Stevens v. State Compensation Mut. Ins. Fund

• Decision Date: 19 December 1994
• Docket Number: 94-005,Nos. 94-004,s. 94-004
• Citation: 886 P.2d 962,268 Mont. 460
• Parties: Patrick STEVENS, Petitioner/Appellant and Cross-Respondent, v. STATE COMPENSATION MUTUAL INSURANCE FUND, Stanford Stevens, Defendant, Employer/Respondent and Cross-Appellant.
• Court: Montana Supreme Court

Page 962

886 P.2d 962

268 Mont. 460

Patrick STEVENS, Petitioner/Appellant and Cross-Respondent, v. STATE COMPENSATION MUTUAL INSURANCE FUND, Stanford Stevens Defendant, Employer/Respondent and Cross-Appellant.

Nos. 94-004, 94-005.

Supreme Court of Montana.

Submitted on Briefs Aug. 11, 1994.

Decided Dec. 19, 1994.

Michael G. Eiselein, Lynaugh, Fitzgerald, Eiselein & Eakin, Billings, for appellant.

Michael P. Heringer, Brown, Gerbase, Cebull, Fulton, Harman & Ross, Billings, for respondent.

NELSON, Justice.

This is an appeal and cross-appeal from a Workers' Compensation Court order concluding that the claimant did not fraudulently obtain workers' compensation benefits from the State Fund. The Workers' Compensation Court also concluded that the insurer was not unreasonable in its investigation and termination of the claimant's benefits. We affirm in part and reverse and remand in part.

We restate the following issues on appeal and cross-appeal:

APPEAL

I. Did the Workers' Compensation Court err in determining that the claimant, Patrick Stevens (Stevens) was not entitled to a 20 percent penalty fee pursuant to § 39-71-2907, MCA?

II. Did the Workers' Compensation Court err in determining that Stevens was not entitled to attorneys' fees pursuant to § 39-71-611, MCA?

III. Did the Workers' Compensation Court err in failing to award the expenses of the private investigator Stevens hired to defend himself against the claim that he fraudulently obtained workers' compensation benefits?

IV. Did the Department of Labor and Industry (DOLI) and the Workers' Compensation Court err when they failed to reinstate Stevens' benefits for 49 days pursuant to § 39-71-610, MCA.

CROSS-APPEAL

I. Did the Workers' Compensation Court err in determining that Stevens did not fraudulently obtain Workers' Compensation benefits?

FACTUAL AND PROCEDURAL BACKGROUND

Stevens' account of his injury provides that he was employed by his father, Stanford Stevens, on October 25, 1990, when he was injured, falling a distance of three feet from a grain drill he was preparing for planting of the winter wheat crop. He experienced increasing pain and complications and went to St. Vincent's Hospital later that day. An MRI revealed that Stevens had a herniated disc, requiring surgery, which was performed on October 26, 1990.

Stevens' father/employer had applied for Workers' Compensation insurance on October 24, 1990. The policy became effective on October 25, 1990, the day Stevens was injured. The State Fund assumed liability for the accident and Stevens was paid temporary total disability benefits of $233.33 per week from November 1, 1990 until October 23, 1991. He also received total rehabilitation On April 22, 1993, Stevens received a letter stating that his benefits would be terminated in 14 days, pursuant to § 39-71-609, MCA. On April 29, 1993, Stevens filed an emergency petition seeking a reinstatement of his benefits. The Workers' Compensation Court held a hearing in Billings, Montana, from August 23 through 25, 1993, on the emergency petition.

benefits of $233.33 per week from October 24, 1991 until his benefits were terminated.

Statements by Carolyn Becker, (Becker), Stevens' ex-wife, to the State Fund had formed the basis for the State Fund's decision to terminate Stevens' benefits. Becker had alleged that Stevens had been injured prior to the accident date of October 25, 1990, and that the reported accident was a ruse to obtain medical treatment for Stevens. Her testimony, however, was inconsistent and bears further elucidation.

Becker provided inconsistent testimony during the two investigations conducted concerning the validity of Stevens' injury, and in her deposition and at the emergency petition hearing. She told Greg Stone, a private investigator hired by the State Fund to conduct the initial investigation, that Stevens had been "injured for a couple days up to one week before having surgery." She also told Stone that Stevens had never had a back injury prior to this injury at issue. She further related to Stone that she would not testify against Stevens regarding the injury.

However, in her July 27, 1993 deposition, she stated that Stevens had been "laid up" and in great pain for a week to ten days prior to going to the hospital. She further testified that he lay or slept on the floor, night and day, in "a lot of pain," for the seven to ten day period. She also asserted that Stevens had been injured while fishing in July 1990, when he fell in a hole in the river. She claimed that he "reinjured" his back in October, trying to lift something, although Becker was not clear about what he was trying to lift at the time. Finally, she stated that he had informed her that the reinjury was related to the July fishing accident.

At the August 23 emergency petition hearing, she testified that Stevens had injured his back when they were on a fishing trip in July of 1990. She stated that he reinjured his back in October of 1990 when he bent over to pick something up. She further testified that he had always had a bad back.

In further testimony at the hearing, Becker claimed that in the days immediately preceding October 25, she spoke with Max Thornton, Mary Jane Coley and Layne Coley about Stevens' back injury, thus proving he was injured prior to the date he professes to have been injured. However, during cross-examination of Becker, Stevens' attorney impeached her testimony with an obituary from the Billings Gazette and a death certificate which indicated that Layne Coley had died in early August of 1990, months before the alleged conversations about Stevens' back injury occurred. Becker's testimony about Stevens' pre-dated injury was also refuted by both Stevens' uncle, Harold Patrick Hughes, and Stevens' father, Stanford Stevens. Stevens' father testified that when he saw him on October 24, he appeared to be fine and showed no sign of back pain or injury.

Hughes, Stevens' uncle, testified that he had seen Stevens at the Northern International Livestock Exposition (NILE) cattle show on October 18, 1990, and that he could discern no signs of back injury; "[h]e seemed very normal, no signs of pain." Although Becker had testified at her deposition that Stevens laid on the floor of their home, except to go to the bathroom, in great pain for seven to ten days prior to his admission to the hospital on October 25, she testified at the hearing that Hughes may very well have seen Stevens at the cattle show because he could do whatever he wanted, "he was up and down, and so on, when I say he basically laid on the floor, it's when he was doing nothing he was laying on the floor."

The hearing examiner concluded that Stevens and his uncle were credible witnesses with consistent testimony. He found that Becker's stories were inconsistent, incredible and appeared to be fabricated. He concluded that the totality of the evidence presented did not justify the termination of benefits and that Stevens was entitled to benefits retroactive to the date of termination. The hearing examiner also concluded that Stevens was The hearing examiner's Findings of Fact, Conclusions of Law, and Proposed Judgment was filed on December 3, 1993. On that same day, the Workers' Compensation Court judge filed an order adopting the Findings of Fact and Conclusions of Law of the Hearing Examiner and entered Judgment. This appeal followed.

not entitled to the 20 percent penalty levied for an unreasonable refusal to provide benefits nor was he entitled to attorneys' fees because the State Fund "acted reasonably with the evidence it had in its possession."

STANDARD OF REVIEW

The standard of review for findings of the Workers' Compensation Court is that such findings will not be overturned if there is substantial evidence in the record to support them. Stordalen v. Ricci's Food Farm (1993), 261 Mont. 256, 258, 862 P.2d 393, 394. "Whether an insurer's conduct is unreasonable is a question of fact." Lovell v. State Comp. Mut. Ins. Fund (1993), 260 Mont. 279, 288, 860 P.2d 95, 101. See also: Dean v. Austin Mut. Ins. Co. (1994), 263 Mont. 386, 389, 869 P.2d 256, 258.

DISCUSSION

ISSUES I AND II--PENALTY FEE AND ATTORNEYS' FEES

Issues I and II address whether the Workers' Compensation Court erred in failing to award a 20 percent penalty fee pursuant to § 39-71-2907, MCA, and attorneys' fees pursuant to § 39-71-611, MCA, for unreasonably terminating a claimant's benefits. Section 39-71-2907, MCA, provides in pertinent part:

(1) When payment of compensation has been unreasonably delayed or refused by an insurer, either prior or subsequent to the issuance of an order by the workers' compensation judge granting a claimant compensation benefits, the full amount of the compensation benefits due a claimant between the time compensation benefits were delayed or refused and the date of the order granting a claimant compensation benefits may be increased by the workers' compensation judge by 20%. The question of unreasonable delay or refusal shall be determined by the workers' compensation judge, and such a finding constitutes good cause to rescind, alter, or amend any order, decision, or award previously made in the cause for the purpose of making the increase provided herein.

Section 39-71-611, MCA, provides in pertinent part:

(1) The insurer shall pay reasonable costs and attorney fees as established by the workers' compensation court if:

(a) the insurer denies liability for a claim for compensation or terminates compensation benefits;

(b) the claim is later adjudged compensable by the workers' compensation court; and

(c) in the case of attorneys' fees, the workers' compensation court determines that the insurer's actions in denying liability or terminating benefits were unreasonable.

Issues I and II must be decided based upon a determination as to whether the insurer was unreasonable in terminating benefits; if it was unreasonable, a penalty fee and attorneys' fees...