No. 79-10
I N THE SUPREME COURT OF THE STATE OF M N A A
O T N
- 1980
CLARENCE WILLOUGHBY,
C l a i m a n t and R e s p o n d e n t ,
VS .
ARTHUR G. McKEE & C O . ,
Employer,
and
GENERAL ACCIDENT FIRE & LIFE,
D e f e n d a n t and A p p e l l a n t .
Appeal from: Workers' Compensation C o u r t
C o u n s e l o f Record:
For Appellant:
H e n n i n g s e n , P u r c e l l & G e n z b e r g e r , B u t t e , Montana
For Respondent:
B u r g e s s , J o y c e a n d Whelan, B u t t e , Montana
S u b m i t t e d o n b r i e f s : F e b r u a r y 2 7 , 1980
Decided: APR 1 -
7
F i l e d : li-" !. ,
1 . '
,.
Mr. Justice John Conway Harrison delivered the Opinion of
the Court.
This is an appeal from an order of the Workers' Compen-
sation Court granting claimant, Clarence Willoughby, a
partial lump sum settlement of benefits due.
Claimant is a fifty-eight year old man whose work
history consists of holding jobs in heavy labor. He has
been employed as a miner, concrete finisher, and bricklayer.
In November 1974 claimant was employed as a bricklayer for
the Arthur G. McKee Company. During that month he suffered
an industrial accident injury while performing construction
work for his employer at the Anaconda smelter in Anaconda,
Montana. He fell off a scaffold which was located approxi-
mately six feet above a concrete floor and sustained injuries
to his neck, left arm and left thumb. He has not worked
since the accident. Claimant underwent a spinal fusion and
surgery to his left elbow and thumb.
At the time of the injury, claimant was earning approxi-
mately $9.50 per hour or $380 weekly. He had no education
or work experience in any other type of employment, and his
formal education consisted of completing grades one through
eight.
A petition for compensation was filed with the Workers'
Compensation Court to determine what benefits, if any, to
which claimant was entitled. A hearings examiner, Robert B.
Sherman, was appointed by the court, and a hearing was held
with respect to the petition on April 19, 1978. After the
hearing, the examiner entered findings of fact and conclu-
sions of law. The examiner found that claimant was entitled
to compensation, as a totally and permanently disabled
person under the Workers' Compensation Act, and that claimant
was entitled to compensation for all medical expenses in-
curred with respect to injuries which were causally related
to the accident in November. On September 21, 1978, the
Workers' Compensation Court adopted the examiner's findings
of fact and conclusions of law.
During the settlement of the workers' compensation
claim and following the Workers' Compensation Court's order,
McKee Company's insurance carrier, General Accident Fire and
Life, made payments to claimant. Claimant also received
benefits under the Social Security Disability Act. Pursuant
to section 39-71-702, MCA, the carrier reduced claimant's
workers' compensation benefits by one-half of the benefits
received under the Social Security Act. On August 8, 1978,
it was discovered that General Accident had overpaid claimant
by approximately $8,180.38. The Workers' Compensation Court
ordered claimant to make repayment of that amount at a
weekly rate of $25.
Including his liability for repayment, claimant presently
receives individual weekly benefits of $96.29 from Social
Security and $23.26 from Workers' Compensation, or $518.85
in total individual monthly benefits. This compares to his
monthly salary of approximately $1,650 while he was working
as a bricklayer. Claimant also receives two auxiliary
benefits for his minor children, who live in Seattle with
claimant's first wife. Claimant was divorced and has since
remarried.
On May 13, 1979, claimant petitioned the Workers'
Compensation Court for a partial lump sum settlement.
Attached to the petition was a list of expenses to which the
settlement, if granted, was to be applied. The expenses
were the following:
House Trailer
Refrigerator and TV
Lot Rental
Phone
Power
Water
Hospital
Bernie's Pharmacy
Dr. Rotar
Durritts
Bill Willoughby--personal loan--brother
Walnut St. Grocery
Taxes on House Trailer
Trailer Insurance
A-1 Ambulance
Car--monthly payments
New Roof on Trailer
Monthly Reserve
TOTAL
A hearing was held on August 30, 1979, with respect to
the petition. The only evidence presented at the hearing
was claimant's testimony. On September 10, 1979, the Workers'
Compensation Court ordered that the petition be granted in
the amount requested. From this order, appellant in this
action, General Accident Fire and Life, appeals.
A single issue is presented for review: Did the Workers'
Compensation Court abuse its discretion in granting claimant's
petition for a partial lump sum settlement?
Statutory authority for the conversion of regular
periodic benefits payable under the Workers' Compensation
Act to a total or partial lump sum settlement is found in
section 39-71-741, MCA. In 1979, section 39-71-741, MCA,
was amended to give the Workers' Compensation Court the
authority to settle disputes concerning lump sum settlements
where an insurer and a claimant disagreed. Prior to 1979
the sole discretion for determining the amount and advisa-
bility of lump sum settlements was vested in either the
Workers' Compensation Division or the Industrial Accident
Board.
The general rule concerning the award or denial of lump
sum settlements under the Workers' Compensation Act is well
settled in this state. Lump sum settlements are only granted
in exceptional circumstances. Where the best interests of
the claimant are generally served by paying compensation in
regular periodic installments, the conversion of benefits to
a lump sum settlement has ecognized as the exception
rather than the rule. Comp. Ins. Fund) (1979),
Mont. , 593 P.2d 739, 741, 36 St.Rep. 799, 801;
Kuehn v. Nat. Farmers Union Co. (1974), 164 Mont. 303, 307,
521 P.2d 921, 923; Legowik v. Montgomery Ward (1971), 157
Mont. 436, 440, 486 P.2d 867, 869; Kent v. Sievert (1971),
158 Mont. 79, 81, 489 P.2d 104, 105.
"The fundamental basis of workmen's compensation
laws is that there is a large element of public
interest in accidents occurring from modern in-
dustrial conditions, and that the economic loss
caused by such accidents shall not necessarily
rest upon the public but that the industry in
which the accident occurred shall pay, in the
first instance, for the accident. [Citation omit-
ted.] Generally, the best interests of the dis-
abled workman or his dependents will be best
served by paying the compensation in regular in-
stallments as wages are paid. Such payments
supply in a measure the loss of the regular pay-
check. [Citation omitted. ]
"'Commutation being a departure from the normal
method of payment is to be allowed only when it
clearly appears that the condition of the bene-
ficiaries warrants such a departure, but there
should be no hesitancy in permitting such depar-
ture where the best interests of the parties
demand it. [Citation omitted.]'" Laukaitis v.
Sisters of Charity (1959), 135 Mont. 469, 472-
73, 342 P.2d 752, 755.
Lump sum settlements are only granted where there is
"outstanding indebtedness," "pressing need," or where "the
best interests of the claimant, his family and the general
public will be served."
"The c r i t e r i a d e t e r m i n a t i v e of t h e a d v i s a b i l i t y
of c o n v e r s i o n t o a t o t a l o r p a r t i a l lump sum
award have g e n e r a l l y been h e l d t o be I * * * t h e
b e s t i n t e r e s t s of t h e c l a i m a n t , h i s f a m i l y and
f o r t h e b e s t i n t e r e s t s o f t h e p u b l i c * * *.'
K u s t u d i a v . I n d . A c c . Brd., 127 Mont. 115, 123,
258 P.2d 965, 969. See a l s o Legowik v . Mont-
gomery Ward, 157 Mont. 436, 486 P.2d 867. The
e x i s t e n c e of a ' p r e s s i n g n e e d ' and/or ' o u t s t a n d -
i n g i n d e b t e d n e s s ' h a s l i k e w i s e been h e l d t o be
r e l e v a n t c r i t e r i o n , Kent v. S i e v e r t , s u p r a . "
Kuehn v . N a t . Farmers Union Co., s u p r a , 1 6 4
Mont. a t 307, 521 P.2d a t 924.
I n t h i s c a s e , w e a r e f a c e d w i t h r e v i e w i n g whether t h e
Workers' Compensation C o u r t s h o u l d have awarded a lump sum
settlement t o claimant. Where we have c o n s i d e r e d t h i s i s s u e
i n o t h e r c a s e s , we have s t a t e d t h a t t h e d e c i s i o n t o award o r
deny a lump sum s e t t l e m e n t w i l l n o t be i n t e r f e r e d w i t h on
a p p e a l u n l e s s t h e r e h a s been an a b u s e of d i s c r e t i o n . Utick
v . S t a t e Comp. I n s . Fund, s u p r a ; S u l l i v a n v . Anselmo Mining
Corp. ( 1 9 2 8 ) , 82 Mont. 543, 557-58, 268 P. 495, 501; Landeen
v . Toole County R e f i n i n g Co. ( 1 9 2 9 ) , 85 Mont. 4 1 , 47, 277 P .
515, 617. The f i n d i n g s of t h e lower t r i b u n a l o r board w i l l
be presumed c o r r e c t and a f f i r m e d i f s u p p o r t e d by s u b s t a n t i a l
evidence. Newman v . Kamp ( 1 9 6 2 ) , 1 4 0 Mont. 487, 490, 374
P.2d 100, 1 0 2 . The d e c i s i o n w i l l be r e v e r s e d , however, i f
t h e evidence c l e a r l y preponderates a g a i n s t it. Legowik,
supra.
Here, t h e Workers' Compensation C o u r t based i t s d e c i -
s i o n t o award c l a i m a n t a p a r t i a l lump sum s e t t l e m e n t on t h e
b a s i s of e v i d e n c e adduced a t a h e a r i n g . Claimant, t h e only
w i t n e s s t e s t i f y i n g , p r e s e n t e d e v i d e n c e of s e v e r a l o u t s t a n d -
ing debts. He t e s t i f i e d , f o r example, t h a t he owed a n
o u t s t a n d i n g b a l a n c e on a TV and r e f r i g e r a t o r he had p u r c h a s e d
and t h a t he was " b e h i n d " on h i s g r o c e r y , phone, w a t e r and
power b i l l s . A l e t t e r from t h e Montana Power Company was
i n t r o d u c e d w i t h r e s p e c t t o h i s power b i l l . It stated that
services would be terminated if claimant's account was not
paid in full. Claimant also presented evidence that pay-
ments remained on his trailer house, that additional sums
were owed for taxes and insurances, and that expenses had
been incurred for the rental of his trailer house lot.
In addition to these debts, claimant testified that he
needed money for future expenses. His trailer house roof
needed repair, he needed a new washing machine, and he
wanted to buy an economy car that was fuel-efficient. He
also stated, though it was not specifically mentioned on his
list of debts, that he expected to incur a $1,500 dental
bill for a set of false teeth for his wife, who did not work
because she had heart trouble.
Appellant contends upon this appeal that the court
abused its discretion in awarding claimant compensation to
pay these ordinary debts and anticipated future expenses.
Appellant objects particularly to the court awarding sums
for the purchase of a fuel-efficient economy car and the
payment of dental bills for his wife's false teeth. Appel-
lant submits, with reference to these future expenses, that
there was no demonstration of "outstanding indebtedness" or
"pressing need. "
In considering appellant's argument, we note, first of
all, that several courts have allowed a claimant to pay his
past debts with proceeds from a total or partial lump sum
settlement. Employers Mut. Liability Ins. Co. v. Hood
(1976), 137 Ga.App. 555, 224 S.E.2d 460; Texas ~mployers
Ins. Ass'n v. Trapp (Tex.Civ.App. 1953)r 258 S.W.2d 112;
U.S. Fid. & Guar. Ins. Co. v. Bradley (1977), 142 Ga.App.
572, 236 S.E.2d 543. Courts have also allowed claimants to
use lump sum settlement proceeds to pay installments on
automobiles or to pay bills for future medical expenses.
See, Bethlehem Steel Co. v. Taylor (1952), 199 Md. 648, 87
A.2d 844; Simpson Lumber Co., Inc. v. Brown (Ky. 1975), 520
Other jurisdictions have denied claimants lump sum
settlements to pay past debts. See, Johnson v. General
Motors Corp. (1967), 199 Kan. 720, 433 P.2d 585; Gill v.
Ozark Forest Prods., Inc. (1974), 255 Ark. 951, 504 S.W.2d
357; Woods v. Sumter Stress-Crete Inc. (1976), 266 S.C. 245,
222 S.E.2d 760. At least one authority has criticized the
practice on the following basis:
". .
. If a partially or totally disabled worker
gives up these reliable periodic payments in ex-
change for a large sum of cash immediately in
hand, experience has shown that in many cases
the lump sum is soon dissipated and the workman
is right back where he would have been if work-
men's compensation had never existed. One rea-
son for the persistence of this problem is that
practically everyone associated with the system
has an incentive--at least a highly-visible
short-term incentive--to resort to lump-summing
...
"The only solution lies in conscientious admin-
istration, with unrelenting insistence that lump-
summing be restricted to those exceptional cases
in which it can be demonstrated that the purpose
of the Act will be best served by a lump-sum
--
award." Larson, Workmen's compensation -Law,
882.71 at 15-572, 573.
This Court has had at least two occasions to review
cases where lump sum settlements and past debts were con-
cerned. In Kuehn, 164 Mont. at 307-08, 521 P.2d at 924, we
approved of a lump sum settlement where proceeds would be
applied to remaining installments on a home, a pickup truck
and other miscellaneous bills, including attorney fees. In
Kustudia, 127 Mont. at 123-24, 258 P.2d at 969, we affirmed
the granting of a lump sum settlement where claimant intended
t o u s e t h e p r o c e e d s t o pay p a s t d e b t s and a t t o r n e y f e e s and
a p p l y t h e remaining b a l a n c e toward f u t u r e e x p e n s e s he would
i n c u r i n h k s and h i s f a m i l y ' s move t o a more d e s i r a b l e l o c a -
tion. The move was n e c e s s i t a t e d b e c a u s e of h i s m e n t a l and
p h y s i c a l h e a l t h problems.
A p a r t from t h i s p r e c e d e n t , however, we have s t a t e d
p r e v i o u s l y , and r e a f f i r m h e r e , t h a t e a c h c a s e f o r a lump sum
payment s t a n d s o r f a l l s on i t s own merits. U t i c k , 593 P.2d
a t 7 4 1 , 36 St.Rep. a t 802. With r e g a r d t o t h e p a r t i c u l a r
f a c t s and c i r c u m s t a n c e s o f t h i s c a s e , w e f i n d t h a t t h e r e was
no a b u s e of d i s c r e t i o n . The Workers' Compensation C o u r t
p r o p e r l y awarded c l a i m a n t a lump sum s e t t l e m e n t . Prior t o
t h e award, t h e c l a i m a n t d e m o n s t r a t e d b o t h " p r e s s i n g need"
and " o u t s t a n d i n g i n d e b t e d n e s s . " The award was made i n t h e
b e s t i n t e r e s t s of t h e c l a i m a n t , h i s f a m i l y and t h e g e n e r a l
public. The compensation s o u g h t h e r e was n o t , a s i n some
cases, f o r pursuing a choice i n a d i f f e r e n t l i f e s t y l e . See
L a u k a i t i s , s u p r a ; Malmedal v . Ind. Acc. Bd. ( 1 9 5 9 ) , 135
Mont. 554, 342 P.2d 745. R a t h e r , it was s o u g h t t o s a t i s f y
d e b t s which had been o r would be i n c u r r e d f o r b a s i c n e c e s -
sities. A t s t a k e was c l a i m a n t ' s need f o r s h e l t e r , g r o c e r i e s ,
w a t e r , power, m e d i c a l t r e a t m e n t , and t r a n s p o r t a t i o n . None
o f t h e s e t h i n g s may be c a l l e d l u x u r i e s . Claimant presented
v i r t u a l l y u n c o n t r o v e r t e d e v i d e n c e of h i s need a t t h e h e a r -
i n g , and we f i n d t h a t t h e c o u r t a c t e d w i t h p r o p e r d i s c r e t i o n .
A s a n a p p e l l a t e c o u r t of r e v i e w , we have c o n s i s t e n t l y
r e c o g n i z e d i n c a s e s of t h i s k i n d t h a t a t r i b u n a l o r b o a r d
w i l l be a f f o r d e d wide d i s c r e t i o n i n d e t e r m i n i n g whether a
lump sum s e t t l e m e n t s h o u l d o r s h o u l d n o t be g r a n t e d . Kuehn,
164 Mont. a t 307, 521 P.2d a t 923; Kent, 158 Mont. a t 81,
489 P.2d at 105. Where the Industrial Accident Board
awarded a lump sum settlement in Legowik, 157 Mont. at 440,
486 P.2d at 869, we stated:
"'The determination of this question requires
the exercise of sound discretion. The board is
more favorably situated than the court to famil-
iarize itself with the circumstances surrounding
the applicant, to consider his needs, and the
results which probably will follow action grant-
ing or denying the application; the power "must
be exercised in conformity with the law and so
as to best promote the ends of justice."'"
In this instance, the Workers' Compensation Court was
in the best position to judge the needs of the claimant.
There was no abuse of discretion. Where the solution to the
lump-summing problem lies in conscientious administration,
we find that the court acted properly.
Accordingly, we affirm the judgment of the court.
We concur:
s Chief Justice
M v 6?dd&&Q