NO. 93-036
IN THE SUPREME COURT OF THE STATE OF MONTANA
1993
LESLIE LEE LOVELL,
Petitioner and Appellant,
-vs-
STATE COMPENSATION MUTUAL
INSURANCE FUND,
Defendant, Insurer
and Respondent.
APPEAL FROM: Montana Workers' Compensation Court,
The Honorable Timothy Reardon, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Terry Spear; Matovich, Addy & Keller, Billings
Montana
For Respondent:
Laurence A. Hubbard; State Compensation Mutual
Insurance Fund, Helena, Montana
Submitted on Briefs: August 12, 1993
Decided: September 2, 1993
Filed: _", .i.i~
Justice Karla M. Gray delivered the Opinion of the Court.
Leslie L. Love11 (Lovell) appeals from a judgment of the
Workers' Compensation Court awarding him temporary total disability
benefits of $8.26 per week. The State Compensation Mutual
Insurance Fund (State Fund) cross-appeals the Workers' Compensation
Court's imposition of a twenty percent penalty, attorney's fees and
costs. We affirm in part, reverse in part and remand.
We phrase the issues on appeal as follows:
1) Did the Workers' Compensation Court err in refusing to
consider Lovell's earnings from other sources when determining his
weekly wage rate for temporary total disability benefits?
2) Did the Workers' Compensation Court err in imposing a
twenty percent penalty against the State Fund for unreasonably
delaying benefits to Lovell?
3) Did the Workers' Compensation Court err in imposing
attorney's fees and costs against the State Fund?
In 1988, Lovell, a twenty-eight-year-old alcoholic, worked as
a painter and roofer and provided lawnmowing services in Forsyth,
Montana. On or around August 9, 1988, he stopped in at the Oak
Room Bar (Oak Room) in Forsyth for a drink after work. Bob
Thompson (Thompson), an owner of the Oak Room, asked Love11 to help
him unload a rol:L carpet and some tiles from a truck. Although
there was no discussion of wages, the parties have stipulated that
Thompson employed Love11 for a two-hour job. The carpet fell on
2
Love11 and he suffered a serious knee injury. The State Fund has
stipulated that Love11 is temporarily totally disabled.
Love11 subsequently signed a tax-withholding statement for the
Oak Room and filled out a claim for workers' compensation benefits.
Love11 testified that he did not want to sign either document, but
Thompson told him that the only available insurance was through
workers' compensation and Love11 would not get his medical bills
paid otherwise. At the time of Lovell's injury, the Oak Room was
enrolled under Plan Three of the Workers' Compensation Act, with
the State Fund as its insurer.
On October 27, 1988 the State Fund accepted Liability for
Lovell's injury and began weekly disability benefits, retroactive
to August 16, 1.988, of $6.33 per week, based on Thompson's
assertion that he intended to pay Love11 $4.75 per hour for a two-
hour job. On March 1, 1989, his disability benefit rate increased
to $8.26 per week after Love11 sent the State Fund his W2 tax-
withholding form from the Oak Room indicating he received $6.20 per
hour. During this time, Love11 attempted to provide the State Fund
with earnings information concerning his painting and lawnmowing
jobs; the State Fund maintained that his other wages were
irrelevant.
On August 13, 1991, the State Fund reduced Lovell's disability
benefits to zero after receiving a computer printout indicating
that Love11 was receiving Social Security benefits. Although
Love11 received Social Security benefits due to his alcoholism, the
claims examiner from the State Fund assumed the benefits were for
3
his knee injury, and applied the Social Security offset pursuant to
§ 39-71-701(4), MCA (1987).
Love11 submitted travel expense vouchers to the State Fund for
the trips he made to obtain medical treatment and physical therapy
for his injured knee. In July, September, October and December of
1991, the State Fund reduced the mileage Love11 claimed by fifty
miles each month because of a "technical error" on the part of the
claims examiner and, as a result, did not reimburse him for that
mileage.
Due to the ongoing dispute over the amount of benefits due,
Love11 filed a petition with the Workers1 Compensation Court on
April 23, 1992. The State Fund apparently reimbursed Love11 for
the withheld travel mileage sometime in September, 1992.
The Workers' Compensation Court heard the case on September
21, 1992, with the parties stipulating that Love11 was employed by
the Oak Room, that he had suffered an industrial injury, and that
he was temporarily totally disabled. The Workers' Compensation
Court concluded that the State Fund had correctly computed Lovell's
weekly wage rate for purposes of temporary total disability
benefits. The court also imposed the statutory twenty percent
penalty against the State Fund for unreasonably terminating
Lovell's benefits due to the Social Security offset in August of
1991 and for improperly denying mileage from his travel claims. On
that basis, the Workers' Compensation Court also awarded Love11
attorney's fees and costs. This appeal followed.
Did the Workers' Compensation Court err in refusing to
consider Lovell's earnings from other sources when determining his
4
weekly wage rate for temporary total disability benefits?
Our review of decisions of the Workers ' Compensation Court is
two-fold. We will not overturn its findings of fact if there is
substantial credible evidence in the record to support them. Grenz
v. Fire and Cas. of Connecticut (1991), 250 Mont. 373, 378, 820
P.2d 742, 745. The Workers' Compensation Court's conclusions of
law will be upheld if the court's interpretation of the law is
correct. Grenz, 820 P.2d at 745. The first issue in this case
turns on a question of law.
In computing Lovell's temporary total disability benefits, the
Workers' Compensation Court determined that $12.40 was 'Lovell's
correct weekly wage with the Oak Room. The court applied the
definition of wages found in § 39-71-123, MCA (1987), the statute
in effect at the time of Lovell's injury. Although Love11 argued
that he should be allowed to aggregate his wages from other
employments, the court concluded that because § 39-71-123(3)(a),
MCA (1987), specifically referred to the claimant's employment with
the "same employer," the statute precluded consideration of other
wages. Relying solely on that phrase, the Workers' Compensation
Court concluded that subsection (3) (a) "seemingly precludes
aggregation of wages from other sources when determining an
employee's wages." We conclude that this interpretation was in
error.
Prior to 1987, wages were defined as "the average gross
earnings received by the employee at the time of injury for the
usual hours of employment in a week. . . .I' Section 39-71-116(20),
5
MCA (1985). Under this definition of wages, we allowed aggregation
of earnings from separate, concurrent employments in the
determination of disability benefits. See Cattyson v. Falls Mobile
Home Center (1979), 183 Mont. 284, 599 P.2d 341; Gee v. Cartwheel
Restaurant (1982), 197 Mont. 335, 642 P.2d 1070; Harmon v. Harmon
(1986) I 220 Mont. 445, 716 P.2d 605; Milender v. Carpenter (1987),
230 Mont. 1, 748 P.2d 932. This Court consistently held that:
The general rule is that earnings from concurrent
employments may be combined if the employments are
sufficiently similar so that a disabling injury at one
employment would necessarily disable the employee in
respect to the other employment.
Milender, 748 P.2d at 933, quoting Harmon, 716 P.2d at 607. Thus,
prior to 1987, it was well-established that if an injury disabled
the employee from concurrent employments, aggregation of the wages
from the concurrent employments was allowed for purposes of
determining disability benefits. We focus our interpretation,
therefore, on whether the 1987 legislature effectively modified
this existing case law in enacting the new definition of wages
found in § 39-71-123, MCA (1987).
The rules of statutory construction require the language of a
statute to be construed according to its plain meaning. If the
language is clear and unambiguous, no further interpretation is
required. GBN, Inc. v. Montana Dep't of Revenue (1991), 249 Mont.
261, 265, 815 P.:2d 595, 597. This Court resorts to legislative
history only if legislative intent cannot be determined from the
plain wording of the statute. State ex rel. Roberts v. Public
Service Comm'n (1990), 242 Mont. 242, 246, 790 P.2d 489, 492.
6
Section 39-71-123, MCA (1987), reads:
Wages defined. (1) "Wages" means the gross
remuneration paid in money, or in a substitute for money,
for services rendered by an employee. Wages include but
are not limited to:
(a) commissions, bonuses, and remuneration at the
regular hourly rate for overtime work, holidays,
vacations, and sickness periods:
(b) board, lodging, rent, or housing if it
constitutes a part of the employee's remuneration and is
based on its actual value; and
(c) payments made to an employee on any basis other
than time worked, including but not limited to piecework,
an incentive plan, or profit sharing arrangement.
(2) Wages do not include:
(4 employee travel expense reimbursements or
allowances for meals, lodging, travel, and subsistence;
(b) special rewards for individual invention or
discovery;
(c) tips and other gratuities received by the
employee in excess of those documented to the employer
for tax purposes:
(d) contributions made by the employer to a group
insurance or pension plan: or
(e) vacation or sick leave benefits accrued but not
paid.
(3) For compensation benefit purposes, the average
actual earnings for the four pay periods immediately
preceding the injury are the employee's wages, except if:
(a) the term of employment for the same employer is
less than four pay periods, in which case the employee's
wages are the hourly rate times the number of hours in a
week for which the employee was hired to work; or
(b) for good cause show by the claimant, the use of
the four pay periods does not accurately reflect the
claimant's employment history with the employer, in which
case the insurer may use additional pay periods.
Although this statute clearly is more specific than the pre-1987
definition, the essence of that earlier definition of wages did not
materially change with the 1987 amendment. Prior to 1987, wages
were Vhe average gross earnings received by the employee . . . ,'I
while the 1987 provision defines wages as "the gross remuneration
paid in money . . . for services rendered by an employee." Section
39-71-116(20), MCA (1985): 5 39-71-123(l), MCA (1987). The
7
remainder of 5 39-71-123(l), MCA (1987), further refines what is
included in "wages;" subsection (2) sets forth types of
remuneration which do not constitute "wages." Subsection (3)
provides the means by which the amount of wages is computed for
purposes of workers' compensation benefits. Nothing in the plain
language of the 1987 amendments creates a material change in the
definition of wages which could be construed as a departure from
existing law regarding aggregation of wages. When taken in the
context of the entire definition, we cannot agree with the Workers'
Compensation Court's conclusion that the phrase "same employer"
contained in subsection (3)(a) demonstrates such a change.
Even if subsection (3) is interpreted in isolation, the plain
language neither directly addresses the aggregation of wages from
other employments nor directly precludes aggregation. Under the
general rule of § 39-71-123(3), MCA (1987), wages are computed for
compensation benefit purposes by using the average actual earnings
for the four pay periods immediately preceding the injury. If
wages cannot be computed under the general rule because the
employee has not yet worked four pay periods with the employer, or
if the use of the preceding four pay periods does not accurately
reflect the employee's work history, subsections (a) and (b)
provide alternative methods for computing wages. Nothing in the
plain language of f, 39-71-123(3), MCA (1987), suggests that the
legislature intended to abolish aggregation of wages from
concurrent employments.
Furthermore, this Court should not interpret a Statute So aS
8
to defeat its purpose; rather, interpretation should achieve the
social purpose for which the statute was enacted. Maney v. State
(1992) t 255 Mont. 270, 274, 842 P.2d 704, 706. An important
purpose of the 1987 Workers# Compensation Act was to provide a
wage-loss benefit that bears a reasonable relationship to the
actual wages lost as a result of the work-related injury. Section
39-71-105(l), MCA (1987). The aggregation principle in effect via
case law at the time of the 1987 amendments comports with the
stated purpose. As we stated in Gee, the amount of compensation
must bear some reasonable relation to the loss sustained on account
of disability. Gee, 642 P.2d at 1071. The Workers' Compensation
Court's interpretation of 5 39-71-123, MCA (1987), defeats this
statutorily stated purpose of the 1987 amendments to the Workers'
Compensation Act.
In sum, we cannot conclude that the reference to the "same
employer" in 5 39-71-123(3)(a), MCA (1987), demonstrates the
legislature's intentional revocation of the well-established
principle allowing aggregation of wages from concurrent
employments. Nothing in the plain language of 5 39-71-123, MCA
(1987) I suggests that the legislature intended to affect, in any
manner, prior case law allowing aggregation of wages from
concurrent employments. We concludethatthe Workers' Compensation
Court erred as a matter of law in interpreting 5 39-71-123(3)(a),
MCA (1987), to preclude aggregation of wages from concurrent
employments.
Because of its conclusion on the aggregation issue, the
9
Workers' Compensation Court did not determine whether Love11 was an
"employee" under the Workers' Compensation Act with regard to other
work he may have been performing or whether other income
constituted wages from concurrent employment. Those issues remain
to be determined by the Workers I Compensation Court on remand.
Did the Workers' Compensation Court err in imposing a twenty
percent penalty against the State Fund for unreasonably delaying
benefits to Lovell?
On August 13, 1991, after receiving a computer printout that
indicated that Love11 was receiving Social Security benefits, the
State Fund applied a statutory offset and reduced Lovell's
disability benefits to zero. In addition, the State Fund
erroneously reduced Lovell's mileage claims for trips he made to
obtain medical treatment for his injured knee by fifty miles each
month for July, September, October and December of 1991.
The Workers' Compensation Court found that the State Fund's
decision to terminate Lovell's disability benefits was unreasonable
because the claims examiner had not investigated, in even a cursory
fashion, the basis upon which Love11 received Social Security
benefits. Investigation would have established that Love11
received Social Security benefits due to his alcoholism. The court
also found that the State Fund's admitted clerical error in denying
reimbursement for a portion of Lovell's claimed medical travel
mileage was unreasonable. The Workers' Compensation Court,
therefore, assessed a twenty percent penalty, pursuant to $4 39-71-
2907, MCA (1987), on the amount of reimbursement due for the
withheld mileage and the erroneous Social Security offset.
10
The State Fund argues that the Workers‘ Compensation Court's
conclusion of unreasonableness was not supported by substantial
credible evidence. Specifically with regard to the erroneous
Social Security offset issue, it contends that it was reasonable
for the claims examiner to assume that Lovell’s Social Security
benefits were for his work-related industrial injury. The State
Fund also contends that, after receiving notice of its intention to
apply the Social Security offset, Love11 had a duty to inform the
State Fund of the reason he received Social Security benefits.
Whether an insurer's conduct was unreasonable is a question of
fact: a finding of unreasonableness will not be overturned on
appeal if supported by substantial evidence. Coles v. Seven Eleven
Stores (1985), 217 Mont. 343, 349, 704 P.2d 1048, 1052; Milender,
748 P.2d at 935. The claims examiner testified that she assumed
Lovell's Social Security benefits were for his knee injury and did
not investigate the matter before terminating his benefits. The
claims examiner also testified that a clerical error resulted in
her denial of medical travel reimbursement for fifty miles each
month for four months. We conclude that the claims examiner's
testimony provided substantial evidence in support of the Workers'
Compensation Court's finding of unreasonableness.
Furthermore, we have held that an insurer has a duty to make
at least a minimal investigation of a claim's validity in light of
the relevant statutes. Absent such an investigation, denial of a
claim for benefits is unreasonable. Gaumer v. Montana Dep't of
Highways (1990), 243 Mont. 414, 421, 795 P.2d 77, 81. The Gaumer
11
rationale is applicable here.
Section 39-Tl-701(4), MCA (1987) (emphasis added), provided:
(4) In cases where it is determined that periodic
disability benefits granted by the Social Security Act
are payable because of the iniury, the weekly benefits
payable under this section [compensation for temporary
total disability] are reduced, but not below zero, by an
amount equal, as nearly as practical, to one-half the
federal periodic benefits for such week . . . .
The statute allows the State Fund to apply the Social Security
offset only when Social Security benefits are payable because of
the claimant's work-related injury. In light of 5 39-71-701(4),
MCA (1987), the State Fund had a duty to investigate the
circumstances surrounding Lovell's receipt of Social Security
benefits prior to reducing his workers' compensation benefits.
This duty to investigate is independent of, and unrelated to, any
action by a claimant. In this case, the State Fund's failure to
fulfill its duty to investigate provides a sufficient basis for the
Workers' Compensation Court's conclusion that the State Fund's
behavior was unreasonable.
The State Fund also claims that its behavior cannot be
considered unreasonable because it has paid Love11 for the
unreimbursed mileage and apparently has agreed to remove the Social
Security offset. We disagree. Payment of unreasonably withheld
benefits "on the courthouse steps I1 does not negate the insurer's
potential liability for a penalty for unreasonable delay of
benefits. To conclude otherwise would render the "unreasonable
delay" provisions of the penalty statute moot. m Handlos v.
Cyprus Indust. Minerals (1990), 243 Mont. 314, 316-17, 794 P.2d
12
702, 703.
The State Fund additionally argues that the Workers'
Compensation Court had no jurisdiction to award a penalty because
the parties had not complied with the dispute resolution and
mediation requirements of 5 39-71-2401, MCA (1987). This argument
is inconsistent with the State Fund's position before the Workers'
Compensation Court. The Pretrial Order, signed by the State Fund,
includes uncontested fact No. 8, which reads, "[plursuant to § 39-
71-2401, et sea., MCA, dispute resolution requirements were
satisfied regarding this dispute." The State Fund also included
this statement as an uncontested fact in its proposed findings of
fact and conclusions of law.
Similarly, the State Fund argues that the Workers'
Compensation Court lacked jurisdiction to award a penalty based on
the Social Security offset because Love11 had not included that
precise issue in his petition. Lovell's petition requested a
penalty pursuant to § 39-71-2907, MCA (1987), alleging that the
State Fund had acted unreasonably. Issue No. 2 in the Pretrial
Order reads:
Whether the Defendant has unreasonably delayed or denied
payment of Petitioner's benefits, thereby incurring an
[sic] twenty percent [sic] pursuant to § 39-71-2907 MCA.
We conclude that the penalty issue was properly before the Workers'
Compensation Court.
Because the Workers' Compensation Court's finding of
unreasonableness is based on substantial credible evidence, we hold
that the court did not err in imposing a twenty percent penalty on
13
the State Fund pursuant to 5 39-71-2907, MCA (1987).
Did the Workers' Compensation Court err in imposing attorney's
fees and costs against the State Fund?
The Workers" Compensation Court concluded that Love11 was
entitled to an award of attorney's fees and costs for the State
Fund's actions regarding the Social Security offset and travel
reimbursement. An award of attorney's fees is governed by 5 39-71-
611, MCA (1987), which provides:
(1) The insurer shall pay reasonable costs and
attorney fees as established by the workers' compensation
court if:
(a) the insurer denies liability for a claim for
compensation or terminates compensation benefits;
(b) the claim is later adjudged compensable by the
workers' compensation court: and
(c) in the case of attorneys' fees, the workers'
compensation court determines that the insurer's actions
in denying liability or terminating benefits were
unreasonable.
. . .
The Workers' Compensation Court did not analyze the question of
attorney's fees under 5 39-71-611(1)(b), MCA, and applicable case
law. See Yearout v. Rainbow Painting (1986), 222 Mont. 65, 719
P.2d 1258; Milender, 748 P.2d at 935.
The record before us is unclear as to whether the State Fund
has reimbursed Love11 for the erroneous Social Security offset or,
if the parties had settled the matter, when the settlement was
reached. Because we are remanding this case for further
proceedings as a result of our holding on the aggregation issue, we
direct the Workers' Compensation Court to readdress the issue of
attorney's fees relating to the Social Security offset and mileage
reimbursement issues.
14
Affirmed in part, reversed in part and remanded for further
proceedings consistent with this opinion.
We concur:
Chief Justice
15
Justice James C. Nelson specially concurs:
While I concur in the Court's opinion, I do so in utter dismay
of the fact that this case is even before us. The claimant, here,
was never eligible for worker's compensation benefits in the first
place. Mr. Love11 stopped by the Oak Room Bar to have a beer and
was asked by one of the owners to help unload some carpet and tiles
from a truck. Mr. Love11 was not the bar's employee; there was
never any discussion of wages; the claimant was never even paid for
the work he did at the bar on the date of his injury.
While helping to unload the truck, the claimant seriously
injured his knee when a carpet roll fell on him. To his credit, at
least, Mr. Love11 did not want to make a worker's compensation
claim. Why should he? He was not the bar's employee: he was not
entitled to benefits. But, since the owners of the bar apparently
did not carry public liability insurance, they convinced Mr. Love11
that the only way he was going to get his medical expenses paid was
to make a claim against their worker's compensation coverage.
The claim was a hoax. The State Fund was simply being used --
abused, actually --- so the bar owners would not have to pay for Mr.
Lovell's injuries out of their own pockets because they failed to
have the foresight and good business sense to carry public
liability insurance.
This travesty was then compounded when the State Fund accepted
liability and began paying benefits of less than $10.00 a week on
the dummied-up claim. Mr. Lovell, again, to his credit, attempted
to undo the claim by numerous phone calls to the State Fund
16
explaining the circumstances of his injury and by filing suit
against the bar for his damages in a separate civil action.
The State Fund would have none of that, however, and continued
to accept liability for the claimant's injury and to pay benefits,
with the result that Mr. Lovell's civil case against the bar was
dismissed because of the exclusivity provision of the Worker's
Compensation Act. That provision prohibits an employee from suing
his V'employer*l for injuries arising out of an "industrial
accident". Unfortunately, however, this comedy of errors did not
end there.
His only other civil remedy having been precluded and having
been determined by the State Fund to be "entitledl* to benefits, the
next logical progression in the chain of events was a dispute over
the amount of the benefits being paid. Mr. Love11 claimed that he
was entitled to combine wages from other odd jobs he had performed
with the "wages" from his "employment" at the bar in order to
establish the wage base on which his benefits were determined. At
least prior to 1987 and after 1989 that was permissible under the
law. The State Fund disagreed with that approach, however, on the
basis of the 1987 statute applicable to Mr. Lovell's claim. The
Fund claimed that Mr. Lovell's only llemploymentV' was at the bar and
that his other wages were irrelevant.
That disagreement, naturally, necessitated a mediation hearing
and, ultimately, a full-blown trial (with all the attendant
discovery that goes with a trial) before the Worker's Compensation
Court.
17
To be fair, there likely would not have been a disagreement
over the proper interpretation of the statute, but for the fact
that every session the Legislature seemingly feels obliged to
rewrite all or substantial portions of the worker's compensation
laws in its biennial attempt to stave off what appears to be the
imminent collapse of the entire system. Rewriting an existing law
or enacting a new law is, at best, risky business, because it often
takes several years and a lawsuit or two for some court to
interpret the law. Here, we are interpreting a law, long since
changed, that was enacted six years ago. In any event, for reasons
probably no one will ever know, in 1987, the Legislature changed
one portion of the statute at issue. (True to form, in 1989, the
law was changed again).
Unfortunately, when the Legislature amended the law in 1987,
the language used was not as precise as it might have been. Hence,
the disagreement between the claimant and his attorneys and the
State Fund and its attorneys over what the statute really said and
meant.
The Worker's Compensation Judge took his best shot at trying
to interpret the statute. In the process, he also determined that
the State Fund had underpaid Mr. Love11 by wrongfully reducing his
mileage claims and offsetting his social security benefits against
his worker's compensation benefit payments. That resulted in the
State Fund having to repay the under-payments along with a 20%
penalty and, possibly, Mr. Lovell's attorney's fees.
Now, the whole case is before the Supreme Court. This Court
18
has spent considerable time applying appropriate legal
interpretations to the facts and law at issue in a case that only
got here by its own bootstraps. Having accomplished our task, we
are now sending the case back to the Worker's Compensation Court
for still further proceedings. I assume that whatever decision is
made on those issues will generate yet another appeal.
I suspect that the average person could put their child
through college on what this case has already cost the State in
attorneys' fees, penalties, expenses, medical costs, travel costs,
benefits and the wasted time and salaries of bureaucrats,
investigators, claims examiners, hearings examiners and judges. To
make matters worse, the final chapter in this case has yet to be
written.
The tragedy of this -- compounded in one form or another in
other cases -- is that employers, taxpayers and, now, employees,
alike, are paying their hard-earned premium, tax and wage dollars
for this nonsense. It is small wonder that the State Fund is in
perpetual financial extremis, if this case is anything but an
anomaly -- which I can only hope is true.
I concur in the Court's opinion because, on the narrow legal
issues presented, the opinion is a correct interpretation of the
law -- long since changed -- and because we are without authority
to do anything but resolve the legal issue presented. It is,
appalling, nonetheless, that this case eve
Chief Justice J. A. Turnage and Justice Terry N. Trieweiler concur
in the foregoing special concurrence.
20
September 2, 1993
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the following
named:
Terry Spear
Matovich, Addy & Keller
225 Petroleum Bldg., 2812 Fist Ave. No.
Billings, MT 59101
Laurence A. Hubbard, Legal Counsel
State Compensation Mutual Ins. Fund
P.O. Box 4759
Helena, MT 596044759
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA