Rausch v. State Compensation Ins. Fund

• Court: Montana Supreme Court
• Citation: Rausch v. State Compensation Ins. Fund, 2002 MT 203, 311 Mont. 210, 54 P.3d 25 (Mont. 2002)
• Decision Date: 05 September 2002
• Docket Number: No. 01-420, No. 01-442., No. 01-441
• Parties: Alexis RAUSCH, as Conservator for Kevin Rausch, and on behalf of others similarly situated, Charles Fisch, individually and on behalf of others similarly situated, Thomas Frost, individually and on behalf of others similarly situated, Plaintiffs/Appellants, v. STATE COMPENSATION INSURANCE FUND, Defendant/Respondent.

54 P.3d 25

2002 MT 203

311 Mont. 210

Alexis RAUSCH, as Conservator for Kevin Rausch, and on behalf of others similarly situated, Charles Fisch, individually and on behalf of others similarly situated, Thomas Frost, individually and on behalf of others similarly situated, Plaintiffs/Appellants, v. STATE COMPENSATION INSURANCE FUND, Defendant/Respondent.

Nos. 01-420, 01-441, 01-442.

Supreme Court of Montana.

Submitted on Briefs December 13, 2001.

Decided September 5, 2002.

Lon J. Dale, James T. Towe, Milodragovich, Dale, Steinbrenner & Binney, P.C., Missoula, Montana (For Rausch), Monte D. Beck, Attorney at Law, Bozeman, Montana (For Fisch), Stephen D. Roberts, Attorney at Law, Bozeman, Montana (For Frost), For Appellants.

Greg E. Overturf, Montana State Fund, Helena, Montana, For Respondent.

Justice TERRY N. TRIEWEILER delivered the Opinion of the Court.

¶ 1 Appellants, Alexis Rausch (as conservator for Kevin Rausch), Charles Fisch, and Thomas Frost, each filed separate petitions in Workers' Compensation Court claiming entitlement to immediate payment of an impairment award based on their respective impairment ratings. Respondent, State Compensation Insurance Fund, denied immediate payment of the impairment awards, asserting that the benefit was not due until each claimant reached his retirement age. Appellants brought their claims as individuals and on behalf of others similarly situated, and also sought attorney fees, penalties, and common fund attorney fees. The Workers' Compensation Court consolidated the three cases and concluded that neither the 1991 nor 1997 Montana Workers' Compensation Acts (which applied to these claimants) provided a statutory basis for an impairment award to permanently totally disabled claimants. Claimants contended that if that conclusion was correct, their rights to equal protection and due process were violated. The Workers' Compensation Court held that the Montana Workers' Compensation Act, as interpreted by the Court in its previous order, did not violate either the equal protection or due process clauses of the Montana Constitution. Appellants appeal from the Workers' Compensation Court's Order and Decision Disposing of Non Constitutional Issues, Order and Judgment Regarding Constitutional Challenge, and the Judgment Respecting Impairment Awards. We reverse the Workers' Compensation Court's orders which denied impairment awards to permanently totally disabled workers and denied attorney fees.

¶ 2 The issues presented on appeal are restated as follows:

¶ 3 1. Did the District Court err as a matter of law when it concluded, pursuant to the 1991 and 1997 versions of the Montana Workers' Compensation Act, that permanently totally disabled workers are not entitled to receive impairment awards?

¶ 4 2. Is an impairment award due to a permanently totally disabled claimant upon the receipt of his or her undisputed impairment rating or upon retirement?

¶ 5 3. Should an impairment award to a permanently totally disabled claimant be characterized as a total or partial disability benefit?

¶ 6 4. Are claimants' attorneys entitled to attorney fees pursuant to the common fund doctrine?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 7 Kevin Rausch, Charles Fisch, and Thomas Frost were all determined to be permanently totally disabled as a result of work-related injuries. Kevin Rausch sustained a head and spinal cord injury on July 8, 1992, and is quadriplegic with brain damage. Charles Fisch sustained a spinal cord injury on July 9, 1998, and is an incomplete quadriplegic. Thomas Frost sustained a back injury on August 30, 1997, and has undergone a series of four back surgeries. The State Compensation Insurance Fund (State Fund) insured each claimant's employer and has accepted liability for each of the injuries.

¶ 8 Rausch, Fisch, and Frost currently receive permanent total disability benefits as a result of their work-related injuries, and are entitled to those benefits until their death or retirement age, whichever occurs first. The claimants began receiving permanent total disability benefits immediately upon termination of their temporary total disability benefits. None of the claimants have ever received permanent partial disability benefits.

¶ 9 Each claimant has reached maximum medical improvement from his respective injuries. On December 14, 1998, Kevin Rausch received an impairment rating equal to 96% of the whole person. On July 29, 1999, Charles Fisch received an impairment rating equal to 74% of the whole person and on August 26, 1999, Thomas Frost received an impairment rating equal to 25% of the whole person. Each impairment rating was based on the American Medical Association Guide to Evaluation of Permanent Impairment, and on objective medical findings.

¶ 10 Each claimant filed separate petitions in the Workers' Compensation Court claiming entitlement to immediate payment of an impairment award. The State Fund denied immediate payment of the impairment awards, based on its contention that impairment awards for permanently totally disabled claimants are not due until the claimants either receive social security retirement benefits or are entitled to receive social security retirement benefits. Claimants also asserted that postponement of their impairment awards would violate their rights to equal protection and substantive due process as guaranteed by the Montana Constitution. Claimants sought attorney fees individually and pursuant to the common fund doctrine for similarly situated claimants. At no time did the State Fund contend that claimants had no entitlement to an impairment award. The dispute centered on the timing of the payment.

¶ 11 On March 29, 2000, the State Fund offered to pay the impairment awards, as an undiscounted, lump sum, to each claimant concurrent with permanent total disability benefits. In addition, the State Fund agreed to pay the claimants' attorney fees. Fisch and Frost accepted the State Fund's offer, but continued to maintain standing for class certification and for common fund attorney fees. Rausch rejected the State Fund's offer because of its unwillingness to characterize the impairment award as a permanent total disability benefit (which would impact whether there is a social security offset). Although the State Fund has paid impairment awards to Fisch and Frost, it has not paid impairment awards to all other similarly situated claimants.

¶ 12 The Workers' Compensation Court consolidated the three cases, and bifurcated the statutory and constitutional issues. It first examined the statutory basis for impairment awards, and then examined the constitutionality of its decision in light of the claimants' constitutional arguments. Based on briefs and stipulated facts, the Workers' Compensation Court issued an Order and Decision Disposing of Non-Constitutional Issues on September 13, 2000. It held that neither the 1991 nor 1997 Montana Workers' Compensation Acts provided for impairment awards to permanently totally disabled claimants. The Workers' Compensation Court then issued an Order and Judgment Regarding Constitutional Challenge on April 20, 2001. In that Order, it held that the Court's interpretation of the Montana Workers' Compensation Act did not violate either the due process or equal protection clauses of the Montana Constitution. ¶ 13 The claimants appealed the Workers' Compensation Court's Order and Decision Disposing of Non-Constitutional Issues, Order and Judgment Regarding Constitutional Challenge, and the Court's Judgment Respecting Impairment Awards which was based on those orders.

STANDARD OF REVIEW

¶ 14 We review the Workers' Compensation Court's conclusions of law to determine whether they are correct. Matthews v. State Compensation Ins. Fund, 1999 MT 225, ¶ 5, 296 Mont. 76, ¶ 5, 985 P.2d 741, ¶ 5.

DISCUSSION

ISSUE 1

¶ 15 Did the District Court err as a matter of law when it concluded, pursuant to the 1991 and 1997 versions of the Montana Workers' Compensation Act, that permanently totally disabled workers are not entitled to receive impairment awards?

¶ 16 The contested legal issue presented to the Workers' Compensation Court by the parties related to when an impairment award should be paid to a permanently totally disabled claimant. The claimants asserted that the impairment award should be paid immediately upon receipt of their undisputed impairment ratings, while the State Fund responded that the impairment award should be paid at age 65, upon retirement, pursuant to § 39-71-710, MCA (1991 & 1997). The State Fund had already conceded that the claimants were entitled to impairment awards. However, in analyzing the legal issue presented, the Workers' Compensation Court concluded there was no statutory basis for impairment awards to permanently totally disabled claimants in either the 1991 or 1997 versions of the Montana Workers' Compensation Act. On that basis, the Workers' Compensation Court concluded as a matter of law that permanently totally disabled workers are not entitled to impairment awards. After review of the applicable statutes, we conclude that the Workers' Compensation Court's interpretation of the acts is incorrect.

¶ 17 Workers' compensation benefits are determined by the statutes in effect on the date of the injury. Buckman v. Montana Deaconess Hosp. (1986), 224 Mont. 318, 321, 730 P.2d 380, 382. Therefore, with respect to the Rausch claim, the 1991 Workers' Compensation Act is applicable. With respect to the Fisch and Frost claims, the 1997 Workers' Compensation Act is applicable.

¶ 18 Montana recognizes four distinct classes of disability benefits: (1) temporary total; (2) temporary partial; (3) permanent partial; and (4) permanent total. § 39-71-116, MCA (1991 & 1997); Reeverts v. Sears, Roebuck & Co. (1994), 266 Mont. 509, 517, 881 P.2d 620, 625. The claimants in this case have all been classified as permanently totally disabled, and have never been classified permanently partially...