CNA Ins. Companies v. Dunn

• Decision Date: 21 September 1995
• Docket Number: No. 95-170,95-170
• Citation: 273 Mont. 295,52 St.Rep. 981,902 P.2d 1014
• Parties: CNA INSURANCE COMPANIES, Petitioner and Appellant, v. Kenneth Raylon DUNN, Uninsured Employers' Fund, and Big Truck Productions, Respondents and Respondents.
• Court: Montana Supreme Court

Page 1014

902 P.2d 1014

273 Mont. 295

CNA INSURANCE COMPANIES, Petitioner and Appellant, v. Kenneth Raylon DUNN, Uninsured Employers' Fund, and Big Truck Productions, Respondents and Respondents.

No. 95-170.

Supreme Court of Montana.

Submitted on Briefs Aug. 3, 1995.

Decided Sept. 21, 1995.

Todd A. Hammer, Warden, Christiansen, Johnson & Berg, Kalispell, for Appellant.

Chris J. Ragar, Bozeman, for Dunn.

Kevin Braun, Department of Labor & Industry, Helena, Beth Heckscher, Big Truck Productions, Hollywood, California, for Respondents.

TRIEWEILER, Justice.

The petitioner, CNA Insurance Companies, filed a petition for declaratory judgment in the Workers' Compensation Court of the State of Montana in which it sought a determination that it provided workers' compensation insurance coverage to Big Truck Productions for injuries sustained by Kenneth R. Dunn. The Workers' Compensation Court concluded that although it had jurisdiction to decide the issue raised by CNA's petition, it was not required to do so, and dismissed the petition without prejudice. CNA appeals from the order and judgment of the Workers' Compensation Court. We affirm the Workers' Compensation Court.

Although a number of issues are raised by CNA on appeal, we find the following issues dispositive.

1. Did the Workers' Compensation Court have either exclusive or concurrent jurisdiction to determine whether Dunn's employer was insured against workers' compensation claims at the time of Dunn's work-related accident and injury?

2. Should sanctions be imposed against CNA for filing a frivolous appeal?

FACTUAL BACKGROUND

In pleadings filed in either the Workers' Compensation Court or the District Court for the Third Judicial District in Powell County, Dunn alleged the following facts:

On August 17, 1993, Dunn suffered an industrial injury arising out of and in the course and scope of his employment with Big Truck. Big Truck first informed him that it was covered by a workers' compensation policy through its payroll company, Axium. Next, Big Truck asserted that Dunn was not entitled to compensation benefits because he had signed a release absolving his employer from responsibility for those benefits.

After his injury, Dunn learned from the State Fund that Big Truck's policy with Axium did not cover him. He also learned from the Montana Department of Labor that it had no notice/information/ or election of workers' compensation coverage for Big Truck at any time in the State of Montana. Therefore, on February 16, 1994, Dunn filed an independent action against Big Truck in Powell County District Court pursuant to § 39-71-515, MCA. Among other allegations, Dunn alleged that he was an employee of Big Truck when, on August 17, 1993, he suffered an industrial injury arising out of and in the course and scope of his employment; that Big Truck was not, at that time, properly insured against workers' compensation claims; and that, therefore, Big Truck was liable pursuant to § 39-71-515, MCA, for damages in an amount equal to the benefits Dunn would have received had Big Truck been insured.

Dunn's District Court complaint was served on Big Truck on March 23, 1994. Two days later, Big Truck, for the first time, asserted that it was covered against Dunn's claim by CNA.

On December 15, 1994, Dunn filed an amended complaint in District Court in which he added claims of fraud and negligent misrepresentation.

On November 22, 1994, after receiving notice of Dunn's proposed amendment, the same attorney who was defending Big Truck in the District Court action filed a petition in the Workers' Compensation Court on behalf of CNA. In that petition, CNA sought a determination that its policy provided workers' compensation insurance coverage to Big Truck for the injury alleged by Dunn.

After appropriately noting that the relief sought by CNA was "odd" because "[a]n insurer is free to admit liability without permission or order of the Court. It is not harmed if the injured worker refuses to accept benefits," the Workers' Compensation Court dismissed CNA's petition. It concluded that although it had jurisdiction to decide the issues raised, it was not required to do so and in exercising its discretion not to do so, it observed that:

The only foreseeable impact of a decision by this Court is the impact it would have in the district court action. Indeed, the present petition appears to be a calculated attempt to circumvent a determination by the district court.

ISSUE 1

Did the Workers' Compensation Court have either exclusive or concurrent jurisdiction to determine whether Dunn's employer was insured against workers' compensation claims at the time of Dunn's work-related accident and injury?

We review the Workers' Compensation Court's conclusions of law to determine whether they are correct. Stordalen v. Ricci's Food Farm (1993), 261 Mont. 256, 258, 862 P.2d 393, 394; Martelli v. Anaconda-Deer Lodge County (1993), 258 Mont. 166, 168, 852 P.2d 579, 580.

In Bohmer v. Uninsured Employers' Fund (1994), 266 Mont. 289, 292, 880 P.2d 816, 818, we held that when a worker sues an uninsured employer because of a work-related injury pursuant to § 39-71-515, MCA, the action and all its "integral elements" are the exclusive jurisdiction of the district court. The Workers' Compensation Court distinguished Bohmer by concluding that it was not asked to exercise jurisdiction over an action commenced pursuant § 39-71-515, MCA, but rather, it was being asked to determine an insurer's liability for benefits. It held that while CNA's petition may raise questions of fact common to those raised in the District Court action, the relief sought by CNA was independent of that action. CNA agrees with the Workers' Compensation Court's conclusion that Bohmer is inapplicable, but contends that the Workers' Compensation Court had exclusive jurisdiction over this matter and erred when it held that the Powell County District Court also had jurisdiction. Dunn, on the other hand, contends that pursuant to our decision in Bohmer, the District Court had exclusive jurisdiction to decide whether Big Truck was insured at the time of his injury.

In Bohmer, the injured employee sued his employer in district court as an uninsured employer. The employer agreed it was uninsured. The employee then petitioned the Workers' Compensation Court to determine the benefits to which he was entitled. Bohmer, 880 P.2d at 817. This Court was, therefore, required to reconcile the Workers' Compensation Court's statutory jurisdictional grant at § 39-71-2905, MCA, with that jurisdiction provided to the district court pursuant to §§ 39-71-515 and -516, MCA.

Section 39-71-515(1), MCA, provides:

An injured employee or the employee's beneficiaries have an independent cause of action against an uninsured employer for failure to be enrolled in a compensation plan as required by this chapter.

Section 39-71-516, MCA, provides in part that "[a]n injured employee ... pursuing an independent cause of action pursuant to 39-71-515 must bring such action in the district court ...." (Emphasis added.)

Prior to the commencement of this action in the Workers' Compensation Court, Dunn had filed suit in district court pursuant to § 39-71-516, MCA, based on his allegation and presumed belief that Big Truck was an uninsured employer. An uninsured employer is defined in § 39-71-501, MCA, as "an employer who has not properly complied with the provisions of 39-71-401 [requiring an employer to elect to be bound by a plan]." Dunn alleged that before filing the suit he learned from the Department of Labor that it had no notice/information/or election of workers' compensation coverage for Big Truck at any time in the State of Montana. This was a sufficient factual basis upon which to invoke the District Court's jurisdiction pursuant to § 39-71-516, MCA. Once the District Court's jurisdiction was properly invoked, it had exclusive jurisdiction over all of the "integral elements" of Dunn's claim.

CNA contends that Bohmer is distinguishable because there the extent of...