In a case we initially reported on last September, the Texas Supreme Court has ruled that “a limitation of liability provision in a utility tariff approved by state regulators bars the utility’s liability for damages suffered by a residential customer’s houseguests.
The facts in CenterPoint Energy Resources Corp. v. Ramirez (No. 20-0354) are as follows. Attempting to repair a dryer in his daughter’s home, Mr. Ramirez was severely injured when he inadvertently opened a gas valve to an unused gas line, causing the gas to ignite and explode. He and his wife sued CenterPoint, the gas utility that supplied gas to the home, the homebuilder, and the plumbing subcontractor who installed the gas lines. The jury determined that the homebuilder bore 60% of the fault, CenterPoint 34%, and the plumber 6%. It awarded nearly $7 million in actual damages against CenterPoint and the homebuilder. The plaintiffs settled with the plumber before trial and the homebuilder while the appeal was pending. CenterPoint appealed.
The San Antonio Court of Appeals affirmed the trial court. In an opinion authored by Chief Justice Sandee Bryan Marion, the court of appeals rejected CenterPoint’s argument that the “filed-rate doctrine” precludes liability. The doctrine provides that “a tariff filed and approved by an administrative agency (here the Railroad Commission) under a statutory scheme is presumed reasonable unless a litigant proves otherwise.” CenterPoint’s tariff limits the utility’s liability for damage or loss caused by gas escaping from housepiping, as well as for damage or personal injury caused by gas or its use after the gas leaves the point of delivery. SCOTX has upheld such liability limitations as reasonable because they are inherently part of a negotiated rate. The court of appeals, however, found that the plaintiffs, who were guests in the home at the time of the accident, were not “consumers, customers, or applicants” of the utility as the tariff defines those terms. The court of appeals further held that there was legally sufficient evidence to support the plaintiffs’ negligent undertaking claim against CenterPoint
In a case of first impression, SCOTX reversed the court of appeals, holding that the tariff’s liability limitation “precludes the houseguests’ negligence claims because (1) the tariff’s terms expressly apply to ‘all consumers’ and (2) the houseguests meet the tariff’s specific definition of that term. The Court pointed out that a tariff adopted by a regulatory agency has “the force and effect of law, at least as to those to whom the tariff applies” (i.e., it is not a private contract between the utility and the customer who pays the bill). As such, the houseguests had neither to agree to be bound by the tariff or have any actual knowledge of it, as the court of appeals held. SCOTX further held that (1) the tariff’s liability limitation does not conflict with local ordinances, such as building codes, even if the ordinance imposes a duty, and (2) the tariff’s liability limitation does not violate the Open Courts provision of the Texas Constitution (Art. 1, 13). With regard to the Open Courts argument, the Court noted that the liability limitation did not preclude the plaintiffs from recovering from other parties and, in any event, was “not unreasonable and arbitrary when balanced against its purposes.”
SCOTX’s decision averts a massive expansion of a gas utility’s exposure to liability. That risk is not currently reflected in the rates consumers pay, but it eventually would have been under a contrary ruling. The purpose of the filed-rate doctrine is to limit such risk in order to keep rates reasonable and affordable for businesses and homeowners. It is important to note that once a tariff is properly filed and approved, it has the force law. Public utilities are bound by them, just as customers are, and cannot vary rates for individual customers, discriminate in providing services, or charge anything other than the tariff permits. SCOTX’s ruling upholds the Legislature’s careful balancing of interests between the utility and the people it serves.