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Victory for Texas Non-Subscriber Employer

Texas is the only state that allows employers to completely opt out of, or “nonsubscribe” from, the traditional workers’ compensation system. Nonsubscribers can avoid high premiums and a rigid state-mandated bureaucracy and instead implement self-funded occupational injury benefits plans that are better tailored to their industry. Many nonsubscribers have realized significant savings compared to the traditional workers’ compensation system. The tradeoff for nonsubscribers, however, is that their injured employees may sue to recover damages based on the employers’ alleged negligence. In these negligence actions, nonsubscribers are barred from asserting any traditional affirmative defenses, such as the employee’s contributory negligence. In addition, the law permits an employee to file a separate suit under ERISA where an employer’s occupational injury plan is alleged to have wrongfully denied benefits.

In one recent case, we won both the ERISA and negligence lawsuits arising out of the same workplace injury. The injured employee underwent neck surgery, experienced significant complications as a result, and never returned to work. In the ERISA case, the employee alleged that the plan administrator wrongfully denied approval of and payment for her surgery. In the nonsubscriber proceeding, the employee blamed the employer for her injury by failing to provide proper equipment and failing to provide proper training and instructions. We successfully obtained summary judgment on the ERISA claim. The U.S. District Court agreed with our argument that the plan administrator acted within his discretion in terminating all benefits prior to the surgical procedure in light of medical evidence suggesting the surgery was unnecessary. We also prevailed in the nonsubscriber action, as the client’s strong workplace safety program enabled us to persuade a three-person arbitration panel that the client acted reasonably with respect to equipping and training its employees.

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