IN THE SUPREME COURT OF THE STATE OF MONTANA
CYRUS ORVILLE WATSON,
Claimant and Appellant,
-vs-
KIRK SEEKINS,
Employer,
and
STATE COMPENSATION INSURANCE FUND,
Defendant and Respondent.
APPEAL FROM: The Workers' Compensation Court, The Honorable
Timothy Reardon, Judge presiding.
COIJNSEL OF RECORD:
For Appellant:
Robert W. Gabriel, Great Falls, Montana
For Respondent:
Mike McCarter; Hughes, Kellner, Sullivan & Alke,
Helena, Montana
Submitted on Briefs: Aug. 4 , 1988
Decided: October 17, 1988
t:
n e '<
C ~ : ,
,"
W '.
-
, * I
-.
=! p 0 L)
3
.I
-
-2
t
- z Clerk
C7
0 e
4
6
03 0
0= I
.
I
Mr. Chief Justice J. A. Turnage delivered the Opinion of the
Court.
Claimant appeals an order of the Workers' Compensation
Court offsetting his state workers' compensation disability
pay by 50 percent of his entire weekly federal disability
pay. The issues on appeal are (1) whether the lower court
erred in determining that the workers' compensation offset
statute, 5 39-71-702 (2), MCA (1981), was clear and unambigu-
ous on its face; (2) whether the lower court erred in denying
Watson attorney fees and costs; (3) whether Watson is enti-
tled to have the statutory penalty of 20 percent assessed
against defendant State Fund for unreasonable delay or fail-
ure to pay a claim; and (4) whether Watson can argue on
appeal that the lower court's construction of the offset
statute is unconstitutional when he did not advance that
argument at the trial level. We affirm.
On August 31, 1979, appellant, age fifty-six, suffered
an industrial accident while working for defendant Seekins
which rendered him totally permanently disabled. He then
began receiving state disability benefits from the Workers'
Compensation State Fund. He was receiving $198.00 per week
from the State Fund in 1985. On January 30, 1985, appellant
Watson turned sixty-two years old and shortly thereafter
applied for early retirement benefits from the Social Securi-
ty Administration. These monthly benefits, payable at
$261.00 per month were lower than full retirement benefits
available from Social Security had he chosen to postpone
retirement until age sixty-five.
After receiving early retirement benefits for about six
months, Watson changed his mind and applied for disability
benefits instead. The disability pay was a larger monthly
amount but was also subject to the state setoff statute,
.
S 39-71-702 (2), MCA (1981) Watson1s election of disability
pay was accepted by the Social Security Administration, and
he began receiving $372.00 per month, an increase of $111.00
per month over the early retirement pay. He also received a
lump sum payment of back benefits for disability dating back
to the date when he actually turned sixty-two. This back
payment effectively made his election to take disability
retroactive and eliminated his election to retire early.
In a letter dated August 4, 1986, the Workers1 Compen-
sation Division notified Watson that it would be applying the
setoff allowed by statute to his weekly disability benefits
received from the state government. The setoff (50 percent
of his weekly federal benefits) would be deducted from his
weekly state disability benefits in order to eliminate the
duplication of disability pay. The Division also claimed an
overpayment in the amount of $3,461.62, which it wished to
recover from Watson.
The result was that Watson suffered a reduction of
$42.81 per week from his state disability pay and actually
received less monthly money overall due to the setoff than he
would have had he stuck with his original election of early
retirement.
The Division's computations were as follows:
Step 1
monthly
$372.00 federal
disability
which
resolves
itself to
weekly
$85.62 federal
disability
,
Step 2
weekly
E 85.62 federal reduced by 50% = $42.81 setoff
disability rate
weekly weekly
$198.00 state - $42.81 setoff = $155.19 workers'
workers ' compensa-
compensation tion
Watson challenged those computations. He argued that
the entire amount of $372.00 disability pay should not be
subject to setoff. Rather, he argued, only the $111.00
difference between retirement pay and disability pay should
be subject to setoff. Watson argued that he was entitled to
retirement pay of $261.00 in his own right which was not
subject to setoff and, therefore, only the increased amount
of $111.00 could be used in the setoff computations. Under
Watson's theory, he would suffer a weekly reduction in state
money of only $12.78.
Defendant State Fund argued that the election was a
choice entitling Watson to one benefit or the other, but not
both. If Watson chose to take disability pay, that pay (the
1 $372 per month x 12 = $4,464 per year
$4,464 5 365 days = $12.230 per day
$12.230 x 7 = $85.610952 per week
Rounded up in favor of Watson -- $85.62 per week
entire amount) was subject to the state statute allowing
setoff. State Fund found the statute in question to be plain
and unambiguous, stating that where disability pay is given
by the federal government it is subject to setoff by the
state government.
The Workers' Compensation Court adopted the findings of
fact and conclusions of law as determined by the Hearing
Examiner and entered its judgment and order on December 21,
1987. The court determined the statute to be clear and
unambiguous on its face, affecting the entire amount of
federal benefits. Its order provided that the defendant was
entitled to an offset in the amount of $42.81 per week based
on the entire weekly disability benefits paid to Watson under
the Social Security Act. It further found that such an
offset would continue for as long as Watson received federa.1
disability pay and that he was neither entitled to the re-
quested attorney fees and costs, nor a 20 percent penalty
against the Division for unreasonable refusal or delay in
payment. Watson's January 7, 1988, motion for a new trial
was denied, and this appeal followed.
Watson's primary issue on appeal is that of statutory
construction and legislative intent. Appellant argues that
the court misinterpreted the statute; that the statute is
ambiguous in that it is susceptible of two interpretations;
that where a genuine doubt exists, the ambiguity should be
resolved in favor of the injured claimant; and finally that
accepting the court's interpretation of the statute would be
an unconstitutional violation of the Supremacy Clause, in
that it would nullify the effect of the federal disability
provisions of the Social Security Act for persons such as
Watson.
This Court finds the statute to be clear and unambigu-
ous, affirming the Workers' Compensation Court judgment.
Affirmation of the lower court on the merits of the first
issue renders the remaining issues of the attorney fees,
costs and penalty moot.
I. INTERPRETATION OF THE STATUTE
The offset statute is § 39-71-702(2), MCA (1981). This
statute was amended in 1987 and its successor is
S 39-71-702(4). However, it is the statute in effect at the
time of the injury that sets the standard by which the bene-
fits to the claimant are to be computed. Trusty v. Consoli-
dated Freightways (Mont. 19841, 681 P.2d 1085, 41 St.Rep.
973. That statute reads in pertinent part as follows:
In cases where it is determined that
periodic disability benefits granted by
the Social Security Act are payable
because of the injury, the weekly bene-
fits payable under this section [under
the state Workers' Compensation Act] are
reduced, but not below zero, by an
amount equal, as nearly as practical, to
one-half the federal periodic benefits
for such week, which amount is to be
calculated from the date of the disabil-
ity social security entitlement.
Watson argues that the language, payable because - -
of the
injury, refers only to the increased amount of $111.00 per
month, which is the difference between the early retirement
amount and the disability amount. It is his statutory con-
struction that this is the only "fair" way to read the stat-
ute and that any other interpretation is perverse. We
disagree.
All statutory construction by courts is an attempt to
search out the intent legislature. Johnson v. Marias River
Electrical Cooperative, Inc. (Mont. 1984), 687 P.2d 668, 41
St.Rep. 1528. This Court's role, then is to let the legisla-
tive intent control whenever possible. Darby Spar, Ltd. v.
Dept. of Revenue (Mont. 1985), 705 P.2d 111, 42 St.Rep. 1262.
Watson argues his interpretation is the only fair one
because it is the one construed consistently with the legis-
lative intent. According to Watson, the legislative intent
is to benefit disabled workers more than merely retired
workers. Watson cites Freeman v. Harris (5th Cir. 19801, 625
F.2d 1303, and Lindquist v. Brown (8th Cir. 1987), 813 F.2d
884, as authority for construing a statute in favor of the
claimant by using legislative intent. However, these cases
are of little help in determining the legislative intent for
the Montana statute in question.
The Freeman case is not dispositive on this issue and
is only similar to the case at bar in that the Freeman court
interpreted the legislative intent espoused in two federal
offset statutes. In Freeman the claimant received benefit-s
from three sources: federal Social Security, state workers'
compensation and federal Black Lung benefits. Because both
the workers' compensation and Social Security were offset
against the Black Lung award, the claimant ultimately re-
ceived less under the three programs than he would have under
only two programs not so heavily offset.
However, the distinction here is that the federal black
lung statute required the claimant to simultaneously pursue
state workers' compensation funds which triggered the double
offset. The court found the congressional intent expressed
in the Social Security Act was that the states would be the
primary providers of disability benefits to workers and that
the federal government would only assist where state programs
were inadequate. The result under double offset was to
discourage injured miners from seeking state workers' compen-
sation benefits. That result contravened the congressional
intent. Additionally, the court found the corresponding
legislative intent behind the Black Lung statute was to
replace income for injured workers. These two legislative
goals could not be met simultaneously in the Freeman case.
Thus, the court resolved the tension by letting both offsets
stand as authorized by statute but not so as to exceed 100
percent of the state workers ' compensation benefits payable
to claimant.
These facts do not help us resolve the question of
legislative intent for our statute. The required double
offset in Freeman is not analogous to the elective single
offset under these facts. Moreover, our statute has already
considered the ultimate issue decided in Freeman, that the
offset cannot be 100 percent of the benefit, or in the lan-
guage of the Montana statute, "cannot reduce the benefit
below zero."
Likewise, Lindquist is not helpful in the instant case
merely because the Lindquist court declared the legislative
intent behind the Social Security retirement pay schedule was
to encoura.ge people to continue working and postpone
retirement.
Claimant also asserts Subsequent Injuries Fund v.
Industrial Accident Commission ( 1 9 6 3 ) , 217 Cal.App.2d 322, 31
Cal.Rep. 508, as authority for "pro rating" the federal
Social Security benefits. By statute, California maintained
a fund to compensate industrial injuries which were aggrava-
tions of a preexisting injury. The legislative intent was to
encourage injured workers tc rehabilitate and re-enter the
work force. The plaintiff in that case went blind as a
result of an industrial accident. It was determined that the
resultant blindness was caused 68.25 percent by the preexist-
ing injury. Thus, the Fund was allowed to reduce its pay-
ments by 68.25 percent of the Social Security benefits
awarded.
However, that California case on quite different facts
is not persuasive authority to pro rate Watson's federal
benefits and find that 70 percent of his pay is due to re-
tirement and 30 percent is due to injury. We are not in-
clined to read that into the Montana statute on the basis of
a California "pro rata" case interpreting a statute with a
totally different legislative intent.
The legislative intent behind the workers1 compensation
statutes is to replace income to injured workers. The pur-
pose behind the state offset statute is to prevent "over
replacement" or duplication of disability pay. Offset has
never applied to federal retirement pay.
Everyone is in agreement that under the Montana statute
where federal disability benefits are awarded, state setoff
occurs. The dispute is how much disability pay should be
used to compute setoff: all of it or only part of it. The
statute simply does not allow for Watson's formula to exclude
a part of the entire award. The words are not there. The
role of the Court is not to insert what has been omitted by
the statute. Chennaults v. Sager (1980), 187 Mont. 455, 610
P.2d 173. Had the legislature intended an exemption, exclu-
sion, or any other formula to apply to reduce the amount
subject to setoff, it is reasonable to assume that it would
have expressed it in the statute.
It should be noted here that Watson did not submit
evidence that the legislature intended only the difference
between the two amounts be considered as disability benefits.
Nor did Watson show that the statute had ever been inter-
preted that way in the past. Absent such evidence, the
Workers' Compensation Court properly was reluctant to change
the plain reading of the language in order to effect claim-
ant's wishes. Additionally, this Court finds no such evi-
dence in the legislative history of the statute.
Therefore, we conclude that the language in the stat-
ute, "payable because of the injury," is not an authorization
for the exemption of a part of Watson's federal disability
from the state setoff. Thus, the statute is not susceptible
of two meanings, and no ambiguity exists.
Lastly, we find that the lower court's interpretation
of the statute is not an unconstitutional violation of the
Supremacy Clause.
Watson is allowed to advance that argument on appeal
when he did not specifically raise it at trial because it is
not meant to be an independent constitutional challenge to
the statute. Rather, it is an attack on how the lower court
construed the statute, which is an inherent theory to his
primary argument: that the court erred in interpreting the
statute. American Equitable Assurance Co. v. Newman (1957),
132 Mont. 63, 313 P.2d 1023, 1027.
However, Watson's theory is without merit. The state
statute does not prohibit Watson from electing to take feder-
al disability pay nor does it preclude him from receiving
that pay to which he is entitled under the federal act.
Thus, it does not nullify the federal statute. Therefore,
the Montana statute as interpreted by the lower court is
constitutional.
It is, however, a likely disincentive for injured
workers between ages sixty-two and sixty-five to elect to
take the federal funds subject to setoff. As in Watson's
case, his choice did not benefit him in the end.
We have considered the statute in question, along with
the arguments and authorities advanced by counsel. We con-
clude that the statute is clear and unambiguous in its plain
language. Whether the plain interpretation of this statute
is unfair under the particular facts of the Watson case is,
regrettably, not for the judiciary.
Judgment affirmed.
We concur:
Mr. Justice John C. Sheehy, specially concurring:
I concur with the result of this case, but I cannot
concur
. .
. . . in the
deviation in application from the basic principles upon which
the setoff is allowed under federal and state law.
The only reason that the total disability payments
received by Watson under the workers' compensation law of
this state maybe offset to any extent by federal payments to
him for his total disability is because of federal law.
Since Watson has not attained age 65, and is entitled to
workers' compensation payments under state law, as well as
disability payments under federal law, the combined benefits
he receives under both sets of laws cannot exceed 80 percent
of his "average current earnings" at the outset of his
disability. 42 U.S.C. S 424(a). The federal law further
provides that the federal benefits under social security for
disability will not be reduced if the state workers"
compensation law under which he also receives benefits
provides for the reduction of the state benefits to meet the
80 percent maximum. 42 U.S.C. S 424 (a)(d).
How this system works was explained in Herzog v.
Department of Labor and Industry (Wash. App. 1985) , 696 P. 2d
1247, where the court said:
Some recipients of workers compensation disability
payments are also entitled to Social Security
payments. When this is so, federal law prohibits
the combined benefits from exceeding 80 percent of
the recipient's average current earnings at the
time the disability was suffered. Combined
benefits exceeding this level must be reduced.
Federal law permits a state to take full advantage
of this by permitting the reduction to be taken
entirely from the state benefits.. ..
Montana has taken advantage of the federal provision by
enacting S 39-71-702(4), MCA, which provides for an offset of
the weekly compensation benefits by an amount equal to
one-half of the federal periodic benefits for such week.
If we assume that the weekly wages that Watson was
receiving at the time of his injury in 1979 was $297 (his
weekly workers' compensation benefit was $198, which should
be two-thirds of his wages, 5 39-71-702 (1979)), then the
following computation would be correct to apply in this case:
I. Determination of the Reduction:
Total monthly workers' compensation payments $ 848.57
Add monthly Social Security disability
benefits 372.00
Total $ 1,220.57
Subtract 80% wages at time of injury
(1272.85 x 80%)
Amount of Reduction
11. Application of Reduction:
Total workers' compensation entitlement $ 848.57
Subtract reduction -202.29
Total monthly workers' compensation payment $ 646.28
111. Payments (monthly) after Reduction:
Social Security disability payment
Workers' compensation disability payment
Total permissible payment
IV. Translate to weekly payments:
Workers' compensation disability payments
($646.28~7) = $ 150.79
30
Social Security disability payments
($372~7) = 86.80
30
TOTAL Weekly Payments
Unfortunately, the above would yield less than money to
the claimant than what he is already receiving (due to the
difference between annual and monthly computations), but I
submit that the foregoing is a proper application of the
benefits to which he entitled taking into account federal and
state law.
I would affirm the judgment.
O~C*,Q& Justice