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Update on Recent Insurance Law – December 2011
Author: H. Norman Kinzy, Oliver B. Krejs, Kent D. Williamson
There have been a number of recent court decisions, which are of significance to the practice of insurance law. These include cases dealing with workers' compensation extra-contractual claims and lifetime benefits, the interpretation of "all risk" policies and toxic torts.
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.
Workers' Compensation Insurance - Extra-Contractual Claims:
In Texas Mutual Insurance Company vs. Ruttiger, 08-0751 (Tex. 2011), the Texas Supreme Court examined earlier case law in light of Texas' current workers' compensation statutory scheme, and held that an injured worker has no claim under the Insurance Code against a workers' compensation insurer for unfair claim settlement practices. However, the court also ruled that claims under the Insurance Code may be made by a plaintiff against an insurer for misrepresenting provisions of an insurer's policy of workers' compensation insurance. Finally the court sent the case back to the intermediate court of appeals to determine whether or not the currently existing common law remedy for breach of the covenant of good faith and fair dealing ("bad faith") against a workers' compensation insurer should be overruled in light of the current workers' compensation statutory scheme.
"All Risks" Insurance Policy - Effect of Manuscript Deletions from Policy Form:
In The Houston Exploration Company and Offshore Specialty Fabricators, Inc., v. Wellington Underwriting Agencies, Ltd., 08-0890 (Tex. 2011), the Texas Supreme Court dealt with a London market "all risk" property damage insurance policy, wherein the parties thereto had manually stricken through, and thereby deleted, several provisions of the policy which would have otherwise provided coverage for certain items, e.g., coverage for certain "weather stand-by charges" in connection with damage to an offshore drilling platform. In rejecting the insured's claims for coverage, the Texas Supreme Court held that deletions in a printed form agreement are indicative of the parties' intent, and that such changes in a printed form must be accorded special weight in construing the instrument. For those reasons the court concluded that the manual deletion of the policy paragraph in dispute effected the removal of coverage for "weather stand-by charges" from the policy.
Pharmaceuticals - Products Liability - Toxic Torts - Causation:
In Merck & Co., Inc. v Garza, 09-0073 (Tex. 2011), the Texas Supreme Court discussed the evidence required to prove causation in products liability cases arising from pharmaceuticals in general and Vioxx in particular. The Supreme Court revisited its decision in Merrill Dow Pharmaceuticals, Inc., v Havner, adhered to that decision, and held that properly designed and executed epidemiological studies may be part of the evidence supporting causation in a toxic tort case, but such studies must be analyzed closely by the court and such studies should show that there is at least a "doubling of the risk" between a pharmaceutical product and the claimed injury in order to satisfy Texas' "no evidence standard of review" as well as the plaintiff's burden of proof that the product in question "more likely than not" caused the injury. A discussion of all aspects of this causation ruling is beyond the scope of this case note, but the court discusses in detail the required analysis of epidemiological studies which is required to validate such studies as proof of medical causation.
Workers' Compensation - Lifetime Income Benefits - Loss of Enumerated "Body Parts":
In Insurance Company of the State of Pennsylvania v Muro, 09-0340 (Tex. 2011), the Texas Supreme Court dealt with whether an award of lifetime income benefits could be made to an employee for loss of use of certain statutorily enumerated body part(s), where the loss of one's ability to use the enumerated body part(s) was not caused by physical loss to the specified body part itself, but is due to injury to a non-enumerated "body part." In this case, the plaintiff claimed that injuries to her non-enumerated hips prevented her from walking normally, thereby effecting a loss of the use of her statutorily enumerated feet, entitling her to lifetime benefits for loss of her feet. In reversing an award for the plaintiff, the Supreme Court noted expert trial testimony that the plaintiff's feet were "functioning fine" and "normal functioning" when taken alone. Thus, the Supreme Court denied lifetime compensability, and stated that although "the injury to the statutory body part may be direct or indirect, … the injury must extend to and impair the statutory body part itself to … allow lifetime benefits."