LIBERTY NORTHWEST INSURANCE CORPORATION

Petitioner/Insurer for

BRAND S LUMBER

Employer

vs.

STATE COMPENSATION INSURANCE FUND

Respondent.

Summary: Liberty Northwest insured Brand S Lumber, which subcontracted with McNeilly Line Logging. Liberty filed a petition against State Fund, alleging that a letter written by State Fund to Brand S indicated that McNeilly was insured, when in fact it was not, causing Liberty, pursuant to section 39-71-405, MCA (1995) to owe benefits to an individual injured while working for McNeilly. State Fund moves to dismiss for lack of subject matter jurisdiction.

Held: While the jurisdiction of the WCC extends to any matter relating to benefits, including claims between insurers to determine which of them is liable to a claimant, the WCC does not have jurisdiction over tort actions against insurers, even though the measure of tort damages may involve the amount of benefits paid by an insurer under the Workers' Compensation Act. (Note: affirmed in Liberty Northwest Ins. v. State Fund, 1998 MT 169.)

Topics:

Constitutions, Statutes, Regulations and Rules: Montana Code Annotated: section 39-71-2905, MCA (1995). While the jurisdiction of the WCC extends to any matter relating to benefits, including claims between insurers to determine which of them is liable to a claimant, the WCC does not have jurisdiction over tort actions against insurers, even though the measure of tort damages may involve the amount of benefits paid by an insurer under the Workers' Compensation Act. (Note: affirmed in Liberty Northwest Ins. v. State Fund, 1998 MT 169.)

Jurisdiction: Subject Matter Jurisdiction. While the jurisdiction of the WCC extends to any matter relating to benefits, including claims between insurers to determine which of them is liable to a claimant, the WCC does not have jurisdiction over tort actions against insurers, even though the measure of tort damages may involve the amount of benefits paid by an insurer under the Workers' Compensation Act. (Note: affirmed in Liberty Northwest Ins. v. State Fund, 1998 MT 169.)

The petition in this case was commenced by Liberty Northwest Insurance Corporation (Liberty) against the State Fund Compensation Insurance Fund (State Fund). The following facts are alleged in the petition:

1. Liberty insures Brand S Lumber, which in turn has subcontracted with McNeilly Line Logging for McNeilly to provide Brand S with logs.

2. On November 25, 1994, the State Fund wrote to Brand S stating that:

. . . McNeilly had applied for coverage with the State Fund and that "we will also notify you if cancellation procedures are initiated for any reason."

3. On September 25, 1995, Durwood Park, an employee of McNeilly, was injured. Brand S and Liberty then discovered that McNeilly was uninsured, therefore, Liberty instituted benefits pursuant to section 39-71-405, MCA.

4. Prior to the injury, the State Fund never notified Brand S that it did not provide coverage for McNeilly.

Based on these facts, Liberty alleges that the State Funds' November 25, 1994 letter was false and further demands judgment against the State Fund for all benefits Liberty has paid to Durwood Park.

The State Fund moves to dismiss on jurisdictional grounds. It argues that the matter is not one involving benefits payable to the claimant; that the cause of action stated in the petition sounds in tort; and that the Workers' Compensation Court lacks jurisdiction over the subject matter. The Court agrees.

The Court's jurisdiction is set forth in sections 39-71-2901 and 39-71-2401, MCA. Section 39-71-2905, MCA (1995), provides in relevant part:

Petition to workers' compensation judge. A claimant or an insurer who has a dispute concerning any benefits under chapter 71 of this title may petition the workers' compensation judge for a determination of the dispute after satisfying dispute resolution requirements otherwise provided in this chapter.

Section 39-71-2401, MCA (1995), provides in relevant part:

Disputes -- jurisdiction -- settlement requirements -- mediation. (1) A dispute concerning benefits arising under this chapter or chapter 72, other than the disputes described in subsection (2), must be brought before a department mediator as provided in this part. If a dispute still exists after the parties satisfy the mediation requirements in this part, either party may petition the workers' compensation court for a resolution.

(2) A dispute arising under this chapter that does not concern benefits or a dispute for which a specific provision of this chapter gives the department jurisdiction must be brought before the department.

(3) An appeal from a department order may be made to the workers' compensation court.

While the jurisdiction of the Court extends to any matter relating to benefits, including claims between insurers to determine which of them is liable to a claimant, Belton v. Hartford Accident and Indemnity Co., 202 Mont. 384, 658 P.2d 405 (1983), no decision of which this Court is aware has ever held or even suggested that it has jurisdiction over tort actions, even though the tort action might result in a judgment requiring another party to pay, as damages, the amount which an insurer has paid to a claimant under the Workers' Compensation Act. The present action plainly sounds in tort. The petition does not allege that the State Fund insured McNeilly or that it is liable to Durwood Park. The whole point of the petition is that the State Fund failed to insure McNeilly.

The motion to dismiss is granted. Accordingly, the petition is dismissed.

DATED in Helena, Montana, this 1st day of October, 1997.

(SEAL)

\s\ Mike McCarter
JUDGE

c: Mr. Larry W. Jones
Mr. Laurence A. Hubbard
Mr. Gene R. Jarussi - Courtesy Copy
Mr. Mark McNeilly - Courtesy Copy
Submitted: September 24, 1997