Texas Injury Lawyer Blog

Personal injury damages are generally not taxable. The notion is that when an injury victim sustains damages as a result of the tortuous conduct of another and subsequently obtains a recovery of personal injury damages that they are merely recouping a loss. The recovery of this loss does not result in any new income or increased benefit to the victim and they have simply been made whole or put back in the same position that they were in before the injury. Thus there is no taxable event. This is the general rule and as with all general rules there are exceptions.

Internal Revenue Code §104(a)(2) generally excludes from gross income all amounts recovered in connection with a personal injury claim. In order to qualify for this IRS exclusion the recovery must be the result of a physical injury and must have been caused by the tortuous conduct of another. In the situation where the tortuous conduct results in physical pain, mental anguish, physical impairment, disfigurement, medical expenses, loss of wage earning capacity, or other traditional elements of Texas personal injury damages then the recovery of those damages is not taxable.

The argument against taxing the recovery of "lost wages" under Texas law has been strengthened by recent legislative changes. Technically, Texas personal injury claimants have historically been limited to recovering "loss of wage earning capacity" rather than "lost wages" and the recovery of loss of wage earning capacity has not been included in taxable income under §104. This position was strengthened in 2003 when the Texas legislature enacted Civil Practice and Remedies Code §18.091. Section 18.091 provided that evidence of loss of earning capacity must be presented to the jury as a net loss after reduction for income tax payments. Thus the recovery of "loss of earning capacity" in Texas is "after tax" and it stands to reason that it would not be included in gross income for IRS purposes.

There are several notable exceptions to the §104 exclusions. Punitive damages are taxable. A claimant who recovers punitive damages is making a recovery over and above the claimant's actual damages and thus the recovery of punitive damages amounts to new income to the claimant and they are appropriately taxable. However, it is important to note an exception to this exception exists in connection with gross negligence claims against employers who have worker's compensation insurance and cause the death of an insured employee. Mental anguish damages which are not accompanied by a physical injury, such as in a case involving the intentional infliction of mental anguish, are taxable. Likewise, lost wages recovered in connection with a breach of an employment contract or an employment discrimination claim are taxable. There are additional less common exceptions.

While the general rule remains that personal injury recovery is not subject to federal income tax treatment the successful personal injury claimant would be well advised to consult with an income tax professional before spending their recovery.

Reglan is the marketing name for metoclopramide, a drug used to treat a variety of conditions but best known for its use to treat gastroesophageal reflux disease (GERD) symptoms such as the heartburn and ulcers which result from GERD. Because of it's many complications and side effects Reglan is a secondary treatment for the symptoms and is used in situations in which primary treatments were unsuccessful. In simple terms, Reglan works by accelerating the flow of food through the digestive tract and thus reducing the time and opportunities for complications.

The disclosed Reglan side effects are far too numerous to list and discuss. The list of side effects is so exhaustive that it leads the ordinary user to believe the side effects have been exaggerated. However, notoriously absent from the disclosed side effects is the most serious known side effect, tardive dyskinesia. Tardive dyskinesia is a movement disorder which commonly involves the uncontrollable movement of the facial muscles. These uncontrollable facial movements include jaw clenching, chewing motions, lip puckering, grimacing, eyelid movements, and squinting. Reglan can also cause uncontrollable body movements to other parts of the body.

Reglan related movement disorders are usually associated with the use of Reglan over extended periods of time and are often permanent. Patients would be well advised to consider less risky alternatives to Reglan.

Bayer Healthcares' contraceptive Yaz continues to cause gall bladder disease. Marketed under the names Yaz, Yasmin and Ocella, Yaz is a widely used hormone based contraceptive. Bayer claims that Yaz helps to control premenstrual dysphoric disorder symptoms, commonly referred to as PMDD, such as anxiety, irritability, moodiness, bloating, headaches, and muscle pain. Bayer also claims that Yaz suppresses acne.

Yaz hit the market with a host of known side effects including heart attack, stroke, blood clots, headaches, mood swings, and acne. Yaz apparently causes some of the same problems that Bayer claims that Yaz cures. Yaz is also known to cause gall bladder disease, a complication that is noticeably absent from any of Bayers' disclosures. Yaz causes an increase in the production of gallstones which can become lodged and require the laproscopic removal of the gallbladder. Yaz victims must then deal with the complications of gall bladder removal.

Texans who have been injured or have a wrongful death claim for the loss of a loved one arising out of a defective product should be aware of the Texas products liability statute of repose. Section 16.012 of the Texas Civil Practice and Remedies Code provides that a products liability action must be brought within 15 years from the date of the original sale by the defendant.

It is important to note that the event which starts the 15 year clock ticking is the sale by the defendant. The primary defendant in a Texas products liability action is usually the manufacturer. Keep in mind that the purchase by a consumer may take place a considerable time after the statute of repose starts to run. For example, consider the situation in which a truck is manufactured in 1993, sold to a dealer in January of 1994, sold to a consumer in January of 1995, and driven for 15 years by the original consumer who rolls the truck over in January of 2010 and is killed when the roof pillars allow the roof to crush. Because the applicable statute of repose runs from the date of the sale by the defendant (January of 1994), the Texas statute of repose on the wrongful death case against the manufacturer starts to run in January of 1994 and expires in January of 2009. While the roof crush case and the resulting wrongful death claim would normally be subject to a two-year statute of limitations from the date of the accident the claim would be barred by the applicable statute of repose before the cause of action accrued.

In this scenario there is nothing the wrongful death claimants could have done to avoid the statute of repose. However, being aware of the statute of repose becomes critical in situations where the statute of repose expires during the applicable statute of limitations. Using the above scenario assume that the truck was originally sold by the manufacturer to the dealer in January of 1996. Under this scenario, the two-year statute of limitations on the wrongful death and survivor claims arising out of the roof crush case which occurred in January of 2010 would not expire until January of 2012. However, the statute of repose would bar the claims when it expired in January of 2011, one full year before the 2 year statute of limitations expired.

Texas victims of a defective product should calculate not only the applicable statute of limitations but also the applicable statute of repose.

Bystander recovery claims are claims for negligent infliction of mental anguish which are available under Texas law to a limited class of persons who contemporaneously witness the serious injury or death of a loved one. The three main elements of a bystander recovery claim are as follows:

1) The claimant must show that they were at or reasonably near the scene of the accident as opposed to some distance away. With the rapid advance of modern technology and the increase in remote monitoring and imaging it is easy to imagine how a family member might inadvertently view the injury or death of a loved one from distances as far away as a foreign country. These situations are unlikely to meet the location requirement of a bystander recovery claim.

2) The bystander recovery claimant must show that he experienced shock and emotional trauma from a contemporaneous perception of the accident as opposed to learning of the accident and purposely traveling to the scene of the accident. Good examples of qualifying contemporaneous perceptions are when a parent witnesses a child being struck and killed by an automobile, a wife who is a passenger in an automobile being driven by her husband witnesses the death of her husband during the accident, or a family member happens upon an accident unknowingly only to realize that they are viewing the death of a loved one.

3) The bystander recovery claimant must show that they were closely related to the victim. The relationship requirements in a bystander recovery claim are less strict than in a wrongful death claim. Texas wrongful death claimants are limited to parents, spouses, and children. The class of persons entitled to make a wrongful death claim is limited and the applicable statute is very narrowly and strictly construed. The right to make a wrongful death claim does not turn upon the claimant's relationship with the deceased. Even estranged family members who fall within the statutory definition of wrongful death claimants have a right to make a wrongful death claim. By contrast, the right to make a bystander recovery claim depends in part upon the extent of the relationship between the claimant and the injured or deceased victim. Parents, spouses, children, step-parents, step-siblings, grandparents, and other persons who have long standing familial type relationships with the injured or deceased victim have been found by Texas courts to have a right to make bystander recovery claims.

Bystander recovery claims are important even to persons who have a right to make a wrongful death claim because of their insurance coverage implications. Many Texas insurance policies have per person limits. These per person limits limit the amount of insurance available to any single injured person and include in that limit the claims of persons making derivative claims such as wrongful death claims. However, under Texas law a bystander recovery claim is an individual, free standing tort claim and gives rise to an additional per person insurance limit. For example, a common Texas insurance policy is one which provides $100,000.00 in liability coverage per person and $300,000.00 in total coverage per accident. If a drunk driver crosses the center line of a highway and kills a husband but causes no significant physical injuries to his wife who was a passenger in the vehicle then the husband's claim together with the wife's wrongful death claim is limited under Texas law to one per person policy limit in the amount of $100,000.00. However, because the wife can satisfy the three bystander recovery claim requirements she is also entitled to make an individual claim for bystander recovery for contemporaneously witnessing the death of her husband. This bystander recovery claim qualifies for an additional per person limit of liability thus doubling the amount of the available insurance coverage from $100,000.00 to $200,000.00.

Texans who witness the serious injury or death of a loved one would be well advised to investigate the possibility of a bystander recovery claim.

On April 1, 2008, the Texas minimum required insurance was increased for the first time in years from $20,000/$40,000/$15,000 to $25,000/$50,000/$25,0000. What this means is that after April 1, 2008, the minimum Texas auto liability insurance policy provides $25,000 in liability insurance per person, $50,000 in total liability coverage per occurrence, and $25,000 in property damage coverage. Many people are led to believe during the insurance sales process that by buying insurance they are "covered" without limitation for any damages which they might cause in an automobile accident. This is an incorrect understanding of the Texas minimum limits insurance policy. A minimum policy provides only $25,000 in coverage per injured person. This per person limit applies regardless of whether the injured person sustains $25,000 in damages or $25,000,000 in damages. The $50,000 "per occurrence" limit sets a maximum that the policy will pay for personal injury damages for any single event, occurrence, or interrelated sequence of events. If two people are severely injured as a result of the negligence of the insured driver then the policy will pay a total of $50,000 in damages. If two hundred people are injured the policy will still only pay a total of $50,000 for that occurrence.

The third number in the sequence is the property damage limitation. If you run a red light and destroy a $25,000 automobile then the policy will pay $25,000. If you run a red light and destroy a $300,000 Rolls Royce then the policy will pay a maximum of $25,000. If you run off the road while texting and clip the hose at a gas station next to a Mercedes dealership and cause an explosion which burns up 400 vehicles worth $30,000,000 then your insurance will pay a total of $25,000 in property damage.

Understanding insurance coverage limitations gets a little more complicated in wrongful death cases. The minimum insurance policy will pay a maximum of $25,000 for each person killed up to a maximum of $50,000 per occurrence. The per person limitation of $25,000 includes not only the claims of the deceased person but also all derivative claims. Derivative claims are those claims which accrue to people who are not actually involved in the accident. Wrongful death claims are derivative claims. Under Texas law parents, spouses, and children of the deceased person have a right to make a wrongful death claim. All of these claims are subject to the per person insurance limits. For example, if a young father is killed in a truck accident and is survived by his parents, wife, and children, then all of these claims together in addition to the estate's claim is limited to a single $25,000 limit of liability.

An exception to the rules regarding derivative claims occurs when a wrongful death claimant also has a bystander recovery claim. A bystander recovery claim constitutes an independent, free standing claim under Texas law and gives rise to an additional per person limit.

The minimum required limits are schedule to increase on January 1,2011 to $30,000/$60,000/$25,000.

In the case of Irving Holdings, Inc. v. Brown the Dallas Court of Appeals held that Texas Practices and Remedies Code Section 41.0105 is a rule of recovery and not a rule of damages and should be applied after the fact finder's determination of damages based on the claimant's reasonable and necessary medical expense affidavits and after other statutory limitations and/or offsets. In so holding, the Dallas Court of Appeals stated that Section 18.001 affidavits were "sufficient evidence to support a finding of fact by judge or jury that the amount charged was reasonable or that the service was necessary."

By contrast, in the case of Garza de Escabedo v. Haygood the Tyler Court of Appeals held that under Section 41.0105 medical affidavits showing the amount of the medical bills were insufficient evidence as a matter of law to support a medical damages verdict.

Apparently the Texas Supreme Court agrees with the Dallas Court of Appeals Irving Holdings opinion and disagrees with the Tyler Court of Appeals Escobedo opinion as the Texas Supreme Court has denied the petition for review in the Irving Holdings matter and granted the petition for review in the Escobedo matter. Historically, when the Texas Supreme Court grants a petition for review it reverses some portion of the underlying opinion in more than 80% of such instances.

When taken as a whole, these developments suggest that the appropriate method of addressing the paid v. incurred issue is to submit all of the medical bills to the jury and then to reduce the medical damages to the "paid" amount after the verdict and after any other offsets or credits.

During the twenty-five years that I have been handling truck accident cases I've run across a number of truck drivers who had exceeded the maximum allowable driving time. Department of Transportation regulations limit a truck driver to a maximum of eleven hours driving and fourteen hours on duty before he must go off duty for a ten hour period of rest. Yet I've never seen a set of truck driver's log books that accurately showed the number of hours that the driver had been on duty when he had in fact exceeded the maximum allowable on duty hours. Proving that a truck driver has actually been driving for more than eleven hours or on duty for more than fourteen hours requires a comprehensive investigation and analysis of many different factors. The investigation starts with the hours that the truck driver will admit that he was driving or on duty. The "on duty" and "off duty" times thereby set the alleged starting and ending point of the day's driving. Then the investigation moves to the identification of activities which can be documented as to time and place. Good examples of this documentation include fuel tickets, traffic citations, toll tickets, toll booth videos, fuel station security videos, delivery receipts, GPS data and cellular phone records. This information is combined with the distance traveled and the posted speed limits along the route traveled. By using this documentation and information to determine the trucker's location along his designated route at various known times it can often be established that the driver necessarily must have been driving in excess of the maximum allowable time. With this information you can prove that the trucker falsified his log books, exceeded the maximum allowable driving hours, and probably committed perjury.

I frequently run into trucking companies that attempt to call their drivers "independent contractors" in an attempt to avoid liability for a truck accident caused by their truck driver. The trucking company usually has the truck driver sign an agreement stating that the truck driver is an independent contractor. However, a close analysis of the employment agreement and the day to day relationship between the trucking company and the truck driver usually establishes that the truck driver is actually an employee and not an independent contractor. The test for whether or not a worker is an employee of an employer resulting in the employer's legal responsibility for the actions of the employee pursuant to the doctrine of respondeat superior is whether the employer had the right to control the details of the work of the employee. The employer doesn't have to actually control the details of the employee's work. Respondeat superior liability will be established if the employer had the actual right to control the details of the work even though the employer chose not to exercise that right.

The typical independent contractor agreement used by a trucking company states that the driver is an independent contractor but then goes on to give the employer the right to control the details of the work such as:

1. Requiring the driver to accept certain loads;

2. Designating the manner in which the driver loads, unloads, and secures his load;

3. Prohibiting a driver from having passengers in his truck;

4. Requiring the driver to use designated fuel suppliers;

5. Requiring a driver to follow a designated communication schedule or designated communication protocol;

6. Requiring the driver to have a company GPS unit installed in his truck so that the company can monitor the driver's progress;

7. Requiring the driver to adhere to a delivery schedule;

8. Requiring the driver to follow designated delivery routes; and,

9. Prohibiting the driver from hauling loads for other carriers.

After a truck accident trucking companies quickly attempt to use their independent contractor agreements to distance themselves from the driver and his negligent actions. A thorough investigation of the trucking company's right to control the day to day activities of their driver in these situations usually results in the trucking company being found to be the employer of the driver and being responsible for the truck driver's actions.

The DTPA offers a powerful tool for forcing wrongdoers to do the right thing in situations where the amount of money at issue might not otherwise justify the expense of litigation. Unfortunately, every industry has abusive practices that survive only because of a lack of enforcement of the civil laws. The DTPA was designed to address such situations. The DTPA applies to false, misleading and deceptive trade practices in connection with the sale of a good or service. The DTPA requires that a demand letter be sent to the wrongdoer setting forth the wrongful acts and demanding the payment of the resulting damages and attorneys fees. If the wrongdoer fails to pay the demand then the victim may proceed with the filing of a DTPA lawsuit and recover statutory damages. If the judge or jury finds that the Defendant "knowingly" violated the DTPA then the victim may recover three times the economic damages. The victim may also recover mental anguish damages. If the trier of fact finds that the Defendant acted intentionally then the trier of fact may award an amount equal to three times the mental anguish damages. In addition to actual damages and treble damages the victim may also recover costs and attorneys fees. Properly used the DTPA provides an economically feasible method of correcting and deterring small damage abusive practices.

Everybody has heard the media version of the McDonalds hot coffee case but nobody seems to have heard the truth. What the media never mentions are the facts that led a jury of conservative people to the conclusion that McDonalds not only caused Stella Liebeck's injuries but also desperately needed to be punished. The pertinent, and usually ignored, facts are that McDonalds maintains their coffee at 180 degrees which is about the temperature of the radiator on an automobile on a hot summer day. Hot coffee at 180 degrees will cause third degree burns in a matter of seconds. Sure, poor Stella Liebeck spilled her coffee in her lap and that's her fault. Her punishment should have been stained sweat pants. However, what she received was almost unimaginable. She received third degree burns to her thighs and genitals. Her burns were so severe that she was hospitalized in a burn ward where her wounds were debrided. Burns are debrided by taking a tool somewhat akin to a cheese grater and scraping away the dead flesh until you hit tissue that bleeds. Over the next year Liebeck underwent plastic surgery and skin grafts on her legs and genitals. Still, all Liebeck wanted was $20,000 to help pay for her medical bills. McDonalds told her to get lost.

McDonalds claimed to be unaware of the danger presented by radiator hot coffee and swore that they had never had another complaint or injury as a result of the temperature of their coffee. Liebeck's counsel ultimately was able to document that McDonalds had received over 700 complaints of injuries caused by the temperature of their coffee, including several as serious as Liebeck's, but had chosen to ignore the complaints because of the profitability of their coffee. The jury awarded Liebeck only $160,000 in actual damages, a rather modest sum considering the severe nature of her injuries. The same jury was so offended by McDonalds' corporate lack of concern for their customers' injuries and their calculated dishonesty that they assessed $2,700,000 in punitive damages against McDonald. The judge reduced the award to $640,000 almost immediately and the matter was settled while on appeal for considerably less than the amount awarded by the judge.

If the true facts of this case still sound frivolous to you then maybe you should drain your radiator onto your lap and rethink the issue.

Most of my clients are nice, responsible people who have suffered significant injuries through no fault of their own. They would have liked to have been able to resolve the matter directly with the liability insurance carrier and made substantial efforts to do so. They made the decision to hire a lawyer as a last resort. Yet many of them still feel the need to make sure that I understand up front that they "don't believe in lawsuits." They then proceed to explain to me how they were blameless in causing their injuries, how difficult dealing with their injuries has been, how they only want to be treated fairly and how the insurance adjuster has ignored and abused them to such an extent that they feel that they have no choice but to hire a lawyer and file a lawsuit.

We have all been brainwashed by many years of insurance company propaganda to subconsciously believe that all lawsuits filed by other people are frivolous and bad while we continue to rationally analyze our own situations and conclude that when necessary a lawsuit is a good thing and should be pursued. I offer as a prime example one of the leaders of the East Texans Against Lawsuit Abuse. This gentlemen is an outspoken critic of lawsuits yet at last count he had filed more than sixty lawsuits. Obviously he believes that a good lawsuit is one which he files and a frivolous lawsuit is one filed by someone else. No one wants to be one of those "other people" who filed a lawsuit that we have been conditioned to believe is groundless or unnecessary. Yet few stop to think that those "other people" were also blameless, dealing with difficult injuries, only wanted to be treated fairly, and were ignored and abused by an insurance adjuster before they filed one of those "other people" lawsuits.

For as long as anyone who is alive today can remember an accident victim in Texas has had a right to recover the reasonable amount of their accident related medical expenses. Then in 2003 the insurance lobby, the so-called Texans for Lawsuit Reform, sought to limit victims to recovering only their deductibles, co-pays, and other out of pocket expenses. The health insurance lobby fought back, fearing that the victims would not recover enough medical damages to repay the health insurance company. The outcome was Texas Civil Practices and Remedies Code section 41.0105 which limits an injured Texan to recovering the amount "actually paid or incurred." Under normal rules of construction "paid or incurred" would simply mean that the victims could choose between the alternative measures of damages.

This was not what the insurance lobby, the Texans for Lawsuit Reform(TLR), had in mind and they launched a vigorous campaign to have the statute interpreted and applied in a way which limited accident victims to recovering only the amount of the medical expenses that had been paid by health insurance or the amounts actually paid out of pocket by the victims. Furthermore, the alternative language in the statute gave rise to a quagmire of unanswered legal and procedural questions. In 2005 the Texas legislature voted almost unanimously to repeal the problematic statute but Governor Rick Perry, pursuant to instructions from TLR, vetoed the repeal. The political wrangling regarding this issue continues.

Texas courts continue to struggle with how to apply the "paid or incurred" standard. The prevailing practice is to apply traditional rules of evidence and submit all of the victim's medical bills to the jury and after the verdict to reduce the amount of the medical expenses awarded by the jury to the amount paid by health insurance, out of pocket, etc. This method of applying the paid or incurred statute post verdict has been approved by most of the Texas appellate courts that have written on the issue. However, the Twelfth Court of Appeals that covers Tyler and the surrounding seventeen county area has ruled in the Escobedo case that only the "paid" amount of the medical bills should be submitted to the jury.

The net result of the paid or incurred confusion is that an injured East Texan might:
1. Submit and recover all of their accident related medical expenses;
2. Submit all of the accident related medical expenses but only recover the amounts paid by health insurance, out of pocket, etc; or,
3. Be limited to submitting and recovering only the "paid" amounts.

These uncertainties make evaluating medical expense damages extremely difficult by all sides and beg for sensible legislative reform.

During the last several sessions of the Texas Legislature the changes to the medical negligence laws have been substantial. Generally, health care liability claims have a two year statute of limitations which does not begin to run on minors until their eighteenth birthday. There are a variety of caveats and limiting doctrines so the potential claimant would be well advised to seek advice early on. A claimant is required to file an expert report within 120 days of the filing of a lawsuit addressing both malpractice and the causation of damages. This is true regardless of whether the case requires expert testimony. For example, if you go in for surgery and the surgeon amputates the wrong leg you must pay a surgeon to author a report stating that it is beneath the standard of care to remove a healthy leg by mistake.

The most notable of the changes are the damages caps. In medical malpractice actions filed after September 1, 2003, noneconomic damages from individual defendants are limited to $250,000 and noneconomic damages from institutions are limited to $250,000 each with a maximum from all institutions of $500,000. Under the current statutes the average injured patient is entitled to recover their medical expenses, lost wages, and a maximum of $250,000 from the physician plus an additional $250,000 if the hospital or clinic can be held responsible. This is true regardless of the severity of the injuries.

The changes to the law are not intuitive and those unfamiliar with their complete meaning should seek assistance.

Basic Texas personal injury damages are limited to physical pain and mental anguish, physical impairment, disfigurement, medical care and loss of earning capacity.

There is no exact definition of physical pain or specific evidence required to prove physical pain. A jury has wide latitude on this issue and may simply infer the existence of physical pain in the event of a serious injury. Mental anguish is more than normal concern or worry and requires proof of a high degree of mental pain and anxiety to such an extent that it disrupts the victim's life. Physical impairment damages are separate and distinct from the other elements and address the inability to engage in activities to such an extent that it causes a disruption of the victim's former lifestyle. Physical impairment is distinct from the inability to continue in gainful employment and focuses on disability that results in a substantial disruption of a former lifestyle. Disfigurement, like physical pain, uses the ordinary meaning of the term and is a matter of degree with the jury having broad discretion. Medical care includes the reasonable and necessary medical expenses, both in the past and in the future, required to treat the accident related injuries. Loss of earning capacity is the inability to engage in gainful employment for which one is otherwise qualified. In most cases the amount of the injured person's actual lost wages are submitted to the jury. However, someone who was between jobs, unemployed, on sabbatical, etc. would nonetheless be entitled to recover the reasonable amount of income which they could have earned during the period of accident related disability.

The spouse of an injured person also has a right to make a claim for loss of household services and consortium. Loss of household services includes the loss of domestic services and support. This element of damages is often used to recover additional expenses incurred in the home during a period of disability such as additional maid services. Loss of consortium includes the loss of care, comfort, society, emotional support, sexual relations, and companionship necessary to a successful marriage. While loss of consortium damages are technically available any time a spouse is injured most jurors tend to think that a certain amount of such damages are included in "for better or worse" and thus loss of consortium damages are usually only asserted where there are serious or disabling injuries to a spouse.