No. 04-807
IN THE SUPREME COURT OF THE STATE OF MONTANA
2005 MT 329
LORI OBERSON, as conservator of the
Estate of BRIAN MUSSELMAN, an
Incapacitated Person,
Plaintiff and Respondent,
v.
FEDERATED MUTUAL INSURANCE COMPANY,
Defendant and Appellant.
APPEAL FROM: The District Court of the Second Judicial District,
In and For the County of Silver Bow, Cause No. DV 2001-242,
Honorable John W. Whelan, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Charles G. Adams, Esq., Keller, Reynolds, Drake, Johnson
& Gillespie, P.C., Helena, Montana
For Respondent:
Keith Marr, Esq., J. David Slovak, Esq., Lewis, Slovak & Kovacich,
Great Falls, Montana
Submitted on Briefs: July 5, 2005
Decided: December 20, 2005
Filed:
__________________________________________
Clerk
Justice Patricia O. Cotter delivered the Opinion of the Court.
¶1 Appellant, Federated Mutual Insurance Company (Federated) seeks subrogation
against Brian Musselman=s (Musselman) estate for workers= compensation benefits it paid
pursuant to a workers= compensation claim Musselman made against his Michigan-based
employer, International Engineering & Manufacturing, Inc. (International). Respondent, Lori
Oberson (Oberson), is Musselman=s sister who serves as the guardian and conservator of
Musselman=s estate, as he is incapacitated. Upon her motion, the District Court granted
Oberson summary judgment, concluding that Montana law governs this case and prevents
subrogation from Musselman=s personal injury tort award until Musselman is made whole.
¶2 Federated appeals the District Court=s grant of summary judgment in Oberson=s
favor. We affirm.
ISSUE
¶3 The restated dispositive issue on appeal is whether Montana law governs a
subrogation claim brought by a workers= compensation insurer for reimbursement of benefits
paid to a Michigan worker who, injured while working in Montana, recovered a third-party
personal injury judgment in a Montana court?
FACTUAL AND PROCEDURAL BACKGROUND
¶4 On February 25, 1996, Musselman, a Michigan resident, suffered an incapacitating
head injury while working in Montana for his Michigan-based employer, International.
Following his injury, Musselman filed a workers= compensation claim in Michigan.
Concurrently, Musselman filed a personal injury claim against third-party tortfeasors in
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Montana pursuant to which the United States District Court for the District of Montana
awarded him a $11,296,800.00 judgment. After extensive litigation regarding the legitimacy
of Musselman=s workers= compensation claim, the Michigan Court of Appeals affirmed that
Musselman was acting in the course and scope of his employment when he was injured. (See
Musselman v. International Engineering & Mfg., Inc. (Mich. 2002), 651 N.W.2d 912
(Table), denying reconsideration). Federated then paid Musselman workers= compensation
benefits.
¶5 Musselman=s injuries are catastrophic and the cost of his life-long care will be
exorbitant. In granting Musselman $11,296,800.00 in damages, Montana=s federal court
found that Musselman=s injury resulted in cerebral spastic quadriparesis and an inability to
swallow or speak. Musselman now resides in an adult care facility. He will be fully
dependent on others and will require 24-hour care to attend to his basic needs such as
feeding, bathing, grooming, and dressing, for the rest of his life. Unfortunately, Musselman
will never recover the full amount of the judgment awarded him by Montana=s federal court,
as the court apportioned 10% of the fault for Musselman=s accident to Musselman himself,
40% to the United States Forest Service, and 50% to an insolvent third-party defendant.
Also, costs and attorney fees incurred in the litigation of Musselman=s claims further
reduced his recovery of the awarded judgment.
¶6 Federated filed a subrogation claim against Musselman=s Montana personal injury
award in Michigan=s workers= compensation court. In response, Oberson, on behalf of
Musselman, filed this declaratory action in Montana. On March 12, 2004, Oberson filed a
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motion for summary judgment in the District Court seeking a declaration that (1) Montana
law governs the enforceability of Federated=s subrogation interest, and (2) Montana law bars
Federated from recovering on a subrogation claim until Musselman is made whole.
Federated filed a cross-motion for summary judgment contending that Montana lacks
jurisdiction over this dispute and Michigan law should control.
¶7 The District Court heard oral argument on July 12, 2004, and on September 28, 2004,
the District Court granted Oberson=s motion for summary judgment.
STANDARD OF REVIEW
¶8 We review a district court=s grant of summary judgment de novo, and apply the same
criteria applied by the district court pursuant to Rule 56(c), M.R.Civ.P. Hanson v. Water Ski
Mania Estates, 2005 MT 47, & 11, 326 Mont. 154, & 11, 108 P.3d 481, & 11. A district
court properly grants summary judgment only when no genuine issues of material fact exist,
and the moving party is entitled to judgment as a matter of law. Baumgardner v. Pub. Empl.
Bd. of State, 2005 MT 199, & 14, 328 Mont. 179, & 14, 119 P.3d 77, & 14 (citations omitted).
DISCUSSION
¶9 We are asked by the parties to determine whether Montana=s or Michigan=s
substantive law governs Federated=s subrogation interest in Musselman=s third-party tort
award. The underlying facts are not in dispute. Further, the parties agree that if Michigan
law applies, the District Court lacked jurisdiction to grant summary judgment and
Michigan=s courts are free to allow subrogation in keeping with Michigan law. The parties
also agree that if Montana law applies, our well-established “made whole” doctrine
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proscribes subrogation here.
¶10 First, Federated contends that comity demands we defer to Michigan=s workers=
compensation court to determine Federated=s subrogation interests in proceedings now
pending before that tribunal. Comity is Anot a rule of law@ but rather Aan expression of
one state=s entirely voluntary decision to defer to the policy of another.@ Simmons v. State
(1983), 206 Mont. 264, 289, 670 P.2d 1372, 1385 (citations omitted). Federated points us to
Siira v. Employers Mut. Liability Insurance Co. (Mich. Ct. App. 1979), 274 N.W.2d 26. In
that case a Montana resident, injured in Montana, received benefits under Montana=s
Workers= Compensation Act, and subsequently recovered a third-party judgment in
Michigan. The Michigan Court of Appeals determined Montana law governed a
subrogation-related dispute between Mr. Siira and his employer=s workers= compensation
insurer. Notably missing from the Siira court=s decision, however, is any discussion
suggesting a Michigan public policy interest in retaining jurisdiction over the subrogation
issue. In contrast, as illustrated below, Montana=s firm public policy disallowing
subrogation prior to full recovery by damaged parties is embodied in Article II, Section 16 of
Montana=s Constitution, and has been applied repeatedly by this Court. Therefore, with all
due respect to Michigan=s court, we reject Federated=s comity argument, and decline to
voluntarily relinquish jurisdiction over this dispute.
¶11 In the alternative, Federated argues that if Montana does have jurisdiction, the
Montana Workers= Compensation Court is the proper forum for resolution. We reject this
contention. Montana=s Workers= Compensation Court maintains limited jurisdiction over
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benefits flowing from Montana=s Workers= Compensation Act. Section 39-71-2905, MCA.
Federated concedes Musselman never filed for workers= compensation benefits in Montana.
The monetary recovery implicated here flows exclusively from tort damages suffered in
Montana, adjudicated in federal civil court, and directed by Montana=s substantive tort law.
Therefore, Montana=s Worker Compensation Court has no jurisdiction over this subrogation
issue.
¶12 Finally, Federated urges this Court to adopt § 185 of the Restatement (Second) on
Conflict of Laws (§185) concerning workers= compensation subrogation. Section 185
provides that the local law of the state in which workers= compensation benefits were paid
shall determine what interest the benefit-paying entity has in any recovery for tort. Were we
to agree with Federated, Michigan law would be applied to this dispute.
¶13 This Court has not adopted the Restatements of Law whole cloth, opting instead to
evaluate the language and provisions of the Restatements in light of Montana=s public
policies and the Legislature=s statutory guidance. Compare Phillips v. General Motors
Corp., 2000 MT 55, & 23, 298 Mont. 438, & 23, 995 P.2d 1002, & 23 (a conflict of law case
where we adopted the Amost significant relationship@ test from the Restatement (Second)
on Conflict of Laws to determine the applicable substantive law for issues in tort) to
Sternhagen v. Dow Co. (1997), 282 Mont. 168, 173-74, 935 P.2d 1139, 1142, (where we
acknowledged previous adoption of Restatement (Second) of Torts § 402A but rejected
corresponding comments to that section as inconsistent with established Montana law) and
Warnack v. Conen Family Trust (1996), 278 Mont. 80, 87, 923 P.2d 1087, 1091 (where we
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declined to adopt §§ 478 and 479 of the Restatement of Property which contradict Montana
jurisprudence). Moreover, in choice of law cases, this Court has consistently rejected rigid
rules, favoring the modern trend toward a Amore flexible approach which permits analysis of
the policies and interests underlying the particular issue before the court.@ Phillips, ¶ 22
(citation omitted). Finally, as noted above, the workers= compensation context giving rise to
the parties= relationship here is of no legal consequence, as the money Federated seeks flows
directly from Musselman=s injury in Montana, to which Montana=s federal court applied
Montana tort law to conclude that damages were warranted. In light of these factors, we
decline to adopt and apply § 185 here.
¶14 This Court has consistently interpreted the language of Article II, Section 16 as
precluding the subrogation of a tort award until the damaged party fully recovers. Article II,
Section 16 of the Montana Constitution provides:
Courts of justice shall be open to every person, and speedy remedy
afforded for every injury of person, property, or character. No person shall be
deprived of this full legal redress for injury incurred in employment for which
another person may be liable except as to fellow employees and his immediate
employer who hired him if such immediate employer provides coverage under
the Workmen=s Compensation Laws of this state. Right and justice shall be
administered without sale, denial, or delay.
Based on this provision and the equities flowing therefrom, Montana has rebuked the
insurance industry=s efforts to garnish an accident victim=s third-party recovery. In
Francetich v. State Comp. Mut. Ins. Fund, we held that Article II, Section 16 expressly
prohibits efforts to restrict the right to obtain full legal redress against third-party tortfeasors:
The record of the debate at the Convention is clear that this was the
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delegates= intent in amending the provision. The second sentence [of Article
II, Section 16] is mandatory, prohibitive, and self-executing and it prohibits
depriving an employee of his full legal redress, recoverable under general tort
law, against third parties.
Francetich (1992), 252 Mont. 215, 224, 827 P.2d 1279, 1285.
¶15 We reaffirmed this Amade whole@ doctrine in Trankel v. State Dept. of Military
Affairs, expanding its principles to protect against interference by either the federal courts or
foreign jurisdictions. Trankel (1997), 282 Mont. 348, 938 P.2d 614.
[A]ny statute or court decision which deprives an employee of his right
to full legal redress, as defined by the general tort law of this state against third
parties, is absolutely prohibited. The second sentence of [Article II, Section
16] is mandatory and self-executing, and leaves no room for erosion based
on what federal courts or the courts of other states would do pursuant to
federal laws or the laws of other states. [Emphasis added.]
Trankel, 282 Mont. at 362, 938 P.2d at 623.
¶16 Musselman cites two illustrative cases in which this Court applied Montana law to
prohibit subrogation by out-of-state insurers. In one personal injury case, we rejected
subrogation efforts by an Oregon insurer, and found in favor of a Washington resident
injured in Montana, stating that subrogation of medical benefits in Montana is void as against
public policy. Youngblood v. American States Ins. Co. (1993), 262 Mont. 391, 400, 866 P.2d
203, 208. Later, we held that a third-party recovery in Montana could not be subjected to a
Colorado insurance policy=s Achoice of law@ provision, as Colorado law would trigger
subrogation rights resulting in violation of Montana=s Amade whole@ doctrine. Swanson v.
Hartford Ins. Co. of Midwest, 2002 MT 81, & 33, 309 Mont. 269, & 33, 46 P.3d 584, & 33.
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¶17 Trankel, Youngblood, and Swanson are determinative in our choice of law analysis
here. Montana=s public policy, as defined in Article II, Section 16, precludes application of
Michigan subrogation law to Musselman=s personal injury recovery until Musselman
realizes the full measure of his adjudicated damages. As the parties agree that application of
Montana law precludes subrogation by Federated in keeping with Montana=s Amade
whole@ doctrine, we need not review the District Court=s application of Montana law.
CONCLUSION
¶18 For the foregoing reasons, we affirm.
/S/ PATRICIA O. COTTER
We Concur:
/S/ KARLA M. GRAY
/S/ JAMES C. NELSON
/S/ W. WILLIAM LEAPHART
/S/ BRIAN MORRIS
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Oberson v. Federated Mutual Insurance
Court: Montana Supreme Court
Date filed: 2005-12-20
Citations: 2005 MT 329, 126 P.3d 459, 330 Mont. 1
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