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Stevens v. State Compensation Insurance Fund

Court of Workers Compensation of Montana

December 3, 1993


          Submitted: November 16, 1993





          ROBERT J. CAMPBELL Presiding Hearing Examiner

         The above-entitled matter was duly heard by Court-appointed Hearing Examiner, ROBERT J. CAMPBELL who conducted the hearing, considered the evidence and prepared and submitted Findings of Fact and Conclusions of Law and Proposed Judgment for consideration by the Court.

         The Court has reviewed the record of the proceedings. The record clearly supports the conclusion of the hearing examiner that petitioner is entitled to benefits and was not guilty of fraud. Carolyn Becker's inconsistent stories, bias, and fabricated story of a conversation with a deceased individual were fatal to the fraud allegations against petitioner.

         The Court also agrees with the hearing examiner's conclusion that petitioner is not entitled to a penalty or attorney fees. However, additional discussion of that matter is warranted.

         The petitioner's industrial accident occurred on October 25, 1990. Thus, the 1989 workers' compensation laws apply to his request for a penalty and attorney fees. Section 39-71-2907(1), MCA (1989) provided in relevant part:

         When payment of compensation has been unreasonably delayed or refused by an insurer . . . the order granting a claimant compensation benefits may be increased by the workers' compensation judge by 20%. [Emphasis added.]

         Section 39-71-611, MCA (1989) governs the award of any attorney fee, and provided in relevant part:

(1) The insurer shall pay reasonable costs and attorney fees as established by the workers' compensation court if:
(a) the insurer denies liability for a claim for compensation or terminates compensation benefits;
(b) the claim is later adjudged compensable by the workers' compensation court; and
(c) in the case of attorneys' fees, the workers' compensation court determines that the insurer's actions in denying liability or terminating benefits were unreasonable. [Emphasis added.]

         Thus, neither a penalty nor attorney fees are automatically awarded merely because a claimant prevails at trial. They are to be awarded only where the actions of the insurer were "unreasonable."

         The imposition of a penalty is inappropriate where there is a legitimate factual or legal dispute concerning benefits under the Workers' Compensation Act. See Garmann v. E.R. Fegert Co., 226 Mont. 432, 437, 736 P.2d 123 (1987); Hengel v. Pacific Hide & Fur Depot, 224 Mont. 525, 530, 730 P.2d 1163 (1986). The penalty provided by the Act was not "intended to eliminate the right of the insurer to assert a legitimate defense." Van Daveer v. Stauffer Chemical Co., 200 Mont. 218, 225, 657 P.2d 1142 (1982). Since the attorney fee statute adopts a similar "unreasonableness" standard, these principles apply as well to any award of attorney fees.

         The reasonableness of the State Fund's termination of petitioner's benefits must be judged in light of what it knew at the time of the termination and during the period leading up to trial. The first fact of consequence was the report of petitioner's ex-wife that petitioner was not injured at work, and her willingness to testify under oath at any trial. Her possible bias against her ex-husband did not render her either incompetent to testify or incredible. As a general matter, a witness is competent to testify unless "he is incapable of expressing himself or is incapable of understanding the duty to tell the truth." State v. Van Dyken, 242 Mont. 415, 435, 791 P.2d 1350 (1990). Even a convicted perjurer is a competent witness. State v. Barick, 143 Mont. 273, 284, 389 P.2d 170 (1964). Finally, the testimony of a single witness, if believed by the fact finder, is sufficient to sustain a verdict, State v. Azure, 181 Mont. 47, 55, 591 P.2d 1125 (1979), irrespective of the witness' bias, Anas v. State, 726 P.2d 552 (Alaska Ct. App. 1986). Prosecutors in criminal cases often rely on individuals with checkered backgrounds and obvious bias. Lacking some obvious and overwhelming flaw in the evidence provided by Carolyn Becker (petitioner's ex-wife) it was not unreasonable for the State Fund to rely on her information.

         Moreover, other information known by the State Fund provided some corroboration for Mrs. Becker's claim that her ex-husband did not suffer a job-related injury. The workers' insurance policy covering the accident became effective the same day as the injury. The employer was the petitioner's father and previously was without workers' compensation insurance coverage. The State Fund was aware of these circumstance at the time it accepted petitioner's claim, and it apparently raised some suspicion about the claim. However, it does not appear that the State Fund at that time had additional information which would support anything more than a suspicion. Carolyn Becker's coming forward, however, changed that.

         The State Fund was also aware that a professional criminal investigator from the Montana Department of Justice had conducted an investigation. Bill Visser, who made the decision to cut off benefits, had discussed the case with one of the investigators, who confirmed Carolyn Becker's willingness to testify. There is nothing to indicate that Visser was told by the investigators that Becker was not credible. In summary, the State Fund had a reasonable albeit imperfect basis for believing that petitioner was not injured on-the-job and was therefore not entitled to benefits. While it might be criticized for not seeking Court permission to cut off benefits, there is nothing in the statutes which required it to do so. The statutes make no distinction between a denial of benefits in the first instance or a later termination. The same "reasonableness" considerations applicable to an initial denial of benefits therefore apply to an insurer's unilateral decision to terminate benefits.

         This case, however, should serve as a caution to the State Fund and other insurers. Not every accusation of fraud is true, and some accusations, while true, may not be provable. Care should be exercised in evaluating all such accusations and, like prosecutors, insurers should evaluate all evidence available to them, conduct further investigation where needed and use good judgment in determining which cases warrant action. While the evidence in this case did not show that the State Fund acted unreasonably, requests for penalties and attorney fees in future failed cases will have to be evaluated according to their own facts. There may even be circumstances where the existence of an accuser willing to testify against the claimant may not be a sufficient basis to either deny benefits or avoid imposition of a penalty and attorney fees.

         Having considered the record in the above-captioned matter, considered the Findings of Fact and Conclusions of Law and Proposed Judgment of the Hearing Examiner, the Court hereby makes and enters the following Order and Judgment.

         IT IS HEREBY ORDERED the Findings of Fact and Conclusions of Law and Proposed Judgment of the Hearing Examiner are adopted.

         IT IS FURTHER ORDERED the Judgment is to be entered as follows:


         1. This Court has jurisdiction over this matter pursuant to section 39-71-2905, MCA.

         2. A preponderance of the credible evidence supports the conclusion that claimant suffered an industrial injury on October 25, 1990, arising out of the course and scope of his employment with Stanford K. Stevens.

         3. The Court cannot decide the issue of whether claimant has been working at his "job of injury" since his injury.

         4. The evidence presented does not justify the termination of claimant's compensation benefits on April 22, 1993 and he is entitled to such benefits retroactive to the date of termination.

         5. Claimant is not entitled to a 20 percent penalty for unreasonable refusal to provide benefits pursuant to section 39-71-2907, MCA.

         6. Claimant is not entitled to attorney fees pursuant to section 39-71-611, MCA, in accordance with ARM 24.5.343, but is entitled to reasonable costs.

         7. Defendant made reasonable inquiry into allegations contained in defendants pleadings.

         8. Defendant is not entitled to reimbursements for benefits paid or attorney fees and costs from either the claimant or the employer.

         9. The JUDGMENT herein is certified as final for purposes of appeal pursuant to ARM 24.5.348.

         10. Any party to this dispute may have 20 days in which to request a rehearing from this Order Adopting Findings of Fact and Conclusions of Law and Proposed ...

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