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McClure v. State Compensation Insurance Fund

Court of Workers Compensation of Montana

July 14, 1994

JAMES D. McCLURE Petitioner
v.
STATE COMPENSATION INSURANCE FUND Respondent/Insurer for BLAZE CONSTRUCTION, INCORPORATED Employer.

          ORDER DENYING RENEWED MOTION FOR DECLARATORY RULING

          Mike McCarter, Judge.

         Introduction

         The petitioner in this matter was injured while working on the Flathead Indian Reservation. His employer, Smith Paving and Construction, Inc. (Smith), was a subcontractor for Blaze Construction, Inc. (Blaze). Smith was not insured at the time of the accident so the petitioner is pursuing a claim for compensation against Blaze and its insurer. He has moved for a declaratory ruling based on the contract between Blaze and Smith. The motion is based on stipulations setting forth agreed facts and exhibits.

         Factual and Legal Background

         The salient facts are few. Blaze entered into a contract with the Bureau of Indian Affairs (BIA) to construct streets in a subdivision located on the Flathead Indian Reservation. Blaze then subcontracted a portion of the work to Smith, which is apparently wholly owned by Native Americans. The subcontract contained the following provision:

THE SUBCONTRACTOR AGREES:
(h) To pay Industrial Insurance and all other payments required under Workmen's Compensation laws as the same become due, and to furnish the CONTRACTOR with evidence that the same has been paid before final payment is made on this SUBCONTRACT.

         All work was performed on the Flathead Indian Reservation.

         Smith hired petitioner (McClure). On June 8, 1992, McClure injured his shoulder while working for Smith. (Ex. 5.) Smith was not insured at the time of the industrial accident. McClure therefore filed a claim seeking benefits from Blaze's insurer (State Fund), invoking section 39-71-405 (1), MCA, which provides:

39-71-405. Liability of employer who contracts work out. (1) An employer who contracts with an independent contractor to have work performed of a kind which is a regular or a recurrent part of the work of the trade, business, occupation, or profession of such employer is liable for the payment of benefits under this chapter to the employees of the contractor if the contractor has not properly complied with the coverage requirements of the Worker's [sic] Compensation Act. Any insurer who becomes liable for payment of benefits may recover the amount of benefits paid and to be paid and necessary expenses from the contractor primarily liable therein. [Emphasis added.]

         The State Fund denied liability because Smith was an "Indian-owned business operating solely on the reservation at the time of the injury" and contends herein that a Native American enterprise operating solely on a reservation is not required to carry Montana Workers' Compensation insurance, hence Smith was not an uninsured subcontractor for purposes of section 39-71-405, MCA. (Answer and Proposed Pretrial Order.)

         On its face, section 39-71-405(1), MCA, applies only in cases where the subcontractor "has not properly complied with the coverage requirements of the Worker's [sic] Compensation Act," a situation commonly referred to as involving an "uninsured employer." The 1993 Montana legislature expressly exempted "a person who is employed by an enrolled tribal member who operates solely within the exterior boundaries of an Indian reservation" from the coverage requirements of the Act. Section 39-71-401(2)(m), MCA (1993) (enacted by 1993 Montana Laws, ch.555, § 4). Since this case occurred prior to the adoption of the exemption, the State Fund's arguments in this case are premised on federal law, which it contends precludes any application of state workers' compensation laws to Indian businesses operating on Indian reservations. The State Fund's position is supported by a 1977 opinion of the Montana Attorney General opinion found at 37 Op. Atty' Gen. No. 29 at 118 (May 25, 1977).

         Procedural Background

         Following the filing of the Petition and the State Fund's Answer, McClure filed what he styled as a Motion for Declaratory Ruling (August 16, 1993). The stated reason for filing the motion was "because it is anticipated that there will be little or any factual dispute between the parties." In his Brief in Support of Motion for Declaratory Ruling McClure set forth four arguments in support of his contention that the State Fund is obligated to pay benefits pursuant to section 39-71-405(1), MCA. Initially, he argued that the Attorney General opinion cited by the State Fund was wrong, [1] and that Montana Workers' Compensation Laws are applicable to Smith and the Flathead Indian Reservation. He also contended that ...


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