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No. 99-375
IN THE SUPREME COURT OF THE STATE OF MONTANA
2000 MT 362
303 Mont. 364
15 P. 3d 948
S.L.H.,
Petitioner and Appellant,
v.
STATE COMPENSATION MUTUAL INSURANCE FUND,
Respondent and Respondent/Insurer for
THIRSTY'S BAR,
Employer.
APPEAL FROM: Workers' Compensation Court, State of Montana
The Honorable Mike McCarter, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Sara R. Sexe; Marra, Wenz & Johnson, Great Falls, Montana
For Respondent:
William O. Bronson; James, Gray, Bronson & Swanberg
Great Falls, Montana
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For Amicus:
Larry Howell, Attorney at Law, Missoula, Montana (for Montana Trial
Lawyers Association)
Submitted on Briefs: January 6, 2000
Decided: December 28, 2000
Filed:
__________________________________________
Clerk
Justice W. William Leaphart delivered the Opinion of the Court.
¶1 S.L.H. filed a petition with the Workers' Compensation Court to resolve a dispute
regarding disability benefits, medical benefits and the State Compensation Mutual
Insurance Fund's (State Fund) subrogation claim. S.L.H. now appeals the court's findings
that she had a 1% mental impairment rating; that her time of injury job was medium-duty;
and that certain of the State Fund's actions did not entitle S.L.H. to an award of penalties,
attorney fees, and costs. Montana Trial Lawyers Association (MTLA) filed an amicus
brief limited to the mental impairment rating issue. The State Fund has not appealed any
of the court's findings. We affirm in part and reverse in part.
¶2 We restate the issues as follows:
¶3 I Did the court err when it held that Dr. Evans' inability to express her evaluation of S.L.
H.'s mental impairments as a percentage was fatal to S.L.H.'s claim?
¶4 II Did the court err in determining that S.L.H.'s time of injury job was medium duty
rather than heavy duty?
¶5 III Did the court err in its decisions regarding penalties, attorney fees, and costs?
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Procedural and Factual Background
¶6 In November, 1991, S.L.H. was kidnaped from her job as a bartender and severely
beaten and raped. At the time of the attack, S.L.H.'s employer was enrolled in a
compensation plan and insured by the State Fund. While the State Fund accepted liability
for S.L.H.'s injuries, the parties have disputed certain medical costs, S.L.H.'s wage loss
and permanent mental impairments. As a result of these disagreements, S.L.H. filed a
petition for hearing with the Workers' Compensation Court.
¶7 S.L.H.'s psychiatrist, Dr. Mary Ann Evans, diagnosed S.L.H. with post-traumatic stress
disorder and major depressive disorder, and evaluated S.L.H.'s impairments according to
the American Medical Association's "Guides to the Evaluation of Permanent
Impairment." (AMA Guides). Both the third edition of the AMA Guides, in effect at the
time of the assault, and the fourth edition, in effect at the trial, evaluate mental
impairments under a five-class rating system, ranging from no impairment (Class 1) to
extreme impairment (Class 5). Dr. Evans testified that S.L.H.'s post-traumatic stress
disorder fell within Class 3 as a moderate impairment while her major depressive disorder
fell between Class 3 and Class 2, and was therefore a moderate to mild impairment.
¶8 S.L.H.'s neurologist referred her to Dr. Patrick Galvas for a physical impairment rating.
Although Dr. Galvas is neither a psychologist nor a psychiatrist, and was asked to evaluate
only S.L.H.'s physical impairment, he provided a mental impairment evaluation as well.
¶9 Dr. Evans testified at the hearing that S.L.H.'s mental impairments were mild-to-
moderate, falling between Classes 2 and 3 according to the AMA Guides. The court read
§ 39-71-711, MCA, which provides the procedure for rating impairments, as requiring that
an impairment rating be expressed by the evaluator as a percentage. The court
consequently asked Dr. Evans to provide the court with a percentage for S.L.H.'s mental
impairments. Abiding by the AMA Guides' warning that "because no data exist that show
the reliability of the impairment percentages, it would be difficult for Guides' users to
defend their use in administrative hearings," Dr. Evans refused to translate S.L.H.'s mental
impairment evaluation into a percentage. The Workers' Compensation Court did not
question the accuracy and validity of Dr. Evans' evaluation and in fact the court concluded
that S.L.H. suffered "severe psychological injuries." Although Dr. Evans' testimony
sufficed to establish a mental impairment under the current AMA Guides, the court held it
was insufficient to satisfy the percentage requirement in § 39-71-711(1)(c), MCA.
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¶10 Dr. Galvas, on the other hand, in contravention of the AMA Guides' admonishment,
but in compliance with § 39-71-711(1)(c), MCA, expressed his ratings of S.L.H.'s mental
impairments as percentages: 1% for her post-traumatic stress disorder and 0% for her
major depressive disorder.
¶11 Relying on Dr. Galvas' impairment ratings, which were the only percentages provided
by an impairment evaluator, the court found that S.L.H. suffered a 1% permanent mental
impairment rating.
¶12 In September of 1998, a vocational consultant analyzed S.L.H.'s job, as it existed at
the time of the assault and concluded that S.L.H.'s bartending job was medium duty. S.L.
H. did not object to introduction of the job analysis as an exhibit at trial, but both S.L.H.
and her mother testified that the job, as it existed in 1991, was a heavy-duty job. The court
concluded that S.L.H.'s time of injury job was medium duty.
Standard of Review
¶13 We review the Workers' Compensation Court's conclusions of law to determine if they
are correct. Russette v. Chippewa Cree Housing Auth. (1994), 265 Mont. 90, 874 P.2d
1217. The Court reviews questions of fact to determine if substantial credible evidence in
the record supports them. Wunderlich v. Lumbermens Mut. Cas. Co. (1995), 270 Mont.
404, 892 P.2d 563. We will not substitute our judgment for that of the trial court where
conflicting evidence, weight to be given witnesses' testimony, or their credibility is at
issue. Burns v. Plum Creek Timber Co. (1994), 268 Mont. 82, 84, 885 P.2d 508, 509.
¶14 This Court will not rule on the constitutionality of a statute if we can decide a case
without addressing constitutional concerns. Wolfe v. Montana Dep't of Labor & Indus.
(1992), 255 Mont. 336, 339, 843 P.2d 338, 340. Because this issue can be decided without
reaching constitutional concerns, we decline to address the appellant's constitutional
arguments.
Discussion
¶15 I Did the court err when it held that Dr. Evans' inability to express her evaluation of S.
L.H.'s mental impairments as a percentage was fatal to S.L.H.'s claim?
¶16 Statutory construction is a "holistic endeavor" and must account for the statute's text,
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language, structure, and object. United States Nat'l Bank v. Indep. Ins. Agents of Am., Inc.
(1993), 508 U.S. 439, 455, 113 S.Ct. 2173, 2182, 124 L.Ed.2d 402, 418 (internal
quotations omitted). Our purpose in construing a statute is to ascertain the legislative
intent and give effect to the legislative will. Section 1-2-102, MCA.
¶17 We discern the intent of the legislature from the text of the statute if the words are
clear and plain. Western Energy Co. v. State, Dep't of Revenue, 1999 MT 289, ¶ 11, 297
Mont. 55, ¶ 11, 990 P.2d 767, ¶ 11 (citation omitted). To avoid an absurd result and to
give effect to a statute's purpose, we read and construe the statute as a whole. Skinner
Enterprises, Inc. v. Lewis and Clark County Board of Health (1997), 286 Mont. 256, 274,
950 P.2d 733, 744.
¶18 S.L.H. and Amicus contend that the Workers' Compensation Court erred in its
interpretation of § 39-71-711, MCA, and that this interpretation led to an absurd result in
the context of mental impairments. Prescribing the procedure for determining an
impairment rating for use in calculating an injured worker's disability award, § 39-71-711,
MCA, provides:
(1) An impairment rating:
(a) is a purely medical determination and must be determined by an
impairment evaluator after a claimant has reached maximum healing;
(b) must be based on the current edition of the Guides to Evaluation of
Permanent Impairment published by the American medical association; and
(c) must be expressed as a percentage of the whole person.
¶19 The Workers' Compensation Court interpreted the statute to require that the
impairment evaluator, who determines the impairment rating, as required by subsection (a)
must also satisfy each of the other two subsections of § 39-71-711, MCA. S.L.H. and
MTLA argue that this creates an internal inconsistency because an impairment evaluator,
under the current AMA Guides (since 1988) can no longer satisfy both subsection (b) and
subsection (c) in the context of a mental impairment.
¶20 The AMA Guides, in both the third and fourth editions, specifically advise
practitioners against the use of percentages for mental impairments. The fourth edition of
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the AMA Guides admonishes:
There is no available empiric evidence to support any method for assigning a
percentage of impairment of the whole person . . . . Translating these guidelines for
rating individual impairment on ordinal scales into a method for assigning
percentage of impairments . . . cannot be done reliably . . . . The use of percentages
implies a certainty that does not exist . . . .
AMA Guides 300-01 (4th ed. 1993).
¶21 According to the court's interpretation, the statute requires the evaluator to express her
evaluation of impairment as a percentage. Although the court accepted Dr Evans'
evaluation when it found "[t]he assault and rape resulted in severe physical and
psychological injuries to the claimant," the court nonetheless concluded that S.L.H.'s claim
failed "since she could not establish a percentage rating under the AMA Guides to
impairment." We conclude that the court erred when it required that Dr. Evans translate
her evaluation into percentages before the court would consider the evaluation for
impairment rating purposes.
¶22 A. Was the court's interpretation required under the plain language of the statute?
¶23 In effect, the Workers' Compensation Court held that subsection (a)'s language that
the impairment "must be determined by an impairment evaluator" means that to satisfy
subsection (c), the evaluator must express the impairment as a percentage. However, the
statute contains no express language stating who must translate the impairment evaluation
into a percentage.
¶24 Subsections (a), (b) and (c) are subordinate to and modify the words "[a]n impairment
rating" that precede them in section (1). None of the three subsections is subordinate to or
modified by the other subsections, but rather each is independent of the others. The
requirement found in subsection (c) that an impairment be expressed as a percentage is
distinct from subsection (a)'s requirement that the impairment be a "purely medical
determination . . . by an impairment evaluator." Reading the impairment evaluator
requirement of subsection (a) into subsection (c) violates a primary rule of construction: a
court's role is "not to insert what has been omitted or to omit what has been inserted."
Section 1-2-101, MCA. Under its interpretation, the Workers' Compensation Court
inserted an additional requirement into subsection (c), namely that the evaluator be the
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one translating the evaluation into a percentage.
¶25 The court's interpretation asked Dr. Evans to do the impossible, both express mental
impairments as a percentage as required by subsection (c), and base her evaluation, as
required by subsection (b), on the current AMA Guides, which proscribes the use of
percentages to express mental impairments. While § 39-71-711, MCA, requires that an
impairment be expressed as a percentage and be based on the AMA Guides, it does not
specifically require that the evaluator be the one translating the impairment evaluation into
a percentage.
¶26 Had S.L.H. litigated prior to 1988, while the second edition of the AMA Guides was
current, the interpretation of § 39-71-711, MCA, employed by the Workers' Compensation
Court would have allowed compensation for S.L.H.'s mental impairments. But in 1998, S.
L.H. was denied an award for her mental impairments, not because of any change in the
statute, but because the AMA revised its AMA Guides, proscribing the use of percentages
for evaluations of mental impairments. Although the court's interpretation may have been
reasonable when the AMA Guides allowed a doctor to translate an impairment evaluation
into a percentage, the statute does not require this interpretation, particularly now that it
creates a result plainly at variance with the policy of the legislation as a whole. We hold
that the court's interpretation was not required by the statute. The court could have reached
a more reasonable result and furthered the legislative intent by examining the plain
language of the statute for a more reasonable alternative.
¶27 When more than one interpretation is possible, in order to promote justice, we will
reject an interpretation that leads to an unreasonable result in favor of another that will
produce a reasonable result. Johnson v. Marias River Elec. Cooperative (1984), 211 Mont.
518, 687 P.2d 668. An alternative reading of the statute that leads to a more reasonable
result and also abides by its grammatical structure is that the percentage required by
subsection (c) is independent of subsection (a) and can be expressed by the workers'
compensation judge, rather than only by the impairment evaluator. The statute allows the
judge to translate into a percentage the evaluator's medical determination of impairment.
¶28 Under this alternative interpretation, the judge himself, in S.L.H.'s case, could have
translated Dr. Evans' evaluation of a mild-to-moderate mental impairment into a
percentage in order to comply with the statute. This would have avoided the absurd result
caused by interpreting the statute as the court did, and would have furthered the legislative
intent of compensating workers for physical injuries suffered on the job.
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¶29 At the time subsection (c) of § 39-71-711, MCA, was enacted, it was redundant as it
merely repeated the percentage requirement included in the AMA Guides referenced in
subsection (b). Since the publishing of the third and fourth editions, which admonish
against the use of percentages, subsection (c) has made § 39-71-711, MCA, internally
incoherent. Although this Court is wary of expanding the judge's role, we must make
sense of this statute. In order to do so, we conclude that when an evaluation is made by a
medical evaluator according to the AMA Guides, the statute does not prohibit a judge from
translating that evaluation into a percentage so that the injured worker may be
compensated as envisioned by the legislation. We further recommend that the legislature
delete subsection (c) so that the statute is coherent and so that a physician can comply with
both the AMA Guides and § 39-71-711, MCA, when providing an impairment evaluation
for compensation purposes.
¶30 B. Does the legislative purpose support the Workers' Compensation Court's
interpretation?
¶31 Generally, courts should apply the plain meaning of legislation, however when "the
literal application of a statute will produce a result demonstrably at odds with the
intentions of its drafters . . . . [T]he intention of the drafters, rather than the strict language,
controls." United States v. Ron Pair Enter. (1989), 489 U.S. 235, 242, 109 S.Ct. 1026,
1031, 103 L.Ed.2d 290, 299 (citation omitted). "Where there are several provisions or
particulars, such a construction is, if possible, to be adopted as will give effect to all."
Section 1-2-101, MCA.
¶32 In this case, the legislature expressly enunciated its intention in § 39-71-105, MCA:
(1) It is an objective of the Montana workers' compensation system to provide,
without regard to fault, wage supplement and medical benefits to a worker suffering
from a work-related injury or disease.
¶33 The legislature's objective in enacting these statutes was to compensate workers for
valid impairments resulting from injuries suffered on the job. While the legislative history
provides little insight, clearly the requirements for establishing impairments are intended
to ensure that the level of impairment is determined by a scientifically sound method,
using objective medical findings.
¶34 In 1987, the legislature amended the definition of injury in §39-71-119, MCA, to
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exclude compensation for claims resulting from non-physical injuries. We have previously
held that excluding workers' compensation for mental or stress claims occurring without a
physical component is constitutional as it rationally relates to the legitimate governmental
objective of controlling the costs of the workers' compensation program in order to
continue providing benefits. Stratemeyer v. Lincoln County (1993), 259 Mont. 147, 154,
855 P.2d 506, 511. In 1993, the legislature amended the public policy statement, § 39-71-
105, MCA, so that it mirrored the injury definition, and expressly precluded awards for
claims resulting from non-physical injuries. In this second amendment, the legislature
wanted to insure that the judiciary understood the legislature's intent to exclude from
compensation claims for injuries that occurred without a physical component. Legislative
history indicates that the concern was for the potential cost of compensating stress claims.
Although the legislature considered the issue of mental injury claims, and amended the
statutes two separate times, nothing in the legislative history so much as hints at an intent
to preclude compensation for mental claims resulting from physical injuries.
¶35 The second edition of the AMA Guides which was current in 1987, when § 39-71-711,
MCA, was enacted, allowed physicians to express mental impairments as percentages. The
legislation, as drafted, echoed the language then present in the AMA Guides. While the
second edition of the AMA Guides was in effect, workers could be compensated for mental
impairments pursuant to the statutory interpretation employed by the Workers'
Compensation Court.
¶36 However, the third and fourth editions of the AMA Guides expressed a change in the
AMA's policy by strongly advising against the use of percentages to express mental
impairments. If it is assumed, as the Workers' Compensation Court did, that the evaluator
must satisfy each of the subsections of § 39-71-711, MCA, this change in the AMA Guides
created contradictory requirements in the statute. The statute requires that the evaluator
base her evaluation on the AMA Guides. The statute also requires that the mental
impairment evaluation be expressed as a percentage, which the AMA Guides advises
against. An impairment evaluator cannot satisfy both subsections (b) and (c) of § 39-71-
711 when evaluating mental impairments.
¶37 Under the court's interpretation then, when an evaluator abides by the AMA Guides'
proscription against the use of percentages to express mental impairments, the injured
worker is denied compensation. Such an interpretation is clearly at odds with the
expressed intent of the legislation: "to provide . . . wage supplement and medical benefits
to a worker suffering from a work-related injury . . . . " Section 39-71-105(1), MCA.
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¶38 The expressed objective of the legislation requires that the court employ a different
interpretation, one that creates a more reasonable result. The legislation allows a judge to
translate the medical evaluation into a percentage so that a worker can be compensated for
impairments resulting from physical injuries suffered on the job, as was intended by the
legislature. We therefore reverse the court's finding regarding mental impairment and
remand so that the Workers' Compensation Court can assign a percentage based on the
evidence in the record for S.L.H.'s mental impairment.
¶39 II Did the court err in determining that S.L.H.'s time of injury job was medium duty
rather than heavy duty?
¶40 This issue involves the specifications for medium and heavy labor as delineated in
§ 39-71-703(6), MCA:
(a) "heavy labor activity" means the ability to lift over 50 pounds occasionally or up
to 50 pounds frequently;
(b) "medium labor activity" means the ability to lift up to 50 pounds occasionally or
up to 25 pounds frequently[.]
¶41 Asserting that the judge's decision that her 1991 job was medium duty was based on
insubstantial credible evidence, S.L.H. claims the only credible evidence regarding her
time-of-injury job was the testimony provided by herself and her mother. S.L.H. argues
that the job analysis did not accurately reflect the nature of the job as it existed in 1991,
and can therefore provide no credible support for the court's decision. S.L.H. now
complains that the State Fund's delay in getting the job analysis resulted in a faulty
analysis, and that S.L.H. had too little time, only nine days before trial, to procure an
expert of her own. However, S.L.H. did not raise these issues at trial and cannot now raise
them on appeal. In re Marriage of Pearson, 1998 MT 236, ¶ 63, 291 Mont. 101, ¶ 63, 965
P.2d 268, ¶ 63. At trial, S.L.H. did challenge the accuracy of the job analysis and we will
review the lower court's decision that S.L.H.'s time-of-injury job was medium duty.
¶42 We review a Workers' Compensation Court's findings of fact to determine if
substantial credible evidence in the record supports them. Wunderlich, 270 Mont. at 408,
892 P.2d at 566. We have defined substantial evidence as "evidence that a reasonable
mind might accept as adequate to support a conclusion; it consists of more than a mere
scintilla of evidence but may be somewhat less than a preponderance." Swain v.
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Battershell, 1999 MT 101, ¶ 34, 294 Mont. 282 ¶ 34, 983 P.2d 873, ¶ 34 (citation omitted).
We will not substitute our judgment for that of the trial court where conflicting evidence,
weight to be given witnesses' testimony, or their credibility is at issue. Burns, 268 Mont. at
84, 885 P.2d at 509. Although the evidence on this issue is conflicting, we conclude it is
sufficiently substantial to support the court's finding that S.L.H.'s 1991 job was medium
duty.
¶43 S.L.H. argues that the job analysis completed in 1998 did not in fact provide any
meaningful analysis of her 1991 job and should not have been relied upon by the judge. At
trial, S.L.H.'s attorney questioned whether the 1998 analysis even related to the job as it
existed in 1991. The vocational consultant, Micki Marion Breedlove (Breedlove) twice
replied that S.L.H.'s employer had been specifically asked to describe the 1991 job as it
existed when S.L.H. was employed as a bartender. The employer's description, along with
the analyst's observations and measurements at the bar, formed the basis for the final job
analysis.
¶44 The analysis indicated that the 1991 job required S.L.H. to: 1) occasionally stock
cases of beer that weighed 31 pounds; 2) rarely, about once a week, move a keg of beer
into the cooler which required the exertion of between 35 and 37 pounds; and 3) "once in a
while" remove garbage which weighed between 25-30 pounds. Breedlove testified that
while S.L.H. may have been required to control the crowd, that duty did not involve any
sort of physical exertion, but consisted only of sharp verbal warnings, and when necessary,
telephone calls to the police. She further testified that in 1991 the bar employed a barback
who helped with the stocking responsibilities, decreasing the frequency with which S.L.H.
would have had to lift cases of beer.
¶45 S.L.H. and her mother testified that S.L.H.: 1) frequently stocked cases of beer; 2)
twice nightly moved kegs of beer into the cooler; 3) physically restrained people from
fighting; and 4) emptied garbage cans into an outside dumpster two or three times a night.
S.L.H.'s mother also testified that she had observed her daughter move a keg, but did not
know its size. She testified that she could not see how her daughter moved the keg and did
not know if S.L.H. lifted the keg to place it in the cooler.
¶46 The judge evaluated the conflicting evidence, weighed the witnesses' testimony and
credibility, and concluded that the 1991 job consisted of lifting up to 50 pounds
occasionally or up to 25 pounds frequently which placed her job within the bounds of
medium-labor activity as prescribed by statute. We hold that the Workers' Compensation
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Court's conclusion is supported by substantial credible evidence and affirm the finding
that S.L.H.'s time-of-injury job was medium duty.
¶47 III Did the court err in its decisions regarding penalties, attorney fees, and costs?
¶48 Resolution of these issues involves the application of two statutes: § 39-71-2907 and §
39-71-612, MCA, to each of several issues which we will address individually. The Court
must determine whether a workers' compensation claimant is entitled to penalties and
attorney fees pursuant to the statutes in effect on date of the claimant's injury. Madill v.
State Comp. Ins. Fund (1997), 280 Mont. 450, 458, 930 P.2d 665, 670. Because S.L.H.
was injured in November of 1991, we will apply the 1991 statutes.
¶49 Pursuant to § 39-71-2907, MCA, the judge may increase by twenty percent, the
benefits due a claimant during a period of delay or refusal to pay when:
(a) the insurer agrees to pay benefits but unreasonably delays or refuses to make the
agreed-upon payments to the claimant; or
(b) prior or subsequent to the issuance of an order by the . . . judge granting a
claimant benefits, the insurer unreasonably delays or refuses to make the payments.
Section 39-71-2907, MCA (1991).
¶50 The determination of whether an insurer unreasonably delayed or refused to make
payment is a question of fact, which we will review to ascertain if it is supported by
substantial evidence. Stordalen v. Ricci's Food Farm (1993), 261 Mont. 256, 258, 862
P.2d 393, 394. We have repeatedly held that insurers have an affirmative duty to
investigate workers' compensation claims and that absent such an investigation, the denial
of a claim for benefits is unreasonable. Marcott v. Louisiana Pacific Corp. (1996), 275
Mont. 197, 210, 911 P.2d 1129, 1137; Stevens v. State Comp. Mut. Ins. Fund (1994), 268
Mont. 460, 467, 886 P.2d 962, 966 (overruled on other grounds by Kloepfer v.
Lumbermens Mut. Cas. Co. (1995), 272 Mont. 78, 899 P.2d 1081); Lovell v. State Comp.
Mut. Ins. Fund (1993), 260 Mont. 279, 288, 860 P.2d 95, 101.
¶51 Costs and attorney fees may be assessed against an insurer by a workers'
compensation judge when: 1) there is a payment or written offer of payment; 2) there is a
controversy relating to the amount of compensation due; 3) the claim is brought before the
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court for adjudication; and 4) the judge's award is greater than that offered by the insurer.
Section 39-71-612, MCA (1991). When the conditions for an award of attorney fees
pursuant to § 39-71-612 are satisfied, the award of attorney fees and costs to the claimant
is not discretionary. Madill, 280 Mont. at 462, 930 P.2d at 673.
¶52 We have held that "[p]ayment of unreasonably withheld benefits 'on the courthouse
steps' does not negate the insurer's potential liability for a penalty for unreasonable delay
of benefits. To conclude otherwise would render the 'unreasonable delay' provisions of the
penalty statute moot." Lovell, 260 Mont. at 289, 860 P.2d at 102. S.L.H. urges this Court
to apply the same reasoning in the context of the attorney fee statute that we have applied
to penalty statute questions. S.L.H. points out that the term "unreasonable" becomes mere
surplusage if the State Fund can deny benefits until the eve of the trial and never be
required to pay the attorney fees its unreasonable behavior has necessitated.
¶53 The attorney fees statute however has two specific requirements that differ
significantly from the penalty statute: 1) the issue must be brought before the court for
adjudication; and 2) the judge must make an award of compensation greater than that
offered by the insurer. In 1987, the legislature excised the word "settlement" from the
attorney fees statutes, so that an award for fees is now precluded, despite potentially
burdensome legal fees, if the insurer agrees to settle, even "on the courthouse steps."
Although S.L.H. makes a good policy argument that our reasoning in Lovell might be
appropriate for attorney fees assessment, the explicit language of the statute precludes
such a reading. We therefore decline to adopt the Lovell reasoning in the context of the
attorney fees and costs statute, § 39-71-612, MCA (1991).
SUBROGATION
¶54 In this case, the State Fund, without investigation and with no factual or legal basis,
claimed a right of subrogation to over $50,000. One week before trial, after claiming the
subrogation right for over six months, the State Fund finally conceded the issue.
Responding to the court's request for an explanation of the basis for the subrogation claim,
the State Fund stated it "took the position that it would be the claimant's burden to
establish that there was no subrogation interest to the Fund in this particular case." The
court replied, "[s]o if the only factual basis was, you know, 'prove it to me and we will just
sit back, and if we are not satisfied with your proof, we will continue to persist in our
claim, even though we haven't done an independent analysis,' that's going to get a
penalty . . . ."
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¶55 In the end, however, the court awarded neither sanctions nor penalties, holding that "a
claim for subrogation with respect to benefits already paid does not constitute benefits
due," and therefore cannot give rise to penalties or attorney fees pursuant to §§ 39-71-
2907 or 39-71-612, MCA. We agree.
56 ¶Although the definitions of "benefits" and "compensation" have been refined over the
years, they have never been considered to include subrogation within their meaning. We
have repeatedly held that the term "compensation" includes not only a worker's wage or
salary, but also compensation for time off the job, for disability and for medical payments.
Lockhart v. New Hampshire Ins. Co., 1999 MT 205, ¶ 16, 295 Mont. 467, ¶ 16, 984 P.2d
744, ¶ 16 (citation omitted). Although a judge may decide whether a subrogation claim is
valid, or an insurer's actions reasonable, a judge awards no compensation in deciding a
subrogation question. We decline to so stretch the definition of compensation as to allow
the inclusion of subrogation, but we do agree with the Workers' Compensation Court and
the appellant that the State Fund's actions in this case are worthy of sanction. Contrary to S.
L.H.'s claim, §§ 39-71-2907 and 39-71-612, are not the only remedies for such conduct. In
this case, S.L.H. could have moved for, or the court, sua sponte, could have imposed
sanctions under § 39-71-2914, MCA (1991).
¶57 The Workers' Compensation Court's corollary to Rule 11 of the Montana Rules of
Civil Procedure provides that an attorney's or party's signature on a petition, pleading,
motion or any other paper certifies that the paper is: 1) well grounded in fact, after
reasonable inquiry; 2) warranted by existing law or a good faith argument for modification
of existing law; and 3) not interposed for any improper purpose such as to harass or cause
unnecessary delay. Section 39-71-2914, MCA (1991). Noting that S.L.H. had not moved
for sanctions, the court explained that although the penalty and attorney fees statutes could
not apply to subrogation claims, a claimant has recourse against unreasonable actions
through the sanction statute.
¶58 The statute requires that "[i]f a . . . paper is signed in violation of this section, the
court , upon motion, or upon its own initiative, shall impose an appropriate sanction upon
the person who signed it, a represented party, or both." Section 39-71-2914(4), MCA
(1991) (emphasis added). Although § 39-71-2914, MCA, permits the judge discretion to
choose appropriate sanctions, the imposition of sanctions is not discretionary. When a
judge finds that § 39-71-2914 has been violated, the statute states that she shall impose
sanctions upon the represented party, attorney or both. S.L.H. explains that she did not
want to request sanctions against an attorney who began representing the State Fund only
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five weeks before trial and had no part in pursuing the baseless subrogation claim. S.L.H.
fails to note that sanctions may be imposed directly upon the party thereby avoiding
punishment of an apparently innocent attorney. Contrary to S.L.H.'s contentions, sanctions
would have been an appropriate punishment for the State Fund's baseless claim of
subrogation which was submitted to the court in both the State Fund's response to S.L.H.'s
petition and in the pretrial order of September 8, 1998.
¶59 All the evidence in the record indicates that the State Fund's assertion of a subrogation
claim was not well grounded in fact as required by § 39-71-2914(3)(b), MCA.
Furthermore, after receiving information from S.L.H. in May, 1998, the State Fund neither
responded nor requested additional information, but rather waited until one week before
trial to concede its claim. During this time, the State Fund's approach was that S.L.H.
should disprove the State Fund's subrogation claim. Consequently, S.L.H. was required to
expend resources in defending against the claim. After listening to the State Fund admit in
court that it had no legal authority or factual theory to support its claim of subrogation,
and that it had completed no investigation whatsoever to support its subrogation claim, the
court, upon its own initiative, should have imposed sanctions against the State Fund for
violation of § 39-71-2914, MCA. However, since S.L.H. does not raise the issue on
appeal, we will not remand for imposition of sanctions. We affirm the court's holding that
subrogation is not a benefit or compensation due and therefore the court could not award
penalties or attorney fees pursuant to §§ 39-71-612 and 39-71-2907, MCA.
GASTROINTESTINAL MEDICATION
¶60 S.L.H. suffered from recurring gastroesophageal reflux which became more severe in
1997. In response to the exacerbated condition, Dr. Dietrich requested authorization to
prescribe Prevacid, a more expensive medication than previously had been prescribed. The
State Fund's claims examiner initially denied payment and requested Dr. Dietrich's notes.
Upon receipt of the notes, she continued to deny payment for the medication.
¶61 As mentioned earlier, absent at least a minimal investigation of a claim's validity,
denial of a claim for benefits is unreasonable. Lovell, 260 Mont. at 288, 860 P.2d at 101.
The claims examiner's investigation consisted solely of her request for Dr. Dietrich's office
notes. In those notes, Dr. Dietrich stated "I would view this as an exacerbation of an
underlying condition due to the stress, mostly all of which is connected in some way to her
assault and subsequent problems." He also attributed the worsening of the condition to
"the stress of the trial, the Workers' Compensation case, vocational rehabilitation, the
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multitude of evaluations that she has had, the depositions, etcetera . . . ."
¶62 In its ruling, the court stated that "[i]n denying authorization for the . . . Prevacid,
Hunt [the claims examiner] acted on her own without any medical consultation or advice
(other than the advice supplied by Dr. Dietrich)." However, the court held that the denial
was not unreasonable because the "State Fund's liability for the more expensive
medication was reasonably debatable as it may be reasonably argued that the more costly
medication is attributable to the stress of the impending trial, not to the injury . . . ."
¶63 S.L.H. contends that the State Fund had no medical evidence that the exacerbation of
the condition, and the resultant need for different medication was not related to her injury.
¶64 The State Fund responds that S.L.H.'s treating physician, Dr. Dietrich, himself noted
that the exacerbated condition was related to an upcoming trial of S.L.H.'s third-party
claim against the manufacturer of the alarm system at her former employer's place of
business. Relying on this opinion expressed by S.L.H.'s treating physician, the State Fund
asserts that its denial of payment for the medication was not unreasonable.
¶65 In this case, although the claims examiner denied payment for medication prescribed
by the claimant's treating physician, she did not "ignore" Dr. Dietrich's opinion. Rather,
the claims examiner relied on the treating physician's notes in which the doctor stated that
the exacerbation of the condition may have been attributable to an impending civil trial,
rather than to her injury. A claims examiner cannot, without any medical consultation or
advice, reasonably ignore the opinion of a claimant's treating physician and refuse to pay
for medication prescribed by the treating physician. Plooster v. Pierce Packing Co. (1993),
256 Mont. 287, 846 P.2d 976. However, we cannot say that the notes from S.L.H.'s
treating physician in this case were unequivocal.
¶66 The claims examiner here performed a very minimal investigation before denying
payment, but she did complete some investigation, and the information she received from
Dr. Dietrich was arguably sufficient to create a question as to the State Fund's liability for
the exacerbation of S.L.H.'s reflux condition. Because there is substantial credible
evidence, although not necessarily a preponderance, to support the Workers'
Compensation Court's ruling that the State Fund had a reasonably debatable argument for
denying payment for the more expensive medication, we affirm the court's decision that
the State Fund's actions were not unreasonable and that S.L.H. was therefore not entitled
to either penalties or attorney fees on that issue.
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WAGE LOSS
¶67 The court found that S.L.H. had suffered a twenty percent wage loss and assessed a
penalty for unreasonable conduct. However, the court also held that the State Fund had a
reasonable argument for denying ten percent of the twenty percent wage loss and
consequently assessed a penalty for only ten percent of the wage loss. Although the judge
initially awarded S.L.H. attorney fees for the unreasonable denial of ten percent of the
wage loss, he later reversed himself and concluded that the State Fund had conceded the
issue prior to trial and that an award of attorney fees was therefore precluded.
¶68 S.L.H. urges this Court to direct the Workers' Compensation Court to award both a
penalty for the additional ten percent wage loss and attorney fees for the entire twenty
percent wage loss. S.L.H. contends that the court's findings are based on factual
inaccuracies. She claims that the court erred in finding that the State Fund did not act
unreasonably in denying the entire twenty percent wage loss. S.L.H. also asserts that the
State Fund did not concede a ten percent wage loss until the first day of trial and that she
was required to litigate and present proof of the entire wage loss. Consequently, she
argues, the court's finding that attorney fees could not be assessed because the State Fund
conceded the issue prior to trial, is unsupported by substantial evidence in the record.
¶69 The State Fund responds that in this case, statutory interpretation was required before
either party could know what might be a reasonable wage loss figure. The State Fund
points to the order in which the judge explained that while § 39-71-703(3)(c), MCA
(1991), speaks simply of a "wage loss of less than $2 or less an hour," the court was
required to consider the claimant's inability to work full time and how that would impact
the figuring of wage loss. The State Fund defends the court's decision not to award
attorney fees by pointing again to the court's order in which the judge finds that, because
the State Fund conceded the initial ten percent wage loss prior to trial, the court did not
adjudicate the issue and S.L.H. was therefore not entitled to attorney fees.
¶70 In light of questions of legal interpretation relating to the ability to work full time or
part time and how that relates to wage loss, the court's factual finding that the State Fund
acted unreasonably only as to the initial ten percent wage loss was supported by
substantial evidence in the record. We therefore affirm the court's ruling that a penalty
pursuant to § 39-71-2907, MCA, was appropriate only for the initial ten percent wage loss.
¶71 As discussed above, the attorney fees statute requires that the case be brought before
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the judge for adjudication, that a judge award an amount greater than that initially offered
by the insurer, and that a judge find the insurer's actions unreasonable before attorney fees
may be assessed pursuant § 39-71-612, MCA. We have held that when a party concedes
an issue in the opening statement of a trial, the issue remains in controversy into the
adjudication phase, and attorney fees and costs may be assessable for that issue. Krause v.
Sears Roebuck & Co. (1982), 197 Mont. 102, 641 P.2d 458.
¶72 In the case at hand, the court found the State Fund conceded a ten percent wage loss
prior to trial. The transcript, however, reveals that the State Fund explicitly declined to
concede the issue on the first day of trial:
MR. BRONSON: But as we have read the medical evidence, there is no indication
that she is going to be absolutely barred from eventually performing some kind of
full-time work. Perhaps at wages that are identical to, if not greater than what she
was earning at the time of injury.
....
And I hesitate to have a situation where we decide automatically that she is entitled
to a wage loss simply because of the limited experience so far in doing some part-
time work, when there is some potential for full-time work and none of her medical
providers are discouraging her from eventually getting into full-time work.
THE COURT: Yes. But you are not- I mean, even under that analysis, isn't she due
some benefits for her current situation, where she is not working full-time?
MR. BRONSON: My-
THE COURT: You are basically offering her nothing.
MR. BRONSON: My concern, Your Honor, is that I think it should be left open-
ended for a reasonable period of time here.
THE COURT: And you would pay her nothing?
MR. BRONSON: For wage loss.
THE COURT: Even though she currently does have a wage loss.
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MR. BRONSON: That's correct.
¶73 This discussion between the State Fund and the judge at trial clearly shows that the
State Fund had not conceded any wage loss prior to trial. The only evidence to suggest
that the State Fund made any concession prior to trial consists of a statement by S.L.H.'s
attorney that the State Fund's previous attorney had orally admitted a ten percent wage
loss. However, the attorney who represented the State Fund at trial maintained the State
Fund's denial of any wage loss payment. Furthermore, the State Fund made no wage loss
payments prior to trial, and made no attempt to refute S.L.H.'s opening statement in which
she stated: "the State Fund has persisted in saying that she is entitled to no benefits for her
wage loss." Additionally, although both the court and S.L.H. listed and discussed the
conceded issues, (the subrogation claim, the MRI/EMG, the gastrointestinal medication,
and the physical restriction), neither referred to the wage loss as a conceded issue.
¶74 Looking to the substance of the trial, it is clear that the wage loss issue remained in
controversy into the adjudication phase of the proceedings. S.L.H. was required to litigate
the issue, presenting witnesses and proof of her wage loss at trial, before the judge
awarded her a twenty percent wage loss. S.L.H. submitted proof on the issue, the State
Fund argued against any wage loss, and the Workers' Compensation Court entered a
conclusion of law and a finding of fact regarding the entire wage loss and the State Fund's
unreasonable actions. We find that the record provides no substantial credible evidence to
support the Workers' Compensation Court's finding that the State Fund conceded any
wage loss prior to trial. We therefore reverse the court's denial of attorney fees and remand
for a determination of reasonable attorney fees and costs in relation to S.L.H.'s proof of the
initial ten percent wage loss.
MRI/EMG
¶75 The workers' compensation judge found that the denial of payment for the two
diagnostic tests requested by S.L.H.'s treating physician was unreasonable and assessed a
penalty against the State Fund, but declined to award attorney fees and costs on the issue.
¶76 S.L.H. again urges this Court to adopt a more flexible approach to assessing attorney
fees and costs. As stated earlier, the language in § 39-71-612, MCA, explicitly providing
that attorney fees are assessable only when the issue has been brought before the court for
adjudication, precludes a court from assessing attorney fees when a party has conceded an
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issue prior to trial. The parties and the court agree that the MRI/EMG dispute had been
conceded prior to trial and although the judge awarded a penalty and warned against
"second-guessing the treating physician, unless you have got some medical backup for it,"
the judge could not award attorney fees. We affirm the court's decision that attorney fees
and costs could not be assessed against the State Fund for its unreasonable actions
regarding the MRI and EMG tests, as the dispute was resolved prior to trial.
PHYSICAL RESTRICTION
¶77 The court ruled that S.L.H. was restricted to light-duty activity and that because her
time-of-injury job had been a medium-duty position, she suffered a ten percent physical
restriction. The court awarded a twenty percent penalty pursuant to § 39-71-2907, MCA,
after finding that the State Fund unreasonably delayed determination of S.L.H.'s physical
restriction. However, because the State Fund conceded the restriction issue prior to trial,
albeit apparently "on the courthouse steps," the court could not assess attorney fees against
the State Fund.
¶78 The record supports the finding that the State Fund conceded the issue prior to trial. S.
L.H., the judge, and the State Fund all refer to the ten percent restriction as conceded prior
to the commencement of the trial. We therefore affirm the Workers' Compensation Court's
ruling that attorney fees could not be awarded on the restriction issue.
/S/ W. WILLIAM LEAPHART
We concur:
/S/ J. A. TURNAGE
/S/ JIM REGNIER
/S/ TERRY N. TRIEWEILER
/S/ JAMES C. NELSON
/S/ KARLA M. GRAY
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Justice William E. Hunt, Sr., did not participate.
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