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No. 01-126
IN THE SUPREME COURT OF THE STATE OF MONTANA
2001 MT 284
RANDAL L. OLSON and PAMELA A.
OLSON, d/b/a BRIMSTONE CREEK RANCH,
Plaintiffs and Respondents,
v.
STEVE DAUGHENBAUGH,
Defendant and Appellant.
APPEAL FROM: District Court of the Nineteenth Judicial District,
In and for the County of Lincoln,
Honorable Michael C. Prezeau, Judge Presiding
COUNSEL OF RECORD:
For Appellant:
William A. Douglas, Douglas Law Firm, P.C., Libby, Montana
For Respondents:
Robert T. Bell, Reep. Spoon & Gordon, P.C., Missoula, Montana
Submitted on Briefs: August 9, 2001
Decided: December 20, 2001
Filed:
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__________________________________________
Clerk
Justice . William Leaphart delivered the Opinion of the Court.
¶1 Steve Daughenbaugh (Daughenbaugh) appeals from the Nineteenth Judicial District
Court's award of summary judgment to Randal L. Olson and Pamela Olson (Olsons) in
their declaratory judgment action. We affirm.
¶2 The following issue is presented on appeal:
¶3 Does § 39-71-515, MCA, permit an injured employee of an uninsured employer to
collect from the employer the amount of compensation the employee would have received
had the employer been properly insured if the employee has admittedly received all of the
workers' compensation benefits to which he is entitled from the State of Montana
Uninsured Employers' Fund?
FACTUAL AND PROCEDURAL BACKGROUND
¶4 The parties agree that the material facts of this case are undisputed. The Olsons own
Brimstone Creek Ranch (the Ranch) in north Lincoln County near Trego, Montana.
Daughenbaugh began working at the Ranch as a ranch hand, and in April 1995
Daughenbaugh was thrown from a horse and injured while performing ranch duties. The
Olsons did not carry workers' compensation insurance on Daughenbaugh. However, in
October 1995 the parties negotiated a settlement agreement in which the Olsons agreed to
pay Daughenbaugh's salary and medical expenses and to allow him to live on the ranch
and continue his duties there for a specific period of time. In turn, Daughenbaugh signed a
general release and indemnification agreement releasing all claims against the Olsons and
agreeing to indemnify them against any claims arising from his injury.
¶5 Notwithstanding the general release and indemnity agreement, Daughenbaugh filed a
claim for workers' compensation benefits with the Montana Department of Labor and
Industry. Since the Olsons were uninsured, the Montana Uninsured Employers' Fund
(UEF) processed the claim and paid wage loss and other benefits to Daughenbaugh.
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¶6 On August 22, 1997, the Olsons filed a lawsuit seeking declaratory relief in the form of
an order holding that the general release and indemnity agreement Daughenbaugh signed
was valid and enforceable. Daughenbaugh responded that the agreement was
unenforceable, and he filed a counterclaim alleging that, pursuant to the independent cause
of action provided in § 39-71-515, MCA, he was entitled to recover directly from the
Olsons damages in the amount of compensation that he would have received had the
Olsons been properly enrolled in a workers' compensation insurance plan. Daughenbaugh
also alleged negligence against the Olsons.
¶7 On May 20, 2000, Daughenbaugh filed a Petition/Order for Compromise and Release
Settlement with the Workers' Compensation Court (Petition). In the Petition,
Daughenbaugh agreed to accept the sum of $5,000 from the Olsons for attorney's fees and
$38,820.88 from the UEF (inclusive of sums already paid by the UEF) and to fully release
and discharge the Olsons and the UEF from all obligations for benefits under the Workers'
Compensation Act. Daughenbaugh acknowledged that the $38,820.88 represented his full
entitlement to workers' compensation benefits arising from the injury had the Olsons been
properly enrolled in a compensation plan. The Olsons agreed to reimburse the UEF in the
amount of $38,820.88 plus pay a $2400 penalty for their failure to enroll in a proper
workers' compensation plan.
¶8 Finally, Daughenbaugh agreed to dismiss his pending negligence action against the
Olsons. However, he reserved the portion of his counterclaim described above alleging
that he was entitled to direct compensation from the Olsons under § 39-71-515, MCA. The
parties agreed to resolve this issue in the district court. The District Court's decision
granting the Olsons summary judgment on this issue is now before the Court.
DISCUSSION
¶9 Does § 39-71-515, MCA, permit an injured employee of an uninsured employer to
collect from the employer the amount of compensation the employee would have received
had the employer been properly insured if the employee has admittedly received all of the
workers' compensation benefits to which he is entitled from the State of Montana
Uninsured Employers' Fund?
¶10 The District Court's conclusion that the doctrine of res judicata prevents an injured
worker from being awarded duplicate compensation in competing forums is a conclusion
of law. We review a district court's conclusion of law to determine if it is correct.
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Neustrom v. Dept. of Labor & Industry (1997), 283 Mont. 179, 182, 939 P.2d 990, 992.
¶11 Daughenbaugh's claim rests upon § 39-71-515, MCA, which provides in pertinent part:
(1) An injured employee or the employee's beneficiaries have an independent cause
of action against an uninsured employer for failure to be enrolled in a compensation
plan as required by this chapter.
....
(4) The amount of recoverable damages in such an action is the amount of
compensation that the employee would have received had the employer been
properly enrolled under compensation plan No. 1, 2, or 3.
(5) A plaintiff who prevails in an action brought under this section is entitled to
recover reasonable costs and attorney fees incurred in the action, in addition to his
damages.
¶12 The District Court held that under the doctrine of res judicata and our decision in
Neustrom, 283 Mont. at 186, 939 P.2d at 994, Daughenbaugh was not entitled to receive
the benefits he would have received from the Olsons in an independent action pursuant to
§ 39-71-515, MCA, since he had, admittedly, already received these benefits from the
UEF. The court stated, "Daughenbaugh is not now entitled to go back to a different forum
to recover the same benefits he already received when the Workers' Compensation Court
approved his settlement with the UEF. . . . It is not the intent of the law to punish a
noncomplying employer by requiring the employer to twice pay benefits and attorney fees
for the same injury."
¶13 On appeal, Daughenbaugh argues that this is precisely the intent of the law. Pursuant
to the plain language of § 39-71-515, MCA, and Thayer v. Uninsured Employers' Fund,
1999 MT 304, 297 Mont. 179, 991 P.2d 447, Daughenbaugh claims that he may pursue an
independent action against the Olsons regardless of the fact that the UEF paid him his full
entitlement to workers' compensation benefits. Daughenbaugh contends that there is
nothing in a fair reading of § 39-71-515, MCA, which bars pursuit of an independent
cause of action if the injured employee has already received benefits from the UEF.
Furthermore, Daughenbaugh insists that the action provided for in § 39-71-515, MCA, is a
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"powerful and new" cause of action independent of any other statutory scheme under the
Workers' Compensation Act.
¶14 The Olsons, on the other hand, contend that the District Court's conclusion of law on
this issue is correct. They maintain that Daughenbaugh already received his full
entitlement to workers' compensation benefits from the UEF, and that the Olsons agreed to
repay the UEF for these sums, pay a penalty fee, and pay $5000 for Daughenbaugh's
attorney's fees. The Olsons assert that they have "paid their penance." In addition, they
dispute Daughenbaugh's claim that § 39-71-515, MCA, is independent from other workers'
compensation statutes, and the Olsons argue that according to the legislative history of §
39-71-515, MCA, and our decisions in Thayer and Neustrom, Daughenbaugh is not
entitled to "double dip" workers' compensation benefits.
¶15 We agree. Daughenbaugh seeks full compensation for his work-related injury twice-
once from the UEF and again from the Olsons. We hold that § 39-71-515, MCA, does not
allow for a double recovery of workers' compensation benefits.
¶16 At the outset, we address Daughenbaugh's contention that § 39-71-515, MCA, is a
"powerful and new" cause of action independent of any other statutory scheme. This is
simply not the case. Rather, § 39-71-515, MCA, is part of the Workers' Compensation Act
under § 39-71-101, MCA. It represents one component of a comprehensive workers'
compensation scheme which provides a quid pro quo for employers who enroll in a
workers' compensation plan and imposes significant and specific penalties upon employers
who do not. See Buerkley v. Aspen Meadows Ltd. Partnership, 1999 MT 97, ¶ 16, 294
Mont. 263, ¶ 16, 980 P.2d 1046, ¶ 16; §§ 39-71-504, -507 and -509, MCA (providing
penalties for uninsured employers). Where there are several statutory provisions or
particulars, the Court construes them, if possible, to give effect to all. Section 1-2-101,
MCA. Accordingly, we construe § 39-71-515, MCA, in conjunction with other relevant
workers' compensation provisions.
¶17 Having said that, Montana employees, under the Workers' Compensation Act, have
several options for recovery when they are injured at work and their employer is
uninsured. Section 39-71-508, MCA, coordinates these remedies. It states that an injured
worker may pursue all remedies concurrently, including but not limited to: (1) a claim for
benefits from the uninsured employers' fund; (2) a damage action against the employer in
accordance with § 39-71-509, MCA; (3) an independent action against an employer as
provided in § 39-71-515, MCA; or (4) any other civil remedy provided by law. Section 39-
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71-508, MCA. The plain language of this section indicates an injured employee may
pursue these remedies concurrently-not duplicatively, as Daughenbaugh suggests. Indeed,
Daughenbaugh's rationale would lead to the absurd result that an injured employee could
be compensated four or more times for his injury. This Court has previously held that
when construing statutes, the interpretation should be reasonable to avoid absurd results.
Doting v. Trunk (1993), 259 Mont. 343, 351, 856 P.2d 536, 541.
¶18 Furthermore, despite Daughenbaugh's assertions to the contrary, there is no indication
that the legislature intended to provide for a "double recovery" when permitting an injured
employee to concurrently seek benefits from the UEF and the uninsured employer. On
February 11, 1985, the House Judiciary Committee held a hearing on House Bill No. 529
regarding proposed statutory amendments drafted to address the compensation problem
that injured employees of uninsured employers faced due to the UEF's insolvency. A
proponent of House Bill No. 529 stated that the intent behind permitting concurrent
actions in § 39-71-508, MCA, was to "take away incentive from employers not to cover
and provide an injured person three ways to try to get compensated for their injuries with
the understanding that he is only going to be compensated one time." See testimony of
Karl Englund, minutes of hearing on HB 529, House Judiciary Committee, February 11,
1985, p. 5 (emphasis added).
¶19 Our previous decisions mirror this rationale. In Thayer v. Uninsured Employers' Fund,
a workers' compensation claimant received a $100,000 settlement from her husband's
uninsured employer. Thayer, ¶ 9. Subsequently, the UEF discontinued payment of her
death benefits under § 39-71-511, MCA, a setoff provision requiring a claimant to
discharge her remaining claims against the UEF if she receives such a settlement. Thayer,
¶ 10. We held that the claimant was not entitled to recover from both the UEF and the
uninsured employer because the Uninsured Employers' Fund is merely a safety net which
stands in the place of the uninsured employer, and the setoff provisions are uniquely
necessary to assure some payment to as many uninsured employees as possible. Thayer,
¶¶ 22, 24. Consequently, a double recovery was not permitted.
¶20 Daughenbaugh, however, encourages the Court to focus its attention on the timing of
events in Thayer rather than the general proposition that a double recovery is forbidden.
He claims that here, unlike in Thayer, the UEF paid all the benefits to which he was
entitled before he sought a settlement from the Olsons, and, as such, a double recovery in
this case is just. However, our decision in Neustrom, which Daughenbaugh fails to
address, explains that regardless of the timing of events, a double recovery is not
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permitted.
¶21 In Neustrom, an injured employee filed a claim for workers' compensation benefits
alleging that he was Neustrom's employee at the time he was injured. Neustrom, 283
Mont. at 181, 939 P.2d at 991. He also filed a § 39-71-515, MCA, independent action
against Neustrom. Neustrom, 283 Mont. at 181, 939 P.2d at 991. Following the UEF's
determination that the alleged employee was in fact Neustrom's employee, Neustrom
petitioned the District Court to vacate this finding. Neustrom, 283 Mont. at 181-82, 939
P.2d at 991-92. We held that the District Court lacked jurisdiction to vacate the decision of
the UEF. We concluded that, under Montana's Workers' Compensation Act, the
employee's independent action and claim for unemployment benefits proceeded along two
separate and exclusive tracks: the independent action in the district court and the
unemployment benefits action in the Workers' Compensation Court. Neustrom, 283 Mont.
at 186, 939 P.2d at 994. Furthermore, we stated:
The Act's plain requirement that the Workers' Compensation Court decide issues
related to UEF claims and the district court decide issues related to the "independent
action" will not, as is impliedly argued in the briefs, create potentially inconsistent
results. The claimant must initiate both claims and is bound by principles of res
judicata or collateral estoppel by the decision of the first venue to arrive at a
decision. The claimant must take that reality into consideration when making a
decision about which claim to file, or the timing of each claim.
Neustrom, 283 Mont. at 186, 939 P.2d at 994.
¶22 The doctrine of res judicata is grounded on the principle that litigation must at some
point come to an end. It bars the relitigation of an entire cause of action once a final
judgment has been entered. Res judicata applies if: (1) the parties or their privies are the
same; (2) the subject matter of the action is the same; (3) the issues are the same and relate
to the same subject matter; and (4) the capacities of the persons are the same in reference
to the subject matter and to the issues. Holtman v. 4-G's Plumbing & Heating, Inc. (1994),
264 Mont. 432, 436, 872 P.2d 318, 320.
¶23 Here, under §§ 39-71-508 and -515, MCA, Neustrom and the doctrine of res judicata,
Daughenbaugh could pursue a claim for benefits from the UEF and an independent action
against the Olsons at the same time. However, Daughenbaugh was bound by the decision
of the first venue to arrive at a decision-here, the UEF's decision to pay Daughenbaugh the
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full the amount of compensation that he would have received had the Olsons been
properly insured.
¶24 Accordingly, we hold that the District Court correctly concluded that § 39-71-515,
MCA, does not permit an injured employee of an uninsured employer to collect from the
employer the amount of compensation the employee would have received had the
employer been properly insured if the employee has admittedly received all of the
workers' compensation benefits to which he is entitled from the State of Montana
Uninsured Employers' Fund. We affirm the District Court's grant of summary judgment to
the Olsons.
/S/ W. WILLIAM LEAPHART
We concur:
/S/ KARLA M. GRAY
/S/ PATRICIA COTTER
/S/ TERRY N. TRIEWEILER
/S/ JIM RICE
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