39-71-2907, MCA

MONTANA SUPREME COURT DECISIONS
[1993] Marcott v. Louisiana Pacific Corp., 297 Mont. 197 (1996) Holton v. F. H. Stoltze Land & Lumber Co., 637 P.2d 10 (1981) requires that an insurer begin paying an impairment award if uncontroverted medical evidence indicates claimant’s entitlement, but does not require the employer to pay benefits where a reasonable dispute as to compensability of the injury exists, even if some doctors have opined the claimant’s condition is work-related.
[1993] Marcott v. Louisiana Pacific Corp., 297 Mont. 197 (1996) An insurer has a duty to make at least a minimal investigation of a claim’s validity in light of the relevant statutes; absent such an investigation, denial of a claim for benefits is unreasonable. The insurer, however, has no duty to make claimant’s case for him by discounting his initial statements to his employers and doctors and soliciting additional information different from that first provided.
[1993] Marcott v. Louisiana Pacific Corp., 297 Mont. 197 (1996) Where the compensability of a leg injury occurring while simply walking had not been so clearly decided as to negate the employer’s ability to reasonably raise the compensability issue, substantial evidence supported the Workers’ Compensation Court’s finding that the employer did not unreasonably deny benefits, though the injury was compensable under the law.
[1983] Galetti v. Montana Power Company, 2000 MT 234, 301 Mont. 314, 8 P.2d 812. Self-insured employer accepted liability for claimant's 1983 back injury, but denied liability for 1994 flare-up. Although the employer accepted liability at the commencement of the hearing, trial proceeded on claims for attorneys fees and penalty. WCC found the self-insured employer's denial of the claim for medical benefits unreasonable where the adjuster had persisted in maintaining claimant's flare-up was not compensable despite medical information and legal precedent to the contrary in his files. Further evidence of unreasonable conduct claim came through evidence the employer ignored several requests by claimant for a copy of his entire file, failing even to provide a copy of the doctors' response to the self-insured employer's inquiries. The Supreme Court found the twenty percent penalty under section 39-71-2907, MCA (1983) applied to the entire amount of workers compensation benefits due claimant from the self-insured employer's workers' compensation plan, even though employee had received some compensation for medical expenses from the same employer's self-insured medical benefits plan.

[1993] Ingebretson v. Louisiana-Pacific Corp., 272 Mont. 294 (1995) (No. 94-622) Although there is no penalty provision in the Occupational Disease Act, section 39-72-402(1), MCA (1993) of that Act provides that “practice and procedure prescribed in the Workers’ Compensation Act applies to all proceedings under this chapter,” allowing the Workers’ Compensation Court to award penalty in an appropriate occupational disease case on the authority of section 39-71-2907, MCA (1993), the penalty provision of the Workers’ Compensation Act.

 
WORKERS' COMPENSATION COURT DECISIONS

Peters v. American Zurich Ins. Co. [07/31/13] 2013 MTWCC 16 No grounds exist to order an “automatic” penalty under § 39-71-2907, MCA, nor may the Court award a penalty merely because a matter requires the time and resources of the Court or the opposing party.

Dostal v. Uninsured Employers' Fund [12/04/12] 2012 MTWCC 45 Where the evidence demonstrated that Petitioner was ineligible for the treatment authorization she sought, the Court held that Respondent could not be found to have unreasonably denied treatment which Petitioner would never have been able to receive.

Dostal v. Uninsured Employers' Fund [12/04/12] 2012 MTWCC 45 Where the Court found no delay, denial, or termination of benefits caused by a dispute between the parties over photocopy charges, the Court held that it was immaterial whether Respondent acted unreasonably regarding the photocopy charge dispute.

Dostal v. Uninsured Employers' Fund [11/15/12] 2012 MTWCC 42 Since the UEF was included in the definition of “insurer” in § 39-71-116(10), MCA (1991), it is therefore treated as such for purposes of § 39-71-2907, MCA, and can be ordered to pay a penalty if this Court determines it unreasonably delays or refuses to pay benefits.

Stewart v. Liberty Northwest Ins. Corp. [04/11/12] 2012 MTWCC 11 An insurer’s reliance on an earlier ruling of this Court forms a reasonable basis to deny liability.  The insurer had a reasonable defense to liability after this Court concluded that Petitioner failed to prove a causal connection between her injury and her pain; however, the insurer continued to pay for the disputed medication under a reservation of rights.  The insurer’s actions were reasonable, and a penalty under these facts is inappropriate.

Baker v. Fireman's Fund Ins. Co. [03/22/12] 2012 MTWCC 9 The insurer agreed to pay certain medical bills in the settlement agreement, yet those bills remained unpaid for months after the agreement was reached despite repeated requests to pay them.  The inexplicable delay was unreasonable, and Petitioner is entitled to a penalty on the value of the medical bills pursuant to § 39-71-2907, MCA. 

Pearson v. MIGA [01/09/12] 2012 MTWCC 1 The Montana Insurance Guaranty Association is not an “insurer” as defined in § 39-71-116, MCA, and within the meaning of the WCA, which provides that attorney fees and penalties can only be awarded in cases involving insurers.  Since it is not an insurer, MIGA is not subject to the penalty and attorney fee statutes of the WCA.

Brown v. Hartford Ins. Co. [12/16/09] 2009 MTWCC 38 The Court concluded that Petitioner was entitled to the statutory penalty due to the unreasonable actions of an insurer in denying liability where the insurer presented no evidence that Petitioner was not suffering from an occupational disease, but argued solely that its adjuster’s “confusion” as Petitioner’s diagnoses denying her claim. The Court noted that the first claims adjuster reviewed Petitioner’s medical records and noted that her condition was not work-related when the medical notes explicitly stated that it was, and that the file sat for four months with no adjuster assigned to it. The Court further noted that both medical providers recorded objective medical findings to support their diagnoses, and the second claims adjuster sat on the file for seven months without seeking clarification regarding her “confusion” about the diagnoses, and later continued to deny liability and again failed to seek clarification after the physician again examined Petitioner and found her to be suffering from an occupational disease.
Long v. New Hampshire Ins. Co. [04/10/09] 2009 MTWCC 14 Respondent’s actions in denying liability were unreasonable where a claims adjuster authorized Petitioner to receive ongoing TTD benefits after Petitioner returned to work at his alternate employment, and when another claims adjuster took over the claim, rather than reevaluating the previous adjuster’s authorization, she simply denied that the authorization existed, and threatened Petitioner with garnishment of his wages to recoup the alleged overpayment. Additionally, the claims adjuster attempted to dissuade Petitioner’s counsel from obtaining a complete copy of his claims file by answering her inquiries in a misleading fashion. Furthermore, the claims adjuster acknowledged that for a period of time, the previous adjuster’s notes were not accessible by anyone in Montana, in violation of § 39-71-103(3), MCA.
Briese v. Ace American Ins. Co. [02/20/09] 2009 MTWCC 5 A Lockhart lien is a payment which a claimant makes to his attorney out of his medical benefits and therefore, a penalty may attach to a Lockhart lien pursuant to § 39-71-2907, MCA, because a penalty may be imposed on the “full amount of benefits due a claimant during the period of delay or refusal to pay.”
Narum v. Liberty Northwest Ins. Corp. [06/04/08] 2008 MTWCC 30 In a case which was settled with medical benefits left open, Respondent stopped paying for ongoing medical treatment without notifying Petitioner, denied authorization for hip replacement surgery even though the possibility of this surgery was specifically identified in the settlement agreement, and provided no persuasive explanation that could justify stopping payment of Petitioner’s medical treatment. The Court concludes Respondent’s actions are unreasonable and Petitioner is entitled to a penalty award.
Porter v. Liberty [10/19/07] 2007 MTWCC 42 Where the claims adjuster admitted during his deposition that he was aware that Petitioner’s treating physician had withdrawn his finding that Petitioner was at MMI, and further admitted that the withdrawal meant that Respondent would have to reinstate benefits, Respondent nonetheless took no action and did not reinstate Petitioner’s TTD benefits. The Court concluded this was an unreasonable refusal to pay benefits and that Petitioner was therefore entitled to a 20% increase of the full amount of benefits due, pursuant to § 39-71-2907, MCA.
Vanbouchaute v. Montana State Fund [08/23/07] 2007 MTWCC 37 Unlike attorney fees and costs, an adjudication of compensability is not a prerequisite for a penalty.
Mack v. Transportation Ins. Co. [05/22/07] 2007 MTWCC 16 Where the difference between two physicians’ impairment ratings was substantial and the Court found both physicians to be credible witnesses, Respondent’s conduct in paying the lower impairment rating was not unreasonable.
Popenoe v. Liberty Northwest [12/01/06] 2006 MTWCC 37 Penalty against insurer assessed where Court failed to appreciate how Respondent could favorably distinguish the facts in this case from the similar fact patterns of two Montana Supreme Court rulings regarding a case where a worker was injured on his employer's premises prior to the start of his shift.
[1989] Doubek v. CNA Ins. Co. [11/10/04] 2004 MTWCC 76 An insurer acts unreasonably and is liable for a penalty, 39-71-2907, MCA (1989), with respect to denied medical benefits where the treating physician finds a causal relationship between the medical condition treated and the industrial injury or occupational disease and where the physician expressing a contrary opinion was hired by the insurer, was provided with only selected records regarding the claimant's treatment, is less qualified than the treating physician, and relies on a medical test of questionable quality and value.
[1993] Nielson v. State Fund [2/20/04] 2004 MTWCC 12 Where arguments of insurer in opposition to claimant's request for impairment award of fifty percent were not unreasonable, claimant is not entitled to a penalty. 39-71-2907, MCA (1993). However, if the 42% has not been paid, claimant is entitled to a penalty on that portion.
[2001] Mosca v. American Home Assurance [2/13/04] 2004 MTWCC 6 Where within thirty days the claimant reported his belief that his herniated disk was job related and the only medical opinions in evidence were that his condition was in fact job related, liability was reasonably clear and it was unreasonable for the insurer to deny the claim and take the case to trial. A twenty percent penalty is therefore awarded under section 39-71-2907, MCA (2001).
[2001] Pekus v. UEF [4/25/03] 2003 MTWCC 33, rev'd in part, 2012 MTWCC 42The UEF is not an insurer under section 39-71-2907, MCA (2001), and is not subject to a penalty.
[2001] Hernandez v. ACE USA [4/24/03] 2003 MTWCC 32 A permanently totally disabled claimant receiving biweekly benefits is not entitled to a penalty where awarded a lump sum even though the insurer's denial of the lump-sum request was unreasonable. The lump sum was not due until approved either by the Department of Labor and Industry or the Workers' Compensation Court, therefore there was no delay in benefits. Thompson v. CIGNA, 2000 MT 306, 24-25, 302 Mont. 399, 14 P.3d 1222.
[1983] Galetti v. MPC [12/05/01] 2001 MTWCC 60 In a Subsequent Injury Fund case, an insurer or self-insured which fails to provide the notice required by section 39-71-908, MCA (1983), and denies a claim for further benefits, is liable for a penalty where the claim is subsequently submitted to the Subsequent Injury Fund and accepted by it.
[1985] Stephenson v. CIGNA [3/29/01] 2001 MTWCC 12 No penalty where the claim for permanent total disability is based upon pain and the insurer reasonably questioned the claimant's credibility as to his pain complaints.
[1991] Shepard v. Borden, Inc. [5/23/00] 2000 MTWCC 28 Although claimant found PTD, insurer did not act unreasonably where it kept claimant on TTD, without threatening to cut him off, pending resolution; diligently explored finding claimant productive employment; and relied on doctor's opinion claimant "can probably return to work in some capacity once he gets a better handle on his pain complaints."
[1997] Patrick v. State Fund [4/4/00] 2000 MTWCC 20 Penalty awarded where insurer unreasonably limited rehabilitation evaluation to the gathering of information to support the insurer's prior conclusion claimant suffered no wage loss. Facts suggesting unreasonable delay and denial of rehab benefits included adjuster's hiring of private investigator based only a computer generated "fraud flag," which in turn was based only on claimant's failure to return to work within a predicted period of time, and did not consider claimant's serious preexisting condition upon which work injury was imposed; adjuster's apparent communication to investigator, without any support, that there was no objective evidence of injury and treating physician was "making matters worse"; referral for neuropsychological evaluation without basis; provision of report unfavorable to claimant, but not report favorable to claimant, to expert; and general tendency to ignore evidence favorable to claimant while seeking opinions to support adjuster's conclusion. (After decision, parties settled and presented a Stipulated Judgment to the Court, which then issued its Order Nunc Pro Tunc For Entry of Judgement and Dismissal with Prejudice, Patrick v. State Compensation Insurance Fund, 2000 MTWCC 20A.)
[1981] Thompson v. CIGNA [8/17/99] 1999 MTWCC 51 [aff'd in 2000 MT 306] PTD claimant receiving benefits on a biweekly benefits wanted lump sum settlement. His attorney was in negotiations with a claims adjuster who did not have final authority to approve settlement. An out-of-state bureaucratic maze caused lengthy delay and put the adjuster in the position of having to attempt to change agreed settlement terms. Penalty not awarded because claimant was receiving biweekly benefits and was not entitled to a lump sum settlement as a matter of law, meaning there was no unreasonable delay of benefits due claimant.
[1991] Pattee v. Twin City Fire Ins. Co. [2/9/99] 1999 MTWCC 14 Where insurer agreed to send settlement checks within one week, and adjuster knew claimant was already emotionally distraught over delays in receiving benefits, the insurer's failure to get settlement checks to claimant's attorney until two weeks after due date constituted unreasonable delay. Twenty-percent penalty imposed on $20,000 insurer check insurer was to pay jointly to claimant and her attorney and $13,250 check insurer was to pay to claimant's attorney where money to attorney was still benefits, not attorneys fees ordered by the Court.
[1983] Galetti v. Montana Power Company [2/4/99] 1999 MTWCC 11. Self-insured employer accepted liability for claimant's 1983 back injury, but denied liability for 1994 flare-up. Although the employer accepted liability at the commencement of the hearing, trial proceeded on claims for attorneys fees and penalty. WCC found the self-insured employer's denial of the claim for medical benefits unreasonable where the adjuster had persisted in maintaining claimant's flare-up was not compensable despite medical information and legal precedent to the contrary in his files. Further evidence of unreasonable conduct claim came through evidence the employer ignored several requests by claimant for a copy of his entire file, failing even to provide a copy of the doctors' response to the self-insured employer's inquiries. A penalty was imposed on the amount of medical benefits claimant paid out of pocket, but not on the amount paid by the employer's self-insured health plan. [Note: the WCC was reversed on its conclusion penalty was not appropriate on amounts paid by the employer's health plan; see Galetti v. Montana Power Company, 2000 MT 234, ¶ 26-32.]
[1991] S.L.H. v. State Fund [1/14/99] 1999 MTWCC 6 Penalty was awarded with respect to (1) a 10% award for physical restrictions, (2) one half of a 20% wage loss award; and (3) the amounts due for an MRI and EMG the insurer had refused to cover. Penalty was not awarded with regard to (1) insurer's assertion of a subrogation interest in a third-party recovery, which assertion was dropped and was not, in any event, relating to benefits due; (2) claimant's request for further impairment award; and (3) a prescription the insurer had denied.
[1995] Leastman v. Liberty Mutual Fire Ins. Co. [1/6/99] 1999 MTWCC 2 After claimant refused to adhere to insurer's rehabilitation provider's advice, insurer refused any rehabilitation benefits. Coupled with the rehabilitation provider's inadequate job of evaluating claimant's realistic job prospects with and without retraining, the delay and denial of benefits caused by this position was unreasonable, giving rise to a penalty and attorneys fees.
[1991] Pittsley v. State Fund [11/19/98] 1998 MTWCC 84 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 denied.
[1993] Huffman v. Twin City Fire Ins. Co. [11/16/98] 1998 MTWCC 83 Claimant's physical restrictions post-injury established his entitlement to PPD benefits for lost lifting capacity; the insurer's refusal to pay these benefits was unreasonable and smacks of punishing claimant for failing to agree to settle all of his claims. Penalty is awarded on what was due claimant for physical restrictions, but not awarded on other benefits ordered where the insurer's denial of those benefits was reasonable given the status of the facts and applicable law.
[1995] McGillis v. State Fund [11/2/98] 1998 MTWCC 79 Attorney fees and penalty were awarded only with respect to the 10% wage loss (PPD benefits) which the insurer conceded at trial and should have conceded earlier based on the evidence.
[1997] Ronemus v. Business Ins. Co. [7/28/98] 1998 MTWCC 59 Although Court found claimant credible and was not persuaded by insurer's witnesses on issues of occurrence of accident and reporting, insurer's conduct in resisting claim was not unreasonable where a legitimate credibility issue existed.
[1995] Wall v. National Union Fire Ins. Co. [2/24/98] 1998 MTWCC 11 Penalty and attorneys fees are warranted based on the insurer's unreasonable denial of the claim, reflected in its failure to ascertain the IME physician's qualifications for the condition at issue, continued reliance on the IME physician's opinions despite information suggesting the treating physician was more qualified, denial of an OD claim in its entirety despite the IME physician's opinion 50% of the condition was occupational, and disregard for some facts and for the opinions of the nurse manager and treating physician.
[1991] O'Brien v. State Fund [2/10/98] 1998 MTWCC 6 Where section 39-71-2907, MCA, refers to unreasonable delay in payment of "benefits," insurer's conduct in causing delay in release of third-party settlement proceeds does not give rise to a statutory penalty. However, sanctions under section 39-71-2914, MCA (1991), a statutory version of Rule 11, are available in workers' compensation proceedings. Claimant may be entitled to sanctions where State Fund's assertion of "equittable subrogation" in claimant's recovery in a third-party malpractice case, maintained in its response to petition, but abruptly dropped prior to trial, raises a prima facie issue as to whether the assertion was well founded and in good faith. Because the facts on that issue are insufficiently developed, a briefing schedule and hearing on sanctions was set.
[1995] Ardesson v. Legion Ins. [1/15/98] 1998 MTWCC 2 The penalty provision is available to a claimant from the moment the insurer's delay in payment becomes unreasonable. See, Mintyala v. State Fund, 276 Mont. 521, 525, 917 P.2d 442, 445 (1996); Handlos v. Cyprus Indus. Minerals, 243 Mont. 314, 317, 794 P.2d 702, 704 (1990).
[1995] Ardesson v. Legion Ins. [1/15/98] 1998 MTWCC 2 The lack of a reasonable investigation into a claimant's demand for inclusion of the actual value of meals into wage rate is itself sufficient to impose a penalty on the insurer.
[1995] Ardesson v. Legion Ins. [1/15/98] 1998 MTWCC 2 Penalty awarded to claimant litigating inclusion of actual value of meals in wages for purposes of TTD benefit rate. Insurer unreasonably delayed payment of benefits corresponding to at least $3.00 valuation of meal. Unreasonable conduct included the insurer's failure to investigate the meal issue following claimant's demand, withholding of increase related to conceded $1.50 because claimant demanded more, and two-month delay in issuing check for conceded back benefits.
[1989] Stevens v. National Union Fire Ins. Co. of Pittsburgh [7/17/97] 1997 MTWCC 45 Insurer's persistent denial of medical benefits was unreasonable. Three doctors consistently opined her condition was related to the injury. While the claims adjuster suspected another accident caused the exacerbation, she took no affirmative steps to investigate that possibility. Claimant was entitled to a twenty-percent penalty on medical benefits under section 39-71-2907, MCA (1989), even though the insurer acknowledged liability prior to trial. Although the statute refers to "an order by the workers' compensation judge" granting benefits, the Supreme Court has found the section ambiguous and construed it to allow penalty in cases where the insurer unreasonably denies benefits, even if the claim is settled prior to trial. Mintyala v. State Compensation Insurance Fund, 276 Mont. 521, 527, 917 P.2d 442, 445-446 (1996); Handlos v. Cyprus Industrial Minerals, 243 Mont. 314, 317 794 P.2d 702, 703-704 (1990).
[1993] Church v. Travelers [5/27/97] 1997 MTWCC 31 Insurer paid PPD claimant benefits corresponding to 17.5% of 350 weeks for the labor factor under section 39-71-703, MCA (1993), representing a "split" between 15% and 20% on the theory that claimant went from the ability to do heavy lifting to an ability falling somewhere between medium and light duty. WCC held there is no statutory or factual basis for "splitting" the labor factor portion of PPD benefits, making the insurer's position unreasonable. The fact that the insurer required trial over $1,631.88 in benefits magnifies its unreasonableness. Penalty and attorneys fees awarded.
[1995] Martinez v. State Fund [3/5/97] 1997 MTWCC 9 Insurer is liable for penalty on all accrued, unpaid benefits based on unreasonable delay. Where insurer has conceded it delayed unreasonably after a particular point, the delay impacted all benefits accrued to that date, not merely benefits accruing after that date. Indeed, the delay is more unreasonable as to earlier accrued benefits as they were past due for a longer period. Attorneys fees awarded as well.
[1995] Gubler v. Liberty Northwest Ins. Co. [1/6/97] 1997 MTWCC 1 Penalty not awarded where insurer relied on version of events described by supervisor when denying liability for motor vehicle accident. While Court found another version of events to have occurred, insurer's reliance on supervisor's recollection was not unreasonable.
[1993] (Evans) Brian v. State Fund [11/22/96] 1996 MTWCC 73 Penalty awarded where insurer unreasonably refused to pay for back surgery although overwhelming evidence indicated claimant's accident caused increased, totally disabling back pain. Reliance on fact that pre- and post-accident MRIs were the same, and fact that surgery had been recommended prior to the accident, was not reasonable where claimant and physicians made clear her pain increased and total disability ensured, where she had previously been working.
[1995] McClanahan v. State Fund [7/5/96] 1996 MTWCC 50 Penalty awarded where Insurer's conduct was unreasonable for failure to investigate. Insurer took employer's story that claimant did not injure his back at face-value, failing to interview witnesses, ignoring consistent medical records, and not facing conflicts within employer's version of events.
[1993] Larsen-English v. Lumbermens Mutual Casualty [6/14/96] 1996 MTWCC 43 When claimant, a waitress, slipped and aggravated her existing knee condition, she was following a cook who playfully stole a pan from her after tossing whipped cream on her. Insurer's contention claimant was acting outside the course and scope of employment was not only unreasonable, but also mean-spirited, where the clear facts show the incident was precipitated for a work-related reason, that claimant did not initiate the incident, and that some horseplay, in any event, was tolerated by the employer. Insurer's reliance on out-of-state cases regarding horseplay was not reasonable where it ignored reasonably clear Montana precedents.

Burgan v. Nationwide Ins. Co. [10/04/95] 1995 MTWCC 75 Claimant is also entitled to a penalty under section 39-71-2907, MCA (1985) because the claimant’s right to some amount of permanent partial disability benefits should have been patently clear to the insurer, but it made no offer to settle claims for permanent partial disability benefits, but tied its offers to relinquishment of all claims for TTD and PTD benefits.

[1993] Marcott v. Louisiana Pacific Corp. [12/07/94] 1994 MTWCC 109 Crediting mechanic’s testimony that he was rushing and turned sharply, placing unusual strain on his calf muscle, the Court finds ruptured calf muscle compensable. Where a legitimate factual dispute existed over whether claimant was merely walking or walking rapidly and turning, the employer’s denial of compensability was not unreasonable. Attorneys fees and penalty were denied.