July 17, 2002TheTexas Supreme Court in June tried to make up for the lack of opinions in March, April and May. As a result, we were not able to report on all of the opinions for this month; however, we will provide an analysis of the June opinions not covered in this newsletter in our next newsletter. The Court ruled on the specificity needed for expert reports in medical malpractice cases in Bowie Memorial Hospital v Wright. In King v Dallas Fire Insurance Co., the Court held that coverage is invoked for an employer that has been sued for intentional tort of the employee. The Court reaffirmed the need for a plaintiff to prove that a premise owner either knew or should have known of a defective condition in Walmart Stores Inc. v Reese. The liability of an employer was limited in defamation actions in Minyard Food Stores, Inc. v Goodman. In the area of worker's compensation law, in Continental Casualty Co. v Downs the Supreme Court strictly construed the Compensation Act when a comp carrier refused to pay compensation benefits. Finally, in the area of employment law, the Court upheld the validity of a mandatory arbitration agreement in Halliburton Company v Brown & Root Energy Services. I. EXPERT REPORTS IN MEDICAL MALPRACTICE CASES MUSTPROVIDE BOTH THE FACTUAL AND MEDICAL BASIS FOR THE EXPERT'S OPINION Bowie Memorial Hospital vs Wright (decided on June 13, 2001) further defined the specificity required in expert medical reports filed in medical malpractice cases.
Barbara Wright brought this medical malpractice case as a result of the alleged failure of hospital personnel at Bowie Memorial Hospital to diagnose a fractured right foot that she sustained in an accident. Mrs. Wright was admitted to Bowie after being involved in a car accident. A physician's assistant employed by Bowie x-rayed Mrs. Wright's right knee and foot. While the physician's assistant correctly diagnosed her fractured patella, he did not diagnose her fractured right foot. Mrs. Wright was transferred to another hospital to be treated by an orthopedic surgeon who did not discover the fractured foot until approximately one month after the accident. Mrs. Wright, as well as her husband, then brought this medical malpractice case against several individuals including Bowie Memorial Hospital, the physician's assistant, and the doctor who supervised the physician's assistant. The Wrights also sued the orthopedic surgeon along with the medical clinic and another treating doctor. The Wrights filed an expert medical report concerning the negligence of Bowie Memorial Hospital, Dr. Hodde (the supervisor for the Bowie physician assistant) and another doctor. The report stated as follows: I have reviewed the material you sent me on the above case. I believe that the hospital fell below the appropriate standard of care in not having a defined mechanism in place whereby x-rays taken in the E.R. are read by a physician specialist in interpreting the films in a timely manner (i.e., less than 24 hrs). X-rays taken in the E.R. need to have re-reads performed withing 24 hrs and if there is a discrepancy [sic] in the x-ray readings. A system should be in place to inform the patient of this. There did not appear to be any procedure that the hospital has for tracking x-rays. The hospital also doesn't seem to have a system of orienting health care professionals working in the E.R. nor any form of Q/A for P.A.'s staffing the E.R. There didn't appear to be any organized system or protocols for P.A. supervision in the E.R. I do believe that it is reasonable to believe that if the x-rays would have been correctly read and the appropriate medical personnel acted upon those findings then Wright would have had the possibility of a better outcome. Bowie moved to dismiss the Wrights' claim alleging that the expert report did not establish that the acts of employees of Bowie Memorial Hospital caused Mrs. Wright's injuries. After two hearings, the trial court dismissed the Wrights' claims against Bowie Memorial Hospital after the trial judge contended that the orthopaedic surgeon "could have done his own work." The Court of Appeals reversed the trial court's decision. While the Court of Appeals concluded that ". . . the report inadequately summarizes the causal relationship between Bowie's alleged negligence and Barbara's injury" the Court of Appeals nevertheless concluded that the report represented a "good-faith" effort to comply with the expert report requirements of art. 4590i, §13.01. The issue before the Supreme Court was whether the report constituted a "good-faith" effort to comply with art. 4590i, §13.01.
The Court pointed out that pursuant to art. 4590i, §13.01(r)(6), an expert report must provide "a fair summary of the expert's opinions as of the date of the report regarding applicable standards of care, the manner in which the care rendered by the physician or health care provider failed to meet the standards, and the causal relationship between that failure and the injury, harm, or damages claimed. Pursuant to art. 4590i, §13.01, if a defendant contests the inadequacy of the report and moves to dismiss the case, the trial court should only dismiss the plaintiff's claim ". . . if it appears to the Court, after hearing, that the report does not represent a good-faith effort to comply with the definition of an expert report in sub-section (r)(6)." The Court reiterated its two-prong test articulated in American Transitional Care Ctrs. Of Texas, Inc. v Palacios, 46 S.W.3rd 873 (Tex. 2001) in which the Court found that in order for the expert report to meet the "good-faith effort" requirement, the report must show two things:
The Court acknowledged that an expert report does not need to provide all of the plaintiff's proof; nevertheless, an expert report must give an opinion as to standard of care, breach, and causal relationship. The expert report cannot be conclusory--the report must provide a factual basis to support the conclusions of the expert. Once the trial court makes its decision, the appellate court will only reverse the trial court's decision based upon an abuse of discretion of the trial court. A court abuses its discretion only if it makes a decision with no legal basis for such decision.
The Supreme Court concluded that the problem with the report of the expert in this case was that it did not provide a factual basis to establish the cause-and-effect relationship between the alleged negligence of the hospital personnel at Bowie Memorial Hospital and Mrs. Wright's injury. None of the parties disputed that the expert report provided both the facts and a medical basis to show a breach of the standard of care. According to the Court, only one statement in the report dealt with causation: If the x-rays would have been correctly read and the appropriate medical personnel acted upon those findings, then Wright would have had the possibility of a better outcome. The Court found that this was insufficient to establish a cause-and-effect relationship between the alleged negligence of Bowie personnel, ". . . because the report lacks information linking the expert's conclusion (that Barbara might have had a better outcome) to Bowie's alleged breach (that it did not correctly read and act upon the x-rays)." The Court therefore found that the actions of the trial court in determining that the report was conclusory was not an abuse of discretion.
It must be remembered that the Supreme Court noted that the actions of the trial court in dismissing medical malpractice cases based upon the inadequacy of an expert report are based upon an abuse of discretion standard. As a result, the Court in this case concluded that the trial court did not abuse its discretion in dismissing the case against Bowie Memorial Hospital. This means that if the trial court had not dismissed the case against Bowie Memorial Hospital, the decision of the trial court would not have been reversed. Nevertheless, the opinion established that expert reports must provide both a factual and legal basis for maintaining a claim against a health care provider. II. THE NEGLIGENT HIRING OF AN EMPLOYEE WHO COMMITS AN INTENTIONAL ACT CONSTITUTES AN "OCCURRENCE" UNDER AN INSURANCE POLICY INVOKING A DUTY TO DEFEND An insurance company does not have a duty to defend an insured for the intentional acts committed by the insured; however, the Supreme Court in King v Dallas Fire Insurance Company, (decided on May 30, 2002) held that an employer's alleged negligent hiring of an employee who commits an intentional tort does constitute an occurrence, thereby invoking coverage on behalf of the employer.
Carlyle King was the sole proprietor of a construction company, Tie Down Construction Company. Mr. King employed Carlos Lopez. An employee of another employer on a work-site sued King, claiming that Mr. Lopez assaulted him. The employee, Jankowiak, alleged that King was liable for failing to run a criminal background check, failing to determine whether Lopez had the propensity for violence, and failing to provide training on how to handle "construction site situations". Jankowiak also sued King on the basis of respondeat superior. King sent Jankowiak's petition to his insurance carrier, Dallas Fire Insurance Company, which refused to defend King. Dallas Fire claimed that the negligent hiring of an employee who committed an intentional act did not constitute an occurrence under King's insurance policy.
Dallas Fire contended that the basis of the claim against King resulted from an intentional act which was clearly not covered under the insurance policy. King, on the other hand, asserted he never intended to injure Jankowiak and that ". . . his only potential contribution to Jankowiak's injury was perhaps negligently hiring, training, or supervising Lopez" Therefore, from King's standpoint, Jankowiak's injuries were the result of an accident--an occurrence invoking the duty to defend. The Court concluded that in determining whether there has been an occurrence under an insurance policy, the facts are viewed from the insured's standpoint to see if the duty to defend has been triggered. As a result, the actions of Lopez, even though intentional, are not viewed to determine the basis of the duty to defend his employer, King. Even though Lopez's conduct was intentional, and therefore not covered under the insurance policy, the allegations against King-that he negligently hired, retained, and employed Lopez, created a duty to defend on behalf of the insurance carrier.
This case establishes that an insurer has a duty to defend when suit is brought against an insured for failing to control an individual who allegedly commits an intentional act. We therefore anticipate that more suits will be filed in the future against employers for negligent hiring. We also anticipate that more suits will be filed against spouses and parents based upon the intentional conduct of a spouse or child. III. EMPLOYEE IN CLOSE PROXIMITY TO DANGEROUS CONDITION WHERE PLAINTIFF FALLS IS INSUFFICIENT TO SHOW BUSINESS HAS KNOWLEDGE OF DANGEROUS CONDITION In Wal-Mart Stores Inc. v. Reese, 2002 WL 1338068 (decided on June 20, 2002) the Texas Supreme Court again addressed the issue of the sufficiency of evidence that must be presented by a plaintiff in order to be successful in a premises liability claim. In this case, the Supreme Court continued its conservative stance regarding slip and fall claims in finding that the mere proximity of an employee to an area where a slip and fall happened is not sufficient to show the knowledge of the premise owner of the dangerous condition.
Plaintiff Lizzie Reese was shopping at her local Wal-Mart Store and bought a chili dog from the snack bar. While exiting in the snack bar area, she slipped and fell in a puddle of clear liquid. The puddle was about the size of a small or medium pizza and was in the area where snack bar customers congregated. Ms. Reese injured her right knee and underwent surgery to repair a ligament. Just prior to her fall, Ms. Reese noticed a Wal-Mart employee who was on his break in the snack bar area. The employee walked away from the snack bar immediately prior to Ms. Reese's fall. The employee testified at trial that he did not notice the liquid on the floor. There was no direct or circumstantial evidence proving how long the liquid was on the floor. Wal-Mart acknowledged that the self-serve drink area in the snack bar area posed an increased risk of spills in the area and that employees were to clean any area should they see a hazard. Ms. Reese sued Wal-Mart on general theories of negligence in regards to premise liability. A jury returned a verdict in her favor. Wal-Mart appealed to the 10th Court of Appeals which found that the employee's close proximity to the spill together with Wal-Mart's awareness of propensity for spills in the area was enough to affirm the trial court's verdict. Wal-Mart appealed to the Texas Supreme Court.
The Texas Supreme Court addressed whether or not Wal-Mart had actual or constructive notice of the spill. The Court noted that a plaintiff must prove that a dangerous condition existed for a sufficient length of time before a premise owner may be charged with constructive notice of that dangerous condition. The Court found that there was a split among the various courts of appeals regarding whether an employee's close proximity to a dangerous condition was sufficient proof that a premise owner should have known of the existence of the dangerous condition. Some courts have held that an employee's proximity to the hazard was enough to impute constructive notice to the premise owner. Wal-Mart contended that mere proof that an employee might have discovered a condition by being close to the condition misstates the plaintiff's burden and requires premise owners to be omniscient. The Supreme Court agreed with Wal-Mart's contentions and re-affirmed its long standing rule that there must be some proof that a premise owner actually knew of a dangerous condition or that the condition had existed for a long enough period of time to give the premise owner a reasonable opportunity to discover it. The Supreme Court disavowed plaintiff's contention that the employee's proximity to the dangerous condition was sufficient to show actual knowledge of the condition.
The Supreme Court found that Plaintiff Reese had failed to present any evidence as to the length of time the clear liquid had been on the floor prior to her fall. Without such evidence, the Court noted that the plaintiff could not be successful in her claim. Therefore, the Supreme Court held that plaintiff was to recover nothing on her claim.
The Supreme Court has continued its conservative stance on premise liability claims by requiring a plaintiff to prove the length of time an allegedly dangerous condition existed where there is no evidence of actual knowledge of the dangerous condition. The issue of an employee's close proximity to a dangerous condition is not enough to satisfy a plaintiff's difficult burden of proof. IV. EMPLOYER'S LIABILITY FOR EMPLOYEE'S DEFAMATION OF FELLOW EMPLOYEE IS DEPENDANT UPON WHETHER SUCH REMARKS WERE MADE IN THE FURTHERANCE OF THE EMPLOYER'S BUSINESS AND FOR THE ACCOMPLISHMENT OF THE OBJECTIVE FOR WHICH THE EMPLOYEE WAS HIRED In Minyard Food Stores, Inc., v. Goodman (decided June 13, 2002), the Court held that there was no evidence to support the finding that an employee's defamatory comments about another employee, which were made to his employer during the employer's workplace misconduct investigation, were made in the course and scope of employment. The Court found that the Court of Appeals failed to analyze whether the employee's defamatory statements concerning another employee were made in the furtherance of the employer's business and for the accomplishment of the objective for which the employee was hired. The Court reversed the Court of Appeals' decision in part, and rendered judgment that Ms. Goodman take nothing from Minyard Food Stores.
Mr. Heflin, Ms. Goodman, Ms. Hughes and Ms. Marks worked for Minyard's Store No. 83, in Denton, Texas. Mr. Heflin was employed as the store manager. Ms. Goodman acted as the point-of-sale coordinator. Ms. Hughes and Ms. Marks worked as cashiers. On January 15, 1998, Ms. Hughes accused Ms. Goodman of having an affair with Mr. Heflin. Ms. Hughes then contacted Minyard's District Manager, Mr. Flowers, and informed him that Mr. Heflin had confided in her about his relationship with Ms. Goodman. Mr. Flowers conducted a workplace misconduct investigation at Minyard Store No. 83. In the investigation, Mr. Heflin admitted that he hugged and kissed Ms. Goodman. Ms. Goodman denied that she kissed Mr. Heflin, however, she admitted that she allowed Mr. Heflin to rub her shoulders. Following this investigation, Mr. Flowers transferred Mr. Hughes, Ms. Goodman and Ms. Marks to different Minyard locations. After the transfer, Ms. Goodman received several calls from her former co-workers who heard that she was transferred by Minyard for having an affair with Mr. Heflin. A checker at her new Minyard location commented to Ms. Goodman that it must have been difficult for her to tell her husband that she was transferred because she had an affair. After this conversation, Ms. Goodman resigned from Minyard Food Stores, Inc. Ms. Goodman sued Minyard Food Stores, Ms. Hughes, Ms. Marks and Mr. Heflin for defamation. Ms. Goodman alleged that Ms. Marks and Ms. Hughes' remarks to Minyard and its employees about her "illicit sexual relations" with Mr. Heflin defamed her. Further, Ms. Goodman alleged that Mr. Heflin's comments to the management of Minyard that he kissed Ms. Goodman on several occasions defamed her. The jury found that Mr. Heflin defamed Ms. Goodman in the course and scope of his employment at Minyard and awarded actual damages of $325,000 and punitive damages of $500,000. The jury did not find that Ms. Hughes and Ms. Marks defamed Ms. Goodman. The trial court disregarded the award of punitive damages and rendered judgment on the actual damages against Minyard and Mr. Heflin, jointly and severally. Minyard and Mr. Heflin appealed the trial court's judgment to the Second Court of Appeals. Minyard challenged the sufficiency of the evidence that Mr. Heflin defamed Ms. Goodman in the course and scope of employment with Minyard. Mr. Heflin argued there was insufficient evidence to support the jury's finding that he defamed Ms. Goodman. A divided Court of Appeals affirmed the decision of the trial court, finding some evidence which would allow a jury to reasonably conclude that Mr. Heflin acted within the course and scope of his employment when he made the defamatory remarks about Ms. Goodman. The Court of Appeals reasoned that an employer is liable for the acts of its employees, even if an act is unauthorized or contrary to express orders, so long as the employee's act is (1) performed while the employee is acting within his or her general authority; and (2) made for the benefit of the employer. The Court of Appeals noted that Mr. Heflin's cooperation during the workplace misconduct investigation was within Mr. Heflin's authority as a store manager of Minyard. Minyard filed a petition for review with the Supreme Court. Minyard argued that liability was dependant upon the Van Cleave test, which stated that an employer is liable for the tortious acts of its employees only when such acts (1) fall within the course and scope of the employee's general authority, in the furtherance of the employer's business; and (2) are made for the accomplishment of the objective for which the employee was hired. Minyard contended that Mr. Heflin's lie during the workplace misconduct investigation that he kissed Ms. Goodman was not made to accomplish any objective for which Mr. Heflin was hired. Ms. Goodman argued that the Poyner test was proper. The Poyner test looks at whether an employee had a duty to the employer and made defamatory remarks while in the discharge of that duty. Even assuming that the Van Cleave test was applicable, Ms. Goodman argued that Minyard was liable because Mr. Heflin's participation in the workplace misconduct investigation accomplished a purpose for which he was hired.
The issue before the Court was whether there was any evidence to support the jury's finding that Mr. Heflin's defamatory comments about Ms. Goodman in the workplace misconduct investigation were made in the course and scope of his employment with Minyard. The Court concluded that there was no evidence of such and reversed the Court of Appeals' decision in part as to the liability of Minyard and rendered judgment that Ms. Goodman take nothing from Minyard. The Court concluded that the Court of Appeals correctly cited the Poyner test in analyzing the evidence with regard to the general authority of Mr. Heflin as store manager. The Court explained that the Court of Appeals' analysis failed to include whether Mr. Heflin's defamatory remarks were made in the furtherance of Minyard's business and for the accomplishment of the objective for which Mr. Heflin was employed. Here, the Court noted that there was only evidence that Mr. Heflin lied to Minyard, not for Minyard.
This opinion establishes that an employer is liable for the defamatory remarks of an employee if : (1) such remarks fall within the course and scope of the employee's general authority, in the furtherance of the employer's business; and (2) such remarks are made for the accomplishment of the objective for which the employee was hired. V. A WORKERS' COMPENSATION CARRIER THAT WANTS TO DISPUTE A CLAIM MUST SEND A NOTICE OF REFUSAL OR START PAYING BENEFITS WITHIN SEVEN DAYS AFTER IT RECEIVES WRITTEN NOTICE OF INJURY In Continental Casualty Company v Downs (decided on June 6, 2002), the Court strictly interpreted §409.021 and §409.022 of the Texas Labor Code which establishes the duty of an insurance carrier to take some action within seven days of receiving written notice of an injury. If an insurance carrier does not comply with the seven day rule, the carrier will not be able to dispute compensability even if compensability is disputed within sixty days of notice of the injury.
Ms. Downs filed a worker's compensation claim as a result of her husband's fatal heart attack. Continental Casualty Company did not initiate payment of benefits within seven days after it received written notice of the injury. Furthermore, Continental Casualty did not send a notice of refusal to pay benefits within seven days after it received notice of the claim. Instead, Continental Casualty Company first notified Downs that it disputed compensability of her claim forty-eight days after it received notice of the claim. Ms. Downs contested the actions of Continental Casualty Company through the administrative process of the Texas Workers Compensation Commission, which upheld the actions of Continental Casualty Company in refusing to pay Ms. Downs. Thereafter, suit was filed and the trial court held that Continental Casualty Company had timely disputed compensability. The Court of Appeals reversed the actions of both the trial court and the administrative tribunals of the Texas Workers Compensation Commission and held that Continental had not timely notified Downs of its refusal to pay benefits. As a result, Continental could not contest compensability.
The Supreme Court held that it is "clear" under §409.21 and §409.022 that:
The Court specifically held that ". . . a carrier that has neither initiated benefits nor filed a notice of refusal has not complied with the statutory requisite, and has failed to trigger the sixty-day period to investigate or deny compensability."
In order to trigger the sixty-day period to investigate or deny compensability, a carrier must either initiate benefits within seven days of receiving notice of the claim or file a notice of refusal to pay the claim; however, if the carrier files a notice of refusal, it is limited to the allegations in the notice as the reason for contesting compensability. Out of an abundance of caution, carriers which are going to contest compensability should initiate compensation benefit payments and file their contest of compensability within sixty days of receiving notice of the injury. VI. EMPLOYMENT DISPUTE RESOLUTION PROGRAMS CAN COMPEL EMPLOYEES TO ARBITRATION The Court in In re Halliburton Company and Brown & Root Energy Services, Relators (Opinion Delivered May 30, 2002) upheld a Dispute Resolution Program ("the Program") instituted by Halliburton which compelled employees to arbitrate employment disputes.
James D. Meyers ("Meyers"), an at-will employee, had been an employee of Brown & Root Energy Services, a subsidiary of Halliburton, for approximately 30 years. In November 1997, Halliburton sent notice to all employees that the company was adopting a Dispute Resolution Program. Part of that Program called for binding arbitration as the exclusive method for resolving all disputes between employer and employee. All employees were notified that by continuing to work for the company after January 1, 1998, the employees were deemed to have accepted the Program. Meyers, who did not dispute that he received notice of the Program, continued working for the company after January 1, 1998. During 1998, he was demoted from his position as General Welding Foreman. Meyers alleged that the demotion was discriminatory, based upon his race. In October 1999, Meyers filed suit in district court alleging wrongful demotion in violation of the Texas Commission on Human Rights Act, Tex. Lab. Code §21.001. Halliburton requested that the trial court compel arbitration pursuant to the terms of the Program instituted by the company. The trial court denied the motion. The appellate court upheld the trial court's denial, relying on the proposition that an at-will employer and employee may not contract to limit the ability of either to terminate employment at will.
(1) Notification and Acceptance of Change of At-Will Employment Contracts In order to change an at-will employment contract, the employer must first give notice of the change and second, the employee must accept the change. The Court has previously held that when an employer gives notice of a change to an at-will employment contract and the employee continues to work with the knowledge of the change, the employee has "accepted" the changes to the employment contract as a matter of law. The notice provided in this case clearly stated its effective date and explained that working after a certain date would be deemed acceptance of the change in the employment contract. Meyers continued to work after the stated date and clearly admitted that he had notice of the Program. The Court deemed his continuation of work as acceptance of the changes in the at-will employment contract for binding arbitration. (2) Changes to At-Will Employment Contracts are not Dependant on Continued Employment The Program was not dependant upon continued employment to become effective. Rather, by Meyers continuing to work after receiving notice of the contract, it was accepted as a change to his at-will employment contract. Whether or not a change to an at-will employment contract will be valid is based upon the employee's need to retain employment in order for the change to become effective. If this is the case, then the change is merely "illusional" and cannot be enforced. That was not the case for Meyers, as the changes to the contract became effective by his working past the designated date. If he left employment after that date it would not affect the terms and conditions set forth in the Program.
There are two aspects in the determination of whether the Program was unconscionable. The first is "procedural unconscionability," which refers to the circumstances surrounding the adoption of the arbitration provision. The second is "substantive unconscionability," which refers to the fairness of the arbitration provision itself. Meyers argued that the Program was unconscionable because of the gross disparity in bargaining power between the parties. Meyers alleged that he had no opportunity to negotiate acceptance of the program, as it was an "accept the Program or leave employment" with the company. The Court held that employer may make a "take it or leave it" offer to its at-will employees and place such provisions in the employment contract. The Court found that the Program established by Halliburton was not substantively unconscionable. The Program provided that the company would pay all of the expenses of the arbitration, (except the $50 filing fee), that both parties could participate in selecting a neutral arbitrator, and that the company would pay up to $2500 for the employee to consult with an attorney. Further, the Program provided that pre-arbitration discovery was to be conducted under the Federal Rules of Civil Procedure.
A company may establish a mandatary arbitration provision relating to any and all issues for at-will employees. Companies need to make sure that proper notice is given to their employees and that there is clear acceptance of the change to the at-will employment contract. The substance of the alternative dispute resolution must be equitable to both sides of the dispute to pass the test of conscionability. Companies can now set up such programs and control their exposure to judicial actions. 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. |
- Insurance Defense and Litigation
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- Professional Malpractice
- Healthcare Malpractice
- Employment Law
- Constitutional Torts and Civil Rights
- Environment and Toxic Torts - Medical Devices
- Construction Defects
- Oilfield and Offshore Platform Accidents
- Business and Commercial Litigation
Volume III, No. 4
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