The Tyler Court of Appeals recently held that the Division has exclusive jurisdiction to determine whether administrative costs qualify as workers’ compensation benefits that the carrier is entitled to recover as part of its subrogation lien.
The Act provides that the net amount recovered by the claimant in a third-party action shall be used to reimburse the carrier for benefits that have been paid for the compensable injury. The Act defines benefits to include medical, income, death, or burial benefits based on a compensable injury.
According to the decision, the carrier allegedly paid a third-party administrator a flat-fee of $5,354,500.00 to assume liability for medical costs on a catastrophic claim. The TPA paid actual medical costs of $2,259,378.58. The carrier allegedly filed an affidavit in the claimant’s third-party action claiming a lien in the amount of $5,587,479.18. This amount allegedly included the $5,354,500.00 paid to the TPA as well as “hundreds of charges for bill and utilization review.”
The claimant’s survivors brought suit against the carrier alleging various fraud claims, all premised on the assertion that a carrier’s administrative costs are not recoverable as part of its subrogation lien. The carrier filed a plea to the jurisdiction which the trial court denied. The carrier then filed a petition for writ of mandamus which the Tyler Court of Appeals granted.
The Court held, “It is axiomatic that the DWC, tasked with regulating and administering the business of workers’ compensation and monitoring insurance carriers, attorneys, and other representatives for compliance with the Act, should be the decision maker with regard to whether benefits have been inflated and administrative costs have been wrongfully included in a subrogation claim.”
The Court explained that because the fraud claims arise out of the carrier’s allegedly improper investigation, handling, or settling of a claim for worker’s compensation benefits, the Division has exclusive jurisdiction over those claims and the claimant’s survivors were required to exhaust their administrative remedies with the Division.
Therefore, the Court held that the fraud claims, should be abated pending the Division’s resolution of whether the carrier is entitled to seek administrative costs as part of its subrogation claim, and if not, whether the carrier committed an administrative violation by allegedly doing so.
In re Old Republic Risk Mgmt., No. 12-19-00144-CV, 2019 WL 2462486 (Tex. App.—Tyler, June 12, 2019).
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