© 2012 The Texas Lawbook.
By Mark Curriden
Senior Writer for The Texas Lawbook
Mary Nichols didn’t invent the Texas workers’ compensation system, but she may be its most ardent and aggressive defender.
A 1985 graduate of the University of Texas School of Law, Nichols is the general counsel and senior vice president of Austin-based Texas Mutual Insurance, which is the largest workers’ comp insurance company in the state with about $900 million in annual revenues.
During her 17 years at Texas Mutual, Nichols has vigorously battled the plaintiff’s bar, scoring high profile and big-dollar courtroom victories. She is credited with being the mastermind behind the legal strategy that led to the Texas Supreme Court’s landmark ruling earlier this year that eliminated the ability of injured workers to sue insurance companies for bad faith. And she has aggressively pursued businesses and individuals for filing fraudulent claims – large and small.
Recognizing Nichols’ success, the Texas General Counsel Forum awarded the former Vinson & Elkins lawyer its prestigious Magna Stella Award for Litigation.
“Awards like this are a great honor, but they are truly a recognition of the amazing legal team here at Texas Mutual and a recognition of the support I receive from senior management and our board of directors,” says Nichols.
Nichols oversees a corporate legal department that includes six lawyers and regularly employs a handful of outside counsel. Litigation is her company’s top legal concern.
“When you work with the same outside lawyers over and over, we understand what each other thinks,” she says. “The only reason I would need to bring in a new lawyer to our outside counsel team is if that lawyer has an expertise that we don’t have but need.”
Nichols says that while she understands the push by many GCs for alternative fee arrangements and admits she has worked some flat fee agreements on appellate matters, she prefers sticking with the hourly billing process for trial work.
“Mary is a great lawyer who has the ability to step back and look at legal issues and disputes in a broader, more strategic viewpoint,” says Pete Schenkkan, a shareholder at Graves, Dougherty, Hearon & Moody who has worked with Nichols on a handful of trial and appellate matters.
“As a GC, Mary is very hands-on,” says Schenkkan. “She knows what she wants and she often knows more than you do about the law.”
Texas Mutual was created in 1992 as a result of the Workers’ Compensation Act of 1989 passed by the Texas Legislature. Nichols was hired as GC three years later.
“My job is to represent the best interests of my company, and that means that my top priority is to protect the fundamental health of the workers’ comp system in Texas,” she says.
Texas Mutual serves more than 51,000 Texas employers, which means that it has about one-third of the market share.
Lawyers in the insurance industry say that Nichols built an aggressive fraud investigations unit that works closely with the Travis County District Attorney’s office to prosecute individuals and companies that file false claims.
During the past two years, more than two dozen Texas employees and employers have been indicted, convicted or settled criminal and civil charges on the basis of evidence unearthed by Texas Mutual’s fraud unit.
For example, in January, two Texas businesses – Granbury Contracting & Utilities and AB Abatement, Inc. – pleaded guilty to misrepresenting the number of employees and their representative payrolls. Granbury paid $149,000 in restitution to Texas Mutual, while AB Abatement paid $70,000 in restitution and a $1,000 fine.
In May, the Travis County grand jury indicted Dr. Howard T. Douglas, III of Hurst and his company, North Texas Medical Evaluators of Carrollton, on felony workers’ compensation fraud-related charges. The state accused the doctor and the medical center of developing a scheme to overbill Texas Mutual for the time taken to perform evaluations.
Last October, a Village Mills, Texas equipment operator was sentenced to 180 days in jail when he fraudulently claimed he was injured on the job and unable to work. Clifford K. Franklin received $1,453 in benefits, but Texas Mutual later learned that he was working as an equipment operator for another employer while receiving income benefits.
Nichols says Texas Mutual has a “zero tolerance” policy for fraud and investigates every report of suspected dishonesty.
Schenkkan and other lawyers say that Nichols has a gift for deciding which cases the insurance company should settle and which cases should be fiercely litigated.
“Once Mary believes in something, she is like a dog with a bone, pursuing cases vigorously, undaunted by legal obstacles,” says Texas Mutual Senior Vice President Terry Frakes.
Nichols and Texas Mutual won two such cases in 2012.
The first case involved Rafael Casados, a temporary employee of Port Elevator in Corpus Christi. Casados was fatally injured his third day on the job.
Casado’s family sued Port Elevator for negligence, claiming that workers’ compensation laws didn’t apply because the worker was temporary and the company didn’t pay worker’s comp premiums.
The trial court agreed, awarding $2.8 million in damages – a verdict that was upheld by the Corpus Christi Court of Appeals.
In January, the Texas Supreme Court unanimously reversed the lower courts, ruling that, because the company had worker’s comp coverage, negligence claims against the policyholders were prohibited. Nichols touts the decision as benefiting workers by ensuring that they will be covered if injured, and benefiting employers because it extended liability protections for them from additional lawsuits.
But Nichols biggest win came in June after an eight year landmark legal battle that split the state’s highest court in half and still has many in the trial bar upset.
The case began in 2004, when Timothy Ruttiger of Galveston sued Texas Mutual after the insurance company initially denied his claim for workers’ comp, saying that Ruttiger wasn’t injured on the job but playing softball.
Ruttiger sued Texas Mutual, contending that the company acted in “bad faith.” A jury in Houston agreed, awarding him $173,500 in damages and lawyer fees. The Houston Court of Appeals affirmed the trial court decision.
Nichols appealed. In truth, she had been preparing for more than a decade for the opportunity to challenge the legality of extrajudicial assaults such as bad faith claims. In 2001, she hired outside counsel to file an amicus brief to argue that the state Legislature intended to eliminate such lawsuits when it passed the Workers’ Compensation Act of 1989.
“I wanted to start the conversation that bad faith claims have no position in workers’ comp,” she says. “The push back on bad faith was very expensive, but it was necessary and well worth it.”
A decade later, the Ruttiger case made its way to the state’s highest court. In August 2011, the justices reversed the judgment and remanded the case back to the Houston Court of Appeals on Texas Mutual’s contention that Texas law now prohibited bad faith claims in worker’s comp disputes.
Both sides filed motions asking the state Supreme Court to reconsider – a move that many legal experts and even some within her own company thought at the time could be a bad strategy.
“I was one of those who thought we should just take our initial win and be satisfied,” says Frakes. “I told Mary that I thought it could backfire. But I also recognize that Mary is very smart and has a very strategic mind. And, of course, she was right.”
In a five to four decision, the justices in June banned bad faith claims – a decision heralded by Nichols as “fundamental to the health of the entire workers’ comp system.”
Those close to Nichols say she has two loves outside of work: her dog and classical theater.
“I think it is important to have excellent live theater available to our community,” says Nichols, who has been a member of the Board of Directors of Austin Shakespeare for nearly a decade. “Austin is a city of lively intellectual accomplishment and it would be shame if we needed to go elsewhere for this critical cultural component.
“Austin Shakespeare does a lot of educational outreach in the belief that such outreach nourishes our young people,” she says. “So, as you can see, I am a proud and doting patron of this particular cause.”
© 2012 The Texas Lawbook. Content of The Texas Lawbook is controlled and protected by specific licensing agreements with our subscribers and under federal copyright laws. Any distribution of this content without the consent of The Texas Lawbook is prohibited.