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Judicial Review is Out of Reach for Most Injured Workers

When the Texas workers compensation system was reformed in 1989, a basic goal of the reform was to make the system simple enough so that injured workers could represent themselves in the workers compensation process without needing legal counsel. The belief was that more money should go to aid injured workers and less to the attorneys who represent them. Attorney incentives were reduced and injured workers were guaranteed lifetime medical benefits. An ombudsman program was created to assist injured workers in representing themselves in the administrative appeals process, whereas insurance carriers continue to hire legal counsel to represent them.[1] This assistance program was strengthened in 2005 when the Texas Legislature created the Office of Injured Employee Counsel to direct the ombudsman program and represent the interests of injured employees as a class.[2]

But whatever parity that exists between injured employees and insurance carriers at the administrative level is wiped out when insurance carriers exercise their right to have unfavorable administrative decisions reviewed by a state district court in a process known as judicial review. Insurance carriers are always represented by legal counsel at judicial review, usually by highly qualified law firms that specialize in workers compensation administrative law, because they have funds to pay lawyers. But the Office of Injured Employee Counsel is prohibited by statute from aiding injured employees facing judicial review, and frequently it is impossible for injured workers to find legal representation, either because they do not have funds to pay an attorney, or because they simply cannot find an attorney qualified and willing to take their cases.[3]

Instead of serving as a check on the administrative process, judicial review often allows an insurance carrier to win what it lost in the administrative process by the simple fact that it can find and hire an attorney to represent it while the injured worker usually cannot. When injured workers can’t find legal representation they often lose the right to lifetime medical treatment for a workplace injury through an uncontested ruling. Also, the State of Texas is required to reimburse carriers hundreds of thousands of dollars a year for services provided in cases that are overruled in uncontested hearings.

Under the benefit dispute resolution process of the Texas workers’ compensation system, an employee or carrier wishing to dispute a benefit decision must first bring the dispute to a series of administrative review bodies. If the party is not satisfied with the decision at the final administrative level, called the Appeals Panel, they may seek judicial review of administrative decisions by filing suit against the other party in state district court.[4]

In 2004 twice as many judicial review cases were brought by insurance carriers as were brought by injured employees.[5] This is not surprising because injured employees usually do not have funds available to hire an attorney because once they are injured, they are typically unemployed and subsisting on a benefit payment equal to 70 percent of their usual weekly pay. Also, since few attorneys represent injured workers in workers compensation cases, it is difficult to find an attorney competent to take this sort of case.

In 2001 the Texas legislature acted to remedy this problem of injured worker representation by requiring insurance carriers to pay the reasonable legal fees of injured workers who prevail at the level of judicial review when they are sued by insurance carriers.[6] Unfortunately, injured workers still are frequently unable to find legal representation despite this economic incentive, probably because of the short time they have to find an attorney, and because so few attorneys represent injured workers in workers compensation cases.

An injured employee who is sued by an insurance carrier receives notice that they have been sued, and has 20 days within which to find an attorney and to file an answer to the suit with the court. They have all of the difficulties listed above with finding legal counsel. As a consequence injured employees often do not respond to the suit, and the carrier takes a default or summary judgment in their favor.[7] Even though the worker is not able to or does not choose to contest the suit, the court is obligated to issue a ruling in favor of the carrier.

Often this holding has no immediate impact on the worker, since in many cases salary replacement benefits will have already been paid and medical treatment will already have been received. But the injured worker will lose his right to lifetime medical treatment for the workplace injury, so if a problem arises in the future, the worker will have to pay for treatment him or herself.

Judicial Review is Costly to the State of Texas

A summary judgment holding can be very expensive to the State of Texas. The State of Texas is required to reimburse insurance carriers for benefits previously paid, whenever the order to pay benefits is overturned in judicial review on a judgment on the merits.[8] Since 2000 the State of Texas has paid more than $2.6 million to insurance carriers in response to motions for summary judgment in judicial review cases. In most of these cases the injured employers were unrepresented by legal counsel and the insurance carriers won a judgment on the merits even though the case was uncontested.

The number of cases and amounts paid to insurance carriers are increasing at a rapid rate. In the first 11 months of 2006 insurance carriers were reimbursed more than $750,000 in 20 cases, more than double the number and amount for all of 2005.

Payments to Insurance Carriers in Judicial Review Cases[9]

Year Total paid # Highest Single Case

2000 $152,688.08 7 $99,271.34

2001 $225,235.45 13 $44,337

2002 $268,846.31 8 $142,571.77

2003 $625,372.78 10 $429,054.23

2004 $263,093.58 18 $39,861.93

2005 $333,308.96 10 $106,118.30

2006 $751,760.29 20 $174,532.54

Total $2,620,305 86

An additional inequality is caused by the difficulty of injured workers who lose an administrative appeal to hire legal counsel to represent them in judicial review. Current law only requires that carriers pay reasonable legal costs for injured workers who prevail at the highest administrative level and in judicial review. This means that an injured employee who loses at the administrative level has no practical way to contest that finding, since they usually do not have funds to pay attorney’s fees. This undermines the point of judicial review, which is to provide a judicial check on the administrative process which is equally available to all parties.

Policy Recommendations

The judicial review process as it currently operates is unfair to injured workers and costly to the State of Texas. Reforms are needed to restore fairness to the judicial review process.

1) Legislation should be passed limiting insurance carrier reimbursements from the Subsequent Injury Fund to judicial review cases where the injured employee is represented by counsel and the lawsuit is contested. Carriers should not be reimbursed pursuant to motions for summary judgment.

2) Public defenders should be provided to injured employees who are sued by insurance carriers, as recommended by the Office of Injured Employee Counsel and as proposed by Texas Senate Bill 287.

3) The State Bar of Texas and all Bar Associations operating legal referral services should redouble their efforts to identify attorneys willing to represent injured workers in judicial review cases.

4) To assure equal access to legal representation, legislation should be passed requiring insurance carriers to pay reasonable legal fees of attorneys representing injured workers who prevail in judicial review, regardless of whether the employee won or lost in the administrative process.

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[1] Tex. Lab. Code § 401.001

[2] Tex. Lab. Code § 404.001

[3] Tex. Lab. Code § 404.105

[4] Tex. Lab. Code § 410.002 et seq.

[5] Data taken from Texas Workers’ Compensation System Data Report, June 30, 2005.

[6] Tex. Lab. Code § 408.221.

[7] (No good data exists on the frequency of default and summary judgments since the State of Texas has no relevant reporting requirements.)

[8] Tex. Lab. Code § 410.209.

[9] Texas Department of Insurance, Division of Workers’ Compensation, Open Records Request #56703, “Request concerning a report of reimbursements paid to insurance carriers from subsequent injury fund.”