96-117
No. 96-117
IN THE SUPREME COURT OF THE STATE OF MONTANA
1996
GERALD MADILL,
Petitioner and Appellant,
v.
STATE COMPENSATION INSURANCE FUND,
Respondent and Respondent.
APPEAL FROM: Workersþ Compensation Court,
The Honorable Mike McCarter, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Gregory H. Warner; Attorney at Law;
Great Falls, Montana
For Respondent:
William O. Bronson; Attorney at Law;
Great Falls, Montana
Submitted on Briefs: December 12, 1996
Decided: January 2, 1997
Filed:
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__________________________________________
Clerk
Justice Terry N. Trieweiler delivered the Opinion of the Court.
The claimant, Gerald Madill, filed a petition for an order
awarding attorney fees and costs pursuant to 39-71-612, MCA
(1979), with the State of Montana Department of Labor and Industry.
He contended that various benefits to which he had been entitled
were denied by his employerþs workersþ compensation insurer, the
State Compensation Insurance Fund; that he incurred attorney fees
and costs to recover those benefits; and that he was entitled to
reimbursement of those fees and costs. Madillþs claim was denied
by the Department of Labor and Industry. Pursuant to 39-71-
204(3), MCA, Madill appealed that denial to the Workersþ
Compensation Court for the State of Montana. The Workersþ
Compensation Court affirmed the order of the Department of Labor
and Industry. Madill appeals from the order of the Workersþ
Compensation Court which affirmed the decision of the Department of
Labor and Industry. We reverse the order of the Workersþ
Compensation Court.
The issue on appeal is whether Madill is entitled to an award
of attorney fees and costs pursuant to 39-71-612, MCA (1979),
when disputed benefits are recovered by settlement, rather than by
an award from the Workersþ Compensation Court.
FACTUAL BACKGROUND
The facts in this case were based largely on stipulations or
stipulated exhibits. In addition, the hearing examiner for the
Department of Labor and Industry made findings of fact from which
no appeal has been taken. Therefore, for purposes of this appeal,
the following facts are undisputed.
The claimant, Gerald Madill, was injured during the course of
his employment with Greenfield Irrigation District on September 28,
1979. His injury occurred when he slipped on underground pipe that
he was installing, he fell between the pipe and a dirt wall, and
twisted his knee.
The claimantþs employer was insured against workersþ
compensation claims by the respondent, the State Compensation
Insurance Fund. The State Fund accepted liability for Madillþs
injury, and commenced payment of temporary total disability
benefits at the rate of $154.63 per week in March 1980.
From 1980 to 1984, Madill underwent eleven surgical procedures
to treat his knee injury. Included among those procedures were a
meniscectomy, arthroscopic surgery, patellar tendon realignment,
and a patellectomy. As a complication of the patellectomy,
Madillþs left patellar tendon ruptured, and his left knee is
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severely impaired. As a result of the alteration to his gait,
which is caused by his injury, Madill suffers from low back and hip
pain.
On August 28, 1986, Michael Sousa, M.D., the orthopedic
surgeon who had been primarily responsible for Madillþs care, wrote
to the State Fund and advised them of the history of Madillþs
surgical treatment and his condition at that time. He stated that,
while Madill had "reached maximum healing," he has lost seventy
percent of the strength in his left leg, experiences hyperextension
and limited flexion in that leg, and cannot ambulate without use of
an orthotic device. In addition to Madillþs difficulty standing or
ambulating, he explained that he would be unable to sit for any
extended period of time due to the difficulties with his left leg.
Dr. Sousa expressed the opinion that the degree of impairment to
Madillþs left lower extremity was fifty percent, that he was "quite
disabled" as a result of his extremity impairment, and that, in the
future, he would be limited to sedentary employment, if it was
available.
At the request of Chip McKenna, the claims examiner
responsible for handling Madillþs claim at the State Fund, Dr.
Sousa submitted an updated report to the State Fund on May 3, 1988.
In that report, he noted that radiographic studies indicated early
development of osteoarthritis in Madillþs knee joint, that his knee
was still unstable, and that he may need a total knee joint
replacement at some time in the future. He repeated his advice
that Madill was "certainly restricted with regard to his employment
capabilities because of a markedly weakened leg."
In spite of that information, and without establishing that
there was employment to which Madill could return, as required by
the Workersþ Compensation Courtþs decision in Coles v. Seven-Eleven Stores
(Mont. W.C.C. Nov. 20, 1984), No. 2000, slip op. at 9, McKenna
wrote to Madillþs attorney on May 17, 1988, and advised him that,
since Madill had completed a two-year training program at Flathead
Valley Community College and reached maximum healing, he would be
reclassified as partially disabled and his benefits would be
reduced to the rate of $99 per week fourteen days from the date of
the letter. At that time, McKenna also offered to settle Madillþs
claim for 300 weeks of partial disability benefits, or $29,700,
minus amounts which had been previously advanced. The total amount
previously advanced was approximately $7,600.
On May 25, 1988, Madillþs attorney responded to McKennaþs
letter and enclosed a report from Ian Steele, a rehabilitation
consultant. Steele noted that, although Madill had received
training in human services at FVCC, by the time he graduated, the
state social services agencies were cutting back on the positions
that he had been trained to perform, few if any of those jobs were
available, and he had been unsuccessful in his attempts to find
other types of work due to his physical limitations. He concluded
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that:
From a vocational standpoint holding full-time employment
would be very difficult due to the pain Mr. Madill
experiences. . . . The before mentioned would make the
placement of Mr. Madill into employment very difficult if
not impossible.
Madillþs total disability benefits were terminated, and he was
paid at the partial disability rate beginning on May 31, 1988. On
June 9, 1988, McKenna acknowledged receipt of Steeleþs report, but
rejected Madillþs request that he be placed back on total
disability status. Further efforts were made to have total
disability benefits reinstated, but were rejected by McKenna. On
October 28, 1988, the attorney for the State Fund rejected a
mediatorþs suggestion that a Coles analysis be performed. On
March 21, 1989, McKenna wrote to Madillþs attorney and reminded him
that the previous offer of a lump sum settlement was being eroded
by the payment of bi-weekly benefits, and that, if he did not hear
from him by April 30, 1989, the offer would be withdrawn.
On January 19, 1989, Madillþs attorney forwarded more
information to the State Fund regarding Madillþs physical
limitations. On July 28, 1989, the State Fund received an
additional report from Dr. Sousa in which he noted that, based on
functional capacities assessment, Madill was markedly limited with
regard to his activities, and that he felt "it would be unlikely he
would be employable in a regular occupation."
In spite of all the mentioned information, McKenna wrote to
Madillþs attorney on August 15, 1989, contended that the vocational
information was incomplete, and declined to reinstate total
disability benefits.
On August 16, 1989, Madillþs attorney forwarded to the State
Fund a report from Grace D. Benesh, a second rehabilitation
consultant. She was asked to do a specific analysis of job
opportunities for people with a degree in human services, which is
what Madill had been trained for at FVCC. She concluded, after a
survey of potential employers, that the degree in no way enhanced
his employability. She also concluded that, due to his physical
restrictions and the fact that he is hard of hearing (he wears two
hearing aids), he is not employable in his normal labor market,
which she defined as the county of his residence.
Finally, on August 30, 1989, McKenna advised Madillþs attorney
that the State Fund would reinstate temporary total disability
benefits retroactive to the date of their termination. A check in
the amount of $3,560.32 was enclosed to compensate for the
difference between Madillþs partial and total disability rate
during the time that his total disability benefits had been
terminated.
In that same August 30, 1989, letter, however, McKenna
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rejected Madillþs claim that he be classified as permanently
totally disabled. He stated:
Finally, at this time, the State Fund is not in
agreement that your client is permanently totally
disabled. We will be referring the file to one of our
private rehabilitation vendors to obtain another view on
your clientþs employability.
The State Fund did refer Madill to Crawford Rehabilitation
Services for further evaluation. On March 8, 1990, that firm
advised the State Fund that jobs directly related to Madillþs prior
work history, or for which he possessed skills as a result of his
training, did not appear readily available. Crawford requested
authority to research whether other occupations for which Madill
was qualified might be available. Apparently authority was given,
because on July 20, 1990, the claims examiner to whom Madillþs
claim had then been assigned at the State Fund, made an entry in
the State Fundþs file to the effect that Dr. Sousa had disapproved
the job suggested by Crawfordþs rehabilitation consultant. In the
meantime, it had been necessary for Madillþs attorney to continue
employing the services of his own vocational consultant to monitor
the investigation and reports being given by Crawford.
Finally, on January 4, 1991, Carol Morris, the next claims
examiner who had assumed responsibility for Madillþs claim, orally
conceded to Madillþs attorney that Madill was permanently totally
disabled. In a letter dated January 29, 1991, Madillþs attorney
confirmed that conversation, noted that Madillþs monthly living
expenses were greater than his disability benefit, and requested
that, for that reason, his future disability benefits be paid to
him in a lump sum.
On February 18, 1991, the State Fund responded to Madillþs
demand by offering to pay him a total amount of $90,000. It
proposed that $30,000 be paid to him in a lump sum, that $34,000 be
used to purchase an annuity for his benefit, and that the remainder
be retained by the State Fund to repay previous amounts that had
been advanced. The State Fund arrived at its proposed settlement
amount by calculating the total amount of disability benefits
payable to Madill until age 65, and then reducing them to present
value. It did so in spite of the fact that he is entitled to
disability benefits for the remainder of his lifetime, and that in
Willis v. Long Construction Co. (1984), 213 Mont. 203, 690 P.2d 434, we held
that there was no authority pursuant to the workersþ compensation
laws, as they applied to Madill, for reduction of lump sum awards
to present value. The State Fundþs offer, if accepted, would have
required that Madill enter into a final settlement of his claim.
No further benefits would have been paid.
On March 4, 1991, Madillþs attorney responded to the State
Fundþs offer by pointing out that he was actually entitled to more
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than $225,000 of disability benefits over the remainder of his life
expectancy, that pursuant to Willis, the State Fund had no authority
to reduce a lump sum settlement to present value, and that Madill
had now accumulated $30,000 of indebtedness for long-overdue family
necessities, including the familyþs home and transportation
requirements.
Having received no satisfactory response from the State Fund,
Madillþs attorney petitioned the Workersþ Compensation Court on
July 26, 1991, for a partial conversion of Madillþs future total
disability benefits to a lump sum without discounting that amount
to present value. On the day set for hearing before the Workersþ
Compensation Court, within minutes of the time the hearing was to
begin, the State Fund agreed to pay Madill a lump sum in the amount
of $69,038.39, which it would then recover from the distal end of
his periodic permanent total disability benefits. It agreed that
the lump sum advance would not be reduced to present value and that
receipt of that amount would not affect Madillþs right to recover
the remainder of his total disability benefits periodically. The
documentation in support of that settlement agreement established
that the lump sum advance was necessary for payment of necessities,
including medical treatment, clothing, beds, housing repairs, auto
repairs, loans from family members, and overdue real estate tax.
The settlement agreement was reached in September 1991. When
timely payment was not made pursuant to that agreement, Madill
requested that his claim be placed back on the Workersþ
Compensation Courtþs trial agenda. After that was done, payment of
his lump sum advance was finally made by the State Fund.
Following receipt of his lump sum advance, Madill petitioned
the Department of Labor and Industry for an award of attorney fees
and costs pursuant to 39-71-612, MCA (1979). He sought fees
related to (1) the reinstatement of his total disability benefits
in 1989; (2) the concession that he was permanently totally
disabled in 1991; and (3) the agreement to convert a portion of his
permanent total disability benefits to a lump sum without reducing
it to present value, and to pay the remainder of his total
disability benefits periodically. Following a hearing and
consideration of testimony previously taken, the hearing examiner
for the Department of Labor and Industry entered findings of fact
which are not challenged by either party on appeal. Many of those
facts have been set forth previously. In addition, the hearing
examiner found (although identified as conclusions) that a
"dispute," as referred to in 39-71-612, MCA (1979), existed in
two respects: first, whether claimant was entitled to total versus
partial disability benefits; and second, whether claimant was
temporarily totally disabled or permanently totally disabled. The
hearing examiner also found that the benefits which were disputed
were recovered due to Madillþs attorneyþs efforts. However, the
hearing examiner then concluded that, because -612 provides that
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attorney fees "may be awarded," that statute is discretionary, and
therefore, no attorney fees were due from the State Fund to Madill.
Madill appealed the denial of his claim by the Department of
Labor and Industry to the Workersþ Compensation Court, which, after
further written argument, affirmed the order of the hearing
examiner, but for different reasons. In reliance on our decisions
in Field v. Sears, Roebuck & Co. (1993), 257 Mont. 81, 847 P.2d 306, McKinley
v. Am. Dental Mfg. Co. (1988), 232 Mont. 92, 754 P.2d 831, and Lasar v. E.H.
Oftedal & Sons (1986), 222 Mont. 251, 721 P.2d 352, the Workersþ
Compensation Court concluded that attorney fees are not recoverable
pursuant to 39-71-612, MCA (1979), for benefits voluntarily paid
by an insurer prior to trial. The Workersþ Compensation Court also
concluded that rejection of a claimantþs demand when an insurer
lacks adequate documentation does not give rise to a "controversy"
within the meaning of -612, and that since Madill had demanded
conversion of more benefits than he ultimately agreed to accept,
there was no evidence that the State Fund had refused the partial
lump sum advance that it ultimately agreed to pay.
The issue on appeal is whether, based on the facts presented,
and without a court order awarding benefits, the claimant is
entitled to an award of attorney fees and costs pursuant to
39-71-612, MCA (1979).
DISCUSSION
There were no factual issues raised by appeal to the Workersþ
Compensation Court. Neither is there a contention by either party
on appeal from the Workersþ Compensation Court that the findings of
fact made by the hearing examiner for the Department of Labor and
Industry were clearly erroneous. The issue raised on appeal
relates solely to the application of 39-71-612, MCA (1979), to
the undisputed facts in this case. This is a legal issue. We
review the Departmentþs and the Workersþ Compensation Courtþs
conclusions of law to determine whether they are correct. Steer, Inc.
v. Department of Revenue (1990), 245 Mont. 470, 474-75, 803 P.2d 601, 603.
Although the Workersþ Compensation Courtþs conclusions
represent a fair application of our decisions in Lasar, McKinley, and
Field, our role in the application of statutory law is simply to
ascertain and declare what is, in substance, contained in that
statute, and not to insert what has been omitted or to omit what
has been inserted. Section 1-2-101, MCA.
Although the Legislature has amended 39-71-612, MCA, since
1979, we determine whether a claimant is entitled to attorney fees
pursuant to the statute in effect on the date of the claimantþs
injury. Hilbig v. Central Glass Co. (1991), 249 Mont. 396, 399, 816 P.2d
1037, 1039. Section 39-71-612, MCA (1979), provides, in relevant
part:
(1) If an employer or insurer pays or tenders payment of
compensation under chapter 71 or 72 of this title, but
controversy relates to the amount of compensation due and
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the settlement or award is greater than the amount paid
or tendered by the employer or insurer, a reasonable
attorneyþs fee, as established by the division or the
workersþ compensation judge if the case has gone to
hearing, based solely upon the difference between the
amount settled for or awarded and the amount tendered or
paid, may be awarded in addition to the amount of
compensation.
(2) When an attorneyþs fee is awarded against an
employer or insurer under this section there may be
further assessed against the employer or insurer
reasonable costs, fees, and mileage for necessary
witnesses attending a hearing on the claimantþs behalf.
Both the necessity for the witness and the reasonableness
of the fees must be approved by the division or the
workersþ compensation judge.
(Emphasis added.)
There can be no dispute that when, in 1988, Madill demanded
that he be paid at the total disability rate and the State Fund
contended that he was entitled to payment at only the partial
disability rate, there was a controversy over "the amount of
compensation due." Furthermore, we have held that, for purposes of
applying -612, a dispute over whether benefits should be
converted to a lump sum or the amount of that lump sum, and a
dispute about whether a claimant is permanently totally disabled,
as opposed to temporarily totally disabled, are controversies
related to "the amount of compensation due." See Krause v. Sears, Roebuck
& Co. (1982), 197 Mont. 102, 641 P.2d 458; Polich v. Whalenþs OK Tire
Warehouse (1981), 194 Mont. 167, 634 P.2d 1162.
Therefore, we conclude that when the State Fund terminated
Madillþs temporary total disability benefits over his attorneyþs
objection in 1988; when the State Fund, instead of asking for
further documentation, declined to classify Madill as permanently
totally disabled in 1989; and when the State Fund refused to
convert a portion of Madillþs future disability benefits to a lump
sum without first reducing his benefits to present value and
requiring final settlement of all benefits in 1991, controversies
existed over "the amount of compensation due."
Neither is there any question that the amounts for which
these three disputes were ultimately settled were greater than the
amounts originally paid or tendered by the State Fund. Although
the term "settled" is not defined within the Workersþ Compensation
Act, and in spite of the State Fundþs contention that we should
interpret it to mean a final resolution of all rights as between
the parties, the term is commonly understood as it relates to legal
affairs, and does not require a resolution of all rights between
two parties.
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Settlement is defined in Blackþs Law Dictionary 1372 (6th ed.
1990) (citations omitted) as:
Act or process of adjusting or determining; an adjusting;
an adjustment between persons concerning their dealings
or difficulties; an agreement by which parties having
disputed matters between them reach or ascertain what is
coming from one to the other; arrangement of
difficulties; composure of doubts or differences;
determination by agreement; and liquidation. In legal
parlance, implies meeting of minds of parties to
transaction or controversy . . . .
In this case, the parties resolved three separate
controversies by settlement. They resolved their dispute regarding
the amount of benefits to which Madill was entitled in 1988 and
1989; they resolved their dispute about the nature and duration of
Madillþs total disability; and they resolved their dispute about
whether Madill was entitled to a lump sum advance without final
settlement of his claim, and whether the benefits being converted
to a lump sum should be reduced to present value. The principle
legal question on appeal is whether these three settlements
triggered an entitlement to attorney fees pursuant to 39-71-612,
MCA (1979), or whether that statute applies only when the dispute
about the amount of compensation due is resolved by the Workersþ
Compensation Court. While it would appear, from the language of
the statute, that the answer to that question is self-evident, it
is appropriate, in light of this Courtþs previous decisions, to
discuss why we are presented with this issue.
The seminal case on which the Workersþ Compensation Court
relied is Lasar v. E.H. Oftedal & Sons (1986), 222 Mont. 251, 721 P.2d 352.
In that case, the claimant was being paid temporary total
disability benefits when he petitioned the Workersþ Compensation
Court to find him permanently totally disabled and to convert his
benefits to a lump sum. Approximately two and one-half weeks prior
to trial, the defendant conceded permanent total disability, and
the Workersþ Compensation Court denied claimantþs request that his
benefits be converted to a lump sum. In spite of the fact that the
State Fund changed its position regarding the nature of his
disability after his petition was filed, the Workersþ Compensation
Court denied any award of attorney fees or costs. He appealed the
denial of those fees and costs. On appeal, this Court affirmed the
Workersþ Compensation Court. Without discussing the reference to
"settlement" in -612, we held that an award of attorney fees
required a controversy and that the amount "awarded" exceed the
amount paid or tendered. However, as noted, there is no discussion
at all in Lasar regarding that language in -612 which provides for
attorney fees and costs where the amount for which a claim is
"settled" exceeds the amount paid or tendered. It is impossible to
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determine whether the issue raised in this case was raised in Lasar.
In McKinley v. American Dental Manufacturing Co. (1988), 232 Mont. 92, 754
P.2d 831, we considered which of several offers by a defendant/
insurer should be considered as the basis for calculating the
claimantþs attorney fees, where the amount actually awarded by the
Workersþ Compensation Court was greater than any of the defendantþs
offers. We held that an offer made by the State Fund on the eve of
trial would not be considered for purposes of calculating the
attorney fee to which the claimant was entitled. However, we
affirmed an attorney fee for the claimant based on the difference
between an earlier offer and the amount ultimately awarded, even
though the amount ultimately awarded by the court was less than the
amount demanded by the claimant. In McKinley, we did not address the
issue that is raised in this case.
Komeotis v. Williamson Fencing (1988), 232 Mont. 340, 756 P.2d 1153,
was not relied on by the Workersþ Compensation Court, but was
relied on by this Court in Field v. Sears, Roebuck & Co. (1993), 257 Mont.
81, 847 P.2d 306, and therefore, warrants brief consideration. In
Komeotis, we affirmed a denial of attorney fees where the issue of
the claimantþs disability had been conceded prior to trial.
However, in arriving at our conclusion, we relied on Yearout v. Rainbow
Painting (1986), 222 Mont. 65, 719 P.2d 1258, and Lasar. As previously
noted, Lasar does not discuss the "settlement" language in -612.
Yearout was not even concerned with -612. It dealt with the issue
of whether a claimant was entitled to attorney fees pursuant to
39-71-611, MCA (1979), which clearly limits an award of attorney
fees to situations where claims are "adjudged compensable." There
is no further discussion of the attorney fee issue in the context
of -612 in our Komeotis decision.
Finally, the Workersþ Compensation Court relied on our
decision in Field. In Field, the claimant petitioned the Workersþ
Compensation Court to find that he was permanently totally disabled
and entitled to a partial lump sum advance of his disability
benefits. His employer originally denied his claim of permanent
total disability, but conceded that issue approximately three and
one-half weeks prior to the date set for hearing. The Workersþ
Compensation Court awarded an attorney fee based on the lump sum
that it granted, but denied attorney fees and costs in relation to
the permanent total disability issue. On appeal, this Court
affirmed that denial of attorney fees based on our prior decisions
in Lasar and Komeotis. We distinguished our decision in Krause v. Sears,
Roebuck & Co. (1982), 197 Mont. 102, 641 P.2d 458, on the basis that,
in that case, the hearing had begun when the employer conceded that
the claimant was permanently totally disabled. However, as in the
Lasar decision, there is no discussion in the Courtþs majority
opinion in Field regarding that language in 39-71-612, MCA (1979),
which provides for fees and costs when the amount for which a case
is "settled" is greater than the amount paid or tendered.
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We conclude that, to the extent that our prior decisions in
Lasar, Komeotis, and Field have ignored the plain language in
39-71-612, MCA (1979), which provides for an award of attorney
fees and costs where there is a controversy regarding the amount of
compensation due, and where the "settlement" is greater than the
amount paid or tendered, those decisions are reversed. Likewise,
we conclude that the Workersþ Compensation Courtþs order, which
affirmed the Departmentþs order denying Madillþs petition for
attorney fees and costs on the basis that his benefits were not the
result of a court award, was incorrect, and therefore, is reversed.
Furthermore, we conclude that the Workersþ Compensation Court
erred when it determined that there was no "controversy" because
the State Fund lacked adequate information on which to base payment
of the benefits demanded by Madill. In each of the three instances
where benefits were demanded, they were ultimately paid based on
the same information which had been in the State Fundþs possession
when they were denied.
Neither was the Workersþ Compensation Court correct when it
concluded that, because the lump sum paid by the State Fund was
less than the amount originally demanded by the claimant, he was
not entitled to a fee. The fee provided for in -612 is not
conditioned on the amount demanded by the claimant. It is
conditioned on the claimantþs recovery of an amount greater than
the amount "paid or tendered" by the insurer. See, e.g., McKinley, 232
Mont. at 97, 754 P.2d at 834.
Finally, we conclude that the hearing examiner for the
Department of Labor and Industry erred when he held that, even
though the conditions for an award of attorney fees pursuant to
39-71-612, MCA (1979), are otherwise satisfied, the award of fees
and costs to the claimant is discretionary. We have held
otherwise. See Holton v. F.H. Stoltze Land & Lumber Co. (1981), 195 Mont. 263,
270, 637 P.2d 10, 14.
We, therefore, reverse the order of the Workersþ Compensation
Court, and hold that Madill is entitled to an attorney fee based on
the difference between 300 weeks of benefits at his partial
disability benefit rate, and the total disability benefits to which
Madill has been entitled since May 31, 1988, and to which he will
be entitled during the remainder of his life expectancy. The
presumption is that a reasonable basis for the attorney fee award
is Madillþs fee agreement with his attorney. See Wight v. Hughes Livestock
Co., Inc. (1983), 204 Mont. 98, 664 P.2d 303. That agreement provides
for a fee equal to twenty percent of those amounts recovered due to
the attorneyþs efforts. That portion of the fee related to those
amounts which have already been paid is due in a lump sum. Any fee
related to periodic benefits which are owed to Madill in the future
should be paid periodically.
This case is remanded to the Workersþ Compensation Court for
entry of judgment consistent with this opinion.
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/S/ TERRY N. TRIEWEILER
We concur:
/S/ WILLIAM E. HUNT, SR.
/S/ JAMES C. NELSON
/S/ W. WILLIAM LEAPHART
Justice Karla M. Gray, dissenting.
I respectfully dissent from the Court's opinion. Stripped to
its essentials, the Workers' Compensation Court's order concluded
that no controversy existed under 39-71-612, MCA, regarding
Madill's early demands for permanent total disability status
because the State Fund indicated its willingness to reconsider that
status on receipt of additional information and, on receipt of that
information, permanent total disability status was conceded. The
court also concluded that Madill was not entitled to fees under
39-71-612, MCA, relating to the 1991 partial lump sum advance
because he had petitioned for lump sum conversion of all future
benefits and dropped that demand at the time of trial, instead
negotiating a partial lump sum advance which included attorney
fees. I would affirm these conclusions. While time does not
permit a full and complete recitation of my concerns with the
Court's opinion and the bases therefor, I set those concerns out
briefly below.
My primary area of concern with the Court's opinion relates to
its presentation of the so-called undisputed facts. I agree with
the Court that the hearing examiner's findings of fact were not
appealed and, as a result, that they constitute facts for purposes
of this case. I also agree that the parties stipulated to certain
factual and exhibit matters.
Unfortunately, the Court's statement of the so-called
undisputed facts is not confined to either the hearing examiner's
unchallenged findings or the matters stipulated by the parties.
Overall, it is my view that the Court selectively presents certain
facts and omits other pertinent facts; moreover, even as to those
"facts" it chooses to present, some are erroneous, while others are
incomplete. Many are liberally interspersed with implicit or
explicit editorial comment, not to mention legal commentary, which
is far afield from the hearing examiner's findings and from any
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actual undisputed fact. The effect of the Court playing fast and
loose with the facts is exactly as intended: to place a decidedly
negative and inappropriate cast on the State Fund's actions in
order to "set up" the reader for the conclusions the Court later
reaches. Because it apparently would be both fruitless and futile
to set out each instance of the Court's actions in this regard, I
mention only a few, confident that these examples will make clear
both the error contained in the Court's presentation of the facts
and the ultimate error in the Court's conclusions reached by
applying the law to the so-called undisputed facts.
An early example of the Court's inclusion of its own editorial
commentary into the presentation of the so-called undisputed facts
is found in the Court's discussion of the State Fund's actions
following Dr. Sousa's updated report in May of 1988. The Court
correctly states that the updated report was requested by the State
Fund as a follow-up to an earlier report limiting Madill to
sedentary employment. In the updated report, as the Court
observes, Dr. Sousa repeated his view that Madill was "restricted
with regard to his employment capabilities." The Court then begins
its next paragraph, purportedly still discussing facts, as follows:
In spite of that information, and without
establishing that there was employment to which Madill
could return, as required by . . . Coles, . . . .
There is nothing of a factual nature in those opening clauses, and
certainly nothing taken from the hearing examiner's findings. The
"in spite of" phrase is a negative connotation added by the Court
in the midst of supposedly undisputed factual material. In
addition, it goes without saying that the "without establishing the
Coles requirements" comment is legal commentary by the Court
interspersed into purported undisputed facts.
These objectionable commentaries merely obfuscate the actual--
and, in and of itself, neutral--factual situation being presented
in this portion of the Court's opinion; namely, that within two
weeks of receiving the updated report from Dr. Sousa, the State
Fund advised Madill's counsel that because Madill had reached
maximum healing and been retrained, his benefit rate was being
reduced. Moreover, I note, as the hearing examiner found, that the
settlement offer contained in the State Fund's letter to Madill's
counsel--and referred to by the Court--was a continuation of a
settlement offer already "on the table." The Court neglects to
include this information.
An example of the Court's use of selective and incomplete
facts in order to "build its case" against the State Fund from the
outset follows soon after. The Court states that "[o]n October 28,
1988, the attorney for the State Fund rejected a mediator's
suggestion that a Coles analysis be performed." I agree that this
is a fact which is explicitly contained in an exhibit in the fairly
voluminous record in this case. It is clearly a "selective" fact,
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however, intentionally chosen for the negative impact it produces
in the reader. It also is the Court's only reference to the
mediation component of this case which was addressed by the hearing
examiner and whose findings in this regard are totally ignored by
the Court.
The actual facts regarding the mediation are that Madill
petitioned for the mediation following the State Fund's June 9,
1988, rejection of his request to be returned to total disability
status. As the hearing examiner found:
Mediator William Connor issued his recommendation on
October 17, 1988. Mr. Connor did not recommend
reinstatement of TTD or payment of PTD. Despite
disagreements with various aspects of the recommendations
on the part of both parties, the matter was not appealed
to the Workers' Compensation Court.
(Emphasis added.) The Court conveniently omits these facts because
to include them would so clearly undercut its negative depiction of
the State Fund's actions.
Further examples of the Court's faulty presentation of the so-
called undisputed facts in this case abound. In discussing the
parties' ongoing efforts at seeking and providing additional
information, the Court editorializes--in its factual discussion of
the State Fund's referral of Madill to Crawford Rehabilitation
Services for further evaluation--that the State Fund wrote to
Madill's counsel in August of 1989 requesting additional
information "[i]n spite of all the mentioned information." There
is nothing factual about the use of "in spite of."
Shortly thereafter, the Court sets out the State Fund's August
30, 1989, letter stating that it did not agree "at this time" that
Madill was permanently totally disabled and its referral of Madill
to Crawford. The Court then adds, "[i]n the meantime, it had been
necessary for Madill's attorney to continue employing the services
of his own vocational consultant to monitor the investigation and
reports being given by Crawford." The hearing examiner made no
finding that such employment "had been necessary;" he found only
that Madill's counsel had employed a vocational consultant to
maintain contact with Crawford and update him on developments
regarding Madill's employability status.
And so it continues. The Court states that the State Fund's
offer of February 18, 1991, was based on benefits payable to Madill
until age 65; it then adds its combined editorial and legal
commentary in the midst of the so-called undisputed facts by
stating "[i]t did so in spite of the fact that he was entitled to
disability benefits for the remainder of his lifetime." Here, even
more important than the improperly included editorial and legal
commentary, is the Court's plain error in reporting the "until age
65" basis on which the State Fund purportedly calculated its offer.
Contrary to the Court's version of the fact, the letter
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communicating the offer clearly states that the figures were
calculated "for both the time between now and age 65 and the
balance of projected lifetime benefits;" the hearing examiner's
corresponding finding is that the settlement offer was "net of
projected lifetime benefits." To its clear misrepresentation of
both the State Fund's actions and the actual undisputed facts of
record, the Court then adds its editorial and legal commentary.
Still purporting to be presenting undisputed facts, the Court then
inserts its own characterization of the legal effect of a
nonexercised acceptance of the State Fund's offer, matters upon
which the hearing examiner neither found nor concluded.
The Court then "neglects" to include the fact--found by the
examiner--that, after Madill rejected the $90,000 offer and in the
course of subsequent negotiations, "a verbal offer was made to
increase the $90,000 offer by 20% to account for attorney fees, for
a total offer of $108,940.80." The record reflects that this offer
was extended in May of 1991. Neither the record nor the examiner's
findings reflect any response by Madill to this offer prior to
filing his petition in the Workers' Compensation Court, in July of
1991, for partial conversion of future benefits to a lump sum.
Thus, at the time of that petition, the State Fund's offer was in
excess of $108,000 and it had been "on the table" for approximately
two months.
A final example of the Court's mistreatment of the facts in
this case is its paragraph about Madill's petition for partial
conversion and the settlement reached in that regard. Having
failed to set forth important facts regarding the State Fund's
latest offer and the short period of time between that offer and
the petition, the Court then "neglects" to include the fact--as
found by the hearing examiner--that $21,903.60 of the partial lump
sum conversion to which Madill and the State Fund agreed was "for
payment of attorney fees and costs incurred over the period of the
attorney/client relationship." The Court also fails to include the
facts that the agreement was not approved by the Employment
Relations Division until January 3, 1992, and that--three months
thereafter--Madill's counsel requested that the State Fund pay
attorney fees and costs totaling just over the $21,903.60 amount
contained in the lump sum conversion for that express purpose.
Perhaps the Court somehow fails to see any relevance in the
actual undisputed facts of this case vis-a-vis the attorney fee
issue before us. Perhaps the actual facts are simply too
"inconvenient" to be noticed by the Court. In any event, as I
indicate briefly below after a short digression relating to legal
principles, the actual undisputed facts do not comport with the
results the Court produces on each of the three attorney fee
subissues.
I begin this portion of my discussion by stating without
equivocation that I agree with the "plain language" principles set
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forth by the Court and with the dictionary definition of "settled"
which it advances. As a result, I also agree with the Court that,
had the Workers' Compensation Court denied claimant's petition for
attorney fees solely on the basis that his benefits were not the
result of a court award, such a denial would have constituted
reversible error. As set forth at the outset of this opinion,
however, the court concluded that Madill was not entitled to fees
for additional reasons which are further addressed below.
Moreover, while I agree with the Court that, pursuant to our case
law, the award of attorney fees under 39-71-612, MCA, is not
discretionary and that the Department erred in concluding
otherwise, the Workers' Compensation Court did not affirm that
portion of the Department's order denying fees; thus, that issue is
not before us in this case.
I also agree with the Court that, at certain points in time,
"controversies" existed between Madill and the State Fund with
regard to: 1) reinstating him to temporary total disability; 2)
whether he was permanently totally disabled; and 3) the lump sum
conversion. I disagree with the Court's attempt to interpret the
statutory word "settled" in a vacuum in these regards by refusing
to recognize any element relating to when and how the parties
reached resolution of the issues, and I address the Court's
application (or lack thereof) of the law to the actual facts of
this case further below.
Before doing so, however, it is important that I state my
disagreement with the Court's overruling of three decisions "to the
extent [they] have ignored the plain language in 39-71-612, MCA,"
regarding settlement. All else aside, "to the extent" overrulings
generally give little guidance to practitioners or trial courts as
to precisely what is being overruled. That is particularly true
here, where a fair reading of at least Lasar and Komeotis makes it
clear that no issue regarding "settlement" was raised and, as a
result, no such issue was addressed by this Court in those cases.
Under such a circumstance, criticizing those decisions for
"ignoring" the statutory language seems absurd. Nor is there any
apparent reason for overruling decisions which did not raise or
address an issue merely because this case does address that issue.
Unfortunately, time does not permit a more thorough statement of
why I believe that the Court is in error in overruling these cases,
as it is more important to return to how the Court disposes of the
three attorney fee subissues before us.
The Court does not apply the principles it sets forth to the
actual undisputed facts in this case. Indeed, it only minimally
bothers with facts at all in its resolution of the subissues after
stating that "the parties resolved three separate controversies by
settlement." The only "factual" statement about this case which
appears thereafter is that "[i]n each of the three instances where
benefits were demanded, they were ultimately paid based on the same
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information which had been in the State Fund's possession while
they were denied." This single "factual" statement is simply not
true.
With regard to Madill's status during the 1988-89 period, the
facts and record are clear that the parties were in close contact
throughout the period, with the State Fund making--and remaking--
its determinations based on frequently updated information from
Madill. After the State Fund's reclassification of Madill in May
of 1988, based on his maximum healing and retraining, Madill sought
mediation of the issue and the mediator "did not recommend
reinstatement of TTD or payment of PTD." Thereafter, Madill
supplied yet another updated report from Dr. Sousa. Because that
report did not take into account Madill's retraining in human
services at Flathead Valley Community College, the State Fund
advised that Madill's vocational information was incomplete. In
response, Madill forwarded a rehab consultant's report in August of
1989 which concluded that Madill's retraining had not enhanced his
employability and that he was "not employable in his normal labor
market." On August 30, 1989, within two weeks of receipt of this
report, the State Fund determined to reinstate Madill's temporary
total disability benefits retroactive to the date of their
termination. Given this record, it is beyond my imagining how the
Court can state that the State Fund reinstated Madill to temporary
total disability in August of 1989 based on the same information in
its possession when it terminated those benefits and reclassified
him in May of 1988.
The same is true of the Court's statement that the State Fund
conceded in 1991 that Madill was permanently totally disabled based
on the information in its possession in August of 1989. In this
regard, the record is clear that when it reinstated Madill to TTD,
the State Fund disagreed "at this time" that Madill was entitled to
permanent total disability benefits. The State Fund then referred
Madill to Crawford for further rehab evaluation. Following Dr.
Sousa's disapproval of the job suggested by the Crawford rehab
consultant, the State Fund conceded that Madill was permanently
totally disabled. Again, the ultimate decision clearly was not
based on the information in the State Fund's possession in August
of 1989.
Finally, with regard to the lump sum issue, the Court
suggests--without ever referring to facts--that the partial lump
sum conversion to which Madill and the State Fund agreed in 1991
was greater than the amount paid or tendered by the insurer. The
genesis of this notion cannot be ascertained from the Court's
opinion and I will not attempt to posit the path by which the Court
arrived at it. The facts relating to this subissue, however, are
as follows.
Immediately following the State Fund's determination in
January of 1991 that Madill was permanently totally disabled,
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Madill requested the lump sum conversion of all of his future
benefits. The State Fund was not interested in a total conversion
without a full settlement of Madill's case (and the law does not
require otherwise). By early March of 1991, the State Fund had
made a settlement offer and Madill had rejected it. The State Fund
increased the settlement offer to approximately $108,000--including
attorney fees--in May of 1991 and Madill did not respond or present
a different proposal for consideration. Instead, in July of 1991,
Madill petitioned the Workers' Compensation Court for a lump sum
conversion of all of his future benefits. At the time of trial
several months later, Madill dropped that request and the parties
negotiated and agreed on a partial lump sum conversion in the
amount of approximately $68,000, including attorney fees.
In short, the parties were attempting to accomplish different
things from the outset. Madill started with a request and petition
for a total lump sum conversion and ended up agreeing with the
State Fund on a partial lump sum conversion. The State Fund began
by desiring a total settlement, offered in the amount of $108,000,
and settled with Madill on a partial lump sum conversion in the
amount of $68,000. How this meets the requirements of 39-71-612,
MCA, of a settlement in excess of any amount tendered by the State
Fund is not explained by the Court. It is my view that the Court
is simply in error, and unwilling to apply its legal principles to
the facts of this case. In addition, of course, the anomaly--to
state it gently--of now awarding attorney fees which were agreed
upon and paid as part of the partial lump sum conversion, is never
explained--or even referred to--by the Court.
I dissent.
/S/ KARLA M. GRAY
Justice Charles E. Erdmann joins in the foregoing dissenting
opinion.
/S/ CHARLES E. ERDMANN
Chief Justice J. A. Turnage joins in the foregoing dissenting
opinion.
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/S/ J. A. TURNAGE
Justice Terry N. Trieweiler specially concurring.
I concur with the majority opinion in order to respond to the
dissenting opinion without unnecessarily cluttering this Courtþs
decision.
It is difficult for me to understand the reason for the
dissent or the point that it makes.
The author agrees that the Departmentþs hearing examiner erred
when he concluded that, even if the other elements of 39-71-612,
MCA (1979), are satisfied, an award of attorney fees is
discretionary.
The author agrees that the Workersþ Compensation Court erred
when it concluded that -612 did not apply to settlements.
Certainly the dissent does not disagree that there was a
controversy over the amount of benefits due the claimant. The
State Fund terminated Madillþs temporary total disability benefits;
decided he was only entitled to partial disability benefits;
offered him 300 weeks of partial disability benefits at the rate of
$99 a week; and refused, in spite of repeated demands, to restore
him to a total disability status. During all of that time, the
claimant, through his attorney, contended that he was permanently
totally disabled and entitled to lifetime benefits at the rate of
$154.63 per week. How could that disagreement not give rise to a
controversy?
Certainly the dissent does not disagree that this case was
settled. Both parties signed a petition for approval of their
settlement agreement.
Finally, the dissent cannot disagree that the amount for which
the claim was settled was greater than the amount paid or tendered
by the State Fund. The State Fund offered to settle claimantþs
case for benefits equal to $29,700. After protracted delay,
substantial expense, and time-consuming effort on the part of
claimantþs attorney, he ultimately settled his claim for $225,000.
Whether there were intervening offers, and how many intervening
offers were made, is irrelevant. The fact that there was a
controversy, the controversy was settled, and the amount received
in settlement was greater than the amount paid or tendered, is all
that was necessary pursuant to the plain language of 39-71-612,
MCA (1979), to warrant reimbursement to the claimant for the
attorney fees and costs that he incurred to compel the State Fund
to pay him the benefits to which he was entitled in the first
place.
On a strictly legal basis, aside from what has been discussed
so far in this concurring opinion, nothing further is necessary.
However, because of the nature of the rhetoric in the dissenting
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opinion, the following response is made to the dissentþs factual
allegations. I will try to confine the response to specific
accusations by the dissent that facts were reported erroneously in
the majority opinion. It is impossible to respond to general
statements to the effect that certain facts have been omitted, some
facts are erroneous, and others are incomplete.
Neither will I try to respond to complaints by the dissent
that the majority opinion includes editorial comments. Matters of
style are not normally the focus of debate between the majority and
minority on this Court, and I would prefer to keep it that way.
First, reference to the Coles decision is not extraneous to the
issues raised by the parties on appeal. The State Fund terminated
Madillþs temporary total disability benefits. He demanded that
they be reinstated. The State Fund argued on appeal that that
termination did not give rise to a controversy within the meaning
of -612 because Dr. Sousaþs report established that he had
reached maximum healing and could perform some kind of sedentary
labor. Therefore, the State Fundþs position was that it had a
right to reduce his benefits until he proved that there was no
occupation to which he could return. In Coles, which had been
decided by the Workersþ Compensation Court prior to the date of the
State Fundþs action, the Workersþ Compensation Court held, and we
later affirmed, that once an injured employee reaches maximum
healing and cannot return to his normal labor market, he has
established the probability of "no reasonable prospect of
employment" within the meaning of the total disability statute, and
therefore, the burden shifts to the insurer to demonstrate that
other suitable work is available. In order to so do, the insurer
must establish the following facts:
1. A physicianþs determination that claimant is as far
restored as the permanent character of his injuries will permit;
2. A physicianþs determination of the claimantþs physical
restrictions;
3. A physicianþs determination that claimant can return to
some form of employment based on evidence that the physician is
familiar with the duties of that employment; and
4. Notice to the claimant that the physicianþs report has
been received, with a copy of the report attached to the notice.
Wood v. Consolidated Freightways (1991), 248 Mont. 26, 30, 808 P.2d 502,
505; Coles v. Seven-Eleven Stores (1985), 217 Mont. 343, 347-48, 704 P.2d
1048, 1051.
The point of the Coles reference was to illustrate that this
was not simply a situation where the claimant had not documented
his temporary total disability. That situation had been documented
to the extent that claimant could at that point. Further
documentation, which was prerequisite to termination of total
disability benefits, was the burden of the State Fund. Likewise,
the only purpose for referring to the mediatorþs recommendation was
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to illustrate that the State Fund was aware of its responsibilities
pursuant to the Coles decision, and chose not to comply with them.
Therefore, this was not a simple situation where the State Fund was
simply awaiting further documentation by the claimant. It was a
controversy created by the State Fundþs failure to perform its own
obligations. Nothing else about the mediatorþs recommendation was
relevant to the issues raised in this case. It was not necessary
that Madill prove the State Fund acted unreasonably in order to
recover attorney fees and costs pursuant to -612, as it existed
in 1979.
Next, the dissent asserts that the majority opinion
mischaracterizes the State Fundþs February 18, 1991, letter to
Madillþs attorney. The majority opinion states that the State
Fundþs offer was based on benefits to which Madill was entitled
until age sixty-five. The dissent contends that the offer was
based on benefits to which Madill was entitled over the remainder
of his lifetime. Which contention is correct is a matter of
interpretation. One conclusion is supported by the actual dollar
amounts involved, another conclusion could arguably be arrived at
based on the language in the letter. However, neither conclusion
is particularly relevant. Under either scenario, Madill was
offered less than he was entitled to and less than he ultimately
received in settlement. The total of benefits to which he was
entitled until age sixty-five was $120,728.40. The total amount
over his lifetime was $225,359.68. The State Fundþs offer was
$90,000, and therefore, did not equal either amount. If the State
Fundþs offer was based on lifetime benefits, then why was it
necessary to calculate what he was entitled to until age
sixty-five? The point, however, is that this interpretive
disagreement is totally irrelevant to the majorityþs ultimate
conclusion.
Neither is it relevant that, at some point later in the
negotiations, the State Fundþs settlement offer was increased by
twenty percent. Any increase followed the original controversy,
was another offer of final settlement, and only resulted from the
efforts of Madillþs attorney.
Next, the dissent finds some significance to the fact that a
portion of the lump sum advance which was made by the State Fund
was for the purpose of paying attorney fees. The suggestion is
that an award of attorney fees, pursuant to -612, would duplicate
what has already been paid. That suggestion shows a complete
misunderstanding of the purpose for Madillþs petition and the
existence of -612.
The attorney fees which have been paid in this case were paid
from a conversion of Madillþs future disability benefits which are
necessary for his and his familyþs support. They were not paid by
the State Fund, as required by -612. They were paid by Madill.
The purpose of this petition is to reimburse him for attorney fees
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that he had to pay out of money that is necessary to pay for his
groceries, his transportation, and his home because the expense was
only necessary due to the State Fundþs denial of the benefits to
which he was entitled. The dissent is absolutely correct, however,
when it observes that the majority fails to see any relevance in
the fact that Madill has previously received a lump sum advance of
future disability benefits in order to pay his attorney. It is not
that those facts are "inconvenient"; it is simply that they have
nothing to do with the issues in this case.
Next, the dissent suggests that the August 1989 report from
National Rehabilitation Consultants was the first vocational report
sent to the State Fund which documented that Madill was not
employable in his normal labor market. The suggestion that it was
Madillþs burden to provide any vocational report ignores the Coles
requirements previously set forth in this opinion. However, it
also ignores the fact that on May 25, 1988, approximately one week
after receiving notice that his total disability benefits would be
terminated, Madillþs attorney forwarded a report from National
Rehabilitation Consultants which concluded that placement of Madill
in employment would be "very difficult, if not impossible." It
also ignores the fact that by July 6, 1989, Dr. Sousa had notified
the State Fund that he doubted Madill was employable in a regular
occupation. It is for these reasons that any additional vocational
rehabilitation reports were cumulative and did not provide
information in addition to what the State Fund already knew very
early in the course of its controversy over the amount of benefits
owed to Madill. It is because of these facts that the majority
opinion is absolutely correct when it states that benefits were
ultimately paid based on the same information which had been in the
State Fundþs possession while they were denied.
Finally, the dissent disagrees with the Courtþs conclusion
that the lump sum conversion, which was ultimately paid to Madill,
was greater than any amount paid or tendered by the insurer. The
dissent suggests that further facts are necessary. Well, here they
are.
First of all, no lump sum was ever paid or tendered to Madill
before the settlement that was finally agreed upon. As we noted in
Hilbig v. Central Glass Co. (1991), 249 Mont. 396, 406-08, 816 P.2d 1037,
1043-45, there is a big difference between an offer conditioned on
the waiver of some right which does not have to be waived, and a
simple payment or tender of benefits. However, even if we assume,
for purposes of argument, that an offer was sufficient, $29,700 is
less than an advance of $69,000 with an agreement that the
remainder of Madillþs lifetime total disability benefits would be
paid periodically. In other words, $225,000 is worth more than
$30,000. It is also more than $90,000, and finally, if the last
offer is relevant, it is worth more than $108,000.
The dissent suggests that because Madill agreed to something
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less than he had originally demanded, -612 is, for some reason,
not applicable. However, as pointed out in the majority opinion,
there is no condition in -612 which requires that before a
claimant is entitled to attorney fees, he must recover by either
settlement or award the amount of his original demand. The
condition to attorney fees is simply that he recover more than was
paid or tendered by the insurer.
The dissent concludes that it is not necessary to overrule
Lasar or Komeotis because they did not deal with the issue with which
this case is concerned. Presumably, the Workersþ Compensation
Court would disagree. Lasar is one of the opinions relied on by the
Workersþ Compensation Court for its conclusion that 39-71-612,
MCA (1979), did not apply to cases which were settled. Komeotis is
one of the opinions relied on by the author of the dissent when she
authored the Field case. If it is so clear that Komeotis is not
applicable to the facts in this case, then it is curious why it was
relied on in Field to support the exact opposite conclusion arrived
at in this case.
In summary, while the dissent nitpicks the majorityþs
interpretation of records which were admitted without objection,
and facts which were agreed upon or found by the hearing examiner,
there is no suggestion in the dissent how any of these
disagreements are relevant to the ultimate outcome of this case.
The statute we have been asked to construe is very clear and
straightforward. It has been applied in the manner that it was
written, and creative arguments to the contrary notwithstanding,
that is what this Court is obliged to do.
/S/ TERRY N. TRIEWEILER
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