No. 12575 INTHE SUPREME COURT OF THE STATE OF MONTANA 1974

DARLENE A. (Ehni) FISHER, GDN., FATAL, RICHARD D. EHNI, Plaintiff and Appellant,

-vs

# - MISSOULA WHITE PINE SASH COMPANY, Employer,

-vs

# - MICHIGAN MUTUAL LIABILITY COMPANY, Defendant and Respondent.

Appeal from: District Court of the Fourth Judicial District, Honorable Jack L. Green, Judge presiding. Counsel of Record: For Appellant: Loble, Picotte, Loble, Pauly and Sternhagen,

Helena, Montana Gene A. Picotte argued, Helena, Montana For Respondent: Worden, Thane, Haines and Williams, Missoula, Montana SheltonWilliams argued, Missoula, Montana

Submitted: January 17, 1974 Decided: 

### FEB

# -71974
Filed: 

### FEB

## -7 lSt4Mr. Justice Frank 

### I. Haswell delivered the Opinion of the Court.

This is an action to determine the subrogation rights of

an employer's insurerunder the Montana Workmen's Compensation Act. Claimantwas awarded workmen's compensationbenefits for the accidentaldeath of her husband. Claimant also received a compromise settlement of $18,000 from an alleged third party tortfeasor in a wrongful death action. Theworkmen's Compensation Division denied the employer's insurer subrogation to any part of the $18,000 compromise settlement proceeds received from the alleged third party tortfeasor. On appeal, the district court of the fourth judicial district, Missoula County, the Hon. Jack L. Green, district judge, reversed and awarded subrogation to one-half of the net amount of settlement proceedswith interest. Claimant appeals to this Court from the district court's judgment. On July 

### 3, 1965,Richard 

### D. Ehni, an employee of Missoula White Pine Sash Company,was killed in the course ofhis employment when a fork lift being driven by himwas struckby a Northern Pacific train. At the time of his death he was married and had three minor children. On July 19, 1965, the Industrial Accident Board (nowworkmen's Compensation Division) issued its order awarding compensation to the survivingwidow and three minor children at the rate of $46 per week for 500weeks. Payments have been made by the employer's Plan I1 insurer, Michigan Mutual Liability Company, in an undetermined amount. On or about October 18, 1965, the widow, as administratrix of the estate of Richard D. Ehni, filed a wrongful death action against the Northern Pacific Railway Company alleging its negligence caused the decedent's death and seeking damages for funeral expenses, loss of support, comfort and companionship. On July 10, 1969, the Northern Pacific Railway Company paid the sum of $18,000

as a compromise settlement for dismissal of the lawsuit and for fulland completerelease of all claims.Claimant, who remarried on October 18, 1969,and whose name is now Darlene Fisher,refused to pay Michigan Mutual Liability Company any subrogation share of the $18,000 compromise settlement received from the Northern Pacific Railway Company. The employer and its insurer then filed a petitionwith the ~orkmen'sCompensation Division to determine the amount of its subrogation claim therein. It was submitted on an agreed statement of facts togetherwith the files and records of theworkmen's Compensation Division. Theworkmen's Compensation Division entered findings of fact,conclusions of law,and an order denying the employer's insurer any subrogation rights in the settlement proceeds received by claimant from the Northern Pacific Railway Company. The employer and its insurer appealed to the district court ofMissoula County, the Hon. Jack 

### L. Green, district judge,where the matter was submitted on the record before the workmen's Compensation Division. The district court held that the employer's insurer is subrogated to one-half the net amount received by claimant and her minor children from the Northern Pacific Railway Company less a prorata share of the fees and costs expended to procure the settlement;a lien to secure the same; interest at the rate of 6% per annum on such amount from July 10, 1969;and

an offset credit to such extent against future installments of workmen's compensationbenefits. Claimant appeals to this Court from the district court's judgment. The sole issue argued on appeal is whether the employer's insurer is entitled to subrogation against the $18,000 compromise settlement received by claimant from the Northern Pacific Railway Company. Claimant contends that any subrogation right the employer

or its insurerpossesses is purely statutoryunder section 92-204, R.C.M. 1947, of the Montana FJorkmen's CompensationAct. She argues that this statute grants subrogationonly on derivative claims of the injured employee and has no application to wrongful death actions involving claims for damages suffered by the survivors.We agree that the subrogation rights of the employer and its insurer are governed by the provisions of the Montana Workmen's CompensationAct, Section 92-204,R.C.M. 1947,provides in pertinent part: "Where both the employer and employeehave elected to comeunder this*ac;, the pro;isions of this act shallbe exclusive,and such election shallbe held to be a surrenderby such employer and such employee, as between themselves,of their right to any other method, form or kind of compensation,or determination thereof, or to any other compensation,or kind of determination thereof,or cause of action,action at law, suit in equity or statutory or common-law right or remedy, or proceedingwhatever, for or on account of any personal injury to or death of such employee, except as such rights may be hereinafter specifically granted; and such election shallbind the employee himself, and in case ofdeath shallbind his personal representative,and all persons having any right or claim to compensation for his injury or death, as well as the employer 

## *

# *." (Emphasis added). The extent of subrogation rights granted by the Workmen's CompensationAct is governed by provisions of this statute set out hereinafter. Inview of the express provisions of this statute, the statement in Hardware Mutual Casualty Co. v. Butler, 116Mont. 73, 

### 148 P.2d 563, suggesting that subrogation rights of the employer and insurer against a third party tortfeasormay exist independently of the workmen's Compensation Act is dictum and should be disregarded. We also recognize that a distinction exists between a survival actionwhich preserves after death a purely derivative right through decedent for his damages, and a wrongful death actionwhich creates an independent right in designated survivors for damages they sustainby reason of decedent's death. See Dillon

v. Great Northern Railway Co., 38 Mont. 485, 100 

### P. 960. In our view this distinction is neither preserved nor differentiated inproviding subrogation rightsunder theWorkmen's Compensation Act. Section 92-204,R.C.M. 1947, in pertinent part, provides these subrogationrights: 

# "*** Provided, that whenever such employee shall receivean injurywhile performing the duties of his employment and such injury or injuries, soreceived by such employee,are causedby the act or omission of some persons or corporations other than his employer, then such employee, or in case of his death his heirs or personal representatives, shall, in addition to the right to receive compensationunder the Workmen's CompensationAct, have a right to prosecute any cause of actionhe may have for damages against suchpersons or corporations, causing such injury. In the event said employee shallprosecute an action for damages for or on account of such injuries so received,he shallnot be deprived of his right to receive compensation but such compensation shallbe received by him in addition to and independent of his right to bring action for such damages, provided, that in the event said employee, or in case ofhis death,his personal representative, shallbring such action, then the employer or insurance carrier paying such compensation shallbe subrogated only to the extent of either one-half (1/2) of the gross amount paid at time ofbringing action and the amount eventually to be awarded to such employee as compensation under theworkmen's compensation law, or one-half (l/2) of the amount recovered and paid to such employee in settlement of, or by judgment in said action, whichever is the lesser amount. All expense of prosecuting such action shallbe borne by the employee, or if the employee shall fail to bring such 

## - action or make settlement of his cause of action within six 

### (6) months from the time such injury is received, the employer or insurance carrierwho pays such compensationmay thereafter bring such action and thus become entitled to all of the amount received from the prosecution of such actionup to the amount paid the employee under the workmen's CompensationAct, and all over that amount shallbe paid to the employee. In the event that the amount of compensationpayable under this act shallnot have been fully determined at the time such employee shall receive settlement of his action,prosecuted as aforesaid, then the industrial accident board shall determine what proportion of such settlement the insurance carrier would be entitled to receiveunder its right of subrogation and such finding of the board shall be conclusive. Such employer or insurance carrier shall have a lien on such cause of action for one-half (1/2) of the amount paid to such employee as compensation under the Workmen's Compensation Act or one-half (l/2) of the amount recovered and paid to such employee in settlement of, or by judgment in said action, whichever is the lesser amount,which shallbe a first lien thereon." (Emphasis added). Claimant contends the quoted language and particularly the underlined words and phrases clearly indicate that subrogation rights extend only to claims for damages sustainedby the injured employeehimself and not to claimsby his survivingkin for damages they have suffered by reason of his death; to claims derived through the employee and not independent claims of his surviving kin;and to survival actionsbut not to wrongful death actions.We reject such construction as inconsistentwith the statutory plan and purpose of the Workmen's CompensationAct. The purpose of the subrogationprovisions is to compensate the employer and his insurer to some extent for the additional liability they assume under theWorkmen's Compensation Act for wrongful acts of independent third party tortfeasors. Koppang

v. Sevier, 

### 101Mont. 234, 53 P.2d 

### 455. This purpose remains the

samewhether compensation is paid to the employee or in case of his death to his surviving dependents,orwhether the injuryproducing damages are sufferedby the employee himself or in the

case of his death by his survivingkin. In a wrongful death action aswell as a survival action, the liability of the third party tortfeasor is derivative through the injured employee and subject to such rights and defenses as exist between such employee and the third party tortfeasor, Melville v. Butte-BalaklavaCopper Co., 47Mont. 1, 130 

### P. 

### 441;Northern Pacific Ry. Co. v. Adams, 192

### U.S. 440, 24 S.Ct. 408, 48 

### L ed 513. Accordingly, the claimed distinction between subrogation rights in survival actions and wrongful death actions findsno support in the statutory plan or purpose of the workmen's CompensationAct. Policy considerationscommand a like result. The following excerpt from 2

### arson's Workmen's Compensation Law, 5 71:20, summarizes the rationale: "1t is equally elementary that the claimant should not be allowed to keep the entire amount both of his compensationaward and of his common-lawdamage recovery. The obvious disposition of the matter is to give the employer somuch of the negligence recovery as isnecessary to reimbursehim for his compensation outlay,and give the employee the excess. This is fair to everyone concerned: the employer,who, in a fault case, isneutral, comes out even; the third person pays exactly the damageshewould normally pay, which is correct, since to reduce his burden because of the relation between the employer and the employeewould be a windfall to him which he has done nothing to deserve; and the employee gets a fuller reimbursement for actual damages sustained than ispossible under the compensation system alone." InMontana, subrogation rights have been heretofore allowed without apportionment in a case involving counts ofwrongful death and a survivalaction. Hardware Mutual Casualty Co. v. Butler, 116Mont. 73, 

### 148 P.2d 563.Finally, if claimant's constructionof the statute is correct there could be no subrogation rights even in survival actions,no lien rights in any death case, and the personal representative would not be subject to any expense in prosecuting the action against the third party tortfeasor, Such result is clearly inconsistentwith the subrogation provisions of section 92-204,

### R.C.M. 1947. Claimant's construction is predicated on the reference to "his action" and to the absence of theword "heirs" in parts of the statute. Although the statutemight have been more precisely drafted, its general intent is ascertainableand its failure to specifically refer in each and every clause thereof to death cases or actions prosecuted by or on behalf of heirs of the deceased employee in their own right against independent third party tortfeasors is not significant in our view. Were we to adopt claimant's literal construction of section 92-204,R.C.M. 1947, standing alone without reference to the statutory plan and purposes of the act as a whole, absurd results would follow. Under such literal construction, the employer or insurer would be subrogated only to the extent of a portion of

II its payments of compensation to such employee" foreclosing recovery of any compensation paid to his surviving dependents in death cases. Similarly,under such literal construction lien rights would be limited to the amount "paid to such employee" without reference to compensationpaid to his surviving dependents in death cases. Further,because the expenses of prosecution of

an action against a third party tortfeasor "shall be borne by the employee", his personal representativeor heirs in death cases would not be chargeablewith such expensewerewe to adopt the literal construction urged by claimant. As these results are squarely at cross purposes with the statutory plan and purposes of the act and its subrogation provisions,wehold the legislature intended no such resultsnor construction.The judgment of the district court is affirmed. We remand the case to the district court of Missoula County for determination of the dollar amount the employer's insurer is entitled to receive under its right of subrogation.

Justice

/ We Concur: .-- =

### 4.

Chief Justice '