      TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN


                                      NO. 03-08-00483-CV



   Texas Property and Casualty Insurance Guaranty Association for Reliance National
                 Insurance Company, an impaired company, Appellant

                                                 v.

                                   Doris J. Toberny, Appellee


     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 345TH JUDICIAL DISTRICT
     NO. D-1-GN-06-003295, HONORABLE STEPHEN YELENOSKY, JUDGE PRESIDING



                            M E M O R A N D U M O P I N I ON


               Appellant Texas Property and Casualty Insurance Guaranty Association for Reliance

National Insurance Company, an impaired company1 (“the Company”), filed suit against appellee

Doris J. Toberny for judicial review of a decision of the Division of Workers’ Compensation of the

Texas Department of Insurance (“the Division”). The district court entered a final judgment in favor

of Toberny on all issues on which the Company sought judicial review. In four issues on appeal, the

Company asserts that (1) the Division’s calculation of Toberny’s impairment rating is incorrect;

(2) Toberny’s compensable injuries do not include her pre-existing scoliosis and degenerative




       1
        For simplicity, we refer to both Reliance National Insurance Company and its receiver
and successor in interest, Texas Property and Casualty Insurance Guaranty Association, as
“the Company.”
disc disease; (3) Toberny was not entitled to supplemental income benefits2 for the ninth and

tenth quarters; and (4) the Company was not obligated to pay Toberny’s attorney’s fees. We will

affirm the trial court’s judgment.


                      FACTUAL AND PROCEDURAL BACKGROUND

                Toberny was employed as an exhibit decorator, setting up and tearing down trade

show exhibits. She injured her back on May 10, 2000, when a registration unit fell on her while she

was working. She sought care with her company doctor, who recommended therapy. After therapy

failed to alleviate her pain, Toberny underwent a nine-level spinal-fusion surgery, performed in

two parts, during which her pre-existing scoliosis was corrected. The surgery left her unable to work

and partially physically impaired. The Company paid for Toberny’s surgery as part of a compensable

injury related to her on-the-job injury. However, in December 2001 the Company sent Toberny a

notice of refused or disputed claim, asserting that her May 10, 2000 injury was a sprain or strain to

her lower back only and was not the producing cause of the diagnosis or treatment of scoliosis. The

Company did not pursue its disputed claim at a contested-case hearing in the Division to determine

the extent of Toberny’s compensable injury at that time.

                On June 26, 2002, Toberny visited Dr. Remon A. Fino to have him assess whether

she had reached maximum medical improvement3 (“MMI”) and, if so, to have him assign a

        2
          Supplemental income benefits are paid to injured workers whose other income benefits
have run out, who have an impairment rating of 15 percent or greater, and who meet other required
statutory criteria. Tex. Lab. Code Ann. § 408.142(a) (West 2006).
        3
           A worker reaches maximum medical improvement (1) when her condition stabilizes,
(2) even if her condition has not yet stabilized, at two years from the date of her injury, or (3) in the
case of a worker who has had spinal surgery and whose condition has not stabilized within two years

                                                   2
whole-body impairment rating.4 Dr. Fino examined Toberny, decided that she had reached MMI,

and assigned her a 15-percent impairment rating. On July 17, 2002, the Company timely filed an

impairment-rating dispute with the Department to contest Dr. Fino’s findings. In accordance with

the procedure for resolving disputed impairment ratings, see Tex. Lab. Code Ann. § 401.0041 (West

2006), Toberny was examined by a different physician, Dr. Soignier, who determined she had

reached MMI on June 26, 2002 and assigned her a 25-percent impairment rating. After that

designation, the Company paid Toberny supplemental income benefits based on her 25-percent

impairment rating for eight quarters, until it later contested the propriety of her impairment rating

and began the proceedings that form the basis of this appeal.

               On September 22, 2005, the Company filed a request with the Division to hold a

benefit-review conference concerning Toberny’s injuries. The Company’s request stated that it was

“disputing [that] the claimant’s current medical condition is related to the compensable lumbar

strain,” and also stated that it “asserts the continued medical treatment is related to the claimant’s

pre-existing scoliosis and degenerative disc disease.”       The Company sought permission to

discontinue providing “medical treatment and/or any indemnity benefits.” On October 4, 2005, the

Division denied the Company’s request for a review conference, stating: “[I]t is the injured workers’

[sic] responsibility to pursue extent of injury issues.”




from the date of injury, at some later date as decided by the Division pursuant to labor code section
408.104 and the Division’s rules. Id. § 401.011(30).
       4
        A doctor assigns an impairment rating pursuant to guidelines specified by statute. See Id.
§ 408.124. The rating is given as a percentage of whole-body impairment resulting from a
compensable injury. Id. § 401.011(24).

                                                   3
                 Although it is unclear which party requested the next benefit-review conference, the

record indicates that the Division held a conference in the Tyler field office on March 3, 2006 in

order “to mediate resolution of disputed issues.” The parties were unable to come to an agreement,

so the Division held a benefit contested-case hearing on April 25, 2006. After taking evidence, the

hearing officer issued a “decision and order” in which he found that the medical evidence was

uniform in stating that Toberny’s pre-existing scoliosis and degenerative disc disease were not

aggravated by her on-the-job injury and that her surgery was done to alleviate problems from

pre-existing conditions only. In addition, however, the hearing officer noted that despite having filed

its dispute to Toberny’s first impairment rating in December of 2001, the Company did not file a

dispute to Dr. Soignier’s 25-percent impairment rating until September 21, 2005, nearly a year and

a half after the first three months of Toberny’s supplemental income benefits had been paid. The

hearing officer concluded that because the Company did not file a dispute to Toberny’s MMI and

impairment rating designations before March 3, 2004—the end of the first quarter of supplemental

income benefits—it had waived its right to contest her MMI or impairment rating under

rule 130.102(g). See 28 Tex. Admin. Code § 130.102(g) (2000) (Tex. Div. Workers’ Comp.,

Eligibility for Supplemental Income Benefits, Amount), recodified at 28 Tex. Admin. Code

§ 130.102(h) by 34 Tex. Reg. 2138 (hereinafter “former rule 130.102(g)”). Because the Company

had waived its right to contest Toberny’s impairment rating, the hearing officer also found that

Toberny was entitled to continued supplemental income benefits for the ninth and tenth quarters.

The Division accepted the decision and order of the hearing officer and adopted it as a final decision

of the agency.



                                                  4
               The Company filed suit for judicial review of the Division’s final order. The

Company filed a motion for summary judgment, and the trial court held a hearing at which the

agency record was admitted. The court rendered a judgment affirming the Division’s final order.

The judgment stated, in pertinent part, that (1) the deadline in former rule 130.102(g) is reasonable

and valid; (2) Toberny’s compensable injury does not extend to or include her scoliosis and

degenerative disc disease; (3) the Company waived the right to contest compensability by failing to

contest the impairment rating in the time allowed by former rule 130.102(g); (4) Toberny’s

impairment rating is 25 percent because of the Company’s failure to timely contest the rating;

(5) Toberny is entitled to supplemental income benefits for the ninth and tenth compensable quarters;

(6) Toberny is entitled to $19,000 in attorney’s fees for defending her suit for judicial review in the

trial court; and (7) should she be successful in this Court, a reasonable and necessary amount of

attorney’s fees for her appeal would be $15,000. The Company appeals.


                                    STANDARD OF REVIEW

               This is an appeal from a suit for judicial review of an agency order, which we review

under the “substantial evidence” standard. See Tex. Lab. Code Ann. § 410.255 (West 2006);

Tex. Gov’t Code Ann. § 2001.174 (West 2008). We may not substitute our judgment for the

judgment of the agency on the weight of the evidence. Tex. Gov’t Code Ann. § 2001.174. We may

affirm the final order of the agency, but we must reverse or remand the case if the substantial rights

of the appellant have been prejudiced because the Division’s findings, inferences, conclusions, or

decisions: (1) violate a constitutional or statutory provision; (2) exceed the agency’s statutory

authority; (3) were made through unlawful procedure; (4) were affected by other error of law; (5) are

                                                  5
not reasonably supported by substantial evidence considering the reliable and probative evidence in

the record as a whole; or (6) are arbitrary or capricious or characterized by abuse of discretion or

clearly unwarranted exercise of discretion. Id.

               The Division’s order is presumed to be valid, so the Company bears the burden of

proof to show a lack of substantial evidence to support it. City of El Paso v. Public Util. Comm’n,

883 S.W.2d 179, 185 (Tex. 1994). “We review the [agency’s] legal conclusions for errors of law

and its findings of fact for support by substantial evidence.” Rosenthal v. Railroad Comm’n,

No. 03-09-00015-CV, 2009 Tex. App. LEXIS 6522, at *14 (Tex. App.—Austin Aug. 20, 2009,

no pet.) (mem. op.). Substantial evidence need not be overwhelming evidence; rather, the reliable

and probative evidence in the record must be such that reasonable minds could have reached the

conclusion the agency reached, even if the evidence preponderates against the agency’s decision.

Heat Energy Advanced Tech., Inc. v. West Dallas Coal., 962 S.W.2d 288, 294-95 (Tex.

App.—Austin 1998, pet. denied). “Ultimately we are concerned not with the correctness of the

agency’s order, but its reasonableness.” Rosenthal, 2009 Tex. App. LEXIS 6522, at *15-16.

Whether the Division’s final order was supported by substantial evidence is a question of law; we

give no deference to the trial court on questions of law. Texas Dep’t of Pub. Safety v. Alford,

209 S.W.3d 101, 103 (Tex. 2006).

               Insofar as a party claims that an agency acted beyond its statutory authority, our

review is de novo. Guitar Holding Co. v. Hudspeth County Underground Water Conservation Dist.

No. 1, 263 S.W.3d 910, 917 (Tex. 2008). “An agency may adopt only such rules as are

authorized by and consistent with its statutory authority.” Pruett v. Harris County Bail Bond Bd.,



                                                  6
249 S.W.3d 447, 452 (Tex. 2008) (citing Railroad Comm’n v. Lone Star Gas Co., 844 S.W.2d 679,

685 (Tex. 1992)). That authority can be express or implied. Id. “In deciding whether a particular

administrative agency has exceeded its rule-making powers, the determinative factor is whether the

rule’s provisions are ‘in harmony with the general objectives of the Act involved.’” Id. (quoting

Gerst v. Oak Cliff Sav. & Loan Ass’n, 432 S.W.2d 702, 706 (Tex. 1968)).


                                           DISCUSSION

               In its first issue, the Company asserts three arguments why Toberny’s impairment

rating is not 25 percent: (1) former rule 130.102(g) is invalid and therefore any impairment rating

based on that rule is also invalid; (2) even if former rule 130.102(g) is valid, the Company did not

waive its right to challenge Toberny’s MMI and impairment rating because there was a “pending

dispute” as that term is used in the rule; and (3) the evidence conclusively establishes that the

impairment rating was made using non-compensable conditions. We will address each assertion

in turn.


Validity of Former Rule 130.102(g)

               The Company asserts that former rule 130.102(g) is invalid because it places an

additional burden on workers’ compensation participants not contemplated by statute. It cites to this

Court’s opinion in Fulton v. Associated Indemnity Corp., 46 S.W.3d 354 (Tex. App.—Austin 2001,

pet. denied), for support. The Company also asserts that “the legislature’s creation of a specific

standard for impairment rating finality, which omits all other forms of finality, precludes the finality

contained in Rule 130.102(g).”



                                                   7
               Rule 130.102 concerns the eligibility of workers for supplemental income benefits.

Payment of supplemental income benefits is based on a worker’s impairment rating, which is

assigned after a worker has reached MMI. See 28 Tex. Admin. Code § 130.102(b) (2008) (injured

employee must have 15-percent or greater impairment rating and meet other requirements to be

eligible for supplemental income benefits); 28 Tex. Admin. Code § 130.1(b)-(c) (2008) (Div. of

Workers’ Comp., Certification of MMI and Eval. of Permanent Impairment) (detailing how to certify

MMI and assign impairment rating). Former rule 130.102(g) finalized a worker’s MMI date and

impairment rating if there was no pending dispute prior to the end of the first quarter of supplemental

income benefits. The rule states:


       If there is no pending dispute regarding the date of maximum medical improvement
       or the impairment rating prior to the expiration of the first quarter, the date of
       maximum medical improvement and the impairment rating shall be final and
       binding.


Former rule 130.102(g).

               The Company argues that the rule is invalid because it creates a “statute of

limitations” for challenging MMI and impairment ratings. It asserts that the rule “preclude[s] a

carrier from challenging the relationship of any condition in such an impairment rating after the

expiration of the first quarter of [supplemental income benefits],” and therefore improperly places

an additional burden on the Company not contemplated by statute, akin to the rule this Court held

invalid in Fulton.

               In Fulton this Court invalidated a Division rule that barred a worker’s right to bring

a challenge to his impairment rating after 90 days from the date the impairment rating was assigned.

                                                  8
Citing to the supreme court’s decision in Rodriguez v. Service Lloyds Insurance Co.,

997 S.W.2d 248 (Tex. 1999), we discussed, as an initial matter, the proposition that MMI and

impairment ratings are inextricably linked, and that making a rule that limits a worker from

contesting his impairment rating has the practical effect of limiting his rights to contest the date his

MMI became final. Fulton, 46 S.W.3d at 371. This connection was important to our holding

because the supreme court had previously upheld the Workers’ Compensation Act’s use of MMI,

which by statute must be finally determined no more than two years after a worker’s injury, as a

constitutionally adequate substitute for workers’ negligence remedies. See Texas Workers’ Comp.

Comm’n v. Garcia, 893 S.W.2d 504, 525 (Tex. 1995). Until he has reached MMI, a worker may be

entitled to temporary income benefits, which the supreme court in Garcia called a “major benefit.”

Id. The court in Garcia said that restricting temporary income benefits to a maximum of two years,

which the Act does by deeming a worker to have reached MMI upon the expiration of two years

regardless of his actual condition, was only justified by medical testimony that indicated the vast

majority of workers’ conditions stabilize within two years. Id. We reasoned in Fulton that if a rule

cuts off temporary income benefits before the worker’s condition has had two years to stabilize, that

rule “might be deemed arbitrary and might call into question the adequacy of the entire statutory quid

pro quo approved in Garcia.” Fulton, 46 S.W.3d at 370. We held that the rule in Fulton was

“arbitrary and invalid because it impermissibly shorten[ed] the statutory time period allotted to an

injured worker to achieve MMI.” Id. at 372.

               Central to our holding were two tenets of construction relevant to the Workers’

Compensation Act. First, we liberally construe the Act to effectuate its purpose of compensating



                                                   9
injured workers and their families. Id. at 370 (citing Albertson’s Inc. v. Sinclair, 984 S.W.2d 958,

961 (Tex. 1999)). Second, “[a]n agency may not supply by implication restrictions on an

employee’s rights that are not found in the plain language of the Act.” Id. (citing Kroger Co. v.

Keng, 23 S.W.3d 347, 349 (Tex. 2000)) (emphasis added).

               The reasoning that underpins Fulton does not avail the Company in this case. As

noted above, “[i]n deciding whether a particular administrative agency has exceeded its rule-making

powers, the determinative factor is whether the rule’s provisions are ‘in harmony with the general

objectives of the Act involved.’” Pruett, 249 S.W.3d at 452 (quoting Gerst, 432 S.W.2d at 706).

Former rule 130.102(g), as applied in this case to bar the Company from contesting Toberny’s MMI

and impairment rating long after they were determined, is in harmony with the objectives of the Act.

It provides finality for an injured worker, helping to compensate the worker and her family for

on-the-job injuries. It is also consistent with the broad rule-making authority granted to the Division

by statute. See Tex. Lab. Code Ann. § 402.061 (West 2006). The question of whether the rule

supplies by implication any impermissible restrictions on an employee’s rights not contemplated by

statute is not before us. With respect to the circumstances presented by this case, Fulton does not

compel the rule’s nullification.

               The Company urges us to hold former rule 130.102(g)—now current

rule 130.102(h)—invalid because the legislature enacted a statute specifically addressing the finality

of impairment ratings. See Act of June 20, 2003, 78th Leg., R.S., ch. 1190, § 1, 2003 Tex. Gen.

Laws 3397, 3397-98 (codified at Tex. Lab. Code Ann. § 408.123(d)-(g) (West 2006)). Since the

legislature has specifically addressed finality of impairment ratings in a statute, the Company asserts



                                                  10
that former rule 130.102(g), which ties finality to the receipt of supplemental income benefits, is

incompatible with the statute and cites Mid-Century Insurance Co. v. Kidd, 997 S.W.2d 265, 273

(Tex. 1999) (explaining doctrine that legislature’s expression of one thing means its exclusion of all

others). We express no opinion as to the applicability of that doctrine in this situation because labor

code section 408.123 does not apply to this case. The 2003 amendment of the labor code provides

that “[t]he change in law made by this Act by amendment”—adding the sections to which the

Company cites—“applies only to a certification of maximum medical improvement and assignment

of an impairment rating that is made on or after the effective date [June 20, 2003] of this Act.”

Id. § 2. Both of Toberny’s MMI and impairment-rating designations were made in 2002. Since the

statute does not apply to this case, we need not address whether the rule is in conflict with it.5


Pending Dispute

                Having found the rule valid in this case, we next address the Company’s assertion that

it had a “pending dispute” within the meaning of the rule and therefore has not waived its right to

contest Toberny’s impairment rating. As noted above, on July 17, 2002, the Company disputed


        5
           In its post-submission brief, the Company cites to the supreme court’s recent decision
in State Office of Risk Management v. Lawton, No. 08-0363, 2009 Tex. LEXIS 629 (Tex.
Aug. 28, 2009), for the proposition that the carrier’s ability to contest the extent of a worker’s injury
is not affected by the labor code’s provision requiring the carrier to contest the compensability of that
injury as a whole within 60 days. The supreme court held that the labor code does not set a deadline
for contesting the extent of injury. The only deadline for that contest comes from a Division rule.
Id. at *3. Insofar as Lawton provides an example of a Division rule that was upheld by the
supreme court even though it imposes a burden on the carrier not found in the labor code, it actually
undermines the Company’s argument that former rule 130.102(g) is invalid in this case. We note
that the issue of extent of injury, as raised in Lawton, is not at issue in this appeal. We do not
speculate as to whether Lawton permits the Company to contest Toberny’s future medical bills based
on extent of injury.

                                                   11
Toberny’s first impairment rating, which led to the Division’s designation of another doctor, a

second exam, and a new impairment rating. The Company asserts that its original dispute is still

pending and has been pending ever since 2002 because “[t]he passage of time does not negate the

pending nature of a dispute,” despite the fact that the Company did nothing else to dispute Toberny’s

second impairment rating until September 22, 2005—more than three years after it filed its first

objection to her impairment rating. The Company suggests that the original dispute was not resolved

by the designation of a doctor and that doctor’s subsequent determination of an MMI date and

impairment rating, but remains “pending” indefinitely until formally and finally decided by, we

assume, either the Division or the courts. The Company cites to several Division appeals panel

decisions for support of its argument. We note that decisions of the Division’s appeals panel in other

cases, of course, are not binding on this Court. However, because the Company cites to them

extensively as persuasive authority, we will summarize the most persuasive holdings in brief.

               In several panel decisions cited by the Company, the panel found that a company’s

first contest to an impairment rating continued to be a “pending dispute” within the meaning of

former rule 130.102(g) even after a designated doctor rendered his or her report. In most of those

cases, the panel noted there was affirmative evidence of a continued dispute before the expiration

of the first quarter of supplemental income benefits, such as notes in the file, phone-call records, or

letters from the worker or the carrier stating that there was a continued dispute. No such evidence

exists in the present case. The Company cites another panel decision for the proposition that the

passage of time does not end a dispute; it remains pending until finally decided, we assume, by the




                                                  12
Division. That decision’s posture was from a contest brought by a worker and relies on this Court’s

holding in Fulton, discussed above. It is therefore not applicable to this case.

               The Company presented no affirmative evidence to the Division that there was a

pending dispute between Toberny and the Company regarding her MMI or impairment rating

between the time of the Company’s first impairment-rating dispute in 2002 and the expiration of the

first quarter of Toberny’s supplemental income benefits more than two years later. The Division did

not err by deciding that there was no pending dispute within the meaning of former rule 130.102(g).6


Other Arguments Fail Due to Waiver

               The Company next asserts that Toberny’s impairment rating is not 25 percent because

a worker’s impairment rating must be based on compensable medical conditions, and there is

conclusive evidence that her impairment rating was based only on non-compensable conditions. The

Company asks us to declare that “there is no valid impairment rating from which to decide the

impairment rating issue” and to remand this portion of the case to the Division for a new

dispute-resolution process. Because former rule 130.102(g) is valid, and because the Company did




       6
           In its post-submission brief, the Company cites labor code section 408.125(c) as support
for its contention that a dispute over an impairment rating stays “pending” forever until decided by
the Division. See Tex. Lab. Code Ann. § 408.125(c) (West 2006). Section 408.125(c) gives
presumptive weight to the findings of a designated doctor and instructs the Division to adopt that
doctor’s impairment rating unless the preponderance of the evidence weighs against his or her rating.
This subsection does not conflict with the Division’s holding that there was no pending dispute in
this case. The Division may assume that a carrier’s lack of diligence in pursuing a dispute means
that a formal dispute no longer exists. Given the lack of evidence in the Division record of the
continued existence of such a dispute, it was not error for the Division to infer from the totality of
circumstances that there was no “pending dispute” in this case.

                                                 13
not have a “pending dispute” within the meaning of the rule, the Division did not err in holding that

the Company had waived its rights to contest this issue. We overrule the Company’s first issue.

                In its second issue, the Company claims that the “compensable injury does not extend

to and include the diagnosed conditions of scoliosis and degenerative disc disease of the lumbar and

thoracic spine,” and therefore the evidence is legally and factually insufficient to support the district

court’s judgment. The Company notes that expert-witness testimony is needed to establish causation

as to medical conditions outside the knowledge of normal individuals. We note first that this appeal

is from a suit for judicial review in the district court, which evaluated the case under the

substantial-evidence standard of review. We therefore assume that the Company is alleging that the

Division’s findings were made without substantial evidence. However, we need not reach this issue

because former rule 130.102(g) bars the Company from contesting Toberny’s impairment rating,

regardless of whether the rating is supported by substantial evidence. We overrule the Company’s

second issue.

                In its third and fourth issues, the Company claims that Toberny is not entitled to

supplemental income benefits for the ninth and tenth quarters and that she is not entitled to attorney’s

fees for defending the Company’s suit against her in district court and its appeal in this Court.

Supplemental income benefits are payable to injured workers whose impairment ratings are

15 percent or greater from a compensable injury. See Tex. Lab. Code Ann. § 408.142(a) (West

2006). For the reasons stated above, we affirm the Division’s determination that Toberny’s

impairment rating is 25 percent; therefore, the Company’s third issue is overruled. Attorney’s fees

are awarded to a claimant when an insurance carrier appeals a decision of the Division and the



                                                   14
claimant “prevails on an issue on which judicial review is sought by the insurance carrier in

accordance with the limitation of issues contained in Section 410.302.” Id. § 408.221(c). Since

Toberny is the prevailing party in both her suit for judicial review and this appeal, the Company is

required to pay her reasonable and necessary attorney’s fees.7 We overrule the Company’s

fourth issue.


                                           CONCLUSION

                   Having overruled the Company’s four issues on appeal, we affirm the judgment of

the trial court.



                                               __________________________________________

                                               J. Woodfin Jones, Chief Justice

Before Chief Justice Jones, Justices Waldrop and Henson

Affirmed

Filed: December 9, 2009




        7
            The Company does not contest the amount of attorney’s fees awarded by the trial court.

                                                  15
