Insurers. Where a claimant seeks penalty and attorneys fees following
a grant of summary judgment turning interpretation of statutes, regulations,
and case law, the question is whether the legal position taken by the
insurer was unreasonable. In this case, important legal precedent was
found by the Court's own research. It is difficult to find an insurer's
legal position unreasonable when a claimant's attorney does not cite
legal precedent to support his or her position. Attorneys fees and penalty
¶1 On July 31, 1998, this Court
entered partial summary judgment holding that saw rental paid to the claimant
by his employer must be included in computing claimant's compensation
benefits. The Court reserved for trial the claimant's request for attorney
fees and a penalty. Thereafter, the parties requested the Court to decide
the attorney fees and penalty issues based upon a stipulation of facts.
The stipulation was filed October 7, 1998. The briefing was completed
on October 13, 1998.
¶2 Claimant, a logger, was
injured on December 13, 1991. (Stipulated Statement of Uncontroverted
Facts (October 7, 1998), Fact 1.) Based on the total amount paid him by
his employer, claimant was entitled to benefits of $336 per week, less
any social security offset. (Partial Summary Judgment (July 31, 1998)
at 7.) However, his gross earnings were allocated 75% for wages and 25%
for saw rental. (Id. at 5.)
¶3 In a 1989 decision, this
Court determined that saw rental of a sawyer (logger) are wages for purposes
of determining benefits. Bobby Guckenberg v. State Compensation Ins.
Fund, WCC No. 8808-4883, Findings of Fact and Conclusions of Law
and Judgment (June 20, 1989). The case was decided under the 1987 version
of the Workers' Compensation Act (WCA).
¶4 At the time of the Guckenberg
decision, the WCA defined wages as "gross remuneration paid in money,
or in substitute for money, for services rendered by an employee." § 39-71-123(1),
MCA (1987). It also set out a list of payments which could not be included
in wages. § 39-71-123(2), MCA. That list did not refer to saw rental.
¶5 In 1991, the legislature
amended section 39-71-123(2), MCA, to provide that the Department of Labor
and Industry could determine by rule what "other" employee expenses should
be excluded in computing wages for compensation purposes.
(2) "Wages" do not include:
(a) employee expense reimbursements
or allowances for meals, lodging, travel, subsistence, and other
expenses, as set forth in department rules. [Emphasis added.]
That statute was effective
October 1, 1991. §1-2-201, MCA.
¶6 The Department thereafter
adopted a rule limiting the amount which could be excluded for saw rental
to $22.50 per work day. (Partial Summary Judgment at 4.) The rule was
published and adopted in 1992; it was effective December 25, 1992. 1992
MAR p. 2753.
¶7 In granting partial summary
judgment, I found that the rule against retroactive application of a statute
applies to a retroactive application of an administrative regulation.
I therefore granted claimant's request that his benefits be recomputed
without consideration of saw rental. Claimant now pursues his requests
for attorney fees and a penalty.
¶8 In excluding saw rental,
the State Fund relied on both section 39-71-123(2), MCA, as amended in
1991, and ARM 24.29.720(2)(d). Certainly its reliance on the amended statute
was justified. The 1991 amendment was effective October 1, 1991, § 1-2-201,
MCA, which was prior to claimant's injury. He can hardly complain that
application of the statute to his injury is a retroactive application,
thus the State Fund's reliance on the statute was not unreasonable. Whether
its reliance on the regulation adopted under the statute was reasonable
presents a closer question.
¶9 While claimant argued that
application of the 1991 statutory amendment is "contingent upon the promulgation
of department rules to specify what expenses would be excluded from wages
and to what extent," Motion for Partial Summary Judgment and Brief in
Support at 2, he did not cite a single case in support of his contention.
The Court did its own legal research and found dictum in Montana Supreme
Court cases which indicate that the rule against retroactive application
of statutes also prohibits retroactive application of administrative regulations.
(Partial Summary Judgment at 6 (citing Porter v. Galarneau, 275
Mont. 174, 182, 911 P.2d 1143, 1148 (1996); Haugen v. Blaine Bank
of Montana, 279 Mont. 1, 7, 926 P.2d 1364, 1367 (1996)).) It is difficult
to find an insurer's legal position unreasonable when a claimant's attorney
does not cite legal precedent to support his or her position.
¶10 Moreover, while persuasive,
the precedent found by the Court is dictum. The Montana Supreme Court
has not directly confronted the issue of retroactive administrative rules,
thus the matter is not beyond the pale of argument.
¶11 The State Fund also urges
that "it reasonably urged this Court to revisit and overturn the rule
set forth in Guckenberg v. State Compensation Ins. Fund, WCC No.
8808-4883, Findings of Fact and Conclusions of Law and Judgment,
(June 20, 1989)." (Respondent's Brief in Opposition to Award of Fees,
Costs and Penalties at 1.) Guckenberg held that under the law
in effect prior to the 1991 amendment of section 39-71-123, MCA, saw rental
should be included in gross income.
¶12 If the State Fund intended
to ask the Court to reconsider Guckenberg, it did a poor job
of articulating its request. In its Reply to Petitioner's Motion for Partial
Summary Judgment at 2, it argued, "Guckenberg is inapplicable to
the case at bar . . . [since] . . . it was concerned with the 1987 version
of the Workers' Compensation Act." Nowhere in its brief did it set out
reasons the decision should be overruled. In denying partial summary judgment
the Court specifically noted, "The State Fund does urge that it [Guckenberg]
should be overruled." The statement contains a typographical error: it
omitted the word "not" before the word urge. Thus it should have read,
"The State Fund does not urge that it [Guckenberg]
should be overruled." (Partial Summary Judgment at 3.)
¶13 Nonetheless, a request
for reconsideration of Guckenberg is not unreasonable. Section
39-71-123, MCA (1987), contained language of inclusion and exclusion.
It set out what should be included in wages while separately setting out
what should be excluded. While the exclusions did not include saw rental
payments, payments for saw rental arguably do not meet the language setting
out what constitutes gross income. Section 39-71-123(1), MCA (1987-91),
defined wages as "gross remuneration paid in money, or in a substitute
for money, for servicesrendered by on employee." Arguably,
saw rental payments which reflect a fair payment for the cost of the saw,
and its maintenance, gas and oil, are not for services and therefore do
not meet the gross income requirement.
¶14 In articulating arguments
that might be made for overruling Guckenberg, I do not intend
to suggest that had those arguments been squarely presented by the State
Fund I would have overruled Guckenberg. The decision is almost
a decade old. Claimants and insurers have relied upon the decision in
the intervening decade. Persons subject to particular laws should be able
to rely upon judicial decisions interpreting and applying them. Courts
should abhor changing rules retrospectively and punishing conduct which
they previously condoned.
¶15 In excluding saw rental
payments, the State Fund did not act unreasonably and claimant is not
entitled to either a penalty or attorney fees. However, since claimant
has prevailed on the merits, he is entitled to his costs.
DATED in Helena, Montana,
this 19th day of November, 1998.
c: Mr. Steve Fletcher
Ms. Carrie L. Garber
Submitted: October 13, 1998