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Klimek v. State Compensation Insurance Fund

Court of Workers Compensation of Montana

October 11, 1996

RICHARD C. KLIMEK Petitioner
v.
STATE COMPENSATION INSURANCE FUND Respondent/Insurer for SONNY ADDINGTON Employer.

          Submitted: August 21, 1996

          ORDER AND PARTIAL SUMMARY JUDGMENT

          Mike McCarter judge

         Summary: Claimant alleged injury during employment on December 19, 1987. State Compensation Insurance Fund, the alleged insurer, conceded it did not accept or deny the claim within 30 days of receipt. Later, it denied the claim on the ground claimant was an independent contractor, not an employee. On November 21, 1995, the Montana Supreme Court decided Haag v. Montana Schools Group Ins. Authority, 274 Mont. 109, 906 P.2d 693 (1995), holding that an insurer that fails to accept or deny a claim within 30 days, as required by section 39-71-606(1), MCA, is liable for the claim as a matter of law. Haag reversed Solheim v. Tom Davis Ranch, 208 Mont. 265, 677 P.2d 1034 (1984), which held that failure to accept or deny within the time specified by the statute "does not automatically entitle a claimant to benefits." Here, the question presented on motions for summary judgment was whether Haag applied "retroactively" to a situation in which the claim was filed, and the insurer's failure to accept or deny within 30 days, occurred before Haag was decided.

         Held: After extensive review of state and federal decisions relevant to the issue whether a court decision overturning a prior decision interpreting a statute should be given "retroactive" application, the WCC finds that Chaney v. U.S. Fidelity & Guaranty, 276 Mont. 513, 917 P.2d 912 (Mont. 1996) and Kleinhesselink v. Chevron U.S.A., 277 Mont. 158, 920 P.1d 108 (Mont. 1996) require retroactive application of court decisions.

         Topics

Cases: Workers' Compensation Court Cases: Haag v. MSGIA. WCC holds that Chaney v. U.S. Fidelity & Guaranty, 276 Mont. 513, 917 P.2d 912 (Mont. 1996) and Kleinhesselink v. Chevron U.S.A., 277 Mont. 158, 920 P.1d 108 (Mont. 1996) require that Haag v. Montana Schools Group Ins. Authority, 274 Mont. 109, 906 P.2d 693 (1995) be applied retroactively to a case in which the injury and failure to accept/deny within 30 days occurred prior to Haag.
Claims: Acceptance. WCC holds that Chaney v. U.S. Fidelity & Guaranty, 276 Mont. 513, 917 P.2d 912 (Mont. 1996) and Kleinhesselink v. Chevron U.S.A., 277 Mont. 158, 920 P.1d 108 (Mont. 1996) require that Haag v. Montana Schools Group Ins. Authority, 274 Mont. 109, 906 P.2d 693 (1995) be applied retroactively to a case in which the injury and failure to accept/deny within 30 days occurred prior to Haag.
Statutes and Statutory Interpretation: Retroactivity. WCC holds that Chaney v. U.S. Fidelity & Guaranty, 276 Mont. 513, 917 P.2d 912 (Mont. 1996) and Kleinhesselink v. Chevron U.S.A., 277 Mont. 158, 920 P.1d 108 (Mont. 1996) require that Haag v. Montana Schools Group Ins. Authority, 274 Mont. 109, 906 P.2d 693 (1995) be applied retroactively to a case in which the injury and failure to accept/deny within 30 days occurred prior to Haag.

         In Haag v. Montana Schools Group Ins. Authority, 274 Mont. 109, 906 P.2d 693 (1995), the Montana Supreme Court held that an insurer which fails to accept a claim for compensation within 30 days, as required by section 39-71-606(1), MCA, is liable as a matter of law for the claim.[1] Haag overruled the Court's prior decision in Solheim v. Tom Davis Ranch, 208 Mont. 265, 280, 677 P.2d 1034, 1041 (1984), which held that failure to accept a claim within the time specified by section 39-71-606(1) "does not automatically entitle a claimant to benefits . . . ." Under Solheim the claimant still bore the burden of proving liability even though the insurer failed to deny the claim within the statutory period, at least where the issue was whether the claimant was an employee or an independent contractor.[2]

         The Haag decision changed the consequence of an insurer's failure to accept or deny a claim within the 30-day period. As a result, a number of claimants who may have been unable to prove the elements necessary to establish liability, but whose claims were not denied within the statutory deadline, have petitioned the Court for a determination that their claims are automatically compensable under Haag. This is one of those cases.

         The claimant herein, Richard C. Klimek (Klimek), alleges that he was injured on December 19, 1987, while employed by Sonny Addington (Addington). At the time of Klimek's alleged injury, Addington was insured by the State Compensation Insurance Fund (State Fund). On August 11, 1988, Klimek's attorney, Tom L. Lewis (Lewis), forwarded a claim for compensation to the Department of Labor (Department), which in turn forwarded the claim to the State Fund. On September 18, 1988, the State Fund wrote Lewis a letter telling him that it had been unable to determine if Klimek was employed by Addington. The State Fund advised Lewis that it would continue its investigation.

         The facts presented to the Court do not show when the State Fund received the claim or whether the State Fund sent the September 18th letter within 30 days after receipt of the claim. In any event the September 18th letter constituted neither an acceptance nor a denial of the claim. However, on November 21, 1988, clearly more than 30 days after receipt of the claim, the State Fund denied the claim.

         The parties apparently mediated the claim in late 1989 and the mediator issued a recommendation in early January 1990. Thereafter, the State Fund persisted in its denial. Nonetheless, Klimek did not pursue the matter until after the Haag decision.

         Haag was decided on November 21, 1995. On February 5, 1996, Klimek filed his present petition, alleging that the State Fund's failure to accept or deny his claim within 30 days amounted to an automatic acceptance of his claim. As in Solheim, the State Fund has responded that Klimek was not an employee of its insured. It argues that Haag should not be applied retroactively and further alleges that the present petition is barred by the doctrine of laches.

         Klimek counters that Haag must be applied retroactively. He also argues that the State Fund is collaterally estopped from urging non-retroactivity because it argued for retroactivity in Chaney v. U.S. Fidelity & Guaranty, 917 P.2d 912 (Mont. 1996), a case in which the Supreme Court applied the Haag decision retroactively to an injury which occurred in November 1983.

         The Pending Motions

         The motions under consideration are Petitioner's Motion for Summary Judgment and the State Fund's Cross Motion for Summary Judgment and Request for Oral Argument.

         Oral Argument and Subsequent Briefing

         Pursuant to the request of the State Fund, this matter was set for oral argument on June 12, 1996. In their initial briefs presented to the Court at that time, both parties relied on Porter v. Galarneau, 275 Mont. 174, 911 P.2d 1143 (1996), as supporting their respective positions. Porter concerned the retroactive application of a statute but in passing also mentioned the retroactivity of judicial decisions. Porter did not specifically address the issue presented in this case, which is whether a judicial decision which overrules a prior decision interpreting a particular statute may be applied retrospectively.

         I consider the specific issue raised by the facts of this case an important one. Had the legislature reacted to the Solheim decision by changing the statute to expressly require automatic liability for failure to accept a claim within 30 days, the Montana Supreme Court would surely have held that the statute may be applied prospectively only. Buckman v. Montana Deaconess Hosp., 224 Mont. 318, 325-29, 730 P.2d 380, 384-86 (1986). Our government is founded on the fundamental principal that we shall be governed by laws. Laws fix the rules by which we must abide. They advise us in advance of the consequences of our acts. Those of us who are law abiding, and who are informed of the laws, do in fact conform our conduct to those laws.

         When it denied Klimek's claim, the State Fund was not automatically liable for his claim: Klimek was still required to prove that he was an employee and not an independent contractor. Had the State Fund been forewarned that the Supreme Court of Montana would overrule Solheim, it might have heeded the 30-day rule and simply denied Klimek's claim upon receipt rather than postponing its decision.[3]

         The retroactivity issue is not one merely affecting insurers or others with deep pockets. The next case could involve retroactive application of a case overruling a prior precedent which benefited claimants. Thus, because of the importance of the issue and the fact that Porter did not directly support either parties' position, I requested the parties to find and supply me with cases which concern the retroactive application of a decision overruling a prior precedent. I also directed them to provide further briefing regarding the laches issue.

         The parties have completed the additional briefing as directed by the Court. Counsel requested oral argument upon completion of that briefing but thereafter agreed that such argument is unnecessary unless the Court has specific questions to ask counsel. I am satisfied that the issue has been adequately aired and have no questions of counsel.

         Facts

         The pertinent undisputed facts, gleaned from the pleadings, an affidavit of Klimek (Affidavit), [4] and the briefs of counsel, [5] are as follows:

1. On August 11, 1988, Klimek forwarded a claim for compensation to the Insurance Compliance Bureau of the Department of Labor and Industry (DLI). (Affidavit of Richard C. Klimek ¶3.)
2. According to his claim, Klimek broke his leg on December 19, 1987, while employed by Sonny Addington. (Ex. A to Memorandum in Support of Petitioner's Motion for Summary Judgment.)
3. At the time of the accident, Addington was insured by the State Fund. (Petition for Hearing, ¶ 2; Response to Petition for Hearing, ¶ 2.)
4. The State Fund received the claim at least by September 18 or 19, 1988. (Affidavit ¶ 4; Ex. D to Memorandum in Support of Petitioner's Motion for Summary Judgment.)
5. By letter dated September 18, 1988, to claimant's counsel, Tom L. Lewis, the State Fund acknowledged the claim. The letter stated:
Dear Mr. Lewis:
We received your client's Claim for Compensation in relation to a December 19, 1987 industrial injury.
To date, we have been unable to establish whether your client is an employee of Sonny Addington. We are continuing to investigate this claim and will contact you as soon as we obtain this information.
Should you have any questions, please feel free to give me a call.
Sincerely,
Jeri Mainer JERI MAINER
Claims Examiner

(Ex. D to Memorandum in Support of Petitioner's Motion for Summary Judgment; Affidavit ¶ 4.)

         6. Thereafter, on November 21, 1988, the State Fund denied the claim in another letter to Lewis. In relevant part, the letter stated:

This letter is in reference to your client, Richard Klimek, and an accident he suffered on December 19, 1987. Upon careful review and investigation of the facts, it appears your client is not an employee of Sonny Addington but rather an independent contractor. Therefore, ...

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