| The
Tort Times |
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March
2008
Volume 168 |
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| THIRD
PARTY ADMINISTRATOR DOES NOT OWE A GENERAL FIDUCIARY DUTY TO INSURANCE
COMPANY |
National
Plan Adm’rs., Inc. v. National Health Ins. Co., 235 S.W.3d
695 (Tex. 2007). National Plan Administrators
is a wholly owned subsidiary of CRS Marketing Agency, Inc. National
Plan Administrators (“NPA”) performs third party administrator
duties for health insurance policies issued and underwritten by
a number of insurance companies.
One of the insurance companies that contracted with
NPA was National Health Insurance Company. National Health agreed
to underwrite CRS’ policies and signed a contract with NPA
for NPA to administer the policies.
Later, National Health informed NPA that
it was going to cease underwriting the CRS policies and that it
had obtained a buyer for its entire book of existing policies.
This buyer was not going to use NPA to administer the policies.
National Health gave NPA 90 days to find an alternate buyer that
would keep NPA as the administrator.
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NPA approached another of its principals, Hartford Life Insurance
Company, about purchasing National Health’s book of
policies. During these negotiations, NPA sent Hartford information
about National Health’s policyholders.
Hartford declined to buy National Health’s
entire book of policies, but did offer replacement policies
to those insureds of National Health who were still actively
at work. This resulted in National Health being left with
a large proportion of less desirable insureds.
National Health then sued NPA, CRS and Hartford.
National Health alleged that NPA’s release of the insureds’
information to Hartford was a breach of common law and statutory
fiduciary duties. National Health also asserted that CRS and
NPA were a “single business enterprise,” and thus
CRS was liable for NPA’s malfeasance.
At trial, the jury found that NPA had breached
a fiduciary duty, with malice, and awarded National Health
actual and punitive damages. The jury also found that NPA
and CRS were a single business entity. The trial court entered
judgment against NPA and CRS jointly and severally for actual
and punitive damages. |
The Court
of Appeals concluded that NPA generally owed a fiduciary duty to
National Health. It also concluded that the single business enterprise
theory was a valid means of piercing the corporate veil to impose
liability on CRS. The Court of Appeals affirmed the judgment of
the trial court.
The Supreme Court examined the case and ruled
that the Insurance Code does not create a general fiduciary duty
applicable to third party administrators. The Court went on to say
that because NPA did not owe National Health a general fiduciary
duty, that National Health should take nothing from NPA. The judgment
against CRS and NPA were both reversed because the liability of
CRS was dependent upon liability being imposed on NPA.
The Court said that it would not reach the question
of whether the single business enterprise theory is a viable doctrine
to pierce the corporate veil of a party such as CRS. |
| In
this issue…
Third Party Administrator Does Not
Owe a General Fiduciary Duty to
Insurance Company
There’s a Difference Between Lack
of Consent to Perform a Procedure
and Lack of Informed Consent
Jail Inmate Hangs Himself with
Telephone Cord. Who is Responsible?
Doctor Prevails on Informed
Consent Case
Parents Not Liable for 13-Year-Old’s
Boating Accident
Doctor Employed by Governmental
Unit Not Afforded Immunity
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THERE’S
A DIFFERENCE BETWEEN LACK OF CONSENT TO PERFORM A PROCEDURE AND
LACK OF INFORMED CONSENT
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Schaub
v. Sanchez, 229 S.W.3d 322 (Tex. 2007). Dr. Crawford
operated on Ms. Sanchez’ broken wrist. Afterwards, he twice
performed a pain relieving procedure known as a “stellate
ganglion block.” He obtained his patient’s informed
consent before these two procedures.
The ganglion blocks did not help
and Ms. Sanchez told Dr. Crawford not to perform any more of them.
Later, Ms. Sanchez underwent another surgical
procedure with Dr. Crawford to try to correct continuing problems
with her wrist. She signed general consent forms applicable to that
procedure. During the course of the surgery, Dr. Crawford decided
that it would be in her best interest to do another stellate ganglion
block.
As a result of the third block, Ms. Sanchez allegedly
developed an infection that ultimately required spinal surgery.
She sued Dr. Crawford and the physician who had assisted him, Dr.
Schaub.
Both sides filed motions for summary judgment.
Prior to a hearing, Ms. Sanchez agreed to dismiss all of her claims
except her claim for “failure to obtain informed consent for
the third stellate ganglion block.”
The trial court then granted summary judgment
for the doctors based on the general consent forms that Ms. Sanchez
had signed prior to the surgical procedure. However, the Court of
Appeals reversed.
The Supreme Court concluded that Ms. Sanchez should
take nothing and, accordingly, reversed the decision of the Court
of Appeals.
The Supreme Court pointed out that a “lack
of informed consent case” is simply a type of negligence case
based on an alleged failure to disclose the risks or hazards of
a procedure. Ms. Sanchez did not complain that she was unaware of
the risks or hazards of the block. To the contrary, she was fully
aware, having twice undergone the procedure.
The Court was careful to point out that Ms. Sanchez
had dismissed her claim for performing a procedure without her consent,
which is what happened here. At the time of hearing, her only cause
of action was a claim for doing a procedure without informed consent.
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JAIL
INMATE HANGS HIMSELF WITH TELEPHONE CORD.
WHO IS RESPONSIBLE?
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JCW
Electronics, Inc. v. Garza, 176 S.W.3d 618 (Tex.App.-Corpus Christi
2005, writ granted). The City of
Port Isabel, Texas contracted with JCW Electronics for the installation
of coinless payphones in jail cells. Thereafter, Mr. Montez allegedly
committed suicide in one of the jail cells, using a cord from
a telephone to hang himself.
Mr. Montez’ survivors
sued JCW alleging negligence, breach of express and implied warranties,
strict liability and misrepresentation. A jury found in favor
of the Plaintiffs on the issues of negligence, misrepresentation
and breach of the implied warranty of fitness for a particular
purpose. The jury also found that Mr. Montez was 60% responsible
for his own death.
The trial court granted the survivors’
motion for judgment notwithstanding the verdict on the issues
of fraud and breach of contract. The trial court rendered judgment
favoring the survivors under these causes of action and also gave
an award of attorney’s fees, court costs and other related
expenses.
The Court of Appeals held that the Plaintiffs had not pled a breach
of contract cause of action and that JCW had not tried that claim
by consent. The Court of Appeals also held that regardless of
whether fraud claims had been tried by consent, Chapter 33 of
the Texas Civil Practice & Remedies Code bars recovery for
tort damages where the injured party is more than 50% responsible.
The Court of Appeals reversed the award for attorney’s fee
and reduced the trial court’s award of costs.
The Court of Appeals also held that the evidence
was sufficient to support a finding of breach of the implied warranty
of fitness for a particular purpose, because there was testimony
that JCW had known of the placement of the telephones in jail
cells; that there were designs for phones in jail cells intended
to prevent such events; and that it was common knowledge in the
industry that a telephone or other object placed in a cell would
constitute a danger to jail inmates.
The Court of Appeals also held that the Uniform
Commercial Code, not the Texas Civil Practice & Remedies Code,
governs the damages for breach of the implied warranty of fitness
for a particular purpose. Therefore, the Court held that a damage
award was not barred by the jury’s finding that Mr. Montez’
death was 60% his responsibility.
The Court of Appeals reversed part of the judgment
of the trial court, modified it in part and confirmed in part.
The Texas Supreme Court has granted writ of error
on this case. It will address the following questions:
1. Does the proportionate liability scheme of
Chapter 33 of the Texas Civil Practice & Remedies Code apply
to breach of implied warranty of fitness
claims under UCC §2.315 where the recovery is based solely
on personal injury damages?
2. Should a claimant in Texas be allowed to recover
for breach of implied warranty of fitness under the UCC §2.315
when there has been no sale of goods?
3. Was there a proximate cause in this case in
light of the argument that all JCW did was merely furnish a condition
that made the injury possible?
We can’t foretell the future, but given
the present conservative trend of the Texas Supreme Court and
Texas judiciary in general, our guess is that the Texas Supreme
Court is going to reverse and render judgment that the Plaintiffs
take nothing.
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| DOCTOR
PREVAILS
ON INFORMED CONSENT CASE
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Bryan v. Watumull, 230
S.W.3d 503, Tex.App.-Dallas 2007, pet. denied. This medical
negligence case involves a claim that a doctor failed to obtain
informed consent before performing a surgical procedure to address
carpal tunnel syndrome.
The Medical Liability and Insurance Improvement
Act created the Texas Medical Disclosure Panel. This organization
was to evaluate all medical and surgical procedures, determine
if disclosure of risks is required, and if so, determine how much
disclosure was required. If the procedure requires some disclosure
of the risks involved in the treatment, it is placed on List A.
However, if it is determined that no disclosure is required, the
procedure is placed on List B.
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| The
Plaintiff had carpal tunnel syndrome and the doctor performed
peripheral nerve surgery including a right radial nerve release
operation. These were List A procedures requiring certain
disclosures. According to the Texas Medical Disclosure Panel,
the doctor was required to disclose the following risks for
a peripheral nerve operation:
• numbness;
• impaired muscle function;
• recurrence or persistence of the condition; and
• continued, increased, or different pain.
For List A procedures, the informed consent
is “considered effective” if it is in writing
and signed by the patient or a person authorized to give the
consent, and also if it is signed by a competent witness.
Advising a patient of risks in compliance with the statute’s
required disclosure creates a rebuttable presumption the physician
was not negligent.
On the other hand, if the procedure is on
List A and the written consent does not comply with the statute,
the statute creates a rebuttable presumption the physician
was negligent in failing to obtain informed consent.
At trial, the Plaintiff argued that the
doctor was negligent for failing to tell her prior to the
surgery that reflex sympathetic dystrophy was a potential
risk of the surgical procedure. She testified that after the
surgery she experienced excruciating pain that eventually
spread throughout her entire body and was not aided by pain
medication. Two physicians later diagnosed her with reflex
sympathetic dystrophy. She insisted that she never would have
undergone the original procedure had the doctor explained
to her beforehand that she was at risk for contracting reflex
sympathetic dystrophy.
According to the Texas Medical Disclosure
Panel, reflex sympathetic dystrophy is not one of the risks
that must be disclosed for peripheral nerve surgery. Therefore,
as a matter of law, the doctor had no duty to disclose this
risk and could not be held liable for a lack of informed consent.
The trial court granted an instructed verdict in his favor,
and it was affirmed on appeal.
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PARENTS
NOT LIABLE FOR 13-YEAR-OLD’S BOATING ACCIDENT |
Newkumet v. Allen, 230
S.W.3d 518 (Tex.App.-Eastland 2007, no pet.). Risty Allen
was 13 years old. Her parents had her attend a boater education
training course, and she received a certificate of completion
issued by the State of Texas. Her parents then allowed her to
use a powerful jet boat with two friends on board.
There was an accident and one of the friends
was injured. The friend and his parents sued Risty and her parents,
claiming that Risty’s parents had been negligent in supervising
her and that they had been negligent in entrusting the jet boat
to her.
Risty and her parents filed a motion for summary
judgment claiming that there was no evidence of negligent supervision
or negligent entrustment. The trial court sustained that motion,
and the Court of Appeals affirmed.
Texas case law holds that parents are not automatically
liable to third parties for the torts of their children. As a
general rule, minors may be held liable for their own wrongdoing.
However, a parent may be held liable for his own negligence with
respect to his child’s tort such as when the parent negligently
allows his child to act in a manner likely to harm another, when
he entrusts the child with a dangerous instrumentality, or when
he fails to restrain a child known to have dangerous tendencies.
The Court of Appeals was impressed that the
Plaintiffs did not produce any evidence to indicate that Risty’s
parents knew or should have known that Risty was incompetent or
reckless. The evidence showed that Risty had grown up around boats,
that her father had taught her how to operate a boat, that her
boat was a simple one to operate, and that her parents had not
allowed her to operate it by herself until she had taken the required
course and received a boater education certificate. Texas law
does not require a “boater’s license.”
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DOCTOR
EMPLOYED BY GOVERNMENTAL UNIT NOT AFFORDED IMMUNITY
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Kanlic v. Meyer, 230 S.W.3d
889 (Tex.App.-El Paso 2007). Ms. Meyer filed a medical
malpractice suit against Dr. Kanlic and Texas Tech University System.
It was undisputed that Dr. Kanlic was an employee of Texas Tech,
a governmental entity. Of course, governmental entities are immune
from suit unless their immunity has been waived by the Texas Tort
Claims Act.
Dr. Kanlic moved to dismiss the case taking the
position that he had immunity, as an employee of the governmental
entity. The trial court denied the motion. The court of appeals
affirmed.
It was noted that before the summary judgment
proceedings had been decided, Ms. Meyers had dismissed Texas Tech
from the suit and the only Defendant was Dr. Kanlic. The complaints
Ms. Meyer had made against Texas Tech would have been addressed
by the Tort Claims Act. The Tort Claims Act waives immunity “for
negligent use of tangible personal property.” With Texas Tech
out of the suit, the only issues to be decided were whether Dr.
Kanlic had misdiagnosed and mistreated Ms. Meyer. There was no claim
that he had been “negligent in the use of tangible personal
property.” Therefore, he was not entitled to immunity.
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WARNING
The Tort Times is not a substitute for legal counsel and does
not presume to constitute legal opinion. We urge you to consult
legal counsel on specific matters.
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