NO. 95-484

IN THE SUPREME COURT OF THE STATE OF MONTANA

1996

EDWIN A. TAYLOR,

Petitioner and Appellant,

APPEAL FROM: Workers' Compensation Court

The Honorable Mike McCarter, Judge presiding

COUNSEL OF RECORD:

For Appellant:

Wade J. Dahood, Bernard J. Everett, Knight, Dahood,

McLean & Everett, Anaconda, Montana

For Respondent:

Oliver H. Goe, Browning, Kaleczyc, Berry & Haven,

Helena, Montana

Filed:

Submitted on Briefs: February 1, 1996

Decided: March 18, 1996
Justice W. William Leaphart delivered the Opinion of the Court.

Edwin A. Taylor (Taylor) appeals from the Findings of Fact,

Conclusions of Law and Judgment of the Workers' Compensation Court

determining that two of three workers' compensation claims filed by

Taylor were fraudulent. We affirm.

We consider the following dispositive issues on appeal:

1 . Does substantial credible evidence support the Workers'

Compensation Court's finding that Taylor filed fraudulent claims

for injuries?

2 . Did the Workers' Compensation Court err when it failed to

find that the insurer's conduct was unreasonable and in failing to

award Taylor his attorney's fees, costs, and the statutory

penalty?

Taylor began working for the Montana Department of

Transportation (DOT) in 1988. At the time of Taylor's alleged

accidents, Taylor's job classification was a truck driver. Taylor

filed claims for industrial accidents that allegedly occurred on

February 26, 1990, November 15, 1990, and March 4, 1991. At the

time of the alleged injuries, State Fund was the workers'

compensation insurer for the DOT. State Fund accepted liability

for each claim and began paying Taylor wage loss and medical

benefits. Although State Fund began an investigation of Taylor's

claims and requested the Montana Criminal Investigations Bureau to

conduct an investigation, State Fund continued to pay benefits

until April of 1994.

Taylor alleges that he injured his neck in an industrial

accident on February 26, 1990. Taylor underwent neck surgery for

this injury. Similarly, Taylor alleges that he suffered a work2
related injury on November 15, 1990, while he was working in the

maintenance shed of the DOT's Bozeman, Montana facility. No one

witnessed this accident. He alleges that he bumped the left side

of his head near his ear while he was standing up from checking

bolts on the plow. Taylor asserts that he hit his head so hard

that it knocked him to his knees. Following this incident, Taylor

consulted Dr. Pamela Hiebert for treatment. Taylor was admitted to

Bozeman Deaconess Hospital overnight for observation. The next

day, Taylor was discharged from the hospital and sought no further

treatment for this injury. State Fund accepted liability for this

claim.

On March 4, 1991, Taylor was working with a road crew fixing

pot holes on Main Street in Bozeman, Montana. Taylor testified

that near the end of his shift he was directed to pick up the

safety cones and signs that marked the job area. He alleges that

while picking up the cones he stumbled and fell, hitting his head,

neck, and shoulders and landing on his hips and back. Again, this

accident was unwitnessed. After the incident, Taylor got into the

truck and drove approximately one mile back to the DOT shop where

he reported the accident to his acting supervisor, Dan Noyes

(Noyes), and asked Noyes to drive him to the hospital. Taylor was

admitted to the hospital and, while hospitalized, he complained of

lumbar pain and pain in his left extremities. Taylor was

discharged from the hospital on March 8, 1991. TWO days later,

Taylor was readmitted to the hospital for injuries related to his

cervical and lumbar spine. He was treated with an anesthetic and

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an anti-inflammatory and was again released from the hospital on

March 15, 1991.

Taylor was admitted to St. Vincent's Hospital in Billings,

Montana, on August 27, 1991, by Dr. James Johnson, and was released

the next day. On August 29, 1991, at the request of Dr. Johnson,

Taylor was examined by Dr. Robert Snider, an orthopedic surgeon,

who stated that surgery may not be of any value because he was not

sure of the source of Taylor's back pain. Another doctor concurred

in the opinion that surgery was not warranted.

In the fall of 1993, Taylor was seen by another orthopedic

surgeon, Dr. James Lovitt, who opined that Taylor had two choices,

to live with his pain or to consider surgery. Dr. Lovitt noted

that Taylor was not a good candidate for surgery, which included

spinal fusion, because of his history of smoking and, further, that

surgery might lead to additional complications.

State Fund asserted that Taylor did not suffer a disabling

injury on March 4, 1991, and, therefore, terminated Taylor's

benefits on April 20, 1994. State Fund filed a petition for

hearing before the Workers' Compensation Court alleging that Taylor

did not suffer any industrial injuries and that his claims were

fraudulent. Taylor responded by filing a petition for hearing in

order to reinstate his benefits. The Workers' Compensation Court

consolidated the petitions and trial was held in February of 1995.

At trial, State Fund offered the testimony of several

witnesses to prove that Taylor's claims were fraudulent. Elizabeth

Larain (Larain) and Robert Beebe (Beebe) testified that Taylor

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allegedly told them that he was "scamming the system" and that his

claims were fraudulent. Beebe testified that he called the

Workers' Compensation Fraud Hotline and reported Taylor's

fraudulent claim. Larain testified that she had telephoned Lance

Zanto, an adjuster with State Fund, and told him that Taylor's

claims were fraudulent. Several other witnesses, including a

claims adjuster with State Fund, an investigator with the Montana

Criminal Investigations Bureau, Taylor's former supervisor from the

DOT, and Taylor's ex-wife testified at trial. The Workers'

Compensation Court acknowledged that "the credibility of witnesses

testifying at trial is critical to the resolution of this case."

Ultimately, the Workers' Compensation Court determined that

both the November 15, 1990 and the March 4, 1991 claims were

fraudulent. The court concluded that State Fund failed to carry

its burden of proof that the February 26, 1990 claim was

fraudulent. Taylor appeals from the determination that two of his

claims were fraudulent.

1 . Does substantial credible evidence support the Workers'

Compensation Court's finding that Taylor filed fraudulent claims

for injuries?

In reviewing findings of the Workers' Compensation Court, we

determine whether the findings are supported by substantial

credible evidence. Wilson v. Liberty Mut. Fire Ins. Co. (Mont.

1995), 903 P.2d 785, 787, 52 St.Rep. 990, 991 (citing Miller v.

Frasure (19911, 248 Mont. 132, 137, 809 P.2d 1257, 1260).

Substantial evidence is more than a mere scintilla of evidence but

may be less than a preponderance of the evidence. Wilson, 903 P.2d

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at 707. We will not substitute our judgment for that of the trial

court where the issue relates to the weight given to certain

evidence or the credibility of the witnesses. Wilson, 903 P.2d at

787 (citing Burns v. Plum Creek Timber Co. (1994), 268 Mont. 82,

84, 885 P.2d 508, 509); Rose v. Burdick's Locksmith (19941, 265

Mont. 178, 180-81, 875 P.2d 337, 339.

The Workers' Compensation Court determined that State Fund

satisfied its burden of proving that Taylor committed actual fraud.

To sustain a claim of fraud, State Fund was required to plead and

prove each of the nine elements of fraud. Haag v. Montana Sch.

Group Ins. Auth. (Mont. 1995), 906 P.2d 693, 697, 52 St.Rep. 1146,

1149. Fraud can never be presumed but must be proved by a

preponderance of the evidence. Barrett v. Holland & Hart (1993),

256 Mont. 101, 106, 845 P.2d 714, 717 (citing Batten v. Watts Cycle

& Marine (1989), 240 Mont. 113, 117, 783 P.2d 378, 381, cert.

denied, 494 U.S. 1087 (1990)). The court found that, as to the

November 15, 1990 and March 4, 1991 claims, State Fund satisfied

its burden and proved each of the nine elements of fraud. The

elements are: (1) a representation; (2) falsity of the

representation; (3) materiality of the representation; (4)

speaker's knowledge of the falsity of the representation or

ignorance of its truth; (5) the speaker's intent it should be

relied upon; (6) the hearer's ignorance of the falsity of the

representation; (7) the hearer's reliance on the representation;

(8) the hearer's right to rely on the representation; and (9) the

hearer's consequent and proximate injury caused by the reliance on

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the representation. Lee v. Armstrong (1990), 244 Mont. 289, 293,

798 P.2d 84, 87; Batten, 783 P.2d at 380-81.

The court noted that Taylor made specific statements

acknowledging that two of his claims were fraudulent. While the

court recognized that "it is ultimately [Taylor's] word against the

words of Larain and Beebe, I found the latter witnesses to be

credible and believable. Ultimately, however, this case doesn't

rely solely on their evidence. The finding of fraud is supported

by other significant evidence." The court made extensive findings

relating to the medical evidence, the testimony of the witnesses,

and the credibility of the witnesses.

Taylor asserts that State Fund did not rebut the testimony of

the numerous physicians who have treated Taylor for his multiple

injuries. The findings of the Workers' Compensation Court,

however, reflect otherwise. The court's findings indicate that

several of Taylor's treating physicians could not find an objective

basis for Taylor's pain complaints and, further, that Taylor's pain

complaints were abnormal and that his subjective complaints were

out of line with the objective medical findings. Nonetheless,

Taylor argues that the medical testimony regarding his injuries was

"unrefuted" and should not be disregarded based on the testimony of

Larain and Beebe. However, in its order supplementing findings of

fact and otherwise denying claimant's post-trial motions, the court

noted that "there is nothing in the medical evidence to indicate an

acute injury as opposed to long term degeneration, or, other than

Taylor's own report, to prove that his back problems stemmed from

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an industrial accident." Further, the court noted that:

Significantly, claimant testified about cuts and

scratches he had when he went to the hospital on March

4th, even mentioning a "pretty good nick on the side of

my head or maybe in my jaw area." (Tr. II at 11.2.) His

complaints of hip pain changed from the left side on

March 4, to the right side on March 11th. He insisted on

hospitalization and claimed he could not perform ordinary

tasks of daily living. Yet, the medical records and

testimony of the physicians who examined him show that

they did not see any objective evidence of any injury.

Thus, even without Beebe's and Larain's testimony there is evidence

in the record which casts doubt on Taylor's claims of industrial

injuries.

According to Taylor, both Larain's and Beebe's testimony

should be disregarded because Larain and Beebe, who were friends

with one another and acquaintances of Taylor's, had a motive to

testify against Taylor because of a dispute regarding some money

Taylor allegedly took from Beebe. Taylor asserts that the Workers'

Compensation Court erred in finding that Larain's and Beebe's

testimony was credible. However, this Court will not substitute

its judgment for that of the trial court on questions of witness

credibility when substantial credible evidence supports the trial

court's determination. Wilson, 903 P.2d at 787. Here, the

findings of fact and the record reflect that the court could have

found these witnesses to be truthful in some areas of their

testimony and untruthful in others. The trial court was in the

best position to judge the credibility and demeanor of the

witnesses while testifying. Where there is conflicting evidence in

the record, it is within the provence of the trial court to pass on

the credibility of witnesses and the sufficiency of the evidence.

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Wilson, 906 P.Zd at 787-88.

Beebe stated that, following the March 4, 1991 injury, he saw

Taylor working on his car and replacing the drive line. Beebe

testified that the parts weighed between seventy and eighty pounds

and that Taylor worked at this heavy labor for over four hours.

Taylor testified that the part weighed approximately twenty pounds

and that he would have completed the job much more quickly but for

his injuries. Larain testified that Taylor was very interested in,

and asked questions about, her own workers' compensation claim and

confided in her that his claims were fraudulent. Taylor denies

that he made any such admissions to Larain.

The findings reflect Taylor's inconsistent explanations of how

the March 4, 1991 incident occurred. For example, Taylor's ex-wife

testified that Taylor told her that he had injured his back

operating a jack-hammer. Larain testified that Taylor told her

that he had tripped over some road cones, and Beebe testified that

Taylor told him that he slipped on some road oil and fell.

As to Taylor's own testimony, the court found that "claimant

has made as great a negative impression on me as any witness I have

observed during the last two years. Listening to him and observing

him, I simply did not believe him and concluded that he was

perpetuating a fraudulent scheme." In its order supplementing

findings of fact and otherwise denying claimant's post-trial

motions, the court also noted that "Taylor's confident, forceful

testimony at trial stood in stark contrast to the complaining,

depressed, non-functional individual who appears in the many

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medical and psychological records presented in this case. . . Re

had a smooth answer for everything presented against him."

The Workers' Compensation Court findings also reflect evidence

and testimony showing that Taylor had been reprimanded at work and

placed on probation for his performance, had a problem with alcohol

abuse, had received citations for DUI's, was in "severe financial

straits," was having his wages attached by creditors, and owed both

the Internal Revenue Service and the State of Montana for unpaid

taxes. Taylor maintains that, regardless of his financial

situation and job performance, he did indeed suffer industrial

injuries. Our standard, however, is not whether the evidence

supports findings different than those made by the Workers'

Compensation Court, but whether substantial credible evidence

supports the court's findings. Wilson, 903 P.2d at 787 (citing

Caekaert v. State Compensation Mut. Ins. Fund (1994), 268 Mont.

105, 110, 885 P.?.d 495, 498). In the instant case, we conclude

that substantial credible evidence in the record supports the

findings of the Workers' Compensation Court that two of Taylor's

three claims were fraudulent.

2 . Did the Workers' Compensation Court err when it failed to

find that the insurer's conduct was unreasonable and in failing to

award Taylor his attorney's fees, costs, and the statutory

penalty?

Although the court found that two of Taylor's three claims

were fraudulent, Taylor nonetheless asks this Court to find State

Fund's conduct unreasonable under § 39-71-611, MCA, and award the

twenty-percent statutory penalty against State Fund pursuant to §

39-71-2907, MCA. Reasonableness is a question of fact. Stordalen

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v. Ricci's Food Farm (1993), 261 Mont. 256, 258, 862 P.2d 393, 394.

We must determine whether substantial credible evidence supports

the court's finding that State Fund's actions were reasonable and

that Taylor was not entitled to the statutory penalty.

The statutory penalty set forth in § 39-71-2907, MCA, was not

intended to eliminate an insurer's assertion of a legitimate

defense to liability. Paulson v. Bozeman Deaconess Found. Hosp.

(1984), 207 Mont. 440, 444, 673 P.2d 1281, 1283. Here, State Fund

pled and proved the nine elements of fraud in defending its

decision to terminate Taylor's benefits. Further, the court

determined that State Fund's actions were not unreasonable and that

Taylor was not entitled to attorney's fees or the statutory

penalty. As is illustrated by the court's findings that two of

Taylor's three claims were fraudulent, substantial credible

evidence supports the court's finding that State Fund's actions in

terminating Taylor's benefits were reasonable. Accordingly, we

conclude that the Workers' Compensation Court did not err in

failing to award attorney's fees, costs, or the statutory penalty.

Affirmed.

1 1
Justices

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Justice William E. Hunt, Sr. specially concurs

I concur in the conclusions reached by the majority but do not

agree with all that is said in the opinion.

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