Lockhart v. New Hampshire Ins. Co., No. 98-518

• Citation: 1999 MT 205,984 P.2d 744
• Decision Date: 01 September 1999
• Docket Number: No. 98-521., No. 98-518
• Court: United States State Supreme Court of Montana
• Parties: Doug LOCKHART, Petitioner and Appellant, v. NEW HAMPSHIRE INSURANCE COMPANY, Respondent and Insurer for Labor Contractors, Employer and Respondent, and Liberty Northwest Insurance Corporation, Petitioner and Respondent, v. Nancy Petak, Claimant, Respondent and Appellant, and Community Medical Center, Respondent.

984 P.2d 744

1999 MT 205

Doug LOCKHART, Petitioner and Appellant, v. NEW HAMPSHIRE INSURANCE COMPANY, Respondent and Insurer for Labor Contractors, Employer and Respondent, and Liberty Northwest Insurance Corporation, Petitioner and Respondent, v. Nancy Petak, Claimant, Respondent and Appellant, and Community Medical Center, Respondent.

Nos. 98-518, 98-521.

Supreme Court of Montana.

Argued February 11, 1999.

Submitted March 11, 1999.

Decided September 1, 1999.

Laurie Wallace (argued), Bothe & Lauridsen; Columbia Falls, Montana, Rex Palmer (argued), Attorneys, Inc., P.C.; Missoula, Montana, For Appellants.

Donald Herndon (argued), Herndon, Sweeney & Halverson; Billings, Montana, Larry Jones (argued), Liberty Northwest; Missoula, Montana, Regan Whitworth (argued), Balyeat Law Offices; Missoula, Montana, For Respondents.

Patrick R. Sheehy (argued), Halverson, Sheehy & Plath; Billings, Montana (MTLA), Oliver H. Goe (argued), Browning, Kaleczyc, Berry & Hoven; Helena, Montana(Assoc. of Health Care Providers), For Amicus.

Justice JIM REGNIER delivered the opinion of the Court.

¶ 1 These combined claims were filed in the Montana Workers' Compensation Court by Doug Lockhart and Nancy Petak in part to recover attorney fees from medical benefits. The Workers' Compensation Court, however, found that medical benefits payable to a claimant are not subject to an attorney fee lien and that the fee must be paid by the claimants out of other funds.

¶ 2 The issue raised on appeal is whether the attorney's fee lien codified at § 37-61-420, MCA, applies to medical benefits recovered due to the efforts of the attorney in a workers' compensation claim.

FACTUAL BACKGROUND

¶ 3 Lockhart v. New Hampshire Insurance Company

¶ 4 On October 3, 1996, Doug Lockhart suffered an industrial injury to his right wrist while working as a construction laborer. The insurer, New Hampshire Insurance Company, denied liability for Lockhart's claim and the matter proceeded to a hearing before the Workers' Compensation Court on September 16, 1997. The court found the insurer liable for Lockhart's industrial injury and ordered payment of temporary total disability and medical benefits. The insurer did not appeal the decision of the Workers' Compensation Court and began payment of the court-ordered benefits.

¶ 5 On December 16, 1997, Lockhart motioned the lower court for an order directing the insurer to pay attorney fees of twenty-five percent of the medical benefits directly to Lockhart's attorney. The insurer objected to Lockhart's motion, and by order dated March 4, 1998, the court invited amicus curiae briefs on whether a twenty-five percent fee can and should be deducted from medical benefits being paid due to the efforts of the attorney.

¶ 6 Liberty Northwest Insurance Corporation v. Petak

¶ 7 On October 19, 1994, Nancy Petak injured her left hand while moving tables as an activities aid at a rest home. The injury developed an abscess that required brief hospitalization and surgery. The treatment was effective and Petak made a complete recovery and returned to her job in a matter of days.

¶ 8 Notwithstanding a letter from Petak's treating surgeon and a letter from her treating infectious disease specialist recommending coverage, the insurer, Liberty Northwest, denied liability for Petak's medical expenses.

¶ 9 On August 7, 1995, Petak filed a petition for hearing in her case, and the Workers' Compensation Court set the trial for the week of October 23, 1995. On August 22, 1995, Liberty Northwest filed its response in which it denied liability for Petak's care once again. However, on September 7, 1995, Liberty Northwest orally accepted liability for Petak's medical care and gave written notice of the acceptance by letter dated September 11, 1995. According to § 39-71-612(2), MCA, the timing of the acceptance (over thirty days before the date of the hearing) protected Liberty Northwest from paying Petak's attorney fees incurred to collect her compensation.

¶ 10 Since identical issues were raised in the Lockhart and Petak cases, the Workers' Compensation Court joined the two cases for purposes of supplemental briefing and oral argument.

¶ 11 The matter was argued on July 22, 1998, with all parties participating. The Workers' Compensation Court found that an attorney fee which becomes due as a result of payment of disputed medical benefits by the insurer cannot be paid out of the medical benefits directly, but must be paid by the claimant from other benefits or resources. The court arrived at this conclusion by determining that medical benefits are not benefits received by the claimant and, thus, no attorney fee lien can attach. According to the court, medical benefits are not "benefits," but an imposition of liability imposed on the insurer. Therefore, since an award of medical benefits does not entitle the claimant to receipt of money, there is no property against which an attorney fee lien can attach. Thus, the court held that where a claim has been denied and later found compensable by the court without a separate award of attorney fees, a contingent attorney fee may be computed based upon medical benefits but the amount computed may not be deducted from the compensation payable to the medical providers.

DISCUSSION

¶ 12 The issue presented on appeal is whether the attorney's lien statute codified at § 37-61-420, MCA, applies to medical benefits recovered due to the efforts of the attorney in a workers' compensation case.

¶ 13 The scope of our review of a decision from the Workers' Compensation Court is whether or not the Workers' Compensation Court correctly interpreted the law as it applies to the facts of this case. See Pinyerd v. State Compensation Ins. Fund (1995), 271 Mont. 115, 119, 894 P.2d 932, 934

.

¶ 14 The Workers' Compensation Court held that medical benefits are not the property of the claimant and thus no attorney fee lien can attach.

¶ 15 The attorney retainer agreement, drafted by the Department of Labor and Industry pursuant to § 39-71-613, MCA, allows for an attorney's contingency fee to be taken from "the amount of additional compensation payments the claimant receives due to the efforts of the attorney." The Department of Labor and Industry expressly included in the attorney retainer agreement, disputed medical benefits in the calculation of "additional compensation" pursuant to ARM 24.29.3802(5)(a).

¶ 16 Additionally, we have held that the term "compensation benefits" includes medical benefits. In Carlson v. Cain (1985), 216 Mont. 129, 136, 700 P.2d 607, 612, we were asked to decide whether a penalty could be assessed for unreasonable delay in the payment of medical benefits. Before determining whether a penalty could be assessed, we first concluded that medical benefits were included in the term "compensation benefits" as used in the penalty statute codified at § 39-71-702, MCA (1979). After reviewing various statutory provisions, we held that:

There should be no argument that the compensation benefits which an injured worker receives under the Act includes compensation for time off the job, for disability and for medical payments. The Act itself makes the term "compensation" universally applicable to all of the sections of the Act. Section 39-71-103, MCA, provides:

XX-XX-XXX. Compensation provisions. The compensation provisions of this chapter, whenever referred to, shall be held to include the provisions of compensation plan no. 1, 2, or 3, and all other sections of this chapter are applicable to the same or any part thereof.

Carlson, 216 Mont. at 136-37, 700 P.2d at 612 (this statute has not been amended since 1947).

¶ 17 As in this case, the insurer in Carlson argued that since the claimant did not receive the medical benefit payments herself, the benefits could not be considered "compensation." We found this argument specious, and agreed with the reasoning of the Kansas court in Farm Bureau Mutual Insurance Company v. Commercial Standard Insurance Company (1980), 5 Kan.App.2d 127, 612 P.2d 1265:

[T]he fact that the payment is made directly to the provider of services does not affect its status as compensation. KSA 1979 Supp. 44-504(b) permits subrogation for compensation paid by the employer regardless of who receives the actual payment.

Carlson, 216 Mont. at 139, 700 P.2d at 614. Considering Montana's similar subrogation provision, we then held that since:

[M]edical payments under the act for the purposes of subrogation are treated as a compensation benefit; for the same reason, medical payments should be treated as a compensation benefit when a penalty is considered for wrongful refusal or delay in payment."

See Carlson, 216 Mont. at 139,

700 P.2d at 614.

¶ 18 We used similar reasoning in Billings Deaconess Hospital, Inc. v. Angel (1986), 219 Mont. 490, 712 P.2d 1323. In that case, we addressed the question of whether hospital services were considered to be "benefits payable to a claimant" for purposes of jurisdiction of the Workers' Compensation Court. We found that such benefits were "compensation benefits" pursuant to the Workers' Compensation Act and thus within the exclusive jurisdiction of the Workers' Compensation Court. ¶ 19 Finally, we note that in the case of Cheetham v. Liberty Northwest Insurance Corporation, (dec'd July 16, 1997), WCC No. 9612-7675, the Workers' Compensation Court itself addressed the exact issue on appeal herein, and concluded the exact opposite as it concluded in this case. Contrary to its decision in this case, the Workers' Compensation Court in Cheetham held that attorney fee liens attach as a matter of law to disputed medical benefits. The court relied on the language of the attorney retainer agreement and our decision in Carlson.

¶ 20 Based on the foregoing analysis, Lockhart and Petak maintain on appeal that medical benefits constitute "compensation" to the claimant and thus the attorney fee lien can attach pursuant to § 37-61-420, MCA, the attorney...