No. 83-305
IN THE SUPREPilE COURT OF THE STATE OF MONTANA
1984
LELAND D. TRUSTY I
Plaintiff and Appellant,
-vs-
CONSOLIDATED FREIGHTWAYS, Employer,
and
CONSOLIDATED FREIGHTWAYS,
Defendant and Respondent.
APPEAL FROM: Workers' Compensation Court, The Honorable Timothy
Reardon, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Donald D. Sommerfeld argued; Towe, Ball, Enright
and Mackey, Billings, Montana
For Respondent :
Garlington, Lohn & Robinson; Robert E. Sheridan
argued, Missoula, Montana
Submitted: January 13, 1984
Decided: May 24, 1934
Filed:
Clerk
Mr. Justice John Conway Harrison delivered the Opinion of
the Court.
Appellant brings this appeal from a Workers'
Compensation Court's judgment determining that claimant was
only entitled to a 50% offset of Social Security benefits,
including auxiliary benefits against his Workers'
Compensation disability benefits and denying penalty and
attorney's fees. This action arose following this Court's
ruling in McClanathan v. Smith (1980), 186 Mont. 56, 606
P.2d 507, that Montana's former offset statute, Section
92-702.1 Revised Codes of Montana (1947), in effect between
July 1973 to July 1974, was constitutionally unenforceable.
Appellant then sought to recover for underpayment due to
excessive offsets .
The parties are in agreement to the following facts:
On May 21, 1974, Leland Trusty suffered a severe injury
while working within the scope and in the course of his
employment with Consolidated Freightways. He slipped while
putting chains on a truck, thereby injuring his back. This
rendered him totally permanently disabled. A report by Dr.
Teal confirms this determination.
Appellant began receiving Social Security disability
benefits for himself and two auxiliaries (his children). He
was also entitled to $131 per week in Workers' Compensation
benefits. Section 92-702.1 R.C.M. (1947), permitted a 100%
offset of total benefits received from Social Security
against the Workers' Compensation benefits. In January,
1975, the Social Security Administration made some minor
adjustments to correct errors it made in their computations.
In May, 1976, it terminated his benefits and later in
September of 1978, it reinstated Trusty's benefits excluding
auxiliaries. Following the McClanathan decision, Trusty
sought to recover the underpayment for the excessive offset
of benefits. On January 11, 1982, respondent began using a
50% offset rate based upon the EJlcClanathan decision. On
August 2, 1982, respondent paid Trusty $2,844.88 for
previous underpaid benefits. Trusty then brought this
action to recover further underpayments of benefits by
claiming no offset amount should have been applied against
his Workers1 Compensation benefits. The Workers'
Compensation Court ruled against Trusty. We reverse in part
the Workers1 Compensation Court.
Appellant raises four issues for appeal:
(1) Did the court err in permitting the respondent to
use a 50% offset rate against appellant's benefits from his
Social Security benefits?
(2) Did the court err in permitting respondent to
include appellant's auxiliaries in the offset formula?
(3) Is appellant entitled to a (20%) penalty under
Section 39-71-2907, MCA?
(4) Is appellant entitled to attorney's fees and costs
as provided in Section 39-71-611, MCA?
Appellant's first issue raises the question of what
rate of offset, if any, applies to appellant. He argues
that McClanathan voided the 100% offset and thereby left no
provision for offset in effect at the date of his accident.
The 50% offset statute that became effective July 1, 1974,
cannot be retroactively applied to appellant. We agree.
In July, 1973, Montana's former offset statute became
effective. Section 92-702.1 R.C.M., provided for a 100%
offset of Social Security benefits:
"In cases where it is determined that
periodic benefits granted by the Social
Security Act, 42 U.S.C. 301 (1935), are
payable because of the injury, the weekly
benefits payable under this section shall
be reduced by the amount of federal
periodic benefits for such week. "
Section 9 2 702.1, R.C.M. (1947)(as
enacted in 1973).
In July, 1974, the statute changed to permit an offset of
50% as provided in Section 39-71-702(2), MCA.
In McClanathan, supra, this Court struck down the
former statute by ruling it constitutionally unenforceable.
This 100% offset provision in the statute became void and
unenforceable as a result of the McClanathan decision.
The statutes in effect at the time of the injury set
the standards by which the benefits for the claimant are to
be computed. Iverson v. Argonaut Ins. Co. (Mont. 1982), 645
P.2d 1366, 39 St.Rep. 1040. Appellant suffered his injury
during the period the 100% offset statute was in effect.
McClanathan left no enforceable offset statute that could be
applied to persons injured during the period between July 1,
1973 (effective date of the 100% offset statute) and July 1,
1974 (effective date of the 50% offset statute). Therefore,
no offset against appellant's benefits applies.
Respondent argues that McClanathan established a 50%
offset for those claims arising during the 1973-74 period.
McClanathan, after finding the former offset statute
constitutionally unenforceable, applied a 50% offset into
the benefits.
Respondent futher contends that the 1974 50% amendment
applies to the appellant's benefits. The legislature did
not take away or impair vested rights which were aquired
under existing law. Respondent reasons that the legislature
merely reduced the offset from 100% to 50% and thereby
lessened the burden. Appellant cites Williams v.
Wellman-Power Gas Inc. ( 1977), 174 Mont. 387, 571 P. 2d 90.
In that case, this Court permitted the extension of the
statute of limitations. This Court held that an amendment
enacted after the date of an accident could be applied so as
to extend the statute of limitations for filing a claim on
the injury. This Court reasoned the legislative action in
that case merely acted prospectively to expand a right.
We distinguish Williams, supra, in that no impairment
of vested rights occurred in that case. In the instant
case, such impairment clearly would occur if the 50% offset
were applied to the benefits. To apply this 50% offset
statute would produce retroactive application of the law.
The statute in effect on the date of the injury determines
the benefits to be received; Iverson, supra. That sets the
contractual rights and debts of the parties. In the instant
case, once the 100% offset statute was found
constitutionally unenforceable, that portion of the statute
became void. This Court cannot come back and change the
statute to a 50% offset. Once we found the statute
constitutionally unenforceable, then no offset remains in
effect.
We hold that the benefits due to the appellant under
his Workers' Compensation award shall not be reduced by an
offset for Social Security benefits. The Workers'
Compensation Court's judgment permitting a 50% offset is
reversed. The 50% offset provision contained in Section
39-71-702, MCA, enacted after the accident cannot be
retroactively applied.
Appellant contends, in his second issue, that the
benefits for auxiliaries cannot be included in the formula
for offsets against the Workers' Compensation benefits. He
stresses that the federal statutes only permit the offset of
the primary benefits and not the a.uxiliary benefits. We
disagree.
42 U.S.C. Section 424(a) permits the state Workers'
Compensation plans to offset benefits received under the
Social Security Act. In McClanathan,we reasoned that the
offset of the disability benefit pertained only to primary
insurance benefits.
"This is recognized, . . .
in the
provisions of 42 U.S.C. Section 424a(d) .
. . which refers to 'benefits under
section 423 of this title.'
"The benefits to which appellant is [sic]
entitled under 42 U.S.C. Section 423 are
disability benefits, not cost-of-living
benefits, and are defined as 'equal to
his primary insurance amount for such
month ' calculated as though he had
attained age 62. It is evident that the
provisions of 42 U.S.C. Section 424a(d)
allowing the states to provide an offset
contemplate only the benefits recoverable
under 42 U.S.C. Section 423, relating to
the individual's primary insurance
benefits." 186 Mont. at 63, 64, 606 P.2d
at 511, 512.
We then went on to hold that the cost of living increase
could not be used as part of the offset to reduce the
benefits.
In NcClanathan, we found there was no equal protection
problem in the different application of offset involving a
disabled person without dependents. We never addressed the
issue if the federal statutory scheme permits the state
offset statutes to apply against auxiliary benefits to
dependents. We find it does include these benefits as part
of the offset formula.
In examining 42 U.S.C. Section 424(a), it appears
Congress intended to reduce the total benefits received by
the disabled person to 80% of his/her average current
income. This reduction in benefits creates an incentive for
the person to seek rehabilitation and attempt to overcome
the disability by developing new skills for employment.
Congress permitted the states to benefit from
provisions formerly limited to the Social Security
Administration. This permits a state workers' compensation
program to take the offset instead of the Social Security
Administration. American Bankers Ins. Co. v. Little (Fla.
1980), 393 So.2d 1063.
If the state program fails to reduce the benefits by
taking the offset, then the federal offset will prevail.
The federal provision permitting state offsets against
Social Security benefits, 42 U.S.C. 424(a)(d), appears in
the section permitting federal disability benefits that may
offset. The federal scheme clearly includes the maximum
federal benefits in the offset formula, which auxiliary
benefits are included, 20 C.F.R. Section 404.408 (1983).
The state Workers' Compensation benefits may offset
against any Social Security benefits received, "[wlhen
anyone is entitled to a benefit under title I1 of the
[Social Security] Act on the basis of the earnings record of
an individual entitled to disability insurance benefits
under section 223 of the Act." 20 C.F.R. Section 404.408(b)
(1983). These benefits referred to in title I 1 of this Act
include not only primary disability benefits but also
auxiliary benefits. The offset can occur only when the
benefits are related to a disabled worker. Therefore, any
benefits received by dependents of the disabled worker not
stemming from the fact he is disabled would not be included
in the offset formula.
We therefore hold that the Social Security auxiliary
benefits may be included in the state's offset formula.
This holding does not disturb the holding in McClanathan
that cost of living benefits may not be included in the
offset formula.
We now turn to the issue of whether the claimant is
entitled to the penalty provision as set forth in Section
39-71-2907, MCA. Appellant claims respondent unreasonably
delayed making payment to him, therefore the penalty
provision should apply. We disagree.
The Workers' Compensation Court did not find any
evidence that respondent unreasonably delayed or refused to
pay compensation. We do not find, in this case, that
respondent acted unreasonably. We therefore find the
Workers' Compensation Court properly denied the penalty
provisions.
Finally, we turn to the question of attorney's fees.
Section 39-71-610, MCA, provides for attorney fees when:
". . . [an] insurer denies liability for a claim for
compensation or terminates compensation benefits and the
claim is later adjudged compensable by the workers'
compensation judge or on appeal. .. " We find payment of
attorney's fees appropriate in this case.
We therefore reverse and remand this case to the
Workers' Compensation Court to enter a judgment consistent
with t h i s opinion.
We concur:
w.
Chief J u s t i c e
Justices
Mr. Justice L.C. Gulbrandson dissenting.
I respectfully dissent.
I would affirm the judgment of the Workers'
Compensation Court.