Submitted: September 13, 2018
ORDER DENYING RESPONDENT'S MOTION FOR SUMMARY
JUDGMENT, AND GRANTING IN PART AND DENYING IN PART
PETITIONER'S CROSS-MOTION FOR SUMMARY JUDGMENT
M. SANDLER JUDGE.
Petitioner petitioned this Court for a ruling that his
attorney earned fees on the reopening of his medical benefits
and that Respondent unreasonably refuses to honor his
attorney's Lockhart lien. On the latter basis,
Petitioner requests a penalty and attorney fees. Respondent
moves for summary judgment on the basis that a claimant's
attorney cannot obtain fees by doing the work pursuant to
which medical benefits that were terminated by operation of
law were reopened; rather, Respondent asserts that a
claimant's attorney is entitled to fees only when an
insurer denies liability for the medical benefits and the
claimant thereafter obtains the medical benefits due to his
attorney's efforts. Respondent also argues that
Petitioner's attorney did not do enough legal work to
earn attorney fees. Petitioner cross-moves for summary
judgment on the relief requested in his Petition for Hearing.
Respondent's Motion for Summary Judgment is denied, and
Petitioner's Cross-Motion for Summary Judgment is granted
in part and denied in part. An insurer's denial of
liability is not a condition precedent to a Lockhart
lien; the relevant inquiry is whether the attorney did the
work that resulted in the additional medical benefits. And
here, Petitioner is receiving two years of additional medical
benefits entirely due to his attorney's efforts, which
were far more than "initiating a process."
Petitioner's attorney obtained the evidence necessary to
reopen Petitioner's medical benefits and then
successfully petitioned the Department to reopen his medical
benefits. However, Respondent's legal argument with
respect to there being a condition precedent to a
Lockhart lien is not unreasonable because this is an
issue of first impression and there is a conflict within the
Department of Labor & Industry's Attorney Retainer
Agreement, and within its rule governing attorney fees. Thus,
Respondent is not liable for a penalty or Petitioner's
1 Petitioner John Webster petitioned this Court for a ruling
that his attorney earned fees on the reopening of his medical
benefits and that Respondent Liberty Northwest Ins. Corp.
(Liberty) unreasonably refused to honor his attorney's
Lockhart lien. On the latter basis, Webster requests a
20% penalty under § 39-71-2907, MCA, and attorney fees
under § 39-71-611, MCA.
2 Liberty moves for summary judgment on the basis that
Webster's attorney did not earn fees, because Liberty
never denied payment, and because she did not do enough legal
work to earn them.
3 Webster cross-moves for summary judgment on the relief
requested in his Petition for Hearing.
4 The following issues are before this Court:
Issue One: Is Webster's attorney entitled to
Lockhart fees on Webster's reopened medical
Issue Two: Is Webster entitled to a penalty and his attorney
5 On February 27, 2012, Webster suffered an industrial injury
in the course of his employment with Pavlik Electric
(Pavlik), which Liberty insured.
6 Liberty accepted liability for the injury, and paid
temporary total disability and medical benefits.
7 Webster has not settled any part of his claim.
8 Webster retained attorney Leslae Dalpiaz because his
medical benefits were going to terminate on February 27,
2017, under § 39-71-704(1)(f)(i), MCA, which provides
that medical benefits terminate 60 months from the date of
injury unless reopened. On October 12, 2016, they executed
the standard Attorney Retainer Agreement drafted by the
Department of Labor & Industry (Department), under which
Dalpiaz's fee would be a percentage "of the amount
of additional compensation payments the claimant receives due
to the efforts of the attorney." As to medical benefits,
the Attorney Retainer Agreement states:
The following benefits shall not be considered as a basis for
calculation of attorney fees:
(1) The amount of medical and hospital benefits received by
the claimant, unless the workers' compensation insurer
has denied all liability, including medical and hospital
benefits, or unless the insurer has denied the payment of
certain medical and hospital costs and the attorney has been
successful in obtaining such benefits for the claimant.
9 On December 20, 2016, Dalpiaz sent a letter to Liberty in
which she set forth her evaluation of the claim, arguing that
Webster was entitled to have his medical benefits reopened
under § 39-71-717, MCA, and made a settlement offer.
10 On December 28, 2016, Liberty rejected the offer and made
a counter-offer. Liberty's adjuster, Justin Fosse,
stated: "If this offer is not accepted, we would want to
wait until his medical is indeed extended and an updated
treatment plan is received before considering
11 On January 4, 2017, Dalpiaz rejected Liberty's
counter-offer and indicated she would be filing a petition to
reopen Webster's benefits with the Department. She
inquired with Fosse if Liberty "would agree to file a
joint petition." Fosse notified Dalpiaz that Liberty
"would not be interested in a Joint Petition."
12 Fosse did not conduct any investigation as to whether
Jeffrey LaPorte, MD, of Missoula Bone & Joint ―
Webster's treating physician ― thought Webster
required medical treatment for his industrial injury in order
to allow him to continue to work, the standard for reopening
medical benefits under § 39-71-717, MCA.
13 Two weeks before Webster's January 25, 2017,
appointment with Dr. LaPorte, Dalpiaz wrote to Dr. LaPorte
and asked him to explain what medical treatment Webster was
likely to require in the future and whether such medical
treatment would be required to allow him to continue working
as an electrician.
14 Dr. LaPorte responded on January 26, 2017, providing
detailed medical information and opinions about Webster's
future medical treatment. Dr. LaPorte also referred Webster
to foot and ankle orthopedic specialist Glenn Jarrett, MD, at
Missoula Bone & Joint, for further evaluation. Dr.
LaPorte concluded his letter by recommending that
"Webster keep his case open for possible future medical
care. This is important in an effort to enable him to
continue in his current profession."
15 On February 3, 2017, Fosse noted in Webster's claim
file that based upon Dr. LaPorte's letter, "it
appears appropriate" for Webster "to have medical
benefits extended" and further noted that he expected
Dalpiaz to file a petition for extended benefits with the
Department. However, Liberty did not stipulate to extending
Webster's medical benefits.
16 On February 7, 2017, Dalpiaz filed a Petition to Reopen
Closed Medical Benefits on Webster's
behalf. Dalpiaz attached a letter to John
Schumpert, MD, the Medical Director for the Department,
explaining that it was Webster's position that medical
benefits should remain open under § 39-71-717(2), MCA,
because they were necessary for him to continue working.
Dalpiaz also attached Dr. LaPorte's letter as the medical
evidence supporting Webster's petition.
17 On February 10, 2017, the Department notified Webster that
it had received his Petition to Reopen Closed Medical
Benefits, and asked Liberty to send it Webster's medical
18 Dr. Jarrett evaluated Webster on February 23, 2017. He
confirmed Webster's ongoing medical problems and outlined
his opinions regarding future treatment options.
19 On February 27, 2017, Webster's medical benefits
terminated pursuant to § 39-71-704(1)(f)(i), MCA.
20 On April 11, 2017, the Department granted Webster's
petition, thereby reopening his medical benefits for an
additional two years, until February 26, 2019, pursuant to
§ 39-71-717(8), MCA.
21 On April 18, 2017, Fosse sent Dalpiaz an email in which he
stated he had requested Webster's most recent medical
records from Missoula Bone & Joint. Dalpiaz responded
with an email, indicating that she wanted a copy of these
medical records. In addition, Dalpiaz notified Fosse that she
was "asserting a Lockhart Lien on all future medical
22 Liberty refused to honor Dalpiaz's Lockhart
lien. Fosse asserted that Dalpiaz was not entitled to a fee
under Montana Contractor Compensation Fund v. Liberty
Northwest Ins. Corp. (In re
Rusco); his response to Dalpiaz's email
In terms of the Lockhart lien, I have reviewed your stance
with my manager and at this time, we do not feel the Lockhart
lien would apply. [Webster's] benefits were never denied,
they were simply set to close due to the 5 year statue [sic].
While you did assist in initiating the reinstatement process,
the Rusco decision states "initiating a process"
and/or "setting in motion" a process doesn't
warrant Lockhart benefits.
23 Dalpiaz responded in a letter to Liberty's Team
Manager Gary Holt, asserting that she was entitled to
attorney fees under the Montana Supreme Court's decision
in Dildine v. Liberty Northwest Ins.
Corp. Dalpiaz explained the reasons she was
entitled to fees as follows:
First, my client came to me with the purpose of getting
assistance in keeping his medical care open. Second, I
contend that I did far more than simply "initiating the
As you are aware, the statute requires that in order to
successfully obtain an order reopening benefits, the claimant
has to show that he is either permanently disabled or needs
the care to continue or return to employment. After reviewing
Mr. Webster's medical record I determined there was not
sufficient documentation to substantiate the burden required
by the Department and hence I contacted Dr. LaPorte,
explained what was required of the statute and then followed
up with a letter that he responded to. Then, I submitted this
along with the supplemental notes from Dr. Jarrett for
review, a second opinion that I also orchestrated for my
client. In the interim, I contacted the Department on two
occasions until we finally received word that the petition
had been granted and my client's medical benefits were to
remain open for an additional two years.
Frankly, I do not think we would have been successful had I
not obtained Dr. LaPorte's opinion with regard to my
client's need for future care. I contend it is this
outcome that the court will look at in supporting our
argument that I did far more than "initiate the
process." In fact, my participation was the key to
obtain [sic] a successful order. Without my efforts, my