No. 87-157 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

KENNETH REIL, 

Claimant and Respondent, 

-vsBILLINGS PROCESSORS, INC., 

Employer, 

and 

STATE COMPENSATION INSURANCE FUND, 

Defendant and Appellant. 

APPEAL FROM: The Workers' Compensation Court, The Honorable 

Timothy Reardon, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

James M. Scheier, Agency Legal Services, Helena, 

Montana 

Nancy Butler, State Comp. Insurance, Helena, Montana 

For Respondent: 

Lloyd Hartford, Billings, Montana 

Submitted on Briefs: Aug. 6, 1987 

Decided: December 3, 1987 

111"" - . *,- 

Filed: ,v 

Clerk 
Mr. Justice L. C. Gulbrandson delivered the Opinion of the 

Court. 

The State Compensation Insurance Fund appeals a 

Workers1 Compensation Court judgment finding Kenneth Reil to 

be entitled to temporary total disability benefits and 

medical benefits. The Workers1 Compensation Court found that 

Mr. Reil had suffered a cornpensable injury arising out of and 

in the scope of his employment and that he had given his 

employer sufficient notice of the injury pursuant to 

S 39-71-603, MCA. We reverse the decision of the Workers' 

Compensation Court on the notice issue and remand with 

directions to dismiss the case. 

Ken Reil suffers a congenital deformity in the 

radioulnar joints of his arms. At age fourteen, Reil 

underwent four surgeries in an attempt to correct these 

deformities. The deformities cause Reil a considerable 

amount of pain in his hands, wrists and elbows. The pain has 

bothered Reil for years and his condition continues to worsen 

over time. 

Reil underwent two later surgeries in 1980 and 1981 for 

an injury to his left wrist suffered in an industrial 

accident while employed with a Billings meat packing plant. 

Reil received a $25,000 settlement of his workers1 

compensation benefits for the February 1980 injury. 

Thereafter, Reil continued to experience pain both as a 

result of the 1980 accident and his congenital deformities. 

After the 1980 accident, Reil's doctor advised him to 

avoid heavy work. Pursuant to the doctor's suggestions, Reil 

enrolled in a computer program training course of instruction 

at Eastern Montana College. Reil quit school after one 

academic quarter to take a job as a computer operator with 

Yellowstone Processors of Billings. At his initial job 
interview, Reil informed Yellowstone Processors of his 

congenital deformities and progressive pain. Yellowstone 

Processors was the predecessor company of Billings 

Processors. 

Reil's initial position with Yellowstone Processors, 

and later with Billings Processors, required that he load and 

unload computer tape reels from a computer. Sometime in 

1982, Yellowstone Processors transferred Reil to a data 

storage position. Reil's responsibilities in data storage 

were to pick-up and deliver client computer tapes, stack 

boxes of computer tapes, catalogue tapes, and file tapes. 

Reil worked with Yellowstone in data storage until the spring 

of 1984 when he was laid-off. Reil experienced pain in his 

arms throughout his tenure with Yellowstone Processors. 

Reil next ran a high pressure power spray washer for a 

company called High Plains Power Wash. Operating the high 

pressure washer caused Reil pain in his elbows and wrists. 

Reil returned to Billings to work for Carey Data as a 

computer tape cataloger after one month with High Plains 

Power Wash. Reil experienced pain in his elbows and wrists 

while lifting twenty to thirty pound boxes of computer tapes 

for Carey Data. In August of 1984, while with Carey Data, 

Reil began a second job as a computer operator with Billings 

Processors. With the exception of one person, the personnel 

and management at Billings Processors were the same people 

Reil had worked with at Yellowstone Processors. After a 

month of holding down two jobs, Reil's position with Carey 

Data was discontinued. 

Reil loaded and unloaded one-pound computer tape reels, 

lifted twenty to thirty pound boxes to waist level, and typed 

for Billings Processors. Reil also performed light 

janitorial work on his own initiative. All of these 

activities caused Reil varying degrees of pain and 
discomfort. During slower work periods, Reil was allowed to 

watch a television he stored in a false ceiling above his 

desk. In addition, Reil played basketball with his 

supervisors and fellow employees on a weekly basis and went 

hunting in the fall. Lifting the television, playing 

basketball, and hunting also caused Reil pain in his arms as 

did most activities utilizing his arms or hands. 

Reil occasionally complained to his employers that his 

arms and wrists hurt. However, Reil did not relate to his 

employers that this pain was as a result of his work related 

duties. Reil's employers assumed that his problems were 

merely the consequences of the congenital deformities. Reil 

did not ask to be reassigned to another position nor did he 

request that his employers modify his duties to reduce the 

necessity for use of his arms and hands. 

Reil's congenital arm problems progressively worsened 

from August to December of 1985. On January 7, 1986, Reil's 

doctor advised him that he would have to undergo more 

surgeries to his left and right wrists on January 20, and 

March 24, 1986, respectively. These surgeries were to remove 

prosthetic devices that had been previously implanted into 

Reil's arms. At Reil's request, Billings Processors laid him 

off the job so that he could undergo surgery and collect 

unemployment compensation during convalescence. Reil's last 

day on the job with Billings Processors was January 16, 1986. 

Thereafter, Reil received six months of unemployment benefits 

and did not return to work for Billings Processors. 

On July 11, 1986, more than five months after leaving 

Billings Processors, Reil filed a claim for compensation with 

the Division of Workers' Compensation. The State Insurance 

Fund denied compensation on the grounds that Reil failed to 

give his employer sufficient notice pursuant to § 39-71-603, 

MCA, and he had not suffered a compensable injury as defined 
by $ 39-71-119 (I), MCA. The Workers' Compensation Court 

heard the matter and found that Reil suffered a compensable 

injury for which Billings Processors had sufficient actual 

knowledge. The State Compensation Insurance Fund appeals and. 

raises the following issues: 

(1) Did the claimant fail to comply with the notice 

requirement of S 39-71-603, MCA? 

(2) Is there insufficient evidence to establish that 

the claimant suffered a compensable in-jury under the Workers' 

Compensation Act? 

On cross-appeal, Reil asserts the following issues: 

(1) Whether the Workers ' Compensation Court' s failure 

to impose the 20% penalty against the insurer for its refusal 

to pay compensation and medical benefits is justified where 

substantial evidence of record fails to demonstrate the 

existence of a bona fide controversy? 

(2) Whether the Workers' Compensation Court erred when 

it ordered the insurer and claimant to apply accrued 

compensation benefits to repay the Unemployment insurance 

Division the unemployment benefits claimant received during 

the period in question where 5 39-71-743, MCA, prohibits said 

funds being used to reduce such debts? 

(3) Whether the appellant's appeal is frivolous and 

therefore subject to the penalties set forth in Rule 32, 

M.R.App.P.? 

We find the State Insurance Fund's first issue to be 

dispositive of this appeal. The Workers' Compensation Court 

considered certain facts cumulatively and interpreted 

S 39-71-603, MCA, to impute constructive knowledge of an 

injury to the employer, Billings Processors. The appropriate 

standard of review in this matter, therefore, is to determine 

whether the lower court's interpretation of the law, as 

applied to the particular facts of this case, is correct. 
Wassberg v. Anaconda Copper Co. (Mont. 1985), 697 P.2d 909, 

912, 42 St.Rep. 388, 391. Accordingly, we are free to 

examine the lower court's legal analysis and draw our own 

conclusions. Wassberg, supra. 

This Court consistently stresses the importance of 

employee compliance with the sixty day notice provision of 

Montana's workers' compensation laws. Masters v. Davis 

Logging (Mont . 19 8 7 ) , P.2d , 44 St.Rep. 1664; Hunt 

v. Sherwin Williams Co. (Mont. 19811, 624 P.2d 489, 38 

St.Rep. 358. Under 5 39-71-603, MCA, notice of an industrial 

accident is "mandatory and compliance with [the requirements 

of the statute] are indispensable to [maintaining] a claim 

for compensation . . . " Dean v. Anaconda Co. (19591, 135 

Mont. 13, 16, 335 P.2d 854, 856. Section 39-71-603, MCA, 

provides the following: 

No claim to recover benefits under the 

Workers' Compensation Act, for injuries 

not resulting in death, may be considered 

compensable unless, within 60 days after 

the occurrence of the accident which is 

claimed to have caused the injury, notice 

of time and place where the accident 

occurred and the nature of the injury is 

given to the employer or the employer's 

insurer by the injured employee or 

someone on the employee's behalf. Actual 

knowledge of the accident and injury on 

the part of the employer or the 

employer's managing agent or 

superintendent in charge of the work upon 

which the injured employee was engaged at 

the time of the injury is equivalent to 

notice. 

It is undisputed that Reil did not give his employer written 

notice of a work related injury. The Workers' Compensation 

Court found, however, that Billings Processors had sufficient 

actual knowledge to satisfy the statute. We disagree with 
the lower court ' s application of the facts to the law of this 

case. 

The Workers' Compensation Court made the following 

findings of fact relevant to the issue of notice: 

28. Claimant states that he notified his 

employers that he was having pain in his 

arms and he was going to see his doctor 

on January 7, 1986. 

29. After finding out he needed surgery, 

claimant asked his employers if he could 

be laid off so that he could draw 

unemployment while he had his surgery. 

30. Claimant's initial request to be 

laid off was refused, but within a matter 

of a few days (possibly the next day) the 

decision was made to grant claimant his 

request and he was laid off. 

31. Claimant states that he asked his 

employer if he would be able to return to 

work after his surgery and that he was 

told he could not come back until he was 

able to handle all of the duties of his 

job. 

32. John Smatla, who was Vice-President 

of Billings Processors at the time of 

claimant's employment, testified that he 

knew of claimant's congenital problems, 

prior to claimant coming to work for 

Billings Processors, but that claimant 

never told him that the difficulties he 

was having with his arms were a result of 

his job duties. Mr. Smatla also 

testified that claimant's termination was 

voluntary, and that claimant wanted to 

leave because he wasn't getting enough 

hours, that he wanted to go to school and 

that he wanted to look for a better job. 

33. Richard DeLanty , who was 

Vice-President of Operations at Billings 

Processors during claimant's employment, 

testified that he knew of claimant's 

congenital difficulties prior to 
claimant's employment with Billings 

Processors. In January of 1986, claimant 

told Mr. DeLanty that he was having 

problems with his arms and constant pain 

in one arm and that he needed to have 

surgery done. Mr. DeLanty stated that 

claimant never told him that claimant's 

arm problems were related to his work, 

but he did know claimant had problems. 

34. Gale Behm was claimant's supervisor 

during claimant's employment with 

Billings Processors. Mr. Behm and 

claimant are cousins and have known each 

other since childhood. Mr. Behm stated 

that the "sole reason" claimant wanted to 

be laid off was to have surgery on his 

arms. Mr. Behm knew of claimant's 

congenital problem, knew claimant was 

having constant pain and wanted to have 

surgery, but denied any knowledge that 

claimant's problems might be connected 

with work. 

35. Claimant's last day of work for 

Billings Processors was January 16, 1986, 

a Thursday. Claimant filed for 

unemployment the next day and had surgery 

performed on Monday, January 20, 1986. 

Claimant received his full six months of 

unemployment, the State finding that his 

post-operative disability occurred after 

his layoff. Claimant has not worked 

since January 16, 1986. Claimant filed a 

claim for compensation on July 11, 1986. 

36. Claimant testified that he never 

told his employers at Billings Processors 

that he had suffered an on-the-job 

injury, but that he did tell them that he 

suffered pain from some of his duties. 

The Workers' Compensation Court found that "[tlhe employer 

knew of the preexisting condition, knew claimant was having 

problems, knew claimant had to stop work to have surgery for 

his problem, and knew claimant's work was aggravating 

claimant's symptoms" and concluded that this was sufficient 
actual knowledge of an injury under S 39-71-603, MCA. All 

but the last finding are supported by the record of this 

case. 

When deposed and questioned by counsel for the State 

Insurance Fund, Reil testified as follows regarding the issue 

of notice: 

Q: Now, did you ever tell either Dick 

Delanty or John Smatla or Gale Behm that 

you had a work related injury or series 

of injuries? 

A: No, I didn't. 

When questioned about the information he provided on his 

initial compensation claim form, Reil went on to testify as 

follows: 

Q: The second line up from the bottom 

[in the block entitled Accident 

Information] is: "Did you notify your 

employer of the accident?'' It says, 

"Yes." "Who did you notify?" It says, 

"Dick Delanty. " "HOW? I'"Told him of 

problems caused by work. " Now is that 

true? 

A: Well, really just kind of in a sense. 

I really never came right out and told 

Dick that I was having problems due to 

the job. I said, "But I'm having a lot 

of problems with my arms lifting and 

carrying things, and I don't know what's 

causing it so that's why I went and saw 

the doctor." As far as being specific 

and notifying him of an accident, no, I 

didn't. 

Q: So correct me if I'm wrong, but Dick 

knew that you had -- were suffering pain 

and had some problems, but what you are 

saying is he didn't have any way of 

knowing if that was work related or you 

didn't tell him if that was work related. 
A: I didn't tell him it was work 

related, no. 

In addition, the transcript of the Workers' Compensation 

hearing reveals the following exchange between Reil and his 

attorney: 

Q: Did you tell [your employer] that it 

was the functions of your job, the 

physical requirements of your job, that 

caused this pan? 

A: No, I didn't. I told them that I was 

having a lot of problems with my arms and 

that when I lifted or carried something 

that they would bother me quite a bit and 

I wanted to go to the doctor. 

After a short recess, and when questioned by the State 

Insurance Fund's attorney, Reil changed his testimony as 

reflected by the following: 

Q: Okay. Now you didn't ever tell any 

of your supervisors at Billings 

Processors that you had suffered an 

on-the-job injury, did you? 

A: No. 

Q: Did you ever tell your supervisors at 

Billings Processors that your job duties 

were causing pain or discomfort in your 

arms? 

A: Yes, I did. I mentioned to them a 

few times that when I lifted or carried 

things that it would cause pain. It was 

just kind of a -- it wasn't the topic of 

conversation but I had mentioned it to 

them quite a few times. 

When confronted with his prior inconsistent statements, Reil 

was asked whether he was now telling the court something 

different, to which he answered: 

A: No, it is not anything different. I 

told Dick Delanty that I was having pain 
because I was lifting and carrying things 

and that's all I told him. I mean I 

didn't come right out and say that my job 

is causing these pains, or causing my 

problems, but I am having a lot of pain 

lifting and carrying things and I left it 

at that. 

Q: So you told him you were having a lot 

of pain because of lifting and carrying 

things. If you didn't specify that it 

was because of the job duties, for all he 

knew it could have been because of 

something you were doing at home, is that 

right? 

A: Well, yes, but my job entailed 

lifting and carrying things, so I guess I 

more or less assumed that he knew that. 

Q: But you never told him that the pain 

was being caused by lifting and carrying 

things at the job, is that what you are 

saying now? 

A: Yes, I guess in a sense. I told him 

I was having pain due to lifting and 

carrying things and I pretty much just 

left it at that. 

Reil's supervisors and fellow employees consistently 

told the same story: Reil did not mention that his job 

duties caused him pain. Reil's testimony on the subject is, 

at best, inconsistent. The lower court recognized and 

resolved these inconsistencies in Reil's favor by concluding 

that they "were caused . . . by the artful phrasing of 

questions . . . " Regardless of how the witnesses' answers 

were solicited, the facts of this case do not support a 

finding that Billings Processors had sufficient actual 

knowledge of an injury pursuant to S 39-71-603, MCA. 

The lower court correctly recognized that " [a] ctual 

knowledge of the accident or injury, while equivalent of 

notice, must be more than simple knowledge that the claimant 
is ill, or that claimant is injured." See Dean v. Anaconda 

Co. (1959), 135 Mont. 13, 16, 335 P.2d 854, 856; State ex 

rel. Magelo v. Industrial Accident Board (1936), 102 Mont. 

455, 464, 59 P.2d 785, 789. The most that Billings 

Processors can be said to have known in this case is that 

Kenneth Reil had congenital problems and these problems often 

caused him pain. Simple knowledge on the part of Billings 

Processors that Reil was experiencing pain does not satisfy 

the actual knowledge requirement of B 39-71-603, MCA. 

"The purpose of the notice requirement or actual 

knowledge in lieu thereof is to enable the employer to 

protect himself by prompt investigation of the claimed 

accident . . . 'I Bender v. Roundup Mining Co. (1960) , 138 

Mont. 306, 313, 356 P.2d 469, 473. In the instant case, the 

notice or actual knowledge requirement serves the additional 

purpose of enabling the employer to reassign an employee with 

a congenital defect to another position or modify his duties 

to reduce the necessity for use of his arms and hands. 

Reil's employers were aware that he suffered a 

congenital defect. They were also aware that Reil lifted a 

heavy television for his own entertainment while at work, 

played basketball, and hunted. It was incumbent upon Reil, 

therefore, to specifically advise Billings Processors that it 

was his job-related duties that exacerbated these congenital 

problems. As stated by Larson in his treatise on workers' 

compensation law: 

As a matter of common sense, the fact 

that claimant is known to have a 

preexisting occupational weakness 

increases the burden -- on the claimant to 

--- show that the employer's knowledge -- of the 

articular manifestation of injury should 

- Ee taken as knowledge-that - it - was 

work-connected . . . --- [I - - is not 

reasonable to expect an employer to - 

launch an investiaation-everv time a 
foreman hears someone complain - of pain - or 

sees someone get a bump, - and - such 

knowledge -- does not tFerefore satisfy the 

obiectives of the notice statute. 

3 Larson, Workmans' Compensation Law, S 78.31(a), p. 15-113 

(1983). Reil off-handedly related to his employers that he 

was experiencing problems. To hold that this is sufficient 

actual knowledge of an injury would thwart the purposes of 

the statute. There is no substantial evidence to support the 

lower court's decision on the notice issue. 

The Workers1 Compensation Court also erred in 

considering the cumulative effect of the facts in this 

particular case. "Actual knowledge of an accident and injury 

. . . " or, as alleged in this case, actual knowledge of a 

job-induced aggravation of a preexisting condition, "on the 

part of . . . the employer's managing agent or superintendent 

. . . " can be imputed as notice to the employer. Section 

39-71-603, MCA; Maki v. Anaconda Copper Co. (1930) 87 Mont. 

314, 322, 287 P. 170, 173. The Workers' Compensation Court 

imputed constructive knowledge of an injury to the employer, 

Billings Processors, on the basis of facts "considered 

cumulatively." However, in construing S 2933, R.C.M. (1947), 

the predecessor statute to S 39-71-603, MCA, we recognized 

that " [i] t is clear from these provisions that any kind of 

knowledge, other than actual, or first-hand knowledge, would 

be insufficient, for the statutory equivalent of information 

required to be given in the notice is actual knowledge." 

Maki, 87 Mont. at 323, 287 P. at 173 (citing smith v. 

Industrial Acc. Com. (Cal. 1917), 162 P. 636, 637). 

Accordingly, constructive knowledge imputed to the employer 

on the basis of facts taken cumulatively is insufficient to 

meet the requirements of S 39-71-603, MCA, under the 

particular circumstances of this case. 
Reil also argues that his injury is "latent" and the 

sixty-day notice requirement should be tolled until such time 

as he realized the alleged compensable nature of his pain. 

To support this argument, Reil relies on our decision in 

Bowerman v. Employment Security Commission (~ont. 1983) , 673 

P.2d 476, 40 St.Rep. 2062. In Bowerman we held that the 

one-year notice of claim limitation of S 39-71-601, MCA, 

"does not begin to run until the claimant, as a reasonable 

man, should recognize the nature, seriousness and probable 

compensable nature of his latent injury." Bowerman, 673 P.2d 

at 479, 40 St-Rep. at 2065. The basis of our holding in 

Bowerman was a 1973 legislative addition to S 39-71-601, MCA, 

whereby " [tlhe division may, upon reasonable showing by the 

claimant of lack of knowledge of disability, waive the time 

requirement up to an additional 24 months." Section 

39-71-601 (2) , MCA. Bowerman, however, does not apply to 

§ 39-71-603, MCA, for the simple reason that the legislature 

did not amend this statute to allow for waiver of the 

sixty-day notice of injury requirement. Compare 55 39-71-601 

and -603, MCA. We also note with approval that the lower 

court found with regard to Reil's latent injury argument that 

"simple ignorance of compensability, absent any evidence of 

estoppel by the employer or medical disinformation [is 

insufficient] to toll the notice requirement." 

Constructive knowledge is not enough to satisfy the 

requirements of S 39-71-603, MCA. An employer, or its 

managing agent or supervisor, must have actual knowledge of 

the accident and injury. The fact that Billings Processors 

knew Reil was experiencing pain, either taken alone or 

cumulatively with the other facts of this case, does not 

constitute actual knowledge. Accordingly, the lower court 

erred in finding that Billings Processors had actual 

knowledge of Reil's alleged injury. We find that Billinss 
Processors had no actual knowledge of either an injury or a 

job-induced aggravation of a preexisting condition in this 

case. Because of this finding we do not address the other 

issues presented on this appeal. The decision of the 

Workers' Compensation Court is reversed with directions to 

dismiss the case. 

Reversed. 

We concur: 
Mr. Justice John C. Sheehy, dissenting: 

The statement of the majority that "Billing Processors 

had no actual knowledge of either an injury or a job-induced 

aggravation of a preexisting condition in this case," is not 

founded on fact in the record, and is expressly adverse to 

the findings of the Workers' Compensation Court. 

The findings of the Workers ' Compensation judge include 

the following: 

Fourth, claimant testified that he told his 

supervisors that his work was causing him problems. 

Admittedly, there are some inconsistencies in 

claimant's testimony. There are conflicts between 

claimant's testimony and the testimony of the 

employers' representatives. However, the 

inconsistencies and conflicts are caused more by 

the artful phrasing of questions rather than by 

claimant's or his supervisors response. Claimant, 

may, indeed, have never been so specific as to 

say--"I have suffered an on-the-job industrial 

injury--to this part of my right arm--on this 

date--resulting in this condition."--but; claimant 

did impart sufficient information to his employers 

for them to have actual knowledge of injury . . ." 

Based on conflicting evidence of the record, the court 

resolved the matter of credibility and determined: 

The employer knew of the preexisting condition, 

knew claimant was having problems, knew claimant 

had to stop work to have surgery for his problem, 

and knew claimant's work was aggravating claimant's 

symptoms. This actual knowledge is sufficient to 

satisfy both the letter and the purpose of the 

notice requirements of 5 39-71-603, MCA. 

For more than 50 years, this Court has been saying that 

the first duty of those who administer the Workers' 

Compensation Act is to give the employee the greatest 

possible protection consistent with its purposes. Miller v. 

Aetna Life Insurance Company (1936), 101 Montana 212, 53 P.2d 

704; in considering the Workers' Compensation Act, all of the 
sections as originally enacted or amended, must be considered 

together in such manner as to give effect to the Act as a 

whole. State ex rel. Roundup Coal Mining Company v. 

Industrial Accident Board (1933), 94 Mont. 386, 23 P.2d 253. 

The majority have not followed the standard of review 

applicable to workers' compensation cases. We have said that 

the decisions of the Workers' Court will not be disturbed if 

supported by substantial evidence. Skukrud v. Gallatin 

Laundry Company, Inc. and Employees Commercial Union 

Insurance Company (1976), 171 Mont. 217, 557 P.2d 278. Where 

findings are based on conflicting evidence, the reviewing 

court's function is confined to determining whether there is 

substantial evidence supporting such findings. It is not the 

court's function to determine whether there is sufficient 

evidence to support contrary findings. Wilson v. Glacier 

General Assurance Company (Mont. 19831, 670 P. 931, 40 

St.Rep. 1509; Stamatis v. Bechtel Power Corporation (1979), 

184 Mont. 64, 601 P.2d 403. We have always stated that we 

will not substitute our judgment for that of the Workers' 

Compensation Court as to the weight of evidence on questions 

of fact. Robbins v. Anaconda Aluminum Company (19781, 175 

Mont. 514, 575 P.2d 67; Brurud v. Judge Moving and Stora.ge 

Company (1977), 172 Mont. 249, 516 P.2d 558. 

In the light of the findings made by the Workers' 

Compensation Court on disputed evidence, and the usual 

standards of review applied to such findings, the duty of 

this Court is to sustain the decision of the Workers' 

Compensation Court, and not set it aside on the dubious 

authority of a 1917 California case. 

This Court has become the trier of both fact and law. 

'i 

(--)riLri Y~,L~ 

Justice 
Mr. Justice William E. Hunt, Sr., concurring: 

I concur with the foregoing dissent. 

/