No. 89-159
IN THE SUPREME COURT OF THE STATE OF MONTANA
1990
KEITH INGRAHAM,
Claimant and Petitioner,
-VS-
CHAMPION INTERNATIONAL, a Self-insured
Plan I Employer,
Defendant and Respondent.
ORIGINAL PROCEEDING:
COUNSEL OF RECORD:
For Petitioner:
Thomas C. Bulman argued; Bulman Law Associates, Missoula,
Montana
For Respondent:
Bradley J. Luck argued; Garlington, Lohn & Robinson,
Missoula, Montana
James Scheier argued, Agency Legal Services, Helena,
Montana
For Amicus Curiae:
John Bothe; Bothe & Lauridsen, Columbia Falls, Montana
Submitted: March 11 1990
~ ~ ~ i d ~ d 23, 1990
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Justice John Conway Harrison delivered the Opinion of the Court.
Petitioner Keith Ingraham has filed his petition for
.declaratory judgment on original proceedings in this Court
requesting that parts of 5 5 39-71-741 (I), 39-71-741 (2), and 39-
71-741(3), MCA, be declared unconstitutional.
On April 3, 1989, this Court ordered respondents Champion
International, the Division of Workers' omp pens at ion, and the
Attorney General for the State of Montana to file written responses
to the petition. Champion International has filed herein its brief
and response, and the Attorney General has responded in brief in
his own behalf and on behalf of the Division of Workers'
Compensation. We have in addition received an amicus brief from
John H. Bothe, an attorney in Columbia Falls, Montana, appearing
as a friend of the court in support of the petition for declaratory
judgment .
Under the facts of this case, not disputed, Keith Ingraham is
an employee of Champion International. Champion is enrolled under
Plan I of the Montana Workers' Compensation Act and is self-
insured. Subsequent to December 18, 1987, Ingraham had reported
that he had suffered an industrial injury on such date in the
course and scope of his employment when a board struck him in the
chest. Champion accepted liability for the injury and benefits
were initiated. At the time briefs were filed herein, Ingraham
continued to receive temporary total disability benefits on a bi-
weekly basis. Champion claims that issues exist in the claim
concerning the relationship of some of Ingrahamlsphysical problems
and the alleged disability from the industrial injury. Ingraham
claims that though he is now receiving total temporary disability
benefits, that he will probably have a permanent partial disability
as defined in 5 39-71-116(14), MCA. The Attorney General concedes
the standing of Ingraham to challenge the constitutionality of the
statutes. Champion does not challenge his standing.
Once standing is established, we determine whether there are
necessary factors sufficient for this Court to accept original
jurisdiction. Speaking in the context of an original action for
declaratory judgment, this Court has stated:
Once standing to bring the action is
established, the question shifts to whether
the action meets the necessary factors for
this Court to accept original jurisdiction.
This Court has found that an assumption of
original jurisdiction is proper when: (1)
constitutional issues of major state wide
importance are involved; (2) the case involves
pure legal questions of statutory and
constitutional construction; and (3) urgency
and emergency factors exist making the normal
appeal process inadequate. (Citations
omitted.) Moreover, this Court clearly stated
the Court has original jurisdiction to accept
declaratory judgment proceedings "where the
issues have impact of major importance on a
statewide basis, or upon a major segment of
the state, and where the purpose of the
declaratory judgment proceedings will serve
the office of a writ provided by law. . .
II
Grossman v. State, Depart. of Natural
Resources (1984), 209 Mont. 427, 436, 682 P.2d
1319, 1324.
Butte-Silver Bow Local Govern. v. State (Mont. 1989) , 768 P.2d 327,
The issues raised by the petitioner Ingraham, and addressed
by the respondent and the Attorney General in their replies, as
well as by amicus, show without a doubt that the requirements for
the acceptance of original jurisdiction are fully present in this
case. We therefore accept original jurisdiction.
In 1987, the legislature embarked on a comprehensive revision
of the laws relating to Workers1 Compensation culminating in the
adoption of Chapter 464, Laws of Montana (1987), approved by the
Governor on April 4, 1987. Included in the legislation were
amendments to then-existing 5 39-71-741, MCA. As amended, the
subsections of 5 39-71-741, MCA, under attack in this case are as
follows:
Compromise settlements, lump-sum payments, and
lump-sum advance payments. (1) (a) Benefits
may be converted in whole to a lump sum:
(i) if a claimant and an insurer dispute
the initial compensability of an injury; and
(ii) if the claimant and insurer agree to
a settlement.
(b) The agreement is subject to division
approval. The division may disapprove an
agreement under this section only if there is
not a reasonable dispute over compensability.
(c) Upon approval, the agreement consti-
tutes a compromise and release settlement and
may not be reopened by the division or by any
court.
(d) The parties1 failure to reach an
agreement is not a dispute over which a
mediator or the workers' compensation court
has jurisdiction.
(2) (a) If an insurer has accepted
initial liability for an injury, permanent
total and permanent partial wage supplement
benefits may be converted in whole to a lump-
sum payment.
(b) The conversion may be made only upon
agreement between a claimant and an insurer.
(c) The agreement is subject to division
approval. The division may approve an
agreement if:
(i) thzre is a reasonable dispute
concerning the amount of the insurer's future
liability or benefits; or
(ii) the amount of the insurer's
projected liability is reasonably certain and
the settlement amount is not substantially
less than the present value of the insurer's
liability.
(d) The partiest failure to reach
agreement is not a dispute over which a
mediator or the workers' compensation court
has jurisdiction.
(e) Upon approval, the agreement
constitutes a compromise and release
settlement and may not be reopened by the
division or by any court.
(3) (a) Permanent partial wage supplement
benefits may be converted in part to a lump-
sum advance.
(b) The conversion may be made only upon
agreement between a claimant and an insurer.
(c) The agreement is subject to division
approval. The division may approve an
agreement if the parties demonstrate that the
claimant has financial need that:
(i) relates to the necessities of life or
relates to an accumulation of debt incurred
prior to injury; and
(ii) arises subsequent to the date of
injury or arises because of reduced income as
a result of the injury.
(d) The parties1 failure to reach an
agreement is not a dispute over which a
mediator or the workers1 compensation court
has jurisdiction.
Ingraham has mounted a number of issues respecting the
constitutionality of the foregoing subsections. Without reaching
the merits of the other issues, we choose two as dispositive in
this case. They are:
1. Do the subsections contain unconstitutional delegations
of legislative authority?
2. Do the subsections violate the administration of justice
clause of the Montana Constitution, Art. 11, 5 16 (1972)?
We must be cognizant, as Champion contends in brief, that in
analyzing constitutional challenges, this Court has certain
boundaries surrounding the power of the Court to determine
constitutionality. Among those is the principal of avoiding
constitutional questions whenever possible, State ex rel. Hammond
v. Hager (1972), 160 Mont. 391, 400, 503 P.2d 52, 57; and an act
of the legislature will not be declared invalid because it is
repugnant to some provision of the constitution, unless its
invalidity is made to appear beyond a reasonable doubt, Shea v.
North-Butte Mining Company (1919), 55 Mont. 522, 530, 179 P. 499,
501. The constitutionality of a legislative enactment is prima
facie presumed, and every intendment in its favor will be made
unless its unconstitutionality appears beyond a reasonable doubt.
T & W Chevrolet v. Darvial (1982), 196 Mont. 287, 292, 641 P.2d
1368, 1370.
Permanent partial disability benefits for injured workers are
provided in 5 39-71-703, MCA. The benefits available are
impairment awards and wage supplements. A worker entitled to an
impairment award may be paid bi-weekly or in a lump sum, at the
discretion of the worker. Lump sums paid for impairments are not
subject to the requirements of 5 39-71-741, MCA. A worker entitled
to permanent partial disability benefits in the form of wage
supplements is limited under the statute. Wage supplement benefits
terminate at the expiration of 500 weeks minus impairment award
weeks. Weekly compensation benefits may not exceed $149.50, at
least until June 30, 1991. It is only a wage supplement award
under the permanent partial disability statute which is subject to
the provisions of 5 39-71-741, MCA.
Ingraham claims that he is a likely candidate for permanent
partial wage supplement benefits. His request for a lump-sum
payment is therefore subject to subdivision (2) or (3) of 5 39-
71-741, MCA, as set out above.
Before the 1987 amendment to fj 39-71-741, MCA, an injured
worker entitled to any bi-weekly payments under the Workers1
Compensation laws could apply to the division (the predecessor of
the department) for a lump-sum payment, with the concurrence of the
insurer. But if the insurer did not agree, and a controversy arose
between the claimant and the insurer regarding the conversion of
bi-weekly payments into a lump sum, the controversy was considered
a dispute within the jurisdiction of the Workers1 Compensation
judge. Section 39-71-741, MCA (1985). Under that statute as now
amended, no application for a lump-sum conversion may be made to
the department unless the conversion is agreed upon by the claimant
and the insurer. If they fail to agree, there is no dispute over
which a mediator or the Workers1 Compensation Court has
jurisdiction. Thus, under the amended statute, in practical
effect, a worker in need of a lump-sum conversion, unless he has
the insurer's approval, cannot apply to the department, much less
to a court, to determine his need. The effect of the statute
places a tilt in favor of the insurer or the worker, either of whom
can withhold consent for any reason, or for no reason, to a request
for a lump-sum conversion.
The power of the legislature to fix the amounts, time and
manner of payment of workers1 compensation benefits is not doubted.
The legislature could, we think, deny completely any authority to
an insurer, a worker, or the department to apply for or to allow
lump-sum conversion of workers' benefits. Here the legislature
has chosen, however, to permit lump-sum conversions in some cases,
but on conditions different fromthat applying to permanent partial
impairment benefits. Had the legislature conferred the authority
solely upon the administrative agency, the legislature would have
been required to lay down the policy or reasons behind the statute
and to prescribe standards and guides for the grant of the power
to the agency. Douglas v. Judge (1977), 174 Mont. 32, 568 P.2d
530; Baucus v. Lake County (1960), 138 Mont. 69, 354 P.2d 1056.
But in this sense the legislature has gone beyond that and has
delegated an absolute discretion to the insurer (with whom a worker
agrees) as to whether a lump-sum conversion of permanent partial
wages settlement benefits will be converted. The legislature has
improperly and unconstitutionally delegated its authority to
private parties as to what terms, and under what circumstances, and
in what amounts, a lump-sum conversion can occur. The power of the
legislature to prescribe the amounts, time and manner of payment
of workers' compensation benefits, which as we said at the outset
of this paragraph is not doubted, has been delegated in subdivision
(2), 5 39-71-741, MCA, to others. This the legislature may not do.
111.
A further reason that subdivision (2), S 39-71-741, MCA, is
constitutionally invalid is that the subsection purports to strip
the courts of their judicial power over controversies regarding
proposed lump-sum conversions.
We are reminded by the respondents, and properly so, that the
Workers1 Compensation Court is a creature of statute, without
constitutional status, with its jurisdiction fixed by the
legislature. State ex rel. Pac. Emp. Ins. v. Wkrs' Comp. (1988),
230 Mont. 233, 234, 749 P.2d 522, 523. We are also reminded that
a worker's right to compensation benefits is not fundamental,
Cottrill v. Cottrill Sodding Service (1987), 299 Mont. 40, 42-43,
744 P.2d 895, 897, and that this Court has held that a person's
right of access to the courts is likewise not considered
fundamental for the purposes of constitutional review. Peterson
v. Gr. Falls Sch. Dist. No. 1 & A (Mont. 1989), 773 P.2d 316, 46
St.Rep. 880. The 1987 amendment goes far beyond fixing the limits
of jurisdiction in the Workers1 Compensation Court. By taking away
the jurisdiction of the Workers1 Compensation Court unless the
insurer agreed to the lump-sum settlement, the legislature did not
only deprive the Workers1 Compensation Court of jurisdiction, but
it deprived this Court of its appellate power under $ 5 39-71-2904
and -2905, MCA, the only appeal allowed a Worker's Compensation
worker or insurer under our laws. See, Billings Deaconess Hosp.,
Inc. v. Angel (1986), 219 Mont. 490, 712 P.2d 1323. Our district
courts have not been concerned with workers1 compensation benefits
since the establishment of the Workers1 Compensation Court in 1975.
Thus the effect of subdivision (2) of 5 39-71-741 is to deprive the
worker or the insurer of any right of access to the judicial
department of this state, if the insurer and the worker do not
agree.
Thus, the amended section abrogates the principle that the
judicial power cannot be taken away by legislative action. State
ex rel. Bennett v. Bonner (1950), 123 Mont. 414, 214 P.2d 747. The
legislation completely negates the state constitutional mandate
that llcourts justice shall be open to every person, and speedy
of
remedy be afforded to every injury of person, property, or
character . . .I1 Article 11, Section 16, Mont.Const. (1972).
IV.
The distinction between legislative and judicial powers brings
before us always the rule that the Supreme Court is not at liberty
to amend statutes, State, Dept. of Hwys. v. Public Employees Craft
Coun. (1974), 165 Mont. 349, 529 P.2d 785, and there is a
constitutional prohibition against the exercise of legislative
power by courts so that this Court may not alter statutes. State
ex rel. Grant v. Eaton (1943), 114 Mont. 199, 133 P.2d 588.
However, the legislature provided in 5 71 of Chapter 464, Laws
of Montana (1987), which includes the legislation we are
considering here, that if a part of the act is invalid, all valid
parts that are severable from the invalid part remain in effect,
and that if a part of the act is invalid in one or more of its
applications, the part remains in effect in all valid applications
that are severable from the invalid applications.
Where an enactment contains a severability clause, the
presumption is that the valid portions would have been enacted
without the invalid parts. State ex. re1 City of Missoula v.
Holmes (1935), 100 Mont. 256, 47 P.2d 624.
Applying the severability provisions of Chapter 464, Laws of
Montana (1987), the effect of our decision leaves subsection (2)
of 5 39-71-741, in effect as follows:
(2) (a) If an insurer has accepted initial
liability for an injury, permanent total and
12
permanent partial wage supplement benefits may
be converted in whole to a lump-sum payment.
(b) [Invalid.]
(c) The agreement is subject to department
approval. The department may approve an
agreement if:
(i) there is a reasonable dispute concerning
the amount of the insurer's future liability
or benefits; or
(ii) the amount of the insurer's projected
liability is reasonably certain and the
settlement amount is not substantially less
than the present value of the insurer's
liability.
(d) [Invalid.]
(e) Upon approval, the agreement constitutes
a compromise and release settlement and may
not be reopened by the department.
It will be noted that the words ''or by any court1' are not
included on the foregoing subdivision (e) of subsection 2 of 5 39-
71-741, MCA, as a valid remaining part of the enactment. The
deletion of those words is necessary because, again, the judicial
power cannot be taken away by legislative action.
After deletion of the invalid parts, as required by the
severability clause, a controversy between an insurer and a worker
as to the propriety of a lump-sum settlement upon which they cannot
agree, would constitute a dispute concerning benefits subject to
a petition to the Workers1 Compensation judge for a determination
after satisfying the dispute resolution requirements otherwise
provided in the Workers1 Compensation provisions. Section 39-71-
2905, MCA.
v.
Subsection (3) of 5 39-71-741, MCA, also concerns itself with
permanent partial wage supplement benefits. The principal
difference between it and subsection (2) of the same statute is
that subsection (2) relates to conversion of benefits in whole to
a lump-sum payment, whereas subsection (3) relates to a conversion
in part to a lump-sum advance.
The same reasons for invalidity that apply to subsection (2)
foregoing apply also to the provisions of subsection (3). There
again it is provided that the conversion may only be made upon the
agreement between a complainant and an insurer, and that the
parties1 failure to reach an agreement is not a dispute over which
a mediator or the Workerst Compensation Court has jurisdiction.
For the reasons stated foregoing under subsection (2), we find
those particular provisions of subsection (3) invalid, the effect
of which is to leave subsection (3) as follows:
(3) (a) Permanent partial wage supplement
benefits may be converted in part to a lump-
sum advance.
(b) [Invalid.]
(c) The agreement is subject to department
approval. The department may approve an
agreement if the parties demonstrate that the
claimant has financial need that:
(i) relates to the necessities of life or
relates to an accumulation of debt incurred
prior to injury; and
(ii) arises subsequent to the date of injury
or arises because of reduced income as a
result of the injury.
(d) [Invalid.]
While Ingraham is not directly concerned with the provisions
of subsection (1) of § 39-71-741, MCA, it is one of the three
subsections that have been considered both in the application and
by the respondents and the legal situation therein involved is much
the same. There is no reason not to declare in this judgment the
same rule with respect to subsection (1) as we said foregoing
respecting subsections (2) and (3). Therefore the effect of this
decision, insofar as it applies to subsection (1) would leave the
statute in effect as follows:
(1) (a) Benefits may be converted in whole to
a lump sum:
(i) if a claimant and an insurer dispute the
initial compensability of an injury; and
(ii) [invalid.]
(b) The agreement is subject to department
approval. The department may disapprove an
agreement under this section only if there is
not a reasonable dispute over compensability.
(c) Upon approval, the agreement constitutes
a compromise and release settlement and may
not be reopened by the department.
(d) [Invalid.]
VII.
In Phelps v. Hillhaven Corp. (1988), 231 Mont. 245, 752 P.2d
737, we held that an injured worker's right to Workers1
Compensation vests at the time of the injury. In Carmichael v.
Workers Compensation Court (Mont. 1988) , 763 P.2d 1122, 45 St.Rep.
2012, we held that the statute mandating binding mediation was
invalid where the injury occurred before the effective date of the
mediation statute, which was also contained in Chapter 464, Laws
of Montana (1987). Thus, our decision here does not affect cases
which occurred prior to the effective date of the amendment. The
department has recognized this. Since Carmichael, supra, it has
been the practice in pre-1987 claims to petition the Workers1
Compensation Court for lump-sum settlements in the same manner as
the earlier statutes provided. In those cases where the injury
occurred after 1987, the department has been applying provisions
of the amended statute insofar as it relates to lump-sum
settlements.
This opinion has no effect upon the remaining provisions of
5 39-71-741, MCA, as amended, which have not been discussed here,
and about which the parties have raised no issues before this Court
in these original proceedings.
Otherwise, the rulings and decisions made in this opinion and
the effect of those rulings as set forth in this opinion shall be
and constitute a declaratory judgment and this opinion shall be and
constitute such a judgment without further action or other
documents or instruments being filed.
We concur:
chief'Justice
Justice John C. Sheehy, specially concurring:
I have signed the foregoing Opinion, which I agree with in
total. I add these additional comments, because while they are not
necessarily judicial in tone or approach, they record some vital
reasons why the Opinion in this case is necessary.
In Montana, there are three ways to provide coverage for
medical expenses and wage loss when workers are injured in their
employment. The employer, if it is financially sound enough, may
be a self-insurer under Plan I; or an employer may provide Workers1
Compensation coverage by contracting with a private insurer
licensed to do business in the state, a method described as Plan
11; or a third way to obtain such coverage is for the employer to
apply for insurance to the State Insurance Fund, known as Plan 111.
A student of government will discern an immediate problem with
Plan 111: the State Insurance Fund was until 1990 operated by the
same agency that is charged with the administration of the Workerst
Compensation Act. The agency had two conflicting duties. It dealt
as an insurer, adverse to the injured worker when the State
Insurance Fund was concerned; it had to supervise the activities
of private insurers and self-insurers, presumably to protect the
injured worker, where the State Insurance Fund itself was not
concerned.
In the decade of the '80s, the adversarial attitude of the
State Insurance Fund to the worker permeated and carried over into
its administration of the rest of the Workers' Compensation ~ c t .
Moreover, the Fund was terribly mismanaged. The result was that
many injured workers, in order to obtain official recognition of
their rights, have had to hire lawyers to enforce their claims.
The insurers, in turn, hired lawyers so that even for the simplest
claims the whole business was awash in litigation.
Except for a few notable cases, self-insurers and private
insurers seemed to have met the flood of claims without serious
financial impairment. The State Insurance Fund, however, became
hopelessly mired in financial difficulties. The managers of the
State Insurance Fund and the agency found an easy target to blame:
it was the lawyers and the courts that were causing all the
trouble.
So it was that in 1987, state employees who were managers of
the Division of Workers' Compensation prodded the legislature into
a comprehensive revamping of the Workers' Compensation laws. S . B .
315 was introduced at the request of Governor Ted Schwinden. The
bill became law as Ch. 464, Laws of Montana (1987). Its purpose
as far as the courts were concerned is easily extracted from the
opening paragraphs which declare public policy, especially this
paragraph:
(3) Montana's Workers' Compensation and Occupational
Disease Insurance systems are intended to be primarily
self-administering. Claimants should be able to speedily
obtain benefits, and employers should be able to provide
coverage at reasonably constant rates. To meet these
objectives, the system must be designed to minimize
reliance upon lawyers and the courts to obtain benefits
and interpret liabilities.
Thus, in childlike simplicity did the legislature purport to remove
from the courts their time-honored duty to interpret liabilities.
Amazingly, S.B. 315 cruised easily through the two houses of
the legislature. In the Senate, whose 50 members were composed of
25 Democrats and 25 Republicans, that measure passed on third
reading by a vote of 44-6. In the House of Representatives, which
had 51 Republicans and 49 Democrats, it passed 70-29 with one
excused. This, in spite of the fact that the measure stripped the
worker of many important protections afforded to him under the old
Act. One of those strippings was the requirement that to obtain
a lump sum settlement, the injured worker must first have the
concurrence of the insurer. Without such concurrence, as the
foregoing opinion demonstrates, not only could the worker not get
into the courts, he or she was unable even to petition the
administration itself for relief, no matter how dire his or her
circumstances might be.
In the nearly three years since the adoption of the Act, the
effect of the lump sum settlements provision is readily
demonstrated. It might be said in favor of the self-insurers and
insurers, that they are somewhat more amenable to lump sum
settlements than is the counterpart State Insurance Fund. The
following table will demonstrate:
Lump-sum settlements approved May 15, 1989
through February 13, 1990
as reported in Montana Law Week
Plan I and I1 (self-insurers and insurers):
Total Pre-1987 % of Post-1987 % of
Settlements Claims Total Claims Total
Plan I11 (State Fund) :
Total Pre-1987 % of Post-1987 % of
Settlements Claims Total Claims Total
564 538 95% 26 5%
Some of the foregoing disparity with respect to settlements
of pre-1987 claims compared to post-1987 claims may be explained
by the fact that the post-1987 claims are relatively new and
perhaps not yet ready for lump sum consideration. The three years
since the Act was adopted, however, indicate that little progress
was made toward any lump sum settlements of post-1987 claims. The
cardinal reason undoubtedly is that before application for a lump
sum settlement can be made, both the insurer and the worker must
agree on the amount.
To some degree, the public policy declared in the 1987
legislation to eliminate lawyers and courts has been successful.
A number of good lawyers have dropped out of Workers' Compensation
practice because of the stumbling blocks placed in the way of
aiding injured workers through lawyers under the revamped Workers'
Compensation laws.
In the three years since the passage of the Act, the
management has continued to frighten employers by threats of
increased premiums. Hoping to cure a bad situation, the
legislature in 1989 separated the State Insurance Fund from the
administrative division of the Workers1 Compensation Act. The
State Insurance Fund has been converted into the "State
Compensation Mutual Insurance Fund." It is now a ltmutual
insurance
carrier. Section 39-71-2314, MCA. My information is that the
separated carrier, now that it is no longer subject to the wage
increase limits imposed on other state employees, immediately
granted large wage increases to its managers for now doing the same
adversarial job as before. From this management, I suspect, we
will find little improvement in the financial crisis, unless that
management can saddle employers insured under Plan I11 with a huge
bonded indebtedness, a plan to defer to the future the payment for
the sins of the past. Thus, in addition to a 25% cut in benefits
to injured workers, is the panacea devoutly wished for by
management.