COURT OF APPEALS

SECOND DISTRICT OF TEXAS

FORT WORTH

NO. 2-09-151-CV

VICTOR MCKOY APPELLANT

V.

CITY OF FORT WORTH, TEXAS APPELLEE

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FROM THE 348TH DISTRICT COURT OF TARRANT COUNTY

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MEMORANDUM OPINION

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I. Introduction

In two issues in this Texas Workers’ Compensation Act case, Appellant

Victor McKoy asserts that the trial court erred by granting Appellee City of Fort

Worth’s motion for summary judgment and concluding that once the City

1 See Tex. R. App. P. 47.4.
accepted that McKoy had incurred a compensable injury, the waiver provisions

of labor code section 409.021 were inapplicable. We affirm.

II. Factual and Procedural History

This case arises out of a claim filed by McKoy, a City employee who was

initially diagnosed with a work-related sprained right knee. The City received

written notice of the injury on November 23, 2005, which meant that under

section 409.021(c) of the labor code, the City had sixty days, or until January

23, 2006, to contest the compensability of the injury; otherwise it would waive

the right to contest compensability. The City accepted McKoy’s knee injury as

compensable and initiated benefit payments to McKoy on December 7, 2005.

On December 20, 2005, McKoy underwent an MRI, which revealed a

Baker’s cyst, grade III–IV chondromalacia, and bursitis, all involving the

sprained right knee. The City received the MRI results on January 20, 2006,

and contested these three new diagnoses ten days later, or seven days after

the sixty-day period had expired.

Throughout the administrative hearings on the claim, the City argued that

once it accepted McKoy’s original knee injury as compensable and timely

initiated payment of income benefits, it was no longer subject to the sixty-day

waiver provision of section 409.021(c) for the newly-diagnosed knee problems.

McKoy, on the other hand, asserted that the City had a continuing duty to

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investigate the claim and to deny these newly-found conditions during the sixtyday investigation period, or it waived its right to contest them. At the

conclusion of the contested case hearing, the hearing officer found the

following:

1. The grade III–IV chondromalacia, Baker’s cyst, and bursitis did

not arise out of or naturally flow from the compensable injury.

2. The City, through a reasonable investigation, could have

determined within sixty days after November 23, 2005, that the

Baker’s cyst and bursitis were part of the claimed injury.

3. The City did not receive notice that the claimed injury included

the grade III-IV chondromalacia within the sixty-day period.

The hearing officer’s pertinent conclusions of law were as follows:

1. The City waived the right to contest the Baker’s cyst and

bursitis by not timely contesting that diagnosis in accordance with

sections 409.021 and 409.022 of the Texas Labor Code.

2. The City did not waive the right to contest the right knee grade

III–IV chondromalacia by not timely contesting those diagnoses in

accordance with sections 409.021 and 409.022 of the Texas

Labor Code.

3. The compensable injury of November 18, 2005, does extend to

include the Baker’s cyst and bursitis since the City waived the right

to contest those diagnoses.

4. The compensable injury of November 18, 2005, does not

extend to include right knee grade III–IV chondromalacia.

On December 3, 2007, the appeals panel affirmed the hearing officer’s

findings and conclusions. The City filed suit in district court, asking the court

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to set aside the appeals panel’s final decision. In response, McKoy asked the

trial court to affirm the appeals panel’s decision and requested attorney’s fees.

One month into the suit, the City filed a motion for summary judgment,

arguing that section 409.021 of the labor code, including the waiver

subsection, does not apply to an accepted claim because article 28, section

124.3(e) of the administrative code states that section 409.021 does not apply

to disputes over the extent of an injury. Hence, because the additional injuries

of bursitis and the Baker’s cyst were disputes over the extent of the knee

injury, the sixty-day waiver period did not apply. McKoy countered that those

additional conditions became compensable by virtue of waiver by the City

because it could have reasonably discovered the additional conditions within the

sixty-day waiver period and they were not contested within that period. He

asserted that the medical documentation for both the Baker’s cyst and bursitis

was available to the City before the sixty-day period had expired.

In a faxed ruling dated March 13, 2009, the trial court stated, “I am going

to support the position of the Plaintiff [the City of Fort Worth]. I do not see

how the law could be written to preclude an employer from stopping

unwarranted benefits because of a waiver.” The trial court subsequently

entered an order granting the City’s motion for summary judgment, and this

appeal followed.

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III. Standard of Review

In a summary judgment case, the issue on appeal is whether the movant

met the summary judgment burden by establishing that no genuine issue of

material fact exists and that the movant is entitled to judgment as a matter of

law. Tex. R. Civ. P. 166a(c); Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211,

215 (Tex. 2002); City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671,

678 (Tex. 1979). The burden of proof is on the movant, and all doubts about

the existence of a genuine issue of material fact are resolved against the

movant. Sw. Elec. Power Co., 73 S.W.3d at 215.

When reviewing a summary judgment, we take as true all evidence

favorable to the nonmovant, and we indulge every reasonable inference and

resolve any doubts in the nonmovant’s favor. Valence Operating Co. v.

Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). Questions of law are appropriate

matters for summary judgment. Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217,

222 (Tex. 1999).

IV. Statutory Provisions

Three statutory provisions and their application are at issue in this case:

section 409.021(c) of the labor code and sections 124.3 and 133.240(a) of the

administrative code. Section 409.021(c) states:

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If an insurance carrier does not contest the compensability of an

injury on or before the 60th day after the date on which the

insurance carrier is notified of the injury, the insurance carrier

waives its right to contest compensability. The initiation of

payments by the insurance carrier does not affect the right of the

insurance carrier to continue to investigate or deny the

compensability of an injury during the 60-day period.

Tex. Lab. Code Ann. § 409.021(c) (Vernon 2006). The pertinent administrative

code provisions are set out below:

(b) Except as provided by subsection (c), the carrier waives the

right to contest compensability of or liability for the injury, if it does

not contest compensability on or before the 60th day after the date

on which the insurance carrier receives written notice of the injury.

. . .

(e) Texas Labor Code, § 409.021 and subsection (a) of this section

do not apply to disputes of extent of injury. If a carrier receives a

medical bill that involves treatment(s) or service(s) that the carrier

believes is not related to the compensable injury, the carrier shall

file a notice of dispute of extent of injury (notice of dispute).

28 Tex. Admin. Code § 124.3(b), (e) (Vernon 2004).

An insurance carrier shall take final action after conducting bill

review on a complete medical bill, or determine to audit the medical

bill in accordance with § 133.230 of this chapter (relating to

Insurance Carrier Audit of a Medical Bill), not later than the 45th

day after the date the insurance carrier received a complete medical

bill.

Id. § 133.240(a) (Vernon 2006).

V. Analysis

McKoy relies primarily on three cases to support the following argument:

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Since the City of Fort Worth, Self-Insured, had notice of McKoy’s

conditions of baker’s cyst and bursitis in the knee within the 60-

day waiver period and did not contest the compensability of these

conditions within the 60-day period, the City of Fort Worth waived

the right to contest compensability of these conditions and they are

compensable as a matter of law. It does not matter that the cause

of the injury may be outside the course and scope of employment

because causation is no longer in dispute when the carrier waives

the right to dispute the compensability.

Those three cases are State Office of Risk Management v. Lawton, 256 S.W.3d

436 (Tex. App.—Waco 2008, pet. granted); Sanders v. American Protection

Insurance Co., 260 S.W.3d 682 (Tex. App.—Dallas 2008, no pet.); and Federal

Insurance Co. v. Ruiz, 124 S.W.3d 705 (Tex. App.—Austin 2003, pet. denied).

The supreme court granted the petition for review in Lawton and has

issued its opinion. See State Office of Risk Mgmt. v. Lawton, No. 08-0363,

2009 WL 2667360, at *1 (Tex. Aug. 26, 2009). It is a “spotted dog” or

“white horse” case.

2 The question before the supreme court was “whether the

2 That is, as our sister court has phrased it:

[A]round the turn of the century, a Texas law firm had a case in

which a white horse owned by the client’s taxi service reared in the

street, causing an elderly woman to fall and injure herself. The

partner handling the case asked a young associate to find a case on

point. The associate came back several hours later with a case

involving an elderly lady who had fallen in the street after a taxi

company’s black horse had reared in front of her. When the

associate took this case to the partner, the partner said, “Nice try,

son. Now go find me a white horse case.”

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sixty-day period for challenging compensability of an injury also applies to a

dispute over the extent of injury, if the basis for that dispute could have been

discovered by a reasonable investigation within the waiver period.” Id.

In Lawton, the State Office of Risk Management (SORM) received notice

that Lawton had received a knee injury. Id. Twenty days later an MRI revealed

a degenerative condition of the knee for which, three months later, an

orthopedic surgeon recommended surgery. The following month, a peer review

physician reported that the recommended surgery was related to the

degenerative condition and not to the July injury. SORM then disputed the

extent of the compensable injury and refused to pay benefits for “any preexisting degenerative joint disease.” Id. at *2. At the contested case hearing,

the hearing officer held that SORM could have discovered the extent of

Lawton’s claimed injury, that is, the degenerative condition, had it conducted

a reasonable investigation within the sixty-day period and that because it had

not, it had waived its right to dispute the claim. An appeals panel, and later the

court of appeals, upheld this holding. In reversing the court of appeals, the

supreme court observed that

Hilland v. Arnold, 856 S.W.2d 240, 242 n.1 (Tex. App.—Texarkana 1993, no

writ).

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[n]owhere in the text of the rule, the statute, or the Texas Register

is there a suggestion that a carrier waives the right to challenge the

extent of an injury if the extent of that claim was reasonably

discoverable within the period for determining compensability . . . .

Here, SORM agreed that Lawton’s injury was compensable. When

it later disputed the extent of that injury, it was governed by the

deadline applicable to such disputes, not the sixty-day deadline

governing compensability. A carrier has up to forty-five days from

the date it receives a complete medical bill to dispute whether that

treatment was necessary.

Id. at *3. The court therefore reversed the court of appeals’s decision in

Lawton and specifically overruled Ruiz and Sanders, the other two cases relied

upon by McKoy.

That said, the City had forty-five days from the time it received further

medical documentation on January 23, 2006,

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related to further problems with

McKoy’s knee, to contest the extent of McKoy’s injuries. Because the City

acted seven days later, well within this forty-five-day period, it did not waive

the right to contest the extent of the injury, and the City’s motion for summary

judgment was therefore properly granted.

3 McKoy also asserts that the City’s representatives had actual

knowledge of the contents of his medical documentation on or before January

23, 2006, including a report from a December MRI and a January 9, 2006

doctor’s report that concluded that McKoy’s diagnosis included prepatellar

bursitis. But even if the forty-five-day deadline began to run on January 9, the

City still would have made its objection within the forty-five-day period.

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VI. Conclusion

Having overruled McKoy’s issues, we affirm the trial court’s judgment.

BOB MCCOY

JUSTICE

PANEL: DAUPHINOT, MCCOY, and MEIER, JJ.

DELIVERED: November 25, 2009

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