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Wausau Underwriters Insurance Co. v. Wedel

Court of Appeals of Texas, Eighth District, El Paso

April 26, 2017

WAUSAU UNDERWRITERS INSURANCE COMPANY, Appellant,
v.
JAMES WEDEL AND MICHELLE WEDEL, Appellees.

         Appeal from the 205th District Court of El Paso County, Texas (TC# 2013DCV3496)

          Before McClure, C.J., Rodriguez, and Palafox, JJ.

          OPINION

          GINA M. PALAFOX, Justice

         In this appeal, we interpret a worker's compensation policy that includes an endorsement waiving subrogation rights. Appellant, the compensation carrier of the policy, asserts that the trial court erred in granting summary judgment in favor of James Wedel, an injured worker who filed a suit for declaratory judgment against the carrier. The carrier contends that the policy endorsement that waives subrogation rights from a liable third-party, as listed on a schedule, does not apply to the injured worker himself. The carrier claims it remains entitled to reimbursement from the worker and seeks recovery of benefits it paid from settlement proceeds the injured worker recovered from a liable third-party listed in the endorsement. The carrier additionally raises a choice of law issue. We affirm the trial court's judgment. Tex.R.App.P. 43.2(a).

          BACKGROUND

         Relevant Contract and Insurance Provisions

         Western Refining Company, L.P., maintains and operates asphalt terminals at various locations from which asphalt may be loaded into transport trucks that are owned or operated by others. Western executed an asphalt terminal access agreement (the contract) with Cactus Transport, Inc., granting Cactus access to Western's asphalt terminals for purposes of loading asphalt into Cactus' trucks for the benefit of customers of Western, or Western's exchange partners, or for Cactus' own benefit as a customer of Western. In the contract, Western required and Cactus agreed that Cactus would obtain workers' compensation insurance coverage with a waiver of subrogation rights favorable to Western and its affiliated entities. Specifically, the Western contract required that the compensation policy must "be ENDORSED to contain a waiver of subrogation against the WESTERN ENTITIES, " which refers to "WESTERN, its parent, subsidiary and affiliated companies, and their respective officers, agents and employees[.]"

         Complying with the Western contract, Cactus purchased and Wausau Business Insurance Company (Wausau) issued a worker's compensation policy to Cactus. The policy contains a provision entitled, "Recovery From Others, " which declares, "We have your rights, and the rights of persons entitled to the benefits of this insurance, to recover our payments from anyone liable for the injury." As required by the Western contract, however, Cactus purchased and Wausau included a "WAIVER OF OUR RIGHT TO RECOVER FROM OTHERS ENDORSEMENT, " for an additional premium, which provides:

We have the right to recover our payments from anyone liable for an injury covered by this policy. We will not enforce our right against the person or organization named in the Schedule. This agreement applies only to the extent that you perform work under a written contract that requires you to obtain this agreement from us.
This agreement shall not operate directly or indirectly to benefit anyone not named in the Schedule.

         Schedule

         ANY PERSON OR ORGANIZATION REQUIRED BY WRITTEN CONTRACT. STATE OF ARIZONA:

THE PREMIUM CHARGE FOR THIS ENDORSEMENT SHALL BE 5% OF THE PREMIUM DEVELOPED IN CONJUNCTION WITH WORK PERFORMED FOR THE ABOVE PERSONS OR ORGANIZATIONS SUBJECT TO A MINIMUM PREMIUM OF $250 PER PERSON, ORGANIZATION OR JOB.

         Cactus' Employee is Injured at Western's Asphalt Terminal

         Cactus employed Appellee James Wedel, an Arizona resident, as a commercial driver working out of its Arizona office. On October 15, 2012, Wedel fell and sustained brain and spinal cord injuries while attempting to load asphalt at Western's facility in El Paso, Texas. Wedel suffered paraplegia as well as profound cognitive defects sustained by his work injury.[1] Pursuant to Cactus' workers' compensation policy, Wausau asserted that it paid Wedel approximately $1, 548, 822 in compensation benefits as of August 12, 2015.

         The Lawsuit

         On September 11, 2013, Wedel and his wife, Michelle, sued Western seeking damages arising from Western's alleged third-party negligence and gross negligence. On December 3, 2013, Wausau intervened in the third-party suit asserting its subrogation rights for past medical expenses and indemnity payments, as well as future medical and indemnity payments it may be required to pay due to Wedel's covered injury. In response, Western asserted that Wausau had no right of subrogation or right of recovery against Western pursuant to the terms of Western's contract with Cactus and the express waiver of subrogation endorsement included in the worker's compensation insurance policy. On September 12, 2014, Wausau non-suited its intervention in the third-party suit pending against Western.

         The Wedels thereafter proceeded to mediation with Western based on their understanding that Wausau had non-suited its subrogation claim under the waiver of subrogation endorsement in the policy. Entering settlement negotiations, the Wedels contacted Wausau to confirm that it had waived its subrogation interest. In response, a representative of Wausau's parent company, Liberty Mutual, responded by email, stating:

Liberty does indeed assert its recovery rights under the Texas' workers' compensation statutory scheme against any and all amount[s] recovered by employee, James Wedel. The contract you reference . . . states that the policy is to "contain a waiver of subrogation against the Western Entities.["] Liberty is not subrogating against any third party entity, clearly not a Western Entity, and only asserting statutory recovery rights against Mr. Wedel's settlement and/or award.

         Seeking a quick resolution of their claim, the Wedels settled with Western contingent on a later resolution of Wausau's subrogation claim.

         Thereafter, the Wedels amended their petition naming Wausau as a party defendant and sought entry of a final judgment declaring that Wausau had waived its right of subrogation against any proceeds recoverable from Western in their personal injury lawsuit. Based on the waiver contained in the policy, the Wedels asserted that Wausau had no right to reimbursement against any proceeds paid to the Wedels arising from their third-party suit against Western. On July 14, 2015, the trial court set the hearing on the entry of a final judgment for August 27, 2015. Wausau filed a plea to the jurisdiction and moved to be dismissed as a party defendant.

         The Wedels then sought traditional summary judgment on the issue of whether Wausau had waived its rights to subrogation and reimbursement. The Wedels tendered as evidence the contract between Cactus and Western, Wausau's policy and waiver endorsement, and Liberty Mutual's email. In response, Wausau asserted that Texas choice of law rules applied to the case, and that Arizona law applied to the question of whether Wausau had waived its right to recover under its policy. Wausau argued that its waiver endorsement waived "subrogation only" as to Western, and did not apply to reimbursements it may recover from Wedel, who is not named in the waiver endorsement Schedule.

         In reply, the Wedels countered that the contract between Cactus and Western specified that the terms of the contract "shall be 'governed by the laws of the State of Texas, '" and countered that no choice of law decision was required because no conflict exists between the laws of Texas and Arizona, and that Texas law applied in the event a conflict was found to exist. Citing Liberty Ins. Corp. v. SM Energy, CIV.A. H-12-3092, 2012 WL 6100303, at *3, *5 (S.D. Tex. Dec. 7, 2012), the Wedels argued that cases interpreting similar subrogation waivers had held that a subrogation waiver applies to an injured employee. See SM Energy, 2012 WL 6100303, at *5. They also asserted that another Texas case specifically held that a waiver of subrogation need not name all employees of an employer when a carrier waives its subrogation rights in favor of a company that contracts with the injured worker's employer.[2]

         After hearing Wausau's plea to the jurisdiction and the Wedels' traditional motion for summary judgment, the trial court denied Wausau's plea and motion to dismiss, granted summary judgment in favor of the Wedels, and found that Wausau had waived its right to "subrogate/reimbursement[.]" After the trial court considered Wausau's motion for reconsideration, the Wedels nonsuited with prejudice their claims against Western, but specified that the nonsuit was "not intended to, nor [did] it, affect or apply to any claims . . . against Wausau[.]"

         The trial court entered final judgment declaring that Wausau had no right to or claim for "subrogation and/or reimbursement" regarding the Wedels' claim, nor was Wausau entitled to any portion of the funds recovered by the Wedels in their suit against Western, and ordered that Wausau take nothing from the Wedels on its reimbursement claim. This appeal follows.

         Issues

         On appeal, Wausau presents two issues. In Issue One, Wausau contends the trial court erred in granting summary judgment because the waiver endorsement did not extinguish its statutory right of reimbursement from Wedel's third-party recovery. In support of this assertion, Wausau argues that rights of subrogation and of reimbursement are distinctly different. Wausau asserts that the waiver endorsement included in its worker's compensation policy waived its right of subrogation only against Western as required by the contract between Western and Cactus. Wausau asserts that it retains its right of reimbursement from the injured worker and this right encompasses recovery of past benefits paid as well as a credit against future benefits. In Issue Two, Wausau asserts that no choice of law decision is necessary.

         DISCUSSION

         Standard ...


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