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1994 MTWCC 15

WCC No. 9209-6591






The trial in this matter was held on September 13, 1993, in Billings, Montana. Petitioner, Russell Paulsen (claimant), was present and represented by Don Edgar Burris. Respondent, Entech Incorporated (Entech), was represented by Robert T. O'Leary. Claimant and Thomas F. Kiely, Jr., were sworn and testified. Exhibit Nos. 1 through No. 13 were admitted into evidence by agreement of the parties.

The Court has considered the Pretrial Order, the testimony presented at trial, the demeanor of the claimant, Mr. Kiely, the exhibits and makes the following:


1. On November 28, 1989, claimant suffered a back injury in the course and scope of his employment while operating a scraper.

2. At the time of injury, the employer, Entech, was self-insured.

3. On or about December 1, 1989, the claimant signed an Employee Confirmation of Work Related Injury. (Ex. No. 12.) The statement described how the injury occurred in the following terms:

This has been a gradual onset from running a scrapper [sic].

Except for the signature and social security number, the claimant did not fill out the remainder of the form. However, upon examination of the form, it would not be immediately apparent to a third party that someone other than claimant had filled out the form.

4. Following his injury the claimant was treated by Dana Stokke, D.C. Dr. Stokke first treated claimant on November 29, 1989. The doctor's notes of that visit describe the circumstances of petitioner's injury as follows:

"Date of onset was November 28, 1989, at about 6:00 P.M., when he was running a scraper, turned to the right to look over his shoulder, hit a bump, and he steadily got worse with aching and burning across low back radiating into right groin. All activity, such as bending, sitting, lifting, standing, walking, coughing, sneezing, increases the pain. He has not tried any home treatment. He has had a previous history of lumbosacral sprain but nothing as severe as now."

(Ex. No. 5 at 2.) Dr. Stokke diagnosed "Lumbo Sacral Sprain complicated by lt lateral convexity and sacralization." (Ex. No. 5 at 8.)

5. Dr. Stokke took claimant off work on November 29, 1989, but approved his return to work on December 8, 1989. (Ex. No. 5 at 1 and 9.) Claimant has worked continuously since that time.

6. By letter dated December 27, 1989, Entech denied claimant's workers' compensation claim. The denial was based on the accident description set forth in the Employee Confirmation. In the opinion of Thomas F. Kiely, Jr., Entech's director of Benefits and Claims, the onset of claimant's pain did not meet the injury definition of the Worker's Compensation Act. The letter stated in relevant part:

Based on the information you supplied us, we are denying your workers [sic] compensation claim filed on November 29, 1989.

On the Employee Confirmation of Work Related Injury form you filled out and signed, you stated the injury has been a "gradual onset from running a scraper." According to Section 39-71-119(2) of the Workers [sic] Compensation Act, an injury is caused by an accident. An accident is defined as "(a) an unexpected traumatic incident or unusual strain; (b) identifiable by time and place of occurrence; (c) identifiable by member or part of the body affected; and (d) caused by a specific event on a single day or during a single work shift."

In addition, we are denying this claim as an occupational disease based upon the medical notes provided by Dr. Dana Stokke.

. . . .

(Ex. No. 10 [emphasis in the original].)

7. In January, 1990 claimant retained attorney Geoffrey R. Keller to represent him with regard to his claim.

8. On January 19, 1990, Mr. Keller wrote a letter to Entech. He enclosed a request for mediation. (Ex. No. 3 at 3.) Mr. Keller did not mention the description of the accident contained in either the Employee Confirmation or Dr. Stokke's report. He did not mention the mechanism of injury.

9. Mr. Kiely of Entech responded to the mediation request by pointing out that no demand for settlement had ever been made.(1) No mediation was held and nothing further occurred until early 1992.

10. In early 1992 the claimant hired Don Edgar Burris to represent him. Mr. Burris has vigorously and effectively represented claimant since that time.

11. Mr. Burris requested and obtained mediation. The mediator made a recommendation. However, after receiving no response to the mediation recommendation, on September 30, 1992, Mr. Burris filed a petition on claimant's behalf seeking an adjudication that claimant suffered an industrial injury. The petition sought an award of benefits, attorney fees and a penalty.

12. The petition was served on Entech on October 1, 1992.

13. On October 7, 1992, Entech accepted liability for the claim and issued two checks, one to Dr. Stokke for $744.00 in payment for his treatment of claimant (Ex. No. 7) and the other to claimant for $239.20 of temporary total disability benefits due him for the days he was off work following the injury (Ex. No. 8.)

14. On July 30, 1993 claimant filed an amended petition seeking only attorney fees and a penalty.

15. Mr. Kiely testified that he initially denied claimant's injury claim based on claimant's description of what occurred (Ex. No. 12 and See F.F. Nos. 3 and 4). In his opinion the claimant's description did not satisfy the definition of an injury. (Tr. at 26.) His testimony is consistent with the letter he wrote to claimant on December 27, 1989, and I find his testimony in this regard credible.

16. It is unclear when Mr. Kiely first became aware of Dr. Stokke's November 29, 1989 office note stating that claimant experienced an acute onset of low back pain when his scraper went over a bump. At hearing he testified that he had "seen that" (Tr. at 34) but did not recall exactly when. His letter of December 27, 1989, states that he had reviewed "medical notes provided by Dr. Dana Stokke." (Ex. No. 10.) However, Dr. Stokke's notes for November 29, 1989, consisted of several pages, and there is insufficient evidence to establish that Mr. Kiely in fact had the note describing the mechanism of injury.

17. Mr. Kiely testified that he persisted in denying the claim because of later medical notes of Dr. Stokke which stated that claimant was suffering from an "Unstable Low back, secondary to scoliosis and sacralization." (Tr. at 34-6; Ex. No. 5 at 10.) Mr. Kiely testified that based on the note he "figured it was a hereditary, preexisting condition." (Tr. at 34.)

18. Mr. Kiely testified that he decided to pay benefits in the late summer of 1992 after conclusion of the mediation procedure.

19. In its October 13, 1992 response to the claimant's initial petition, Entech sets forth the following explanation for the delay in accepting liability:

That a mediation conference was held on March 20, 1992, and the mediator's report and recommendation was dated June 4, 1992 and received sometime thereafter by the Defendant/Employer. A copy of the Mediation Report and Recommendation is attached to this response and identified as Exhibit A. After receiving the mediation report, the Defendant/Employer's attorney, Robert T. O'Leary, and the Defendant/Employer's Claim Manager, Tom Kiely, decided to accept the recommendation of the mediator, but unfortunately, each thought the other was going to notify the mediator and counsel for the petitioner of the decision to accept the mediator's report.

(October 13, 1992 Defendant/employer's Response to Petitioner for Hearing.) The response is deemed a judicial admission that through inadvertence Entech failed to communicate its acceptance of liability until several months after its decision to do so.

20. Entech's delay in communicating its acceptance of the claim and in paying benefits following the mediation was unreasonable even though inadvertent.


1. This Court has jurisdiction over this proceeding pursuant to section 39-71-2905, MCA.

2. Benefits are not at issue in this case. Entech has paid $239.20 in temporary total disability benefits to claimant and $774.00 in medicals. Claimant is seeking attorney fees and a penalty with respect to those amounts.

3. Dr. Stokke's report of the manner in which the injury occurred arguably could have put Entech on notice of a need to further investigate. However, the evidence fails to establish that Mr. Kiely had this particular report at the time of the denial, and it is unclear when he received it. The description of the accident in the Employee Confirmation provided a reasonable basis for denial of the claim and there is was no evidence that would show that Mr. Kiely knew that the description of the accident in the Employee Confirmation was filled out by someone other than claimant.(2)

The failure of claimant's original counsel to the press the matter to conclusion contributed to the delay in resolving this matter.

Although Entech's denial of the claim was not initially unreasonable, its failure to communicate its acceptance of the claim following mediation was unreasonable although inadvertent. The decision to accept was made several months before it was communicated, and several months before benefits were paid. Nonetheless, as discussed hereinafter, the unreasonable delay in acceptance and payment do not entitle claimant to either attorney fees or a penalty.

4. Claimant incorrectly requested attorney fees and costs pursuant to section 39-71-612, MCA. Section 39-71-612 is applicable when there has been a payment or offer of payment of compensation and the amount of compensation is in dispute. Section 39-71-611, MCA, is applicable when the insurer has denied liability or terminated benefits. Since the dispute in the present case was over liability, not the amount of compensation, attorney fees and costs would properly be requested under section 39-71-611, MCA. The Court will treat claimant's request for attorney fees and costs as a request pursuant to section 39-71-611, MCA.

Claimant is not entitled to attorney fees. Section 39-71-611, MCA (1989), provides in relevant part:

39-71-611 Costs and attorneys' fees payable on denial of claim or termination of benefits later found compensable. (1) The insurer shall pay reasonable costs and attorney fees as established by the workers' compensation court if:

(a) the insurer denies liability for a claim for compensation or terminates compensation benefits;

(b) the claim is later adjudged compensable by the workers' compensation court; and

(c) in the case of attorneys' fees, the workers' compensation court determines that the insurer's actions in denying liability or terminating benefits were unreasonable. [Emphasis added.]

Interpreting similar language of earlier attorney fee statutes, the Supreme Court has held that the requirement that the claim be "later adjudged compensable by the worker's compensation court" precludes an award of attorney fees unless the insurer persists in its denial of liability and the Court actually awards benefits: Attorney fees cannot be awarded where the insurer belatedly accepts liability prior to an actual adjudication. Lasar v. E.H. Oftedal & Sons, 222 Mont. 251, 252-3, 721 P.2d 352 (1986); Yearout v. Rainbow Painting, 222 Mont. 65, 68, 719 P.2d 1258 (1986).

Claimant filed his petition on September 30, 1992. Eight days after the filing of the filing of the petition, Entech accepted liability and paid benefits, long before the trial on September 13, 1993. Under these circumstances, the Court is powerless to award attorney fees whether or not Entech's actions were unreasonable. See Field v. Sears Roebuck, 50 St. Rptr. 166, 167-68, 847 P.2d 306 (1993); Komeotis v. Williamson Fencing, 232 Mont. 340, 345, 756 P.2d 1153, 1156 (1988).

5. The petitioner is not entitled to a penalty. Section 39-71-2907, MCA (1989), provides:

39-71-2907. Increase in award for unreasonable delay or refusal to pay. (1) When payment of compensation has been unreasonably delayed or refused by an insurer, either prior or subsequent to the issuance of an order by the workers' compensation judge granting a claimant compensation benefits, the full amount of the compensation benefits due a claimant between the time compensation benefits were delayed or refused and the date of the order granting a claimant compensation benefits may be increased by the workers' compensation judge by 20%. The question of unreasonable delay or refusal shall be determined by the workers' compensation judge, and such a finding constitutes good cause to rescind, alter, or amend any order, decision, or award previously made in the cause for the purpose of making the increase provided herein.

. . .

While the section appears to require an "order" for benefits as a prerequisite to any penalty, the Supreme Court in Handlos v. Cyprus Industrial Minerals, 243 Mont. 314, 317, 794 P.2d 702 (1990), found the section to be ambiguous and construed it to allow imposition of the penalty in cases where the insurer delays payment until mid-trial. The Court held:

[T]he penalty under sec. 39-71-2907, MCA, is available where an insurer unreasonably delays paying a claim until the claimant takes the case to trial. We hold that sec. 39-71-2907, MCA, allows the Workers' Compensation Court to award a penalty when payment of benefits has been unreasonably delayed until mid-trial. [Emphasis added.]

The claimant argues that Plooster v. Pierce Packing, 50 St. Rptr. 59 (1993) applies in this case. In Plooster the Supreme Court held that the claimant was entitled to a statutory penalty where eight days prior to trial the insurer conceded liability for payment of certain medicines. However, the claim in that case was governed by the 1978 version of section 39-71-2907, which permitted the award of a penalty where "payment of compensation has been unreasonably delayed or refused, either prior or subsequent to the issuance of an award". A 1979 amendment to the section deleted reference to "issuance of an award" and substituted "issuance of an order by the workers' compensation judge." In the recent case of Field v. Sears Roebuck, 50 St. Rptr. 166 (1993), the insurer conceded permanent total disability 25 days before the trial was to take place. The Supreme Court, applying section 39-71-2907, MCA (1979), held that no penalty could be awarded since "no award of permanent total disability benefits was made by order of the Workers' Compensation Court that would serve as a basis for a penalty under Section 39-71-2907, MCA (1979)." Id. at 169.

The law in effect at the time of claimant's injury must be applied. Buckman v. Montana Deaconess Hospital, 224 Mont. 318, 730 P.2d 380 (1986). Accordingly, this Court must apply the 1989 version of Section 39-71-2907, MCA. Handlos and Field apply. Since liability was conceded long prior to trial, the Court is powerless to award a penalty even though Entech's delay in communicating its acceptance of liability following mediation was unreasonable.


1. This Court has jurisdiction over this matter pursuant to section 39-71-2905, MCA.

2. The claimant is not entitled to attorney fees, costs, or a penalty.

3. The JUDGMENT herein is certified as final for purposes of appeal pursuant to ARM 24.5.348.

4. Any party to this dispute may have 20 days in which to request a rehearing from these Findings of Fact and Conclusions of Law and Judgment.

DATED in Helena, Montana, this 22nd day of February, 1994.


/s/ Mike McCarter

c: Mr. Don Edgar Burris
Mr. Robert T. O'Leary

1. 1A demand for settlement must be made before mediation can take place. Section 39-71-2401(4)(a), MCA.

2. Entech initially denied the claim because claimant described his injury as "a gradual onset from running a scraper." In doing so, it relied on the definition of "injury" in section 39-71-119(2), Section 39-71-119(2) (1989) provides:

(2) An injury is caused by an accident. An accident is:

(a) an unexpected traumatic incident or unusual strain;

(b) identifiable by time and place of occurrence;

(c) identifiable by member or part of the body affected, and:

(d) caused by a specific event on a single day or during a single work shift.

Entech could have reasonably concluded that claimant's description did not meet the injury definition. Its initial denial was therefore not unreasonable.

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