
IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,

AT AUSTIN


 



NO. 3-91-335-CV



PACIFIC INDEMNITY INSURANCE COMPANY,

	APPELLANT

vs.



LIBERTY MUTUAL INSURANCE COMPANY AND VIDAL LOPEZ,

	APPELLEES


 


FROM THE DISTRICT COURT OF TRAVIS COUNTY, 353RD JUDICIAL DISTRICT

NO. 492,489, HONORABLE PAUL R. DAVIS, JR., JUDGE PRESIDING


 


	Pacific Indemnity Insurance paid workers' compensation benefits to Vidal Lopez,
an injured worker, and then sued Liberty Mutual Insurance in district court for reimbursement
without first seeking relief from the Industrial Accident Board (IAB or Board).  Because Pacific
Indemnity failed to exhaust its administrative remedies before filing its lawsuit, we hold that the
trial court correctly granted summary judgment in favor of Liberty Mutual.


BACKGROUND
	 Lopez suffered an on-the-job back injury in 1984 while working for Pure Castings
Company.  He was treated for lumbar strain and returned to work after a few days.  His job at
Pure Castings Company required lifting and standing for long periods of time, and his back
condition worsened until he became totally disabled in November 1988.  In February 1989, Dr.
Pedro Quiroga diagnosed Lopez as having a repetitious-trauma injury and concluded that Lopez
had re-injured his back in 1988.  Lopez underwent back surgery in November 1990.
	Pacific Indemnity was the workers' compensation carrier for Pure Castings
Company at the time of the initial injury in 1984.  Liberty Mutual replaced Pacific Indemnity as
Pure Castings's carrier on April 11, 1988.  When notified of Lopez's condition in January 1989,
Pacific Indemnity initiated disability and medical-expense benefits because it was unclear at that
time whether Lopez was suffering continued effects from the 1984 injury or had re-injured himself
late in 1988.  In February 1989, after learning of Dr. Quiroga's diagnosis, Pacific Indemnity
requested Liberty Mutual to assume compensation payments to Lopez and reimburse Pacific
Indemnity for payments made up to that date.  Liberty Mutual did neither, and Pacific Indemnity
voluntarily continued to pay all of Lopez's disability and medical benefits until September 1990. 

	Lopez filed claims with the IAB against Pacific Indemnity and Liberty Mutual in
January 1989.  In August 1990, the IAB issued two orders:  it ordered Pacific Indemnity to pay
all reasonable and necessary medical bills attendant to the 1984 injury, and ordered Liberty
Mutual to pay sums relating to the 1988 injury.  The orders did not outline the expenses owed by
each insurer, nor did they  direct Liberty Mutual to reimburse Pacific Indemnity for monies
already paid to Lopez. 
	On several occasions, Pacific Indemnity again asked Liberty Mutual to assume
benefit payments to Lopez and to reimburse Pacific Indemnity for expenses paid to Lopez since
November 1988.  Liberty Mutual settled with Lopez but refused to reimburse Pacific Indemnity. 
In September 1990, Pacific Indemnity stopped paying benefits to Lopez.  The following month,
Pacific Indemnity filed suit in district court against Liberty Mutual and Lopez for unjust
enrichment, fraud, and violations of the Texas Insurance Code.  
	Liberty Mutual filed a motion for summary judgment, alleging that Pacific
Indemnity failed to exhaust its administrative remedies and that Pacific Indemnity's other claims
fail as a matter of law.  The trial court granted the motion without specifying the grounds and
Pacific Indemnity now appeals.


DISCUSSION
	In its first point of error, Pacific Indemnity argues that the district court erred in
granting Liberty Mutual's motion for summary judgment on the basis that Pacific Indemnity failed
to exhaust administrative remedies.  Liberty Mutual and Lopez rejoin that this suit is barred as
a matter of law because Pacific Indemnity did not present its reimbursement claim to the IAB and
obtain a final award before appealing to the district court.  We agree.
	The workers' compensation law directs that all claims arising under the law must
first be adjudicated at the agency level:  "All questions arising under this law, if not settled by
agreement of the parties interested therein and within the provisions of this law, shall, except as
otherwise provided, be determined by the Board."  1977 Tex. Gen. Laws, ch. 412, § 1, at 1113
(Tex. Rev. Civ. Stat. Ann. art. 8307, § 5, since repealed) (current version at Tex. Rev. Civ. Stat.
Ann. art. 8308-6.61-.64 (Supp. 1992)). (1)
	The IAB has exclusive jurisdiction to hear and determine claims arising under the
workers' compensation law.  See id.  Although a party who is dissatisfied with an IAB award may
obtain a trial de novo in the district court, the party must pursue its administrative remedy first,
since trial-court jurisdiction attaches only by way of appeal from an IAB decision.  See Johnson
v. American Gen. Ins. Co., 464 S.W.2d 83, 84 (Tex. 1971).  A party's failure to obtain an IAB
ruling on an issue arising under the workers' compensation statute prevents the party from
invoking the jurisdiction of the district court to later decide the issue.  Paradissis v. Royal Indem.
Co., 496 S.W.2d 146, 150 (Tex. Civ. App. 1973), aff'd, 507 S.W.2d 526 (Tex. 1974).
	Pacific Indemnity contends that it was not required to present its reimbursement
claim to the IAB before suing Liberty Mutual and Lopez in district court for two reasons:  (1) 
Pacific Indemnity is not an interested party within the meaning of the workers' compensation law
and (2) this dispute does not "arise under" the compensation law because the law does not
specifically address this reimbursement issue.    
	First, we cannot agree that Pacific Indemnity is not an interested party.  Although
article 8307, section 5 does not define the term "interested party," the facts speak for themselves. 
Pacific Indemnity was the insurance carrier for Pure Castings at the time of Lopez's 1984 injury
and this entire dispute turns on whether Lopez aggravated the 1984 injury or re-injured himself
in 1988.  In August 1990, the IAB resolved the matter and issued an order directing Pacific
Indemnity to pay the medical bills relating to Lopez's 1984 injury.
	Moreover, Pacific Indemnity raised this exact reimbursement claim in two notices
of controversion filed with the IAB before Pacific Indemnity initiated the present lawsuit.  The
notices, filed on November 15, 1989, and April 5, 1990, both requested that Liberty Mutual
assume benefit payments to Lopez and reimburse Pacific Indemnity for expenses paid to Lopez
since November 1988.  Finally, we note that in August 1990, Pacific Indemnity wrote a letter to
the IAB discussing dissatisfaction with Lopez's compensation award. This letter shows clearly that
this is a workers' compensation dispute and that Pacific Indemnity was a party.
	We believe any definition of an "interested party" would include Pacific Indemnity. 
The fact that this cause involves one insurance carrier's reimbursement claim against another
carrier does not alter the fact that Pacific Indemnity is an interested party within the meaning of
article 8307, section 5.  
	We next review whether this dispute "arises under" the workers' compensation law. 
Pacific Indemnity argues that the compensation statutes in existence at the time this controversy
began did not specifically state the right of the IAB to resolve carrier disputes and render orders
regarding the same.  However, this dispute arose because Pacific Indemnity voluntarily paid a
claim it believed it did not owe and now seeks reimbursement from Liberty Mutual.  The workers'
compensation statutes offered Pacific Indemnity an alternative course of action.
	The workers' compensation law provides that within twenty days after a carrier
receives a claimant's written notice of injury, the carrier must either initiate compensation
payments or file a statement of controversion with the IAB.  1983 Tex. Gen. Laws, ch. 989, § 1,
at 5379 (Tex. Rev. Civ. Stat. Ann art. 8306, § 18a(a), since repealed)(current version at Tex.
Rev. Civ. Stat. Ann. art. 8308-5.21-.23 (Supp. 1992)).  Once the carrier files a statement of
controversion, the Board must set the matter for a prehearing conference on the merits.  Id.  Thus,
Pacific Indemnity had a forum for clarifying its obligations to Lopez.   
	Pacific Indemnity indicates that it began disability and medical-expense benefits
because it was initially unclear whether Lopez was suffering continued effects from the 1984
injury.  Once Pacific Indemnity learned in February 1989 that Lopez had re-injured himself in
1988, Pacific Indemnity's remedy was to suspend or stop payments of Lopez's benefits and file
a statement with the IAB within ten days stating the reasons for suspending payment.  Id.
§ 18a(b).  Pacific Indemnity could have invoked this procedure to force Liberty Mutual to assume
benefit payments to Lopez.
	Finally, we note that if a carrier does not consent to abide by a final IAB ruling,
it may appeal the ruling by notifying the Board within twenty days of the award.  The carrier must
then file suit in district court within twenty days of giving notice.  1977 Tex. Gen. Laws, ch. 412,
§ 1, at 1113 (Tex. Rev. Civ. Stat. Ann. art. 8307, § 5, since repealed) (current version at Tex.
Rev. Civ. Stat. Ann. art. 8308-6.61-.64 (Supp. 1992)).  The carrier then receives a trial de novo
in district court.  Id.; see Johnson, 464 S.W.2d at 84.  The present cause is not an appeal from
the IAB ruling and the record contains no evidence that Pacific Indemnity attempted such an
appeal.
	Because the workers' compensation statute provides a mechanism for resolving
Pacific Indemnity's exact dispute, we conclude that Pacific Indemnity's claim "arises under" the
workers' compensation law.  Accordingly, the IAB must rule on Pacific Indemnity's
reimbursement claim before Pacific Indemnity is entitled to file a lawsuit. 		
	Pacific Indemnity twice filed notices of controversion with the IAB, requesting a
determination that Liberty Mutual must reimburse Pacific Indemnity for all monies paid to Lopez
after November 1988.  Pacific Indemnity apparently never obtained an IAB hearing on the
reimbursement issue, however, and failed to pursue that claim within the administrative agency. 
The record does not reveal why Pacific Indemnity abandoned the agency process in favor of a
lawsuit, but having dropped its efforts to resolve this claim at the administrative agency, Pacific
Indemnity waived its right to bring this suit. 


CONCLUSION
	Pacific Indemnity's failure to exhaust its administrative remedies bars this suit as
a matter of law and requires that we affirm the trial court's granting of summary judgment. 
Because we conclude that the trial court has no jurisdiction to hear this suit, we overrule this first
point of error.  We need not review Pacific Indemnity's remaining points of error.  The trial-court
judgment is affirmed.


  
					Jimmy Carroll, Chief Justice
[Before Chief Justice Carroll, Justices Aboussie and Kidd]
Affirmed
Filed:   July 1, 1992
[Publish]
1.        Enactment of the Texas Workers' Compensation Act in late 1989 substantially changed the
Texas workers' compensation laws.  See 1989 Tex. Gen. Laws, 2nd C.S., ch. 1, § 1.01-17.19,
at 1-122 (Tex. Rev. Civ. Stat. Ann. art. 8308-1.01-8309-1 (Supp. 1992)). Because the new Act
took effect January 1, 1991, and Pacific Indemnity filed this lawsuit October 19, 1990, the former
workers' compensation provisions govern the disposition of this cause.
