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No. 00-230 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

2000 MT 310 

302 Mont. 442

14 P.3d 1234 

CARL WALLACE,

Plaintiff and Appellant,

v.

PROFESSIONAL FARM SYSTEMS,

Employer, Defendant, and Respondent,

and

STATE COMPENSATION INSURANCE FUND,

Insurer, Defendant, and Respondent.

APPEAL FROM: Montana Workers' Compensation Court, 

The Honorable Mike McCarter, Judge presiding.

COUNSEL OF RECORD:

For Appellant:

Randall O. Skorheim, Skorheim Law Office, Great Falls, Montana

For Respondent:

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Greg Overturf, State Compensation Insurance Fund, Helena, Montana

Submitted on Briefs: July 20, 2000 

Decided: December 7, 2000

Filed:

__________________________________________

Clerk

Justice Terry N. Trieweiler delivered the opinion of the Court.

¶1 The Claimant, Carl Wallace, filed a petition in the Workers' Compensation Court 

seeking retroactive reinstatement of total disability benefits from the Defendant, State 

Compensation Insurance Fund. The Workers' Compensation Court denied Wallace's 

petition and Wallace appeals from that decision. We affirm the judgment of the Workers' 

Compensation Court. 

¶2 The sole issue raised on appeal is:

¶3 Did the Workers' Compensation Court err when it held that the State Fund was not 

required to comply with the steps set forth in Coles v. Seven Eleven Stores (1985), 217 

Mont. 343, 704 P.2d 1048, or the 14-day notice requirement of § 39-71-609, MCA (1981) 

prior to converting Wallace's temporary total disability benefits to permanent partial 

disability benefits?

FACTUAL BACKGROUND 

¶4 At the time of his work-related injury, the Claimant, Carl Wallace was employed by 

Professional Farm Systems, primarily "selling grain handling equipment and storage."

¶5 On May 21, 1982, he suffered a herniated inter-vertebral disc in his lower back while 

delivering a grain bin to a farmer. Wallace filed a claim with the Respondent, State Fund. 

The Fund accepted liability and began paying him temporary total disability benefits in 

1983. Wallace continued to experience pain. He was evaluated at the Mayo Clinic in 1985 

and 1993. The diagnosis was an early onset of arachnoiditis causing fixation of the lumbar 

roots, leading to friction with spine movement and radicular pain. 

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¶6 In May 1985, Wallace attempted to go back to work. The State Fund converted his 

benefits to permanent partial disability benefits, but resumed paying him total temporary 

disability benefits when he was forced to quit in November 1985 due to his back injury. In 

1986, Wallace received training to be a real estate salesperson. His doctors determined 

that real estate would provide a healthy working environment within his physical 

limitations. Additionally, in November 1986, the State Fund requested that Dr. David 

Friedrick examine Wallace to evaluate his medical impairment. Dr. Friedrick found that he 

had reached maximum medical improvement and provided a 5 percent impairment rating. 

¶7 Wallace obtained his realtor's license and began working at Bison Realty on April 2, 

1987. After Wallace received his first commission from a real estate sale, the State Fund 

reduced his payments to the partial disability rate. The State Fund admitted that Friedrick's 

report affected this decision but that they had not notified Wallace of Friedrick's report. He 

did not receive notice of Dr. Friedrick's diagnosis until 1997 when it was produced as part 

of the discovery in this proceeding.

¶8 After petitioning the Workers' Compensation Court for retroactive payments of his 

temporary total disability benefits, Wallace and the State Fund agreed to allow the 

Workers' Compensation Court decide the issues presented as a matter of law. Wallace 

filed a Motion for Summary Judgment to which the State Fund responded. The Court 

denied Wallace's motion, and held that the State Fund properly reduced Wallace's benefit 

rate. 

DISCUSSION 

¶9 Did the Workers' Compensation Court err when it held that the State Fund was not 

required to comply with the steps set forth in Coles v. Seven Eleven Stores (1985), 217 

Mont. 343, 704 P.2d 1048, or the 14-day notice requirement of § 39-71-609, MCA (1981), 

prior to converting Wallace's temporary total disability benefits to permanent partial 

disability benefits?

¶10 The issues in this case were submitted to the Workers' Compensation Court as issues 

of law. We review the Workers' Compensation Court's conclusions of law to decide 

whether they were correctly decided. Stordalend v. Ricci's Food Farm (1993), 261 Mont. 

256, 258 862 P.2d 393, 394. 

¶11 Wallace first contends that the State Fund failed to comply with the third and fourth 

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requirements set out in Coles. In Wood v. Consolidated Freightways, Inc. (1991), 248 

Mont. 26, 30, 808 P.2d 502, 505, this Court clarified the Coles criteria and held that before 

an insurer can reduce benefits it must obtain:

(1) a physician's determination that the claimant is as far restored as the permanent 

character of his injuries will permit, (2) a physician's determination of claimant's 

physical restrictions resulting from an industrial accident, (3) a physician's 

determination based on his knowledge of the claimant's former duties, that the 

claimant can return to work, with or without restrictions, on the job for which he is 

fitted by age, education, work experience, and physical condition and (4) notice to 

the claimant . . . . 

¶12 Wallace contends that the State Fund violated the Coles requirements because it failed 

to inform Dr. Friedrick of Wallace's job history. In addition, Wallace points out that he 

was not notified of Dr. Friedrick's medical opinion that Wallace had reached maximum 

medical recovery. Wallace now claims that these omissions by the State Fund require that 

it continue to pay Wallace total disability benefits until the State Fund complies with the 

Coles requirements. 

¶13 In response, the State Fund contends that it is not required to comply with the Coles 

criteria because Wallace returned to work as a real estate salesperson in 1987. In Larson v. 

CIGNA Insurance Company (1996), 276 Mont. 283, 915 P.2d 863, we held that "the 

insurer can rightfully terminate temporary total benefits without proceeding with an 

investigation under § 39-71-609 . . . [s]ince the duty of investigation was statutorily 

discharged, the Coles criteria do not apply." Larson, 276 Mont. at 294, 915 P.2d at 870. 

Our decision in Larson applies when a claimant returns to work.

¶14 The record in this case establishes that Wallace did return to work. He began work as 

a real estate agent in 1987. Since then, he worked an average of 30 hours per week. In 

addition, he did spot jobs for the U.S.D.A. from 1987 to 1997. Therefore, we conclude that 

the Workers' Compensation Court did not err when it held that the State Fund was not 

required to comply with the Coles procedures before reducing Wallace's benefit rate.

¶15 Next, Wallace contends that the State Fund failed to comply with the statutory 

requirements set out in § 39-71-609, MCA (1981) which requires that "an insurer must 

give 14 days' written notice to the claimant before reducing benefits from total to partial." 

Section 39-71-609, MCA (1981). However, Wallace overlooks the additional provision 

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which states that "benefits may be terminated as of the time the claimant has returned to 

work." Section 39-71-609(1), MCA (1981). Wallace returned to work as a real estate 

agent in April 1987. His benefits were not reduced until he realized income from that 

work. Therefore, we conclude that the 14-day notice requirement in § 39-71-609(1), MCA 

(1981) does not apply to the reduction of his benefits. Contrary to Wallace's argument, we 

conclude that the exception to the 14-day notice requirement upon which we base our 

decision does not require that Wallace be "employed" or earn "wages" as defined in the 

Act. 

¶16 For these reasons, we affirm the judgment of the Workers' Compensation Court.

/S/ TERRY N. TRIEWEILER 

We Concur:

/S/ J. A. TURNAGE

/S/ JAMES C. NELSON

/S/ W. WILLIAM LEAPHART

/S/ JIM REGNIER 

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