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State Compensation Insurance Fund v. Anderson Logging Co., Inc.

Court of Workers Compensation of Montana

June 29, 2000

STATE COMPENSATION INSURANCE FUND, Petitioner,
v.
ANDERSON LOGGING COMPANY, INCORPORATED, Employer, LOWELL McMILLAN, Respondent/Claimant.

         AFFIRMED 8/23/01

          Submitted: March 20, 2000

          SUMMARY JUDGMENT ORDER AND MEMORANDUM

          MIKE MCCARTER JUDGE

         Topics:

Constitution, Statutes, Regulations and Rules: 39-71-414. Given the Supreme Court's rulings in Ness v. Anaconda Mineral's Co., 279 Mont. 472, 478, 929 P.2d 205, 210 (1996) and Zacher v. American Insurance Co., 243 Mont. 226, 694 P.2d 335, 338 (1990) that an insurer has no subrogation rights until a claimant has been made whole for his entire loss, the insurer's subrogation rights under section 39-71-414(1), MCA (1985) begin after claimant has been made whole for his gross damages or loss, not after he recovers the amount of net judgment he received following trial against a third-party after taking his own contributory negligence into account.
Subrogation. Where the Supreme Court in Ness v. Anaconda Mineral's Co., 279 Mont. 472, 478, 929 P.2d 205, 210 (1996) and Zacher v. American Insurance Co., 243 Mont. 226, 694 P.2d 335, 338 (1990) has made clear that an insurer has no subrogation rights until a claimant has been made whole for his entire loss, the insurer's subrogation rights under section 39-71-414(1), MCA (1985) begin after claimant has been made whole for his gross damages or loss, not after he recovers the amount of net judgment he received following trial against the third-party after taking his own contributory negligence into account.

         ¶1 The present matter is presented to the Court upon stipulated facts. At issue is the State Compensation Insurance Fund's right to subrogation.

         ¶2 The essential facts can be briefly summarized. The claimant suffered a serious industrial accident on July 13, 1987. He brought a third-party action against the United States of America and a United States District Court fixed his damages at $4, 762, 686.00, however, it reduced the award to $2, 619, 477.00 based on claimant's contributory negligence (45%). After attorney fees and costs, claimant netted $1, 888, 899.75. As of January 4, 2000, the State Fund had paid $782, 411.85 in compensation and medical benefits and has continued to pay $278.96 weekly in total disability benefits and $2, 926.98 monthly for domiciliary care.

         ¶3 The State Fund petitioned this Court, requesting a determination of its subrogation interests in the claimant's third-party recovery. It asserts that it is entitled to cease paying benefits because claimant has obtained full redress for his injuries. It argues that the $2, 619, 477 net judgment establishes the amount claimant must receive for subrogation to kick in. Since claimant has now been paid more than that, it argues it should be relieved of liability for further compensation and medical benefits. Its arithmetic is as follows:

State Fund's Arithmetic

Net third-party recovery

$2, 619, 477.00

Workers' Compensation benefits to date

$782, 411.85

Less attorney fees

($654, 869.25)

Less litigation costs

($75, 708.00)

Total recovery as of January 4, 2000

$2, 671, 311.60

State Fund overpayment as of January 4, 2000

$51, 834.60

(Response to Respondent's Motion for Summary Judgment at 5.)

         ¶4 Claimant, on the other hand, asserts that the amount necessary to make him whole is $4, 672, 686, which is the amount of his total damages as determined by the District Court. His arithmetic shows he must receive some $2 million more in benefits before he is made whole:

Claimant's Arithmetic

Total damages per District Court

$4, 762, 686.00

Less total recovery as of January 4, 2000

($2, 671, 311.60)

Balance necessary for full recovery of loss

$2, 091, 374.40


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