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Reule v. Brock

Court of Workers Compensation of Montana

April 11, 2017

TIM REULE Petitioner
v.
ANDREW N. BROCK and CHRIS M. ALBRECHT and UNINSURED EMPLOYERS' FUND Respondents.

          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 JUDGMENT

          DAVID M. SANDLER JUDGE.

         Summary: 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.

         Held: 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.

         Procedural History

         ¶ 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 motion.

         ¶ 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. Albrecht's injury."

         ¶ 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.[1] The UEF attempted service on Brock but was unsuccessful.

         ¶ 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), MCA.[2]

         ¶ 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.[3] 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)[4] and gave the parties an opportunity to present all evidence material to the motion.

         ¶ 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.[5] 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.[6] 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.[7]

         FACTS

         ¶ 11 This Court has reviewed the parties' filings in their entirety, and made all inferences in Reule's favor.[8] 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 Certificate (ICEC).

         ¶ 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 roofing.

         ¶ 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. Albrecht's injury.
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.

         LAW AND ANALYSIS

         ¶ 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 accident.[9]

         ¶ 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.[10] 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 judgment.[11]

         Issue 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.[12] 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."[13] 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."[14] 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.' "[15]

         ¶ 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 ...

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