TEXAS SUPREME COURT TO RECONSIDER LANDMARK RUTTIGER DECISION ON WORKER’S COMPENSATION / BAD FAITH CLAIMS

February 20, 2012

On Friday, the Texas Supreme Court agreed to review its own decision from last August in the landmark Ruttiger decision in which the Court decided that worker’s compensation insurers are not subject to statutory “bad faith” claims for unfair claims settlement practices under the Texas Insurance Code.  The Court granted motions for rehearing filed by both sides of the suit, and will revisit a number of legal issues vital to worker’s compensation litigation in this state.

In Texas Mut. Ins. Co. v. Ruttiger, No. 08-751, — S.W.3d — (Tex. August 26, 2011), the Court held worker’s comp litigants could not bring claims for unfair settlement practices under the Insurance Code, but that suits could be brought against worker’s comp insurers “for misrepresenting provisions of their policies” (although there was no evidence of misrepresentation in this particular case).  However, a divided Court did not reach an even more far-reaching question regarding whether common law bad faith claims  were  still  viable  in  the  worker’s  compensation  context  following  the legislature’s  wholesale revision of the Texas worker’s compensation scheme in 1989.

Both Texas Mutual and Ruttiger moved for rehearing.  Texas Mutual urged the Court to reach the question of whether the 1988 Aranda case, which added the common law duty of good faith and fair dealing to the Texas worker’s compensation regime, was still good law.  Alternatively, Texas Mutual urged the Court to devise a method to curb lawsuit abuse and “minimize the perverse incentives” of the common law cause of action—matters that, according to Texas Mutual, the lower courts had already addressed sufficiently for the Supreme Court’s review.  Ruttiger, on the other hand, argued that Texas Mutual had waived the issues that the Supreme Court decided in its August opinion, that the Court’s ruling on the Insurance Code was incorrect and “may confuse” worker’s compensation lawyers, and that the Court incorrectly determined that there was no evidence of a misrepresentation of the policy.

The Court granted both sides’ motions.  We will continue to monitor this important case, since a shift in either direction from the Texas Supreme Court’s previous opinion will have significant repercussions for worker’s compensation practice in this state.