No. 79-10 INTHE SUPREME COURT OF THE STATE OF MONTANA

- 1980

CLARENCE WILLOUGHBY, Claimant and Respondent,

VS

# . ARTHUR G. McKEE & CO., Employer, and GENERAL ACCIDENT FIRE & LIFE, Defendant and Appellant.

Appeal from: Workers' Compensation Court Counsel of Record: For Appellant: Henningsen, Purcell & Genzberger, Butte, Montana For Respondent: Burgess, Joyce and Whelan, Butte, Montana

Submitted on briefs: February 27, 1980 Decided:

### APR 

## 1

# - li-" 7

## ,. Filed: 1.' !.

## ,Mr. Justice John Conway Harrison delivered the Opinion of the Court. This is an appeal from an order of the Workers' Compensation Court granting claimant,Clarence Willoughby, a partial lump sum settlement of benefits due. Claimant is a fifty-eight year old man whose work history consists of holding jobs in heavy labor. He has been employed as a miner, concrete finisher, and bricklayer. In November 1974 claimant was employed as a bricklayer for the Arthur G. McKee Company. During that month he suffered

an industrial accident injury while performing construction work for his employer at the Anaconda smelter in Anaconda, Montana. He fell off a scaffold which was located approximately six feet above a concrete floor and sustained injuries to his neck, left arm and left thumb. He has notworked since the accident. Claimant underwent a spinal fusion and surgery to his left elbow and thumb. At the time of the injury, claimant was earning approximately $9.50 per hour or $380weekly. He had no education

or work experience in any other type of employment, and his formal education consisted of completing grades one through eight. A petition for compensationwas filed with the Workers' Compensation Court to determinewhat benefits, if any, to which claimantwas entitled. A hearings examiner, Robert B. Sherman,was appointed by the court, and a hearing was held with respect to the petition onApril 19, 1978. After the hearing, the examiner entered findings of factand conclusions of law. The examiner found that claimant was entitled to compensation,as a totally and permanently disabled person under the Workers' CompensationAct, and that claimantwas entitled to compensation for all medical expenses incurred with respect to injurieswhich were causally related to the accident inNovember. On September 21, 1978, the Workers' Compensation Courtadopted the examiner's findings of factand conclusions of law. During the settlementof the workers' compensation claim and following the Workers' Compensation Court's order, McKee Company's insurance carrier, General Accident Fire and Life,made payments to claimant. Claimant also received benefits under the Social Security Disability Act. Pursuant to section 39-71-702,MCA, the carrier reduced claimant's workers' compensation benefits by one-half of the benefits received under the Social SecurityAct. OnAugust 8, 1978, itwas discovered thatGeneralAccident had overpaid claimant by approximately $8,180.38. TheWorkers' Compensation Court ordered claimant to make repaymentof that amount at a weekly rate of $25. Including his liability for repayment, claimantpresently receives individual weekly benefits of $96.29 from Social Security and $23.26 from Workers' Compensation,or $518.85 in total individual monthly benefits. This compares to his monthly salary of approximately $1,650while he was working

as a bricklayer. Claimant also receives two auxiliary benefits for hisminor children,who live in Seattle with claimant's firstwife. Claimantwas divorced and has since remarried. On May 13, 1979, claimantpetitioned the Workers' CompensationCourt for a partial lump sum settlement. Attached to the petition was a list of expenses to which the settlement, if granted,was to be applied. The expenses
were the following:House Trailer Refrigerator and TV Lot Rental Phone Power Water Hospital Bernie's Pharmacy Dr. Rotar Durritts Bill Willoughby--personal loan--brother Walnut St. Grocery Taxes on House Trailer Trailer Insurance A-1 Ambulance Car--monthly payments New Roof on Trailer Monthly Reserve TOTAL A hearing was held onAugust 30, 1979,with respect to the petition. The only evidencepresented at the hearing

was claimant's testimony. On September 10, 1979, the Workers' Compensation Court ordered that the petition be granted in the amount requested. From this order, appellant in this action, GeneralAccident Fire and Life, appeals. A single issue is presented for review: Did the Workers' Compensation Court abuse its discretion in granting claimant's petition for a partial lump sum settlement? Statutory authority for the conversion of regular periodic benefits payable under the Workers' Compensation Act to a total or partial lump sum settlement is found in section 39-71-741, MCA. In 1979, section 39-71-741, MCA,

was amended to give the Workers' Compensation Court the authority to settle disputes concerning lump sum settlements where an insurer and a claimant disagreed. Prior to 1979 the sole discretion for determining the amount and advisability of lump sum settlementswas vested in either the Workers' Compensation Division or the Industrial Accident Board.The general rule concerning the award or denial of lump

sum settlementsunder the Workers' CompensationAct iswell settled in this state. Lump sum settlementsare only granted in exceptional circumstances. Where the best interests of the claimant are generally served by paying compensation in regular periodic installments, the conversion of benefits to

a lump sum settlementhas ecognized as the exception rather than the rule. Comp. Ins. Fund)(1979)

## , Mont. 

## , 593 P.2d 739, 741, 36 St.Rep. 799, 801; Kuehn v. Nat. FarmersUnion Co. (1974), 164Mont. 303, 307, 521 P.2d 921, 923;Legowik v. Montgomery Ward (1971),157 Mont. 436, 440, 486 P.2d 867, 869; Kent v. Sievert (1971), 158Mont. 79, 81, 489 P.2d 104, 105. "The fundamental basis of workmen's compensation laws is that there is a large element of public interest in accidents occurring frommodern industrial conditions, and that the economic loss caused by such accidents shall not necessarily rest upon the public but that the industry in which the accident occurred shallpay, in the first instance, for the accident. [Citationomitted.] Generally, the best interests of the disabled workman or his dependentswill be best served by paying the compensation in regular installmentsaswages are paid. Such payments supply in a measure the loss of the regularpaycheck. [Citationomitted.] "'Commutation being a departure from the normal method of payment is to be allowed only when it clearly appears that the conditionof the beneficiaries warrants such a departure,but there should be no hesitancy inpermitting suchdeparture where the best interestsof the parties demand it. [Citationomitted.]'" Laukaitisv. Sisters of Charity (1959), 135Mont. 469, 472- 73, 342 P.2d 752, 755. Lump sum settlements are only granted where there is "outstanding indebtedness," "pressing need," or where "the best interests of the claimant,his family and the general public will be served.""The criteria determinative of the advisability of conversion toa total or partial lump sum award have generally been held tobe I* 

## * *the best interests of the claimant, his family and for the best interests of the public

## * * *.' Kustudia v. Ind. Acc. Brd., 127Mont. 115, 123, 258 P.2d 965, 969. See alsoLegowik v. Montgomery Ward, 157Mont. 436, 486 P.2d 867. The existence of a 'pressing need' and/or 'outstanding indebtedness' has likewise been held tobe relevant criterion, Kent v. Sievert, supra." Kuehn v. Nat. Farmers Union Co., supra, 164 Mont. at307, 521 P.2d at924. In this case, we are faced with reviewing whether the Workers' Compensation Court should have awarded a lump sum settlement to claimant. Where we have considered this issue inother cases, we have stated that the decision to award or deny a lump sum settlement willnot be interfered with on appeal unless there has been an abuse of discretion. Utick

v. StateComp. Ins. Fund, supra; Sullivanv. Anselmo Mining Corp. (1928), 82 Mont. 543, 557-58, 268 P. 495, 501; Landeen

v. Toole County Refining Co. (1929), 85 Mont. 41, 47, 277 P. 515, 617. The findings of the lower tribunal orboard will be presumed correct and affirmed if supported by substantial evidence. Newman v. Kamp (1962), 140Mont. 487, 490, 374 P.2d 100, 102. The decisionwillbe reversed, however, if the evidence clearlypreponderates against it. Legowik, supra. Here, the Workers' Compensation Court based itsdecision to award claimant a partial lump sum settlement on the basis of evidence adduced ata hearing. Claimant, the only witness testifying, presented evidence of several outstanding debts. He testified, forexample, thathe owed an outstanding balance on a TV and refrigerator he had purchased and that he was "behind" on his grocery, phone, water and power bills. A letter from the Montana Power Company was introduced with respect tohispower bill. It stated thatserviceswould be terminated if claimant's accountwas not paid in full. Claimant also presented evidence thatpayments remained on his trailer house, that additional sums

were owed for taxes and insurances, and that expenses had been incurred for the rental of his trailer house lot. In addition to these debts, claimant testified that he needed money for future expenses. His trailer house roof needed repair,he needed a newwashing machine, and he wanted to buy an economy car thatwas fuel-efficient. He also stated, though itwas not specifically mentioned on his list of debts, that he expected to incur a $1,500 dental bill for a setof false teeth for his wife,who did notwork because she had heart trouble. Appellant contendsupon this appeal that the court abused its discretion in awarding claimant compensation to pay these ordinary debts and anticipated future expenses. Appellant objects particularly to the court awarding sums for the purchase of a fuel-efficient economy car and the payment of dental bills for his wife's false teeth. Appellant submits, with reference to these future expenses, that there was no demonstration of "outstanding indebtedness"or "pressingneed.

### " In considering appellant's argument,we note, first of all, that several courts have allowed a claimant to pay his past debts with proceeds from a total or partial lump sum settlement. Employers Mut. Liability Ins. Co. 

### v. Hood (1976), 137Ga.App. 555, 224 S.E.2d 460; Texas ~mployers Ins. Ass'n 

### v. Trapp (Tex.Civ.App. 1953)r 258 S.W.2d 112; U.S. Fid. & Guar. Ins. Co. 

### v. Bradley (1977),142 Ga.App. 572, 236 S.E.2d 543. Courts have also allowed claimants touse lump sum settlementproceeds to pay installmentson automobiles or to pay bills for future medical expenses. See,Bethlehem Steel Co. v. Taylor (1952),199Md. 648, 87 A.2d 844; Simpson Lumber Co., Inc. v. Brown (Ky. 1975), 520

Other jurisdictions have denied claimants lump sum settlements to pay past debts. See, Johnson

### v. General Motors Corp. (1967),199 Kan. 720, 433 P.2d 585; Gill 

### v. Ozark Forest Prods., Inc. (1974),255 Ark. 951, 504 S.W.2d 357;Woods 

### v. Sumter Stress-Crete Inc. (1976),266 S.C. 245, 222 S.E.2d 760. At least one authority has criticized the practice on the followingbasis: 

# ".

.

# . If a partially or totally disabled worker gives up these reliableperiodic payments in exchange for a large sum of cash immediately in hand, experiencehas shown that inmany cases the lump sum is soon dissipated and the workman is rightback where he would have been if workmen's compensationhad never existed. One reason for the persistence of this problem is that practically everyone associated with the system has an incentive--at least a highly-visible short-term incentive--to resort to lump-summing



# ... "The only solution lies in conscientious administration,with unrelenting insistence that lumpsumming be restricted to those exceptional cases in which it can be demonstrated that the purpose of the Act will be best served by a lump-sum

- - award." Larson,Workmen's compensation 

## - Law, 882.71 at 15-572, 573. This Court has had at least two occasions to review cases where lump sum settlementsand past debts were concerned. In Kuehn, 164Mont. at 307-08, 521 P.2d at 924, we approved of a lump sum settlementwhere proceedswould be applied to remaining installments on a home, a pickup truck and other miscellaneous bills, including attorney fees. In Kustudia, 127Mont. at 123-24, 258 P.2d at 969,we affirmed the granting of a lump sum settlement where claimant intendedtouse the proceeds topay past debts and attorney fees and apply the remaining balance toward futureexpenses he would incur inhksand his family's move toa more desirable location. The move was necessitated because of hismental and physical health problems. Apart from thisprecedent, however, we have stated previously, and reaffirm here, that each case for a lump sum payment stands or fallson itsown merits. Utick, 593 P.2d at741, 36 St.Rep. at802. With regard to theparticular facts and circumstances of thiscase, we find that therewas

no abuse of discretion. The Workers' Compensation Court properly awarded claimant a lump sum settlement. Prior to the award, the claimant demonstrated both "pressingneed" and "outstanding indebtedness." The award was made inthe best interests of the claimant, his family and the general public. The compensation sought here was not, as in some cases, forpursuing a choice ina different lifestyle. See Laukaitis, supra; Malmedal v. Ind. Acc. Bd. (1959), 135 Mont. 554, 342 P.2d 745. Rather, it was sought to satisfy debtswhich had been orwould be incurred for basic necessities. Atstakewas claimant's need for shelter, groceries, water, power, medical treatment, and transportation. None of these thingsmay be called luxuries. Claimant presented virtually uncontroverted evidence of his need atthe hearing, and we find that the court acted with proper discretion. As an appellate courtof review, we have consistently recognized incases of thiskind that a tribunal orboard willbe afforded wide discretion indetermining whether a lump sum settlement should or should not be granted. Kuehn, 164 Mont. at307, 521 P.2d at923; Kent, 158Mont. at81,489 P.2d at 105. Where the IndustrialAccident Board awarded a lump sum settlement in Legowik, 157Mont. at 440, 486 P.2d at 869,we stated: "'The determination of this question requires the exercise of sound discretion. The board is more favorably situated than the court to familiarize itself with the circumstances surrounding the applicant, to consider his needs, and the resultswhich probably will follow action granting or denying the application;the power "must be exercised in conformitywith the law and so as to best promote the ends of justice."'" In this instance, the Workers' Compensation Courtwas in the best position to judge the needs of the claimant. There was no abuse of discretion. Where the solution to the lump-summing problem lies in conscientious administration,

we find that the court acted properly. Accordingly,we affirm the judgment of the court.

We concur:

sMv Chief Justice 

# 6?dd&&Q