39-71-414, MCA

MONTANA SUPREME COURT DECISIONS

[1985] State Fund v. McMillan, 2001 MT 168 Affirming WCC, Supreme Court holds that State Fund's subrogation interest in claimant's third party recovery is not determined by the net judgement in the third party action, which represented a reduction from gross damages due to claimant's comparative negligence. Based upon the equitable limitation on legal subrogation articulated by the Supreme Court, known as the "made whole doctrine," the insurer's subrogation interest is determined by claimant's entire loss, which is measured in this case by the amount of gross damages calculated by the federal judge hearing his case. Under Zacher v. American Ins. Co., 243 Mont. 226, 231, 794 P.2d 335, 338 (1990):

"In determining whether a claimant has been made whole, the amounts received and to be received under the workers' compensation claim shall be added to the amounts otherwise received or to be received from third party claims, and also added to the costs of recovery, including attorneys fees; and when that total equals claimant's entire loss, then the insurer shall be entitled to subrogation from all amounts received by the claimant in excess of his entire loss...."

[1985] Royal Ins. Co. v. Roadarmel, 2000 MT 259 Under three year statute of limitations (§ 72-34-511(1)(a), MCA) applicable to claim against claimant's attorney for payment of insurer's statutory lien under section 39-71-414, MCA (1985) allegedly held in "constructive trust" by attorney, the statutory period for commencing action against attorney had expired before action was commenced. Thus, WCC erred in not dismissing claim.
[1985] Royal Ins. Co. v. Roadarmel, 2000 MT 259 An insurer's "first lien" under section 39-71-414(1), MCA (1985) is a liability created by statute governed by the two-year statute of limitations of section 27-2-211(1)(c), MCA. Given the "tight liability scheme" established by section 39-71-414, MCA, no valid contract arose between the insured and claimant regarding subrogation rights. Thus, the WCC erred in applying the longer statute of limitations applicable to contract claims.
[1981] Ness v. Anaconda Minerals Co., 279 Mont. 472, 929 P.2d 205 (1996) Although Brander v. Traveler’s Ins. Co., 179 Mont. 208, 587 P.2d 933 (1978) held that a claimant who settles a third party claim for less than policy limits would be deemed to have been made whole for purposes of determining whether the insurer has any right to subrogation under section 39-71-414, MCA, subsequent decisions overruled Brander and similar cases. The proper inquiry looks to whether in fact the settlement made claimant whole. Where even the insurer’s expert admitted claimant was not in fact made whole by the settlement, the insurer does not have a subrogation interest in claimant’s settlement.
 
WORKERS' COMPENSATION COURT DECISIONS

[1985] State Fund v. McMillan [6/29/00] 2000 MTWCC 42 Given the Supreme Court's rulings in Ness v. Anaconda Mineral's Co., 279 Mont. 472, 478, 929 P.2d 205, 210 (1996) and Zacher v. American Insurance Co., 243 Mont. 226, 694 P.2d 335, 338 (1990) that an insurer has no subrogation rights until a claimant has been made whole for his entire loss, the insurer's subrogation rights under section 39-71-414(1), MCA (1985) begin after claimant has been made whole for his gross damages or loss, not after he recovers the amount of net judgment he received following trial against a third-party after taking his own contributory negligence into account. Note: WCC affirmed by Montana Supreme Court in State Fund v. McMillan, 2001 MT 168.

[1985] State Fund v. Lowell McMillan [10/25/99] 1999 MTWCC 64 Section 39-71-414, MCA (1985) creates a statutory lien against monies received by claimant. The two-year statute of limitations specified by section 27-2-211(1), MCA, applies. Under section 39-71-414, MCA, the two-year statute starts running from the "claim, judgment, or recovery" of a claimant, which means that actual receipt of monies due under a judgment (i.e., "recovery") triggers a renewal of the statutory lien and commencement of a two-year limitations period. Where the action is timely under the appropriate limitations period, the claimant must show "extraordinary circumstances" to invoke the doctrine of laches. Note: The WCC issued an order granting summary judgment to claimant on a separate issue, reported at 2000 MTWCC 42. As of 6/13/01, that order was on appeal to the Montana Supreme Court. See also, Royal Insurance Company v. Roadarmel, 2000 MT 259, in which the Supreme Court concluded that an insurer's "first lien" under section 39-71-414(1), MCA (1985), against any proceeds in a third-party action constitutes a "liability created by statute" governed by the two-year limitation period of section 27-2-211(1)(c), MCA.
[1991] Ivan G. Walker (Deceased), James H. Walker v. Credit General Ins. Co. [8/24/99] 1999 MTWCC 53 Under 39-71-414, MCA, an agreement to settle a subrogation interest does not become a compromise settlement unless approved by the Department of Labor.

[1993] State Fund v. Martin J. Douma [6/29/99] 1999 MTWCC 39 Petition filed by insurer to adjudicate subrogation interests was dismissed because mediation had not been conducted. Contrary to insurer's argument, following 1991 amendments to section 39-71-414(5), MCA, the WCC, not the Department of Labor, had jurisdiction to adjudicate subrogation issues. Since the WCC had jurisdiction over the subrogation issue ab initio, the mediation provisions applicable to the WCC on the date of the injury also apply. See, §39-71-2401(1), MCA (1993).
[1985] McLaughlin v. ANR [6/4/97] 1997 MTWCC 36 A 45-year old truck driver suffered crush injury to hand and wrist while unloading at federal facility. He recovered $60,000 in settlement of lawsuit against federal government. WCC rejected insurer's claim for subrogation where claimant was not made whole by his third-party recovery. He settled in order to end that litigation, but proved his losses far exceeded $60,000.
[1981] Ness v. Anaconda Minerals Co. [12/29/95] 1995 MTWCC 115 Under current decisions of the Montana Supreme Court, see Zacher v. American Insurance Co., 243 Mont. 226, 794 P.2d 335 (1990) and Francetich v. State Compensation Insurance Fund, 225 Mont. 215, 827 P.2d 1279 (1992), an insurer has no subrogation interest in proceeds from a third party action until a claimant has in fact been made whole. The insurer’s was erroneous in contending that the settlement amount, as a matter of law, established the amount that made claimant whole. Note: this decision was affirmed by the Montana Supreme Court in Ness v. Anaconda Minerals Co., 279 Mont. 472, 929 P.2d 205 (1996) (Ness II).