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Ness v. Anaconda Minerals Co.

Court of Workers Compensation of Montana

December 29, 1995

HARRY A. NESS Petitioner
v.
ANACONDA MINERALS COMPANY, a division of ATLANTIC RICHFIELD COMPANY, INCORPORATED Respondent.

          Submitted: October 23, 1995

          ORDER AND FINAL JUDGMENT

          MIKE McCARTER JUDGE.

         Summary: In case with long litigation history, the final issue presented for resolution was whether the insurer was entitled to a subrogation interest in claimant's settlement proceeds from a third party action. Expert testimony, even from respondent's expert, demonstrated claimant's economic losses exceeded his settlement recovery. Claimant's attorney in the third party action testified that settlement reflected the possibility that claimant would recover nothing at trial due to proof problems.

         Held: 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, 252 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).

         Topics:

Subrogation. 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, 252 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).
Constitutions, Statutes, Regulations, and Rules: Montana Code Annotated: section 39-71-414, MCA (1981). 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, 252 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).

         This case has a long history. It has already been to the Supreme Court once. On March 24, 1993, that Court reversed the initial decision of this Court and remanded the case for further proceedings. Since remand the parties have proceeded in a leisurely and piece-meal fashion. The remaining issue has finally been submitted for decision. That issue is respondent's subrogation interest, if any, in a $75, 000 settlement petitioner received with regard to a third-party claim against Caterpillar Tractor Company and Long Machinery (collectively referred to hereinafter as "Caterpillar").

         The parties have stipulated that the Court shall determine the subrogation issue based upon an agreed record and discovery on file with the Court. Since the facts are basically uncontested, this decision will be in narrative form.

         Factual and Procedural Background

         The essential facts and procedural background in this case are set forth in the decision of the Supreme Court and this Court's Decision Granting Partial Summary Judgment dated February 3, 1995. We will briefly summarize them here.

         Petitioner, Harry Ness (claimant), was injured on October 14, 1981, while working for Anaconda Minerals Company (Anaconda). He was working on the belly pan of a D-8 Caterpillar when it fell and crushed him. He suffered severe, permanent and disabling injuries.

         Anaconda, which was self-insured, accepted liability for claimant's injuries and began paying total disability benefits. On October 19, 1982, claimant's treating physician, Dr. James P. Murphy, concluded that claimant had reached maximum healing and rated the extent of claimant's impairment at 25% percent. Based on Dr. Murphy's finding of maximum healing, but lacking any medical release approving claimant's return to work, Anaconda terminated claimant's temporary total disability benefits effective December 8, 1982. It then began paying permanent partial disability benefits, and continued those benefits until November 18, 1987, at which time it discontinued all benefits.

         On June 29, 1989, claimant filed a Petition for Hearing with this Court. He sought reinstatement of total disability benefits retroactive to December 8, 1982. A trial was held on September 5, 1989. On August 23, 1990, the Court entered judgment for Anaconda, concluding that claimant was not totally disabled after December 8, 1982. Claimant appealed.

         On appeal the Montana Supreme Court reversed this Court's decision. The majority held that Anaconda improperly terminated claimant's temporary total disability benefits because it failed to comply with the four-part test established in Coles v. Seven Eleven Stores, 217 Mont. 343, 704 P.2d 1048 (1985). Ness v. Anaconda Minerals Company, 257 Mont. 335, 339, 340, 849 P.2d 1021, 1024 (1993). That test requires:

(1)a physician's determination that the claimant is as far restored as the permanent character of his injuries will permit;
(2)a physician's determination of the claimant's physical restrictions resulting from an industrial accident;
(3)a physician's determination, based on his knowledge of the claimant's former employment duties, that he can return to work, with or without restrictions, on the job on which he was injured or another job for which he is fitted by age, education, work experience, and physical condition;
(4) notice to the claimant of receipt of the report attached to a copy of the report.

Ness at 339-40, 849 P.2d at 1024 (italics omitted). The Court found that as of December 8, 1982, only the first element had been satisfied. However, it went on to determine that by August 30, 1989, the first three elements of that test had been satisfied. It then concluded that Anaconda's liability for temporary total disability would cease on the date the fourth element was satisfied:

We conclude, however, that there was substantial evidence that as of August 30, 1989, the first three elements of the Coles test had been satisfied. When there is proof of the date on which the fourth element of the Coles test has been satisfied, there will be substantial evidence for the termination of claimant's total disability benefits, and the commencement of partial disability benefits. [Emphasis added.]

Id. at 340.

         In reversing the judgment of this Court, the Supreme Court remanded the case with specific instructions, as follows:

The judgment of the Workers' Compensation Court is, therefore, reversed, and this case is remanded to that court with instructions to reinstate claimant's total disability benefits retroactive to December 8, 1982, and continuing until the date on which claimant or his attorney were provided with notice of the report completed by Dr. James P. Murphy on August 30, 1989. At that point, ...

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