Submitted: January 7, 1998
Neal Legal Counsel
W. Jones Senior Attorney Liberty Northwest Insurance Corp.
ORDER INVITING AMICUS CURIAE BRIEFS AND DIRECTING
WITHHOLDING OF ATTORNEY FEES
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
WCC invites amicus curiae briefs on behalf of medical
providers and from attorneys practicing before the Court.
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.
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).
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.
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.
IT IS HEREBY ORDERED AS FOLLOWS:
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.
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
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.
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.
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
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.
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.
Northwest Ins. Co. v. Nancy Petak, WCC No.
9711-7872, Petition for Declaratory Judgment filed November
Northwest Ins. Co. v. Nancy Petak, WCC No.
9711-7872, Order Denying Community Medical Center's
Motion to Dismiss, issued March 4, 1998.
OF LABOR AND INDUSTRY
Chuck Hunter, Administrator
Deducting Atty. Fees from Medical Providers Payments
Division requested a legal opinion on the above problem. This
letter is in response to your request.
Can a percentage of the medical payments owed by a work comp
insurer to the medical providers be deducted to pay attorney
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.
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.
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).
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.
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.
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.
trust that the above information will be helpful to inquiring
parties as they attempt to resolve this recurring and
troublesome problem. ...