Flynn v. Montana State Fund

• Court: Montana Supreme Court
• Citation: Flynn v. Montana State Fund, 267 P.3d 23, 363 Mont. 55, 2011 MT 300 (Mont. 2011)
• Decision Date: 29 November 2011
• Docket Number: No. DA 10–0368.,DA 10–0368.
• Parties: Robert FLYNN and Carl Miller, Individually and on Behalf of Others Similarly Situated, Petitioners and Appellants, v. MONTANA STATE FUND, Appellee and Cross–Appellant,andLiberty Northwest Insurance Corporation, Respondent/Insurer and Appellee.

2011 MT 300

267 P.3d 23

363 Mont. 55

Robert FLYNN and Carl Miller, Individually and on Behalf of Others Similarly Situated, Petitioners and Appellants,

v.MONTANA STATE FUND, Appellee and Cross–Appellant,andLiberty Northwest Insurance Corporation, Respondent/Insurer and Appellee.

No. DA 10–0368.

Supreme Court of Montana.

Argued and Submitted Sept. 28, 2011.Decided Nov. 29, 2011.

For Appellants: Rexford L. Palmer (argued); Attorneys Inc., P.C.; Missoula, Montana.

For Appellees: Steven W. Jennings (argued); Crowley Fleck PLLP; Billings, Montana (Common Fund Insurers), Larry W. Jones; Law Offices of Larry W. Jones; Missoula, Montana (Liberty Northwest Insurance Corporation), Bradley J. Luck (argued); Garlington, Lohn & Robinson; Missoula, Montana (Montana State Fund), Thomas E. Martello; Montana State Fund; Helena, Montana.

For Amicus Curiae (Cassandra Schmill): Laurie Wallace; Bothe & Lauridsen, P.C.; Columbia Falls, Montana.Justice BETH BAKER delivered the Opinion of the Court.

[363 Mont. 56] ¶ 1 Petitioners Robert Flynn and Carl Miller (collectively “ Flynn”) appeal the Order of the Workers' Compensation Court (WCC) defining the term “paid in full,” as used in the definition of “settled” workers' compensation claims, for purposes of determining the retroactive application of judicial decisions. On appeal, we consider whether the WCC properly applied retroactivity principles in formulating a definition of “paid in full.”

FACTUAL AND PROCEDURAL BACKGROUND

¶ 2 We begin by summarizing the protracted history of this matter. This opinion marks the Court's third decision since 2002, complementing several other cases that have outlined the parameters for retroactive application of new judicial decisions in workers' compensation cases. Flynn initially filed a petition in the WCC, alleging Respondent State Compensation Insurance Fund should pay a proportionate share of the attorney fees he incurred to recover social security disability benefits. Flynn v. St. Compen. Ins. Fund, 2002 MT 279, ¶ 1, 312 Mont. 410, 60 P.3d 397 ( Flynn I). Applying the common fund doctrine, we held that if a claimant successfully recovers social security disability benefits, thereby allowing the workers' compensation insurer to offset benefits paid the claimant, the insurer must bear a proportionate share of the costs and attorney fees incurred by the claimant in pursuing the social security benefits. Flynn I, ¶¶ 15–18.

[363 Mont. 57] ¶ 3 On remand, the WCC determined Flynn I applied retroactively and Flynn's attorney was entitled to common fund attorney fees from claimants who benefitted from the decision. Flynn v. Mont. St. Fund, 2008 MT 394, ¶¶ 7, 347 Mont. 146, 197 P.3d 1007 ( Flynn II). Shortly thereafter, this Court decided Schmill v. Liberty N.W. Ins. Corp., 2005 MT 144, ¶ 28, 327 Mont. 293, 114 P.3d 204 ( Schmill II), concluding that our decision in Schmill v. Liberty N.W. Ins. Corp., 2003 MT 80, 315 Mont. 51, 67 P.3d 290 ( schmill i) APPLIED RETROACTIVELY. RELYing on previous case law and reiterating the importance of finality, we held the retroactive effect of a decision “does not apply to cases that became final or were settled prior to a decision's issuance.” Schmill II, ¶ 17 (quoting Dempsey v. Allstate Ins. Co., 2004 MT 391, ¶ 31, 325 Mont. 207, 104 P.3d 483). We left the determination of what is considered “final or settled” to the WCC. Schmill II, ¶ 19.

¶ 4 Heeding this command, the WCC issued the Flynn Order, which was intended to be used as a general model for determining whether a claim is final or settled and the effect of retroactivity on each type of claim. Flynn II, ¶¶ 8–9. In its order, the WCC defined a “final” claim as a “claim in which a final judgment has been entered by the Workers' Compensation Court only if the claim is not currently pending on appeal.” Flynn II, ¶ 9. The WCC relied on § 39–71–107(7)(a), MCA (2005), to define “settled” as “a department-approved or court-ordered compromise of benefits between a claimant and an insurer or a claim that was paid in full.” Flynn II, ¶ 9.

¶ 5 Shortly following the WCC's order, we decided Stavenjord v. Mont. St. Fund, 2006 MT 257, 334 Mont. 117, 146 P.3d 724 ( Stavenjord II). In Stavenjord II, we determined there is no “legal authority for ‘partial’ retroactive application” of a judicial decision and found that judicial decisions apply retroactively to “any and all open claims ....” ¶ 15 (emphasis in original). Moreover, we defined “open claims” as those “still actionable, in negotiation but not yet settled, now in litigation, or pending on direct appeal.” Stavenjord II, ¶ 15.

¶ 6 In Flynn II, we clarified several points arising from the intersection between the Flynn Order and Stavenjord II and the definition of “final,” “settled,” and “open.” First, the language of Stavenjord II discussing “open claims” did not change previous retroactivity rules or create new law. Flynn II, ¶ 21. Reaffirming prior case law, we confirmed that retroactivity principles apply to cases not “final” or “settled.” Flynn II, ¶ 21. We held a “settled” claim is “a department-approved or court-ordered compromise of benefits between a claimant and an insurer or a claim that was paid in full.” Flynn II, ¶ 26 (emphasis added).

¶ 7 The WCC subsequently requested briefing on the definition of “paid in full.” Or. Re: Paid in Full, Flynn v. Mont. St. Fund, 2010 MTWCC 20, ¶ 1 (July 1, 2010). After considering the parties' arguments, the WCC defined “paid in full” as:

A claim in which all benefits to which a claimant is entitled[,] pursuant to the statutes applicable to that claim, are paid prior to the issuance of a judicial decision. If any benefits are paid on the claim after the issuance of a judicial decision, the claim can no longer be considered “paid in full” and is subject to retroactive application of the judicial decision.

Or. Re: Paid in Full, ¶ 17. Thus, according to the WCC's Order, a “settled” claim for purposes of retroactivity is either (1) a department-approved or court-ordered settlement agreement or (2) a claim in which the claimant received all applicable benefits prior to a new judicial decision and has not received subsequent benefits on his or her pre-judicial decision claim.

¶ 8 Flynn appealed, challenging the WCC's decision on the definition of “paid in full.”

STANDARD OF REVIEW

¶ 9 “We review the WCC's conclusions of law for correctness.” Flynn II, ¶ 12 (citing Schmill II, ¶ 11).

DISCUSSION

¶ 10 Whether the WCC properly applied retroactivity law in formulating a definition of “paid in full.”

¶ 11 The general rule favors retroactive application of new rules of law. Stavenjord II, ¶ 9; Dempsey, ¶ 29. We continue to recognize, however, that “truly compelling” cases merit application of a new rule prospectively only. Dempsey, ¶ 29. This Court's approach to retroactivity was thoroughly analyzed in Dempsey. There, we considered whether our decision in Hardy v. Progressive Specialty Ins. Co., 2003 MT 85, 315 Mont. 107, 67 P.3d 892, applied prospectively only, or applied retroactively to require payment of certain insurance coverages in qualifying circumstances to open claims arising before Hardy was issued. Dempsey, ¶ 3. In keeping with our prior rulings, we held the Hardy decision applied retroactively to cases pending on direct review or not yet final. Dempsey, ¶ 4. We concluded that “the retroactive effect of a decision does not apply ab initio, that is, it does not apply to cases that became final or were settled prior to a decision's issuance.” Dempsey, ¶ 31.

¶ 12 Citing Dempsey, we reiterated the importance of finality in Flynn II. We stated, “the interests of fairness and finality are not generally served by drawing ‘an arbitrary distinction between litigants based merely on the timing of their claims.’ ” Flynn II, ¶ 33.

¶ 13 Here, we conclude the WCC properly applied retroactivity analysis in the unique field of workers' compensation law. The workers' compensation system is by nature open-ended; in some cases, benefits may continue for the life of a claimant, or a claimant may be eligible for new benefits upon aggravation of a prior injury. Sections 39–71–710, 39–71–739, MCA. Despite the potentially indefinite length of a party's claim, principles of finality still must be incorporated. As explained below, the WCC's decision properly gives credit to the necessary balance between finality and fairness.

¶ 14 In its order, the WCC recognized four types of claims that would be considered “open” and subject to retroactivity: (1) claims where the claimant was still receiving benefits at the time Flynn I was decided; (2) claims where the parties were still negotiating the amount of indemnity to be paid; (3) claims where settlement negotiations had broken down and the claim was subject to litigation or appeal at the time Flynn I was decided; and (4) claimants whose benefits may have terminated prior to the issuance of Flynn I, but received further benefits on their claim after the issuance of Flynn I. Or. Re: Paid in Full, ¶¶ 15–16.

¶ 15 Urging reversal, Flynn argues a claim is “paid in full” only if the applicable statutory rules bar the disabled worker from seeking further benefits. Flynn's proposed definition fails in several respects.

¶ 16 First, Flynn's position gives no independent meaning to “paid in full” because he essentially argues the only claims truly “paid in full” are those stemming from a settlement agreement. Flynn cites § 39–71–739, MCA, for the proposition no claim really can be “paid in full” because though a claim may be “temporarily dormant,” a claimant later may receive benefits for aggravation of a disability. That section provides:

If aggravation, diminution, or termination of disability takes place or is discovered after the rate of compensation is established or compensation is terminated in any case where the maximum payments for disabilities as provided in this chapter are not reached, adjustments may be made to meet such changed...