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
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 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),
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
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 judgment.
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 ...