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Lako v. Employment Relations Divisionuninsured Employers' Fund

Court of Workers Compensation of Montana

October 25, 2002

RITA LAKO Appellant
v.
EMPLOYMENT RELATIONS DIVISION UNINSURED EMPLOYERS' FUND Respondent.

          Submitted: January 16, 2002

         AFFIRMED 10/19/04

          DECISION AND JUDGMENT AFFIRMING DECISION BELOW

          MIKE McCARTER JUDGE.

         Summary: Claimant was injured in 1984 while working for an uninsured employer. She contacted the Uninsured Employers' Fund (UEF) and was told the UEF was not paying benefits and that she could pursue an action against her employer. In fact, the UEF had ceased paying benefits in 1981, and did not commence paying benefits until 1987 after the legislature amended statutes requiring it to maintain "adequate reserves and surpluses." Claimant waited until 1992 to file a claim and now asserts that the UEF is equitably estopped from interposing the one-year claim filing requirement, § 39-71-601(1), MCA, as a defense, and that it should have paid a portion of benefits during the 1981-1987 time frame rather than ceasing to pay any benefits. A hearing officer for the Department rejected her claim and she requested judicial review by the Workers' Compensation Court.

         Held: While the UEF's action cutting off all benefits is questionable, the Court need not decide that issue since the claimant has failed to prove that the UEF misrepresented any fact and has therefore failed to establish even the first element for estoppel.

         Topics:

         Limitations Periods: Claim Filing: Estoppel. The first element of an equitable estoppel is a misrepresentation of fact, thus, where the representation is true there is no estoppel. (Note: this decision was affirmed at Lako v. ERD/UEF, 2004 MT 290.)

Limitations Periods: Claim Filing. The one-year claim filing requirement, § 39-71-601(1), MCA (1983-1993), applies to claims with the Uninsured Employers' Fund since "all appropriate provisions" of the Workers' Compensation Act apply to UEF claims. § 39-71-505, MCA (1977-2001).
Constitutions, Statutes, Regulations and Rules: Montana Code Annotated: § 39-71-601(1), MCA (1983-1993). The one-year claim filing requirement, § 39-71-601(1), MCA (1983-1993), applies to claims with the Uninsured Employers' Fund since "all appropriate provisions" of the Workers' Compensation Act apply to UEF claims. § 39-71-505, MCA (1977-2001).

         ¶1 This is an appeal of a decision of the Department of Labor and Industry (Department) denying the claimant's request for benefits from the Uninsured Employers' Fund (UEF). Claimant, Rita Lako (Lako), was injured in 1984 while working for an uninsured employer. At the time of her injury, the UEF deemed itself insolvent and unable to pay benefits. In 1984, it advised Lako that no UEF claims were being paid and told her that she could pursue a private civil action against her employer. Over the next eight years claimant did nothing to pursue a claim with the UEF. Finally, on August 19, 1992, she filed a written claim, which was denied by the UEF as untimely. After a hearing, the Department affirmed the UEF's determination that the claim was untimely. This Court now affirms the Department's decision.

         Statutory and Factual Background

         I. The Uninsured Employers' Fund

         ¶2 The UEF was created in 1977[1] as a safety net for workers injured while working for uninsured employers. It "is a legislatively provided source from which to minimize the hardships imposed when an injured worker is unable to get workers' compensation benefits as a result of the employer's failure to provide coverage." Thayer v. Uninsured Employers' Fund, 297 Mont. 179, 184, 991 P.2d 447, 450 (1999).

         ¶3 Funded by penalties and reimbursement from uninsured employers, who often are insolvent, the legislature recognized that benefits payable by the UEF could outstrip its ability to pay. It therefore provided for that contingency, first by providing for an initial $150, 000 capitalization of the Fund before paying benefits;[2] second, by requiring the UEF to maintain "[p]roper surpluses and reserves";[3] and, third, by providing for a proportionate reduction of benefits in the event the sums maintained by the UEF are inadequate to pay all claims.[4]

         II. Insolvency

         ¶4 In 1981 the administrator of the UEF determined that there were inadequate funds on hand to pay all benefits and "proportionately" reduced benefits by 100%, i.e., payment of all benefits ceased. (Findings of Fact; Conclusions of Law; and Final Order (FFCL) at 5.) Thereafter, the UEF continued to receive monies from penalties, however, it still paid no benefits because, according to its accounting, its projected liability for claims, which was also growing, continued to exceed the accumulated funds on hand. (Id. at 5-6.) According to a 1987 legislative audit, by 1987 the funds on hand had grown to $874, 000 but liability for claims had grown to $1.6 million. (Id. at 6.)

         ¶5 In 1987 the legislature finally addressed the divergence between UEF revenues and liabilities, repealing the surplus and reserve requirement and directing the UEF to make payments that it considers appropriate as funds become available from time to time. The existing provision for proportionate reduction of payments if UEF funds, § 39-71-510, MCA, was unaffected, as was a companion provision in the same existing section which provided that "reductions do not entitle claimants to retroactive reimbursements in the future."[5] Payments of benefits by the UEF resumed July 1, 1987. (Uncontested Fact 3.[6])

         III. History of Lako's Claim

         ¶6 On September 27, 1984, Lako was injured in the course and scope of her employment. (FFCL, Finding 5.) Her employer - Siversten Ranches/Robert Sivertsen - was uninsured at the time. (FFCL, Finding 4.)

         ¶7 After learning of her employer's lack of insurance Lako and her husband contacted the UEF. On October 4, 1984, they "were informed by the UEF that no claims for UEF benefits were being paid, and that Lako had a right to pursue a private civil action against" the employer. (Uncontested Fact 8.) Lako did nothing further to pursue UEF benefits at that time.

         ¶8 Eight years passed, then on August 19, 1992, Lako filed a written claim for compensation. (Uncontested Fact 9.) No prior written claim had been filed and on October 1, 1992, the UEF denied the claim since it had not been filed within one year of the work-related injury. Untimeliness was the sole basis articulated for the denial. (Uncontested Fact 10 and Department File - October 1, 1992 letter of Cheryl Russell to Lako.)

         ¶9 On December 30, 1992, Lako filed a request for mediation. (Department File.) However, since jurisdiction to review the UEF's determination lay with the Department, the Mediation Unit dismissed the request and referred the matter to the Hearings Unit, which opened a contested case file on January 22, 1993. After multiple continuances and seven years, the case was finally submitted to the hearing officer on ...


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