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FINDINGS OF FACT, CONCLUSIONS OF LAW AND JUDGMENT
Summary: Claimant seeks occupational disease (OD) benefits from the Uninsured Employers' Fund (UEF). The UEF declined benefits based on a $328,500 settlement claimant made with his employer and its general liability insurance carrier, and for other reasons. The settlement agreement included a comprehensive General Release of any and all claims against the employer. Claimant argued the settlement related only to his claim for his back injury during his employment and not to any claim for OD benefits relating to his knee condition. He also argued the UEF could not raise the general release as a defense.
Held: The UEF properly raised the General Release. The failure of the UEF to "appeal" from an initial Department order does not preclude it from raising affirmative defenses to a claim where the claimant requests a contested case hearing. On the merits of the dispute, the General Release bars any claim against the UEF existing at the time of the release.
¶1 The trial in this matter was held on March 6, 2002, in Helena, Montana. Petitioner, Dennis Hand (claimant), was present and represented by Mr. Tom L. Lewis. Respondent, Uninsured Employers' Fund (UEF), was represented by Mr. Mark Cadwallader.
¶2 Exhibits: Exhibits 1 through 10 were admitted through stipulation.
¶3 Witnesses: Claimant, Kathy Brown, Keith Messmer, and Bernadette Rice testified at trial. No depositions were submitted.
¶4 Issues: The dispositive issues, as restated by the Court, are:
¶5 Having considered the Pretrial Order, the testimony presented at trial, the demeanor and credibility of the witnesses, the exhibits, and the arguments of the parties, the Court makes the following:
FINDINGS OF FACT
¶6 Claimant worked as a ranch hand/manager for G. Jon Roush(1) (Roush) for approximately 12 years. He last worked for Roush on or about January 15, 1993. (Uncontested Fact 1.)
¶7 During claimant's employment at the ranch, Roush was an uninsured employer within the meaning of section 39-71-501, MCA (1991). (Uncontested Fact 2.)
¶8 Around 1984, claimant fell while loading hay and injured one or both of his knees. There is no record of medical treatment at that time. The first mention of the injury is in 1989, when claimant was treated by Dr. Patrick R. Robins. At that time, claimant reported twisting his left knee quite severely four years earlier, following which he developed prominent swelling and pain. (Ex. 8 at 1.) Claimant reported that his symptoms had continued since the 1984 incident. He sought treatment from Dr. Robins in 1989 because his knee had recently "went out on him and became swollen." (Id.) Dr. Robins's impression was "internal derangement, left knee, likely secondary to torn meniscus." (Id.) He recommended arthroscopic surgery, but surgery was evidently not performed at that time.
¶9 Claimant did not return to Dr. Robins until September 1992. (Id.) At that time he reported problems with both knees and told the doctor that his right knee sometimes locked. (Id.) Claimant was still managing the ranch, but indicated that work would "end as of the end of next month." (Id.) Dr. Robins recommended outpatient arthroscopic evaluation of both knees. (Id.)
¶10 On October 10, 1992, claimant filed a claim with the UEF for a back injury. Bernadette Rice (Rice), the claims adjuster for the UEF, testified that a narrative attached to the October 10, 1992 claim mentioned knee problems arising from a fall in 1983. Rice accepted the back claim but denied liability for any knee injury.
¶11 In mid-October 1992, claimant underwent bilateral knee arthroscopy. (Id.) During the next several months, claimant made "gradual improvement" from his surgery. (Id. at 2.)
¶12 On March 31, 1993, claimant filed a second claim with the UEF in which he claimed he suffered from an OD of both knees. (Uncontested Fact 3.) Apparently that claim was denied, at least there is no contention that it was accepted, and there is no evidence that claimant did anything further to pursue the claim until 1998, some 5 years later.
¶13 Following the filing of the claim, claimant continued to have knee problems. In April 1993, Dr. Robins recommended further arthroscopic surgery. (Id. at 3.) On January 13, 1994, claimant returned to Dr. Robins for "multiple problems with his lower extremities." (Id.) He reported continued pain and clicking, especially of the left knee. Claimant told Dr. Robins he quit work a couple of weeks earlier because of pain in his lower extremities. (Id.) Dr. Robins concluded:
(Id. at 4.)
¶14 Sometime prior to September 1995, claimant sued Roush and Roush's wife over injuries he allegedly suffered on September 18 and October 10, 1992. (See Ex. 9.) The case went to trial and judgment was entered against the Roushes on September 21, 1995, in the amount of $550,000. (Id.)
¶15 Five days after the verdict, on September 26, 1995, claimant entered into an Assignment and Agreement with Roush and Katherine M. Roush. (Id.) The agreement included the following recitals:
(Id. at 1-2.) Through the assignment agreement, the Roushes went on to assign to Hand
(Id. at 2.) The Roushes also assigned to Hand their claims against Travelers for payment of attorney's fees and costs in defense of the action filed by Hand against the Roushes.
¶16 In exchange for this assignment, and for payment of $5,000 by the Roushes to Hand, Hand agreed
(Id. at 3.)
¶17 Finally, the agreement provided: "This assignment and agreement does not affect First Party's right to proceed with a claim, if any, of uninsured employers fund workers' compensation benefits." (Id. at 3-4, emphasis added.)
¶18 However, Hand thereafter negotiated a settlement with Travelers Insurance Companies (Travelers) and on January 17, 1996, he executed a comprehensive General Release in exchange for payment of $328,500. The release reads in full:
(Ex. 10, bolding and underlining added for emphasis.)
¶19 Another two years, ten months, and three days passed, then on November 20, 1998, some five and a half years after his initial claim, the claimant filed a request for an evaluation of his "bilateral knee problems" by the Occupational Disease Panel. (Ex. 1.)
¶20 On December 18, 1998, the Department of Labor and Industry ordered a medical examination by Dr. Dana Headapohl. (Ex. 2; Uncontested Fact 4.)
¶21 Dr. Headapohl examined claimant on December 29, 1998. (Ex. 4; Uncontested Fact 4.) She concluded that he was suffering from an OD but apportioned 75% to injuries rather disease. (Uncontested Facts 4 - 6.)
¶22 Based on Dr. Headapohl's evaluation, on February 1, 1999, the Department issued an Order of Determination finding that claimant "is suffering from an occupational disease and is entitled to benefits under the Occupational Disease Act [ODA]." However, based on Dr. Headapohl's apportionment opinion, the Department went on to find that claimant "is entitled to TWENTY FIVE PERCENT (25%) of their total disability benefits if they suffer a total wage loss as a result of the occupational disease." The Department further ordered that claimant "is entitled to medical and hospital expenses directly related to their occupational disease." (Ex. 5; Uncontested Fact 7.)
¶23 On February 5, 1999, counsel for claimant filed an "Objection to Order of Determination and Request for Hearing." (Ex. 6.) The document stated in its entirety:
¶24 At the time the request for hearing was filed, section 39-72-612, MCA (1997), provided for a contested case hearing before the Department. However, effective April 23, 1999, section 39-72-612, MCA, was amended to give the Workers' Compensation Court original jurisdiction over OD disputes. Those amendments, discussed in detail below, resulted in transfer of this case to the Workers' Compensation Court before any contested case hearing was conducted in the Department.
¶25 The UEF offered no evidence of what, if any, portion of the amount of the money paid in settlement of his claims against Roush was for his knees. His district court action appears to have been on account of his back injury and resulted in a judgment which was in excess of the final settlement with Travelers. I am therefore unable to assign any of the settlement to his knee claims.
¶26 The parties agree that claimant suffers from an OD that arose while he was employed by the uninsured employer. (Uncontested Fact 9.) The UEF, however, has refused payment of any benefits on two grounds. First, it urges it is entitled to an offset under section 39-71-511, MCA , which provides that a claim for benefits against the UEF is "discharged . . . to the extent that an employee . . . receive[s] actual monetary compensation by judgment or settlement from the uninsured employer . . . ." Secondly, it contends that the general release executed by claimant bars his claim altogether.
¶27 Claimant argues that the UEF's defenses are barred because the UEF did not "appeal" or "cross-appeal" from the February 1, 1999 Order of Determination of the Department of Labor and Industry. Claimant argues as follows:
(Petitioner's Post-Trial Brief at 3.)
¶28 Claimant misconstrues section 39-72-612, MCA (1991). Further, he overlooks other provisions applicable to these proceedings.
¶29 Provisions governing OD proceedings are procedural, therefore the ODA version in effect at the time of the proceedings applies. EBI/Orion Group v. Blythe, 281 Mont. 50, 54, 931 P.2d 38, 40 (1997). The 1997 version of the ODA was in effect at the time claimant requested a panel examination, at the time the Department issued its initial order, and at the time the claimant filed his request for a contested case hearing, therefore it was that version which applied to those three events.
¶30 Initially, section 39-72-602(2)(a), MCA (1997), provided for a medical examination by a panel physician. That was done. Under subsection (2)(b), both claimant and the UEF then had 20 days in which to request a further examination by a second panel member. They did not request a second examination, therefore a determination was issued February 1, 1999, pursuant to subsection (2)(c)(i), which provided:
¶31 This order issued February 1st, was not a final order of determination, rather it was an initial order subject to provisions giving both parties a right to a hearing. See Epperson v. Willis Corroon Administrative Services Corp., 281 Mont. 373, 934 P.2 1034 (1997). Section 39-72-611 and -612, MCA (1997), provide:
The sections do not refer to an "appeal"; they do not require either party to state grounds for a so-called "appeal"; and they do not preclude any party from raising issues not expressly stated in a so-called "appeal." Indeed, terming the request for hearing an "appeal" is a misnomer. Under sections 39-72-611 and -612 a request by either party simply triggered a contested case proceeding under the Montana Administrative Procedure Act (MAPA).
¶32 Under MAPA the UEF was entitled to raise defenses or other matters in avoidance of the claimant's ODA claim. MAPA expressly contemplates expansion of issues beyond an original notice of hearing. Section 2-4-601, MCA (2002), provides in relevant part:
In Board of Trustees of Billings School Dist. No. 2 of Yellowstone County v. State ex rel. Bd. of Personnel Appeals, 185 Mont. 104, 108, 604 P.2d 778, 780 (1979), the Supreme Court acknowledged that pleadings may be appropriate in administrative proceedings and
that any pleadings should be "liberally construed."
¶33 Subsequent to the claimant's request for a hearing, the 1999 legislature amended sections 39-72-602, MCA, and repealed sections 39-72-611 and -612, MCA. As amended, section 39-72-602, MCA, vests the Workers' Compensation Court with original jurisdiction over OD disputes, providing:
¶34 The 1999 amendments to section 39-72-602, MCA, were effective April 23, 1999. However, the legislature made a specific provision regarding the application of the amendments to OD claims arising prior to the effective date. Section 31(2), Ch. 442 , 1999 Montana Laws, states that the transfer of jurisdiction to the Court applies to occupational diseases occurring before April 23, 1999, unless a party elects, after notification by the department, to remain in the contested case process. In this matter, neither party asked to remain within the contested case process of the Department of Labor and on May 24,1999, the Department transferred the case to the Court.
¶35 Subsequent to the transfer, the Court issued a Scheduling Order establishing dates for trial and pretrial procedures and ordering the parties to participate in mediation before a Department mediator. Mediation was unsuccessful and on March 27, 2000, the parties presented a Stipulation to the Court requesting a pretrial resolution of the following question: "Is the Uninsured Employers' Fund entitled to a setoff under the provisions of § 39-71-511, MCA against petitioner's settlement with Travelers Insurance Company and its insureds?"(2) (Stipulation at 2.) After briefing, that issue was submitted and resolved by this Court's September 18, 2000 Order on Applicability of Section 39-71-511, MCA. In that Order I held that the setoff applies only to the extent that the Travelers' settlement encompassed the harm or condition for which claimant is presently seeking benefits.
¶36 Since the proceeding in this Court was commenced in the Department and did not involve a petition, response or other pleadings, on September 18, 2000, the Court also issued an Order directing both parties to file summaries of their contentions. The Order provided in relevant part:
(Order to File Summary of Contentions at 1.)
¶37 Petitioner thereafter filed a Summary of Contentions requesting a determination that he suffered a compensable OD and is entitled to full total disability benefits as well as rehabilitation, rehabilitation benefits, and medical benefits. In turn, the UEF filed its Summary of Contentions, which reads as follows:
(UEF's Summary of Contentions at 2-3, emphasis added.) Even if the response filed by the UEF is deemed an amendment to the pleadings, it would be an abuse of discretion to deny the amendments. As said in the recent case of Loomis v. Luraski, 2001 MT 223, ¶41, 36 P.3d 862:
¶38 I therefore conclude that the claimant's attempt to preclude the Court from considering the effect of his release on his right to benefits is without merit.
¶39 In light of my resolution of the first issue, I now consider the effect of the claimant's release of Roush.
¶40 The UEF is a statutory entity created by the legislature to provide a safety net for claimants who suffer industrial injuries while working for uninsured employers.
Auto Parts of Bozeman v. Employment Relations Div. Uninsured Employers' Fund, 2001 MT 72, ¶ 22, 305 Mont. 40, 47, 23 P.3d 193, 198 (2001). Thus,"[t]he Fund merely stands in the place of the uninsured employer, to provide some basis for recovery where the employer is impecunious." Thayer v. Uninsured Employers' Fund, 1999 MT 304, ¶ 23, 297 Mont. 179, 991 P.2d 447.
¶41 At the time of the claimant's OD claim, the UEF was required to pay the claimant the same benefits as he would have been entitled to if his employer had been insured. Section 39-71-502, MCA (1991), provided:
Thus, if claimant recovers in this case, the UEF would be statutorily entitled to seek repayment from Roush.
¶42 The comprehensive General Release was clearly and unequivocally intended to prevent that possibility. While the release has been set out in full earlier in this decision, the pertinent parts bear repeating here:
The release could hardly be more clear in its intent to release not only the Roushes and Travelers, but any other entities which may be derivatively liable, from "any and all actions and causes of action . . . from the beginning of time until the date of this release." It could not be more clear in its intent to protect the Roushes from any further liability relating to the claimant and its employment of him.
¶43 To allow claimant's ODA claim would require one of two things: it would require nullification of the UEF's statutory right to recover payments made to claimant from the Roushes or it would require the Roushes to pay additional amounts in contravention with the claimant's release. Neither alternative is acceptable. I therefore hold that the UEF was released from liability.
¶44 I am unsympathetic to claimant's assertions that he did not intend to settle the OD claims. There is no provision in the General Release reserving those claims. Moreover, claimant clearly could have pursued his OD claim long ago. He mentioned his knee problems when he filed his 1992 back claim. He filed his knee claim in 1993, then he sat on the claim for over five and a half years while he pursued a district court action against the Roushes and collected $328,500 from the Roushes' liability insurer. Then he renewed his OD claim. Whether his failure to pursue his OD claim for five and a half years was a deliberate strategy is unknown. If it was, it has not worked and warrants condemnation. If it was not, then he was remiss in failing to diligently pursue the claim and for executing the General Release without excepting the OD claim.
¶45 The claimant is not entitled to OD benefits. His claim is dismissed with prejudice.
¶46 The claimant is not entitled to costs or attorney's fees.
¶47 This JUDGMENT is certified as final for purposes of appeal.
¶48 Any party to this dispute may have 20 days in which to request a rehearing from these Findings of Fact, Conclusions of Law and Judgment.
DATED in Helena, Montana, this 28th day of August, 2002.
c: Mr. Tom L. Lewis
1. Roush did business as Swtichback Ranch.
2. That stipulation is inconsistent with claimant's present contention that the UEF is barred from raising defenses to his claim because it failed to appeal the Department's February 1, 1999 Order. The stipulation expressly requested the Court to consider a defense.
3. When beginning work on this decision it occurred to me that one possible outcome was a determination that the UEF is liable for benefits and could seek statutory reimbursement from the employer despite the General Release. In light of that possibility I had the Court's hearing examiner contact counsel to query whether the employer should be joined as a party since it could potentially relitigate the issue if not a party in this case, thus creating the potential for conflicting decisions. Claimant's counsel objected to joinder. In light of my ultimate resolution of the issues, joinder is moot in any event.
4. Current law permits recovery without restriction on amount. § 39-71-504(1)(b), MCA (2001).
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