1... See TEX. R. APP. P. 47.4.

COURT OF APPEALS

SECOND DISTRICT OF TEXAS

FORT WORTH

NO. 2-07-296-CV

VALEAN CHILDERS APPELLANT

V.

GALLAGHER BASSETT APPELLEES

SERVICES, INC., MYRTIS 

LACY, AND ZURICH

AMERICAN INSURANCE COMPANY

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FROM THE 17TH DISTRICT COURT OF TARRANT COUNTY

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MEMORANDUM OPINION1

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I. Introduction

In two points, Appellant Valean Childers (“Childers”) asserts that the trial

court erred in granting summary judgment to Appellees Gallagher Bassett

Services, Inc. (“Gallagher”), Myrtis Lacy (“Lacy”), and Zurich American
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Insurance Company (“Zurich”) (collectively “GLZ”). We affirm in part, and

reverse and remand in part.

II. Factual and Procedural Background

This is the case of “when does the statute begin to run?” This bad-faith

lawsuit originated with a workers’ compensation claim filed by Childers,

wherein she alleged she sustained a compensable injury on February 4, 2003.

The defendants include Gallagher, a third party administrator which adjusted

Childers’ workers’ compensation claim; Lacy, an employee of Gallagher who

was the licensed adjuster handling the claim, and Zurich, the workers’

compensation carrier for the claims. Because numerous dates are involved in

this question involving the appropriate statute of limitations, we will set forth

a time line of pertinent events:

• 2/4/03-Alleged injury occurred

• 3/6/03-The injury is reported by this date

• 3/7/03-The claim is disputed by the carrier as being untimely

filed (the “first dispute”)

• 3/29/03-Childers requests a benefit review conference.

• 5/15/03-Benefit review conference is held and Childers

prevails

• 7/16/03-First part of contested case hearing

• 8/31/03-Two years before suit is filed
2... We will collectively refer to the 1/2/04 panel ruling and Zurich’s

7/8/04 dispute of Childers’ claim as the “second dispute.”

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• 10/2/03-Conclusion of contested case hearing

• 10/13/03-Contested case hearing ruling is in favor of Childers

• 1/2/04-Appeals panel ruling in favor of Childers

• 7/8/04-Childers’ Claim is again disputed by the carrier based

on alleged new evidence2

• 9/28/04-Decision and Order by Hearing Officer in favor of

Childers

• 8/31/05-Bad faith suit filed

On March 6, 2007, GLZ filed a motion for summary judgment based on

the two-year statute of limitations. The trial court found that Childers did not

timely file suit within two years of the accrual of her cause of action and

accordingly granted summary judgment in favor of GLZ. A motion for new trial

was overruled by operation of law, and this appeal followed.

III. The Issue

GLZ asserts that the trial court acted correctly in granting summary

judgment based on limitations because the case was not filed within two years

of the time that Zurich initially denied Childers’ worker’s compensation claim.

GLZ also asserts that this is also true for the second denial of the claim because

Childers suffered no damage from the second denial and there is no authority
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that a subsequent denial restarts the clock running on the statute of limitations.

Childers asserts that the statute of limitations did not begin running on

the first denial of her claim until she had exhausted her administrative remedies

on February 2, 2004, and, regardless, the second denial began the statute of

limitations running on June 28, and July 8, 2004. Hence, she argues her

lawsuit was timely brought on August 31, 2005 regarding both denials, and the

trial court erred in granting summary judgment. 

IV. Standard of Review

A defendant who conclusively negates at least one essential element of

a cause of action is entitled to summary judgment on that claim. IHS Cedars

Treatment Ctr. of DeSoto, Tex., Inc. v. Mason, 143 S.W.3d 794, 798 (Tex.

2004); see TEX. R. CIV. P. 166a(b), (c). 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. IHS

Cedars Treatment Ctr., 143 S.W.3d at 798. 

A defendant is entitled to summary judgment on an affirmative defense

if the defendant conclusively proves all the elements of the affirmative defense.

Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 223 (Tex. 1999); see TEX. R.

CIV. P. 166a(b), (c). To accomplish this, the defendant-movant must present

summary judgment evidence that establishes each element of the affirmative
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defense as a matter of law. Ryland Group, Inc. v. Hood, 924 S.W.2d 120, 121

(Tex. 1996). 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. IHS Cedars

Treatment Ctr. of DeSoto, Tex., Inc. v. Mason, 143 S.W.3d 794, 798 (Tex.

2004). 

V. Limitations

A statute of limitations begins to run when the cause of action accrues.

Tectonic Realty Inv. Co. v. CNA Lloyd’s of Tex. Ins. Co., 812 S.W.2d 647, 652

(Tex. App.—Dallas 1991, writ denied). A cause of action accrues when facts

come into existence that authorize a claimant to seek a judicial remedy. Celtic

Life Ins. Co. v. Coats, 885 S.W.2d 96, 100 (Tex. 1994). A bad faith cause of

action involving an insurance claim accrues on the date the insurer denies

coverage. Murray v. San Jacinto Agency, Inc., 800 S.W.2d 826, 828 (Tex.

1990). This same rule is applicable to insurance code and DTPA claims.

Stevens v. State Farm Fire & Cas. Co., 929 S.W.2d 665, 671 (Tex.

App.—Texarkana 1996, writ denied). Intentional infliction of emotional distress

is also governed by the two year statute of limitations. Bhalli v. Methodist

Hosp., 896 S.W.2d 207, 211 (Tex. App.—Houston [1st Dist.] 1995, writ

denied). Hence, all of Childers’ claims are governed by a two-year statute of
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limitations, and all stem from the bad faith allegations. See generally TEX. INS.

CODE ANN. 21.21 § 16(d) (Vernon 2005), repealed by Act of May 23, 2003,

78th Leg., R.S., ch. 1274, § 26(a)(1), 2003 TEX. GEN. LAWS 3611, 4138; TEX.

INS. CODE § 541.162 (Vernon Supp 2008); TEX. BUS. & COM. CODE ANN. §

17.565 (Vernon Supp. 2008); TEX. CIV. PRAC. & REM. CODE § 16.003(a) (Vernon

Supp. 2008). We must therefore address whether Childers’ cause of action

accrued more than two years prior to the date that she filed suit—August 31,

2005—to determine whether the granting of GLZ’s motion for summary

judgment is proper. 

VI. Analysis

A. The First Denial—March 2003

Both parties cite and discuss American Motorists Insurance Co. v. Fodge,

63 S.W.3d 801 (Tex. 2001), as it impacts the limitations issue. The question

presented to our Supreme Court was 

whether a compensation claimant can prosecute a lawsuit against

a carrier to recover benefits and damages resulting from a denial of

benefits without a prior determination by the Texas Workers’

Compensation Commission that benefits are due her. We hold that

she cannot do so.

Id. at 802. This case stands for the proposition that just as a court cannot

award compensation benefits under the Worker’s Compensation Act because

that determination must go through the administrative process, neither can the
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court award damages for the denial of compensation benefits absent a holding

made through the administrative process that such benefits were due. Id. at

804. Hence, “the process precludes bad faith liability for denying benefits to

which the claimant is not entitled.” Id. 

Childers takes the position that as a result of the Fodge holding, there is

no claim for bad faith until the procedures under the Texas Workers

Compensation Act have been concluded because, in essence, she has no

entitlement to benefits that have been wrongfully denied, until that entitlement

has been determined under the Act. Were it otherwise, she argues, presumably

it could necessitate filing a bad faith case following the initial denial of benefits

by the carrier, only to have the case dismissed if under the Act it was

subsequently determined that she had not been entitled to benefits. 

GLZ takes the position that not only has our Supreme Court rejected

Childers’s argument regarding the accrual of the limitations period, but that if

her position was correct, a claimant could delay indefinitely completing the

administrative process and then have an additional two years in which to file

suit for bad faith. In short, they argue there is no statute, case law, or

reasoning to support her position. 

As our sister court has explained, 
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damages constituting recovery of lost compensation benefits must

be pursued via the Act regardless of the legal theory through which

they are sought. Thus, the injury sought to be recompensed and

the purpose of the relief are all important. If the relief serves to

recompense the wrong or injury which was originally redressed

under the Act . . . then the Act controls their recovery. But, if it

serves to recompense some wrong independent of the original

injury compensable under the Act . . . then the Act and its

restrictions are inapplicable. . . . Escajeda did not have to exhaust

any administrative remedy, and the trial court had jurisdiction to

consider that aspect of her 21.21 and 17.46(a) suit. Finally,

though this could result in piecemeal litigation, the Texas Supreme

Court long ago recognized and approved that possibility in a suit

such as this. 

Escajeda v. Cigna Ins. Co. of Tex., 934 S.W.2d 402, 406-07 (Tex.

App.—Amarillo 1996, no writ).

The parties dispute whether Fodge has overruled Escajeda. Without

becoming involved in that dispute, it is apparent that part of the reasoning in

Escajeda is sound. Much of our jurisprudence involves the ability to avail

oneself of our court system only after administrative remedies are exhausted.

This presupposes, of course, that the requested remedy in our court system is

the same as was sought in the administrative process. Here, however, the

redress sought through the court system—the bad faith claim—is not the same

redress as sought through the administrative process—the worker’s

compensation claim. Therefore, we hold that the accrual of the limitations

period for a bad faith claim does not await the outcome of the administrative
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process, but rather begins at the same time as any other bad faith claim not

connected to our Worker’s Compensation Act remedies, and that accrual is on

the date the insurer wrongfully denies coverage. We overrule Childers’ first

issue.

B. The Second Denial—June/July 2004

It is undisputed that Childers filed suit within two years of the second

denial of her benefits, which the parties have referred to as the “second

dispute.” 

GLZ takes the position that Childers was allegedly “injured” as a result of

the initial denial of her claim on March 7, 2003, and that there was no new

damage or injury resulting from the second dispute. GLZ also argues that

although damage may continue to occur after a wrongful denial of benefits, this

does not prevent limitations from commencing to run. See Murray, 800

S.W.2d at 828. Hence, they assert that the second denial did not restart the

limitations clock. 

Childers takes the position that the facts of this case are clearly

distinguishable from Murray. In the Murray case, damages continued to occur

after the denial, whereas here, the initial claim and dispute were resolved and

benefits were paid. Then, argues Childers, she was again damaged when the
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second dispute occurred, that is, when there was another denial on allegedly

new grounds and benefits again were stopped. 

We agree with Childers’ argument. The first denial had been fully and

finally resolved in Childers favor before the second two denials occurred in June

and July of 2004. These are separate incidents theoretically given rise to a

new bad faith claim. If timely claims for additional payments by an insured can

give rise to “the statute of limitations running anew,” then it follows that

additional denials of coverage after an initial denial has been fully and finally

resolved starts the running of the statute of limitations on the new denial. Pena

v. State Farm Lloyds, 980 S.W.2d 949, 954 (Tex. App.—Corpus Christi 1998,

no pet.). We sustain Childers’ issue number two and hold that the lawsuit filed

by Childers on August 31, 2005, was not barred by the statute of limitations

as it related to the disputes of the claim by the carrier filed June 28, 2004, and

July 8, 2004. Our disposition of issue one affirms that the statute of

limitations had run on her August 31, 2005 lawsuit as it related to the dispute

of the claim by the carrier filed March 7, 2003.
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VII. Conclusion

Having overruled Childers’ first issue and sustained her second issue, we

affirm the trial court’s judgment in part, and reverse and remand in part.

BOB MCCOY

JUSTICE

PANEL A: CAYCE, C.J.; DAUPHINOT and MCCOY, JJ.

CAYCE, C.J., concurs without opinion.

DELIVERED: April 3, 2008