NO. 95-221 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1996 

THOMAS R. BROEKER, 

Petitioner, Appellant, and Cross-Respondent, 

v. 

GREAT FALLS COCA-COLA BOTTLING COMPANY, 

Employer, 

and 

STATE COMPENSATION MUTUAL INSURANCE FUND, 

Defendant, Respondent, and Cross-Appellant. 

APPEAL FROM: Workers' Compensation Court of the State of Montana 

The Honorable Mike McCarter, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Lawrence A. Anderson, Attorney at Law, 

Great Falls, Montana 

For Respondent: 

William 0. Bronson, James, Gray, 

& McCafferty, Great Falls, Montana 

For Amicus American Insurance Association: 

Jacqueline T. Lenmark, Keller, Reynolds, 

Drake, Johnson & Gillespie, Helena, Montana 

Filed: 

Submitted on Briefs: February 1, 1996 

Decided:~;:,: April 5, 1996 

. 

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

The petitioner, Thomas Broeker, filed a petition in the 

Workers' Compensation Court of the State of Montana in which he 

sought to reduce the amount by which State Compensation Mutual 

Insurance Fund was offsetting his workers' compensation disability 

benefits based on his receipt of social security disability 

benefits. He alleged that cost-of-living adjustments were 

inappropriately included in the offset computation and that the 

social security rate against which his benefits were offset should 

have been indexed to his date of injury, rather than his 

eligibility date. The Workers' Compensation Court entered an order 

and judgment resolving the cost-of-living issue in favor of Broeker 

and the indexing issue in favor of the State Fund. Both Broeker 

and the State Fund appeal the order and judgment. We affirm the 

order and judgment of the Workers' Compensation Court. 

The issues on appeal include: 

1. Did the Workers' Compensation Court err when it concluded 

that the State Fund could not include social security cost-ofliving increases in its calculation of the amount by which 

Broeker's workers' compensation benefits could be reduced? 

2. Did the Workers' Compensation Court err when it concluded 

that the social security disability benefit by which Broeker's 

workers' compensation benefits would be offset should be indexed to 

the date on which he became eligible for social security benefits, 

rather than the date of his injury? 

2 
FACTUAL BACKGROUND 

In 1980, Thomas Broeker, a truck driver and refrigeration 

repairman with a ninth-grade education, suffered an industrial 

injury when a Coke machine fell on him. His injury arose out of 

and in the course of his employment with Great Falls Coca-Cola 

Bottling Company, which was insured by the State Compensation 

Insurance Fund. 

Broeker properly reported his injury pursuant to the workers' 

compensation law and the State Fund accepted liability for his 

claim and has paid him benefits since 1980. After his injury, 

Broeker continued to work intermittently; however, by August 1984, 

the degree of his disability had worsened and he was no longer able 

to perform his job. At that time, the State Fund began to pay him 

temporary total disability benefits, which it continued to pay 

until June 1, 1992, when his status was converted to permanent 

total disability. Since 1992, the State Fund has continued to pay 

Broeker permanent total disability benefits. 

On May 30, 1990, Broeker applied for Social Security 

Disability Benefits and in March 1992, after a hearing, an 

administrative law judge held that he was entitled to benefits. 

The judge found that Broeker's period of disability, pursuant to 

the Social Security Act, began on August 23, 1984. Benefits were 

awarded retroactive to May 1989. While the payment accrued from 

May 1989, the initial benefit rate, which was $651 per month, 

reflected a basic rate indexed to August 23, 1984, plus five 

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cost-of-living increases that had gone into effect between December 

1984 and December 1987. 

Following the Social Security Administration's determination, 

the State Fund began to take an offset from Broeker's workers' 

compensation payments based on his reception of federal social 

security benefits pursuant to §§ 39-71-701(2) and -702(2), MCA 

(1979). The amount of the offset was based on the initial amount 

of the social security disability benefit, $651.50, and amounted to 

$74.91 per week. 

Broeker petitioned the Workers' Compensation Court to reduce 

the State Fund's offset based on his claim that the State Fund 

should not be able to include adjustments for inflation in its 

offset calculation. He also claimed that the State Fund's offset 

should be based on a social security disability rate indexed to his 

date of injury, rather than the date on which he became eligible 

for benefits. 

ISSUE 1 

Did the Workers' Compensation Court err when it concluded that 

the State Fund could not include social security cost-of-living 

increases in its calculation of the amount by which Broeker's 

workers' compensation benefits could be reduced? 

We review the Workers' Compensation Court's conclusions of law 

to determine whether they are correct. CNA Ins. Co’s, v. Dunn (Mont. 

1995), 902 P.2d 1014, 1016, 52 St. Rep. 981, 982; Stordalenv.Ricci’sFood 

Farm (1993), 261 Mont. 256, 258, 862 P.2d 393, 394. 

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The State Fund contends that it did not miscalculate its 

offset, but simply based it on the initial social security 

disability benefit Broeker was entitled to receive. And while this 

benefit included cost-of-living increases, the State Fund has not 

taken an offset based upon any cost-of-living increases Broeker 

received since the date of his initial social security benefit. 

Therefore, the State Fund asserts that it did not act contrary to 

the offset statutes or this Court's decision in McClanathan v.Smith 

(198O)I 186 Mont. 56, 606 P.2d 507. 

The offset statute applicable to this case provides: 

In cases where it is determined that periodic 

benefits granted by the Social Security Act, 42 U.S.C. 

301 (1935), are payable because of the injury, the weekly 

benefits payable under this section are reduced, but not 

below zero, by an amount equal, as nearly as practical, 

to one-half the federal periodic benefits for such week. 

Sections 39-71-701(2) and -702(2), MCA (1979). 

In McClanathan , we held that Congress intended that the offset 

apply only to the primary insurance amount specified pursuant to 

42 U.S.C. § 423, and not to cost-of-living increases provided 

pursuant to 42 U.S.C. § 415. McClanathan , 186 Mont. at 64, 606 P.2d 

at 512. McClanathan concerned cost-of-living increases made 

subsequent to the initial award, and therefore, we did not discuss 

increases included in the initial award. 

Any cost-of-living increases, including those which become a 

part of the initial award, are governed by the Social Security Act. 

Because the State Fund has not taken offsets based upon any 
cost-of-living increases since the initial award, the cost-ofliving adjustments at issue here are those built into the Social 

Security Administration's initial benefit determination in 1992. 

&e 42 U.S.C. 5 415(i). Pursuant to 42 U.S.C. § 415, the cost-ofliving increase is added to the primary insurance amount, and 

increases which are granted in any year following and including the 

year the individual becomes eligible for benefits are added to the 

primary insurance amount "without regard to the time of entitlement 

to that benefit." 42 U.S.C. § 415(i) (2) (A) (ii)-(iii). 

Therefore, although Broeker did not apply for benefits until 

May 1990, he became eligible for benefits on August 23, 1984 (his 

disability date), subject to a waiting period, and was entitled to 

cost-of-living increases which were granted between that 1984 

eligibility date and the date his benefits actually commenced. 

Broeker's commencement date was May 1989 at which time his initial 

benefit was $651.50 and included five cost-of-living increases 

granted social security recipients between 1984 and 1988. These 

increases included a 3.5 percent increase on 12/84; a 3.1 percent 

increase on 12/85; a 1.3 percent increase on 12/86; a 4.2 percent 

increase on 12/87; and a 4.0 percent increase on 12/88. 

When we decided A4cClanathan, the statutory formula for 

determination of the primary insurance amount, unlike the version 

which is now applicable, did not include cost-of-living 

adjustments. 42 U.S.C. § 415. Therefore, when we decided that 

case we concluded that: 
The benefits to which appellant is entitled under 

42 U.S.C. § 423 are disability benefits, not cost-ofliving benefits, and are defined as "equal to his primary 

insurance amount for such month" calculated as though he 

had attained age 62. It is evident that the provisions 

of 42 U.S.C. 5 424a(d) allowing the states to provide an 

offset contemplate only the benefits recoverable under 

42 U.S.C. § 423, relating to the individual's primarv 

insurance benefits. Therefore, we hold that the state 

offset may not be used to reduce the benefits accruing to 

the appellantunderthe cost-of-living increases provided 

in 42 U.S.C. 5 415. 

McClanathan, 186 Mont. at 64, 606 P.2d at 511-12 (emphasis added). 

Because the definition of primary insurance amount has since 

changed to include cost-of-living adjustments, we must IlOW 

determine whether the cost-of-living adjustments included in the 

primary insurance amount should also be excluded from the offset 

determination. 

Despite the change in the definition of primary insurance 

amount, the basic benefit for disabled persons is still the amount 

prescribed by 42 U.S.C. § 415(a) before any cost-of-living 

increases are added. Any increase to that basic amount is due to 

an increase in the cost-of-living, which in turn is caused by 

inflation. For several reasons, inclusion of cost-of-living 

increases in offset calculations is neither equitable nor 

necessary. McClanathan, 186 Mont. at 64, 606 P.2d at 511. Reasons 

for exclusion were given by the Colorado Supreme Court in Engelbrecht 

v. HartfordAccident andIndemnity Co. (Cola. 1984) , 680 P.2d 231. The court 

reasoned: 

Allowing an injured worker to keep his cost-of-living 

increase better protects the worker and gives him a more 

7 
reliable source of income. In addition a cost-of-living 

increase does not result in a double award. The federal 

government has decided that it will maintain the buying 

power of social security payments, not that it will 

provide additional benefits for a particular injury. 

Because Colorado does not provide [workers' compensation1 

benefits to keep pace with inflation, there is no double 

payment. 

Engelbrecht , 680 P.Zd at 233. Like Colorado's Act, the Montana 

Workers' Compensation Act, at the time of Broeker's injury, did not 

provide for cost-of-living increases. Therefore, allowing Broeker 

to keep the cost-of-living increases does not result in an 

increased benefit or a double award. Moreover, inclusion of costof-living increases in offset calculations does not serve the 

purpose of the offset statute, which we have described as follows: 

The legislative intent behind the workers' 

compensation statutes is to replace income to injured 

workers. The purpose behind the state offset statute is 

to prevent " over replacement" or duplication of 

disability pay. 

Watsonv.Seekins (1988), 234 Mont. 309, 314-15, 763 P.2d 328, 332. 

As noted in Colorado, allowing a claimant to keep that portion 

of his or her benefits attributable to inflation allows that person 

to replace income without duplication of benefits. 

For these reasons, we conclude that all social security 

disability cost-of-living increases, whether included in the 

initial rate or awarded later, should be excluded when the offset 

against workers' compensation disability benefits is calculated 

pursuant to 5s 39-71-701(2) and -702(2), MCA (1979). The decision 

of the Workers' Compensation Court to this effect is affirmed 

8 
ISSUE 2 

Did the Workers' Compensation Court err when it concluded that 

the social security disability benefit by which Broeker's workers' 

compensation benefits would be offset should be indexed to the date 

on which he became eligible for social security benefits, rather 

than the date of his injury? 

Broeker contends that the language of the offset statute 

requires use of an offset based on a social security disability 

rate indexed to the date of his injury, rather than the date on 

which he became eligible to receive those benefits. His contention 

is based on his suggestion that the offset statute is ambiguous 

when it provides: 

In cases where it is determined that periodic 

benefits granted by the Social Security Act, 42 U.S.C. 

301 (1935), are payable because of the injury, the weekly 

benefits payable under this section are reduced, but not 

below zero, by an amount equal, as nearly as practical, 

to one-half the federal periodic benefits for such week. 

Sections 39-71-701(2) and -702(Z), MCA (1979) (emphasis 

added). Broeker claims that the phrase "for such week," is 

ambiguous because it could refer to the date of the claimant's 

industrial injury; the date of the claimant's disability; or the 

date of the claimant's ultimate entitlement to Social Security 

benefits. Broeker asks this Court to conclude that since the 

statute is ambiguous, it should be interpreted liberally in favor 

of the claimant so that "for such week" refers to "the week of the 

injury." See § 39-71-104, MCA (1979). 

9 
In response to this argument, the Workers' Compensation Court 

held that: 

HOWeVer, the Court finds nothing ambiguous about the 

phrase. None of the proposed interpretations is correct. 

The provision is express and clear. It provides that 

"the weekly [workers' compensation] benefits" are to be 

reduced by "one-half of the federal periodic benefits for 

such week." It is plain from the words and context of 

the provision that "for such week" refers to the week in 

which the workers' compensation benefits are paid. The 

statute requires that the offset be based on actual 

social security benefits paid during the same week as the 

workers' compensation benefits are paid. 

(Alteration in original.) 

We agree. Furthermore, the rule of liberal construction in 

effect at the time of Broeker's injuries is inapplicable because, 

as stated, the words of the statute are plain and unambiguous on 

their face and must be applied as written. Love11 v. state camp. Mut. Ins. 

Fund (1993), 260 Mont. 279, 285, 860 P.2d 95, 99. Rules of 

construction applicable to ambiguous statutes do not apply to this 

statute. 

Therefore, we conclude that the Workers' Compensation Court 

was correct when it held that the amount by which Broeker's 

workers' compensation benefits should be offset is based on the 

social security disability benefit as indexed to the date on which 

he became eligible to receive those benefits. 

For these reasons we affirm the order and judgment of the 

Workers' Compensation Court. 
we concur: 

Chief Justice 

i