WAUSAU UNDERWRITERS INSURANCE COMPANY, Petitioner, v. James WEDEL and Michelle Wedel, Respondents

No. 17-0462

Supreme Court of Texas.

Argued March 1, 2018 Opinion Delivered: June 8, 2018 Rehearing Denied October 19, 2018

David L. Plaut, Jeffrey C. Glass, Hanna & Plaut, L.L.P., Austin, TX, for Petitioner.

G. Alan Waldrop, Paul M. Terrill III, Ryan D. Greene, Terrill & Waldrop, PLLC, Austin, TX, Jason M. Medina, Kevin T. Glasheen, Glasheen Valles & Inderman, LLP, Lubbock, TX, for Respondents.

Peter M. Kelly, Kelly Durham & Pittard, LLP, Houston, TX, Glenn W. Cunningham, Houston, TX, for Amicus Curiae Texas Trial Lawyers Association.

Jackie M. Kenyon, Mary Barrow Nichols, Texas Mutual Insurance Co., Mary A. Keeney, Graves Dougherty Hearon & Moody, P.C., Austin, TX, for Amicus Curiae Texas Mutual Insurance Company.

Loren R. Smith, Kelly, Smith & Red, P.C., Houston, TX, for Amicus Curiae Insurance Company of the State of Pennsylvania.

David M. Gunn, Beck Redden LLP, Houston, TX, for Amicus Curiae Exxon Mobil Corporation.

Justice Brown delivered the opinion of the Court, in which Chief Justice Hecht, Justice Green, Justice Guzman, Justice Lehrmann, Justice Devine, and Justice Blacklock joined.

*555The workers'-compensation carrier in this case paid benefits to an injured employee. It later sought reimbursement of those payments from any settlement proceeds the employee might receive from an allegedly liable third party. Ordinarily, Texas law grants it that right. But the policy in this case includes an endorsement waiving the carrier's right to recover from the third party sued by the employee. The carrier concedes it can't recover directly from the third party but insists it can recover indirectly from any settlement the third party pays to the employee. Standing on over twenty years of unanimous case law to the contrary, as well as Texas Department of Insurance rulings consistent with that case law, we disagree. The carrier signed away its right to recover benefits it paid to the employee and received a higher premium in exchange for assuming that risk. It cannot now seek to indirectly recover the same proceeds it agreed not to pursue directly. We affirm the court of appeals' judgment.

**I**

James Wedel, a truck driver for Cactus Transport, Inc., was injured on the job. The accident occurred while he was loading asphalt at a terminal owned by Western Refining Company, L.P. Wedel received workers'-compensation benefits from Cactus's insurance carrier, Wausau Underwriters Insurance Company (Underwriters). But he separately sued Western Refining for alleged negligence contributing to his accident.

To gain access to its terminals, Western Refining required Cactus to furnish workers'-compensation coverage to its employees. Western Refining also mandated that Cactus's workers'-compensation policy "contain a waiver of subrogation rights" against Western Refining. The parties agree this meant the policy must include a waiver of Underwriters' right to seek reimbursement directly from Western Refining for benefits Underwriters paid under Cactus's policy. It is also undisputed that Cactus paid a higher premium in exchange for Underwriters' assumption of that risk.

Underwriters nonetheless intervened in Wedel's lawsuit against Western Refining, asserting subrogation rights against it for past and future medical expenses and indemnity payments. Relying on the policy's subrogation waiver, Western Refining argued Underwriters had no right to recover. Underwriters later non-suited its intervention. Wedel and Western Refining then began settlement negotiations but reached an impasse when Underwriters announced it would seek reimbursement from any settlement paid to Wedel. Wedel then joined Underwriters as a third-party defendant. He moved for summary judgment declaring Underwriters had waived its right to recover any proceeds from the lawsuit, whether directly from Western Refining or indirectly from Wedel's recovery from Western Refining. The trial court granted summary judgment for Wedel. The court of appeals affirmed, concluding Wedel established that Underwriters "contractually waived its statutory right of subrogation and this waiver encompasses the *556right of reimbursement [against the employee] as well." 518 S.W.3d 615, 630 (Tex. App.-El Paso 2017). We agree and affirm the court of appeals' judgment.

**II**

In most cases, workers'-compensation benefits are the exclusive remedy against a workers'-compensation subscribing employer for on-the-job injuries. *See* TEX. LAB. CODE 408.001(a) ; *Port Elevator-Brownsville, L.L.C. v. Casados* , 358 S.W.3d 238, 241 (Tex. 2012). But an employee may still seek damages from a liable third party in addition to receiving workers'-compensation benefits. *See* TEX. LAB. CODE § 417.001(a) ; *State Office of Risk Mgmt. v. Carty* , 436 S.W.3d 298, 302 (Tex. 2014). Similarly, a workers'-compensation carrier is "subrogated to the rights of the injured employee and may enforce the liability of the third party in the name of the injured employee." TEX. LAB. CODE § 417.001(b). Under either scenario, the "net amount recovered by a claimant in a third-party action shall be used to reimburse the insurance carrier for benefits, including medical benefits, that have been paid for the compensable injury." *Id.* § 417.002(a). The upshot of these provisions is that "until the carrier 'is paid in full[,] the employee or his representatives have no right to any funds.' " *Tex. Mut. Ins. Co. v. Ledbetter* , 251 S.W.3d 31, 33 & n.1 (Tex. 2008) (quoting *Argonaut Ins. Co. v. Baker* , 87 S.W.3d 526, 530 (Tex. 2002) ).

The policy in this case included a standard endorsement promulgated by the Texas Department of Insurance (the department). The parties call it a "subrogation waiver." *See* TEX. DEP'T OF INS., TEXAS WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY MANUAL : WC 42 03 04 A (2d reprt. 2011). It reads as follows:

> TEXAS WAIVER OF OUR RIGHT TO RECOVER FROM OTHERS ENDORSEMENT

> ...

> 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 [Western Refining], but this waiver applies only with respect to bodily injury arising out of the operations described in the Schedule where you are required by a written contract to obtain this waiver from us.

> This endorsement shall not operate directly or indirectly to benefit anyone not named in the schedule.

> ...

> The premium charge for this endorsement shall be 2 percent of the premium developed on payroll in connection with work performed for the above person(s) or organization(s) arising out of the operations described.

Underwriters argues this waiver (1) forecloses only its right to pursue reimbursement directly from Western Refining but (2) leaves intact its right to pursue reimbursement from an employee's recovery against the same. Moreover, construing the waiver to insulate an employee would violate the waiver's proviso that it not "operate directly or indirectly to benefit anyone not named in the schedule." Taken as a whole, Underwriters contends, the provision can be interpreted only to waive its "subrogation right" against Western Refining, a right Underwriters considers statutorily distinct from its "reimbursement right" against the employee.

Wedel insists the waiver also bars Underwriters' right to reimbursement from any proceeds he recovers from Western Refining. The waiver relinquishes Underwriters' "right to recover" from Western *557Refining, which includes direct recovery from Western Refining or indirect recovery from funds it pays to Wedel. Either way, Wedel argues, the proceeds constitute a recovery from Western Refining even if they first pass through him. Wedel further points out that this is the only waiver of subrogation rights the department has approved for use in Texas. And every court that has interpreted it has concluded that it waives a carrier's right to reimbursement from an injured employee's recovery. He also maintains that Underwriters' interpretation of the waiver frustrates the rationale for paying a higher premium for the waiver. The practical effect of Underwriters' reading of the waiver, Wedel claims, would be that he could settle with Western Refining for only an amount that would satisfy Underwriters' eventual reimbursement claim against him. This scenario effectively forces the third party to reimburse the carrier, which is exactly what the employer paid a higher premium to avoid.

"A declaratory judgment granted on a traditional motion for summary judgment is reviewed de novo." *Kachina Pipeline Co. v. Lillis* , 471 S.W.3d 445, 449 (Tex. 2015). When construing an insurance policy, we ordinarily "ascertain and give effect to the parties' intent as expressed by the words they chose to effectuate their agreement." *In re Deepwater Horizon* , 470 S.W.3d 452, 464 (Tex. 2015). But because the waiver at issue here was not freely negotiated by the parties, this is no ordinary policy. Rather, it is a standard endorsement the department has promulgated and mandated for use in Texas workers'-compensation policies. *See* TEX. LAB. CODE § 406.051(b) ("The contract for coverage must be written on a policy and endorsements approved by the Texas Department of Insurance."). And "where the policy forms are mandated by a state regulatory agency, the actual intent of the parties is not material." *Progressive Cty. Mut. Ins. Co. v. Sink* , 107 S.W.3d 547, 551 (Tex. 2003). "As a practical matter, the actual intent involved in the precise words is as much or more the intent of the [agency] which prescribes the wording of the policy as it is the intent of the parties." *Id.* (quoting *United States Ins. Co. of Waco v. Boyer* , 153 Tex. 415, 269 S.W.2d 340, 341 (1954) ).

We are not provided any guidance on the department's intent in drafting the waiver, but we can glean insight from its actions since promulgating the waiver. First, the department has kept the form substantively the same in the face of more than twenty years of case law unanimously interpreting it to foreclose recovery from proceeds paid to an injured employee. *See**Hartford Accident & Indem. Co. v. Buckland* , 882 S.W.2d 440, 445 (Tex. App.-Dallas 1994, writ denied) ; *Lumbermens Mut. Cas. Co. v. Carter* , 934 S.W.2d 912, 913 (Tex. App.-Beaumont 1996, no writ) ; *Am. Risk Funding Ins. Co. v. Lambert* , 59 S.W.3d 254, 259 (Tex. App.-Corpus Christi 2001, pet. denied) ; *Liberty Ins. Corp. v. SM Energy* , No. H-12-3092, 2012 WL 6100303, at *7-9 (S.D. Tex. Dec. 7, 2012). In two of these cases- *Hartford Accident and Indemnity Co. v. Buckland* and *Liberty Insurance Corp. v. SM Energy* -the opinions quote substantively identical versions of the department's endorsement at issue in this case. *See**Buckland* , 882 S.W.2d at 441 ; *SM Energy* , 2012 WL 6100303, at *2. In light of the unanimity in these decisions, we find it noteworthy, though not dispositive, that the department has not substantively altered the endorsement. If the department believes its endorsement has been misinterpreted, it certainly has had ample time to revise the text and clarify its intent. Instead, two recent administrative orders the department's Division of Workers' Compensation *558benefit-review officers have issued construing the waiver reflect an interpretation consistent with unanimous judicial precedent. TEX. DEP'T OF INS. , *Decision and Order* , Docket No. HE-10324483-02-CC-HI043 (Apr. 21, 2014) ("Carrier waived its right to reimbursement and/or subrogation under Texas Labor Code § 417.001 and § 417.002."); TEX. DEP'T OF INS. , *Decision and Order* , Docket No. HW-11293057-01-CC-HW42 (Mar. 29, 2016) ("Carrier contractually waived its statutory right to subrogation as to the workers' compensation benefits paid to the Claimant, which include reimbursement for benefits it has paid or credit for benefits it will pay in the future.").

The courts' and the department's interpretations are consistent with the endorsement's plain language. The endorsement is titled "Texas Waiver of Right to Recover from Others Endorsement" and provides that a carrier that agrees to the endorsement waives its "right to recover." It then recognizes the carrier's "right to recover our payments from anyone liable for an injury covered by this policy" but provides that the carrier "will not enforce that right against" the named third party. The question is whether an effort to collect from settlement proceeds that third party pays to an injured employee-an obvious end-around to avoid the waiver-is any less an attempt to "enforce" the right the carrier has contractually waived.

We conclude it is not. Under the endorsement, the waiver of a carrier's "right to recover" from the third party named in the schedule includes both a direct recovery from the third party and an indirect recovery from proceeds the third party pays to an injured employee. There is no meaningful difference between the two. Under either scenario, the reimbursement the carrier attains flows from the third party. True, the waiver speaks to the carrier's right to recover from liable third parties, not injured employees. But any settlement the employee receives from the carrier *is* a recovery from a liable third party. Once paid, the money belongs to the employee, but it did not exist before the third party made the payment to dispose of the employee's lawsuit. The waiver's language does not compel us to ignore the source of the proceeds the carrier seeks to capture simply because they flowed through the employee.

Both Underwriters and the dissent argue, however, that we must read the endorsement in light of the separate and distinct rights of a workers'-compensation carrier to "subrogation" and "reimbursement" found in Labor Code sections 417.001 and 417.002 -the former being the carrier's ability to "enforce the liability of the third party in the name of the injured employee," *see* TEX. LAB. CODE § 417.001(b), and the latter being the statutory mandate that the "net amount recovered by a claimant in a third-party action shall be used to reimburse the insurance carrier," *see* TEX. LAB. CODE § 417.002(a). Considered against this statutory backdrop, Underwriters and the dissent contend the endorsement addresses only a carrier's subrogation interest, not its statutory right to recover proceeds from an injured employee who settles.

Courts that have considered the distinction in this context-including the court of appeals in this case-have rejected it. *See, e.g.* , *Wedel* , 518 S.W.3d at 622 ("[I]n construing Sections 417.001 and 417.002, we observe that an insurance carrier's right of subrogation encompasses the right of reimbursement, and consequently encompasses the right to recover for benefits paid and to a credit against future benefits."); *SM Energy* , 2012 WL 6100303, at *8 ("Courts applying Texas law do not distinguish between a carrier's subrogation *559and reimbursement rights in the Worker's Compensation Act context."); *Buckland* , 882 S.W.2d at 445 ("[A] carrier's subrogation interest includes its right to reimbursement as well as its right to future amounts for which it is relieved of liability."). But even if we accepted the distinction, our reading of the waiver would not change. Although the endorsement may be called, colloquially, a "subrogation waiver," neither the word "subrogation" nor "reimbursement" actually appears in its text. Whether the two amount to independent statutory rights is a question separate from and unnecessary to interpreting the waiver's language. The question, as we see it, is simply whether the carrier's waiver of its "right to recover" against the third party is limited to only a *direct* recovery against the third party. And we see nothing in the waiver compelling that result.

Moreover, Underwriters' and the dissent's reading of the waiver undermines the rationale for having such a waiver in the first place. The carrier requires a higher premium payment on policies that include the waiver. Why? Because the carrier is giving up the right to seek reimbursement from a liable third party if it has to pay workers'-compensation benefits following an accident. If an accident occurs, the carrier is on the hook regardless of fault and cannot proceed directly against the third party. But what if it could sit back and wait for the employee to recover from the third party and then get the same money from him? The practical effect would be that the third party's cost for resolving the case has increased, likely by the amount it would have had to pay the carrier if there had never been a waiver. The carrier's pending reimbursement claim will be taken into account during settlement negotiations and influence the amount necessary to dispose of the case.

This is not speculation-it is exactly what happened in this case. Settlement negotiations halted once Underwriters announced its intention to seek reimbursement from those proceeds. Despite the waiver, Underwriters sought the same money through the back door that it could not get through the front. Underwriters' position drove up the cost of settling the case, with Underwriters poised to claim the same money from Wedel that it could not get from Western Refining. Under these facts, the value of the case is the same as if there had been no waiver at all.

Nor are we persuaded that the waiver's admonition that it "shall not operate directly or indirectly to benefit anyone not named in the Schedule" allows the carrier to pursue the employee's settlement. First, if our reading of the waiver benefits the employee at all, it benefits the third party-the one named in the Schedule-more. As explained above, the third party is better off if the carrier cannot recover against the employee, because the third party is then free to negotiate with the employee without a carrier's pending reimbursement claim driving up the cost to settle. Again, this is the reason for the waiver and the corresponding higher premium in the first place. *See**Lambert* , 59 S.W.3d at 259 ("The third party having the benefit of the waiver is free to negotiate a settlement with the injured employee without having to pay additional to the employee to cover any subrogation of compensation of workers' compensation benefits."). In the event of an accident for which it was liable, Western Refining preferred to face only the injured employee rather than both the employee and his employer's workers'-compensation carrier-and required Cactus to pay a premium for that privilege.

Second, although the employee might on occasion incidentally benefit from the waiver, he benefits less than the third party, if *560at all. *See id.* ("The fact the third parties' settlement amount is lowered doesn't necessarily mean the employee is benefitted."). Certainly, a carrier's claim for reimbursement can drive up the cost of settling an injured employee's claim. But it does not necessarily follow that the employee will net a smaller recovery; it means only that the injured employee and the settling third party will have to take the carrier's reimbursement claim into consideration. The liable third party might ultimately pay more overall to satisfy both claims, but this would not necessarily benefit the injured employee. It is conceivable that a third party might be unable to be as generous in settling with an injured employee as it would if it did not have to also satisfy a carrier's reimbursement claim. But it is also possible that the injured employee would receive the same amount either way. In any event, the possibility that an injured employee might indirectly benefit from the waiver in some cases does not cancel out the fact that the liable third party benefits more in every case that includes a subrogation waiver.

The dissent reads the waiver more narrowly. Its interpretation of the text is not unreasonable, but text is rarely interpreted on a blank slate. As we have mentioned, in this case we interpret the waiver's language to effect agency intent, and the department has acquiesced in decades of unanimous precedent from our courts of appeals and a federal district court interpreting the waiver as Wedel urges and has affirmed that interpretation in its own administrative rulings. We still must ask if the waiver's plain language supports that interpretation-the practical fallout of our reading of a policy cannot control the meaning we assign to the text used. But in this case, we see nothing in the waiver's language that compels us to undercut decades of settled and unanimous precedent, the department's interpretation of its own waiver, or the allocation-of-risk considerations for using a subrogation waiver-and charging a higher premium for it-in the first place.

* * *

The waiver in this case forecloses Wausau's right to recover from a liable third party. That includes direct recovery from Western Refining or indirect recovery of the same proceeds after Western Refining pays them to Wedel. The court of appeals' judgment is affirmed.

Justice Johnson filed a dissenting opinion, in which Justice Boyd joined.

This case is about an unambiguous endorsement to a workers' compensation insurance policy. The Court concludes that the endorsement not only waived Wausau Underwriters Insurance Company's (Wausau) right of *subrogation*1 as to Western Refining Company, L.P. (Western), but also Wausau's right of *reimbursement* from amounts Western paid to Cactus Transport, Inc.'s (Cactus) employee, James Wedel.2 There is a decided and *561recognized difference between an insurer's right of subrogation and its right of reimbursement. *See**Fortis Benefits v. Cantu* , 234 S.W.3d 642, 645 (Tex. 2007) (involving a health insurance policy with separate clauses3 addressing the rights of subrogation and reimbursement which "conferred on [insurer] two separate contractual rights of recovery, one styled 'subrogation' and one styled 'reimbursement.' ").

I agree that the endorsement waived the statutory subrogation right afforded Wausau by section 417.001 of the Workers' Compensation Act (Act).*See* TEX. LAB. CODE § 417.001. But I disagree that the endorsement waived the separate statutory right to reimbursement afforded by section 417.002. *Id.* § 417.002.

There are several problems with the Court's position. First, the Act expressly distinguishes between a carrier's right of subrogation and its right of reimbursement, as demonstrated in part by their being addressed in separate sections of the statute. *See**id.* §§ 417.001, .002. Both are favored and are integral to success of the workers' compensation system. *See, e.g.* , *State Office of Risk Mgmt. v. Carty* , 436 S.W.3d 298, 304 (Tex. 2014) (stating that protection of these rights is the "primary purpose" of Labor Code sections 417.001 (subrogation) and 417.002 (reimbursement) ); *Tex. Mut. Ins. Co. v. Ledbetter* , 251 S.W.3d 31, 35 (Tex. 2008) (stating that first-money reimbursement is crucial to the workers' compensation system and prevents double recovery by workers). Yet the Court effectively ignores the distinction the statute makes between the two. Second, the endorsement on which Wedel bases his argument was obtained by Wedel's employer, Cactus, to comply with Western's written contractual requirement that Cactus's workers' compensation policy be endorsed with a waiver of the carrier's right of subrogation. The requirement was not that the policy be endorsed to waive the carrier's right to both subrogation *and* reimbursement. Third, the endorsement to Wausau's policy, according to its plain, explicit language, only precluded Wausau from "enforc[ing] [its] right" against Western to recover for payments Wausau paid to Cactus's employees. It did not reference and did not waive Wausau's right to reimbursement if Cactus's employees recovered on claims against third parties, such as Western.

I respectfully dissent.

*562**I. Subrogation and Reimbursement in the Act**

Texas enacted its first workers' compensation legislation in 1913. *See* Act of April 16, 1913, 33rd Leg., R.S., ch. 179, 1913 Tex. Gen. Laws 429, *amended by* Act of Mar. 28, 1917, 35th Leg., R.S., ch. 103, 1917 Tex. Gen. Laws 269. The Legislature amended the Act in 1917 to provide that an employee injured during the course of employment for an employer that provided workers' compensation insurance had an election if the injury was caused by a third party: the employee could elect to receive workers' compensation or pursue a third-party action against the alleged tortfeasor. *See**Fort Worth Lloyds v. Haygood* , 151 Tex. 149, 246 S.W.2d 865, 867 (1952). If the employee elected to receive workers' compensation, then the carrier was "subrogated to the rights of the injured employ[ee] in so far as may be necessary and may enforce in the name of the injured employ[ee] or of his legal beneficiaries or in its own name and for the joint use and benefit of said employ[ee] or beneficiaries and the [carrier] the liability of said other person." *Id.* (quoting Act of Mar. 28, 1917, 35th Leg., R.S., ch. 103, § 6a, 1917 Tex. Gen. Laws 269, 285, *repealed by* Act of Dec. 11, 1989, 71st Leg., 2nd C.S., ch. 1, § 16.01(10), 1989 Tex. Gen. Laws 1, 114). The Legislature periodically amended the Act. As relevant to this case, the amendments refined provisions regarding the carrier's being subrogated to the rights of an injured employee4 against third parties liable for the injury and the rights of the injured employee regarding such third parties. *See, e.g.* , Act of Mar. 28, 1917, 35th Leg., R.S., ch. 103, § 6a, 1917 Tex. Gen. Laws 269, 285 (repealed 1989).

In 1993, the Legislature adopted the current Act. TEX. LAB. CODE tit. 5. Section 417.001 of the Act (1) expressly authorizes an injured employee to pursue both workers' compensation benefits and an action against third parties who caused the injury; (2) expressly provides a right of subrogation to the carrier and gives the carrier the right to enforce its subrogation right in the name of the employee; and (3) provides that if the carrier recovers an amount greater than its subrogation interest from a third party, then after the carrier reimburses itself and pays its costs from the amount recovered, it is to pay the remainder to the employee:

> (a) An employee or legal beneficiary may seek damages from a third party who is or becomes liable to pay damages for an injury or death that is compensable under this subtitle and may also pursue a claim for workers' compensation benefits under this subtitle.

> (b) If a benefit is claimed by an injured employee or a legal beneficiary of the employee, *the insurance carrier is subrogated* to the rights of the injured employee *and may enforce the liability of the third party* in the name of the injured employee or the legal beneficiary.... If the recovery is for an amount greater than the amount of the insurance carrier's subrogation interest, the insurance carrier shall:

> (1) reimburse itself and pay the costs from the amount recovered; and

> (2) pay the remainder of the amount recovered to the injured employee or the legal beneficiary ....

*Id.* § 417.001 (emphasis added). A separate section of the Act-section 417.002-addresses a carrier's right of reimbursement *563in the event an injured employee asserts a claim against a third party because of the injury and makes a recovery. That section requires the employee to reimburse the carrier for benefits the carrier paid to or for the employee's benefit, but allows the employee to retain the balance subject to the carrier's right to offset any future benefits by the amount of the balance:

> (a) The net amount recovered by a claimant in a third-party action shall be used to *reimburse the insurance carrier* for benefits, including medical benefits, that have been paid for the compensable injury.

> (b) Any amount recovered that exceeds the amount of the reimbursement required under Subsection (a) shall be treated as an advance against future benefits, including medical benefits, that the claimant is entitled to receive under this subtitle.

> (c) If the advance under Subsection (b) is adequate to cover all future benefits, the insurance carrier is not required to resume the payment of benefits. If the advance is insufficient, the insurance carrier shall resume the payment of benefits when the advance is exhausted.

*Id.* § 417.002 (emphasis added).

Manifestly, the Act distinguishes between the carrier's right of subrogation and its right of reimbursement-and those are two different rights. *See**Fortis Benefits* , 234 S.W.3d at 645. Section 417.001 expressly grants the carrier a statutory right of subrogation and expressly authorizes the carrier to bring suit directly against a third party to "enforce the liability of the third party" to the injured employee. TEX. LAB. CODE § 417.001. The statute authorizes the carrier to prosecute the subrogation claim in order to recover the benefits it has paid and to offset the benefits it might owe to the employee in the future by any excess recovered by, or on behalf of, the injured employee, regardless of whether the injured employee chooses to pursue a claim against the third party. *See id.* And if it does so, it is to "reimburse itself and pay the costs from the amount recovered," then pay the remainder to the injured employee. *Id.* "Costs" include the carrier's attorney's fees. *E.g.* , *Jones v. Liberty Mut. Ins. Co.* , 745 S.W.2d 901, 902 (Tex. 1988).

Section 417.002, on the other hand, separately and expressly gives carriers only the right to receive reimbursement in the event the *employee* recovers from a third party. *See* TEX. LAB. CODE § 417.002. Section 417.002 does not empower the carrier to proceed, or even to make claims, against, third parties in order to enforce rights the carrier might have pursuant to the carrier's payments to and for the employee's benefit in the past or as to those which the Act would require it to pay in the future. *Id.* Nor does section 417.002 entitle the carrier to both reimbursement for payments it made to and for the employee's benefit and recovery of its costs-such as attorney's fees-out of the recovery from a third party. *See id.* Thus, if the carrier waives its right to subrogation under section 417.001, section 417.002 still specifically provides the carrier a separate right to reimbursement. But, under such circumstances, section 417.002 effectively relegates the carrier to paying benefits and then waiting on the employee to prosecute a third-party action. If the employee chooses not to do so, or if the employee does not succeed in recovering on a third-party action, then the carrier has no pathway for recovering from a third party for the benefits it paid, or will pay, to the employee. Under section 417.002, it is only if the employee recovers from a liable third party that the carrier has the right to be reimbursed, and even then, the statute does not give the carrier the right to *564recover its costs in addition to reimbursement for the amounts paid.

In sum, where the carrier has subrogation rights under section 417.001, it is entitled to directly bring and directly participate in suits against third parties. Under that section, the subrogated carrier is in charge of its own destiny as to prosecuting a third-party claim to recoup payments it has made to the injured employee, obtaining credit for those it is obligated to make in the future, and recovering its costs, including attorney's fees, in addition to reimbursement. When the carrier has only reimbursement rights pursuant to section 417.002, it is neither in charge of its own destiny vis-a-vis prosecuting a third-party claim nor statutorily entitled to recover its costs in addition to the amount it paid, or will pay, to the employee from the amount received from the third party.

So when does the statutory language matter? That is, in which situations does a carrier not have subrogation rights but has only reimbursement rights? As explained below, under the clear, plain language of sections 417.001 and 417.002, this is one such situation.

**II. The Terminal Agreement and the Policy Endorsement**

Western and Cactus entered into an "Asphalt Terminal Access Agreement" (Terminal Agreement) that required Cactus to carry insurance, including workers' compensation insurance. As related to this matter, the Terminal Agreement contains the following provision regarding Cactus's workers' compensation insurance:

> The insurance ... shall be ENDORSED to contain a waiver of *subrogation* against the WESTERN ENTITIES ....

(Emphasis added).

Wausau was the workers' compensation carrier for Cactus. Pursuant to the Terminal Agreement, Cactus purchased an endorsement to its policy entitled "Texas Waiver of Our Right to Recover from Others Endorsement." The endorsement provides as follows:

> 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* , but this waiver applies only with respect to bodily injury arising out of the operations described in the Schedule where you are required by written contract to obtain this waiver from us.

> This endorsement shall not operate *directly or indirectly to benefit anyone not named in the Schedule.*

> The premium for this endorsement is shown in the Schedule.

(Emphasis added). In the Schedule, the endorsement specified that it applied as follows:

> (X) Blanket Waiver

> Any person or organization for whom the Named Insured has agreed by written contract to furnish this waiver.

As the Court notes, the endorsement is a standard form promulgated by the Texas Department of Insurance (TDI). *See* TEX. DEP'T OF INS., TEXAS WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY MANUAL : WC 42 03 04 A (2d reprt. 2011). There is no dispute that Western and its affiliates (the Western entities) were the entities for which Cactus agreed, by written contract, to obtain an endorsement waiving the insurer's subrogation rights.

There is also no dispute that Wedel is not listed in the "Schedule" section of the policy. Accordingly, the endorsement expressly excludes him from being benefitted by the endorsement "directly or indirectly."

*565**III. The Meaning of the Language Is Clear**

The Court says that the actual intent of the parties when entering into workers' compensation contracts in Texas is immaterial because the policy forms are mandated by a state agency. *Ante* at 557 (citing *Progressive Cty. Mut. Ins. Co. v. Sink* , 107 S.W.3d 547, 551 (Tex. 2003) ). It also notes that "[i]n construing such forms, we strive to 'determine the ordinary, everyday meaning of the words to the general public.' " *Ante* at 557 (quoting *Progressive Cty. Mut. Ins. Co.* , 107 S.W.3d at 551 ). The problem is that the Court does not adhere to this latter statement regarding construing this form.

As related to this controversy, the Terminal Agreement was simple and clear. It required Cactus to maintain workers' compensation insurance that contained a "waiver of subrogation against the Western Entities," with "Western Entities" being defined as "Western, its parent, subsidiary and affiliated companies, and their respective officers, agents and employees." What the contract did *not* require was waiver of the carrier's statutory right of reimbursement, as is provided for by section 417.002 of the Act.

The endorsement to Cactus's policy began by reiterating Wausau's statutory right to recover payments it made under the policy "from anyone liable for an injury covered by this policy." In the next sentence, Wausau agreed that it would "not enforce our right against the person or organization named in the Schedule, but this waiver applies only ... where you are required by a written contract to obtain this waiver from us." The endorsement contained no additional language waiving rights as to any other person or entity. And the written contract between Cactus and Western required only that the workers' compensation policy be endorsed "to contain a waiver of subrogation against the WESTERN ENTITIES."

The Court concludes that "the waiver of a carrier's 'right to recover' from a third party named in the schedule includes both a direct recovery from [Western] and an indirect recovery from proceeds paid by [Western] to an injured employee," such as Wedel. *Ante* at 558. It further posits that "[t]here is no meaningful difference between the two." *Ante* at 558. I disagree with both conclusions.

As to the first statement, the policy waives only Wausau's right to recover from Western. Recovery by Wausau from Wedel, regardless of whether those funds originated with Western, is not waived by the policy language because under these facts, Wedel is not a person "liable for an injury covered by this policy." The Court asserts that a reading of the language to waive only subrogation rights against third parties instead of waiving both subrogation rights as well as reimbursement rights, as referenced in section 417.002, "undermines the rationale for having such a waiver in the first place." *Ante* at 559. The response to that statement is four-fold. First, the endorsement language specifies that it precludes Wausau from exercising its rights "against the person or organization named in the Schedule," which is just what Western contracted for. Second, the endorsement unambiguously and simply specifies that the endorsement "shall not operate directly or indirectly to benefit anyone not named in the Schedule." Wedel is not named in the schedule, yet the Court's interpretation manifestly benefits him both directly and indirectly. And there is no evidence or contention that Western's contractual requirement for waiver of subrogation by the carrier was intended to benefit Cactus or its employees who might be injured. Third, the Act specifies that carriers have rights of both subrogation as *566to third parties liable for injuries to covered employees and reimbursement in the event the carrier does not have or does not assert a right of subrogation against a third party like Western. And fourth, Western's requirement was transparently intended to protect the interests of the Western Entities, as specified in its contract with Cactus and as discussed below, not to benefit Cactus's employees.

As to the Court's second statement, a brief review of the previous discussion regarding subrogation and reimbursement, as addressed by sections 417.001 and 417.002, demonstrates that there indeed is a meaningful difference in how the two are treated by the Act. First, the Act addresses the two in different sections. TEX. LAB. CODE §§ 417.001, .002. Second, an insurer who is subrogated to the rights of another-such as Wausau is, or would be except for the waiver, subrogated to the rights of Wedel-steps into the shoes of the party to whose rights it is subrogated and obtains all the rights of that party related to recovery of amounts paid to it. *See**Guillot v. Hix* , 838 S.W.2d 230, 232 (Tex. 1992) (stating that the rights conferred by subrogation are derivative of the subrogor's interests, to which the subrogee succeeds). The right of reimbursement in section 417.002 does not afford the carrier such extensive rights and, in most instances, will result in a lesser recovery than would be obtained under section 417.001.

Further, the Court goes beyond the language of the endorsement and talks about the "rationale for having such a waiver." *Ante* at 559. But "rationale" does not trump the express language of the endorsement in context of the statutory provisions. By implying that it does, the Court second-guesses and encroaches on the Legislature's exercise of its policy-making function when it enacted sections 417.001 and 417.002 and their clear, separate treatment of subrogation and reimbursement. *See**Town of Flower Mound v. Stafford Estates Ltd.* , 135 S.W.3d 620, 628 (Tex. 2004) ("[T]he State's public policy is reflected in its statutes." (quoting *Tex. Commerce Bank, N.A. v. Grizzle* , 96 S.W.3d 240, 250 (Tex. 2002) ) ). Further, the Court's "rationale" discussion fails to justify its position. The rights of subrogation and reimbursement are distinct and have different characteristics, as noted above. A waiver as to subrogation alone provides value to both a policy holder and potential third-party defendant. A waiver of subrogation prevents claims and lawsuits brought by a carrier-whose business generally is adjusting and paying claims with money received through premiums and collateral activities like recovering on subrogation claims and litigating regularly-to recover benefits paid to covered employees, even if the employees choose not to bring suit. This alone would be worth a premium to a policy holder, such as Cactus, that is seeking to interact or do business with an entity such as Western. And it would be of value to Western to have a workers' compensation carrier, whose business model includes litigating, removed from the decision-making process regarding potential third-party claims and suits against Western. Finally, even if Western intended to acquire a waiver as to both subrogation and reimbursement (an intent not expressed in the simple, clear language of its agreement with Cactus), we have consistently held that the intent of parties to an insurance contract does not matter-it is the policy language that matters. *E.g.* , *Greene v. Farmers Ins. Exch.* , 446 S.W.3d 761, 766 (Tex. 2014). And policy language is interpreted according to its ordinary, plain meaning. *Id.* ; *Progressive Cty. Mut. Ins. Co.* , 107 S.W.3d at 551.

Further, the endorsement to Wausau's policy states that "[w]e will not enforce our right against the person or organization *567named in the Schedule." The schedule is limited to "[a]ny person or organization for whom the Named Insured has agreed by written contract to furnish this waiver." Thus, the endorsement is not ambiguous or unclear. It waives only Wausau's right to assert a claim against or sue an alleged tortfeasor (such as Western) if that tortfeasor is party to a written contract requiring the waiver. Here, the only parties to the written contract were Cactus and Western. Because Wedel is not a party to that contract, the endorsement does not apply to impair Wausau's rights as to him-which are the rights of reimbursement specified in section 417.002 of the Act. And to the extent the Court discusses the premiums paid by Cactus for the endorsement, how the premiums were calculated is beyond anything in this record other than the parties do not dispute that Cactus paid a premium for the endorsement to its policy. The question is: What did the endorsement do and thus what did Cactus pay for? The answer is: It clearly and unambiguously waived only Wausau's right to "enforce our right [to recover payments] against the person or organization named in the Schedule." That person or organization was not Wedel, it was the "Western Entities."

Noticeably absent from the contract between Western and Cactus, as well as from the endorsement, is any indication that Cactus or Western intended for Wedel or any other Cactus employee who was injured on the job to receive a double recovery in the nature of both workers' compensation benefits and recovery from Western on a third-party claim. Further, permitting Wedel to receive both workers' compensation benefits and a recovery from Western free of Wausau's right to reimbursement amounts to a clear benefit in violation of the endorsement's explicit provision stating that "[t]his endorsement shall not operate directly or indirectly to benefit anyone not named in the Schedule." To reiterate, Wedel is not named in the schedule.

The Court discusses the practicalities of the carrier's subrogation and reimbursement rights under the statute and the endorsement, and says that those rights cause problems in settling claims like those Wedel made against Western. *Ante* at 557. But such problems have existed since the Legislature enacted workers' compensation statutes and created the need to balance the interests of injured workers, carriers, and employers who pay premiums for insurance and whose premiums are affected by losses. There simply is unavoidable tension where multiple parties, with differing interests and motivations, are contesting liability for injuries, liquidating claims based on alleged liability for injuries, and allocating proceeds in settlement of claims. But those practicalities should not be the basis for interpreting language of an insurance policy endorsement. The language itself should be the basis. Nor should courts simply substitute their idea of a preferred settlement process for the unambiguous language of a binding contract. *Fiess v. State Farm Lloyds* , 202 S.W.3d 744, 753 (Tex. 2006) ("[W]here the language is plain and unambiguous, courts must enforce the contract as made by the parties ...." (quoting *E. Tex. Fire Ins. Co. v. Kempner* , 87 Tex. 229, 27 S.W. 122, 122 (1894) ) ). The Act is a detailed product of over one hundred years of adjusting various provisions in it by the Legislature with input from the various interests involved in the workers' compensation system. Sections 417.001 and 417.002 reflect that detail. So does the waiver endorsement promulgated by TDI. Adjustments to such detailed prescription for how subrogation and reimbursement are to work in the context of the Act should be left to the Legislature.

*568**IV. Case Law**

The Court states that its decision "stand[s] on over twenty years of unanimous case law" and notes that it "glean[s] insight" from TDI's inaction in light of those decisions. *Ante* at 555. However, the case law stems from various courts of appeals and a federal district court. *See**Liberty Ins. Corp. v. SM Energy* , No. H-12-3092, 2012 WL 6100303, at *7-9 (S.D. Tex. 2012) ; *Am. Risk Funding Ins. Co. v. Lambert* , 59 S.W.3d 254, 259 (Tex. App.-Corpus Christi-Edinburg 2001, pet. denied) ; *Lumbermen's Mut. Cas. Co. v. Carter* , 934 S.W.2d 912, 913 (Tex. App.-Beaumont 1996, no writ) ; *Hartford Accident & Indem. Co. v. Buckland* , 882 S.W.2d 440, 445 (Tex. App.-Dallas 1994, writ denied). And much of it emanates from and relies on decisions based on the language of repealed provisions predating the current Act. *See, e.g.* , *Buckland* , 882 S.W.2d at 444 (discussing article 8307 § 6a, Act of May 15, 1973, 63rd Leg., R.S., ch. 88, § 10, 1973, Tex. Gen. Laws 193 (repealed) ).

Wausau asserts that while the *Buckland* decision is the foundation for the courts of appeals' opinions that follow, the case does not actually support a conclusion that the policy waiver encompasses subrogation as well as reimbursement. I agree. The Court is correct that the *Buckland* opinion quotes a TDI waiver that is substantively the same as the one at issue in this case. *Ante* at 559 (citing *Buckland* , 882 S.W.2d at 441 ). In *Buckland* , however, the court of appeals stated, without analyzing the policy's language, that "a carrier's subrogation interest includes its right to reimbursement as well as its right to future amounts." *Buckland* , 882 S.W.2d at 445. Wausau contends that the court's conflation of subrogation and reimbursement extended the approved waiver language beyond its plain meaning. Again, I agree. As discussed above, the language of the TDI-originated form waiver simply does not address a carrier's statutory right of reimbursement.

The Court also notes that *SM Energy* addressed the same TDI waiver language and the issue was the same as presented here. *Ante* at 557-59 (citing *SM Energy* , 2012 WL 6100303, at *1 ). But again, without full analysis of the endorsement's language, the district court concluded that the endorsement waived the carrier's rights as to both subrogation and reimbursement on the basis that "[c]ourts applying Texas law do not distinguish between a carrier's subrogation and reimbursement rights in the Worker[s'] Compensation Act context." *SM Energy* , 2012 WL 6100303, at *9. I disagree with this analysis as Texas law-the Workers' Compensation Act-clearly distinguishes between the two rights. *See* TEX. LAB. CODE §§ 417.001, .002.

At the end of the day, while persuasive, the referenced opinions are not binding on this Court pursuant to our constitutional charge. TEX. CONST. art. IV, § 3 (stating that the Court's appellate jurisdiction shall be final). And the legislative acceptance doctrine-which the Court substantively references and which comes into play where interpretations of statutory law such as the sections of the Act involved here, are concerned-applies only where the relevant provisions have "been interpreted by a court of last resort or given a longstanding construction by a proper administrative officer." *Tex. Dep't of Protective & Regulatory Servs. v. Mega Child Care, Inc.* , 145 S.W.3d 170, 176 (Tex. 2004). This Court has never decided the issue before us today. And though the Court notes decisions of TDI administrative judges regarding the question, "[a]nother element of the legislative acceptance doctrine is that the statute at issue must be ambiguous. Under the doctrine of legislative acceptance, an administrative agency's *569construction of a statute cannot contradict the statute's plain meaning." *Fleming Foods of Tex., Inc. v. Rylander* , 6 S.W.3d 278, 282 (Tex. 1999) (citation omitted). Moreover, appeals from both TDI decisions the Court references remain pending in the courts-one in a district court and one in a court of appeals. *See**Liberty Mut. Ins. Co. v. Trahan* , No. 14-17-00528-CV (Tex. App.-Houston [14th Dist.] submitted Mar. 22, 2018); *Liberty Mut. Fire Ins. Co. v. Ainsworth* , No. 2016-45952 (165th Dist. Ct., Harris County, Tex. status report May 4, 2018).

The Court builds on its references and concludes that they "are consistent with the waiver's plain language." *Ante* at 560. But, as explained, neither the language of the endorsement nor that of sections 417.001 and 417.002 support the conclusion that subrogation and reimbursement are treated as one and the same. Authorities concluding otherwise are simply not consistent with language of the waiver and the relevant statutory provisions. Neither is the Court's conclusion.

Finally, while the "decades of settled and unanimous" case law the Court references does not serve as valid, binding precedent, even if it did, the doctrine of stare decisis is not absolute. *See**Sw. Bell Tel. Co. v. Mitchell* , 276 S.W.3d 443, 447 (Tex. 2008). "[U]pon no sound principle do we feel at liberty to perpetuate an error, into which either our predecessors or ourselves may have unadvisedly fallen, merely upon the ground of such erroneous decision having been previously rendered." *Id.* (alteration in original) (quoting *Willis v. Owen* , 43 Tex. 41, 48-49 (1875) ). Errors, when discovered, should be corrected.

**V. Conclusion**

Insurance policies and their endorsements are to be construed according to their plain language. Here, the endorsement did just what Cactus and Western contracted for: it waived Wausau's right to sue or make a claim against Western for the payments it made to and for the benefit of Wedel. If, as the Court says, the "rationale" for Wausau's endorsement requires waiver of both the carrier's right of subrogation and its right of reimbursement, *ante* at 559, then the rationale should be effected by the parties, who contract for the waiver, and TDI, which prescribes the language for such waivers. But the solution is not for the Court to construe an unambiguous insurance policy endorsement to say something it does not say. I would reverse the judgment of the court of appeals and remand the case for further proceedings.

1

Wausau argues that the endorsement did not waive its statutory right to subrogation, only its right to recover for payments it made. In my view, the distinction, if any, is not determinative of the issue before us and need not be addressed because the endorsement did not waive Wausau's reimbursement right. The Court refers to the rights in question as Wausau's rights of subrogation and reimbursement. I will do likewise to avoid confusion.

2

Both James Wedel and his wife, Michelle, were parties to the suit filed against Western. James died while this matter was pending in the court of appeals. Any references to "Wedel" will encompass James, both James and Michelle, or Michelle, depending on the context. Wausau asserts, and Wedel does not dispute, that as of August 15, 2014, Wausau had paid over $1,548,822 in medical and income benefits to and for Wedel's benefit.

3

The *Fortis Benefits* policy provided:

> **Subrogation Right.** Upon payment of benefits, *We will be subrogated to all rights of recovery a Covered Person may have against any person or organization* . This includes but is not limited to recoveries against such third party, against any liability coverage for such third party or against automobile insurance in the event a claim is made under the uninsured or underinsured motorist coverages. Such right extends to the proceeds of any settlement or judgment; but is limited to the amount of benefits We have paid. You must 1) do nothing to prejudice any right of recovery; 2) execute and deliver any required instruments or papers; and 3) do whatever else is necessary to secure such rights.

> If We are precluded from exercising Our Subrogation Right, We may exercise Our Right of Reimbursement.

> **Right of Reimbursement.** If benefits are paid under this plan, and any Covered Person recovers against any person or organization by settlement, judgment or otherwise, *We have a right to recover from that Covered Person an amount equal to the amount We have paid.* This includes but is not limited to recoveries against such third party, against any liability coverage for such third party or against automobile insurance in the event a claim is made under n.11 the uninsured or underinsured motorist coverages.

*Fortis Benefits* , 234 S.W.3d at 645 n.11.

4

The Act fairly consistently uses the phrase "the injured employee or the employee's beneficiaries," or a variation of that language. For convenience, I will simply refer to "the employee." When appropriate, the reference is intended to include both the employee and the employee's beneficiaries under the Act.