NO. 95-484
IN THE SUPREME COURT OF THE STATE OF MONTANA
1996
EDWIN A. TAYLOR,
Petitioner and Appellant,
APPEAL FROM: Workers' Compensation Court
The Honorable Mike McCarter, Judge presiding
COUNSEL OF RECORD:
For Appellant:
Wade J. Dahood, Bernard J. Everett, Knight, Dahood,
McLean & Everett, Anaconda, Montana
For Respondent:
Oliver H. Goe, Browning, Kaleczyc, Berry & Haven,
Helena, Montana
Submitted on Briefs: February 1, 1996
Decided: March 18, 1996
Filed:
Justice W. William Leaphart delivered the Opinion of the Court.
Edwin A. Taylor (Taylor) appeals from the Findings of Fact,
Conclusions of Law and Judgment of the Workers' Compensation Court
determining that two of three workers' compensation claims filed by
Taylor were fraudulent. We affirm.
We consider the following dispositive issues on appeal:
1. Does substantial credible evidence support the Workers'
Compensation Court's finding that Taylor filed fraudulent claims
for injuries?
2. Did the Workers' Compensation Court err when it failed to
find that the insurer's conduct was unreasonable and in failing to
award Taylor his attorney's fees, costs, and the statutory
penalty?
Taylor began working for the Montana Department of
Transportation (DOT) in 1988. At the time of Taylor's alleged
accidents, Taylor's job classification was a truck driver. Taylor
filed claims for industrial accidents that allegedly occurred on
February 26, 1990, November 15, 1990, and March 4, 1991. At the
time of the alleged injuries, State Fund was the workers'
compensation insurer for the DOT. State Fund accepted liability
for each claim and began paying Taylor wage loss and medical
benefits. Although State Fund began an investigation of Taylor's
claims and requested the Montana Criminal Investigations Bureau to
conduct an investigation, State Fund continued to pay benefits
until April of 1994.
Taylor alleges that he injured his neck in an industrial
accident on February 26, 1990. Taylor underwent neck surgery for
this injury. Similarly, Taylor alleges that he suffered a work-
2
related injury on November 15, 1990, while he was working in the
maintenance shed of the DOT's Bozeman, Montana facility. No one
witnessed this accident. He alleges that he bumped the left side
of his head near his ear while he was standing up from checking
bolts on the plow. Taylor asserts that he hit his head so hard
that it knocked him to his knees. Following this incident, Taylor
consulted Dr. Pamela Hiebert for treatment. Taylor was admitted to
Bozeman Deaconess Hospital overnight for observation. The next
day, Taylor was discharged from the hospital and sought no further
treatment for this injury. State Fund accepted liability for this
claim.
On March 4, 1991, Taylor was working with a road crew fixing
pot holes on Main Street in Bozeman, Montana. Taylor testified
that near the end of his shift he was directed to pick up the
safety cones and signs that marked the job area. He alleges that
while picking up the cones he stumbled and fell, hitting his head,
neck, and shoulders and landing on his hips and back. Again, this
accident was unwitnessed. After the incident, Taylor got into the
truck and drove approximately one mile back to the DOT shop where
he reported the accident to his acting supervisor, Dan Noyes
(Noyes), and asked Noyes to drive him to the hospital. Taylor was
admitted to the hospital and, while hospitalized, he complained of
lumbar pain and pain in his left extremities. Taylor was
discharged from the hospital on March 8, 1991. TWO days later,
Taylor was readmitted to the hospital for injuries related to his
cervical and lumbar spine. He was treated with an anesthetic and
3
an anti-inflammatory and was again released from the hospital on
March 15, 1991.
Taylor was admitted to St. Vincent's Hospital in Billings,
Montana, on August 27, 1991, by Dr. James Johnson, and was released
the next day. On August 29, 1991, at the request of Dr. Johnson,
Taylor was examined by Dr. Robert Snider, an orthopedic surgeon,
who stated that surgery may not be of any value because he was not
sure of the source of Taylor's back pain. Another doctor concurred
in the opinion that surgery was not warranted.
In the fall of 1993, Taylor was seen by another orthopedic
surgeon, Dr. James Lovitt, who opined that Taylor had two choices,
to live with his pain or to consider surgery. Dr. Lovitt noted
that Taylor was not a good candidate for surgery, which included
spinal fusion, because of his history of smoking and, further, that
surgery might lead to additional complications.
State Fund asserted that Taylor did not suffer a disabling
injury on March 4, 1991, and, therefore, terminated Taylor's
benefits on April 20, 1994. State Fund filed a petition for
hearing before the Workers' Compensation Court alleging that Taylor
did not suffer any industrial injuries and that his claims were
fraudulent. Taylor responded by filing a petition for hearing in
order to reinstate his benefits. The Workers' Compensation Court
consolidated the petitions and trial was held in February of 1995.
At trial, State Fund offered the testimony of several
witnesses to prove that Taylor's claims were fraudulent. Elizabeth
Larain (Larain) and Robert Beebe (Beebe) testified that Taylor
4
allegedly told them that he was "scamming the system" and that his
claims were fraudulent. Beebe testified that he called the
Workers' Compensation Fraud Hotline and reported Taylor's
fraudulent claim. Larain testified that she had telephoned Lance
Zanto, an adjuster with State Fund, and told him that Taylor's
claims were fraudulent. Several other witnesses, including a
claims adjuster with State Fund, an investigator with the Montana
Criminal Investigations Bureau, Taylor's former supervisor from the
DOT, and Taylor's ex-wife testified at trial. The Workers'
Compensation Court acknowledged that "the credibility of witnesses
testifying at trial is critical to the resolution of this case."
Ultimately, the Workers' Compensation Court determined that
both the November 15, 1990 and the March 4, 1991 claims were
fraudulent. The court concluded that State Fund failed to carry
its burden of proof that the February 26, 1990 claim was
fraudulent. Taylor appeals from the determination that two of his
claims were fraudulent.
1. Does substantial credible evidence support the Workers'
Compensation Court's finding that Taylor filed fraudulent claims
for injuries?
In reviewing findings of the Workers' Compensation Court, we
determine whether the findings are supported by substantial
credible evidence. Wilson v. Liberty Mut. Fire Ins. Co. (Mont.
1995), 903 P.2d 785, 787, 52 St.Rep. 990, 991 (citing Miller v.
Frasure (19911, 248 Mont. 132, 137, 809 P.2d 1257, 1260).
Substantial evidence is more than a mere scintilla of evidence but
may be less than a preponderance of the evidence. Wilson, 903 P.2d
5
at 707. We will not substitute our judgment for that of the trial
court where the issue relates to the weight given to certain
evidence or the credibility of the witnesses. Wilson, 903 P.2d at
787 (citing Burns v. Plum Creek Timber Co. (1994), 268 Mont. 82,
84, 885 P.2d 508, 509); Rose v. Burdick's Locksmith (19941, 265
Mont. 178, 180-81, 875 P.2d 337, 339.
The Workers' Compensation Court determined that State Fund
satisfied its burden of proving that Taylor committed actual fraud.
To sustain a claim of fraud, State Fund was required to plead and
prove each of the nine elements of fraud. Haag v. Montana Sch.
Group Ins. Auth. (Mont. 1995), 906 P.2d 693, 697, 52 St.Rep. 1146,
1149. Fraud can never be presumed but must be proved by a
preponderance of the evidence. Barrett v. Holland & Hart (1993),
256 Mont. 101, 106, 845 P.2d 714, 717 (citing Batten v. Watts Cycle
& Marine (1989), 240 Mont. 113, 117, 783 P.2d 378, 381, cert.
denied, 494 U.S. 1087 (1990)). The court found that, as to the
November 15, 1990 and March 4, 1991 claims, State Fund satisfied
its burden and proved each of the nine elements of fraud. The
elements are: (1) a representation; (2) falsity of the
representation; (3) materiality of the representation; (4)
speaker's knowledge of the falsity of the representation or
ignorance of its truth; (5) the speaker's intent it should be
relied upon; (6) the hearer's ignorance of the falsity of the
representation; (7) the hearer's reliance on the representation;
(8) the hearer's right to rely on the representation; and (9) the
hearer's consequent and proximate injury caused by the reliance on
6
the representation. Lee v. Armstrong (1990), 244 Mont. 289, 293,
798 P.2d 84, 87; Batten, 783 P.2d at 380-81.
The court noted that Taylor made specific statements
acknowledging that two of his claims were fraudulent. While the
court recognized that "it is ultimately [Taylor's] word against the
words of Larain and Beebe, I found the latter witnesses to be
credible and believable. Ultimately, however, this case doesn't
rely solely on their evidence. The finding of fraud is supported
by other significant evidence." The court made extensive findings
relating to the medical evidence, the testimony of the witnesses,
and the credibility of the witnesses.
Taylor asserts that State Fund did not rebut the testimony of
the numerous physicians who have treated Taylor for his multiple
injuries. The findings of the Workers' Compensation Court,
however, reflect otherwise. The court's findings indicate that
several of Taylor's treating physicians could not find an objective
basis for Taylor's pain complaints and, further, that Taylor's pain
complaints were abnormal and that his subjective complaints were
out of line with the objective medical findings. Nonetheless,
Taylor argues that the medical testimony regarding his injuries was
"unrefuted" and should not be disregarded based on the testimony of
Larain and Beebe. However, in its order supplementing findings of
fact and otherwise denying claimant's post-trial motions, the court
noted that "there is nothing in the medical evidence to indicate an
acute injury as opposed to long term degeneration, or, other than
Taylor's own report, to prove that his back problems stemmed from
7
an industrial accident." Further, the court noted that:
Significantly, claimant testified about cuts and
scratches he had when he went to the hospital on March
4th, even mentioning a "pretty good nick on the side of
my head or maybe in my jaw area." (Tr. II at 11.2.) His
complaints of hip pain changed from the left side on
March 4, to the right side on March 11th. He insisted on
hospitalization and claimed he could not perform ordinary
tasks of daily living. Yet, the medical records and
testimony of the physicians who examined him show that
they did not see any objective evidence of any injury.
Thus, even without Beebe's and Larain's testimony there is evidence
in the record which casts doubt on Taylor's claims of industrial
injuries.
According to Taylor, both Larain's and Beebe's testimony
should be disregarded because Larain and Beebe, who were friends
with one another and acquaintances of Taylor's, had a motive to
testify against Taylor because of a dispute regarding some money
Taylor allegedly took from Beebe. Taylor asserts that the Workers'
Compensation Court erred in finding that Larain's and Beebe's
testimony was credible. However, this Court will not substitute
its judgment for that of the trial court on questions of witness
credibility when substantial credible evidence supports the trial
court's determination. Wilson, 903 P.2d at 787. Here, the
findings of fact and the record reflect that the court could have
found these witnesses to be truthful in some areas of their
testimony and untruthful in others. The trial court was in the
best position to judge the credibility and demeanor of the
witnesses while testifying. Where there is conflicting evidence in
the record, it is within the provence of the trial court to pass on
the credibility of witnesses and the sufficiency of the evidence.
8
Wilson, 906 P.Zd at 787-88.
Beebe stated that, following the March 4, 1991 injury, he saw
Taylor working on his car and replacing the drive line. Beebe
testified that the parts weighed between seventy and eighty pounds
and that Taylor worked at this heavy labor for over four hours.
Taylor testified that the part weighed approximately twenty pounds
and that he would have completed the job much more quickly but for
his injuries. Larain testified that Taylor was very interested in,
and asked questions about, her own workers' compensation claim and
confided in her that his claims were fraudulent. Taylor denies
that he made any such admissions to Larain.
The findings reflect Taylor's inconsistent explanations of how
the March 4, 1991 incident occurred. For example, Taylor's ex-wife
testified that Taylor told her that he had injured his back
operating a jack-hammer. Larain testified that Taylor told her
that he had tripped over some road cones, and Beebe testified that
Taylor told him that he slipped on some road oil and fell.
As to Taylor's own testimony, the court found that "claimant
has made as great a negative impression on me as any witness I have
observed during the last two years. Listening to him and observing
him, I simply did not believe him and concluded that he was
perpetuating a fraudulent scheme." In its order supplementing
findings of fact and otherwise denying claimant's post-trial
motions, the court also noted that "Taylor's confident, forceful
testimony at trial stood in stark contrast to the complaining,
depressed, non-functional individual who appears in the many
9
medical and psychological records presented in this case. . . Re
had a smooth answer for everything presented against him."
The Workers' Compensation Court findings also reflect evidence
and testimony showing that Taylor had been reprimanded at work and
placed on probation for his performance, had a problem with alcohol
abuse, had received citations for DUI's, was in "severe financial
straits," was having his wages attached by creditors, and owed both
the Internal Revenue Service and the State of Montana for unpaid
taxes. Taylor maintains that, regardless of his financial
situation and job performance, he did indeed suffer industrial
injuries. Our standard, however, is not whether the evidence
supports findings different than those made by the Workers'
Compensation Court, but whether substantial credible evidence
supports the court's findings. Wilson, 903 P.2d at 787 (citing
Caekaert v. State Compensation Mut. Ins. Fund (1994), 268 Mont.
105, 110, 885 P.?.d 495, 498). In the instant case, we conclude
that substantial credible evidence in the record supports the
findings of the Workers' Compensation Court that two of Taylor's
three claims were fraudulent.
2. Did the Workers' Compensation Court err when it failed to
find that the insurer's conduct was unreasonable and in failing to
award Taylor his attorney's fees, costs, and the statutory
penalty?
Although the court found that two of Taylor's three claims
were fraudulent, Taylor nonetheless asks this Court to find State
Fund's conduct unreasonable under § 39-71-611, MCA, and award the
twenty-percent statutory penalty against State Fund pursuant to §
39-71-2907, MCA. Reasonableness is a question of fact. Stordalen
10
v. Ricci's Food Farm (1993), 261 Mont. 256, 258, 862 P.2d 393, 394.
We must determine whether substantial credible evidence supports
the court's finding that State Fund's actions were reasonable and
that Taylor was not entitled to the statutory penalty.
The statutory penalty set forth in § 39-71-2907, MCA, was not
intended to eliminate an insurer's assertion of a legitimate
defense to liability. Paulson v. Bozeman Deaconess Found. Hosp.
(1984), 207 Mont. 440, 444, 673 P.2d 1281, 1283. Here, State Fund
pled and proved the nine elements of fraud in defending its
decision to terminate Taylor's benefits. Further, the court
determined that State Fund's actions were not unreasonable and that
Taylor was not entitled to attorney's fees or the statutory
penalty. As is illustrated by the court's findings that two of
Taylor's three claims were fraudulent, substantial credible
evidence supports the court's finding that State Fund's actions in
terminating Taylor's benefits were reasonable. Accordingly, we
conclude that the Workers' Compensation Court did not err in
failing to award attorney's fees, costs, or the statutory penalty.
Affirmed.
11
Justices
12
Justice William E. Hunt, Sr. specially concurs
I concur in the conclusions reached by the majority but do not
agree with all that is said in the opinion.
13