March, 20, 2002The members of the Supreme Court spent most of February and March campaigning for the primary elections. As a result, the Court handed down only three opinions in the last month that are of interest to those of us in the insurance business. In Utts v Short, the Supreme Court issued a new opinion which completely changed the Court's earlier opinion. Utts involves the application of a settlement credit for wrongful death and other derivative claimants; unfortunately, the Utts opinion ended up providing more questions than answers on the application of settlement credits. The opinion of the Court in Texas Department of Transportation v Garza established that a governmental entity cannot be sued based on a claim that the speed limit in the area of an accident should have been lower. The Court disagreed with the court of appeals in Limestone Products Distribution, Inc. v Helen Hershel McNamara, et al, and held that the independent contractor status of a party is determined by the relationship of the parties on the day of the accident rather than on the relationship of the parties over a term of years. I. DETERMINATION OF SETTLEMENT CREDIT FOR DERIVATIVE PLAINTIFFS PURSUANT TO THE CIVIL PRACTICE AND REMEDIES CODE The Supreme Court in Utts v Short (decided on February 28, 2002), reversed its prior decision rendered on December 7, 2000, on how to handle the application of settlement credits.
This wrongful death case was brought when Mr. Short died as a result of a perforated colon that occurred during surgery performed by the defendant, Dr. Steven Utts. The suit was brought by the wife of Clifton Short as well as the children of Mr. Short against Dr. Utts, HCA South Austin Medical Center, and Dr. Jean-Pierre Forage. All plaintiffs subsequently non-suited Dr. Forage which left only Dr. Utts and HCA as the defendants. One of the children, Dorothy Short Walker, then settled with HCA for $200,000. Pursuant to the settlement agreement, Ms. Walker was paid $50,000 by HCA and the balance of $150,000 was paid to a trust account of the law firm representing the plaintiffs. When Ms. Walker signed the settlement agreement she directed the law firm to pay $10,000 to her mother and $10,000 to each of her three brothers and sisters. The remaining plaintiffs then settled with HCA for $10.00 for a total payment of $40.00. Ms. Walker eventually non-suited her claim against Utts. This left Ms. Walker's mother and three brothers and sisters as the only remaining plaintiffs. Dr. Utts filed a written election pursuant to §33.012 of the Texas Civil Practice and Remedies Code claiming a $200,040.00 dollar for dollar settlement credit. The jury found that both Dr. Utts and HCA were negligent. The jury attributed 25% of the negligence to Dr. Utts and 75% to HCA (the suit was filed prior to September 1, 1995; as a result, Dr. Utts was jointly and severally liable for the entire amount of damages.) The jury awarded a total of $436,000.00 in damages. The plaintiffs then moved for judgment contending that Dr. Utts was only entitled to a $40.00 credit. Dr. Utts, as can be imagined, claimed that he was entitled to a credit of $200,040.00. The trial court rendered judgment in the amount of the jury verdict less a settlement credit of $50.00. (The trial court added $10.00 to the $40.00 claim based on the settlement of the claim under the survival statute).
The troubling aspect of this case to the members of the Supreme Court was the obvious attempt by the attorney for the plaintiffs to circumvent the right of the non-settling defendant, Dr. Utts, to claim a $200,000 settlement credit. As a result, the Court held that when a non-settling plaintiff benefits from a settlement between a defendant and other plaintiffs, the defendant is entitled to a settlement credit for the amount of the settlement. The non-settling plaintiff can nevertheless show that he did not benefit from the settlement in order to avoid the settlement credit. The Court first noted that in order for a defendant to obtain a dollar for dollar credit on any jury verdict against a non-settling plaintiff, the defendant must file a written election claiming a dollar for dollar credit before the case is submitted to the jury. It is also necessary for the defendant to put into evidence the amount of the settlement. Once this is done, the defendant can request that the Court make a ruling before the case is submitted to the jury concerning how the settlement at issue benefits the non-settling plaintiff. Alternatively, the defendant can request a ruling after the case is submitted to the jury. Once evidence is admitted showing that the plaintiff benefitted from the settlement, the burden then shifts to the plaintiff to show that he did not benefit from the settlement.
The Court did not provide any guidance on how a trial court determines whether a non-settling plaintiff benefits from the settlement of a settling plaintiff. In this case, the Supreme Court noted that the non-settling plaintiffs did not benefit from the $50,000 paid to the settling plaintiff. As a result, the Court remanded this case to the trial court to determine whether the non-settling plaintiffs benefitted from the residual settlement amount of $150,000.00 from the Walker settlement.
The Court's opinion indicates the uncertainty that exists among members of the Supreme Court concerning how to credit a settlement in wrongful death cases. There is sufficient division among the members of the Supreme Court to indicate that the decision of the Court in Drilex Systems, Inc. v Flores 1 S.W.2d 112 (Tex. 1999) might be overturned. In Drilex the Court held that all family members suing in a wrongful death case are to be considered as "one claimant." As a result, the Court decided in Drilex that the settlement of one family member in a wrongful death case is to be credited against the jury verdict awarded to the other family members. The plaintiffs in Utts v Short attempted to avoid the effect of the Drilex opinion by settling with one plaintiff and then dismissing that plaintiff from the lawsuit. The opinion of the Court in Utts indicates that the effect of settlements in wrongful death cases and other cases involving derivative plaintiffs is still uncertain. II. THE DECISION ESTABLISHING A SPEED LIMIT IS NOT A CONDITION OR USE THAT WAIVES SOVEREIGN IMMUNITY The Supreme Court in Texas Department of Transportation v Garza (decided on January 24, 2002), held that a governmental entity cannot be sued based on a claim that the posted speed limit in an area is excessive.
Suit was brought in this case as a result of a pedestrian-automobile accident on September 26, 1998, when a motorist lost control of her vehicle causing her to veer off the road, striking and killing Rolando Garza, who was walking to school. Suit was brought against the Texas Department of Transportation alleging, among other things, that TXDOT was liable due to its failure to lower the speed limit in the area where the accident occurred from 45 miles per hour to a lower speed limit. The point where Rolando Garza was standing at the time of the accident was located over 1,000 feet from a school zone. The plaintiffs in Garza therefore alleged that TXDOT was liable due to its "...failure to correct the absence, condition, or mal-function of road signs within a reasonable time after notice was given." The trial court granted summary judgment in favor of the Texas Department of Transportation. The case then took a rather long and tortured route through the appellate process which involved two separate appeals to the Corpus Christi Court of Appeals before the case was ultimately heard by the Texas Supreme Court.
The Supreme Court first noted that a governmental unit retains its sovereign immunity from suits arising from "the absence, condition, or malfunction of a traffic or road sign, signal or warning device unless the absence, condition, or malfunction is not corrected by the responsible governmental unit within a reasonable time after notice." In this case, the issue was whether the failure to lower the speed limit from 45 miles an hour to a lower speed limit consistent with an area near a school zone constituted an "absence, condition, or a malfunction" of a traffic or road sign. The Court noted that it has only found liability against a governmental unit for the road signs and signals when the road sign has either been obstructed from view or the road sign reported an inaccurate speed limit. In this case, the road sign corrected the established speed limit of 45 miles an hour. The decision to set the speed at 45 miles an hour is not a condition for which immunity is waived.
This decision establishes that a governmental unit cannot be sued based upon the decision setting the speed limit. III. FACTS EXISTING AT TIME OF THE ACCIDENT DETERMINE INDEPENDENT-CONTRACTOR STATUS In Limestone Products Distribution, Inc. v Helen Hershel McNamara, et al, the Supreme Court held that independent contractor status is based upon the facts as they exist on the day of the accident (decided on February 14, 2002)(per curiam). The Supreme Court determined that the court of appeals misapplied the right-to-control test to the facts of the case. As such, in determining independent-contractor status, it is essential to know all of the facts concerning the relationship between the parties on the day of the accident.
Coy Mathis was originally hired by Limestone as an employee. Mathis drove a Limestone delivery truck, owned by Limestone. Limestone prescribed specific routes that Mathis used on deliveries and paid for gasoline, repairs and insurance on the truck that Mathis used for deliveries. Mathis was paid twenty-five percent of the income received for each load that he delivered. Mathis received a paycheck from Limestone, from which Limestone withheld social security and federal income taxes. Limestone reported Mathis's income on a W-2 form. Additionally, Mathis was covered under Limestone's workers' compensation insurance. Three years prior to this accident Mathis purchased a truck from Limestone. Mathis drove the truck as his own. After this purchase, Mathis was not required to drive specific routes so long as his deliveries were timely. Mathis paid for his own gasoline, truck repairs and insurance. Limestone paid Mathis eighty percent of the income received for each load that he delivered, rather than twenty five percent he received when he was driving Limestone's truck as an employee. Limestone reported Mathis' income on a 1099 form, rather than a W-2 form. Mathis paid his own social security and federal income taxes. He no longer received coverage under Limestone's workers' compensation insurance. Several aspects of Mathis' work were the same before and after the purchase of his own truck. Mathis did not have regular hours nor did he call Limestone's office daily for delivery assignments. He did not receive vacation, sick leave, or holidays. Limestone required Mathis to submit his load tickets to Limestone for each job so that Limestone could bill its customers and pay Mathis. When the accident occurred, Mathis was driving his car to Limestone's property to deliver load tickets. Mathis did not have any loads to deliver that day. As he attempted to turn onto Limestone's property, his car collided with Tom McNamara's motorcycle, causing McNamara's fatal injuries. McNamara's survivors sued Mathis and Limestone Products Distribution, Inc., alleging that Mathis was Limestone's employee. McNamara's survivors alleged that Mathis was acting in the course and scope of employment at the time of the accident. Limestone moved for summary judgment on the ground that Mathis was an independent contractor. The trial court granted Limestone's summary judgment and McNamara's survivors appealed the judgment. The court of appeals determined that a fact issue existed on whether Mathis was acting within the course and scope of his employment and reversed and remanded the case to the trial court. Limestone petitioned the Supreme Court for review.
The Supreme Court concluded that the court of appeals misapplied the right-to-control test. According to the Supreme Court, the court of appeals incorrectly compared Limestone's right to control Mathis throughout their relationship, rather than determining Limestone's right to control Mathis when the accident occurred. In Texas, the standard to determine whether a worker is an independent contractor is the right-to-control test. Under this test, an employer's right to control is measured by the following factors:
Pitchfork Land & Cattle Co. v King, 346 S.W.2d 598, 603 (Tex. 1961). The Supreme Court applied the right-to-control test to determine Limestone's control over Mathis at the time of the accident. Under this test, the evidence showed that while Limestone instructed Mathis where and when to make deliveries and required load tickets to be submitted to Limestone to receive pay, Mathis exercised broad discretion over everything else. Mathis owned and used his own truck for deliveries, as well as paid for gasoline, repairs, and insurance. Mathis, not Limestone, paid his own social security and federal income taxes. Limestone reported Mathis's income on a 1099 form, not a W-2 form. After applying these factors, the Supreme Court held that the summary judgment evidence conclusively established that Mathis was an independent contractor of Limestone. Thus, the Supreme Court reversed the judgment of the court of appeals, in favor of Limestone.
The Supreme Court held that the court of appeals did not correctly interpret the facts of this case to determine the independent contractor status of Coy Mathis. Please feel free to call any of our partners or associates with any questions that you may have at 361-881-9217 or fax us at 361-882-9437. |
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Volume III, No. 2
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