Yesterday morning the Texas Supreme Court heard oral argument in Texas Mutual Insurance Co. v. Timothy Ruttiger. In this workers compensation bad faith case, Texas Mutual requests to be immune from liability for violations of the Texas Insurance Code and seeks to avoid any accountability before a court or jury for bad faith conduct on the part of its managers, supervisors and adjusters. In doing so, the state’s largest workers’ compensation insurance company asked the Texas Supreme Court to overturn many years of precedent recognizing the important legal obligation to handle claims in good faith and to abrogate the Texas Insurance Code.
At oral argument, four Justices seemed to express skepticism on various grounds about Texas Mutual’s immunity bid, while two suggested otherwise in their comments and questions. The argument was attended by Texas Mutual’s executives as well as a number of their lawyers, and representatives of other insurers that write workers compensation insurance in Texas were also present. One insurance carrier, Liberty Mutual, even hired former Chief Justice Tom Phillips to write an amicus brief in support of Texas Mutual’s arguments. Ruttiger represents the third attempt in recent decades (following the Aranda and Fodge decisions) where the insurance industry has made this same immunity pitch to the Texas Supreme Court. Those prior attempts were rejected by the Court.
The case arises out of Texas Mutual’s denial of a workers’ compensation claim, and the case was tried to a verdict in Galveston County in 2006. The jury found that Texas Mutual violated the Texas Insurance Code and committed bad faith by failing to conduct a reasonable investigation into the claim and denying our client Tim Ruttiger’s insurance benefits without a reasonable basis. The First Court of Appeals affirmed the judgment in favor of Mr. Ruttiger. Texas Mutual made a number of complaints to the Texas Supreme Court, but at oral argument put front and center their request for outright immunity from any liability whatsoever.
The state of the law is clear, and we are confident it will remain so. The Court has previously rejected the same immunity arguments Texas Mutual made this week, and the Texas legislature has both tacitly recognized a cause of action for bad faith and has never overruled any of the prior Texas Supreme Court decisions recognizing this important legal right. Perhaps best summarizing the issues, when Texas Mutual’s counsel threw a barb (at about 39:55 on the attached video) about workers and their lawyers being “unscrupulous,” one of the justices asked “so what do we do about the unscrupulous claims adjuster?” under the insurance industry’s proposed immunity regime. That is certainly a good question, and one that we hope will guide the Court’s decision in this very important case.