Elwell v. American Smelting & Refining, Inc.

No. 85-22

IN THE SUPREME COURT O F THE STATE OF MONTANA
1985

ALFRED M. ELWELL ,

C l a i m a n t and A p p e l l a n t ,

AMERICAN SMELTING AND R E F I N I N G , I N C . ,
(ASARCO) ,
E m p l o y e r , D e f e n d a n t and
Respondent.

APPEAL FROM: T h e Workers' C o m p e n s a t i o n C o u r t , T h e H o n o r a b l e
T i m o t h y R e a r d o n , Judge p r e s i d i n g .

COUNSEL OF RECORD:

For Appellant:

Utick, G r o s f i e l d & Uda; Joan A. Uda, Helena, Montana

For R e s p o n d e n t :

Hughes, K e l l n e r , S u l l i v a n & Alke; S t u a r t L. Kellner,
Helena, Montana

S u b m i t t e d on B r i e f s : Oct. 3, 1985

Decided: December 31, 1 9 8 5

Filed :lftj; 1 1985
;j

Clerk
Mr. Justice John C. Sheehy delivered the 0pini.on of the
Court.

Alfred Elwell appeals from a December 12, 1984, judgment
of the Workers' Compensation Court that determined Elwell's
employer, ASARCO, was entitled to subrogation against
Elwell's third party settlement from Anthony Strainer, a
co-employee. The judgment of the Workers' Compensation Court
is remanded for further proceedings.
The parties agree on the following facts:
ASARCO is a self-insured employer under Conpensation
Plan I. of the Workers ' Compensation Act (hereinafter the
Act). On October 17, 1979, Elwell suffered an industrial
injury while working at the ASARCO plant in East Helena,
Montana. ASARCO supplied stannic oxychloride to test
respirator masks for leakage. The chemical was to be blown
around the outside of the mask while a worker was wearing a
respirator; a leak would cause the worker to cough, showing a
need to refit the mask. Anthony Strainer, a co-employee who
was then the plant OSHA officer, unscrewed the respirator
hoses from Elwell's oxygen tank and squirted stannic
oxychloride, a toxic gas, into claimant's respirator.
Neither Elwell nor Strainer were testing at the time the
injury occurred. Strainer, acting without Elwell's
knowledge, squirted the chemical into the respirator as a
practical joke.
Elwel.1 suffered serious, disabling injuries to his
bronchial system as a result and has not been gainfully
empl-oyed since October 17, 1979. ASARCO accepted liability
for the claim and paid Workers' Compensation benefits of
$41,269 temporary disability, $198 per week permanent
disability and $4,639 medical.
In October 1981, pursuant to S 39-71-413, MCA, Elwell
sued Strainer alleging that Strainer's intentional and
maLicious act caused Elwel-1's injury. Elwe11 also named
ASARCO as a defendant, but that claim was dismissed because
the provisions of the Act were determined to be Elwell's
exclusi ve remedy from ASARCO. ASARCO elected not to
participate in the cost of the action against Strainer, thus
waiving 50% of the subrogation rights granted by statute.
Section 39-71-414 (2)(c).
Prompted by Elwell's suit, Straj-ner's homeowner's
insurance company, Millers Mutual Insurance Company, sought a
declaratory judgment that Strainer's act was intentional and
therefore not covered under the homeowner's insurance policy.
This Court held that the Millers' Mutual policy provided
coverage. Miller Mutual Insurance Co. v. Strainer (Mont.
1983), 663 P.2d 338, 40 St,Rep. 743.
Elwell then negotiated a settlement of his claim against
Strainer for $50,000, the policy limits. Elwe11 incurred
attorneys' fees of $16,500 and costs of $30 leaving a net
recovery of $33,470. The parties agreed that pursuant to S
39-71-414 (2)(d), MCA, Elwell was entitled to one-third, or
$11,157. ASARCO asserted a subrogation right to the $22,313
balance, but Elwe11 disagreed. The parties invested the
disputed money in a tax-exempt money market. fund. The
balance of that account, which continues to draw interest at
a variable rate, was $24,139 as of July 16, 1984.
The Workers' Compensation Court, citing S 39-71-414,
MCA, ruled that ASARCO was statutorily entitled to
subrogation for the $22,313 but gave Elwell the interest
earned.
Elwell appeals, raising two issues:
Issue No. 1. Did ASAR.CO ha.ve a right of subrogation i n
.
Elwell's third party settlement?
Issue No. 2. Are Elwell's attorneys entitled to fees
and costs incurred incident to the resolution of issue no. l ?
ASARCO raises one issue:
Did the Workers' Compensation Court err in concluding
that Elwell was entitled to the interest earned on the
disputed amount?
The Workers' Compensation Court, relying on the
following statutory language, concluded ASARCO was entitled
to subrogation:
37-71-414 (1). If an action is prosecuted as
provided for in ... 39-71-413 and except as
otherwise provided in this section, the insurer is
entitled to subrogation for all compensation and
benefits paid or to be paid under the Workers'
Compensation Act. The insurer's right of
subrogation is a first lien on the claim, judgment
or recovery.
Strainer's acts were intentional as that word is used in
39-17-413, MCA. Elwe11 sued Strainer and settled for
Strainer's policy limit of $50,000 which is reduced by
$16,530 attorneys' fees and costs. El-well contends that,
although he is receiving the maximum benefits allowed under
the Workers' Compensation Act, it is not sufficient to
compensate him for his injury so ASAF.CO is not entitled to
subrogation.
Elwe11 concedes, and we agree, that tort concepts of
negligence and full legal redress do not apply to benefits
under the Workers' Compensation Act. There is a trade-off of
ful.1 redress for not requiring proof of fault. El-well also
concedes, and we agree, that ASAFCO's actions do not take
them out of the exclusive remedy provisions of the Act.
But, Elwell argues this is an atypical industrial
accident. Elwell's injuries were caused by the intentional

acts of his co-employee, Strainer. ASARCO1s acts did not
remove it from the exclusive remedy provision of the Workers1
Compensation Act, but ASARCO' s safety officer , showing
incredibly poor judgment, caused the accident. ASARCO chose
Strainer to be their safety officer; ASARCO provided the
noxious gas, and ASAFCO gave Strainer access to it.
As the Workers' Compensation Court recognized, Elwell

raises an equitable argument against subrogation. The
wrongful acts of ASARCO's safety officer injured Elwell. The
Act, however, provides that the insurer, or in this case the
self-insured, is entitled to subrogation. Mr. Elwe11 is
caught in the legal twilight zone where the Act precludes him
from pursuing tort remedies from ASARCO, but a part of the

tort recovery he received from Strainer may be returned to
ASARCO.
This issue is controll-ed by our decision in Hall v.
State Compensation Insurance Fund, Division of Workers'

Compensation (Mont. 1985) , - P.2d -, 42 St.Rep. 1502.
That case treated the problem of a claimant who sustained
injuries the value of which exceeded amounts he would receive
under Workers1 Compensation benefits and from a responsible
third party. In that case the insurer claimed, as ASARCO
does here, that it was entitled under subrogation
to a portion of the recovery the employee made from the
responsible third party.
We held in Hall that when a claimant is forced, in a

case of clear liability, because of maximum limits of an
insurance policy to a settlement with a third party
tortfeasor, the amount of which settlement, together with
claimant's Workers ' Compensati-on award, does not give the
claimant full legal redress, the insurer or the employer is
not entitled to subrogation rights under 5 39-71-414, MCA,

until the claimant has attained full legal redress.
ASARCO indicates that the claimant here will receive in
Workers' Compensation benefits, over the course of his
disability the total sum of $334,562. While that sum in the
aggregate may seem large, it must nevertheless be considered
in the light of our earlier discussion that the Workers'
Compensation system is based upon a surrender by the worker
of his right to ful.1 legal redress in return for the Workers'
Compensation coverage provided by the employer. A question
of fact exists, which must be resolved by the Workers'
Compensatjon Court, as to whether the total prospective
Workers' Compensation benefits plus the $50,000 recovery frnm
the third party insurer, will give the claimant full legal
redress. At the point where he does obtain full legal
redress, if that is the case, ASARCO, in this case, under
Hall, would then be entitled to subrogation for that portion
of the $22,313 which exceeded full legal redress.
We are returning this cause to the Workers' Compensation
Court for a determination of that issue.
Elwell also contends that he is entitled to attorneys'
fees in this case, citing Wight v. Hughes Livestock Company
(Mont. 1983), 664 P.2d 303, 40 St.Rep. 696, as authority for
assessing fees to ASARCO rather than paying them out of the
judgment. In this claim Elwell is incorrect. Attorneys'
fees in Workers' Compensation cases are recoverable under S
39-71-611, MCA, b~here the insurer denies liability for a
claim for compensation or terminates compensation benefits,

and the claimant is later adjudged compensable by the
Workers ' Compensation judge or on appeal-. The dispute
between Elwe11 and ASARCO here does not come within the
provisions of 5 39-71-611, MCA. Moreover, the amount of

attorneys' fees incurred in the claim against the third party
insurer has already been included in the computation which
yields the $22,313 which is at issue here. Elwell has no

right to attorneys' fees as to this disputed sum.
ASARCO claims that the Workers' Compensation Court erred
in determining that Elwell was entitled to all- interest
earned on the $22,313 fund in escrow.
Since we hold here that Elwell's right to the $22,313 is

dependent on whether or not his benefits plus his recovery
from the third party insurer constitute full legal redress, a
determination of which of the parties is entitled to interest
accumulating on the fund is dependent upon who has the right
to the proceeds, or any portion thereof. In the event that
the Workers' Compensation Court determines that ASARCO is
entit-led to a portion or all of the $22,313, it will also be
entitled to the interest earned in the same proportion.
Otherwise, claimant is entitled to the interest
accumulations.
The judgment of the Workers' Compensation Court is
reversed, and this cause is remanded for further proceedings
before that Court in accordance with this opinion. Costs of
appeal to Elwell.

q k l.,%-fGY
Justice
W e Concur:

Ckief J u s t i c e

Mr. J u s t i c e F r e d J . Weber and M r . Z u s t i c e L. C. Gulbrandson

M. C h i e f J u s t i c e J . A .
r Turnage c o n c u r r i n g :

While t h e undersigned. d i s s e n t e d i n Hall, t h a t opinion

now is controllinq. We therefore concur in the present

majority opinion.