North American Van Lines v. Evans Transfer & Storage

No. 87-367
IN THE SUPREME COURT OF THE STATE OF MONTANA
1988
NORTH AMERICAN VAN LINES,
Employer,
and
LIBERTY MUTUAL INSURANCE CO.,
Petitioner and Appellant,
-vs-
EVANS TRANSFER AND STORAGE, and
STATE COMPENSATION INSURANCE FUND,
Defendants and Respondents.
APPEAL FROM: The Workers' Compensation Court, The Honorable
Timothy Reardon, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Garlington, Lohn & Robinson; Larry Jones, Missoula,
Montana
For Respondent:
James Gardner, Workers' Compensation, Helena, Montana
Submitted on Briefs: Aug. 11, 1988
Decided: October 4, 1983
Clerk
Mr. Chief Justice J. A. Turnage delivered the Opinion of the
Court.
Appellant, Liberty Mutual Insurance Company (Liberty
Mutual), appeals the Workers' Compensation Court's denial of
attorney fees on summary judgment. Liberty Mutual and re-
spondent, State Compensation Insurance Fund (State Fund),
were named as defendants in an action involving Darrell
Schrock, an injured worker. State Fund was found to be
liable for benefits to Schrock and Liberty Mutual moved for
its attorney fees to be paid by State Fund. Liberty Mutual
alleged that its costs and expenses went to defending against
the allegations by State Fund that Liberty Mutual was the
insurer at risk.
We affirm.
The issue on appeal is whether 5 39-71-611, MCA (1979),
awards attorney fees between two defendant insurance
companies.
On December 11, 1984, Darrell Schrock was injured in an
industrial accident while driving a truck owned by Evans
Transfer and Storage and leased by North American Van Lines.
Schrock sued both Liberty Mutual Insurance (appellant),
insurer for North American Van Lines, and State Compensation
Insurance Fund (respondent), insurer for Evans Transfer and
Storage. In Schrock v. Evans Transfer and Storage (Mont.
1987), 732 P.2d 848, 44 St.Rep. 292, it was held that Liberty
Mutual was not liable to claimant Schrock for the payment of
workers' compensation benefits. Rather, State Fund was the
insurer at risk and was liable for Schrock's workers' compen-
sation benefits.
On April 8, 1987, appellant moved for summary judgment
on the issue of attorney fees to be paid by State Fund to
Liberty Mutual. In the proposed pretrial orders, though,
neither State Fund nor Liberty Mutual had brought forth a
claim for attorney fees. On August 5, 1987, the Workers'
Compensation Court denied the claim for attorney fees stating
that there was no genuine issue of fact and neither of the
insurers, as defendants, was entitled to attorney fees.
The issue on appeal is whether an insurer is entitled
to attorney fees from another insurer for defending a claim
against the injured worker. In Schrock, State Fund alleged
that Liberty Mutual was the carrier at risk. Liberty Mutual
contends that it spent time defending against the claims of
State Fund and, therefore, is entitled to attorney fees from
State Fund.
Appellant cites two cases as precedent in the matter of
attorney fees in a dispute between insurance carriers. These
cases are: Belton v. Carlson Transport (1983), 202 Mont. 384,
658 P.2d 405, and Guild v. Big Fork Convalescent Center
(Mont. 1987), 747 P.2d 217, 44 St.Rep. 2139. In Belton, the
claimant was injured in 1977. Hartford Accident and Indemni-
ty paid the workers' compensation benefits. In 1979 claimant
was injured again, aggravating the 1977 injury. Although the
claimant was covered by another insurance company, Transport
Indemnity, the Workers' Compensation Court held that Hartford
was at risk for this injury also. The Workers' Compensation
Court stated that because the injury had never completely
healed, payments for aggravation of the original injury were
still the obligation of Hartford. On appeal we held that it
is not necessary that the injury be "completely healed" but
that the duty to pay benefits ends when the injury is at
"maximum healing" or a "medically stable condition." Where
two insurance companies are in dispute over which insurer is
the obligatory party, the insurance company which was on risk
at the time of the injury pays the benefits until the dispute
is resolved. The Court went on to say:
If it is later determined that the
insurance company on risk at the time of
the accident should not pay the bene-
fits, this insurance company, of course,
has a right to seek indemnity from the
insurance company responsible for the
benefits already paid out to the
claimant.
Belton, 202 Mont. at 392, 658 P.2d at 410.
Appellant asserts that the language from Belton author-
izes it to collect attorney fees from State Fund. However,
the language above shows that the insurance company is enti-
tled to only the "benefits" already paid out to the claimant.
We discussed the right of a prevailing insurer to seek indem-
nity for benefits it paid out. In Belton, whether one insur-
er is responsible for another insurer's attorney fees was not
at issue.
The claimant in Guild v. Big Fork Convalescent Center
(Mont. 1987), 747 P.2d 217, 44 St.Rep. 2139, was injured in
1983 when covered by Rockwood Insurance Company. In 1985 the
claimant was again injured in a nonwork-related accident
"triggered" by the 1983 injury. In 1985 the claimant's
insurer was Employee Benefits Insurance Co. (EBI), who paid
benefits before the Workers' Compensation Court's findings.
We held that Rockwood was liable to pay benefits to the
claimant, and, in turn, Rockwood was liable to EBI to pay
those benefits paid prior to the decision.
In Guild, 747 P.2d at 220, 44 St.Rep. at 2143-2144, we
stated:
If on remand the Workers' Compensation
Court rules that Rockwood is responsible
for temporary total or permanent partial
benefits for Mrs. Guild, it appears that
Rockwood is liable to EBI for benefits
paid during this action and for EBI1s
attorney fees.
This language in Guild, apparently granting attorney
fees to ERI on remand, making Rockwood liable for attorney
fees, was a misinterpretation of the legislative intent in
designing the workers' compensation statutes.
Section 39-71-611, MCA (1979), applicable here, pro-
vides that:
In the event an insurer denies liability
for a claim for compensation or termi-
nates 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 as established
by the workers' compensation judge.
A legislative history of 5 39-71-611 reveals that the origi-
- language used by the Montana legislature provided attor-
nal
ney fees for claimants only:
Section 2. In the event the insurer
denies the claim, or terminates a claim
that has already been accepted, and the
claim is later determined to be compen-
sable either through hearing or appeal
to the courts, the insurer shall pay all
costs incurred by the claimant, includ-
ing reasonable attorneys' fees as estab-
lished by the division.
Chapter 477, Section 2, Laws of Montana, 1973.
In 1974 and 1979, the statute was amended. Although
the amendment discarded the language "all costs incurred by
the claimant," there is no indication that the purpose of the
statute is changed. Nor does the legislative intent appear
to have changed. Attorney fees were meant to be provided to
the claimant and not to the defending insurance parties. In
the minutes for the Labor and Employment Relations Committee,
Norm Grosfield, Administrator of the Workers' Compensation
Division in 1979, stated as a proponent of the bill:
Section 2 would amend 39-71-611 by
providing that the workers' compensation
judge rather than the division of work-
ers' compensation shall set the award of
attorney fees and costs in certain
cases. Under the law if an insurer
denies liability for a claim or termi-
nates benefits, and it is determined
that the action of the insurer was
wrong, the insurer must pay reasonable
costs and attorney fees to the claim-
ant's attorney.
We hold that § 39-71-611 grants compensation to the
claimant for attorney fees in defending against the insurance
company's denial of a rightful claim for benefits. Attorney
fees are not granted to the insurance companies. The purpose
of statutorily providing attorney fees in claims of injured
workers is to provide the injured claimant with the fullest
recovery possible.
If therefore, the social purpose of
Workers' Compensation Acts is to provide
for the injured worker a fund which
replaces his lost earnings or his lost
earning capacity, the reasonable cost of
effectuating such social purpose where
litigation is necessary ought also be
the burden of the industry. Any erosion
of the workers' right of recovery by
imposing upon the worker the cost of
procuring his rights erodes to that
extent the social purpose.
Wight v. Hughes Livestock Co., Inc. (1983), 204 Mont. 98,
Because the purpose of attorney fees is to insure that
the injured worker receives the full amount of available
compensation benefits, the insurance company, in turn, should
not be able to claim that § 39-71-611 entitles it to attorney
fees, as a defendant, when it is successful over another
defendant insurance company. That is not the purpose of the
statute.
Moreover, § 39-71-611 is written in terms of a "claim."
It is the "claim" which is denied by the insurance company
and that same "claim" which may or may not be adjudged com-
pensable by the court. When an injured worker is successful
in that "claim," he alone is entitled to attorney fees.
However, in the case where two insurers are both defendants,
attorney fees cannot be sanctioned against the insurer who is
liable for the benefits, to be paid to the other defendant
insurer. Attorney fees are allowed for "claimants" only.
The defending insurance companies are not claimants.
In Guild we incorrectly ordered attorney fees on re-
mand. It would be improper for the Workers' Compensation
Court to order the party found responsible for the benefits
to pay the other insurance company for the time it spent in
defending against the claim. That portion of Guild which
ordered attorney fees to the losing insurance company in a
dispute between insurers is overruled.
The purpose of the workers1 compensation statutes is to
protect the interests of the injured worker.
Because of the decision here, it is not necessary to
discuss the other issues on appeal. A
Affirmed.