Recently, a court decision in Texas eroded some worker rights with respect to the Workers’ Compensation Act by scrutinizing what it means when an insurer or employer acts in “bad faith.”
In the case of Texas, a rising tide of lawsuits claiming “bad faith” motives for all Texan insurance carriers were peaking in the courts. It was in this climate that Texas Mutual Insurance Company v. Timothy J. Ruttiger was filed in 2004.
Texas Mutual initially refused Mr. Ruttiger’s claim for compensation because his employer claimed that he suffered the injury at a softball game that was unrelated to work. However, Texas Mutual did come to a compromise with Mr. Ruttiger.
Later, a trial court decided that the company’s insurance adjuster had too readily believed the claims of Texas Mutual over Mr. Ruttiger, thus acting in “bad faith.” As such, the court compensated him over and above the amount Texas Mutual had already dispensed to cover medical costs and lost wages. In effect, the extra money was awarded for “mental anguish.”
Although a Court of Appeals upheld the decision, the cased case was appealed to the Supreme Court. Unfortunately, the Texas Supreme Court sided with Texas Mutual, arguing that allowing employees to receive compensation for dealing with unwarranted obstacles, delay, and obstructions to just compensation amounted to a burden on the Workers’ Compensation system.
Predictably, Mary Barrow Nichols, Counsel for Texas Mutual, declared the decision a “significant victory for Texas employers.”
Still, advocates for workers’ rights note that this decision reinforces the unpleasant reality that in many ways “bad faith” decisions by insurers are very much built into the system in favor of employers.