Galetti v. Montana Power Co.

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No. 99-374
IN THE SUPREME COURT OF THE STATE OF MONTANA
2000 MT 234301 Mont. 3148 P. 3d 812GARY GALETTI,
Petitioner and Appellant,
v.
MONTANA POWER COMPANY,
Respondent and Respondent.
APPEAL FROM: Workers' Compensation Court
The Honorable Mike McCarter, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Chris J. Ragar, Attorney at Law, Bozeman, Montana
For Respondent:
W. Wayne Harper, Montana Power Company, Butte, Montana
Submitted on Briefs: March 16, 2000
Decided: August 25, 2000
Filed:
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__________________________________________
Clerk
Justice Jim Regnier delivered the opinion of the Court.
¶1 Gary Galetti appeals from both the Findings of Fact, Conclusions of Law and Judgment
and the Order Denying Motion to Amend Except as to Costs entered by the Workers'
Compensation Court of the State of Montana. We reverse.
¶2 Galetti raises the following issues on appeal:
¶3 1. Whether the Workers' Compensation Court erred in failing to assess attorney fees
against Montana Power?
¶4 2. Whether the Workers' Compensation Court erred by not imposing a 20 percent
penalty on all of the medical benefits Montana Power unreasonably delayed or refused?
BACKGROUND
¶5 The facts as found by the Workers' Compensation Court are essentially undisputed by
the parties. On August 13, 1983, Galetti suffered a compensable back injury while
employed by Montana Power. Montana Power accepted liability for this injury. As a result
of this injury, Galetti underwent a surgical procedure known as chemonucleolysis, which
resulted in severe degenerative changes to Galetti's lumbar spine.
¶6 On December 11, 1994, Galetti experienced a flare-up of his back problem. The flare-
up occurred after Galetti coughed while lying in bed. Galetti had been snowmobiling the
day before. Galetti was hospitalized for five days as a result of the flare-up and incurred
approximately $10,000 in medical expenses. These medical expenses were paid by
Galetti's employer-provided health insurance plan, which is funded by contributions from
both employees and Montana Power.
¶7 Galetti sought recovery from Montana Power for the medical expenses associated with
the flare-up of his back condition, claiming that they were the result of his previous
compensable injuries. Montana Power concluded that Galetti's medical expenses were due
to Galetti's snowmobile outing and denied liability for his claim. However, Montana
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Power did offer to pay Galetti $10,000 on a "non-acceptance basis." Galetti testified that
Montana Power offered him between $10,000 and $12,000 in exchange for his agreement
to give up his present claim for medical costs associated with his flare-up along with any
further claims for workers' compensation liability arising out of his compensable back
condition.
¶8 On June 4, 1998, Galetti filed a Petition for Hearing in the Workers' Compensation
Court seeking reimbursement from Montana Power for reasonable medical expenses,
attorney fees, and a 20 percent penalty for unreasonable refusal and delay in paying
benefits. Montana Power denied liability, claiming that Galetti had not made a request for
payment. The Workers' Compensation Court held a hearing on Galetti's petition on
November 12, 1998. At the hearing, Montana Power conceded that Galetti's 1994 flare-up
was related to his compensable injury in 1983 and accepted liability for his medical
expenses. The issue of attorney fees and penalties remained.
¶9 The court entered its Findings of Fact, Conclusions of Law and Judgment on
February 4, 1999. The court denied Galetti's request for attorney fees because Montana
Power's concession of liability at the commencement of the hearing made an adjudication
of liability unnecessary. The court imposed a 20 percent penalty against Montana Power
for unreasonable delay or refusal to pay compensation, but not on the entire amount of
reasonable medical expenses. The court segregated the portion of expenses paid by
Galetti's health insurance plan into two categories: payments attributable to employee
contributions and payments attributable to Montana Power contributions. The court did
not impose a 20 percent penalty on that portion of the health insurance plan payments
attributable to Montana Power contributions.
¶10 Galetti filed a motion to amend the court's judgment, seeking attorney fees and costs
pursuant to either §§ 39-71-611 or -612, MCA, as well as a 20 percent penalty on the full
amount of workers' compensation benefits denied. On April 19, 1999, the Workers'
Compensation Court denied Galetti's motion to amend. Galetti appeals.
STANDARD OF REVIEW
¶11 We review the Workers' Compensation Court's findings of fact to determine whether
they are supported by substantial credible evidence. See Matthews v. State Compensation
Ins. Fund, 1999 MT 225, ¶ 5, 296 Mont. 76, ¶ 5, 985 P.2d 741, ¶ 5. We review the
Workers' Compensation Court's conclusions of law to determine whether they are correct.
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Matthews, ¶ 5.
ISSUE ONE
¶12 Whether the Workers' Compensation Court erred in failing to assess attorney fees
against Montana Power?
¶13 The Workers' Compensation Court concluded that Galetti was not entitled to an award
of attorney fees under § 39-71-612, MCA (1983), because the controversy between the
parties was not related to the amount due. The court concluded that Galetti was not
entitled to an award of fees under § 39-71-611, MCA (1983), because Montana Power
conceded liability for the benefits at the commencement of trial and thus an adjudication
of the claim was unnecessary.
¶14 Montana Power claims that its denial of compensation for the 1994 flare-up of
Galetti's previous back injury was a "termination of compensation benefits" and, therefore,
pursuant to our decision in Allen v. Treasure State Plumbing (1990), 246 Mont. 105, 803
P.2d 644, Galetti's claim for attorney fees must be analyzed under § 39-71-611, MCA
(1983). Montana Power contends that Galetti is not entitled to fees under § 39-71-611,
MCA (1983), because Montana Power conceded liability prior to the commencement of
the hearing before the Workers' Compensation Court.
¶15 Montana Power's assertion that Galetti is not entitled to fees under § 39-71-611, MCA
(1983), is correct. As a preliminary matter, we determine whether a claimant is entitled to
attorney fees pursuant to the statute in effect on the date of the claimant's injury. See
Madill v. State Compensation Ins. Fund (1997), 280 Mont. 450, 458, 930 P.2d 665, 670.
Section 39-71-611, MCA (1983), provides:
In the event an insurer denies liability for a claim for compensation or terminates
compensation benefits and the claim is later adjudged compensable by the workers'
compensation judge or on appeal, the insurer shall pay reasonable costs and
attorneys' fees . . . .
¶16 Montana Power's refusal to pay benefits on the grounds that a subsequent injury
relieved it of further liability for Galetti's back condition was "tantamount to a 'termination
of compensation benefits.'" See Allen, 246 Mont. at 110, 803 P.2d at 647. The Workers'
Compensation Court correctly concluded that Montana Power was not liable for attorney
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fees under § 39-71-611, MCA (1983), because Montana Power's concession of liability at
the commencement of the hearing did not amount to an adjudication of compensability.
See Yearout v. Rainbow Painting (1986), 222 Mont. 65, 68, 719 P.2d 1258, 1260.
¶17 However, the Workers' Compensation Court's conclusion that an analysis of Galetti's
right to attorney fees under § 39-71-611, MCA (1983), ends the issue of whether Galetti is
entitled to attorney fees is incorrect. The determination that Montana Power is not liable
for attorney fees under § 39-71-611, MCA (1983), pursuant to our decisions in Allen and
Yearout does not preclude Montana Power's liability for attorney fees under § 39-71-612,
MCA (1983). The applicability of § 39-71-612, MCA (1983), to a refusal to pay further
claims of compensation arising from an injury for which an employer has already accepted
liability was not addressed in either Allen or Yearout.
¶18 Section 39-71-612(1), MCA (1983), provides:
If an employer or insurer pays or tenders payment of compensation under chapter 71
or 72 of this title, but controversy relates to the amount of compensation due and the
settlement or award is greater than the amount paid or tendered by the employer or
insurer, a reasonable attorney's fee . . . based solely upon the difference between the
amount settled for or awarded and the amount tendered and paid, may be awarded in
addition to the amount of compensation.
¶19 Galetti claims that he is entitled to fees under § 39-71-612, MCA (1983), because the
controversy related to the amount of compensation due. Galetti notes that Montana Power
had already accepted liability for his 1983 back injury and had paid compensation benefits
related to this injury. Thus, he claims that Montana Power's refusal to pay expenses
associated with the 1994 flare-up of his back injury resulted in a controversy which related
to the amount he was due for his back injury.
¶20 Section 39-71-612, MCA (1983), has three elements: (1) an employer or insurer must
pay or tender payment of compensation under chapter 71 or 72; (2) there must be a
controversy which "relates to the amount of compensation due"; and (3) the settlement or
award must be greater than the amount paid or tendered by the employer or insurer.
¶21 The first issue is whether Montana Power paid or tendered payment of compensation
under chapter 71 or 72. Montana Power paid compensation for Galetti's back injury under
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chapter 71 or 72 when it accepted workers' compensation liability for the medical
expenses arising from Galetti's back condition and paid claims of compensation associated
with that injury.
¶22 The second issue is whether the controversy between Galetti and Montana Power
related to an amount due. A denial of a claim for further benefits for medical expenses
arising from a work-related injury for which the employer has previously accepted liability
is a controversy which relates to the amount of compensation due for that work-related
injury. Montana Power had previously accepted liability for Galetti's back condition.
Galetti asked Montana Power to pay for the medical expenses he incurred as a result of a
flare-up of his back condition. Montana Power initially refused to pay for these expenses,
asserting that Galetti was not due these expenses because they were not the result of his
previous back condition, but rather were a result of a snowmobile outing. Montana
Power's refusal of Galetti's claim for further benefits for his compensable back condition
related to the amount Galetti was due for this condition.
¶23 We also note that according to the Findings of Fact, Conclusions of Law and
Judgment of the Workers' Compensation Court, one of the issues set forth in the Final
Pretrial Order was "[w]hether MPC is liable for the medical expenses that [Galetti]
incurred in December 1994 and thereafter, as medical benefits under the Workers'
Compensation Act for [Galetti's] 1983 injury, and if so, to what extent." (Emphasis
added.) Thus, the Workers' Compensation Court clearly understood that the issue of the
amount of compensation Galetti was due for his 1983 injury was before it.
¶24 The last element of § 39-71-612(1), MCA (1983), requires us to determine whether
the settlement was "greater than the amount paid . . . by the employer." As discussed
above, the amount paid by Montana Power was the total amount of previous claims for
compensation arising out of Galetti's compensable back condition for which Montana
Power had accepted liability and paid. The settlement between Galetti and Montana Power
is greater than the amount paid in that Montana Power accepted workers' compensation
liability for Galetti's reasonable medical expenses occasioned by the flare-up of his back
condition. By accepting liability, Montana Power conceded that Galetti was due more
workers' compensation than it had previously paid.
¶25 All three of the elements of § 39-71-612, MCA (1983), are met on the facts of this
case. Accordingly, we conclude that the Workers' Compensation Court erred when it
concluded that Galetti was not entitled to attorney fees. We hold that Galetti is entitled to
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attorney fees based on the difference between the amount of the settlement and the amount
of compensable benefits arising from his back injury which Montana Power had
previously paid. See § 39-71-612, MCA (1983). The difference between the settlement
and the amount paid is equal to the amount of compensable benefits for which Montana
Power conceded liability at the beginning of the Workers' Compensation Court hearing.
We note that "the presumption is that a reasonable basis for the attorney fee award is [the
petitioner's] fee agreement with his attorney." Madill, 280 Mont. at 463, 930 P.2d at 673.
ISSUE TWO
¶26 Whether the Workers' Compensation Court erred by not imposing a 20 percent
penalty on all of the medical benefits Montana Power unreasonably delayed or refused?
¶27 The Workers' Compensation Court found that Montana Power unreasonably refused
and delayed Galetti's claim for payment of compensation. As a result, the court ordered
Montana Power to pay a 20 percent penalty as provided in § 39-71-2907, MCA (1983).
The penalty was not on the entire amount of compensable benefits that Galetti had
claimed. Rather, the court applied the 20 percent penalty to Galetti's out-of-pocket
expenses and to that portion of his expenses paid by his employee medical benefits plan
which were attributable to employee contributions. The court did not apply a 20 percent
penalty to that portion of Galetti's medical expenses paid by his benefit plan which were
attributable to employer contributions.
¶28 Section 39-71-2907, MCA (1983), provides that "[w]hen payment of compensation
has been unreasonably delayed or refused . . . the full amount of the compensation benefits
due a claimant . . . may be increased by the worker's compensation judge by 20%."
¶29 Galetti claims that the court erred by not applying the 20 percent penalty to the full
amount of compensable benefits denied, including that portion of the payments made by
his employee benefit program and funded by Montana Power. Montana Power claims that
the court was correct in not applying a penalty on the payments made by Galetti's
employee medical benefit plan and funded by it. Montana Power contends that these
payments were not "compensation benefits due a claimant" because they were in fact paid
by Montana Power. According to Montana Power, the fact that these benefits were paid by
Galetti's medical benefits plan and not paid by Montana Power's workers' compensation
plan is simply an accounting difference and is irrelevant to the penalty provision.
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¶30 A penalty for unreasonable delay or refusal is limited to 20 percent of "the full amount
of the compensation benefits due a claimant." Section 39-71-2907, MCA (1983). "[C]
ompensation benefits due a claimant" under this provision include medical expenses. See
Belton v. Carlson Transport (1986), 220 Mont. 194, 198, 714 P.2d 148, 150. Moreover,
Montana Power has conceded that Galetti is "due" these benefits. Lastly, we think the term
"full amount" is clear. The "full amount" is the entire amount of compensable medical
expenses unreasonably refused or delayed. The statute is not limited to only those
compensable medical expenses which were personally paid by the claimant.
¶31 Montana Power unreasonably refused and delayed payment of all of Galetti's workers'
compensation benefits associated with his 1994 flare-up. The fact that Galetti had to pay
some of his medical expenses with his employee medical benefits plan which was partially
funded by Montana Power is irrelevant to a determination of "the full amount of
compensation benefits" unreasonably delayed or refused. Medical expenses paid by a
health insurance plan partially funded by employer contributions are not payments of
workers' compensation benefits. Although some of Galetti's health insurance benefits may
not have been unreasonably refused or delayed, all of Galetti's workers' compensation
benefits were unreasonably refused or delayed.
¶32 We conclude that the Workers' Compensation Court erred by not ordering a penalty
on the entire amount of medical expenses incurred as a result of the flare-up of Galetti's
back condition. Galetti's compensation benefits shall be increased by 20 percent on "the
full amount of compensation benefits" he was due which were unreasonably refused or
delayed.
¶33 Reversed and remanded.
/S/ JIM REGNIER
We Concur:
/S/ J. A. TURNAGE
/S/ JAMES C. NELSON
/S/ W. WILLIAM LEAPHART
/S/ WILLIAM E. HUNT, SR.
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/S/ TERRY N. TRIEWEILER
/S/ ROY C. RODEGHIERO
District Court Judge sitting for
Justice Karla M. Gray
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