No. 79-103 IN THE SUPREME COURT OF THE STATE OF MONTANA 1981

ALASKA PACIFIC ASSURANCE COMPANY, Insurer and Appellant, and CLARENCE R. RAINES, Claimant and Appellant,

### -vsL. H. C., INC., Employer and Respondent, and MARIE J. HARTMAN, et al., Applicants 

### inIntervention and Respondents.

Appeal from: Workers' Compensation Court, The HonorableWilliam Hunt, Judge presiding.

Counsel of Record: For Appellant: Utick and Grosfield, Helena, Montana Alex C. Morrison, Plains, Montana

For Respondent: C. Eugene Phillips, Ralispell, Montana Robert L. Fletcher, Thompson Falls, Montana

Submittedon Briefs: May 27, 1980 Decided: 

### 12

# /?r,/

Filed:

## Lfnq12 1981

### Mr. Justice Daniel J. 

### Shea delivered the Opinion of the Court.

This appeal comes from the Workers' Compensation Court

as a result of that court's refusal to assume jurisdiction to determine whether Clarence R. Raines was, at the time of

a collision between two logging trucks, the employee of L.H.C., Inc., or an independent contractor in relation to L.H.C., Inc. On September 10, 1980, we filed our opinion in this case (37

### St.Rep. 16161, affirming the Workers' Compensation Court and fining Alaska Pacific Assurance Company $500 for taking a frivolous appeal. The insurance company promptly filed a petition for rehearing alleging that it was "shocked" by our opinion. This opinion shall take the place of the previous one entered on September 10, 1980,and our former opinion is withdrawn. The alleged "shock" ofAlaska Pacific is apparently premised on its belief that "thedecision is wrong on the facts and law." We agree that our previous opinion misstated the precise nature of the proceedings before the Workers' Compensation Court;but the correctionwe make here does not impel us to change the resultwe reached in our first opinion. We also agree that we overstated our conclusion that the Workers' Compensation Court is not empowered to render declaratory judgments;but the correctionwe make here also does not impel us to change the result reached in our former opinion. The appeal is as frivolous upon our reconsideration as we determined it to be in our first consideration. Our explanation follows. This dispute has its background in the death of Thomas H. 

### Hartman, and a resulting lawsuit filed in Sanders County District Court by his widow,who sued Clarence R. 

### ~aines for the wrongful death of her husband. At the time of his -2-

### death, ~homas H. Hartmanwas an employee of L.H.C., Inc. and he hauled logs for this company. Clarence R. Raines also hauled logs for the same company--but a dispute exists as to whether he was an employee of this company, or whether he

was solely an independent contractor. As we shall explain, a final determination that Raines was an employee of L.H.C., Inc. at the time of the accident, will absolve Raines of any liability to Hartman's widow, and itwill also, of course, relieve Alaska Pacific of any contractual duty to represent Raines in that suit, for Alaska Pacific is Raines' liability insurance carrier. On the other hand, a final determination that Raines had an independent contractor relationship with L.H.C., Inc., will mean that Hartman's widow can maintain her wrongful death action against Raines, and that Alaska Pacific will be obligated to defend the lawsuit as well as pay any potential judgment to the extent of the insurance coverage. The accident resulting in Hartman's death, occurred on June 28, 

### 1978,when a logging truck driven by Hartman, collided with a logging truck driven by ~aines.Hartman's widow collected death benefits from L.H.C., Inc. pursuant to the Workers' Compensation Act--Alaska Pacific is the compensation insurance carrier for L.H.C., Inc. No dispute exists as to the right of Hartman's widow to collect these benefits, or

as to the amount of the benefits. Although we do not know when the suitwas filed, Hartman's widow also filed a wrongful death suit against Clarence Raines, alleging that ~aines negligently caused Hartman's death. Alaska Pacific again stepped into the picture, this time as the liability insurance carrier for Clarence Raines. Sometime after the June 28, 

### 1979 accident, ~aines filed

a claim to collect Workers' Compensation benefits and Alaska -3-Pacific then asked theWorkers' Compensation Division to investigate and determine whether Raines was an employee of L.H.C., Inc., orwhether he was an independent contractor. ~aines could collectWorkers' Compensation benefits only upon a determination that he 

### was an employee of L.H.C., Inc. (The record before us fails to tellus whether Raines filedhis Workers' Compensation claim afterhe and Alaska Pacific

### were notified that Hartman's widow was making a claim against them for the wrongful death of her husband.) It appears thatafter investigation, theWorkers' Compensation Division decided that although therewas a written contract purporting tocreate an independent contractor relationship between Raines and L.H.C., Inc., Raines was an employee, atleast for purposes of the Workers' Compensation Act. It alsoappears that L.H.C., Inc. disputes thisdetermination. In any event, it isundisputed that Raines collected

a total of about $60 inbenefits from Alaska Pacific. Now back tothewrongful death action filed against Raines in stateDistrict Court. As a defense tothe claim, Raines, through counsel representing both himself and Alaska Pacific, moved the court todismiss the lawsuit on the ground that Raines

was alsoan employee of L.H.C., Inc., atthe timeof the accident inwhich Hartman was killed, and thisbeing so, the widow could not bring an action against a fellow servant, but 

### was confined tothe receipt of benefits under the Workers' Compensation Act. But Alaska Pacific and Raines 

### were not content to let the DistrictCourt ruleon this motion. Two days afterthey had filedthismotion, they filed a petition before theWorkers' Compensation Court and sought a ruling that Raines was an employee and not an independent contractor. The opposing party named inthepetition

### was L.H.C., Inc. This petitionwas signed by counsel acting forboth Alaska Pacific and ~aines. -4-The essence of the petition before the Workers' Compensation Court is thatAlaska Pacific wanted topay benefits toRaines, and that Raines wanted toreceive them, but that L.H.C., Inc., would not permit thesepayments because of its refusal toacknowledge that Raines was one of its employees. The petition recited the former declaration of theWorkers' Compensation Division, and also stated thatAlaska Pacific had paid benefits toRaines based on thisdetermination. (The petition didnot reveal, however, thatAlaska Pacific had paid only $60 inbenefits, and thatRaines was not alleging that he was entitledtoany more.) In the finalpart of the joint petition, Alaska Pacific and Raines allege thatbecause L.H.C., Inc. refuses toacknowledge that Raines was an employee, the Workers' Compensation Court should stepinand make a ruling. Before theWorkers' Compensation Court entered a ruling, L.H.C., Inc. made its appearance--and essentially took the position that there

### was reallyno issuebefore that court, and that inany event, the 

### same issuehad firstbeen presented before the District Court inthewrongful death action, and that the issue should be resolved there. Mrs. Hartman intervened through counsel inorder that the judge would know thepossible effect that a decisionof theWorkers' Compensation Court would have on her wrongful death action filed inDistrict Court against Raines. She also argued that the issuewas firstraised in DistrictCourt, and that 

### it should firstbe resolved there. On October 12, 1979, the District Court denied the motion todismiss, but not on themerits--apparently deciding that themotion raised a factual issue on which evidence would be taken before thequestion could be decided. Two weeks later, on October 26, 1979, theWorkers' Compensation Court refused totake jurisdiction and dismissed the petition without prejudice. It was dismissed because of a belief that -5-

### the case involved an application of the race-to-the-courthouse theory, and that the issue should be decided in District Court because itwas first raised there. From this decision, Alaska Pacific takes its appeal. In our original opinion in this appeal,we erroneously stated that Alaska Pacific and Raines filed their petition before the Workers' Compensation Court when there was absolutely

no issue before that court upon which it should take jurisdiction. For this reason,we concluded that the request was for the court to enter a declaratory judgment. We therefore, erroneously concluded that the Workers' CompensationCourt is not empowered to issue declaratory judgments. In this statement,we were wrong to the extent that the Workers' Compensation Court,which operates under the Montana Administrative Procedure Act (section39-71-2903,MCA) has a limited right to issue declaratory rulings (section2-4-501, MCA)

# . The question then is whether there was an issue before the Workers' Compensation Court in need of resolution, or whether the proceedings before that court were commenced with the objective of obtaining a ruling there and then taking the ruling before the District Court to be used in support of Raines' motion to dismiss the wrongful death action filed by Hartman's widow against Raines. Undoubtedly,

a legitimate dispute did not exist that required the Workers' Compensation Court to act. The petition before that court does not in any way indicate that Raines was then being deprived of compensation benefits. At the hearing before the Workers' Compensation Court, there was no allegation that Raines was being deprived of his just benefits under the Act because of the unwillingness of L.H.C., Inc. to admit that he was an employee. Counsel for Alaska pacific -6-

### at no time indicated at the hearing any great concern for Raines as an employee who may not get his benefits; rather, counsel was interested only in obtaining a ruling from the workersrCompensation Court that could then hopefully be used most effectively in District Court to determine whether or not Raines was an employee of L.H.C., Inc. Alaska Pacific makes the bald statement that, "regardless of the effect of one action on the other, Raines was entitled to a speedy determination of his right to compensation from the appropriate tribunal, 

### -- and this Court's opinion has deprived him --- 

### of that." (Emphasisadded.) Raines, however, does not make that contention. He is not before this Court

on a petition for rehearing, seeking to have this Court

reverse its earlier holding. Nor is this a case where Raines is threatened with having compensationbenefits cut off because a recalcitrant employer will not cooperate. It is a case where Alaska Pacific and Raines (theinsured and the insurer) have a common interest to defeat the right of Hartman's widow to proceed with her wrongful death suit in District Court, by 

### a ruling that Raines was an employee of L.H.C., Inc. Also, should Raines have an actual need for compensation benefits as a result of any injuries sustained in the same accident that took Hartman's life, nothing prevents Alaska Pacific from voluntarily paying them. To do this, neitherAlaska Pacific nor Raines need to get the consent of L.H.C., Inc. The 

### only reasonable conclusion we can reach is that Alaska Pacific and Raines filed their petition (signedby the same counselwho represented Raines and Alaska Pacific in the District Court suit) in an effort to sidetrack the wrongful death action filed in District Court. At no time did Raines or Alaska Pacific place an issue before the -7-Workers' Compensation Court thatwas inneed of resolution. Neither Raines nor Alaska Pacificwas concerned with obtaining compensation benefits forRaines; rather, they were concerned with affecting the District Court suitby obtaining a ruling before theWorkersr Compensation Court that Raines was an employee of L.H.C., Inc. This is clearly an instancewhere

an insurance company has abused the court system inits efforts toavoid meeting the issues head-on inDistrict Court. For this reason, 

### we impose the same sanctions imposed inour 

### earlier opinion inthe same case. We assess a penalty against the Alaska PacificAssurance Company, inthe amount of $500, forprosecuting a frivolous appeal. See Rule 32, M.R.App.Civ.P. Wecannot ignore the fact that theinsurance company, rather than Raines, 

### is the realparty ininterest inthese proceedings, and therefore, the insurance company should bear fullresponsibility for bringing this frivolous appeal. Weorder that $250 be paid by the insurance company toL.H.C., Inc., and that $250 be paid by the insurance company toMarie J. Hartman. L.H.C., Inc. was directly forced intotheWorkers' Compensation Court proceedings, and therehad todefend its interests. Marie J. Hartman, intervened intheWorkers' Compensation Court proceedings sothather interestwould be considered there. Under the circumstances, she had no other choice. Wenote, finally, thatwhether Raines 

### was an employee

or an independent contractor with relation toL.H.C., Inc., is firsta question for the DistrictCourt. The question has not been decided on themerits. If it is determined, and if there is a finaldetermination of the underlying lawsuit againstRaines, Raines and the insurance company are protected inthe event of an adverse judgment, by their right toappeal. We express no opinion as tothe meritsof -8-

### the employer-independent contractor issue. We state only that the court system should not be abused in the process of getting this issue resolved. Itwas abused in this case, and the fault can be laid directly on the doorstep of the insurance company. The order of the Workers' Compensation Court declining jurisdiction is affirmed.

We Concur:

Chief Justice

Justices