Texas Workers' Compensation Fund v. Jose Serrano, et al., No. 13-95-482-CV, Court of Appeals (Tex. Civ. App. - Corpus Christi 1999).
Jose Serrano, a Mexican citizen, was severely injured when he was pinned between a truck and trailer, paralyzing him from the waist down. The Fund paid $247,602.20 for medical bills and $3,200.14 for lost wages to the worker's compensation carrier. The plaintiffs settled the third party case for $750,000 and the trial judge approved the settlement as follows:
Jose Serrano $250,000
Mrs. Serrano $200,000
Minor Children (3) $100,000 Each
Ironically, the trial court originally denied the Fund the right to recover on it subrogation claim, claiming that it had failed to offer sufficient evidence to establish a subrogation interest and medical expenses for the injured. The Corpus Christi Court of Appeals affirmed the trial court's decision on January 9, 1997 in an unpublished opinion, and the Texas Supreme Court reversed that decision and allowed the Fund to recover in its opinion in Texas Worker's Compensation Insurance Fund v. Serrano, 962 S.W. 2d 536 (Tex. 1998).
Now the Corpus Christi Court of Appeals is again hearing an appeal by the Fund based on the argument that the trial court allowed a gerrymandered settlement in that Jose Serrano's family received twice as much of the settlement as did Mr. Serrano himself. Despite being presented with well-reasoned opinions such as Insurance Company of North America v. Wright, 886 S.W. 2d. 337 (Tex. App. - Houston [1st Dist.] 1994 writ denied), the Court of Appeals looked at the losses suffered by the family of Mr. Serrano, and held that the evidence was legally and factually sufficient to support the trial court's division of the settlement.
Previous case law made clear that any decision which appears to circumvent the insurer's worker's compensation carrier's subrogation rights would be held to be improper and will be struck down.
The decision by the Court of Appeals in this case is not tremendously well-reasoned in light of current law regarding gerrymandering settlements. In appealing matters such as these, it is necessary to challenge the legal sufficiency of the evidence relating to the complaint about the manner in which the settlement is distributed amongst the plaintiffs. The rule of appellate procedure is that the Appellate Court considers all of the evidence in the record in a light most favorable to the party in whose favor the verdict has been rendered, and they indulge every reasonable inference in that party's favor.
This rule of appellate procedure, when taken in conjunction with the Corpus Christi Court of Appeals decision in this case, gives plaintiffs' attorneys ample ammunition to gerrymander settlements in such a way as to reduce or virtually eliminate subrogation liens by apportioning the majority of settlements for lives for loss of contortions claims and to children who will also be named as plaintiffs in personal injury cases. This methodology directly circumvents the intent and purpose of the Texas Worker's Compensation Subrogation Statute, and makes it more difficult for subrogating carriers to recover most or all of their monies, therefore, we believe that this case will have dire ramifications for future subrogation efforts in Texas, and that these ramifications may spread to other states in the near future. We do note, however, that this case has been appealed to the Texas Supreme Court, and as soon as they determine whether to hear this case, we will notify you of the result.