Madill v. State Compensation Ins. Fund

• Court: Montana Supreme Court
• Writing for the Court: TRIEWEILER; GRAY; TURNAGE, C.J., and ERDMANN; TRIEWEILER
• Citation: Madill v. State Compensation Ins. Fund, 280 Mont. 450, 930 P.2d 665 (Mont. 1997)
• Decision Date: 02 January 1997
• Docket Number: No. 96-117,96-117
• Parties: Gerald MADILL, Petitioner and Appellant, v. STATE COMPENSATION INSURANCE FUND, Respondent and Respondent.

Page 665

930 P.2d 665

280 Mont. 450

Gerald MADILL, Petitioner and Appellant, v. STATE COMPENSATION INSURANCE FUND, Respondent and Respondent.

No. 96-117.

Supreme Court of Montana.

Submitted on Briefs Dec. 12, 1996.

Decided Jan. 2, 1997.

[280 Mont. 452] Gregory H. Warner; Great Falls, for Petitioner and Appellant.

William O. Bronson; Great Falls, for Respondent and Respondent.

TRIEWEILER, Justice.

The claimant, Gerald Madill, filed a petition for an order awarding attorney fees and costs pursuant to § 39-71-612, MCA (1979), with the State of Montana Department of Labor and Industry. He contended that various benefits to which he had been entitled were denied by his employer's workers' compensation insurer, the State Compensation Insurance Fund; that he incurred attorney fees and costs to recover those benefits; and that he was entitled to reimbursement of those fees and costs. Madill's claim was denied by the Department of Labor and Industry. Pursuant to § 39-71-204(3), MCA, Madill appealed that denial to the Workers' Compensation Court for the State of Montana. The Workers' Compensation Court affirmed the order of the Department of Labor and Industry. Madill appeals from the order of the Workers' Compensation Court which affirmed the decision of the Department of Labor and Industry. We reverse the order of the Workers' Compensation Court.

The issue on appeal is whether Madill is entitled to an award of attorney fees and costs pursuant to § 39-71-612, MCA (1979), when disputed benefits are recovered by settlement, rather than by an award from the Workers' Compensation Court.

FACTUAL BACKGROUND

The facts in this case were based largely on stipulations or stipulated exhibits. In addition, the hearing examiner for the Department of Labor and Industry made findings of fact from which no appeal has been taken. Therefore, for purposes of this appeal, the following facts are undisputed.

The claimant, Gerald Madill, was injured during the course of his employment with Greenfield Irrigation District on September 28, 1979. His injury occurred when he slipped on underground pipe that he was installing, he fell between the pipe and a dirt wall, and twisted his knee.

The claimant's employer was insured against workers' compensation claims by the respondent, the State Compensation Insurance Fund. The State Fund accepted liability for Madill's injury, and commenced payment of temporary total disability benefits at the rate of $154.63 per week in March 1980.

From 1980 to 1984, Madill underwent eleven surgical procedures to treat his knee injury. Included among those procedures were a meniscectomy, arthroscopic surgery, patellar tendon realignment, and a patellectomy. As a complication of the patellectomy, Madill's left patellar tendon ruptured, and his left knee is severely impaired. As a result of the alteration to his gait, which is caused by his injury, Madill suffers from low back and hip pain.

On August 28, 1986, Michael Sousa, M.D., the orthopedic surgeon who had been primarily responsible for Madill's care, wrote to the State Fund and advised them of the history of Madill's surgical treatment and his condition at that time. He stated that, while Madill had "reached maximum healing," he has lost seventy percent of the strength in his left leg, experiences hyperextension and limited flexion in that leg, and cannot ambulate without use of an orthotic device. In addition to Madill's difficulty standing or ambulating, he explained that he would be unable to sit for any extended period of time due to the difficulties with his left leg. Dr. Sousa expressed the opinion that the degree of impairment to Madill's left lower extremity was fifty percent, that he was "quite disabled" as a result of his extremity impairment, and that, in the future, he would be limited to sedentary employment, if it was available.

At the request of Chip McKenna, the claims examiner responsible for handling Madill's claim at the State Fund, Dr. Sousa submitted an updated report to the State Fund on May 3, 1988. In that report, he noted that radiographic studies indicated early development of osteoarthritis in Madill's knee joint, that his knee was still unstable, and that he may need a total knee joint replacement at some time in the future. He repeated his advice that Madill was "certainly restricted with regard to his employment capabilities because of a markedly weakened leg."

In spite of that information, and without establishing that there was employment to which Madill could return, as required by the Workers' Compensation Court's decision in Coles v. Seven-Eleven Stores (Mont.W.C.C. Nov. 20, 1984), No. 2000, slip op. at 9, McKenna wrote to Madill's attorney on May 17, 1988, and advised him that, since Madill had completed a two-year training program at Flathead Valley Community College and reached maximum healing, he would be reclassified as partially disabled and his benefits would be reduced to the rate of $99 per week fourteen days from the date of the letter. At that time, McKenna also offered to settle Madill's claim for 300 weeks of partial disability benefits, or $29,700, minus amounts which had been previously advanced. The total amount previously advanced was approximately $7,600.

On May 25, 1988, Madill's attorney responded to McKenna's letter and enclosed a report from Ian Steele, a rehabilitation consultant. Steele noted that, although Madill had received training in human services at FVCC, by the time he graduated, the state social services agencies were cutting back on the positions that he had been trained to perform, few if any of those jobs were available, and he had been unsuccessful in his attempts to find other types of work due to his physical limitations. He concluded that:

From a vocational standpoint holding full-time employment would be very difficult due to the pain Mr. Madill experiences.... The before mentioned would make the placement of Mr. Madill into employment very difficult if not impossible.

Madill's total disability benefits were terminated, and he was paid at the partial disability rate beginning on May 31, 1988. On June 9, 1988, McKenna acknowledged receipt of Steele's report, but rejected Madill's request that he be placed back on total disability status. Further efforts were made to have total disability benefits reinstated, but were rejected by McKenna. On October 28, 1988, the attorney for the State Fund rejected a mediator's suggestion that a Coles analysis be performed. On March 21, 1989, McKenna wrote to Madill's attorney and reminded him that the previous offer of a lump sum settlement was being eroded by the payment of bi-weekly benefits, and that, if he did not hear from him by April 30, 1989, the offer would be withdrawn.

On January 19, 1989, Madill's attorney forwarded more information to the State Fund regarding Madill's physical limitations. On July 28, 1989, the State Fund received an additional report from Dr. Sousa in which he noted that, based on functional capacities assessment, Madill was markedly limited with regard to his activities, and that he felt "it would be unlikely he would be employable in a regular occupation."

In spite of all the mentioned information, McKenna wrote to Madill's attorney on August 15, 1989, contended that the vocational information was incomplete, and declined to reinstate total disability benefits.

On August 16, 1989, Madill's attorney forwarded to the State Fund a report from Grace D. Benesh, a second rehabilitation consultant. She was asked to do a specific analysis of job opportunities for people with a degree in human services, which is what Madill had been trained for at FVCC. She concluded, after a survey of potential employers, that the degree in no way enhanced his employability. She also concluded that, due to his physical restrictions and the fact that he is hard of hearing (he wears two hearing aids), he is not employable in his normal labor market, which she defined as the county of his residence.

Finally, on August 30, 1989, McKenna advised Madill's attorney that the State Fund would reinstate temporary total disability benefits retroactive to the date of their termination. A check in the amount of $3,560.32 was enclosed to compensate for the difference between Madill's partial and total disability rate during the time that his total disability benefits had been terminated.

In that same August 30, 1989, letter, however, McKenna rejected Madill's claim that he be classified as permanently totally disabled. He stated:

Finally, at this time, the State Fund is not in agreement that your client is permanently totally disabled. We will be referring the file to one of our private rehabilitation vendors to obtain another view on your client's employability.

The State Fund did refer Madill to Crawford Rehabilitation Services for further evaluation. On March 8, 1990, that firm advised the State Fund that jobs directly related to Madill's prior work history, or for which he possessed skills as a result of his training, did not appear readily available. Crawford requested authority to research whether other occupations for which Madill was qualified might be available. Apparently authority was given, because on July 20, 1990, the claims examiner to whom Madill's claim had then been assigned at the State Fund, made an entry in the State Fund's file to the effect that Dr. Sousa had disapproved the job suggested by Crawford's rehabilitation consultant. In the meantime, it had been necessary for Madill's attorney to continue employing the services of his own vocational consultant to monitor the investigation and reports being given by Crawford.

Finally, on January 4, 1991, Carol Morris, the next claims examiner who had assumed responsibility for Madill's claim, orally conceded to Madill's attorney that Madill was permanently totally disabled. In a letter dated January 29, 1991, Madill's attorney confirmed that conversation,...