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April 26, 2011
Court Limits Attorneys’ Fees in Workers’ Comp Appeal

A Texas appeals court has reversed a jury award of attorney’s fees in a workers’ compensation case when the only issue was the awarding of attorneys’ fees. The court said that Texas law does not authorize the award of fees if the insurer is no longer contesting compensability and the only issue was the amount of the fees.

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What happened. “Becker” injured his shoulder and back while working for the Austin Independent School District (AISD). AISD acknowledged a compensable shoulder injury, but disputed whether the back injury was compensable. A Division of Workers’ Compensation hearing officer ruled that both of Becker’s conditions were compensable. AISD then sought review before the Division’s appeals panel and then in court. Becker made a counterclaim for attorney’s fees. AISD then withdrew its suit leaving attorney’s fees as the only issue. After a jury trial, Becker was awarded $36,000 for trial services before AISD withdrew its claim and $17,415 for trial services after AISD’s withdrawal.

What the court said. The general rule in litigation is that the parties pay their own legal costs unless specifically authorized by statute or contract. Texas Labor Code Sec. 408.221 provides that fees must come out of the recovery. However, Sec. 408.221(c) provides that claimants may recover attorneys’ fees from workers’ compensation insurers incurred in the judicial review of a decision on compensability.

AISD argued that any fees Becker incurred after the judicial appeal was withdrawn were not incurred because of the appeal of the decision on the compensability of Becker’s back injury. Thus, the sole issue was the counterclaim for attorneys' fees which AISD argued was not in itself an issue on which it sought judicial review, or in other words, Becker was not entitled to attorneys’ fees for the cost of recovering the attorneys’ fees.

Becker argued that unless a claimant could recover fees for the cost of recovering fees, insurers could prolong fee disputes and intimidate claimants into not pursuing claims for fees. The court disagreed and stated that it was conceivable that the legislature intended to strike a balance by granting claimants a limited ability to recover fees incurred in defeating insurer’s appeals and deterring carriers somewhat from pursuing suits that lack merit, while also attempting to limit incentives for claimants or their lawyers to pursue protracted litigation over attorneys' fees. Austin ISD v. Manbeck, Texas Court of Appeals, No. 03-09-00682-CV, (3/23/2011)

Point to remember. AISD still has to pay the $36,000 for fees incurred before it withdrew its judicial appeal. That fee could have been avoided if a decision not to pursue the judicial appeal was made earlier.

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