Opinion ID: 6109919
Heading Depth: 1
Heading Rank: 3

Heading: 565III The Meaning of the Language Is Clear

Text: 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  to 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  named 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.