Corizon Unit’s Bankruptcy Alters a Key Element of Texas Two-Step

Prison health-care company Tehum Care Services Inc. won approval to exit bankruptcy with a personal injury settlement that partly shed the controversial legal strategy it intended to pursue two years ago.

The company’s reorganization plan allowed tort claimants, including prisoners, to opt out of a $75 million settlement and instead seek larger payouts in state court for poor medical service they say they received in prison.

That means hundreds of personal injury and wrongful death claimants were given the option to preserve their right to sue Tehum’s private equity-backed parent Corizon Health Inc. and affiliate YesCare Corp. for successor liability—a ...