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Webster v. Liberty Northwest Ins. Corp.

Court of Workers Compensation of Montana

September 21, 2018


          Submitted: September 13, 2018



         Summary: 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.

         Held: 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 attorney fees.

         ¶ 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.[2] 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 benefits?
Issue Two: Is Webster entitled to a penalty and his attorney fees?


         ¶ 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 settlement."

         ¶ 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.[3] 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 records.

         ¶ 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 care received."

         ¶ 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);[4] his response to Dalpiaz's email states:

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.[5] 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 process."
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 ...

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