<%@LANGUAGE="JAVASCRIPT" CODEPAGE="1252"%> Rita Lake

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IN THE WORKERS' COMPENSATION COURT OF THE STATE OF MONTANA

2002 MTWCC 53

WCC No. 2000-0183


RITA LAKO

Appellant

vs.

EMPLOYMENT RELATIONS DIVISION

UNINSURED EMPLOYERS' FUND

Respondent.


DECISION AND JUDGMENT AFFIRMING DECISION BELOW

AFFIRMED 10/19/04

Summary: Claimant was injured in 1984 while working for an uninsured employer. She contacted the Uninsured Employers' Fund (UEF) and was told the UEF was not paying benefits and that she could pursue an action against her employer. In fact, the UEF had ceased paying benefits in 1981, and did not commence paying benefits until 1987 after the legislature amended statutes requiring it to maintain "adequate reserves and surpluses." Claimant waited until 1992 to file a claim and now asserts that the UEF is equitably estopped from interposing the one-year claim filing requirement, 39-71-601(1), MCA, as a defense, and that it should have paid a portion of benefits during the 1981-1987 time frame rather than ceasing to pay any benefits. A hearing officer for the Department rejected her claim and she requested judicial review by the Workers' Compensation Court.

Held: While the UEF's action cutting off all benefits is questionable, the Court need not decide that issue since the claimant has failed to prove that the UEF misrepresented any fact and has therefore failed to establish even the first element for estoppel.

Topics:

Limitations Periods: Claim Filing: Estoppel. The first element of an equitable estoppel is a misrepresentation of fact, thus, where the representation is true there is no estoppel. (Note: this decision was affirmed at Lako v. ERD/UEF, 2004 MT 290.)

Limitations Periods: Claim Filing. The one-year claim filing requirement, 39-71-601(1), MCA (1983-1993), applies to claims with the Uninsured Employers' Fund since "all appropriate provisions" of the Workers' Compensation Act apply to UEF claims. 39-71-505, MCA (1977-2001).

Constitutions, Statutes, Regulations and Rules: Montana Code Annotated: 39-71-601(1), MCA (1983-1993). The one-year claim filing requirement, 39-71-601(1), MCA (1983-1993), applies to claims with the Uninsured Employers' Fund since "all appropriate provisions" of the Workers' Compensation Act apply to UEF claims. 39-71-505, MCA (1977-2001).

1 This is an appeal of a decision of the Department of Labor and Industry (Department) denying the claimant's request for benefits from the Uninsured Employers' Fund (UEF). Claimant, Rita Lako (Lako), was injured in 1984 while working for an uninsured employer. At the time of her injury, the UEF deemed itself insolvent and unable to pay benefits. In 1984, it advised Lako that no UEF claims were being paid and told her that she could pursue a private civil action against her employer. Over the next eight years claimant did nothing to pursue a claim with the UEF. Finally, on August 19, 1992, she filed a written claim, which was denied by the UEF as untimely. After a hearing, the Department affirmed the UEF's determination that the claim was untimely. This Court now affirms the Department's decision.

Statutory and Factual Background

I. The Uninsured Employers' Fund

2 The UEF was created in 1977(1) as a safety net for workers injured while working for uninsured employers. It "is a legislatively provided source from which to minimize the hardships imposed when an injured worker is unable to get workers' compensation benefits as a result of the employer's failure to provide coverage." Thayer v. Uninsured Employers' Fund, 297 Mont. 179, 184, 991 P.2d 447, 450 (1999).

3 Funded by penalties and reimbursement from uninsured employers, who often are insolvent, the legislature recognized that benefits payable by the UEF could outstrip its ability to pay. It therefore provided for that contingency, first by providing for an initial $150,000 capitalization of the Fund before paying benefits;(2) second, by requiring the UEF to maintain "[p]roper surpluses and reserves";(3) and, third, by providing for a proportionate reduction of benefits in the event the sums maintained by the UEF are inadequate to pay all claims.(4)

II. Insolvency

4 In 1981 the administrator of the UEF determined that there were inadequate funds on hand to pay all benefits and "proportionately" reduced benefits by 100%, i.e., payment of all benefits ceased. (Findings of Fact; Conclusions of Law; and Final Order (FFCL) at 5.) Thereafter, the UEF continued to receive monies from penalties, however, it still paid no benefits because, according to its accounting, its projected liability for claims, which was also growing, continued to exceed the accumulated funds on hand. (Id. at 5-6.) According to a 1987 legislative audit, by 1987 the funds on hand had grown to $874,000 but liability for claims had grown to $1.6 million. (Id. at 6.)

5 In 1987 the legislature finally addressed the divergence between UEF revenues and liabilities, repealing the surplus and reserve requirement and directing the UEF to make payments that it considers appropriate as funds become available from time to time. The existing provision for proportionate reduction of payments if UEF funds, 39-71-510, MCA, was unaffected, as was a companion provision in the same existing section which provided that "reductions do not entitle claimants to retroactive reimbursements in the future."(5) Payments of benefits by the UEF resumed July 1, 1987. (Uncontested Fact 3.(6))

III. History of Lako's Claim

6 On September 27, 1984, Lako was injured in the course and scope of her employment. (FFCL, Finding 5.) Her employer - Siversten Ranches/Robert Sivertsen - was uninsured at the time. (FFCL, Finding 4.)

7 After learning of her employer's lack of insurance Lako and her husband contacted the UEF. On October 4, 1984, they "were informed by the UEF that no claims for UEF benefits were being paid, and that Lako had a right to pursue a private civil action against" the employer. (Uncontested Fact 8.) Lako did nothing further to pursue UEF benefits at that time.

8 Eight years passed, then on August 19, 1992, Lako filed a written claim for compensation. (Uncontested Fact 9.) No prior written claim had been filed and on October 1, 1992, the UEF denied the claim since it had not been filed within one year of the work-related injury. Untimeliness was the sole basis articulated for the denial. (Uncontested Fact 10 and Department File - October 1, 1992 letter of Cheryl Russell to Lako.)

9 On December 30, 1992, Lako filed a request for mediation. (Department File.) However, since jurisdiction to review the UEF's determination lay with the Department, the Mediation Unit dismissed the request and referred the matter to the Hearings Unit, which opened a contested case file on January 22, 1993. After multiple continuances and seven years, the case was finally submitted to the hearing officer on March 8, 2000. It was submitted on the parties' statement of agreed facts, depositions, briefs, and oral argument.

The Decision Below

10 The issue and sub-issues, as framed below, were as follows:

Were benefits to Rita Lako properly denied by the Uninsured Employers' Fund (UEF)?

a) Were sums in the UEF inadequate to pay claimants during the period between January 13, 1981 and July 1, 1987?

b) Was it lawful for the UEF administrator to reduce benefits by 100% during the period between January 13, 1981 and July 1, 1987?

c) Did Rita Lako file a timely claim for UEF benefits?

(Findings of Fact; Conclusions of Law; and Final Order at 2.)

11 The hearing officer issued his Findings of Fact; Conclusions of Law; and Final Order on July 31, 2000. He determined that the UEF properly reduced benefits to zero and that Lako's claim was untimely in any event.

The Present Appeal

12 Following the hearing officer's decision, Lako appealed to this Court. The matter was extensively briefed, and argued, and finally submitted for decision on January 16, 2002.

Standard of Review

13 This is a judicial review of an agency decision. The applicable standard of review is found in section 2-4-704, MCA. The standard is as follows:

2-4-704. Standards of review. (1) The review shall be conducted by the court without a jury and shall be confined to the record. In cases of alleged irregularities in procedure before the agency not shown in the record, proof thereof may be taken in the court. The court, upon request, shall hear oral argument and receive written briefs.

(2) The court may not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact. The court may affirm the decision of the agency or remand the case for further proceedings. The court may reverse or modify the decision if substantial rights of the appellant have been prejudiced because:

(a) the administrative findings, inferences, conclusions, or decisions are:

(i) in violation of constitutional or statutory provisions;

(ii) in excess of the statutory authority of the agency;

(iii) made upon unlawful procedure;

(iv) affected by other error of law;

(v) clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record;

(vi) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion; or

(b) findings of fact, upon issues essential to the decision, were not made although requested.

Discussion

14 Lako devotes much of her argument to the ability of the UEF to pay benefits between 1981 and 1987. While troubled by the UEF's determination in 1981 to cut off all UEF benefits, and its adherence to that decision over the next six years,(7)

the Court need not, and does not, address that issue since it agrees with the hearing officer below that the claim in this case is barred by the one-year limitations period under section 39-71-601, MCA.

15 Section 39-71-601, MCA, provided at the time of Lako's injury, and continues to provide, that a claimant must file a written claim for compensation within one year. The provision is made applicable to claims against the UEF through section 39-71-505, MCA (1977-2001), which provides, "All appropriate provisions in the Workers' Compensation Act apply to the fund in the same manner as they apply to compensation plans No. 1, 2, and 3." The claim in this case was filed more than a year after the injury, therefore it is barred unless Lako can bring herself within some exception to the rule.

16 Subsection (2) of 39-71-601, MCA, provides one possible exception. In 1984 the subsection allowed the Division of Workers' Compensation to waive the 1-year written claim requirement for up to an additional 24 months. The 1984 version allowed the Department to grant a waiver "upon a reasonable showing by the claimant of lack of knowledge of disability." 39-71-601(2), MCA (1983). By 1992, when the claim was in fact filed, the subsection had transferred authority for a waiver from the Division, which ceased to exist in 1987, to the Department and expanded the grounds on which the waiver could be granted. The subsection provided for a waiver by the Department

upon a reasonable showing by the claimant of:

(a) lack of knowledge of disability;

(b) latent injury; or

(c) equitable estoppel.

39-71-601(2), MCA (1991).

17 However, subsection (2) of 39-71-601, MCA, is inapplicable under the facts of this case since the claim was not filed within 3 years, the outside time limit allowed through a waiver. Thus, there is no statutory authority to relieve claimant of the consequences of her failure to file a timely claim.

18 Therefore, authority, if any, must derive from decisional law extending judicially created equitable estoppel principles to statutes of limitations. The first case doing so in the workers' compensation context was Lindblom v. Employers' Liability Assur. Corp., 88 Mont. 488, 295 P. 1007 (1930). In Lindblom the Supreme Court held that the doctrine of equitable estoppel may relieve a party from a bar arising under a statute of limitations. In that case a 6-month limitations period applied to the presentment of a claim. The claim in that case was filed after the 6-month period had expired but claimant had been misled by the insurer into believing his claim had been accepted and he needed to do nothing more to perfect it. With regard to the application of the doctrine of equitable estoppel to toll the limitations period, the Court said:

[W]e think the conclusion that the doctrine of equitable estoppel should be applied in this case is unassailable. "Equitable estoppel is defined as the effect of the voluntary conduct of a party whereby he is absolutely precluded, both at law and in equity, from asserting rights which might perhaps have otherwise existed, either of property, or contract, or of remedy, as against another person who in good faith relied upon such conduct, and has been led thereby to change his position for the worse, and who on his part acquires some corresponding right either of contract or of remedy. This estoppel arises when one by his acts, representations or admissions, or by his silence when he ought to speak out, intentionally or through culpable negligence induces another to believe certain facts to exist and such other rightfully relies and acts on such belief, so that he will be prejudiced if the former is permitted to deny the existence of such facts. It consists in holding for truth a representation acted upon, when the person who made it, or his privies, seek to deny its truth, and to deprive the party who has acted upon it of the benefit obtained. When a party unjustly contrives to put another in a dilemma and to subject him to necessity and distress and he acts one way, it is not for the wrongdoer to insist that he should have acted another way." 21 C. J., 116, p. 1113.

88 Mont. at 493-494, 295 P.2d at 1008.

19 Application of the doctrine was reaffirmed in Ricks v. Teslow Consolidated, 162 Mont. 469, 481, 512 P.2d 1304, 1311 (1973), in which the Court noted that "the doctrine of estoppel applies where employer, insurer or Board as the case may be, has taken some positive action [within the limitations period] which either prevents the claimant from making a claim or leads him reasonably to believe he need not file such a claim." A mere failure to follow usual reporting procedures does not give rise to an estoppel. Id. at 484-85, 512 P.2d at 1313.

20 For claimant to prevail based on the doctrine of equitable estoppel, she must prove all of the six essential elements of estoppel. The elements were outlined in Lindblom and repeated in Ricks. They are:

1. There must be conduct - acts, language, or silence-amounting to a representation or a concealment of material facts. 2. These facts must be known to the party estopped at the time of his said conduct, or at least the circumstances must be such that knowledge of them is necessarily imputed to him. 3. The truth concerning these facts must be unknown to the other party claiming the benefit of the estoppel, at the time when it was acted upon by him. 4. The conduct must be done with the intention, or at least with the expectation, that it will be acted upon by the other party, or under such circumstances that it is both natural and probable that it will be so acted upon. 5. The conduct must be relied upon by the other party, and, thus relying, he must be led to act upon it. 6. He must in fact act upon it in such a manner as to change his position for the worse; in other words, he must so act that he would suffer a loss if he were compelled to surrender or forego or alter what he has done by reason of the first party being permitted to repudiate his conduct and to assert rights inconsistent with it.

Ricks at 486, 512 P.2d at 1314 (quoting from Lindblom, 88 Mont. at 494, 295 P. at 1009).

21 Initially, there must be some misrepresentation of a material fact. Elk Park Ranch, Inc. v. Park County, 282 Mont. 154, 166, 935 P.2d 1131, 1138 (1997) ("Equitable estoppel, by its terms, requires the misrepresentation of a material fact."). It is not enough that the insurer or employer fails to solicit a claim or to inform claimant of her right to file a claim. Ricks, 162 Mont. at 483-84, 512 P.2d at 1312-13; Wassberg v. Anaconda Copper Co., 215 Mont. 309, 317-18, 697 P. 2d 909, 914 (1985). Moreover, "it is essential to establish an equitable estoppel that the party sought to be estopped have knowledge that he is misleading the claimant and an intention to mislead the claimant to his detriment." Ricks, 162 Mont. at 487, 512 P.2d at 1314; accord Turjan v. Valley View Estates, 272 Mont. 386, 395, 901 P.2d 76, 82 (1995).

22 In the present case, the agreed facts demonstrate that the UEF did not misrepresent, misstate, or mislead claimant. The UEF told claimant in 1984 that it was not paying benefits and that she could pursue a claim against her employer. Both statements were absolutely true.

23 Moreover, claimant at that time could have readily inquired into why benefits were not being paid and learned of the Division of Workers' Compensation order. That order was issued January 13, 1991, signed by the Division Administrator, and expressly referred to section 39-71-510, MCA, as authority for a 100% reduction in payment of benefits. (Ex. B to Smith Dep.) The document was publically disseminated. (Palmer Dep. 8-9). Claimant could have obtained and reviewed the document and UEF statutes, and at that time taken issue with the UEF's interpretation and application of the statutes. She could have sought independent counsel to determine whether the UEF should have been paying benefits and whether it was worth pursuing a claim. As in Elk Park Ranch, she was "equally able to perform the necessary legal analysis to discover the validity and applicability of the" statutes she now contends the UEF misinterpreted and misapplied. 283 Mont. at 167, 935 P.2d at 1131. Claimant could also have filed a claim to maintain her right to claim compensation from the UEF in the event funds became available. Instead she did nothing for almost nine years.

ORDER AND JUDGMENT

24 Claimant has not satisfied even the first element for estoppel. Therefore, her claim for benefits is barred by section 39-71-601(1), MCA. The decision below is affirmed.

25 This judgment is certified as final for all purposes.

DATED in Helena, Montana, this 25th day of October, 2002.

(SEAL)

\s\ Mike McCarter
JUDGE

c: Mr. Stuart C. MacKenzie
Ms. Julia W. Swingley
Submitted: January 16, 2002

1. 1977 Mont. Laws, ch. 550, 4, intitially codified at 92-212, R.C.M. 1947 and recodified at section 39-71-502, MCA (1979).

2. 1977 Mont. Laws, ch. 550, 6, codified at 92-214, R.C.M. 1947 but not recodified in MCA. The provision was in the alternative, providing for commencement of benefits either upon the Fund attaining $150,000 or on January 1, 1997, whichever came first.

3. 1977 Mont. Laws, ch. 550, 4, codified at 92-212, R.C.M. 1947 and recodified at section 39-71-503, MCA (1979).

4. 1977 Mont. Laws, ch. 550, 5, codified at 92-213, R.C.M. 1947 and recodified at section 39-71-510, MCA (1979).

5. Both provisions were part of the original Act establishing the UEF, 1977 Mont. Laws, ch. 550.

6. The parties filed a statement of uncontested facts in the proceeding below. The statement is attached to a "Submission of Uncontested Facts" filed December 11, 1998, with the Department's Hearings Bureau.

7. The Court notes that between 1981 and 1987, the actual amount of monies on account with the UEF after deducting administrative costs grew from $181,942.76 on March 31, 1981 (Ex. E to Smith Dep.) to $874,000.00 as of December 31, 1986 (Legislative Audit found at Ex. C to Smith Dep. at 47), yet nothing was paid out since estimated liabilities for claims ($1.6 million as of December 31, 1986, id.) exceeded monies on hand. Notwithstanding the decision in Vasil v. Uninsured Employers' Fund, WCC No. 9010-5984 , Order on Appeal (May 15, 1991), the Court has difficulty understanding the UEF's interpretation of the provisions pertaining to a shortage of funds. While section 39-71-503(2), MCA (1977-1985), certainly required the UEF to maintain "[p]roper surpluses and reserves", section 39-71-510, MCA (1977-1985), expressly authorised "proportionate reductions in benefits to all claimants" in the event the UEF had insufficient funds to fully pay all benefits. Under well established rules of statutory interpretation, sections of a statute must be read together and construed to give effect to all of its provisions, 1-2-101, MCA; State v. Butler,1999 MT 70. 25, 294 Mont. 17, 26, 977 P.2d 1000 (1999) (It is the "[c]ourt's obligation to interpret the Act in a manner that will give each provision meaning and effect."); and, if possible, "a court must reject a construction that would leave any part of the statutory language without effect," Montco v. Simonich, 285 Mont. 280, 287, 947 P.2d 1047, 1051 (1997). Clearly, section 39-71-510, MCA, is applicable only in situations where reserves are inadequate, i.e., where the funds are inadequate to pay all claims. Even if the "adequate reserves" requirement is inviolable as the UEF contends, as payments are reduced proportion-ately in accordance with section 39-71-510, MCA, is there not a corollary reduction in the amount needed for reserves, thus equalizing the amount needed to be reserved for future benefits to existing funds? And, is that not a more reasonable and practical construction of the two provisions than is the UEF's interpretation, which effectively nullifies section 39-71-510, MCA?

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