Equity [Estoppel and Waiver]: Equitable Estoppel

MONTANA SUPREME COURT DECISIONS
Lako v. ERD/UEF, 2004 MT 290 The Supreme Court affirmed the determination by the WCC that the Uninsured Employers’ Fund (UEF) was not equitably estopped from asserting time filing requirements against the claimant where the claimant did not prove the first element of equitable estoppel--that the UEF misrepresented or concealed a material fact. The UEF's 1984 statement that it was not paying benefits due to its determination of insolvency was not a misrepresentation.
Lako v. ERD/UEF, 2004 MT 290 The doctrine of equitable estoppel applies where an employer or insurer has taken some positive action which either prevents a claimant from filing a timely claim or leads him reasonably to believe he need not file such a claim. It is a flexible principle which should be applied when an employer or insurer misleads a claimant by foisting onto the claimant a misrepresentation of the Workers’ Compensation Act.
Wiard v. Liberty Northwest Ins. Corp., 2003 MT 295 Insurer’s refusal to pay for claimant’s medical visit, based on position that he suffered a new injury, did not estop the insurer from later relying on the 60-month rule of section 39-71-704(1)(d), MCA (1991), in denying medical benefits.
Selley v. Liberty Northwest Ins. Corp. 2000 MT 76 Because insurer was in a better position than claimant to determine whether a particular physician had hospital admitting privileges, the Supreme Court found the insurer should have known the doctor did not have admitting privileges and should not have acquiesced in claimant's treatment by physician without admitting privileges, satisfying elements of equitable estoppel and preventing the insurer from refusing prospective compensation of physician as treating physician even though he did not meet the criteria of section 39-71-116(30), MCA (1993), regarding hospital privileges.
Selley v. Liberty Northwest Ins. Corp. 2000 MT 76 As a general matter, equitable estoppel arises when a party through its acts, conduct, or acquiescence, has caused another party in good faith to change its position for the worse. Six elements are necessary: (1) the existence of conduct, acts, language or silence amounting to a representation or concealment of material facts; (2) the party estopped must have knowledge of these facts at the time of the representation or concealment, or the circumstances must be such that knowledge is necessarily imputed to the party; (3) the truth concerning these facts must be unknown to the other party at the time it was acted upon; (4) the conduct must be done with the intention of expectation that it will be acted upon by the other party, or have occurred under circumstances showing it to be both natural and probable that it will be acted upon; (5) the conduct must be relied upon by the other party and lead that party to act; and (6) the other party must in fact act upon the conduct in such a manner as to change its position for the worse. Equitable estoppel must be established by clear and convincing evidence. The doctrine of equitable estoppel is designed to prevent one party from unconscionably taking advantage of a wrong while asserting a strict legal right, and will be invoked where "justice, honesty, and fair dealing" are promoted.
Selley v. Liberty Northwest Ins. Corp. 2000 MT 76 After approximately two years of compensating claimant's physician as her treating physician, insurer learned the doctor did not have admitting privileges at any hospital and thus did not qualify as a treating physician under section 39-71-116(30), MCA (1993.) Reversing WCC, Supreme Court held insurer was equitably estopped from refusing prospective compensation of physician as treating physician.
Smith v. Old Republic Ins. Co., 1999 MT 88N (unpublished, nonciteable opinion). In an unpublished, nonciteable opinion, the Supreme Court affirmed the WCC's finding that the insurer was not estopped from refusing to cover claimant's desired return to an out-of-state physician he had previously visited for a consultation on a new condition claimant was concerned he might have, thoracic outlet syndrome, where no physician had diagnosed him with that condition and his treating physician had recommended he consult with one of two local experts in the condition. Claimant had been promptly informed the insurer would not cover claimant's desired consultation.
 
WORKERS' COMPENSATION COURT DECISIONS

Nelson v. Montana Schools Group Ins. Auth. [05/28/14] 2014 MTWCC 15 Where Respondent advised Petitioner in writing that she would need to seek preauthorization under ARM 24.29.1517(5)(d) for all future treatment with her out-of-state surgeon because she had reached MMI, Petitioner cannot meet the first element of equitable estoppel when she failed to seek preauthorization, since there was no “conduct, acts, language, or silence amounting to a representation or concealment of material facts” by Respondent.

Newlon v. Teck American Inc. (Formerly Cominco) [05/08/14] 2014 MTWCC 12 Where Petitioner set forth an argument for each element of equitable estoppel and Respondent did not dispute that Petitioner had satisfied the elements, the Court concluded that Petitioner had met the elements of equitable estoppel.

Peters v. American Zurich Ins Co. [07/31/13] 2013 MTWCC 17 Where there was both an overpayment and an underpayment of benefits, it would hardly be equitable to require Respondent to increase Petitioner’s average weekly wage (AWW) by including his yearly bonus while not allowing it to recoup its overpayment.  The Petitioner cannot satisfy the sixth element of equitable estoppel since he cannot demonstrate that he changed his position for the worse by spending the overpayment of benefits; the Respondent can recover its overpayment from the increase in Petitioner’s AWW or from the lump-sum of back benefits.

Peters v. American Zurich Ins Co. [07/31/13] 2013 MTWCC 17 Where Respondent had a “quick and easy” way to discover that Petitioner’s son was receiving auxiliary SSDI benefits, and where the evidence demonstrates that Petitioner did not attempt to conceal this information but provided it as soon as Respondent asked about it, the Court concluded that knowledge of the benefits could be imputed to the insurer and therefore Petitioner had fulfilled the second element of equitable estoppel (the circumstances must be such that knowledge of the facts is necessarily imputed to the party estopped).

Hartford Ins. Co. of the Midwest v. Montana State Fund, In re McKirdy [02/11/13] 2013 MTWCC 4 The Court concluded that Petitioner had established the fifth element of equitable estoppel, noting that Petitioner began paying the claimant’s benefits under § 39-71-407(5), MCA, in response to Respondent’s representation that the only issue of liability was to determine which insurer was liable.  Petitioner changed its position for the worse when it relied on Respondent’s representation and Respondent later raised an affirmative defense under § 39-71-603(2), MCA.

Hartford Ins. Co. of the Midwest v. Montana State Fund, In re McKirdy [02/11/13] 2013 MTWCC 4 The parties agree that when Petitioner began paying the claimant benefits under § 39-71-407(5), MCA, Respondent’s decision to mount a defense against liability under § 39-71-603(2), MCA, had not yet seen the light of day.  Therefore, at that point in time, the only dispute was which insurer was liable for the claim.  Had Petitioner not paid under § 39-71-407(5), MCA, it would have breached its duty.  Under these circumstances, whether or not Respondent intended or expected Petitioner to act, it was both natural and probable for Petitioner to do so.  Therefore, Petitioner established the fourth element of equitable estoppel.

Hartford Ins. Co. of the Midwest v. Montana State Fund, In re McKirdy [02/11/13] 2013 MTWCC 4 After the Court found that Petitioner did not know Respondent intended to raise an affirmative defense under § 39-71-603(2), MCA, at the time Petitioner agreed to pay the claimant’s benefits under a reservation of rights, the Court concluded that Petitioner had met the third element of equitable estoppel. 

Hartford Ins. Co. of the Midwest v. Montana State Fund, In re McKirdy [08/01/12] 2012 MTWCC 28 The third element of equitable estoppel is not fulfilled unless the facts relate to the two involved parties; if an estoppel exists, it would be between the two parties to the dispute.

Morse v. Liberty Northwest Ins. Corp. [05/03/12] 2012 MTWCC 16 The Court determined that Petitioner had established the six elements of equitable estoppel and ordered Respondent estopped from denying Petitioner’s claim under the one-year claim filing limitation of § 39-71-601, MCA.  In this instance, Petitioner trusted his employer’s representation that he had properly reported his industrial accidents and that he need not take further action to protect his claim; Petitioner’s employer knew that an injured worker would believe that following the employer’s reporting requirements would fulfill the injured worker’s responsibilities in properly reporting a potential claim; Petitioner was unaware that his employer had not filed a claim on his behalf after he followed his employer’s reporting procedure; Petitioner’s employer would reasonably expect Petitioner to act as if he had properly reported his industrial accidents because Petitioner followed his employer’s reporting procedure; Petitioner relied upon his employer’s reporting procedure and therefore did not file a claim with Respondent; and Petitioner’s reliance on his employer’s reporting procedure changed his position for the worse when Respondent later denied his claim as untimely.
McLaughlin v. Northwestern Corp. [07/07/11] 2011 MTWCC 17 An attorney’s opinion regarding the legal ramifications of settlement agreement language is an opinion and not a fact and therefore cannot be considered a material fact for fulfillment of the first element of equitable estoppel.
Young v. Montana State Fund [01/08/08] 2008 MTWCC 2 Petitioner set forth an undisputed account of how he spent a PPD award which Respondent mistakenly paid Petitioner. Respondent demanded the return of the funds, and when they were not forthcoming, reduced Petitioner’s benefit payments to recoup them. Petitioner argued that Respondent was equitably estopped from recouping, asserting that the six elements of equitable estoppel were met. The Court concluded that while all six elements were met as to some items in Petitioner’s accounting, other items, such as $3,500 which Petitioner placed in savings and payments made on monthly debts which Petitioner would have owed regardless of any award, did not satisfy the sixth element: that Petitioner must have acted upon Respondent’s conduct so as to change his position for the worse, or to so act that he would suffer a loss if he were compelled to surrender the funds.
Auchenbach v. UEF [03/29/06] 2006 MTWCC 13 The Court found the elements of equitable estoppel satisfied where the UEF had a statutory duty to notify the mediation unit of its acceptance or rejection of a mediation recommendation within twenty-five days under § 39-71-520(2), MCA, failed to notify the mediation unit of its acceptance or rejection, let the sixty-day statute of limitation for filing a petition with the Court under § 39-71-2411(6), MCA, run on a pro sé claimant, and moved to dismiss based on the claimant’s failure to file her claim within sixty days of the mailing of the mediator’s recommendation.
MP Livestock Trust/Perry Polzing Trucking [02/04/05] 2005 MTWCC 6 The elements of equitable estoppel are satisfied and the Department of Labor and Industry (DLI) is estopped from seeking a penalty against an uninsured Montana employer utilizing employees furnished by a professional employer organization (PEO) where: (1) the DLI concealed a material fact (lapse of insurance) from the Montana employer; (2) the DLI had knowledge of the material fact (lapse of insurance) during the entire penalty period (the time of concealment); (3) the lack of insurance was unknown to the Montana employer; (4) the facts and circumstances known to the DLI at the time of the concealment were such that there was a natural and probable consequence that the Montana employer would act as if insurance were in effect by continuing to utilize the furnished employees without procuring its own insurance and by continuing to reimburse the PEO for insurance premiums it was supposedly paying; (5) in fact the Montana employer did act in such a manner; and (6) the Montana employer changed its position for the worse since its actions resulted in its reimbursing the PEO for premiums not incurred and exposed it to the very civil penalty the DLI seeks to impose.
MP Livestock Trust/Perry Polzing Trucking [02/04/05] 2005 MTWCC 6 Equitable estoppel requires proof of six elements: (1) the existence of conduct, acts, language, or silence amounting to a representation or concealment of material facts; (2) the party estopped must have knowledge of these facts at the time of the representation or concealment, or the circumstances must be such that knowledge is necessarily imputed to that party; (3) the truth concerning these facts must be unknown to the other party at the time it was acted upon; (4) the conduct must be done with the intention or expectation that it will be acted upon by the other party, or have occurred under circumstances showing it to be both natural and probable that it will be acted upon; (5) the conduct must be relied upon by the other party and lead that party to act; and (6) the other party must in fact act upon the conduct in such a manner as to change its position for the worse.
Fuss v. Ins. Co. of NA and Valor [4/8/04] 2004 MTWCC 34 The claimant is not estopped from invoking a prior and final decision of the Department of Labor and Industry holding he suffers from an occupational disease where the evidence establishes that he did not deliberately and intentionally misrepresent facts and the insurer has failed to present evidence that the additional facts changed the opinions of the occupational physician upon which the decision was based.
Spurlock v. State Fund [7/15/03] 2003 MTWCC 49 A certificate of insurance which certifies there is workers' compensation insurance coverage for a business operated by a sole proprietor but which also warns the reader that certain employees may opt out does not estop the insurer from denying coverage to a sole proprietor who has expressly opted not to have coverage for himself or herself. There is no estoppel since there is no misrepresentation of fact.
Geiger v. UEF/David Deckert, d/b/a David Deckert Trucking [8/22/01] 2001 MTWCC 46 Equitable estoppel applies when an employer has taken some positive action which either prevents a claimant from a timely claim or leads the claimant to reasonably believe he or she need not file such a claim. One of the six requirements is conduct amounting to a representation or a concealment of material facts. Where trial court was convinced claimant understood pre-injury that any workers' compensation insurance was his responsibility, putative employer and UEF were not equitably estopped from denying claim. (Affirmed in Geiger v. UEF/Deckert 2002 MT 332.)
Bustell v. Ins. Co. Of PA [5/15/02] 2002 MTWCC 26 Where an insurer files a first report on behalf of a catastrophically injured claimant, does so based solely on information provided by its insureds, and notifies the claimant that her remedies are in Montana, and where the claimant in reliance of the insurer's representations hires a Montana lawyer and pursues her claim in Montana, and also accepts third-party monies which may jeopardize her ability to pursue her claim in the state the insurer later contends is the proper forum, the insurer is estopped from asserting that the claim should have been pursued in another state.

Hiett v. MSGIA [9/6/01] 2001 MTWCC 52 Insurer was not equitably estopped from discontinuing prospective coverage of prescriptions to which claimant was not entitled under section 39-71-704, MCA (1995), where she did not prove detriment. See Hiett v. Missoula County Public Schools, 2003 MT 213.
Wiard v. Liberty Northwest Ins. Corp. [7/20/01] 2001 MTWCC 31A Failure of insurer or adjuster to tell claimant that failure to use medical benefits for 60 months would result in termination of medical benefits was not a representation. There was no duty by the insurer to advise claimant of the 60-month limitation and no reliance on such omission. The 60- month limitation does not preclude claimant from seeking medical care during that time. The only purpose of requiring notice of requirement would be to allow a claimant to seek unnecessary care merely to toll the period, which would be tantamount to fraud.
Wiard v. Liberty NW [6/08/01] 2001 MTWCC 31 Rejection of a single medical bill by the insurer does not amount to a misrepresentation of a 1991 law which provides for termination of liability for medical benefits if claimant fails to use medical benefits for 60 or more months. There was no representation at all with respect to the 60 month rule.
Davis v. State Fund [6/9/00] 2000 MTWCC 34Insurer denied claim on ground that owner-operator, who was himself covered under WC policy, failed to notify insurer of injury within 30 days, as required by 39-71-603(2), MCA (1997). Where insurer had for several years undertaken to provide policy-holders notice of important statutory changes and coverage requirements, but did not provide notice that a covered "owner" must inform insurer, not just employer, within 30 days of injury, insurer was equitably estopped from asserting limitations period.
Selley v. Liberty Northwest Ins. Corp. [11/16/98] 1998 MTWCC 82 . The insurer was not equitably estopped from refusing future payment to claimant's physician, whom it learned did not have hospital admitting privileges and thus did not qualify as a treating physician, where the insurer did not make any representation or concealment of fact and was not shown to have had knowledge that the doctor did not meet statutory criteria for a treating physician. [Note: the WCC was reversed on this point; see Selley v. Liberty Northwest, 2000 MT 76 .]
Smith v. Old Republic Ins. Co. [3/4/98] 1998 MTWCC 20, affirmed in Smith v. Old Republic Insurance Company, 1999 MT 88N (unpublished, nonciteable opinion). Although insurer paid for claimant's prior out-of-state consultations with a particular physician, it was not estopped from refusing to cover claimant's desired return to the physician for a consultation on thoracic outlet syndrome where no physician had diagnosed him with that condition and his treating physician had recommended he consult with one of two local experts in the condition. Claimant had been promptly informed the insurer would not cover claimant's desired consultation.
St. Paul Fire and Marine Ins. Co. v. Subsequent Injury Fund [2/19/98] 1998 MTWCC 10 On appeal from the DOL, the WCC agreed that the notice provisions of section 39-71-906, MCA (1989) could not be tolled and that the Subsequent Injury Fund (SIF) was not estopped from relying on those provisions. Although a worker had been certified with the SIF, he lied to his employer about the existence of prior injuries and neither the employer nor the insurer knew he was certified with the SIF, thus no notice was given to the SIF about his employment. Nevertheless, the plain terms of section 39-71-906, MCA, require the employer to advise the Department within 60 days after the first day of employment or "before an injury. . . " that an employee is certified under the SIF. There is no provision for tolling the limitation. The elements of estoppel are not satisfied where the party against whom the insurer wishes to apply the elements of estoppel, the SIF, made no representations whatsoever. Even if the estoppel doctrine could be applied to the SIF through the employer and claimant, the insurer failed to prove the reliance and injury elements where it never asked claimant if he was certified and the insurer would not have reduced insurance premiums based on the employee's certification.

Lockhart v. New Hampshire Ins. Co. [12/11/97] 1997 MTWCC 67 Although section 39-71-712, MCA (1995) limits temporary partial disability benefits to 26 weeks, insurer was estopped from relying on 26 week limit where it had denied claim and caused claimant to delay surgery, meaning he could not undergo surgery and return to temporary total disability status before using up 26 weeks.
Baumgartner v. Liberty NW [4/14/97] 1997 MTWCC 19 Estoppel is an affirmative defense that must be plead by the insurer. Where the defense was not plead and does not appear in the pretrial order, the insurer cannot raise it at trial to argue claimant cannot recover for an occupational disease where it accepted liability for his condition as an injury. Moreover, the estoppel defense is meritless where claimant did not mislead the insurer into accepting liability for his condition as an injury.
Filcher v. National Union Fire Ins. Co. [4/15/96] 1996 MTCC 30 Insurer estopped from recouping social security offset where claimant relied on income without offset and where insurer, which did not take offset earlier based on erroneous information from the federal Railroad Retirement Board that claimant's federal benefits were retirement benefits, had ample information to put it on notice to investigate whether claimant's benefits were in fact disability benefits allowing an offset.

Maggs v. State Compensation Ins. Fund [05/16/95] 1995 MTWCC 36 Under section 39-71-601(2), MCA (1989), the Department of Labor and Industry is the exclusive forum for presentment of claimant’s argument that the insurer is estopped from relying on the one-year statute of limitations for claim filing. While the Workers’ Compensation Court may judicially review the Department’s determination, it lacks jurisdiction to conduct a de novo hearing into claimant’s argument that the insurer is estopped where his supervisor allegedly threatened him with termination if he filed a workers’ compensation claim.