  Second, Morris=s lawyers sent medical records to TMICincluding the page of treatment notes from Dr. WaldropCshowing a number of visits by Morris between 2001 and