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Lockhart v. New Hampshire Insurance Co.

Court of Workers Compensation of Montana

March 4, 1998

DOUG LOCKHART Petitioner
v.
NEW HAMPSHIRE INSURANCE COMPANY Respondent/Insurer for LABOR CONTRACTORS Employer.

          Submitted: January 7, 1998

          Claren Neal Legal Counsel

          Larry W. Jones Senior Attorney Liberty Northwest Insurance Corp.

          ORDER INVITING AMICUS CURIAE BRIEFS AND DIRECTING WITHHOLDING OF ATTORNEY FEES

          MIKE MCCARTER JUDGE

         Summary: This and other cases raise the significant question whether attorneys fees may be paid from medical benefits obtained through the efforts of a workers' compensation claimant's attorney.

         Held: WCC invites amicus curiae briefs on behalf of medical providers and from attorneys practicing before the Court.

         Topics:

Briefs: Amicus Curiae. In cases raising the significant question whether attorneys fees may be paid from medical benefits obtained through the efforts of a workers' compensation claimant's attorney, WCC invites amicus curiae briefs on behalf of medical providers and from attorneys practicing before the Court.

         ¶1 The claimant in this matter has moved for an order directing the respondent insurer to pay the 25% attorney fee which is due his attorney directly to the attorney, single payee. The request contemplates that 25% of medical benefits otherwise payable to medical providers will be deducted from the medical benefits and paid directly to the claimant's attorney. Thus, medical providers would receive only 75% of the payments otherwise specified by section 39-71-704(2), MCA, and ARM 24.29.1501 to 24.29.1581. The Court, without extended briefing or discussion, issued such an Order in Robert Cheetham, Jr. v. Liberty Northwest Ins. Corp., Order Regarding Medical Payments, WCC No. 9612-7675 (July 16, 1997).

         ¶2 Respondent objects to the motion and has provided the Court with a copy of a January 26, 1993 memorandum of counsel for the Department of Labor and Industry which concludes, based on two Montana Supreme Court cases, that "attorney fees may not be deducted from medical payments without the consent of the medical providers." The two cases cited in the memorandum involve tort recoveries but may arguably apply to workers' compensation recoveries.

         ¶3 After reviewing the memorandum, and after review of another petition specifically requesting a determination as to whether attorney fees are deductible from medical payments, Liberty Northwest Ins. Co. v. Nancy Petak, WCC No. 9711-7872, I find that the matter warrants further consideration. I am therefore requesting further briefing by the parties in this case and by the parties in Petak. Further, I invite amicus curiae briefs on behalf of medical providers and from attorneys practicing before the Workers' Compensation Court.

         THEREFORE, IT IS HEREBY ORDERED AS FOLLOWS:

         ¶4 1. Copies of this Order and its attachments shall be sent to the Montana Medical Association, the Montana Hospital Association, the Division of Occupational and Professional Licensing, attorneys practicing before this Court, the legal unit of the Department of Labor and Industry, and the medical providers in this case.

         ¶5 2. On or before April 10, 1998, the parties herein, the parties in Liberty Northwest Ins. Co. v. Nancy Petak, WCC No. 9711-7872, the medical providers in this case, and groups and individuals wishing to file amicus briefs, shall file opening briefs concerning attorney fees with respect to medical benefits obtained through the efforts of a claimant's attorney. Any answer briefs shall be filed no later than April 27, 1998. No reply briefs shall be allowed.

         ¶6 3. The briefs shall address whether attorney fees authorized by an attorney fee agreement with a claimant are payable out of medical benefits which are paid as a result of the attorney's efforts, or whether such fees are payable solely out of any non-medical compensation benefits obtained by the attorney.

         ¶7 4. All briefs in this matter, as well as in Northwest Ins. Co. v. Nancy Petak, WCC No. 9711-7872, shall bear the caption of this case.

         ¶8 5. Any party or amicus curiae wishing to orally argue the matter shall file a written request for oral argument on or before April 27, 1998. If the Court finds that oral argument is warranted, it will then schedule a hearing for the argument.

         ¶9 6. Pending a final determination concerning attorney fees, the respondent shall forward payment for 75% of the amount due medical providers directly to those providers single payee, and shall hold in trust the remaining 25% pending further order of this Court. Further, it shall forward an amount equal to 25% of the non-medical compensation benefits due claimant to claimant's attorney, single payee. Finally, the respondent shall forward to the claimant, single payee, the amount due him in non-medical compensation benefits, less 25% of the total amount of both medical and compensation benefits. The 25% withheld shall be held by the respondent in trust pending further order of this Court.

         ¶ 7. Respondents shall serve copies of this Order on all medical providers who are due medical benefits in this case and shall file a certificate of service showing the names and addresses of the providers.

         ATTACHMENTS:

         (1) January 26, 1993 letter of Mr. Claren J. Neal, attorney for the Department of Labor and Industry to Mr. Chuck Hunter, Administrator of the Employment Relations Division of the Department of Labor.

         (2) Northwest Ins. Co. v. Nancy Petak, WCC No. 9711-7872, Petition for Declaratory Judgment filed November 18, 1997.

         (3) Northwest Ins. Co. v. Nancy Petak, WCC No. 9711-7872, Order Denying Community Medical Center's Motion to Dismiss, issued March 4, 1998.

         DEPARTMENT OF LABOR AND INDUSTRY

         Legal Services Division

         January 26, 1993

         Mr. Chuck Hunter, Administrator

         EMPLOYMENT RELATIONS DIVISION

         1805 Prospect Avenue

         P.O. Box 1728

         Helena, Montana 59624

         RE: Deducting Atty. Fees from Medical Providers Payments

         Dear Mr. Hunter:

         Your Division requested a legal opinion on the above problem. This letter is in response to your request.

         Question: Can a percentage of the medical payments owed by a work comp insurer to the medical providers be deducted to pay attorney fees?

         Answer: No. Although the medical payments may be subject to an attorney's lien, it is my opinion that attorney fees may not be deducted from medical payments without the consent of the medical providers.

         Equities: The Department recognizes the equities on both sides. The attorneys claim that "but for" their work, there would be no coverage and the providers are getting a free ride. The medical providers claim that there is no attorney/client relationship hence there can be no fee; their bills are already reduced by the fee schedule, and finally they cannot collect the difference between their bill and the fee schedule amount from the injured worker.

         Authorities: The authority for an attorney's lien is Kelleher Law Office v. State Compensation Insurance Fund, 213 Mont. 412, 691 P.2d 823, (1984). But Kelleher is not directly on point. However 2 statutory sections and another case answer our question. Section 39-71-704 provides that medical and hospital charges are separate and apart from compensation. Section 39-72-712 provides that the attorney can take his fee from the claimant's biweekly compensation payments. The case which is helpful is Sisters of Charity of Providence of Mont. v. Nichols 157 Mont. 106, 483 P.2d 279 (1971). The Sisters of Charity case stands for the general principle that attorneys may not take their fees from payments made to medical providers. The Sisters of Charity case remains good law in Montana and has been cited favorably in the case of Wyoming Farm Mutual Insurance v. Mondale, 160 Mont. 239, 502 P.2d 39 (1972).

         Conclusion: Section 39-71-704, Section 39-72-712, and the Sisters of Charity case address the question posed. I conclude that an attorney may not deduct his attorney fee from payments made to the medical providers in a Montana Workers' Compensation or Occupational Disease case without the medical providers consent.

         Followup: The Legal Services Division makes no recommendations to Plan 1 self insurers, Plan 2 insurers, and the State Fund regarding how to handle this problem. Their decision on whether to issue single payee or dual payee checks is a business decision best left to the respective company or insurer. In short, since it is the insurer's money, the insurer should do what it thinks is best.

         Cautionary Note: I specifically note for readers of this Opinion that the precise issue presented has not yet been decided by a Court. Accordingly insurers and medical providers are advised to consult with their own attorneys and take whatever action they deem prudent after consultation. Whatever action is ultimately taken by the insurance company obviously will be at its own risk. The Montana Department of Labor is not responsible for any liability which might ultimately flow from such action.

         We trust that the above information will be helpful to inquiring parties as they attempt to resolve this recurring and troublesome problem. ...


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