No. 85-22 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1985 

ALFRED M. ELWELL , 

Claimant and Appellant, 

AMERICAN SMELTING AND REFINING, INC., 

(ASARCO) , Employer, Defendant and 

Respondent. 

APPEAL FROM: The Workers' Compensation Court, The Honorable 

Timothy Reardon, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

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

For Respondent: 

Hughes, Kellner, Sullivan & Alke; Stuart L. Kellner, 

Helena, Montana 

Submitted on Briefs: Oct. 3, 1985 

Decided: December 31, 1985 

Filed :lftj; ;j 1 1985 

Clerk 
Mr. Justice John C. Sheehy delivered the 0pini.on of the 

Court. 

Alfred Elwell appeals from a 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 judgment of the Workers' Compensation Court 

is remanded for further proceedings. 

The parties 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 chemical was to be blown 

around the outside of the mask while a worker was wearing a 

respirator; a leak would cause the worker to cough, showing a 

need to refit the mask. Anthony Strainer, a co-employee who 

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-oyed since 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 $4,639 medical. 

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 claim was dismissed because 

the provisions of the Act were determined to be Elwell's 

exclusi ve 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 

therefore not covered under the homeowner's insurance policy. 

This Court held that the Millers' Mutual policy provided 

coverage. Miller Mutual Insurance Co. v. Strainer (Mont. 

1983), 663 P.2d 338, 40 St,Rep. 743. 

Elwell then negotiated a settlement of his 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 interest at 

a variable 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: 

Issue No. 1. Did ASAR.CO ha.ve a 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 resolution of issue no. l? 

ASARCO raises one 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's acts were intentional as that word is used 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-well contends 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 the Workers' Compensation Act. There is a trade-off of 

ful.1 redress for not requiring proof of fault. El-well also 
concedes, and we agree, that ASAFCO's actions do not take 

them out of the exclusive remedy provisions of the Act. 

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 remedy provision of the Workers1 

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 of ASARCO'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 the Act 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-ed by 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 of which exceeded amounts he would 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 

responsible third party. 

We held in Hall that when a claimant is forced, in a 

case of clear liability, because of maximum limits of an 
insurance policy to a settlement with a third party 

tortfeasor, the amount of which settlement, together with 

claimant' s Workers ' Compensati-on award, 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 

aggregate may seem large, it must nevertheless be considered 

in the light of our earlier discussion that the Workers' 

Compensation system is based upon a surrender by the worker 

of his right to ful.1 legal redress in return for the Workers' 

Compensation coverage provided by the employer. A question 

of fact exists, which must be resolved by the Workers' 

Compensatj on Court, as to whether the total prospective 

Workers' Compensation benefits plus the $50,000 recovery 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 $22,313 which 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~here the insurer denies liability for a 
claim 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 this disputed sum. 

ASARCO claims that the Workers' Compensation Court erred 

in determining that Elwell was entitled to all- interest 

earned on the $22,313 fund in escrow. 

Since we hold here that Elwell's right 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 dependent upon who has the right 

to the proceeds, or any portion thereof. In the event that 

the Workers' Compensation Court determines that ASARCO is 

entit-led to a portion or all of the $22,313, it will also be 

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 further proceedings 

before that Court in accordance with this opinion. Costs of 

appeal to Elwell. 

qk Justice l. ,%-fGY 
We Concur: 

Ckief Justice 

Mr. Justice Fred J. Weber and Mr. Zustice L. C. Gulbrandson 

Mr. Chief Justice J. A. Turnage concurring: 

While the undersigned. dissented in Hall, that opinion 

now is controllinq. We therefore concur in the present 

majority opinion.