Tuttle v. Morrison-Knudsen Co., Inc.

• Court: Montana Supreme Court
• Writing for the Court: HASWELL
• Citation: Tuttle v. Morrison-Knudsen Co., Inc., 177 Mont. 166, 580 P.2d 1379, 35 St.Rep. 864 (Mont. 1978)
• Decision Date: 19 June 1978
• Docket Number: MORRISON-KNUDSEN,No. 14123,14123
• Parties: Irvin B. TUTTLE, Claimant, v.CO., INC., Employer, and Argonaut Insurance Company, Defendants and Appellants, and Division of Workers' Compensation, Intervenor.

Page 1379

580 P.2d 1379

177 Mont. 166

Irvin B. TUTTLE, Claimant, v. MORRISON-KNUDSEN CO., INC., Employer, and Argonaut Insurance Company, Defendants and Appellants and Division of Workers' Compensation, Intervenor.

No. 14123.

Supreme Court of Montana.

Submitted June 6, 1978.

Decided June 19, 1978.

Harris, Jackson & Murdo, Helena, LaVerne V. Harris, argued, Helena, for defendants and appellants.

Berger, Anderson, Sinclair & Murphy, Billings, Christopher J. Nelson, argued, Billings, for respondent.

Norman Grosfield, argued, Helena, Tim Reardon, Helena, for intervenor.

HASWELL, Chief Justice.

Insurer, Argonaut Insurance Co., and claimant's employer Morrison-Knudsen Co., Inc. appeal from the judgment of the Workers' Compensation Court, on November 18, 1977, which affirmed the Division of Workers' Compensation order that determined appellants' interest in claimant's third party recovery. Following the denial of appellant's petition for rehearing, this appeal ensued.

On appeal, the parties have stipulated to an agreed statement of facts, which is:

On January 18, 1974, Irvin B. Tuttle, while commuting to work at the Sarpy Creek Mine, near Hardin, Montana, where he worked for the Morrison-Knudsen Company, from his home in Billings, Montana, was involved in an automobile accident. Tuttle was not driving. He was injured and claimed workers' compensation benefits based on the fact that he was receiving travel pay and was in the course of his employment.

Argonaut Insurance Company, the insurer for Morrison-Knudsen, an employer enrolled under Plan No. 2 of the Workers' Compensation Act, denied coverage.

Tuttle petitioned the Division for a determination of disability and an order awarding compensation was issued June 19, 1975.

Argonaut has paid compensation from January 18, 1974 to May, 1977 pursuant to the June 19, 1975 order.

Tuttle instituted a third-party action against the driver of the vehicle he was riding in when the accident, which caused his injury, occurred. Argonaut was not advised of the filing of this law suit. On May 4, 1977 Argonaut was advised of an offer of settlement in the amount of $147,500 in this law suit. On May 5, 1977 Tuttle accepted the offer of settlement.

Argonaut was advised of the acceptance of this offer on May 11, 1977.

From the $147,500 received in settlement of the third-party action, the entire attorney fees in the amount of $47,500 and the entire costs in the amount of $2,427 were paid, $18,045.52 was retained in trust, and the balance of $79,527.48 was distributed to the claimant or for his benefit. No request was made upon Argonaut Insurance Company to contribute to the attorney fees or costs in advance of the consummation of the settlement.

Argonaut and Morrison-Knudsen Company, Inc., petitioned the Division for an order determining their subrogation interest in the May 4, 1977 award. The division issued an order determining subrogation interest on May 19, 1977.

Argonaut petitioned for reconsideration of the May 19, 1977 order. This petition was denied by the Division's order denying insurer's petition for reconsideration of order determining subrogation interest of June 1, 1977.

The insurer, Argonaut Insurance Company, and employer, Morrison-Knudsen Company, Inc., petitioned for appeal of the division's order determining subrogation interest of May 19, 1977, and order denying insurer's petition for reconsideration of order determining subrogation issued June 1, 1977, and from the whole thereof.

The Workers' Compensation Court held a hearing on the insurer's appeal. On November 18, 1977, that court affirmed the division's order. Insurer appeals from that judgment.

The sole issue before this Court is whether the Workers' Compensation Division order that determined the insurer's subrogation interest in claimant's third party recovery, and which was affirmed by the Workers' Compensation Court, is correct in light of the provisions of section 92-204.1, R.C.M.1947.

Section 92-204.1 establishes the insurer's right to subrogation in third party recoveries by injured workmen. The statute under consideration was amended in 1977. The amendments simply cleaned up the language in the statute and divided it into two sections. They did not make any substantive change in the statute. In this case, we are concerned with the statute as it existed prior to the 1977 amendments.

This is a case of first impression in Montana.

We have held that the Workers' Compensation Act must be liberally construed in favor of claimant. Murphy v. Anaconda Co., (1958), 133 Mont. 198, 321 P.2d 1094; Marker v. Zeiler, (1961), 140 Mont. 44, 367 P.2d 311. Applying that standard of liberal construction to this statute, we believe that the order of the Workers' Compensation Division must be affirmed.

In its order of May 1977, the Workers' Compensation Division determined the insurer's statutory subrogation interest pursuant to section 92-204.1. That section provides that the insurer is entitled to full subrogation for all compensation and benefits paid or to be paid. The insurer's right of subrogation is a first lien on the third party recovery. However, the employee is guaranteed at least one-third of the recovery and the insurer is required to pay his proportionate share of the costs and attorney fees of the third party action. The section further provides that when the third party action is settled and the amount of benefits and compensation has not been fully determined, the Division of Workers' Compensation shall determine what proportion of such settlement shall be allocated under subrogation.

In this case, claimant settled his third party action for $147,500. The action was settled prior to a full determination of his workmen's compensation benefits. Due to that fact, the Division of Workers' Compensation was requested to determine how much of the third party settlement should be allocated under subrogation. Their determination was as follows:

"Amount of third party action recovery        $147,500.00
                "Amount of attorney fees         $47,500.00
                "Amount of costs relating
                  to third party action            2,427.00
                                           ----------------
                "Total: Attorney fees and        $49,927.00
                          costs
                "Factor to be used in determining
                  proportion of attorney fees and costs
                  to be assumed by insurer and claimant
                  ($49,927.00 / $147,500.00)                        33.85%
                "Claimant's minimum statutory entitlement
                  under Section 91-240.1 (1/3 of
                  $147,500), excluding proportionate
                  share of costs and attorney fees              49,161.75
                "Insurer's maximum possible statutory
                  entitlement under Section 92-204.1
                  (2/3 of $147,500), excluding
                  proportionate share of costs and
                  attorney fees                                 98,338.25
                "Insurer's total payments to date               18,045.52
                "Insurer's portion to date of
                  attorney fees and cost obligation
                  ($18,045.52 X 33.85%)                          6,108.41
                                                             ------------
                "Net portion insurer is entitled to
                  from third party action for payments
                  made to the present date                    $ 11,937.11"
                

"The claimant shall pay to the workers' compensation insurer the sum of $11,937.11, out of the amount recovered from the third party action, for the insurer's portion of its subrogation interest for payments made to date. In addition, the workers' compensation insurer may reduce its further obligations to the claimant to the extent that it shall continue to pay the claimant 33.85% Of the future benefits it is obligated to pay the claimant under the Workers' Compensation Act, until it has paid out an actual total amount of $33,287.50 ($98,338.25 X 33.85%), should such a total actual payout ever be...