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Recent Developments in Law Worth Noting

Texas Supreme Court:

On November 18, 2022, the Texas Supreme Court denied the motion for rehearing and re-released it’s April 22, 2022, opinion, with corrections, in Columbia Valley Healthcare Sys., L.P. v. A.M.A. by & through Ramirez, No. 20-0681, 2022 WL 1194371 (Tex. Apr. 22, 2022), reh’g denied (Nov. 18, 2022).

This was a medical malpractice case construing the “future damages” portion of Chapter 74 of the Texas Civil Practice and Remedies Code (the chapter that regulates healthcare liability claims). The defendant or claimant can request that the court order future damages to be paid in whole or in part in periodic payments rather than in a lump sum. Tex. Civ. Prac. & Rem. Code § 74.503(a), (b). One advantage, for a defendant, to the future payment structure is that, on the death of the recipient, only payment for future loss of earning is made to the estate. The rest ends and any security given reverts to the defendant. Tex. Civ. Prac. & Rem. Code Ann. § 74.506 (d).

When the defendant or claimant requests that the court order periodic payments of future damages for medical, health-care, or custodial-care services, the court must grant the request. For any other future damages, the court may grant the request. Columbia Valley explains that the defendant must present sufficient evidence of the amount that would fairly and reasonably compensate the plaintiff if future damages are paid periodically. The trial court may require additional evidence not entered into the record in the underlying claim if the evidence provided during trial is insufficient under the periodic-payment statute. The trial court cannot craft a damages award that is inconsistent with a jury’s verdict. A request for future payment is not an affirmative defense that must be pleaded. And in Columbia Valley, the Texas Supreme Court ruled that, as a matter of first impression, a trial court is not required to submit questions to the jury regarding a patient’s life expectancy and annual medical expenses in order to determine the amount and frequency of periodic payments. As Columbia Valley reaffirms, the Texas Rules of Civil Procedure (Rule 278) requires only that “controlling questions” be submitted. Using such questions, however, could help protect a judgment on damages from reversal on appeal. In Columbia Valley the Supreme Court reversed the judgment for future payments because there was no “probative evidence” to support the way the trial court ordered the periodic payments to be structured. The structured ordered by the trial court broke the jury award—for a lump sum through the minor claimant’s 18th birthday plus an additional amount in future care after 18—into 5 payments, lasting until the claimant turned 8 years old with a remainder going to a special needs trust. This not only did not provide the support through age 18 as indicated by the jury, but also any unpaid amount did not revert to the defendant on the death of the claimant. Lastly there was no justification in the evidence for the division between the lump sum portion and periodic portion of the payment. To justify a lump sum, the Court commented, there ought to be evidence that a lump sum is needed for a large expense soon after trial.

The lesson is that if you want a period payment in the judgment, the evidence has support the structure requested.

Texas Federal Court:

In October the Federal District Court for the Western District of Texas applied and expanded the Fifth Circuit’s holding from earlier this year that losses due to Covid shutdowns in the last two years are not covered under “business interruption” coverage in commercial insurance policies, under Texas law.  Spider House LLC v. Certain Underwriters at Lloyd’s, London, No. A-22-CV-277-RP, 2022 WL 17038909, at *1 (W.D. Tex. Oct. 19, 2022), report and recommendation adopted sub nom. Spiderhouse LLC v. Certain Underwriters at Lloyds, London, No. 1:22-CV-277-RP, 2022 WL 17038907 (W.D. Tex. Nov. 4, 2022) and Terry Black’s Barbecue, L.L.C. v. State Automobile Mutual Insurance Co., 22 F.4th 450 (5th Cir. 2022). In Terry Black’s, the Fifth Circuit held COVID-19 business closures are not covered under insurance policies because there is no direct physical loss of or damage to property.

Spider House argued that it suffered a physical loss of its property from a physical alteration. Its landlord changed the locks on the property (because of the government ordered shutdown, Spider Hhouse could not pay rent, leading to being locked out) which, Spider House argued “physically altered the property.” The Western District disagreed, holding that the analysis in Terry Black’s is that some harm must come to the property to constitute a direct physical loss. Moreover, business interruption insurance is not insurance against inability to keep up rent payments. Therefore the court granted the motion to dismiss for failure to state a claim under Rule 12(b)(6).

For more information regarding this recent development, please reach out to Bill Newman at (214) 905-2003.

Attorney: William A. Newman