The Texas Supreme Court in Texas Mutual Insurance Company v. Ruttiger recently effectively gave Texas workers compensation carriers immunity for their bad faith misconduct committed during the claims handling process. In Ruttiger, Timothy Ruttiger was injured on the job and filed a workers’ compensation claim. The employer took the position that Ruttiger’s injury was not job related. Anyone who has dealt with workers’ compensation adjusters knows that their evaluation as to whether an injury is work-related is little more than a hunt for an excuse to deny the claim. The employer’s unsupported assertion was more than enough for the Texas Mutual Insurance adjuster and the claim was denied.
At trial the credible evidence proved both that Ruttiger had sustained an on-the-job injury and that Texas Mutual had acted in bad faith in denying the claim. The First Court of Appeals in Houston upheld the Trial Court and Texas Mutual appealed to the Texas Supreme Court. The Texas Supreme Court recently issued an opinion reversing the First Court of Appeals and eliminating the common law cause of action for breach of the duty of good faith and fair dealing in connection with the handling of a workers’ compensation claim.
Insurance companies are purely economic institutions. They have no conscience and are amoral in their approach. This is not so much a criticism but rather a simple and candid observation that an insurance company will do what is in its’ economic best interest. The potential for a bad faith claim gives the carrier the economic interest to act in good faith. Without the potential for a bad faith claim hanging over the insurance company’s head unchecked workers’ compensation company bad faith will likely become norm.
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