Stewart v. Liberty Northwest Insurance

April 23 2013
DA 12-0273
IN THE SUPREME COURT OF THE STATE OF MONTANA
2013 MT 107SHARON STEWART,
Petitioner, Appellee, and
Cross-Appellant,
v.
LIBERTY NORTHWEST INSURANCE CORPORATION,
Respondent/Insurer and Appellant.
APPEAL FROM: Montana Workers’ Compensation Court, WCC No. 2008-2066
Honorable James Jeremiah Shea, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Kelly M. Wills, Kathleen L. DeSoto, Garlington, Lohn & Robinson, PLLP,
Missoula, Montana
For Appellee and Cross-Appellant:
Michael J. San Souci, Attorney at Law, Bozeman, Montana
Submitted on Briefs: February 20, 2013
Decided: April 23, 2013
Filed:
__________________________________________
Clerk
Justice Laurie McKinnon delivered the Opinion of the Court.
¶1 Liberty Northwest Insurance Corporation (Liberty) appeals an order of the
Workers’ Compensation Court (WCC) determining that Sharon Stewart is entitled to
continued payment for her pain medication. Stewart cross-appeals the WCC’s
determination that she is not entitled to attorneys’ fees or the statutory penalty.
¶2 We have consolidated the appeal and cross-appeal issues into the following three
issues:
¶3 1. Whether the WCC erred when it determined that Stewart was entitled to
continued payment for the pain patches prescribed by her treating physician.
¶4 2. Whether the WCC erred when it determined that Stewart was not entitled to
reimbursement for her attorneys’ fees.
¶5 3. Whether the WCC erred when it failed to impose the statutory penalty on
Liberty, pursuant to § 39-71-2907, MCA.1
Factual and Procedural Background
¶6 On August 26, 2002, Stewart suffered an injury in the course and scope of her
employment with Gallatin Laundry Company, Inc. (Gallatin). Liberty, which insured
Gallatin, accepted liability for Stewart’s injury and paid wage loss and medical benefits
with an 18% whole person impairment rating.
1
The statutes in effect on the date of Stewart’s work-related injury govern Stewart’s
claim. Ford v. Sentry Cas. Co., 2012 MT 156, ¶ 32, 365 Mont. 405, 282 P.3d 687 (citing
Fleming v. International Paper Co., 2008 MT 327, ¶ 26, 346 Mont. 141, 194 P.3d 77).
Consequently, unless otherwise indicated, the statutes referenced in this decision refer to
the 2001 version of the Montana Code Annotated.
2
¶7 Stewart’s initial treating physician, Dr. John Campbell, diagnosed her injury as a
“probable medial meniscal tear” of the right knee. Stewart underwent two arthroscopic
surgeries over the next few months, but she continued to have issues with pain and range
of motion in her knee.
¶8 In 2003, Dr. Lowell Anderson examined Stewart. He noted that she continued to
have right knee pain with an “unknown etiology.” Dr. Anderson listed several possible
causes for her pain including a “possible saphenous nerve neuroma.” Dr. Anderson
assigned Stewart a 35% impairment rating based on his opinion that Stewart’s physical
findings “most closely resemble the diagnostic findings in reflex sympathetic dystrophy.”
Based on Dr. Anderson’s diagnosis, Stewart filed a petition with the WCC for an
increased impairment rating.
¶9 An evidentiary hearing on Stewart’s petition was held on August 9, 2006. Despite
his earlier statements, Dr. Anderson testified in his deposition in preparation for the
hearing, that he did not know how Stewart’s saphenous nerve could have been injured
during her surgeries, and that, while there was a good chance that Stewart suffered from a
pain complex, he could not point to any medical evidence supporting the conclusion that
there was a relationship between Stewart’s surgeries and her pain symptoms.
¶10 The WCC, in a decision entered September 14, 2007, determined that Stewart
failed to carry her burden of proving causation, thus the court denied her request for an
increased impairment rating. Stewart did not appeal the WCC’s decision.
¶11 On March 12, 2008, Stewart was informed by her pharmacist that Liberty would
no longer approve or cover the expense of the pain patches that she had been using for
3
the past several years. This determination was initiated without any advance notice or
warning to Stewart or her counsel.
¶12 On March 26, 2008, Stewart filed her Petition for Emergency or Expedited
Declaratory Relief to Reinstate Medical Benefits. In her petition, Stewart sought
reinstatement of medical benefits for the Lidoderm pain patches for her knee as well as
for attorneys’ fees and penalties for Liberty’s failure to provide benefits to cover the
patches.2 In support of her request for reinstatement of these benefits, Stewart had her
medical records reviewed by Dr. Clifford Wheeless, an orthopedic surgeon licensed in
North Carolina. Dr. Wheeless opined that more probably than not, either Stewart’s
original knee injury or her resulting surgery were “absolutely” the cause of the chronic
pain condition from which Stewart now suffers.
¶13 After the WCC denied Liberty’s Motion for Judgment on the Pleadings or
Alternatively Rule 12(b)(6) Motion to Dismiss as well as Liberty’s Motion for Summary
Judgment, the parties submitted the case to the WCC on a stipulated record. The WCC
issued its Findings of Fact, Conclusions of Law and Judgment on April 11, 2012, wherein
the court determined that Stewart had met her burden of showing that her knee pain and
her need for medication for that pain, was causally related to her industrial injury and
subsequent knee surgery, and that she was entitled to payment for her pain medication.
The WCC also determined that Stewart was not entitled to her attorneys’ fees or to the
statutory 20% penalty pursuant to § 39-71-2907, MCA.
2
After Stewart filed her petition, Liberty reinstated coverage for Stewart’s pain
medication under a reservation of rights.
4
¶14 In addition, the WCC noted in its judgment that in Stewart’s original proceeding,
although Dr. Anderson believed there was a causal connection between the knee surgery
and the pain, he could not provide a definite opinion as to how that connection existed.
In contrast, Dr. Wheeless testified in the current proceeding that in his medical opinion
either Stewart’s original knee injury or her resulting surgery were “absolutely” the cause
of the chronic pain condition from which she now suffers.
¶15 Liberty appeals the WCC’s determination that Stewart is entitled to continued
payment of benefits for the pain patches. Stewart cross-appeals the WCC’s decision
denying Stewart’s request for attorneys’ fees and for payment of the statutory penalty.
Standard of Review
¶16 We review the WCC’s conclusions of law to determine whether they are correct.
Keller v. Liberty Northwest, Inc., 2010 MT 279, ¶ 20, 358 Mont. 448, 246 P.3d 434(citing Schmill v. Liberty Northwest Ins. Corp., 2009 MT 430, ¶ 8, 354 Mont. 88, 223
P.3d 842; Lanes v. Mont. State Fund, 2008 MT 306, ¶ 16, 346 Mont. 10, 192 P.3d 1145).
In addition, we review the WCC’s findings of fact to determine whether they are
supported by substantial credible evidence. Keller, ¶ 20 (citing Schmill, ¶ 8; Lanes, ¶ 16;
Van Vleet v. Mont. Ass’n of Counties Workers’ Comp. Trust, 2004 MT 367, ¶ 9, 324
Mont. 517, 103 P.3d 544).
Issue 1.
¶17 Whether the WCC erred when it determined that Stewart was entitled to continued
payment for the pain patches prescribed by her treating physician.
5
¶18 Liberty maintains that Stewart’s petition in this case focused on whether her knee
pain was causally connected to her industrial injury. Liberty contends that the issue of
causation of Stewart’s knee pain was already litigated and decided in a prior proceeding,
thus Stewart is collaterally estopped from challenging the WCC’s prior conclusion on
causation. Conversely, Stewart argues that Liberty’s collateral estoppel defense fails
because, contrary to Liberty’s contentions, the identical issue was not litigated in the
prior proceeding.
¶19 The doctrine of collateral estoppel, “which embodies the concept of ‘issue
preclusion,’ ” bars a party from re-litigating an issue where that issue has been litigated
and determined in a prior suit. Lorang v. Fortis Ins. Co., 2008 MT 252, ¶ 65, 345 Mont.
12, 192 P.3d 186 (citing Baltrusch v. Baltrusch, 2006 MT 51, ¶ 15, 331 Mont. 281, 130
P.3d 1267; State v. Ditton, 2006 MT 235, ¶ 40, 333 Mont. 483, 144 P.3d 783). Collateral
estoppel “favors a definite end to litigation” and prevents parties “from incessantly
waging piecemeal, collateral attacks against judgments.” Baltrusch, ¶ 15 (citing Kullick
v. Skyline Homeowners Ass’n, Inc., 2003 MT 137, ¶ 17, 316 Mont. 146, 69 P.3d 225;
Olympic Coast Inv., Inc. v. Wright, 2005 MT 4, ¶ 26, 325 Mont. 307, 105 P.3d 743).
Moreover, collateral estoppel “deter[s] plaintiffs from splitting a single cause of action
into more than one lawsuit, thereby conserving judicial resources and encouraging
reliance on adjudication by preventing inconsistent judgments.” Baltrusch, ¶ 15 (citing
Smith v. Schweigert, 241 Mont. 54, 59, 785 P.2d 195, 198 (1990); Allen v. McCurry, 449
U.S. 90, 94, 101 S. Ct. 411, 415 (1980)).
6
¶20 We apply the following four-part test to determine whether collateral estoppel bars
relitigation of an issue: (1) the identical issue raised was previously decided in a prior
adjudication; (2) a final judgment on the merits was issued in the prior adjudication;
(3) the party against whom collateral estoppel is now asserted was a party or in privity
with a party to the prior adjudication; and (4) the party against whom preclusion is
asserted must have been afforded a full and fair opportunity to litigate any issues which
may be barred. Baltrusch, ¶ 18.
¶21 We have held that the most crucial element of collateral estoppel is the identity of
issues. Watkins Trust v. Lacosta, 2004 MT 144, ¶ 28, 321 Mont. 432, 92 P.3d 620 (citing
Fadness v. Cody, 287 Mont. 89, 96-97, 951 P.2d 584, 588-89 (1997)). In order to satisfy
this element, the identical issue or “precise question” must have been litigated in the prior
action. Watkins Trust, ¶ 28 (citing Fadness, 287 Mont. at 96-97, 951 P.2d at 588-89).
The mere fact that each action arises from the same transaction does not necessarily mean
that they each involve the same issues. Watkins Trust, ¶ 28 (citing Fadness, 287 Mont. at
96-97, 951 P.2d at 588-89).
¶22 To determine whether the issues decided in the prior adjudication are identical to
those presented in the present case, “we compare the pleadings, evidence and
circumstances surrounding the two actions.” Baltrusch, ¶ 25 (quoting Holtman v. 4-G’s
Plumbing & Heating, Inc., 264 Mont. 432, 439, 872 P.2d 318, 322 (1994)).
¶23 In Lund v. State Compensation Mut. Ins. Fund, 263 Mont. 346, 868 P.2d 611(1994), we held that because the question of petitioner’s entitlement to indemnity benefits
in the current proceeding was based on different statutory criteria than his entitlement to
7
permanent partial disability benefits decided in a prior proceeding, the doctrine of
collateral estoppel did not apply. In Lund, both actions arose from Lund’s July 8, 1986
workplace injury. The parties engaged in litigation in 1990 ending with a determination
by the WCC that the petitioner was entitled to receive 500 weeks of permanent partial
disability benefits pursuant to § 39-71-703, MCA (1985), at a weekly rate of $13.34. In
September 1992, the petitioner withdrew his election to proceed under § 39-71-703,
MCA (1985), and filed a petition to seek indemnity benefits under §§ 39-71-705 through
-708, MCA (1985), at a rate of $149.50 per week. Lund, 263 Mont. at 347-49, 868 P.2d
at 612-13. We determined in Lund that because the benefits sought in each action were
based on two different statutes, the issues in each action were not identical, thus collateral
estoppel did not apply. Lund, 263 Mont. at 351, 868 P.2d at 614.
¶24 In the case sub judice, the fact that the 2007 action and the current action both
involved questions regarding causation does not mean the issues were identical. The
issue in the prior proceeding specifically dealt with Stewart’s potential entitlement to an
increased impairment rating given the overall deterioration in her condition, including
increased pain symptoms. Unlike the prior proceeding, the issue in the current
proceeding involves whether Stewart is still suffering from acute pain as a result of her
initial work-related injury and whether Liberty continues to be liable for Stewart’s pain
medication.
¶25 In addition, contrary to Liberty’s contention that the statutory criteria for Stewart’s
original claim and Stewart’s current claim are the same, we conclude that each of
Stewart’s claims was brought under a different statutory basis. Stewart’s original claim
8
was based on § 39-71-711, MCA, regarding impairment ratings, while Stewart’s current
claim is based on § 39-71-704, MCA, regarding the payment of medical benefits,
specifically the pain patches.
¶26 Based on the foregoing, we conclude that the question of Stewart’s entitlement to
payment for her pain patches is a different question than her entitlement to an increased
impairment rating, thus the doctrine of collateral estoppel does not apply. Accordingly,
we hold that the WCC did not err when it determined that Stewart was entitled to
continued payment for the pain patches prescribed by her treating physician.
Issue 2.
¶27 Whether the WCC erred when it determined that Stewart was not entitled to
reimbursement for her attorneys’ fees.
¶28 In its April 11, 2012 Findings of Fact, Conclusions of Law and Judgment, the
WCC determined that “Liberty had a legitimate defense to liability for Stewart’s pain
medication, based upon the earlier holding of this Court, but continued to pay the
disputed medical benefits under a reservation of rights pending a resolution of the
dispute.” Because the WCC determined that Liberty’s actions in this case were
reasonable, the court determined that Stewart was not entitled to reimbursement for her
attorneys’ fees.
¶29 Stewart argues by way of cross-appeal that the WCC erred, and that she is entitled
to an award of her attorneys’ fees because Liberty’s “sudden, unexpected and unilateral”
cancellation of Stewart’s ongoing pain prescription was “inherently unreasonable” within
the meaning of § 39-71-611, MCA. Liberty contends on the other hand that Stewart is
9
not entitled to an award of attorneys’ fees because Liberty reasonably relied on the
WCC’s prior determination that Stewart’s chronic knee pain was not causally connected
to her industrial injury.
¶30 Section 39-71-611, MCA, provides in pertinent part:
Costs and attorneys’ fees payable on denial of claim or
termination of benefits later found compensable. (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.
(2) A finding of unreasonableness against an insurer made under
this section does not constitute a finding that the insurer acted in bad faith
or violated the unfair trade practices provisions of Title 33, chapter 18.
[Emphasis added.]
Thus, a request for attorneys’ fees requires the WCC to find that the insurer acted
unreasonably.
¶31 “Reasonableness is a question of fact.” Marcott v. Louisiana Pacific Corp., 275
Mont. 197, 202, 911 P.2d 1129, 1133 (1996) (citing Stordalen v. Ricci’s Food Farm, 261
Mont. 256, 258, 862 P.2d 393, 394 (1993)). As we indicated earlier in this Opinion, we
review the WCC’s findings of fact to determine whether they are supported by substantial
credible evidence. Keller v. Liberty Northwest, Inc., 2010 MT 279, ¶ 20, 358 Mont. 448,
246 P.3d 434. Substantial credible evidence is evidence that a reasonable mind might
accept as adequate to support a conclusion. Keller, ¶ 20. “Indicating the high level of
deference this Court accords to the WCC’s factual findings, we have stated that evidence
10
will be considered substantial even if it is contradicted by other evidence, even if it is
somewhat less than a preponderance, and even if it is inherently weak.” Gamble v. Sears,
2007 MT 131, ¶ 20, 337 Mont. 354, 160 P.3d 537 (citing EBI/Orion Group v. State
Compensation Mut. Ins. Fund, 249 Mont. 449, 453, 816 P.2d 1070, 1073 (1991); Simms
v. State Compensation Ins. Fund, 2005 MT 175, ¶ 11, 327 Mont. 511, 116 P.3d 773;
Wolfe v. Webb, 251 Mont. 217, 230, 824 P.2d 240, 248 (1992)).
¶32 Stewart argues that this case is analogous to this Court’s decision in Narum v.
Liberty Northwest Ins. Corp., 2009 MT 127, 350 Mont. 252, 206 P.3d 964, wherein we
upheld both the statutory penalty and the attorneys’ fees awards granted by the WCC.
We disagree, however, and conclude that Narum is distinguishable from the instant case.
¶33 Narum worked in the beer and wine industry for 37 years. The last 17 of those
years he spent driving a small semi-truck delivering beer. His job duties included heavy
lifting and loading. In March 2003, Narum stepped out of his truck and either slipped
and fell to the pavement or missed the last step and fell to the pavement, landing on his
left side. At the time, Narum experienced only a slight pain in his left hip. When the
pain did not subside within a few weeks, Narum filed a worker’s compensation claim.
Narum, ¶ 2. Narum underwent numerous medical examinations and treatments with
several doctors. Those medical examinations indicated that Narum would eventually
need a hip replacement. Narum, ¶ 10.
¶34 Liberty was also the insurer in Narum. Liberty accepted liability for Narum’s
claim and paid benefits through December 2003. At that time, Liberty informed Narum
that it would no longer pay benefits, so Narum hired an attorney to negotiate a settlement
11
with Liberty. The parties reached a settlement agreement in February 2004 wherein
Liberty agreed to pay Narum $25,000, and to allow Narum to reserve his medical
benefits. Narum, ¶¶ 10-11.
¶35 In January 2006, Liberty sent a letter to one of Narum’s doctors asking questions
about the cause of Narum’s hip condition. Based on the doctor’s response to the letter,
Liberty refused to make further payments of medical benefits related to the treatment for
Narum’s left hip. Narum, ¶ 13. Narum was receiving cortisone shots for his hip pain.
Narum later testified that Liberty did not inform him that it would no longer pay for the
cortisone shots. Instead, Narum received word of Liberty’s refusal to pay from his
medical provider. In addition, Narum underwent hip replacement surgery in September
2007, but Liberty refused to pay for the surgery and related treatment. Narum, ¶ 14.
¶36 Narum filed a claim before the WCC. After reviewing all of Narum’s medical
records, the WCC found that Liberty was liable for medical and hospital benefits related
to treatment of Narum’s hip. And, because the WCC determined that Liberty acted
unreasonably in denying payment for Narum’s medical benefits, the court awarded
Narum a 20% penalty and his attorneys’ fees and costs. Narum, ¶ 15. The WCC based
part of its determination that Liberty’s actions were unreasonable on the fact that Liberty
denied payment for Narum’s hip replacement surgery even though hip replacement
surgery was specifically identified as a possibility in the settlement agreement between
the parties. The WCC also determined that Liberty had provided no persuasive
explanation as to how it justified stopping payment for Narum’s ongoing treatment.
12
Narum, ¶ 34. This Court agreed with the WCC and affirmed the WCC’s decision to
award attorneys’ fees and the statutory penalty. Narum, ¶¶ 35, 38-39.
¶37 The instant case is distinguishable from Narum because here Liberty did not
breach a settlement agreement and, although it did stop payment for the pain patches
without notice to Stewart, it did so in reliance on the previous factual and legal findings
of the WCC. Liberty’s case manager, Sandy Scholl, testified that she only terminated
payment for the pain patches after she reviewed the WCC’s 2007 Findings of Fact,
Conclusions of Law and Judgment wherein the WCC denied Stewart’s request for an
increased impairment rating because it did not see any causal relationship between the
pain issues and Stewart’s injury. In addition, after a short break in the payments, Liberty
resumed paying for the pain patches under a reservation of rights.
¶38 We conclude here that reliance on a prior order from the WCC creates a
reasonable basis for denying liability, thus Liberty’s actions were not unreasonable.
Accordingly, we hold that the WCC did not err when it determined that Stewart was not
entitled to reimbursement for her attorneys’ fees.
Issue 3.
¶39 Whether the WCC erred when it failed to impose the statutory penalty on Liberty,
pursuant to § 39-71-2907, MCA.
¶40 The WCC determined that Liberty had “a legitimate defense to liability” for
Stewart’s pain medication based upon the earlier holding of the WCC, thus Liberty’s
actions were reasonable and “the application of a penalty under these facts is
inappropriate.”
13
¶41 Stewart argues in her cross-appeal that this was error on the WCC’s part because
Liberty’s failure to provide a reasonable explanation for how it could justify the sudden
and unilateral cessation of payment for her pain prescriptions warrants the imposition of
the 20% penalty provided for in § 39-71-2907, MCA. Conversely, Liberty argues that
Stewart is not entitled to an award of the statutory penalty because Liberty reasonably
relied on the WCC’s prior determination that Stewart’s chronic knee pain was not
causally connected to her industrial injury.
¶42 Under § 39-71-2907, MCA, the WCC may increase by 20% the full amount of
benefits due to a claimant during the period of delay or refusal to pay if the insurer’s
delay or failure to pay is deemed to be unreasonable. However, the penalty set forth in
§ 39-71-2907, MCA, was not intended to eliminate an insurer’s assertion of a legitimate
defense to liability. Marcott, 275 Mont. at 202, 911 P.2d at 1132 (citing Paulson v.
Bozeman Deaconess Foundation Hosp., 207 Mont. 440, 444, 673 P.2d 1281, 1283
(1984)).
¶43 As we stated in the previous issue, reliance on a prior order from the WCC creates
a reasonable basis for denying liability, thus Liberty’s actions were not unreasonable.
Accordingly, we hold that the WCC did not err when it failed to impose the statutory
penalty on Liberty pursuant to § 39-71-2907, MCA.
¶44 Affirmed.
/S/ LAURIE McKINNON
14
We Concur:
/S/ MIKE McGRATH
/S/ MICHAEL E WHEAT
/S/ JIM RICE
/S/ BRIAN MORRIS
15