     Case: 10-20630     Document: 00511704393         Page: 1     Date Filed: 12/22/2011




            IN THE UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                     Fifth Circuit

                                                                            FILED
                                                                        December 22, 2011

                                       No. 10-20630                        Lyle W. Cayce
                                                                                Clerk

MICHAEL EFFINGER,

                                                  Plaintiff-Appellant
v.

CAMBRIDGE INTEGRATED SERVICES GROUP; NEW HAMPSHIRE
INSURANCE COMPANY; PENNY JAY,

                                                  Defendants-Appellees



                   Appeal from the United States District Court
                        for the Southern District of Texas
                             USDC No: 4:09-CV-02326


Before KING, DAVIS, and GARZA, Circuit Judges.
PER CURIAM:*
        The original opinion in this matter was issued by the panel on August 30,
2011. Appellant’s petition for panel rehearing is now GRANTED IN PART.
Accordingly, we WITHDRAW our previous opinion and replace it with the
following opinion.
        This appeal stems from a workers’ compensation claim from Plaintiff-
Appellant Michael Effinger (“Effinger”). Effinger alleges Defendants-Appellees


        *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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                                  No. 10-20630

Cambridge Integrated Services Group (“Cambridge”), New Hampshire Insurance
Co. (“New Hampshire”), and individual insurance adjuster Penny Jay violated
a common law duty of good faith and fair dealing, various subsections of the
Texas Insurance Code (“TIC”), and the Texas Deceptive Trade Practices Act
(“DTPA”). The district court held that Effinger lacked standing under the TIC
and DTPA and that the Appellees had acted in good faith. We AFFIRM.
                                         I
      A truck driver for Old Dominion Freight Line, Effinger suffered a back
injury while lifting a dolly at work.        Effinger reported the injury to his
supervisor and filed a workers’ compensation claim with the Appellees. A
physician’s assistant initially diagnosed Effinger’s injury as a hip strain. Shortly
after the initial diagnosis, Effinger saw a doctor who diagnosed Effinger with a
herniated disc in his back, which pressed on his nerve root and caused pain to
radiate down his right leg into his foot. Because of the initial diagnosis of
Effinger’s injury as a hip strain, an issue arose as to whether Effinger’s
compensable injury included his herniated disc. After seeing several physicians,
Effinger argued that his work-related injury included the medical condition
related to his back. The Appellees sent Effinger to a doctor appointed by the
Texas Workers’ Compensation Commission for an evaluation. Cambridge then
filed a notice of compensability dispute and denial, which contested Effinger’s
claim for benefits related to his back injury. Effinger hired an attorney to
contest the denial.    The parties met and discussed the matter several times
before reaching a “benefit settlement agreement.” In this agreement, Cambridge
agreed to pay for Effinger’s back treatment.
      After Effinger and Cambridge entered into the benefits settlement
agreement, and Effinger had received the promised benefits, Effinger sued the
Appellees in Texas state court. The Appellees removed the case to federal court.
Effinger’s lawsuit alleged that the defendants had violated Sections 541.060 and

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                                 No. 10-20630

541.061 of the TIC as well as the DTPA. Effinger also alleged that the Appellees
had breached their duty of good faith and fair dealing. Effinger sought punitive
damages for this claim.
      The Appellees moved for summary judgment, which the district court
denied. Effinger then proceeded to a jury trial. After hearing Effinger’s expert
witness testimony and a proffer of Effinger’s and his wife’s testimony, the
district court dismissed Effinger’s claims under Rule 50 of the Federal Rules of
Civil Procedure. The court concluded that Effinger lacked contractual privity
with the Appellees and therefore, Effinger did not have standing to bring claims
under the DTPA and Sections 541.060–.061 of the TIC. The court dismissed
Effinger’s duty of good faith claim. The court concluded that the evidence did
not demonstrate that the Appellees had unreasonably denied Effinger benefits
to which he was entitled. In addition, the court decided that Effinger’s breach
of good faith claim failed because the injuries caused by the purported delay
were not separate or distinct from the injuries covered by Effinger’s workers’
compensation benefits. Effinger appealed.
                                       II
      We use a de novo standard of review when considering a district court’s
ruling on a motion for judgment as a matter of law. McBeth v. Carpenter, 565
F.3d 171, 176 (5th Cir. 2009). Judgment as a matter of law is appropriate “[i]f
a party has been fully heard on an issue during a jury trial and the court finds
that a reasonable jury would not have a legally sufficient evidentiary basis to
find for the party.” FED. R. CIV. P. 50(a). “We are to review the record as a
whole, drawing all reasonable inferences in favor of the nonmoving party and
without making credibility determinations or weighing the evidence.” Wallace
v. Methodist Hosp. Sys., 271 F.3d 212, 219 (5th Cir. 2001).




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                                  No. 10-20630

                                         A
      First, Effinger contends that the district court erred in finding that he
lacked standing to sue under Sections 541.060 and 541.061 of the TIC. Effinger
brings to our attention the Texas Supreme Court’s recent decision in Texas
Mutual Ins. Co. v. Ruttiger, No. 08-0751, 2011 WL 3796353 (Tex. Aug. 26, 2011).
In Ruttiger, the court discussed whether TIC Sections 541.060 and 541.061 are
inconsistent with the Texas Workers’ Compensation Act (“TWCA”), an act which
“demonstrat[es] Legislative intent for there to be no alternative remedies.” Id.
at *12. The court reached different conclusions for the two TWCA sections,
holding that a workers’ compensation plaintiff “may not assert a cause of action
under section 541.060,” but that Section 541.061 on the other hand “does not
evidence intent that it be applied in regard to settling claims [and] is not at odds
with the dispute resolution process of the workers’ compensation system.” Id.
at *13. Though the court ultimately disposed of the plaintiff’s claims on the
merits, Texas law after Ruttiger is clear: workers compensation plaintiffs do not
have standing to sue under 541.060, but claims under 541.061 are not precluded
by the TWCA. Accordingly, the district court was correct to deny standing to
Effinger on his unfair settlement practices claim under TIC Section 541.060, but
incorrect in ruling that Effinger lacked standing on his misrepresentation claim
under Section 541.061.
      Effinger’s 541.061 claim nevertheless fails. The district court concluded,
alternatively, that Effinger failed to adduce legally sufficient evidence of
misrepresentation, and our review of the record confirms this conclusion.
Effinger contended at the district court that Appellees misrepresented the scope
of coverage by representing that they would promptly pay for compensable
injuries. But a policy’s promise to promptly compensate does not become a
misrepresentation merely because an insurance carrier disputes whether an
injury is compensable and delays payment. Neither does a carrier’s statement

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                                      No. 10-20630

to the insured that coverage is denied amount to actionable misrepresentation
merely because it is later determined that coverage was appropriate. Section
541.061 contemplates, in contrast, situations where a carrier represents “specific
circumstances” which will be covered and subsequently denies coverage. See
United States Fire Ins. Co. v. Confederate Air Force, 16 F.3d 88, 91 (5th Cir.
1994) (citing Parkins v. Texas Farmers Ins. Co., 645 S.W.2d 775, 776-77 (Tex.
1983)). The district court was correct to conclude that the insurance carrier in
this case made no misrepresentations in violation of Section 541.061.
       Second, Effinger asserts that the district court erroneously concluded that
he lacked standing as a “consumer” under the DTPA. We need not engage this
inquiry. Effinger’s DTPA claim, as pleaded, was dependent on his TIC claims.
Because his claim under Section 541.060 fails for lack of standing and his claim
under Section 541.061 fails for lack of a misrepresentation, Effinger’s DTPA
claim fails as well. See Ruttiger, 2011 WL 3796353 at *13.
                                             B
       Effinger also alleges that the Appellees breached their duties of good faith
and fair dealing by refusing to properly investigate his claim and by denying him
benefits. In Texas, “an insurer has a [common law] duty to deal fairly and in
good faith with its insured in the processing and payment of claims.” Republic
Ins. Co. v. Stoker, 903 S.W.2d 338, 340 (Tex. 1995). To succeed on a claim
alleging bad faith dealing by an insurance company, a plaintiff must establish:
“(1) the absence of a reasonable basis for denying payment of the benefits of the
policy, and (2) the carrier knew or should have known there was not a
reasonable basis for denying the claim or delaying payment of the claim.”1 Jones


       1
          Some Texas appellate courts have recognized a separate and distinct injury
requirement as a third element of the breach of good faith claim. See Hulshouser v. Tex.
Workers’ Compensation Ins. Fund, 139 S.W.3d 789, 792 (Tex. App.–Dallas 2004, no pet.). The
district court relied, in part, on this prong when that court dismissed Effinger’s bad faith
claim. We do not address this element because Effinger does not satisfy the other

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                                          No. 10-20630

v. Ill. Emp’rs Ins. of Wausau, 136 S.W.3d 728,744 (Tex. App.–Texarkana 2004,
no pet.); Gonzales v. Tex. Workers’ Compensation Fund, 950 S.W.2d 380, 382
(Tex. App.–Houston [14th Dist.] 1997, no writ); see also 75 TEX. JUR. 3d Workers’
Compensation § 129 (2000).
       Effinger’s appeal of this issue fails for two reasons. First, in his brief,
Effinger neglected to challenge the district court’s conclusions as to the
Appellees’ reasonable investigation and reasonable delay in payment. A failure
to challenge an issue on appeal constitutes a waiver of that issue. Bailey v. Shell
W.E & P, Inc., 609 F.3d 710, 722 (5th Cir. 2010). Regardless of Effinger’s
inability to properly preserve this issue for appeal, the record demonstrates that
the district court correctly decided this claim. The Appellees had a reasonable
basis for initially denying Effinger’s claim because Effinger was originally
diagnosed with a hip, not a back, injury. Thus, the Appellees reasonably delayed
payment of the claim until they could properly investigate the discrepancy.
Further, the Appellees acted reasonably because the Appellees paid Effinger
income benefits without disruption, consistently granted preauthorization for
medical treatment, and paid submitted medical bills. Thus, the district court did
not err when it concluded the Appellees had not acted in bad faith.
                                              III
       For the foregoing reasons, we AFFIRM the district court’s judgment.




prerequisites for this cause of action.

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