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Thayer v. Uninsured Employers' Fund

Court of Workers Compensation of Montana

October 28, 1998

GERALD L. THAYER, (DECEASED) PHYLLIS THAYER Petitioner
v.
UNINSURED EMPLOYERS' FUND Respondent/Insurer for RICHARD SMITH, d/b/a RRS, INCORPORATED Employer.,

          Date Submitted: April 6, 1998

          DECISION AND JUDGMENT

          MIKE MCCARTER JUDGE.

         Summary: Under section 39-71-511, MCA, Uninsured Employers' Fund ceased paying death benefits to widow of worker whose death resulted from burns received during the course and scope of employment for an uninsured employer. The UEF argues it was entitled to discharge the remaining $74, 301.22 of future benefits following the widow's recovery of $100, 000 from the uninsured employer in a tort lawsuit. The widow argues the UEF is not entitled to a set-off and that section 39-71-511, MCA is unconstitutional in that it violates the full redress provision stated in Article II, section 16 of the Montana Constitution.

         Held: UEF is entitled to discharge the future benefits at issue under section 39-71-511, MCA. Because this is not the application of a subrogation interest under section 39-71-414, MCA, limits on subrogation under that statute do not apply. Application of the statute to permit discharge following recovery from an employer does not limit full legal redress under the Montana Constitution.

         Topics:

         Constitutions, Statutes, Regulations and Rules: Montana Code: section 39-71-511, MCA (1991). Under section 39-71-511, MCA, the Uninsured Employers' Fund is entitled to discharge the remaining $74, 301.22 of future benefits payable to decedent's widow based upon her recovery of $100, 000 from the uninsured employer in a tort lawsuit. See also Montana Supreme Court decision affirming WCC, Thayer v. Uninsured Employer's Fund, 1999 MT 304.

         Constitutions, Statutes, Regulations and Rules: Montana Code: section 39-71-511, MCA (1991). The statutory authorization that the UEF may discharge benefits payable to claimants of uninsured employers by the amount of third-party recovery does not violate the "full redress" provision of Article II, Section 16 of the Montana Constitution. See also Montana Supreme Court decision affirming WCC, Thayer v. Uninsured Employer's Fund, 1999 MT 304.

         Constitutions, Statutes, Regulations and Rules: Montana Constitution: Article II, section 16. The statutory authorization that the UEF may discharge benefits payable to claimants of uninsured employers by the amount of third-party recovery does not violate the "full redress" provision of Article II, Section 16 of the Montana Constitution. See also Montana Supreme Court decision affirming WCC, Thayer v. Uninsured Employer's Fund, 1999 MT 304.

         Subrogation. Under section 39-71-511, MCA, the Uninsured Employers' Fund is entitled to discharge the remaining $74, 301.22 of future benefits payable to decedent's widow based upon her recovery of $100, 000 from the uninsured employer in a tort lawsuit. The statutory authorization that the UEF may discharge benefits payable to claimants of uninsured employers by the amount of third-party recovery does not violate the "full redress" provision of Article II, Section 16 of the Montana Constitution. See also Montana Supreme Court decision affirming WCC, Thayer v. Uninsured Employer's Fund, 1999 MT 304.

         Uninsured Employers' Fund: Generally. Under section 39-71-511, MCA, the Uninsured Employers' Fund is entitled to discharge the remaining $74, 301.22 of future benefits payable to decedent's widow based upon her recovery of $100, 000 from the uninsured employer in a tort lawsuit. The statutory authorization that the UEF may discharge benefits payable to claimants of uninsured employers by the amount of third-party recovery does not violate the "full redress" provision of Article II, Section 16 of the Montana Constitution. See also Montana Supreme Court decision affirming WCC, Thayer v. Uninsured Employer's Fund, 1999 MT 304.

         ¶1 This case is submitted on an agreed statement of facts and exhibits. The issue presented is whether the Uninsured Employers' Fund (UEF) may cut off death benefits based on a monetary recovery received in an action against the uninsured employer.

         Factual Background

         ¶2 Gerald L. Thayer suffered fatal burns when his clothes caught fire while he was cutting scrap metal with a torch. Mrs. Phyllis Thayer, the petitioner herein, is his widow.

         ¶3 In a prior proceeding before this Court, I found that at the time of his accident Mr. Thayer was employed by Richard Smith (Smith) and acting within the scope and course of his employment. Since Smith was uninsured, I entered judgment against the UEF for medical and death benefits. Gerald Thayer (deceased) by Phyllis Thayer v. Uninsured Employers' Fund, WCC No. 9311-6942, Findings of Fact, Conclusions of Law and Judgment (December 8, 1994). Facts concerning the accident and the employment relationship are set forth in the prior decision.

         ¶4 Thereafter, Mrs. Thayer pursued negligence and wrongful death actions against Smith and Garry Thompson (Thompson), who worked for or with Smith.[1] She also brought negligence and products liability actions against the retail seller and the manufacturer of a chemical product Mr. Thayer had applied to his clothing as a fire retardant. Ultimately, Smith declared bankruptcy; however, his liability insurer paid $100, 000 to Mrs. Thayer. The remaining actions were settled for $305, 000, bringing the total amount received by Mrs. Thayer to $405, 000 before attorney fees and costs.

         ¶5 Based on the $100, 000 settlement with Smith's liability insurer, on June 25, 1997, the UEF terminated Mrs. Thayers' biweekly death benefits effective July 9, 1997.

         ¶6 Mr. Thayer's medical expenses alone were $253, 207.98. In addition, in the tort actions, Mrs. Thayer claimed the following damages:

Lost earnings

$263, 592.82

Funeral expenses

$ 3, 531.88

Pain and suffering[2]

$250, 000.00

Wrongful death, loss of companionship, grief, etc.

$1, 000, 000.00

Loss of services

$ 85, 734.78

Including medical expenses, the total damages claimed were

$1, 856, 067.46.

         ¶7 The UEF's payments on this claim total $156, 878.78. Of that amount, $85, 000.00 was paid to the Montana Department of Public Health and Human Services (DPHHS) to reimburse it, at least in part, for medical payments it made for Mr. Thayer's treatment.[3] The DPHHS released its lien, thus the UEF's obligation for medical expenses has been satisfied. The remaining $71, 878.78 represents biweekly benefits paid to Mrs. Thayer for the period October 22, 1992 through July 8, 1997. Absent the settlements, the UEF's additional exposure is $74, 301.22.[4]

         Issues

         ¶8 The parties have separately set out their statement of issues. Mrs. Thayer frames her issues as follows:[5]

1.Is § 39-71-511 MCA, constitutional?
2.If § 39-71-511 is constitutional, is UEF entitled to a setoff when the Petitioner's damages exceed the third party recoveries from the uninsured employer?
3.If § 39-71-511 is constitutional, is UEF entitled to a setoff before the employee or his beneficiaries is made whole for their entire loss, including attorney fees and costs?
4.If § 39-71-511 is constitutional, is UEF entitled to a setoff for settlements which include damages that are in addition to medical expenses and lost earnings?
5.Were the actions of the UEF in terminating benefits unreasonable or did the UEF unreasonably delay or refuse to make the benefit payments?
6.If the actions of the UEF were unreasonable or if the UEF unreasonably delayed or refused to make benefit payments, what is the amount of attorney fees, costs, and statutory penalty to which Petitioner is entitled?

         The UEF sets forth the following issue:

7.Does the UEF's application of § 39-71-511 MCA (1991), set off rights as to the $100, 000.00 paid by the uninsured employer, Richard Smith, deny Mrs. Thayer her right to full legal redress under the Montana Constitution, Article II, Section 16?

         Discussion

         I.

         ¶9 The Montana Workers' Compensation Act (WCA) requires every employer, with some exceptions, to provide workers' compensation insurance coverage for its workers. § 39-71-401, MCA. Coverage may be provided by insuring with the State Compensation Insurance Fund or a private insurer, or by self-insuring. (Id. and see Title 39, chap. 71, parts 21, 22 and 23.) In exchange for providing workers' compensation insurance to its workers, the employer is insulated from liability arising in tort on account of injuries the employee suffers at work. § 39-71-411, MCA.

         ¶10 The WCA establishes the UEF as a safety net for workers whose employers fail to provide insurance. Section 39-71-502, MCA, provides in relevant part:

39-71-502. Creation and purpose of uninsured employers' fund.
(1) There is created an uninsured employers' fund. The purpose of the fund is to pay:
(a) to an injured employee of an uninsured employer the same benefits the employee would have received if the employer had been properly enrolled under compensation plan No. 1, 2, or 3, except as provided in 39-71-503(2); and
. . .

         ¶11 On its face, section 39-71-502(1)(a), MCA, requires that the UEF pay the same benefits as plan 1, 2 and 3 insurers and self-insurers. The section, however, does not stand alone. It must be read together with other sections. Dale v. Trade Street, Inc., 258 Mont. 349, 357, 854 P.2d 828, 832 (1993) (Courts must "construe the several provisions of a statute to give effect to all, if possible."); State v. Berger, 259 Mont. 364, 367, 856 P.2d. 552, 554 (1993) ("We are required to avoid any statutory interpretation that renders any sections of the statute superfluous and does not give effect to all of the words used.").

         ¶12 Other sections limit the benefits payable by the UEF. Initially, section 39-71-503, MCA, provides a statutory appropriation for the UEF and limits the benefits payable by the UEF to the appropriated moneys. Since the appropriation may be insufficient to pay all benefits, the section also prioritizes benefits. The section provides:

39-71-503. Administration of fund -- appropriation.
(1)The department shall administer the fund and shall pay from it all expenses of administering the fund, all loss adjustment expenses for claims of injured employees of uninsured employers, and all proper benefits to injured employees of under insured and uninsured employers.
(2)Surpluses and reserves may not be kept for the fund. The department shall make payments that it considers appropriate as funds become available from time to time. The payment of weekly disability benefits takes preference over the payment of medical benefits. No lump-sum payments of future projected benefits, including impairment awards, be made from the fund. The board of investments shall invest the ...

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