Submitted: October 12, 2016
ORDER GRANTING THE UNINSURED EMPLOYERS'
FUND'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING
PETITIONER'S CROSS MOTION FOR PARTIAL SUMMARY
M. SANDLER JUDGE.
The UEF moves for partial summary judgment on the grounds
that there are no disputes of material fact and, as a matter
of law, Petitioner is liable to reimburse the UEF for all the
workers' compensation benefits it has paid or will pay on
Petitioner's behalf. The UEF maintains Petitioner is
liable as a statutory employer under § 39-71-405, MCA,
which is Montana's "contractor-under" statute.
Petitioner opposes the UEF's motion, and cross moves for
partial summary judgment, arguing § 39-71-405(2), MCA,
does not apply because Respondent Brock was an independent
contractor, or if Petitioner is made liable by §
39-71-405(2), MCA, that statute is unconstitutional.
There are no disputes of material fact; as a matter of law,
Petitioner is liable as a statutory employer under
§§ 39-71-405(2), and -504(1)(b), MCA, to reimburse
the UEF for all the workers' compensation benefits it has
paid or will pay on Petitioner's behalf; and
Petitioner's constitutional challenge fails. Therefore,
the UEF is entitled to judgment as a matter of law on the
issue of Petitioner's liability.
1 This case is before this Court on the Uninsured
Employers' Fund's (UEF) Motion for Judgment on the
Pleadings, which this Court converted to a Motion for Partial
Summary Judgment. During the course of this matter,
Petitioner Tim Reule cross moved for partial summary
judgment. This Court held a hearing on October 12, 2016. Eric
Edward Nord represented Reule. Quinlan L. O'Connor
represented the UEF. R. Russell Plath represented the injured
Respondent Chris M. Albrecht.
2 The procedural history of the motions before this Court is
complicated, and many of the parties' arguments appear in
filings made outside the briefing on the UEF's original
3 Pursuant to § 39-71-520(2)(a), MCA, Reule petitioned
this Court to contest the UEF's determination that he was
Albrecht's statutory employer under § 39-71-405,
MCA. He named Brock and Albrecht, as well as the UEF, as
Respondents, but did not make service on Brock. Reule
contends, "The nature of the dispute is whether or not
Chris Albrecht was an employee of [Reule] on the date of Mr.
4 In its Response, the UEF counterclaimed against Reule,
alleging if Reule is found to be Albrecht's direct
employer, then Reule is liable to reimburse the UEF under
§ 39-71-504(1)(b), MCA. In the alternative, the UEF
alleges if Reule is found to be Albrecht's statutory
employer, then Reule is liable for all benefits paid to
Albrecht under § 39-71-405, MCA.
5 The UEF also filed a crossclaim against Brock, alleging if
Brock is found to be Albrecht's direct employer, then
Brock is liable to reimburse the UEF under §
39-71-504(1)(b), MCA. The UEF attempted service on Brock but was
6 On the same date as its Response, the UEF also filed a
Motion for Judgment on the Pleadings, in which it argued
Reule is liable for Albrecht's injury as an uninsured
employer under §§ 39-71-405 and/or -504(1)(b),
7 Reule opposed the UEF's motion on the grounds that it
was procedurally improper, and that if he is liable under
§ 39-71-405, MCA, that statute is
unconstitutional. Reule referred to certain documents filed
in the Yellowstone County District Court and attached these
documents as exhibits to his brief. Following the filing of
the UEF's reply brief, this Court converted the UEF's
Motion for Judgment on the Pleadings to a Motion for Partial
Summary Judgment pursuant to M.R.Civ.P. 12(d) and gave the
parties an opportunity to present all evidence material to
8 In support of his opposition, Reule filed additional
evidence, including several affidavits and a number of sealed
documents, which he claimed shed light on the relationships
between the parties. The UEF objected to this Court's
consideration of the additional evidence, asserting it is
irrelevant to the issues at hand. In response to the UEF's
objection, Reule offered additional arguments in opposition
to the UEF's Motion for Partial Summary Judgment, and
purportedly in support of his own entitlement to summary
judgment. The additional arguments included that
§ 39-71-405(2), MCA, does not apply because Brock was an
independent contractor. The UEF filed a reply brief, the
parties presented oral arguments on the UEF's motion and
evidentiary objection, and Reule's motion, and the Court
deemed the matter submitted.
9 The UEF Objection to Consideration of Reule's Documents
is overruled. This Court considers the
additional evidence to the extent of its relevance.
10 Reule, Albrecht, and the UEF are in the process of
mediating the issue of Brock's employment status.
However, they have agreed to stay the mediation pending the
outcome of this litigation.
11 This Court has reviewed the parties' filings in their
entirety, and made all inferences in Reule's
favor. The following facts are uncontroverted.
12 At the times relevant to this case, Reule operated under
the business name Reule Builders and was a contractor who did
construction work in Billings. Reule employed at least two
carpenters to work on his projects.
13 Reule contracted with Brock, who operated under the
business name AB Roofing and Construction, to do the roofing
on Reule's projects.
14 Brock did not have an Independent Contractor Exemption
15 Brock hired Albrecht to work on his roofing jobs.
16 Reule did not supervise or direct Albrecht, provide
Albrecht with any tools or equipment, or pay Albrecht.
17 Rather, Brock supervised and directed Albrecht, provided
Albrecht with tools and equipment, and paid Albrecht.
18 In September 2014, Reule was the contractor for a job at a
residence in Billings. Reule contracted with Brock to do the
19 On September 12, 2014, Albrecht was working as a roofer on
the project. At approximately 10:30 a.m., Albrecht fell off
the roof and suffered injuries.
20 Reule's "lead carpentry man" was at the job
site, but did not witness the accident because he was on the
other side of the building.
21 Albrecht filed a workers' compensation claim. On his
First Report of Injury or Occupational Disease, Albrecht
listed his employer as "Andrew Brock - subcontractor,
" and "Tim Reule - contractor."
22 At the time of Albrecht's injury, Brock did not have
workers' compensation insurance.
23 At the time of Albrecht's injury, Reule did not have
workers' compensation insurance.
24 Because neither Brock nor Reule had workers'
compensation coverage, Albrecht's claim was tendered to
the UEF, which accepted liability. During its investigation,
the UEF determined that Brock was Reule's roofing
subcontractor, and that Brock hired Albrecht.
25 On October 22, 2014, the UEF sent a letter to Brock
stating, in relevant part:
As [Albrecht's] employer, pursuant to Sections 39-71-504
and 39-71-405, MCA, the Uninsured Employers' Fund (UEF)
may recover an amount equal to all benefits paid or to be
paid to the claimant pursuant to the Montana Workers'
Compensation Act, together with related necessary expenses,
from you as the employer primarily liable therein. Based on
all documentation received to date, UEF found the claim to be
compensable and are [sic] initiating benefits to Mr. Albrecht
under a full reservation of rights.
Pursuant to the two attached letters dated, [sic] this claim
is being tendered to Tim Reule in accordance with Section
39-71-405, MCA. Since Tim Reule has been found to be
responsible for this claim pursuant to Section 39-71-405,
MCA, he has a statutory right to demand reimbursement from
you for all costs and related necessary expenses on this
claim. If this case moves forward to court and he is found
not to be responsible then you would become directly liable
to the UEF for all benefits paid on this claim.
26 Also on October 22, 2014, the UEF wrote a letter to Reule,
stating, in relevant part:
The Uninsured Employers' Fund (UEF) received the attached
First Report of Injury form regarding the above referenced
claim. It appears Andrew Brock did not have a workers'
compensation policy in effect at the time of Mr.
As the statutory employer, in accordance with Section
39-71-405, MCA, we are tendering this claim to you. A
thorough review of the Department's files failed to
locate any workers' compensation coverage in effect for
your firm at the time of the injury. Since we have been
unable to locate coverage for you, this claim will be
administered by UEF.
In accordance with Section 39-71-504, MCA, you are required
to pay an amount equal to all benefits paid or to be paid
pursuant to the Montana Workers' Compensation Act,
together with related necessary expenses. In addition to
claim cost reimbursement, you will accrue interest at 12% per
year on the unpaid balance.
In addition, pursuant to Sections 39-71-503(3)(c), and
39-71-508(3), MCA, the medical expenses payable by the UEF is
[sic] limited to a maximum of $100, 000 on this claim. Be
advised, you will become directly liable to all medical
providers for any amounts that exceed that amount.
27 This case is governed by the 2013 version of the Montana
Workers' Compensation Act (WCA) since that was the law in
effect at the time of Albrecht's industrial
28 This Court renders summary judgment when the moving party
demonstrates an absence of a genuine issue of material fact
and entitlement to judgment as a matter of law. After the
moving party meets its initial burden to show the absence of
a genuine issue of fact and entitlement to judgment, the
burden shifts to the party opposing summary judgment either
to show a triable issue of fact or to show why the undisputed
facts do not entitle the moving party to
1: Is Reule liable to reimburse the UEF for all the
workers' compensation benefits it has paid or will pay on
Reule's behalf for Albrecht's claim?
29 The majority of states, including Montana, have adopted a
"contractor-under" statute, which imposes
workers' compensation liability on a general contractor
to the employees of a subcontractor if the subcontractor is
uninsured. In Larson's Workers'
Compensation Law, Professor Larson explains the purpose
of these statutes is "to protect employees of
irresponsible and uninsured subcontractors by imposing
ultimate liability on the presumably responsible principal
contractor, which has it within its power, in choosing
subcontractors, to pass upon their responsibility and insist
upon appropriate compensation protection for their
workers." The statute also aims "to forestall
evasion of the act by those who might be tempted to subdivide
their regular operations among subcontractors, thus escaping
direct employment relations with the workers and relegating
them for compensation protection to small contractors who
fail to carry . . . compensation
insurance." Professor Larson also explains, "It
has become quite common to speak of the general
contractor's liability as that of the 'statutory
employer' to a 'statutory employee.'
30 Montana's "contractor-under" statute is
§ 39-71-405, MCA. It sets forth the circumstances under
which a general contractor who contracts work out is made
liable as a statutory employer, and breaks them down based on
whether the subcontractor is an "independent
contractor" or a "contractor." In pertinent
part, it provides:
Liability of employer who contracts work
out. (1) An employer who contracts with an
independent contractor to have work performed of a kind which
is a regular or a recurrent part of the work of the trade,
business, occupation, or profession of such employer is
liable for the payment of benefits under this chapter to the
employees of the contractor if the contractor has not
properly complied with the coverage requirements of the
Worker's Compensation Act. Any insurer who becomes liable
for payment of benefits may recover the amount of benefits
paid and to be paid and necessary expenses from the
contractor primarily liable therein.
(2) Where an employer contracts to have any work to be done
by a contractor other than an independent contractor, and the
work so contracted to be done is a part or process in the
trade or business of the employer, then the employer is
liable to pay all benefits under this chapter to the same
extent as if the work were done without the intervention of
the contractor, and the work so contracted to be done shall
not be construed to be casual employment. Where an employer
contracts work to be done as specified in this ...