No. 89-159 IN THE SUPREME COURT OF THE STATE OF MONTANA 1990

KEITH INGRAHAM, Claimant and Petitioner,-VSCHAMPION INTERNATIONAL, a Self-insured Plan I Employer, Defendant and Respondent.

ORIGINAL PROCEEDING: COUNSEL OF RECORD: For Petitioner: Thomas C. Bulman argued; Bulman Law Associates, Missoula, Montana For Respondent: Bradley J. Luck argued; Garlington, Lohn & Robinson, Missoula, Montana James Scheier argued,Agency Legal Services,Helena, Montana For Amicus Curiae: John Bothe; Bothe & Lauridsen, Columbia Falls,Montana

Filed: c;'

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. .. (7: ;:-- !.: Submitted: March 111990 ~~~id~d: March 23, 1990



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8 Clerk

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i-1 1- --- . <>Justice John Conway Harrison delivered the Opinion of the Court.

Petitioner Keith Ingraham has filed his petition for .declaratory judgment on original proceedings in this Court requesting that parts of 55 39-71-741(I), 39-71-741(2)

### , and 39- 71-741(3), MCA, be declared unconstitutional. On April 3, 1989, this Court ordered respondents Champion International, the Division of Workers' omp pens at ion, and the Attorney General for the Stateof Montana to file written responses to thepetition. Champion Internationalhas filedherein itsbrief and response, and the Attorney General has responded in brief in his own behalf and on behalf of the Division of Workers' Compensation. We have in addition received an amicus brief from John H. Bothe, an attorney in Columbia Falls, Montana, appearing

asa friend of the court in support of thepetition fordeclaratory judgment

# . Under the facts of this case, not disputed,Keith Ingraham is

an employeeof Champion International. Champion is enrolled under Plan I of the Montana Workers' Compensation Act and is selfinsured. Subsequent to December 18, 1987, Ingraham had reported that he had suffered an industrial injury on such date in the

course and scope of his employment when a board struck him in the chest. Champion accepted liability for the injury and benefitswere initiated. At the time briefs were filed herein, Ingraham continued to receive temporary total disability benefits on a biweekly basis. Champion claims that issues exist in the claim concerningtherelationship of some of Ingrahamls physical problems and the alleged disability from the industrial injury. Ingraham claims that though he is now receiving total temporary disability benefits,thathewill probably have apermanentpartial disability

as defined in 5 39-71-116(14), MCA. TheAttorney General concedes the standingof Ingrahamto challenge the constitutionality of the statutes. Champion does not challenge his standing. Once standing is established,we determine whether there are necessary factors sufficient for this Court to accept original jurisdiction. Speaking in the context of an original action for declaratory judgment, this Court has stated: Once standing to bring the action is established, the question shifts to whether the action meets the necessary factors for this Court to accept original jurisdiction. This Court has found that an assumption of original jurisdiction is proper when: (1) constitutional issues of major state wide importanceare involved; (2) the case involves pure legal questions of statutory and constitutional construction; and (3) urgency and emergency factors exist making the normal appeal process inadequate. (Citations omitted.) Moreover, thisCourt clearly stated the Court has original jurisdiction to accept declaratory judgment proceedings "where the issues have impact of major importance on a statewide basis, or upon a major segment of the state, and where the purpose of thedeclaratory judgment proceedings will serve the office of a writ provided by law. 

# . .II Grossman v. State, Depart. of Natural Resources (1984), 209 Mont. 427, 436, 682P.2d 1319, 1324. Butte-Silver Bow Local Govern.v. State (Mont. 1989)

### , 768 P.2d 327,

The issues raised by the petitioner Ingraham, and addressed by the respondent and the Attorney General in their replies, as well as by amicus, showwithout a doubt that the requirements for the acceptance of original jurisdiction are fully present in this

case. We therefore accept original jurisdiction.

In 1987, the legislature embarked on a comprehensiverevision of the laws relating to Workers1Compensation culminating in the adoption of Chapter 464, Laws of Montana (1987), approved by the Governor on April 4, 1987. Included in the legislation were amendments to then-existing 5 39-71-741, MCA. As amended, the subsections of 5 39-71-741, MCA, under attack in this case are as follows: Compromise settlements, lump-sum payments, and lump-sum advancepayments. (1) (a) Benefits may 

### be converted in whole to a lump sum: (i) if a claimant and an insurer dispute the initial compensability of an injury; and (ii) if the claimant and insurer agree to a settlement.(b) The agreement is subject to division approval. The division may disapprove an agreement under this section only if there is not a reasonabledispute over compensability. (c)Upon approval, the agreement constitutes a compromise and release settlement and may not be reopened by the division or by any court. (d) The parties1 failure to reach an agreement is not a dispute over which a mediator or the workers' compensation court has jurisdiction. (2) (a) If an insurer has accepted initial liability for an injury, permanent total and permanent partial wage supplement benefits may be converted in whole to a lumpsum payment. (b) The conversionmay be made only upon agreement between a claimant and an insurer. (c) The agreement is subject to division approval. The division may approve an agreement if: (i) thzre is a reasonable dispute concerning the amount of the insurer's future liability or benefits; or (ii) the amount of the insurer's projected liability is reasonably certain and the settlement amount is not substantially less than the present value of the insurer's liability. (d) The partiest failure to reach agreement is not a dispute over which a mediator or the workers' compensation court has jurisdiction. (e) Upon approval, the agreement constitutes a compromise and releasesettlement and may not be reopened by the division or by any court. (3) (a)Permanent partialwage supplement benefits may be converted in part to a lumpsum advance. (b) The conversionmay be made only upon agreementbetween a claimant and an insurer. (c)The agreement is subject to division approval. The division may approve an agreement if theparties demonstrate that the claimanthas financialneed that: (i) relatesto thenecessities of life or relates to an accumulation of debt incurred prior to injury; and (ii) arises subsequent to the date of injury or arises because of reduced income as a result of the injury. (d) The parties1 failure to reach an agreement is not a dispute over which a mediator or the workers1 compensation court has jurisdiction.

Ingraham has mounted a number of issues respecting the constitutionality of the foregoing subsections. Without reaching the merits of the other issues, we choose two as dispositive in this case. They are: 1. Do the subsections contain unconstitutional delegations of legislative authority? 2. Do the subsectionsviolate the administration of justice clause of theMontana Constitution,Art. 11, 5 16 (1972)?We must be cognizant, as Champion contends in brief, that in analyzing constitutional challenges, this Court has certain boundaries surrounding the power of the Court to determine constitutionality. Among those is the principal of avoiding constitutionalquestions whenever possible, State ex rel. Hammond

v. Hager (1972), 160 Mont. 391, 400, 503 P.2d 52, 57; and an act of the legislature will not be declared invalid because it is repugnant to some provision of the constitution, unless its invalidity is made to appear beyond a reasonable doubt, Shea v. North-Butte Mining Company (1919), 55 Mont. 522, 530, 179 P. 499, 501. The constitutionality of a legislative enactment is prima facie presumed, and every intendment in its favor will be made unless its unconstitutionality appears beyond a reasonabledoubt. T & W Chevrolet v. Darvial (1982), 196 Mont. 287, 292, 641 P.2d 1368, 1370. Permanentpartial disability benefits for injuredworkers are provided in 

### 5 39-71-703, MCA. The benefits available are impairment awards and wage supplements. A worker entitled to an impairment award may be paid bi-weekly or in a lump sum, at the discretion of the worker. Lump sumspaid for impairments are not subjectto therequirementsof 5 39-71-741, MCA. A worker entitled to permanent partial disability benefits in the form of wagesupplements islimitedunderthe statute. Wage supplementbenefits terminate at the expiration of 500 weeks minus impairment award weeks. Weekly compensation benefits may not exceed $149.50, at least until June 30, 1991. It is only a wage supplement award under thepermanent partial disability statutewhich is subject to the provisions of 5 39-71-741,MCA. Ingraham claims that he is a likely candidate for permanent partial wage supplement benefits. His request for a lump-sum payment is therefore subject to subdivision (2) or (3) of 5 39- 71-741, MCA, as set out above. Before the 1987 amendment to fj 39-71-741, MCA, an injured worker entitled to any bi-weekly payments under the Workers1 Compensation laws could apply to the division (thepredecessor of thedepartment) fora lump-sum payment,with the concurrenceof the insurer. But if the insurerdid notagree,and a controversyarose between the claimant and the insurer regarding the conversion of bi-weekly payments into a lump sum, the controversywas considered a dispute within the jurisdiction of the Workers1 Compensation judge. Section 39-71-741, MCA (1985). Under that statute as now amended, no application for a lump-sum conversionmay be made to thedepartment unless theconversion isagreed uponby theclaimant 

### and the insurer. If they fail to agree, there is no dispute over which a mediator or the Workers1 Compensation Court hasjurisdiction. Thus, under the amended statute, in practical effect, a worker in need of a lump-sum conversion, unless he has the insurer's approval, cannot apply to the department,much less to a court, to determine his need. The effect of the statute places a tilt in favor of the insurer or the worker,either ofwhom

canwithhold consent forany reason,or forno reason,to a request for a lump-sum conversion. The power of the legislature to fix the amounts, time and

manner ofpayment ofworkers1compensation benefits is notdoubted. The legislature could,we think,deny completely any authority to

an insurer, a worker, or the department to apply for or to allow lump-sum conversion of workers' benefits. Here the legislature has chosen, however, topermit lump-sum conversions in some cases, but on conditions different fromthatapplying topermanentpartial impairmentbenefits. Had the legislature conferred the authority solely upon the administrative agency, the legislaturewould have been required to lay down thepolicy or reasonsbehind the statute and to prescribe standards and guides for the grant of the power to the agency. Douglas v. Judge (1977), 174 Mont. 32, 568 P.2d 530; Baucus v. Lake County (1960), 138 Mont. 69, 354 P.2d 1056. But in this sense the legislature has gone beyond that and has delegated anabsolutediscretionto the insurer (with whom aworker agrees) as to whether a lump-sum conversion of permanent partialwages settlement benefitswill be converted. The legislaturehas improperly and unconstitutionally delegated its authority to private partiesas towhat terms,andunder what circumstances,and inwhat amounts,a lump-sum conversion can occur. Thepower of the legislature to prescribe the amounts, time and manner of payment of workers' compensation benefits,which as we said at the outset of thisparagraph isnot doubted,hasbeen delegated in subdivision (2)

## , 5 39-71-741,MCA, to others. This the legislaturemay not do. 111. A further reason that subdivision (2), S 39-71-741, MCA, is constitutionally invalid is that the subsectionpurports to strip the courts of their judicial power over controversies regarding proposed lump-sum conversions. We are remindedby the respondents,and properly so,that the Workers1 Compensation Court is a creature of statute, without constitutional status, with its jurisdiction fixed by the legislature. State ex rel. Pac. Emp. Ins. v. Wkrs' Comp. (1988), 230 Mont. 233, 234, 749 P.2d 522, 523. We are also reminded that

a worker's right to compensation benefits is not fundamental, Cottrill 

### v. Cottrill Sodding Service (1987), 299 Mont. 40, 42-43, 744 P.2d 895, 897, and that this Court has held that a person's right of access to the courts is likewise not considered fundamental for the purposes of constitutional review. Petersonv. Gr. Falls Sch. Dist. No. 1 & A (Mont. 1989), 773 P.2d 316, 46 St.Rep. 880. The 1987 amendment goes farbeyond fixing the limits of jurisdictionin theWorkers1CompensationCourt. By takingaway the jurisdiction of the Workers1 Compensation Court unless the insureragreed to the lump-sum settlement, the legislaturedid not only deprive the Workers1Compensation Court of jurisdiction,but it deprived this Court of its appellatepower under $5 39-71-2904 and -2905, MCA, the only appeal allowed a Worker's Compensation worker or insurer under our laws. See, Billings Deaconess Hosp., Inc. v. Angel (1986), 219 Mont. 490, 712 P.2d 1323. Our district courts have notbeen concerned withworkers1compensationbenefits sincetheestablishment of theWorkers1CompensationCourt in 1975. Thus the effectof subdivision (2) of 5 39-71-741 istodeprive the worker or the insurer of any right of access to the judicial department of this state, if the insurer and the worker do not agree. Thus, the amended section abrogates the principle that the judicial power cannot be taken away by legislativeaction. State

ex rel. Bennettv. Bonner (1950), 123 Mont. 414, 214 P.2d 747. The legislation completely negates the state constitutional mandate that llcourts of justice shall be open to every person, and speedy remedy be afforded to every injury of person, property, or character 

# . . .I1 Article 11, Section 16,Mont.Const. (1972).IV. Thedistinctionbetween legislativeand judicialpowersbrings before us always the rule that the Supreme Court isnot at liberty to amend statutes, State, Dept. of Hwys. v. Public Employees Craft Coun. (1974), 165 Mont. 349, 529 P.2d 785, and there is a constitutional prohibition against the exercise of legislative power by courts so that this Courtmay not alter statutes. State

ex rel. Grant v. Eaton (1943), 114 Mont. 199, 133 P.2d 588. However, the legislatureprovided in 5 71of Chapter 464,Laws of Montana (1987), which includes the legislation we are considering here, that if a part of the act is invalid, all valid parts that are severable from the invalid part remain in effect, and that if a part of the act is invalid in one or more of its applications, the part remains in effect in all valid applications that are severable from the invalid applications. Where an enactment contains a severability clause, the presumption is that the valid portions would have been enacted without the invalid parts. State ex. re1 City of Missoula v. Holmes (1935), 100Mont. 256, 47 P.2d 624. Applying the severability provisions of Chapter 464, Laws of Montana (1987)

## , the effect of our decision leaves subsection (2) of 5 39-71-741, in effect as follows: (2) (a) If an insurer has accepted initial liability for an injury, permanent total and 12permanent partialwage supplementbenefitsmay be converted in whole to a lump-sum payment.

(b) [Invalid.] (c) The agreement is subject to department approval. The department may approve an agreement if:

(i) there is a reasonable dispute concerning the amount of the insurer's future liability or benefits; or (ii) the amount of the insurer's projected liability is reasonably certain and the settlement amount is not substantially less than the present value of the insurer's liability. (d) [Invalid.] (e) Upon approval, the agreement constitutes a compromise and release settlement and may not be reopened by the department. It will be noted that the words ''or by any court1'are not included on the foregoing subdivision (e)of subsection 2 of 5 39- 71-741, MCA, as a valid remaining part of the enactment. The deletion of thosewords is necessary because, again, the judicial power cannotbe taken away by legislative action. After deletion of the invalid parts, as required by the severability clause, a controversy between an insurer and a worker

as tothepropriety of a lump-sum settlementuponwhich they cannot agree, would constitute a dispute concerning benefits subject to

a petition to the Workers1Compensation judge for a determinationafter satisfying the dispute resolution requirements otherwise provided in theWorkers1Compensationprovisions. Section 39-71- 2905,MCA. 

### v. Subsection (3) of 5 39-71-741,MCA, also concerns itself with permanent partial wage supplement benefits. The principal difference between it and subsection (2) of the same statute is that subsection (2) relates to conversion of benefits in whole to

a lump-sumpayment, whereas subsection (3) relates to a conversion in part to a lump-sum advance. The same reasons for invalidity that apply to subsection (2) foregoing apply also to the provisions of subsection (3). There again it isprovided that the conversionmay only bemade upon the agreement between a complainant and an insurer, and that the parties1failure to reach an agreement is not a dispute overwhich

a mediator or the Workerst Compensation Court has jurisdiction. For the reasons stated foregoing under subsection (2), we find those particular provisions of subsection (3) invalid, the effect of which is to leave subsection (3) as follows: (3) (a) Permanent partial wage supplement benefits may be converted in part to a lumpsum advance. (b) [Invalid. ] (c) The agreement is subject to department approval. The department may approve anagreement if the parties demonstrate that the claimanthas financial need that:

(i) relates to the necessities of life or relates to an accumulation of debt incurred prior to injury; and

(ii) arises subsequent to the date of injury or arises because of reduced income as a result of the injury.

(d) [Invalid.]

While Ingraham is not directly concerned with the provisions of subsection (1) of § 39-71-741, MCA, it is one of the three subsections that have been considered both in the application and by therespondentsand the legal situation therein involved ismuch the same. There is no reason not to declare in this judgment the same rule with respect to subsection (1) as we said foregoing respecting subsections (2) and (3). Therefore the effect of this decision, insofar as it applies to subsection (1)would leave the statute in effect as follows: (1) (a) Benefits may be converted in whole to a lump sum:

(i) if a claimant and an insurer dispute the initial compensability of an injury; and (ii) [invalid.] (b) The agreement is subject to department approval. The department may disapprove an agreement under this section only if there is not a reasonable dispute over compensability.(c) Upon approval, the agreement constitutes a compromise and release settlement and may not be reopened by the department.

(d) [Invalid.] VII. In Phelpsv. Hillhaven Corp. (1988), 231 Mont. 245, 752 P.2d 737, we held that an injured worker's right to Workers1 Compensation vests at the time of the injury. In Carmichael v. Workers CompensationCourt (Mont. 1988)

## ,763 P.2d 1122, 45St.Rep. 2012, we held that the statute mandating binding mediation was invalidwhere the injury occurred before the effective date of the mediation statute, which was also contained in Chapter 464, Laws of Montana (1987). Thus, our decision here does not affect cases which occurred prior to the effective date of the amendment. The department has recognized this. Since Carmichael, supra, it has been the practice in pre-1987 claims to petition the Workers1 Compensation Court for lump-sum settlements in the samemanner as the earlier statutes provided. In those cases where the injury occurred after 1987, the department has been applying provisions of the amended statute insofar as it relates to lump-sum settlements. This opinion has no effect upon the remaining provisions of 5 39-71-741, MCA, as amended,which have not been discussed here,and about which theparties have raised no issuesbefore thisCourt in these original proceedings. Otherwise,the rulings and decisions made in this opinion and the effect of those rulings as set forth in this opinion shall be and constituteadeclaratory judgmentand thisopinion shallbe and constitute such a judgment without further action or other documents or instrumentsbeing filed.

We concur:

chief' JusticeJustice John C. Sheehy, specially concurring:

I have signed the foregoing Opinion, which I agree with in total. I add these additional comments, because while they arenot necessarily judicial in tone or approach, they record some vital

reasonswhy the Opinion in this case is necessary. In Montana, there are three ways to provide coverage for medical expenses and wage loss when workers are injured in their employment. The employer, if it is financially sound enough,may be a self-insurer under Plan I;or an employermay provideWorkers1 Compensation coverage by contracting with a private insurer licensed to do business in the state, a method described as Plan 11; or a third way to obtain such coverage is for the employer to apply for insuranceto the State InsuranceFund, knownas Plan 111. A studentofgovernmentwill discern an immediateproblemwith Plan 111: the State InsuranceFundwas until 1990 operated by the

sameagency that is charged with theadministrationof theWorkerst CompensationAct. Theagencyhad two conflictingduties. Itdealt

as an insurer, adverse to the injured worker when the State Insurance Fund was concerned; it had to supervise the activities of private insurers and self-insurers,presumably to protect the injured worker, where the State Insurance Fund itself was not concerned.In the decade of the '80s, the adversarial attitude of the State InsuranceFund to theworkerpermeated and carried over into its administration of the rest of the Workers' Compensation ~ct. Moreover, the Fund was terribly mismanaged. The result was that many injured workers, in order to obtain official recognition of their rights, have had to hire lawyers to enforce their claims. The insurers, in turn,hired lawyers so that even for the simplest claims the whole business was awash in litigation. Except for a few notable cases, self-insurers and private insurers seemed to have met the flood of claims without serious financial impairment. The State Insurance Fund, however, became hopelessly mired in financial difficulties. The managers of the State InsuranceFund and the agency found an easy target to blame: it was the lawyers and the courts that were causing all the trouble. So itwas that in 1987, state employees who were managers of the Division ofWorkers' Compensationprodded the legislature into

a comprehensive revamping of theWorkers' Compensation laws. S.B. 315was introduced at the request of Governor Ted Schwinden. The bill became law as Ch. 464,Laws of Montana (1987). Itspurpose

as far as the courts were concerned is easily extracted from the opening paragraphs which declare public policy, especially this paragraph: (3) Montana's Workers' Compensation and Occupational Disease Insurance systems are intended to be primarily self-administering. Claimants shouldbeabletospeedily obtainbenefits, and employers shouldbe able toprovide coverage at reasonably constant rates. To meet these objectives, the system must be designed to minimizereliance upon lawyers and the courts to obtain benefits and interpret liabilities. Thus, inchildlikesimplicitydid the legislaturepurport to remove from the courts their time-honored duty to interpret liabilities. Amazingly, S.B. 315 cruised easily through the two houses of the legislature. In the Senate,whose 50members were composed of 25 Democrats and 25 Republicans, that measure passed on third reading by a vote of 44-6. In the House of Representatives,which had 51 Republicans and 49 Democrats, it passed 70-29 with one excused. This, in spite of the fact that themeasure stripped the worker of many important protections afforded tohim under the old Act. One of those strippings was the requirement that to obtain a lump sum settlement, the injured worker must first have the

concurrence of the insurer. Without such concurrence, as the foregoing opinion demonstrates, not only could the worker not get into the courts, he or she was unable even to petition the administration itself for relief, no matter how dire his or her circumstancesmight be. In the nearly three years since the adoption of theAct, the effect of the lump sum settlements provision is readily demonstrated. Itmight be said in favor of the self-insurers and insurers, that they are somewhat more amenable to lump sum settlements than is the counterpart State Insurance Fund. The following tablewill demonstrate:Lump-sum settlements approved May 15, 1989 through February 13, 1990 as reported in Montana Law Week Plan 

### I and I1 (self-insurersand insurers): Total Pre-1987 % of Post-1987 % of Settlements Claims Total Claims Total

Plan I11 (StateFund): Total Pre-1987 % of Post-1987 % of Settlements Claims Total Claims Total 564 538 95% 26 5%

Some of the foregoing disparity with respect to settlements of pre-1987 claims compared to post-1987 claims may be explained by the fact that the post-1987 claims are relatively new and perhaps notyet ready for lump sum consideration. The three years since theAct was adopted,however, indicate that little progress was made toward any lump sum settlements of post-1987 claims. The cardinal reason undoubtedly is that before application for a lump

sum settlement can be made, both the insurer and the worker must agree on the amount. To some degree, the public policy declared in the 1987 legislation to eliminate lawyers and courts has been successful. A number of good lawyers have dropped out ofWorkers' Compensation practice because of the stumbling blocks placed in the way of aiding injuredworkers through lawyersunder therevamped Workers' Compensation laws.In the three years since the passage of the Act, the management has continued to frighten employers by threats of increased premiums. Hoping to cure a bad situation, the legislature in 1989 separated the State Insurance Fund from the administrative division of the Workers1 Compensation Act. The State Insurance Fund has been converted into the "State CompensationMutual InsuranceFund." Itis nowa ltmutual insurance carrier. Section 39-71-2314, MCA. My information is that the separated carrier, now that it is no longer subject to the wage increase limits imposed on other state employees, immediately granted large wage increasesto itsmanagers for now doing the same adversarial job as before. From this management, I suspect, we will find little improvement in the financial crisis, unless that management can saddleemployers insuredunder Plan I11with ahuge bonded indebtedness,aplan todefer to the future thepayment for the sins of thepast. Thus, in addition to a 25% cut in benefits to injured workers, is the panacea devoutly wished for by management.