No. 96-038
IN THE SUPREME COURT OF THE STATE OF MONTANA
1996
HARRY A. NESS,
APPEAL FROM: Workers' Compensation Court
State of Montana
The Honorable Mike McCarter, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
R. Lewis Brown, Butte Legal Center, Butte, Montana
For Respondent:
Andrew J. Utick, Helena, Montana
Submitted on Briefs: October 31, 1996
Decided: November 25, 1996
Filed:
Justice William E. Hunt, Sr. delivered the Opinion of the Court.
Appellant Harry A. Ness (Ness) appeals the decision of the
Workers' Compensation Court concluding that Ness was entitled to
total disability benefits only until September 11, 1989, the date
on which Anaconda Minerals Company (Anaconda) properly discharged
its duties to investigate the extent of Ness's disability and to
notify Ness of the results of that investigation. Anaconda cross
appeals the Worker's Compensation Court's determination that
Anaconda was not entitled to subrogate the benefits it had paid
against Ness's settled third party claim, as well as the court's
determination that Ness was entitled to attorney's fees based upon
the award of permanent partial disability benefits. We affirm.
ISSUES
Ness presents the following issue on appeal:
1. Did the Workers' Compensation Court err in concluding
that the statutorily mandated notice of intent to reduce workers'
compensation benefits validly may be given before the insurer has
discharged its duty to investigate the extent of the claimant's
disability?
In addition, Anaconda presents the following two issues on
cross-appeal:
2. Did the Workers' Compensation Court err in concluding that
Anaconda was not entitled to subrogate the benefits it had paid to
Ness against his settled third-party claim?
3. Did the Workers' Compensation Court err in concluding that
Ness was entitled to attorney's fees based upon the award of
permanent partial disability benefits?
FACTS
Ness was injured in 1981 during the course of his employment
for Anaconda. On the day in question, he was welding the belly pan
of a D-8 Caterpillar when it fell and crushed him. Anaconda, which
was self-insured, accepted liability and began paying temporary
total disability benefits to Ness. Ness also instituted suit
against the Caterpillar Tractor Company (Caterpillar), asserting
that his injury was caused, at least in part, by a defective part
on the Caterpillar he had been repairing.
After paying total disability benefits for over a year,
Anaconda terminated total disability payments and began paying
partial disability benefits, relying on a doctor's opinion that
Ness had reached maximum healing and could return to light work.
Anaconda notified Ness on November 22, 1982, of its intention to
reduce his benefits from total to partial disability.
Ness petitioned the Workers' Compensation Court to reinstate
total disability benefits, which that court refused to do. Ness
then appealed the matter to this Court. In Ness v. Anaconda
Minerals Co. (19931, 257 Mont. 335, 849 P.2d 1021 (Ness I), this
Court determined that Anaconda's reduction of Ness's benefits was
improper because Anaconda had not complied with the Coles test.
While the first three elements of the coles test had been fulfilled
in Ness I, this Court noted that Anaconda had not given Ness the
required notice of the doctor's report or a copy thereof. we
therefore held that
[wlhen there is proof of the date on which the fourth
element of the Coles test has been satisfied, there will
be substantial evidence for the termination of claimant's
total disability benefits, and the commencement of
partial disability benefits.
Ness I, 849 P.2d at 1024.
On remand to the Workers' Compensation Court, Ness stipulated
that he had received notice of the doctor's report on September 11,
1989. Accordingly, the Workers' Compensation Court determined that
September 11, 1989, was the proper date for the reduction of Ness's
benefits from total to partial.
Ness, however, argued that the letter he had received on
November 22, 1982, by which Anaconda notified him of its intention
to reduce his benefits, was insufficient notice because it was
given before all of the Coles factors were fulfilled. He therefore
contended that Anaconda was precluded from reducing his benefits
until it re-notified him of its intention to do so after complying
with the Coles test. The Workers' Compensation Court disagreed,
concluding that the plain language of this Court's opinion in
Ness I allowed Anaconda to reduce Ness's disability benefits from
total to partial as of the date the fourth Coles factor was met.
Ness appeals this conclusion.
In addition, Anaconda appeals the Workers' Compensation
Court's determination that it cannot subrogate the benefits it paid
to Ness against his third party claim. It also appeals the court's
4
determination that Ness is entitled to attorney's fees based on the
award of permanent partial disability benefits.
DISCUSSION
1. Did the Workers' Compensation Court err in concluding that
the statutorily mandated notice of intent to reduce workers'
compensation benefits validly may be given before the insurer has
discharged its duty to investigate the extent of the claimant's
disability?
The Coles test ensures that the insurer has provided the
claimant with the minimum information necessary to discharge its
duty to investigate the extent of the claimant's disability.
Compliance with the Coles test is a mandatory prerequisite for
benefit reduction or termination. The Coles test requires:
(1) a physician's determination that the claimant is as
far restored as the permanent character of his injuries
will permit;
(2) a physician's determination of the claimant's
physical restrictions resulting from an industrial
accident;
(3) a physician's determination, based on his knowledge
of the claimant's former employment duties, that he can
return to work, with or without restrictions, on the job
on which he was injured or another job for which he is
fitted by age, education, work experience, and physical
condition; and
(4) notice to the claimant of receipt of the report
attached to a copy of the report.'
Ness I, 849 P.2d at 1024.
Part of the confusion regarding this issue may have arisen
because it involves two separate and distinct notice requirements.
The fourth factor of the Coles test requires an insurer to notify
a claimant of a physician's report regarding the nature and extent
of the claimant's injury and the physician's opinion regarding the
claimant's ability to return to work. We have held that, until
such a physician's report is made and the claimant notified of it,
5
an insurer may not reduce a claimant's benefits because it has not
acquired sufficient information to discharge its duty to
investigate the extent of the claimant's disability. Wood v.
Consolidated Freightways, Inc. (1991), 248 Mont. 26, 808 p.2d 502.
This is the Coles test, and notice to the claimant is the fourth
factor of this test. Ness I, 849 P.2d at 1024.
In addition, the insurer is statutorily required to provide
the claimant with at least 14 days' notice of its intent to
terminate benefits. Section 39-71-609, MCA, provides in part:
if an insurer determines to deny a claim on which
payments have been made under 39-71-608 during a time of
further investigation or, after a claim has been
accepted, terminates all biweekly compensation benefits,
it may do so only after 14 days' written notice to the
claimant, the claimant's authorized representative, if
any, and the department. For iniuries occurrincr prior to
Julv 1, 1987, an insurer must qive 14 davs' written
notice to the claimant before reducinq benefits from
total to uartial.
Section 39-71-609(l), MCA (emphasis added). Ness does not argue
that Anaconda's notice, when given, did not properly comply with
the statute. Instead, he argues that Anaconda did not have the
ability to reduce his benefits at the time it notified him of its
intent to do so, and that, once it had the ability to do so, its
former notice no longer was effective.
We fail to see why the passage of time should render the
notice ineffective. The cases Ness cites in support of this theory
are not on point. In Catteyson v. Falls Mobile Home Center (1979),
183 Mont. 284, 599 P.2d 341, notice was not given until nearly one
month after benefits were terminated. This Court held that such
notice was void because it did not follow the clear statutory
6
,mandate that notice be given at least 14 days before termination of
benefits. This Court has also held that if no statutory notice was
w given, the insurer will not be allowed to reduce or terminate
benefits unless and until the statutory notice properly is given.
Chagnon v. Tillman Motor Co. (1993), 259 Mont. 21, 855 P.2d 1002;
Clark v. Hensel (1977), 127 Mont. 8, 560 P.2d 515. Ness cites no
case in which this Court has held that the requisite statutory
notice cannot be given until after the Coles test is completed or
that, once properly given, the notice will somehow expire.
As Ness rightly noted, when the language of a statute is
plain, unambiguous, direct, and certain, the statute speaks for
itself and leaves nothing for this Court to construe. Clark, 560
P.2d at 516-17. Further, it is the function of an appellate court
to ascertain what is actually contained in a statute, not to insert
that which has been omitted. Russette v. Chippewa Cree Housing
Authority (1994), 265 Mont. 90, 93-94, 874 P.2d 1217, 1219
(citations omitted). Accordingly, we decline to interpret § 39-71-
609, MCA, as including an expiration provision which, on its face,
it does not in fact contain. The statutory notice given to Ness on
November 22, 1982, was both proper and effective. Anaconda had no
duty to re-notify Ness of its intention to reduce his benefits once
the Coles test was fulfilled, and the Workers' Compensation Court
properly refused to impose such a duty upon it.
2. Did the Workers' Compensation Court err in concluding that
Anaconda was not entitled to subrogate the benefits it had paid to
Ness against his settled third-party claim?
7
Anaconda argues that the Workers' Compensation Court erred by
refusing to allow it to subrogate the benefits it paid to Ness. It
contends that Ness has been made whole as a matter of law because
he settled with the third party, Caterpillar, for less than policy
limits. Anaconda contends that this Court's prior case law
mandates such a result.
In workers' compensation cases, the law in effect at the time
of a claimant's injury establishes the claimant's substantive right
to benefits. Williams v. Plum Creek Timber Co. (1995), 270 Mont.
209, 213, 891 P.2d 502, 504 (citing Plooster v. Pierce Packing Co.
(1993), 256 Mont. 207, 291, 846 P.2d 976, 978; Buckman v. Montana
Deaconess Hospital (1986), 224 Mont. 318, 321, 730 P.2d 380, 382).
Therefore, the governing statutes in this case are 5 39-71-412, MCA
(1981) and 5 39-71-414, MCA (1981).
Section 39-71-412, MCA (1981), which addressed a claimant's
right to pursue a third party claim, provided:
The right to compensation and medical benefits as
provided by this chapter is not affected by the fact that
the injury, occupational disease, or death is caused by
the negligence of a third party other than the employer
or the servants or employees of the employer. Whenever
such event occurs to an employee while performing the
duties of his employment and such event is caused by the
act or omission of some persons or corporations other
than his employer or the servants or employees of his
employer, the employee or in case of his death his heirs
or personal representative shall, in addition to the
right to receive compensation under this chapter, have a
right to prosecute any cause of action he may have for
damages against such person or corporations.
Section 39-71-414, MCA (1981), which addressed an insurer's right
to subrogation, provided in part:
8
If an action is prosecuted as provided for in 39-71-412
or 39-71-413 and except as otherwise provided in this
section, the insurer is entitled to subrogation for all
compensation and benefits paid or to be paid under the
Workers' Compensation Act. The insurer's right of
subrogation is a first lien on the claim, judgment, or
recovery.
Section 39-71-414(l), MCA (1981). However, while this latter
statute set forth an insurer's entitlement to subrogation, it did
not set forth whether this right to subrogation began before or
after the claimant was made whole.
This Court determined that an insurer was not entitled to
invade a claimant's paid third party claim via subrogation until
the claimant had been made whole. See Brandner v. Traveler's
Insurance Co. (1978), 179 Mont. 208, 587 P.2d 933; Hall v. State
Compensation Insurance Fund (1985), 218 Mont. 180, 708 P.2d 234;
Getten v. Liberty Mutual Insurance Co. (1989), 240 Mont. 90, 782
P.2d 1267. However, the Court also held that a claimant who had
settled a third party claim for less than the policy limits would
be deemed to have been made whole. Brandner, 587 P.2d at 938;
u, 708 P.2d at 236; Getten, 782 P.2d at 1270-71. The rationale
behind this determination was the assumption that no claimant would
settle for a sum of money which was insufficient to make him or her
whole. In Brandner, this Court reasoned:
[i]t cannot logically be contended, therefore, that [al
claimant has not been made whole for his Workers'
Compensation injury, when he, by his own voluntary
action, has finally compromised his claim in full against
the third-party tortfeasor.
Brandner, 587 P.2d at 938
9
The decision in m carved out an exception to this rule by
holding that it could not be assumed that a claimant had been made
whole if he or she was forced to settle a third party claim for
less than the policy limits. Consequently, the insurer's right to
recoup its payments from the third party settlement under a theory
of subrogation could only be exercised once the claimant was
actually made whole. In Getten, this Court noted that the
claimant's settlement had been voluntary, not forced. It therefore
distinguished &a.lJ and embraced the holding in Brandner.
1n arguing that it should be allowed to exercise its right of
subrogation, Anaconda relies almost entirely on the decisions in
Brandner and Getten. Under the law as articulated in those two
cases, Anaconda contends that it is entitled to subrogate because
Ness settled his third party claim for less than the policy limits
and did so voluntarily. Relying on the decisions in Brandner and
Getten, Anaconda contends that Ness "was 'made whole' by [his]
voluntary settlement, or he would presumably not have made such
settlement."
In response, Ness contends that the rule relied upon by
Anaconda and set forth in Brandner and Getten no longer is good
law. We agree. While Anaconda attempts to distinguish these
earlier cases from the later ones which vitiate the Brandner/Getten
rule, there is no escaping the fact that both those cases have been
substantively and unambiguously overruled.
In Zacher v. American Insurance Co. (1990), 243 Mont. 266, 794
P.2d 335, this Court stated:
10
We hold that where a workers' compensation claimant
recovers against a third party an insurer has no
subrogation rights until a claimant has been made whole
for his entire loss and any costs of recovery, including
attorney fees. . . . To the extent that Hall and Getten
contain requirements which mav be interpreted as addinq
to the foreqoina holdinq, Hall and Getten are expressly
overruled.
Zacher, 794 P.2d at 338 (emphasis added). In Francetich v. State
Compensation Mutual Insurance Fund (1992), 252 Mont. 215, 827 P.2d
1279, this Court held:
[In Brandnerl The Court also distinguished the situation
in Brandner from the decision in Skauqe [v. Montana
States Telephone and Telegraph Co. (1977), 172 Mont. 521,
565 P.2d 6281. The basis for this distinction apparently
was the Court's belief that the injured worker's
voluntary settlement with the third party for less than
the upper limits of the third party's insurance policy
indicated that the worker had been fully compensated for
his injuries. There is language in Brandner which might
be viewed as indicating that subrogation might have been
appropriate even if the injured worker had not been fully
compensated for his injuries. To the extent that
Brandner miqhtbe interpreted as allowins for subrooation
prior to the injured worker receivins full comwensation,
it is overruled.
Francetich, 827 P.2d at 1284 (emphasis added).
Despite the clear language to the contrary, Anaconda attempts
to distinguish both Zacher and Francetich is an attempt to preserve
the applicability of the Brandner/Getten rule. It argues that
Zacher does not necessarily conflict with Getten because,
factually, both cases involve situations where the claimant was
forced to settle for the third party's insurance policy limits.
Ness, they remind us, was not forced to settle for policy limits.
Instead, he voluntarily settled for a sum far below that dictated
by Caterpillar's policy limits.
11
The holding in Zacher, set out above, does not distinguish
between voluntary and non-voluntary settlements. Indeed, while
noting that such a distinction had been made in past cases, this
Court specifically chose not to rely on that distinction when
articulating the rule regarding an insurer's right to subrogation.
We will not narrow the impact of Zacher by inferring a limitation
which the Court itself refused to place on its own holding. By its
terms, the holding in Zacher refers to & cases where an insurer
seeks to exercise a right to subrogation regarding a claimant's
paid third party claim. And, by its terms, the holding
specifically overrules Getten to the extent that it might add
additional requirements to the holding in Zacher.
Similarly, Anaconda relies on the cited language in Francetich
which states that:
[tlhe Court also distinguished the situation in Brandner
from the decision in Skauqe. The basis for this
distinction apparently was the Court's belief that the
injured worker's voluntary settlement with the third
party for less than the upper limits of the third party's
insurance policy indicated that the worker had been fully
compensated for his injuries.
Francetich, 827 P.2d at 1284. Anaconda attempts to construe this
language as the actual holding in Francetich, which it clearly is
not. It is merely this Court again noting, as it did in Zacher,
its own former reliance on the Brandner/Getten rule. The holding
is contained in the next sentence, which notes that Brandner might
be construed to indicate that subrogation may be allowed before the
claimant has been made whole. To the extent Brandner might support
12
such a result, Francetich expressly overruled it. Francetich, 827
P.2d at 1284.
Further, we note the fundamental flaw in Anaconda's reliance
on a rule which attempts to set forth when a claimant has been made
whole as a matter of law. The question of whether an injured
claimant has been made whole is a question of fact
-I dependent on
the level of his or her physical recovery and the extent of his or
her compensation through benefits paid and/or damages recouped.
In this case, Anaconda's own expert placed the amount of
Ness's damages at $145,000, which was the lowest estimate
presented. But Ness has not received benefits and settlement
proceeds totalling $145,000, even if Anaconda's own estimate is
presumed to be an accurate one and even if the entire $75,000
settlement from Caterpillar is credited to Ness. On this basis,
the Workers' Compensation Court concluded that "the settlement with
Caterpillar did not in fact represent the amount necessary to make
claimant whole. Therefore, it does not entitle respondent as a
matter of law to a subrogation interest in the settlement
proceeds." (Emphasis added.)
The Brandner/Getten rule, which is the mainstay of Anaconda's
subrogation argument, has been substantively overruled. To the
extent that Brandner or Getten or their progeny indicate that the
issue of whether a claimant has been made whole is a question of
law, they are expressly overruled. The issue of whether a claimant
has been made whole is a question of fact. Even Anaconda's own
expert admits that Ness in fact has not been made whole to date.
13
Accordingly, the Workers' Compensation Court did not err in
refusing to grant Anaconda the right to a subrogation interest in
Ness's settlement with Caterpillar.
3. Did the Workers' Compensation Court err in concluding that
Ness was entitled to attorney's fees based upon the award of
permanent partial disability benefits?
Anaconda also contends that the Workers' Compensation Court
erred by awarding Ness attorney's fees based on the award of
permanent partial disability benefits. Anaconda argues that Ness's
entitlement to permanent partial disability benefits was not the
issue in this case. It further argues that Ness is not entitled to
attorney's fees because Ness never specifically requested permanent
partial disability benefits and, therefore, such benefits were not
secured through the efforts of Ness's attorney. This argument is
entirely without merit.
Ness pursued his claim in the Workers' Compensation Court with
the assistance of an attorney, who instituted suit after Anaconda
stopped paying benefits to Ness. The issue faced by the Workers'
Compensation Court was what benefits, if any, Ness was entitled to
receive. The attorney's efforts in securing Ness's award are not
diminished simply because Ness did not specifically request a given
type of relief.
The decision of the Workers' Compensation Court is affirmed.