Texas Prop & Cas. v. National American Ins., 03-05-00401-CV.

208 S.W.3d 523

TEXAS PROPERTY AND CASUALTY GUARANTY ASSOCIATION, for Paula Insurance Company, an Impaired Insurer, Appellant, v. NATIONAL AMERICAN INSURANCE COMPANY and Clayton Mark Beck, Appellees.

No. 03-05-00401-CV.

Court of Appeals of Texas, Austin.

March 31, 2006.

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Jane Lipscomb Stone, Shannon Simmons Pounds, Stone, Loughlin & Swanson, LLP, Austin, for appellant.

David L. Brenner, Amanda Lewis, Burns, Anderson, Jury & Brenner, LLP, Austin, for National American Insurance Company.

Gary L. Rodriguez, Austin, for Clayton Mark Beck.

Before Chief Justice LAW, Justices PEMBERTON and WALDROP.

OPINION

BOB PEMBERTON, Justice.

This is an appeal from a suit for judicial review of a workers' compensation decision concerning which of two companies— Jerry Gregory, Inc., or Hunter Trucking—was the employer of two workers at the time the workers were injured in a trucking accident. The outcome of this dispute, in turn, controls whether National American Insurance Company (NAIC), Gregory's workers' compensation insurance carrier, or Texas Property Casualty Insurance Guarantee Association (TPCIGA), the successor to Hunter's carrier, must pay medical and income benefits. After the Workers' Compensation Commission (the Commission) made a final determination that Gregory was the employer and NAIC was therefore liable to pay benefits, NAIC brought a suit for judicial review. However, after a jury trial under the "modified de novo" standard applicable to disputes relating to compensability, eligibility, or amount of income benefits, see Tex. Lab.Code Ann. § 410.301 (West Supp.2005), the district court rendered judgment on a verdict that Hunter was the employer, making TPCIGA the liable carrier.

TPCIGA appeals, contending principally that this dispute concerns "coverage," not compensability, and that "coverage" disputes must be decided under the substantial-evidence review regime of the Administrative Procedures Act. See id. § 410.255 (West 1996). TPCIGA contends that, by reviewing the administrative decision under the modified de novo standard, the district court exceeded its "subject-matter jurisdiction" to disturb the Commission's order. See Morales v. Liberty Mut. Ins. Co., 169 S.W.3d 485, 488 (Tex.App.-El Paso 2005, pet. filed).

We will affirm the judgment of the district court.

BACKGROUND

The underlying dispute centers on the business relationship between Hunter and Gregory. Gregory was a common carrier licensed by the U.S. Department of Transportation; Hunter owned tractor and trailer equipment. In July 2000, the companies executed an agreement whereby Gregory leased the "equipment and services" of Hunter. The agreement provided that:

• Gregory "shall have exclusive possession, control, and use of the equipment, and shall assume complete responsibility for the operation of the equipment for the duration of the lease."

• Hunter "is responsible for providing all fuel, meals and lodging, repairs and maintenance to tractor and trailer, tolls, ferries, detention, etc., necessary in the operation of equipment while in the service of [Gregory]."

• "[T]he services of [Hunter] under the terms of the lease agreement is that of independent contractor and that no `employee-employer' relationship exists between [Hunter] and [Gregory]. [Hunter] is therefore responsible for providing his own workman's compensation insurance, employment and income taxes, etc. Further, any drivers or employees of [Hunter] are the complete responsibility of [Hunter]."

• Gregory "agrees to compensate [Hunter] in the amount of 75% of gross revenues for each trip ticket. [Gregory] will provide all permitting necessary and will pay all fuel taxes."

In October 2000, Benjamin Brown and Clayton Mark Beck were injured in a single-vehicle accident while they were driving a truck owned by Hunter, pulling a trailer owned by Gregory, on a trip assigned to them by Gregory. Beck was left a paraplegic. Both Beck and Brown filed workers' compensation claims.

Hunter's workers' compensation carrier, Paula Insurance, and Gregory's carrier, NAIC, both denied liability for benefits, each maintaining that Brown and Beck were employees of the other's insured at the time of the accident. NAIC and Paula submitted the dispute to the Commission, and a benefits contested case hearing was held. See Tex. Lab.Code Ann. §§ 410.151-.169 (West 1996 & Supp.2005). The hearing examiner concluded that Gregory was the workers' employer at the time of the accident and that NAIC was thus liable for benefits. NAIC appealed to the Commission's appeals panel, id. §§ 410.201-.208 (West Supp.2005), which rendered a final decision affirming the hearing examiner's decision. See id. §§ 410.203-.204.

NAIC filed a petition for judicial review and a jury demand in McLennan County district court. As required by the workers' compensation act, Paula and the two injured workers, Beck and Brown, were named as defendants and served. See id. § 410.253. Paula filed a general denial and its own jury demand. While the case was pending, Paula was declared insolvent and placed in receivership, and the Texas Department of Insurance designated Paula as an impaired insurer. See Tex. Ins.Code Ann. art. 21.28-C, §§ 5(9), 8(b) (West Supp.2005). TPCIGA, which is statutorily obligated to discharge the policy obligations of impaired insurers, intervened and was substituted for Paula. See id. TPCIGA filed an agreed motion to transfer venue to Travis County, which was granted. See id. § 10(g) (venue in suit by or against TPCIGA in Travis County). The Commission subsequently intervened. See Tex. Lab.Code Ann. § 410.254 (West Supp.2005) (Commission may intervene in suit for judicial review of final decision of Commission's appeals panel).

NAIC and TPCIGA filed cross-motions for summary judgment, and the district court denied both, finding that fact questions remained regarding whether Brown and Beck were employees of Hunter or Gregory. Beck, who had previously answered with a general denial of NAIC's claims that he and Brown were Hunter employees, announced at trial that he instead agreed with plaintiff NAIC's position.¹ Beck proceeded to participate in the trial as a plaintiff, advocating, alongside NAIC, the position that he was a Hunter employee.

At the conclusion of the trial, the district court submitted a single issue to the jury: whether Hunter was the employer of Beck and Brown at the time of their injuries. The jury found in the affirmative. Following the verdict, but before judgment, Beck filed a motion to be realigned as a plaintiff, urging that he had "sat at Plaintiff's table, and vigorously advocated Plaintiff's position." Over TPCIGA's objection, the district court granted the motion. The court subsequently rendered judgment on the verdict that Beck and Brown were Hunter employees at the time of their accident and that TPCIGA was liable for benefits. TPCIGA appealed.

DISCUSSION

TPCIGA brings five issues on appeal. In its first issue, TPCIGA contends that the district court lacked subject-matter jurisdiction to adjudicate NAIC's suit for judicial review. In its second issue, TPCIGA complains that the district court erred in permitting Beck to participate at trial as a de facto plaintiff. In its third issue, TPCIGA challenges the legal and factual sufficiency of the jury's finding that Hunter was the claimants' employer at the time of the accident. TPCIGA's remaining two issues concern the district court's exclusion of two trial exhibits, a copy of the commission's appeals panel decision and a letter from Gregory's owner to Beck complaining of log book violations.

Subject-matter jurisdiction

In its first issue, TPCIGA presents a jurisdictional argument rooted in the distinctions between the Act's "two mutually exclusive categories" of appealable commission decisions and their corresponding "separate, distinct, and quite different judicial review paths." 1 John T. Montford, et al., A Guide to Texas Workers' Comp Reform § 6.64 cmt a (1991) [hereinafter "Guide"]. TPCIGA's contentions can be summarized: the parties and district court have ventured down the wrong judicial review path, and this error deprived the district court of subject-matter jurisdiction.

The Act's two judicial review paths

Under earlier workers' compensation law, courts reviewed final administrative determinations under a single de novo review standard, with a right to jury trial. See Rodriguez v. Service Lloyds Ins. Co., 997 S.W.2d 248, 252 (Tex.1999). In its 1989 revisions to the workers' compensation system, the legislature replaced that standard for judicial review with two different standards, "modified de novo" and substantial evidence. See id. at 252-53.

Under the "modified de novo" standard, the parties try, before the trial court or a jury, only those issues finally decided by the commission appeals panel, and the party appealing has the burden of proof by a preponderance of the evidence. Tex. Lab. Code Ann. §§ 410.304 (West Supp.2005). The trier of fact must consider, but is not bound by, the appeals panel's decision. Id. Venue in a suit for judicial review under the modified de novo standard is generally in the county where the injured employee resided at the time of injury. Id. § 410.252(b).

In disputes other than those governed by the modified de novo standard, the appeals panel's decision is appealable, if at all, under the more deferential substantial-evidence rule and "in the manner provided for judicial review of a contested case" under subchapter G of the Administrative Procedures Act. Id. § 410.255 (West 1996); see Tex. Gov't Code Ann. § 2001.171-.178 (West Supp.2005). Under subchapter G, the trial court sits without a jury and is generally confined to the agency record. Tex. Gov't Code Ann. § 2001.175(e). These provisions have been viewed as also requiring that any suits for judicial review...