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Update on Recent Insurance Law – May 2011

Author: H. Norman Kinzy

There have been a number of recent court decisions which are of significance to the practice of insurance law. These include cases dealing with the duties to defend and to indemnify under a CGL policy, the Texas Tort Claims Act, and numerous healthcare claims, inter alia.

Always, each case involves different facts and law, and accordingly the following must be taken for general information purposes only, rather than for action upon any specific fact situation.

Insurance - Commercial General Liability – The Separate Duties to Defend and to Indemnify:
In The Burlington Northern and Santa Fe Railway Company v. National Union Fire Insurance Company of Pittsburg, PA, 10-0064 (Tex. 2011), the Texas Supreme Court reversed a summary judgment in favor of the insurer because the Court of Appeals did not consider evidence extrinsic to the pleadings and insurance policy in determining whether the insurer owed a duty to indemnify. The Court of Appeals had determined that the insurer did not have a duty to defend under our “eight-corners rule” which requires a comparison of the allegations of the four corners of the petition with the four corners of the policy to see if a duty to defend arises, and had also held that there was no duty on the part of the insurer to indemnify the insured.

The Supreme Court assumed, without deciding, that the Court of Appeals had correctly decided that the insurer owed no duty to defend, but the Supreme Court went further and held that the Court of Appeals nevertheless erred by not considering all the evidence presented by the parties when it determined the question of the insurer’s duty to indemnify the insured. In other words, the gist of the Supreme Court’s decision is that unless the pleadings show that the policy’s contractual provisions and “other extrinsic evidence” cannot possibly bring the plaintiff’s claim within the policy’s coverage, then a court cannot find “no duty to indemnify” on the part of the insurer until that court has at some time in the future considered “all the evidence presented by the parties,” including all evidence extrinsic to the policy and pleadings which the parties might present.

Healthcare Liability Claims – Limitations – “Responsible Third Parties”:
In Molinet vs. Kimbrell, M.D., 09-0544 (Tex. 2011) the Supreme Court dealt with a healthcare liability claim where the plaintiff sued one doctor, but did not sue two other doctors until after the additional two doctors had been designated as “responsible third parties” under Texas’ Proportionate Responsibility Act, which designation did not occur until after the two year statute of limitations of the Texas Medical Liability Act had expired. Although Texas’ Proportionate Responsibility Act allows a sixty day extension of limitations to bring suit against additional defendants designated as “responsible third parties,” the Texas Medical Liability Act has an “absolute” two year limitation period. Since the Medical Liability Act provides (i) that its two year limitation period applies “notwithstanding any other law” and (ii) that the Medical Liability Act applies in the event any of its provisions conflict with any other statute, the Supreme Court analyzed both statutes, held that the two year limitations of the Texas Medical Liability Act controlled, and that the plaintiff’s claims against the two new “responsible third party” doctor-defendants were barred.

Healthcare Liability Claims - Failure to Serve Statutorily Required Medical Authorization with 60 Day Notice of Claim:
In Carreras, M.D., v. Marroquin, 09-0857 (Tex. 2011) a plaintiff gave the statutorily required Notice of Claim two days before the two year statute of limitations expired under Texas’ Medical Liability Act, but failed to accompany the Notice of Claim with the likewise statutorily required “Authorization Form for Release of Protected Health Information.” Noting that said statute provides in some situations for a sixty day abatement from the date when a medical authorization is in fact received, the Supreme Court analyzed the statute and its history, held that the requirement to provide the medical authorization form was mandatory, and ruled that a plaintiff’s failure to do so does not stop the running of the two year statute of limitations, thereby barring plaintiff’s claim.

Healthcare Liability Claims – Defective Equipment:
In another healthcare case, Turtle Healthcare Group v. Linan, 09-0613 (Tex. 2011), the Supreme Court reiterated one of its recent decisions and again held that claims based upon medical equipment can not be brought separately as claims both subject to the Texas Medical Liability Act and as claims not subject thereto. In other words all such claims involving equipment utilized in medical care must be brought under the Texas Medical Liability Act, and if the requirements of that statute are not complied with, such claims must be dismissed. In this case the healthcare provider was negligent in delivering a defective ventilator, battery and battery box. The Court held that the healthcare plaintiffs could not divide their claims relating to “defective batteries” from their “non-battery” claims, and that all such claims were subject to the Texas Medical Liability Act.

Damages - Illegal Immigrant Status – Wrongful Death:
In Republic Waste Services, LTD v. Martinez, 01-09-00236-CV (Tex. App. [1st District – Houston] 2011, no writ), our Houston Court of Appeals discussed the Trial Court’s exclusion from evidence of the illegal immigrant status of plaintiff’s decedent, even though the deceased illegal immigrant’s status was arguably relevant to the amount of recovery for lost future earnings based upon U.S. wages, as opposed to Guatemalan wages, and held that the Trial Court’s exclusion of the evidence of the deceased illegal immigrant’s status fell within the Trial Court’s discretion and was not an abuse thereof, because the relevancy of such evidence was outweighed by the risk of substantial prejudice which would have been caused by the admission thereof.

Texas Tort Claims Act – Suits Against Government- Employees Individually:
In Franka v. Velasquez, 07-0131 (Tex. 2011), the Supreme Court dealt with Section 101.106(f), Texas Tort Claims Act, which provides that a suit against a government employee acting within the general scope of his employment must be dismissed “if it could have been brought under this chapter against the governmental unit.” Noting that the Texas Tort Claims Act is not limited to encompass only tort claims for which the Act waives immunity against the State, the Supreme Court held that where a tort action is brought against an individual government employee in his individual capacity, such a claim is brought “under” the Texas Tort Claims Act even if the government has not waived its immunity for such actions, and such lawsuits against government employees in their individual capacities must be dismissed.