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Appeals Court and Texas Supreme Court Uphold Jury Verdict

Oil Field Explosion Burn Injury Leads to Discovery of Fraud and DTPA

BY THE DEFENDANTS, BUSINESS STAFFING, INC., TRANSGLOBAL INDEMNITY LTD., LHR ENTERPRPISES, INC., HARRY SEWILL, RICHARD GABLE CHAPMAN, BART BOGUS, and BSI INSURANCE SERVICES, INC.

Timothy Bryan Smith lead trial counsel for the Plaintiffs and sole appellate counsel.

JURY VERDICT AND JUDGMENT AGAINST ALL DEFENDANTS

Appellate Opinion published at:
Business Staffing, Inc., et al v. Jackson Hot Oil Service d/b/a Jackson Brothers Hot Oil Service, and Cody Jackson, 401 S.W.3d 224, (Tex. App. – El Paso, 2012, pet. denied)

Jackson Hot Oil Service, and Cody Jackson v. Business Staffing, Inc. et al,  Cause No. 17,301, In The 109th Judicial District Court, Andrews, Texas

In this case an oil field service contractor/worker sued a staff leasing company for fraud, and for misrepresenting that it would provide workers’ compensation insurance for its leased employees, and also sued an insurance company for fraud as well as deceptive and unfair practices.  The staffing company and the insurance company were owned by the same people, also Defendants in the case, who were sued for fraud and conspiracy to commit fraud.

In the mid ’90s the plaintiff Jackson Brothers Hot Oil Service hired Business Staffing, Inc. to provide staff leasing to their family business in order to, and upon the promise to have workers’ compensation insurance. The Defendants regularly sent letters and certificates of insurance to the Plaintiffs and all of their customers showing Transglobal Indemnity as the insurer providing workers compensation insurance coverage for Plaintiffs.

In March 2005, Cody Jackson was severely burned in an oil field fire/explosion while operating his hot oil unit treating the oil in temporary frac tanks on a customer’s well site. The insurance company told all of Jackson’s medical providers that Jackson’s medical bills would be paid under the Texas Workers’ Compensation Act rules.   A year and three months later, over a million dollars of those bills remained unpaid, but the claims had not been denied. The Plaintiffs then learned that Business Staffing and thus the Plaintiffs’ company did not have workers comp under the Texas Workers Compensation Act, and that the insurance company was an off-shore entity, not authorized to do insurance business in Texas.  Plaintiffs filed suit in Andrews County, Texas, for violation of the Deceptive Trade Practices Act, and Cody Jackson sued BSI for workplace negligence as a non-subscriber.  It was then learned that in 1995 a judgment had been rendered against Business Staffing for fraud for procuring insurance for its leased employees from another off-shore company ordered not to engage in the insurance business in Texas.

Plaintiffs then took the deposition of Richard Chapman, the vice president, of the staffing company, who testified that he and the president of the Business Staffing made the decision to obtain workers’ compensation insurance from Transglobal Indemnity when a third party found it for them, and Chapman referred to Transglobal as “they” and “them”.

However, after Chapman’s deposition, Plaintiffs learned of Chapman’s previous testimony before the Texas Department of Insurance, that he and the president of Business Staffing, Harry Sewill, were also the founders and owners of Transglobal, and that Transglobal Indemnity, while headquartered in Turks and Caicos (West Indies), had no office there and no employees there. The insurance company, which had only one employee, was not licensed to do business in Texas, yet had its sole employee office with Business Staffing in Conroe, Texas. The Plaintiffs then sued Transglobal, Chapman, and Sewill, and related Defendants.

The Plaintiffs contended that the named parties, Harry Sewill, Richard Chapman and Bart Bogus engaged and participated in a conspiracy to commit fraud by creating a scheme to give the appearance to their clients of procuring Workers’ Comp for them and their leased employees. The Plaintiffs contended that Defendants engaged in deceptive trade practices, insurance code violations, fraudulent inducement, and fraudulent concealment, by misrepresenting insurance services and benefits, unfair claims settlement practices, and failing to provide statutory notices, failing to disclose material facts, and concealing material information.   The Defendants contended that they never represented that they would provide insurance for their clients, but that they only promised to provide benefits.  Defendants contended that Plaintiffs breached their contract, that there could be no fraud or misrepresentations when there is a written contract, that there cannot be fraud upon Cody Jackson by each defendant without representations made by each defendant directly to Cody Jackson, and that the statute of limitations precludes recovery. Defendants also contended that Cody Jackson was not their employee or insured beneficiary of the policy, and that they did not owe him benefits because he should have looked to the comp coverage of the oil and gas operator.  The case was mediated twice. The Defendants offered $80,000 to settle. The Plaintiffs’ final demand was $1,000,000.

During the 7 day trial Dr. John Griswold, M.D., of Texas Tech University Health Science Center, testified to the extent of treatment necessary and the medical costs incurred.  Evidence showed that Transglobal issued only one insurance policy, which was to Business Staffing, for an estimated annual premium of around $6,700, for workers compensation coverage in the amount of $1,000,000 per accident for each client leasing a total of approximately 1,800 employees. Transglobal’s employee testified that Transglobal is not a company that is capable of paying this claim. Evidence presented to the jury included testimony that Harry Sewill and Richard Chapman formed Transglobal Indemnity in order to enter the insurance business, but are not licensed in the insurance business in Texas. The testimony established that Sewill and Chapman are President and Vice President and each 25% owners in the Staff Leasing enitity, and directors and 33% owners in the  insurance entity, and that they called their future employee in Houston, and then drove 5 miles across the Texas border to meet in a café with him to buy the Transglobal insurance policy in order to declare that they obtained the Transglobal policy outside of the State of Texas by “independent procurement”, so that they could legally bring it back into the state; even though the two men are  directors, and owners, of both companies’ and Chapman the overseer of compliance.  The insurance policy in question was printed out from Chapman’s computer in the staff leasing office.  The evidence showed that a year and a half after the accident, Transglobal had failed to pay any of the medical bills to Texas Tech University Health Science Center, and University Medical Center Hospital in Lubbock, Texas, totaling $1,016,000, but that Transglobal had not denied the claims; and then later as a basis of denial took the position that the claim should be the responsibility of the oil and gas operator’s comp carrier.

After 9 hours of deliberation on the liability and actual damage phase and 45 minutes on the punitive damage phase, the jury returned a unanimous verdict for the Plaintiffs, finding that all Defendants committed fraud, that Sewill, Chapman and Bogus were part of a conspiracy, that all Defendants violated the DTPA, that Business Staffing, Transglobal Indemnity, Harry Sewill, and Richard Gable Chapman acted knowingly in connection with the DTPA issues, and that there was clear and convincing evidence of harm done to Cody Jackson as a result of the fraud found by the jury.  The jury awarded Cody Jackson  $1,016,000 in past medical costs, $5,000 for future medical costs, and $1,161,000 in unpaid lifetime income benefits to which he would have been entitled had there been legitimate workers compensation in place and the ability to enforce his remedies under the Texas Workers’ Compensation Act, plus additional DTPA damages of $1,000,000 against Transglobal Indemnity, $700,000 against Business Staffing, $150,000 against Harry Sewill, and $150,000 against Richard Chapman. Exemplary damages were awarded against Transglobal Indemnity in the amount of $250,000, against Business Staffing in the amount of $175,000, against Harry Sewill in the amount of $37,000, and against Richard Chapman in the amount of $37,000. The Jackson Brothers Hot Oil Service was awarded $47,000 for fees paid to Business Staffing, Inc. After election of remedies under the different causes of action and reduction of the verdict for a third party settlement credit, the Court entered judgment against the various Defendants including pre-judgment interest totaling $3,489,000.  After the appeals were final, and the judgments were upheld, the trial court ordered all of the Defendants to turn over all of their non-exempt assets to a Turnover Receiver appointed by the Court for the purpose of enforcing this judgment.  All of the corporate defendants’ assets have been seized by the Receiver to pay the judgment. The assets are being used to pay out the judgement over time into the future until paid. Out of these funds, court costs and attorney expenses of $47,235 were paid to the attorneys, after which 1/3 was and is paid for attorney fees, 1/3 is paid to the Plaintiffs, and 1/3 is paid to the medical providers.

The Defendants Appealed the case to the Eighth Court of Appeals and the Texas Supreme Court, and the case was affirmed on appeal by the Appeals Court, and upheld by denial of petition for review by the Texas Supreme Court. Business Staffing, Inc., et al v. Jackson Hot Oil Service d/b/a Jackson
Brothers Hot Oil Service, and Cody Jackson, 401 S.W.3d 224, (Tex. App. – El
Paso, 2012, pet. denied)