No. 89-512 

IN THE SIJPREME COURT OF THE STATE OF MONTANA 

1990 

DAVID A. MALEK, 

Claimant and Respondent, 

-vsHENRY'S SAFETY SUPPLY COMPANY, 

Employer, 

and 

STATE COMPENSATION INSURANCE FUND, 

Insurer and Appellant. 

APPEAL FROM: The Workers' Compensation Court, The Honorable 

Timothy Reardon, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Richard E. Bach, Helena, Montana 

For Respondent: L - 

o 1- Geoffrey R. Keller; Matovich, Addy & Keller, Billings, cV3 . " > Montana 

0 

4 I 

r - 8 ('" 

U. 

-1 - c'3 

LL r-4 Submitted on Briefs: Feb. 9, 1990 

Decided: March 13, 1990 

Clerk 
Justice John C. Sheehy delivered the Opinion of the Court. 

The State Compensation Insurance Fund appeals from a judgment 

of the Workers1 Compensation Court ordering the Fund to return 

monies to the claimant. We affirm. 

In this case we hold principally that the Workers1 

Compensation Court had subject matter jurisdiction to compel the 

State Compensation Insurance Fund, where no prior determination had 

been made as to subrogation rights by the Division of Workers1 

Compensation, to return subrogation funds to the claimant. 

Respondent David Malek suffered an injury compensable under 

the Workers1 Compensation Act when he was injured in an automobile 

accident on February 8, 1985. Malek fully settled the resulting 

third-party action for $25,000, the third-party driver's insurance 

policy limits. 

On March 27, 1985, a claims examiner for the State 

Compensation Insurance Fund (Fund) informed Malek that the Fund was 

entitled to a 50 percent subrogation interest in his third-party 

settlement under the provisions of 5 39-71-414, MCA. Malek 

thereafter paid the sum of $12,500 to the Fund. 

Malek retained counsel in 1988 to pursue a claim for permanent 

partial disability benefits. Shortly thereafter Malek filed a 

petition with the Workers' Compensation Court seeking, amongst 

other things, to have the $12,500 subrogation payment refunded, as 

Malek alleged he had not been fully informed of the subrogation 

issues, and that until action by the Division no subrogation 

entitlement in favor of the Fund existed. 

The Fund filed a motion to dismiss the portion of the petition 

relating to the determination and allocation of subrogation under 

the provisions of subsection (5) of 5 39-71-414, MCA. That section 

reads: 
(5) If the amount of compensation and other benefits 

payable under the Workers' Compensation Act have not been 

fully determined at the time the employee, the employee s 

heirs or personal representatives, or the insurer have 

settled in any manner the action as provided for in this 

section, the department shall determine what proportion 

of the settlement shall be allocated under subrogation. 

The department's determination may be appealed to the 

workerst compensation judge. 

The Workers' Compensation Court, pursuant to 5 39-71-414(5), 

MCA, granted the Fund's motion to dismiss the subrogation issue. 

It then ordered the Fund to return immediately the $12,500 payment 

to the claimant. 

The Fund now appeals the lower court's order, maintaining that 

the Workerst Compensation Court was without jurisdiction to order 

a return of the subrogation funds. 

This Court recently held, in First Interstate Bank v. Tom 

Sherry Tire, Inc. (1988), - Mont. -, 764 P.2d 1287, that the 

Workerst Compensation Court is without jurisdiction over the issue 

of subrogation where a third-party settlement precedes a petition 

for full and final settlement of workers' compensation benefits. 

In such a situation, under the statute, the Workerst Compensation 

Division, and not the Workers' Compensation Court, has 

jurisdiction. 

The issue now before this Court requires a closer look at 5 

39-71-414(5), MCA, and the jurisdictional powers of the Workers' 

Compensation Court. 

The Workerst Compensation Court is granted general 

jurisdiction by 5 39-71-2905, MCA. This statute reads in part: 

Petition to workerst compensation judge. A claimant or 

an insurer who has a dispute concerning any benefits 
under Chapter 71 of this title may petition the workers' 

compensation judge for a determination of the dispute 

after satisfying dispute resolution requirements 

otherwise provided in this chapter. 

. . . The workersf compensation judge has exclusive 

jurisdiction to make determinations concerning disputes 

under Chapter 71 . . .. 

In State ex rel. Uninsured Employersf Fund v. Hunt (1981) , 191 

Mont. 514, 625 P.2d 539, this Court, in review of H 39-71-2905, 

MCA, stated that: 

[The Workers' Compensation Court] has been given broad 

powers concerning benefits due and payable to claimants 

under the Act. It has the power to determine which of 

several parties is liable to pay Workersf Compensation 

benefits, or if subrosation is allowable, what 

apportionment of liability may be made between insurers, 

and other matters that so beyond the minimum 

determination of the benefits payable to an employee. 

(Emphasis added.) 

Amendments to !j 39-71-2905, MCA, since Hunt, have mandated 

certain dispute resolution requirements to be comported with prior 

to petitioningthe Workers' Compensation judge. Subrogation rights 

under § 39-71-414(5), MCA, are not included in those dispute 

resolution requirements. 

Hence we have a situation where the Fund claims that, under 

3 39-71-414(5), MCA, and this Court's interpretation of that 

statute in First Interstate, the Workers' Compensation Court has 

no jurisdiction at this time as to subrogation. On the other hand, 

the claimant maintains that the Workers' Compensation Court's 

jurisdiction extends to the dispute here by virtue of 5 39-71- 

2905, MCA, and our interpretation of that statute in Hunt. 
We Concur with the claimant on this issue. The Workers1 

Compensation Court noted correctly that the determination of the 

amount of subrogation is a matter to be addressed initially by the 

Division, under § 39-71-414 (5) , MCA. The Court then pointed out 

that the Fund had no right to be in possession of subrogation funds 

until a Division determination as to subrogation rights occurred. 

The claimant is disputing the Fund's right to claim any subrogation 

funds prior to the Division determination, and it was within the 

courtls jurisdiction, as authorized by 5 39-71-2905, MCA, to 

determine this dispute over benefits. 

There can be no question that the State Fund is improperly in 

possession of $12,500 of claimant's third-party settlement, as the 

rights to subrogation had not been first determined by the 

Division. The Workers' Compensation Court had jurisdiction in this 

dispute over benefits, and ruled properly. We hereby affirm the 

Workers1 Compensation Court order to the State Fund to return the 

$12,500 to claimant, along with accrued interest. 

6. Jhh 

Justice 

We Concur: