COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 2-07-296-CV
VALEAN CHILDERS APPELLANT
V.
GALLAGHER BASSETT APPELLEES
SERVICES, INC., MYRTIS
LACY, AND ZURICH
AMERICAN INSURANCE COMPANY
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FROM THE 17TH DISTRICT COURT OF TARRANT COUNTY
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MEMORANDUM OPINION 1
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I. Introduction
In two points, Appellant Valean Childers (“Childers”) asserts that the trial
court erred in granting summary judgment to Appellees Gallagher Bassett
Services, Inc. (“Gallagher”), Myrtis Lacy (“Lacy”), and Zurich American
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… See T EX. R. A PP. P. 47.4.
Insurance Company (“Zurich”) (collectively “GLZ”). We affirm in part, and
reverse and remand in part.
II. Factual and Procedural Background
This is the case of “when does the statute begin to run?” This bad-faith
lawsuit originated with a workers’ compensation claim filed by Childers,
wherein she alleged she sustained a compensable injury on February 4, 2003.
The defendants include Gallagher, a third party administrator which adjusted
Childers’ workers’ compensation claim; Lacy, an employee of Gallagher who
was the licensed adjuster handling the claim, and Zurich, the workers’
compensation carrier for the claims. Because numerous dates are involved in
this question involving the appropriate statute of limitations, we will set forth
a time line of pertinent events:
• 2/4/03-Alleged injury occurred
• 3/6/03-The injury is reported by this date
• 3/7/03-The claim is disputed by the carrier as being untimely
filed (the “first dispute”)
• 3/29/03-Childers requests a benefit review conference.
• 5/15/03-Benefit review conference is held and Childers
prevails
• 7/16/03-First part of contested case hearing
• 8/31/03-Two years before suit is filed
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• 10/2/03-Conclusion of contested case hearing
• 10/13/03-Contested case hearing ruling is in favor of Childers
• 1/2/04-Appeals panel ruling in favor of Childers
• 7/8/04-Childers’ Claim is again disputed by the carrier based
on alleged new evidence 2
• 9/28/04-Decision and Order by Hearing Officer in favor of
Childers
• 8/31/05-Bad faith suit filed
On March 6, 2007, GLZ filed a motion for summary judgment based on
the two-year statute of limitations. The trial court found that Childers did not
timely file suit within two years of the accrual of her cause of action and
accordingly granted summary judgment in favor of GLZ. A motion for new trial
was overruled by operation of law, and this appeal followed.
III. The Issue
GLZ asserts that the trial court acted correctly in granting summary
judgment based on limitations because the case was not filed within two years
of the time that Zurich initially denied Childers’ worker’s compensation claim.
GLZ also asserts that this is also true for the second denial of the claim because
Childers suffered no damage from the second denial and there is no authority
2
… We will collectively refer to the 1/2/04 panel ruling and Zurich’s
7/8/04 dispute of Childers’ claim as the “second dispute.”
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that a subsequent denial restarts the clock running on the statute of limitations.
Childers asserts that the statute of limitations did not begin running on
the first denial of her claim until she had exhausted her administrative remedies
on February 2, 2004, and, regardless, the second denial began the statute of
limitations running on June 28, and July 8, 2004. Hence, she argues her
lawsuit was timely brought on August 31, 2005 regarding both denials, and the
trial court erred in granting summary judgment.
IV. Standard of Review
A defendant who conclusively negates at least one essential element of
a cause of action is entitled to summary judgment on that claim. IHS Cedars
Treatment Ctr. of DeSoto, Tex., Inc. v. Mason, 143 S.W.3d 794, 798 (Tex.
2004); see T EX. R. C IV. P. 166a(b), (c). When reviewing a summary judgment,
we take as true all evidence favorable to the nonmovant, and we indulge every
reasonable inference and resolve any doubts in the nonmovant’s favor. IHS
Cedars Treatment Ctr., 143 S.W.3d at 798.
A defendant is entitled to summary judgment on an affirmative defense
if the defendant conclusively proves all the elements of the affirmative defense.
Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 223 (Tex. 1999); see T EX. R.
C IV. P. 166a(b), (c). To accomplish this, the defendant-movant must present
summary judgment evidence that establishes each element of the affirmative
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defense as a matter of law. Ryland Group, Inc. v. Hood, 924 S.W.2d 120, 121
(Tex. 1996). When reviewing a summary judgment, we take as true all
evidence favorable to the nonmovant, and we indulge every reasonable
inference and resolve any doubts in the nonmovant’s favor. IHS Cedars
Treatment Ctr. of DeSoto, Tex., Inc. v. Mason, 143 S.W.3d 794, 798 (Tex.
2004).
V. Limitations
A statute of limitations begins to run when the cause of action accrues.
Tectonic Realty Inv. Co. v. CNA Lloyd’s of Tex. Ins. Co., 812 S.W.2d 647, 652
(Tex. App.—Dallas 1991, writ denied). A cause of action accrues when facts
come into existence that authorize a claimant to seek a judicial remedy. Celtic
Life Ins. Co. v. Coats, 885 S.W.2d 96, 100 (Tex. 1994). A bad faith cause of
action involving an insurance claim accrues on the date the insurer denies
coverage. Murray v. San Jacinto Agency, Inc., 800 S.W.2d 826, 828 (Tex.
1990). This same rule is applicable to insurance code and DTPA claims.
Stevens v. State Farm Fire & Cas. Co., 929 S.W.2d 665, 671 (Tex.
App.—Texarkana 1996, writ denied). Intentional infliction of emotional distress
is also governed by the two year statute of limitations. Bhalli v. Methodist
Hosp., 896 S.W.2d 207, 211 (Tex. App.— Houston [1st Dist.] 1995, writ
denied). Hence, all of Childers’ claims are governed by a two-year statute of
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limitations, and all stem from the bad faith allegations. See generally T EX. INS.
C ODE A NN . 21.21 § 16(d) (Vernon 2005), repealed by Act of May 23, 2003,
78th Leg., R.S., ch. 1274, § 26(a)(1), 2003 T EX. G EN. L AWS 3611, 4138; T EX.
INS. C ODE § 541.162 (Vernon Supp 2008); T EX. B US. & C OM. C ODE A NN. §
17.565 (Vernon Supp. 2008); T EX. C IV. P RAC. & R EM. C ODE § 16.003(a) (Vernon
Supp. 2008). We must therefore address whether Childers’ cause of action
accrued more than two years prior to the date that she filed suit—August 31,
2005—to determine whether the granting of GLZ’s motion for summary
judgment is proper.
VI. Analysis
A. The First Denial—March 2003
Both parties cite and discuss American Motorists Insurance Co. v. Fodge,
63 S.W.3d 801 (Tex. 2001), as it impacts the limitations issue. The question
presented to our Supreme Court was
whether a compensation claimant can prosecute a lawsuit against
a carrier to recover benefits and damages resulting from a denial of
benefits without a prior determination by the Texas Workers’
Compensation Commission that benefits are due her. We hold that
she cannot do so.
Id. at 802. This case stands for the proposition that just as a court cannot
award compensation benefits under the Worker’s Compensation Act because
that determination must go through the administrative process, neither can the
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court award damages for the denial of compensation benefits absent a holding
made through the administrative process that such benefits were due. Id. at
804. Hence, “the process precludes bad faith liability for denying benefits to
which the claimant is not entitled.” Id.
Childers takes the position that as a result of the Fodge holding, there is
no claim for bad faith until the procedures under the Texas Workers
Compensation Act have been concluded because, in essence, she has no
entitlement to benefits that have been wrongfully denied, until that entitlement
has been determined under the Act. Were it otherwise, she argues, presumably
it could necessitate filing a bad faith case following the initial denial of benefits
by the carrier, only to have the case dismissed if under the Act it was
subsequently determined that she had not been entitled to benefits.
GLZ takes the position that not only has our Supreme Court rejected
Childers’s argument regarding the accrual of the limitations period, but that if
her position was correct, a claimant could delay indefinitely completing the
administrative process and then have an additional two years in which to file
suit for bad faith. In short, they argue there is no statute, case law, or
reasoning to support her position.
As our sister court has explained,
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damages constituting recovery of lost compensation benefits must
be pursued via the Act regardless of the legal theory through which
they are sought. Thus, the injury sought to be recompensed and
the purpose of the relief are all important. If the relief serves to
recompense the wrong or injury which was originally redressed
under the Act . . . then the Act controls their recovery. But, if it
serves to recompense some wrong independent of the original
injury compensable under the Act . . . then the Act and its
restrictions are inapplicable. . . . Escajeda did not have to exhaust
any administrative remedy, and the trial court had jurisdiction to
consider that aspect of her 21.21 and 17.46(a) suit. Finally,
though this could result in piecemeal litigation, the Texas Supreme
Court long ago recognized and approved that possibility in a suit
such as this.
Escajeda v. Cigna Ins. Co. of Tex., 934 S.W.2d 402, 406-07 (Tex.
App.—Amarillo 1996, no writ).
The parties dispute whether Fodge has overruled Escajeda. Without
becoming involved in that dispute, it is apparent that part of the reasoning in
Escajeda is sound. Much of our jurisprudence involves the ability to avail
oneself of our court system only after administrative remedies are exhausted.
This presupposes, of course, that the requested remedy in our court system is
the same as was sought in the administrative process. Here, however, the
redress sought through the court system—the bad faith claim—is not the same
redress as sought through the administrative process—the worker’s
compensation claim. Therefore, we hold that the accrual of the limitations
period for a bad faith claim does not await the outcome of the administrative
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process, but rather begins at the same time as any other bad faith claim not
connected to our Worker’s Compensation Act remedies, and that accrual is on
the date the insurer wrongfully denies coverage. We overrule Childers’ first
issue.
B. The Second Denial—June/July 2004
It is undisputed that Childers filed suit within two years of the second
denial of her benefits, which the parties have referred to as the “second
dispute.”
GLZ takes the position that Childers was allegedly “injured” as a result of
the initial denial of her claim on March 7, 2003, and that there was no new
damage or injury resulting from the second dispute. GLZ also argues that
although damage may continue to occur after a wrongful denial of benefits, this
does not prevent limitations from commencing to run. See Murray, 800
S.W.2d at 828. Hence, they assert that the second denial did not restart the
limitations clock.
Childers takes the position that the facts of this case are clearly
distinguishable from Murray. In the Murray case, damages continued to occur
after the denial, whereas here, the initial claim and dispute were resolved and
benefits were paid. Then, argues Childers, she was again damaged when the
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second dispute occurred, that is, when there was another denial on allegedly
new grounds and benefits again were stopped.
We agree with Childers’ argument. The first denial had been fully and
finally resolved in Childers favor before the second two denials occurred in June
and July of 2004. These are separate incidents theoretically given rise to a
new bad faith claim. If timely claims for additional payments by an insured can
give rise to “the statute of limitations running anew,” then it follows that
additional denials of coverage after an initial denial has been fully and finally
resolved starts the running of the statute of limitations on the new denial. Pena
v. State Farm Lloyds, 980 S.W.2d 949, 954 (Tex. App.—Corpus Christi 1998,
no pet.). We sustain Childers’ issue number two and hold that the lawsuit filed
by Childers on August 31, 2005, was not barred by the statute of limitations
as it related to the disputes of the claim by the carrier filed June 28, 2004, and
July 8, 2004. Our disposition of issue one affirms that the statute of
limitations had run on her August 31, 2005 lawsuit as it related to the dispute
of the claim by the carrier filed March 7, 2003.
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VII. Conclusion
Having overruled Childers’ first issue and sustained her second issue, we
affirm the trial court’s judgment in part, and reverse and remand in part.
BOB MCCOY
JUSTICE
PANEL A: CAYCE, C.J.; DAUPHINOT and MCCOY, JJ.
CAYCE, C.J., concurs without opinion.
DELIVERED: April 3, 2008
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