No. 85-22 IN THE SUPREME COURT OFTHE STATE OF MONTANA 1985

ALFRED M. ELWELL

## , Claimantand Appellant,

AMERICAN SMELTING AND REFINING, INC., (ASARCO)

## , Employer, Defendant and Respondent.

APPEAL FROM: TheWorkers' CompensationCourt, TheHonorable TimothyReardon, Judge presiding.

COUNSEL OF RECORD:

ForAppellant: Utick, Grosfield & Uda; Joan A. Uda, Helena, Montana

For Respondent: Hughes, Kellner, Sullivan & Alke; StuartL. Kellner, Helena, Montana

Submittedon Briefs: Oct. 3, 1985 Decided: December 31, 1985

Filed

## :lftj; ;j

## 11985

Clerk

### Mr. Justice John C. 

### Sheehy delivered the 0pini.on of 

### the Court.

Alfred Elwell appeals froma December 12, 1984, 

### judgment of the Workers' Compensation Court that determined Elwell's employer, ASARCO, was entitled to subrogation against Elwell's third party settlement from Anthony Strainer, a co-employee. The judgmentof theWorkers' Compensation Court is remanded for furtherproceedings. Theparties agree on the following facts: ASARCO is a self-insured employer under Conpensation Plan 

### I. of the Workers

### ' Compensation Act (hereinafter the Act). On October 17, 1979, Elwell suffered an industrial injury while working at the ASARCO plant in East Helena, Montana. ASARCO supplied stannic oxychloride to test respirator masks for leakage. The chemicalwas to be blown around the outside of the mask while a worker was wearing a respirator;a leakwould cause theworker to cough, showinga need to refit themask. Anthony Strainer,a co-employeewho

was then the plant OSHA officer, unscrewed the respirator hoses from Elwell's oxygen tank and squirted stannic oxychloride, a toxic gas, into claimant's respirator. Neither Elwell nor Strainer were testing at the time the injury occurred. Strainer, acting without Elwell's knowledge, squirted the chemical into the respirator as a practical joke. Elwel.1 suffered serious, disabling injuries to his bronchial system as a result and has not been gainfully empl-oyedsince October 17, 1979. ASARCO accepted liability for the claim and paid Workers' Compensation benefits of

### $41,269 temporary disability, $198 per week permanent disability and $4,639medical. In October 1981, pursuant to S 

### 39-71-413, MCA, Elwell sued Strainer alleging that Strainer's intentional and maLicious act caused Elwel-1's injury. Elwe11 also named ASARCO as a defendant, but that claimwas dismissed because the provisions of the Act were determined to be Elwell's exclusive 

### remedy from ASARCO. ASARCO elected not to participate in the cost of the action against Strainer,thus waiving 50% of the subrogation rights granted by statute. Section 39-71-414(2)(c)

# . Prompted by Elwell's suit, Straj-ner's homeowner's insurance company,Millers Mutual Insurance Company, sought a declaratory judgment that Strainer's act was intentional and thereforenot coveredunder the homeowner's insurancepolicy. This Court held that the Millers' Mutual policy provided coverage. Miller Mutual Insurance Co. v. Strainer (Mont. 1983), 663P.2d 338, 40 St,Rep.743. Elwell then negotiated a settlementofhis claim against Strainer for $50,000, the policy limits. Elwe11 incurred attorneys' fees of $16,500 and costs of $30 leaving a net recovery of $33,470. The parties agreed that pursuant to S 39-71-414(2)(d)

## , MCA, Elwell was entitled to one-third, or $11,157. ASARCO asserted a subrogation right to the $22,313 balance, but Elwe11 disagreed. The parties invested the disputed money in a 

### tax-exempt money market. fund. The balance of that account, which continues to draw interestat

avariable rate, was $24,139 as of July 16, 1984. The Workers' Compensation Court, citing S 

### 39-71-414, MCA, ruled that ASARCO was statutorily entitled to

### subrogation for the $22,313 but gave Elwell the interest earned. Elwell appeals,raising two issues: IssueNo. 1. Did ASAR.COha.vea right of subrogation i.n Elwell's third party settlement? Issue No. 2. 

### Are Elwell's attorneys entitled to fees and costs incurred incident to the resolutionof issueno. l? 

### ASARCO raisesone issue: Did the Workers' Compensation Court err in concluding that Elwell was entitled to the interest earned on the disputed amount? The Workers' Compensation Court, relying on the following statutory language, concluded ASARCO was entitled to subrogation: 37-71-414(1). If an action is prosecuted as provided for in

# . . . 39-71-413 and except as otherwise provided in this section, the insurer is entitled to subrogation for all compensation and benefits paid or to be paid under the Workers' Compensation Act. The insurer's right of subrogation is a first lien on the claim, judgment or recovery. Strainer'sactswere intentionalas thatword isused in 39-17-413, MCA. Elwe11 sued Strainer and settled for Strainer's policy limit of $50,000 which is reduced by $16,530 attorneys' fees and costs. El-wellcontends that, although he is receiving the maximum benefits allowed under the Workers' Compensation Act, it is not sufficient to compensate him for his injury so ASAF.CO is not entitled to subrogation. Elwe11 concedes, and we agree, that tort concepts of negligence and full legal redress do not apply to benefits under theWorkers' CompensationAct. There is a trade-off of ful.1redress for not requiring proof of fault. El-wellalsoconcedes, and we agree, that ASAFCO's actions do not take them out of the exclusiveremedyprovisions of theAct. But, Elwell argues this is an atypical industrial accident. Elwell's injuries were caused by the intentional acts of his co-employee, Strainer. ASARCO1 s acts did not remove it from the exclusive remedyprovision of theWorkers1 Compensation Act, but ASARCO' s safety officer

### , showing incredibly poor judgment, caused the accident. ASARCO chose Strainer to be their safety officer; ASARCO provided the noxious gas,and ASAFCO gave Strainer access to it. As the Workers' Compensation Court recognized, Elwell raises an equitable argument against subrogation. The wrongful acts ofASARCO's safety officer injured Elwell. The Act, however, provides that the insurer, or in this case the self-insured, is entitled to subrogation. 

### Mr. Elwe11 is caught in the legal twilight zone where theAct precludes him from pursuing tort remedies from ASARCO, but a part of the tort recovery he received from Strainer may be returned to ASARCO. This issue is controll-edby our decision in Hall 

### v. State Compensation Insurance Fund, Division of Workers' Compensation (Mont. 1985)

## , - P.2d - 

### , 42 St.Rep. 

### 1502. That case treated the problem of a claimant who sustained injuries the value ofwhich exceeded amounts hewould receive under Workers1 Compensation benefits and from a responsible third party. In that case the insurer claimed, as ASARCO does here, that it was entitled under subrogation to a portion of the recovery the employee made from the responsiblethirdparty. We held in Hall that when a claimant is forced, in a

case of clear liability, because of maximum limits of aninsurance policy to a settlement with a third party tortfeasor, the amount of which settlement, together with claimant' s Workers

### ' Compensati-onaward, does not give the claimant full legal redress, the insurer or the employer is not entitled to subrogation rights under 5 39-71-414, MCA, until the claimant has attained full legal redress. ASARCO indicates that the claimant here will receive in Workers' Compensation benefits, over the course of his disability the total sum of $334,562. While that sum in the aggregatemay seem large, itmust neverthelessbe considered in the light of our earlier discussion that the Workers' Compensation system is based upon a surrenderby the worker of his right to ful.1legal redress in return for theWorkers' Compensation coverage provided by the employer. A question of fact exists, which must be resolved by the Workers' Compensatjon Court, as to whether the total prospective Workers' Compensation benefitsplus the $50,000recovery frnm the third party insurer, will give the claimant full legal redress. At the point where he does obtain full legal redress, if that is the case, ASARCO, in this case, under Hall, would then be entitled to subrogation for that portion of the $22,313which exceeded full legal redress. We are returning this cause to the Workers' Compensation Court for a determination 

### of that issue. Elwell also contends that he is entitled to attorneys' fees in this case, citing Wight v. Hughes Livestock Company (Mont. 1983), 664 P.2d 303, 40 St.Rep. 696, as authority for assessing fees to ASARCO rather than paying them out of the judgment. In this claim Elwell is incorrect. Attorneys' fees in Workers' Compensation cases are recoverable under S 39-71-611, MCA, b~herethe insurer denies liability for aclaim for compensation or terminates compensation benefits, and the claimant is later adjudged compensable by the Workers

### ' Compensation judge or on appeal-. The dispute between Elwe11 and ASARCO here does not come within the provisions of 5 39-71-611, MCA. Moreover, the amount of attorneys' fees incurred in the claim against the third party insurer has already been included in the computation which yields the $22,313 which is at issue here. Elwell has no right to attorneys' fees as to thisdisputed sum. ASARCO claims that theWorkers' CompensationCourterred in determining that Elwell was entitled to all- interest earned on the $22,313 fund in escrow. Sincewe hold here that Elwell'sright to the $22,313 is dependent on whether or not his benefits plus his recovery from the third party insurer constitute full legal redress,a determination of which of the parties is entitled to interest accumulating on the fund is dependentupon who has the right to the proceeds, or any portion thereof. In the event that the Workers' Compensation Court determines that ASARCO is entit-ledto a portion or all of the $22,313, it will alsobe entitled to the interest earned in the same proportion. Otherwise, claimant is entitled to the interest accumulations. The judgment of the Workers' Compensation Court is reversed, and this cause is remanded for furtherproceedings before that Court in accordancewith this opinion. Costs of appeal to Elwell. 

# qk Justice 

# l. ,%-fGYWeConcur:

Ckief Justice

Mr. Justice Fred J. Weber and Mr. Zustice L. C. Gulbrandson Mr. Chief JusticeJ. A. Turnage concurring:

While the undersigned. dissented in Hall, that opinion

now is controllinq. We therefore concur in the present majorityopinion.