No. 14853 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1980 

FRANCIS HAYES, 

Plaintiff and Appellant, 

AETNA FIRE UNDERWRITERS, a 

corporation, and GEORGE WOOD, 

d/b/a COMPENSATION ADJUSTERS, INC., 

Defendants and Respondents. 

Appeal from: District Court of the Fourth Judicial District, 

Honorable Jack L. Green, Judge presiding. 

Counsel of Record: 

For Appellant: 

Hoyt, Trieweiler, Lewis & Regnier, Great Falls, Montana 

John Hoyt argued, Great Falls, Montana 

For Respondents: 

Garlington, Lohn & Robinson, Missoula, Montana 

Larry E. Riley argued, Missoula, Montana 

Church, Harris and Johnson, Great Falls, Montana 

Cresap S. McCracken argued, Great Falls, Montana 

Submitted: January 15, 1980 

Decided : MAR I E 1980 

Filed: @AR 1 ? 198C 
Mr. Justice Gene B. Daly delivered the Opinion of the Court. 

This is an appeal from a judgment of dismissal of plaintiff's action from the District Court of the Fourth Judicial 

District, in and for the County of Missoula. 

Plaintiff was injured within the course and scope of his 

employment with JMS Construction in an industrial accident that 

occurred on October 23, 1975. Defendant Aetna was the Plan I1 

carrier for JMS Construction. Aetna employed defendant Wood to 

handle the adjusting of workers' compensation claims on its behalf. Both defendants accepted plaintiff's workers' compensation 

claim as compensable under the Workers' Compensation Act. 

In January 1977, plaintiff filed a complaint against Aetna 

and Wood in the District Court of the Fifteenth Judicial District, 

in and for the County of Roosevelt, alleging tortious acts on the 

part of Aetna and Wood with respect to the adjusting and handling 

of his workers' compensation claim. Aetna and Wood appeared and 

moved to dismiss. The Roosevelt County District Court granted the 

motion to dismiss on May 12, 1977, determining that plaintiff first 

had to establish his right to compensation before the Workers' 

Compensation Court, which possessed exclusive jurisdiction. 

Following the Roosevelt County District Court's dismissal, 

plaintiff pursued his claim for workers' compensation benefits 

before the Workers' Compensation Court, wherein he prevailed. 

Aetna then appealed the Workers' Compensation decision to the 

Montana Supreme Court. This Court affirmed the decision of the 

Workers' Compensation Court. Hayes v. J.M.S. Const. (1978), 

Mont . , 579 P.2d 1225, 35 St.Rep. 722. 

Thereafter, plaintiff filed an amended complaint in Roosevelt County District Court in July 1978, alleging that Aetna and 

Wood had committed the intentional torts of fraud, conversion 

and intentional infliction of emotional distress. Plaintiff also 

alleged that Aetna and Wood had continuously refused to pay 
compensation benefits and medical bills. Both Aetna and Wood 

moved to dismiss in August 1978. On September 12, 1978, the 

Roosevelt County District Court denied the motions of Aetna and 

Wood to dismiss and ordered responsive pleadings. 

The case was then transferred to Missoula County by 

stipulation of counsel, together with a memorandum opinion issued 

by the Honorable M. James Sorte, Judge of the District Court, 

Fifteenth Judicial District, Roosevelt County. The pertinent 

part reads: 

"By reason of a stipulation filed by counsel, 

this case is transferred to the jurisdiction of 

Missoula County, Montana. However, there has been 

filed in the case, Plaintiff's Reply to the Objections by Aetna,Fire Underwriters to Plaintiff's 

Motion to Dismiss. The tenor of the reply is that 

counsel for Plaintiff entered into a stipulation 

that the matter could be transferred to Missoula 

County but counsel for Defendants have raised 

certain questions that have already been ruled 

upon by this Court. It is the opinion of this Court 

that the matters that have been briefed, considered 

by the Court, and ruled upon, are the rule and law 

of the case in this matter and that the District 

Court of the Fourth Judicial District is and should 

be bound by the rulings of this Court on all matters 

that have been previously brought before the Court, 

ruled upon, and are now final for those reasons. 

To allow counsel to again raise the same questions as 

have been ruled upon by this Court would do nothing 

less than encourage counsel to shop around for a 

different venue so that their position could be ruled 

upon on several occasions. All of this is contrary 

to the clear intent of our rules of procedure." 

In disregard of Judge Sorte's Opinion, Wood and Aetna refiled 

in the Missoula County District Court on February 28, 1979 and 

March 13, 1979, respectively, motions which had been previously 

ruled upon in Roosevelt County. Such refiling constitutes a 

contempt. Sections3-1-502 and 503, MCA. On June 1, 1979, the 

Missoula County District Court filed an order dismissing plaintiff's 

complaint upon the grounds that the District Court lacked jurisdiction because exclusive jurisdiction rested with the Workers' 

Compensation Court under section 92-204.1, R.C.M. 1947, and the 

complaint failed to state a claim against the defendant upon which 
relief could be granted. 

Plaintiff now appeals from the judgment of the Missoula 

County District Court granting the defendants' motions to dismiss. 

The appellant in this case states the issue for review 

by this Court as follows: whether a worker who sustains an injury covered by the Workers' Compensation Act may assert in 

District Court a separate claim for damages alleging that the 

insurer and its adjustor committed intentional torts and acted 

in bad faith in adjusting and processing the workers1 compensation 

claim. Stated in another manner, is a complaint alleging that a 

workers' compensation insurer and its adjustor committed the 

intentional torts of fraud, conversation, and intentional infliction of emotional distress upon a workers' compensation claimant 

within the exclusive subject matter jurisdiction of the Workers' 

Compensation Court? 

Respondent George Wood agrees with the issue as stated by 

appellant. Respondent Aetna would like to confine the issue to 

the question: can the injured workman have his cake and eat it 

too? 

We will accept the issues as formulated by appellant. 

The dismissal by the Missoula District Court dated May 31, 

1979, is with prejudice for lack of jurisdiction and exclusive 

jurisdiction in the Workers' Compensation Court under section 

92-204.1, R.C.M. 1947, and because the complaint fails to state a 

claim against the defendant upon which relief can be granted. 

It is a little difficult to agree or disagree with the 

Missoula District Court because the presiding judge rendered no 

opinion. We do not know if the court meant that under the exclusivity provision of section 92-204.1, R.C.M. 1947, (now section 

39-71-411, MCA) the Workers' Compensation Court has jurisdiction 

to try willful torts not arising out of the actual employment or 
that the pleading was such that it did not state a claim in any 

court. In any case, the dismissal appears to be in direct conflict with the law of the case as established by the District 

Court of the Fifteenth Judicial District, the court of original 

jurisdiction. 

We will not attempt to evaluate the merits of the dismissed 

case by the manner in which it was pleaded, but rather try to evaluate it from the standpoint of the type of action at bar and its 

genesis. 

At the center of the dispute is the exclusivity provision 

of the Montana Workers' Compensation Act, which is set forth in 

section 39-71-411, MCA. That statute states: 

"For all employments covered under the Workers' 

Compensation Act or for which . an . election has 

been made for coveraae under this chapter, the 

provisions of this chapter are exclusive. Exce~t as ~rovided in part 5 of this chapter for 

unlnsureh employers and except as othekwise 

provided in the Workers' Compensation Act, - an 

employer is not subject to any liability . . whatever for the death of or personal injury to an 

em~lovee covered bv the Workers' Compensation 

AC~ o; for any claims for contribution or indemnity asserted by a third person from whom 

damages are sought on account of such injuries 

or death. The Workers' Compensation Act binds 

the employee himself, and in case of death binds 

his personal representative and all persons having any right or claim to compensation for his 

injury or death, as well as the employer and the 

servants and employees of such employer and those 

conducting his business during liquidation, bankruptcy, or insolvency." (Emphasis added.) 

Professor Larson in his treatise on Workmen's Compensation Law has categorized exclusivity statutes in state workers' 

compensation schemes into three general types. Larson, Workmen's 

Compensation Law, S 66.00, at 12-20, 21. Montana's statute is a 

blend of two categories. It is intended to be a broad surrender 

of liability. It partakes of the California and Michigan type 

statutes, which state that an employer shall have "no other liability whatsoever," and the New York type statute, which carries 

the surrender of liability one step farther by specifying that 
the excluded action includes those by "such employee, his personal representative, husband, parents, dependents or next of 

kin, or anyone otherwise entitled to recover damages, at common 

law or otherwise on account of such injury or death." The last 

category is the Massachusetts type, which is the narrowest and 

states that the employee, by coming within the act, only waives 

his common law rights. 

In three recent cases, this Court has been concerned with 

the exclusivity of Montana's Workers' Compensation Act. Each 

time the Court has resolved any doubt about the exclusivity of 

remedies in favor of the provisions of the Act. See Jacques v. 

Nelson (1979), Mont . , 591 P.2d 186, 36 St.Rep. 287; 

Carlson v. Anaconda Co. (1974), 165 Mont. 413, 529 P.2d 356. 

Cordier v. Stetson-Ross, Inc. (1979), Mont. , 604 P.2d 86, 

Respondents urge that Carlson is on all fours with the 

present cases. Carlson may be distinguished from the case at bar, 

however, on the basis that the facts and circumstances in Carlson 

give the case a much different character. Whereas the present 

case involves intentional torts or the presence of bad faith, 

Carlson involved a case of negligence or mismanagement. In Carlson, 

the Court seems to have accepted Anaconda's argument that the 

failure to pay resulted from a mix-up in record keeping, not from 

bad faith. The Court distinguished Carlson from cases like Reed 

v. Hartford Accident & Indemnity Co. (E.D. Pa. 1973), 367 F.Supp. 

134, which involved the commission of intentional torts. In Carlsonthe Court stated: 

"Reed, cited by plaintiff is distinguishable on 

theacts. There the action at law was against 

the employer's Workmen's Compensation insurance 

carrier based on independent intentional torts 

and breach of an express contract to pay total 

disability benefits by false, fraudulent and 

perjured means. This is a far cry from the facts 

here and the attempted analogy fails." 165 Mont. 

at 417, 529 P.2d at 358. 
Jacques involved a claimant who filed a common law tort 

action in ~istrict Court against his employer, Anaconda Company, 

for injuries sustained while he was working as an employee at 

the Anaconda Reduction Works. Anaconda was a Plan I self-insurer 

under the Workers' Compensation Act who had failed to file an 

employer's first report of injury or to give the required notice 

that the claim was being denied. Anaconda moved to dismiss the 

complaint on the grounds that Jacques' remedy was exclusively 

within the Workers' Compensation Act. The motion was granted. 

Upon appeal, Jacques contended that the Act was not his exclusive 

remedy because Anaconda had elected not to comply with certain 

mandatory requirements of the Act. This Court rejected Jacques' 

argument by stating: 

"The Act requires the employer to file a first 

report of injury. . . Here, plaintiff's employer 

failed to do so. The Act provides a civil penalty 

of not more than $1,000 against the employer for 

failure to file the first report of injury. . . Nowhere in the Act does such failure constitute 

an election by the employer not to be bound by the 

Act or subject him to a common law tort action. 

The mandatory coverage of all private employment 

not expressly exempted under the Act would be nullified were we to hold that such failure removes 

Workmen's Compensation coverage. 

"The Act further requires the employer to give 

written notice to the employee of denial of his 

claim. . . Plaintiff alleges he never received such 

notice. The Act provides for the imposition of a 

10% penalty if compensation is awarded by the Workers' 

Compensation Court. . . Nowhere in the Act does 

failure to give such notice remove the employer 

from coverage under the Act or subject him to a common law tort action. 

"If the law were otherwise, the purpose and intent 

of the mandatory coverage of the Act would be effectively subverted. The employer could eliminate the 

coverage of the Act over a particular employee or a 

particular accident at will simply by refusing to 

file an accident report or failing to notify its 

employee of a, denial of his claim. This would indeed be a unique and unparalleled kind of Workmen's 

Compensation Act coverage." Jacques, supra, 591 P.2d 

at 187, 188. 

Again, respondents urge that Jacques is persuasive and 

controlling. Jacques may be distinguished from the cases at bar, 
however, on the basis that it involved an action in District 

Court against an employer for injuries sustained by an employee 

during the course of his employment, whereas the present cases 

involve actions in District Court against insurers and their 

adjusters for intentional torts committed after the employment 

relationship had ceased. Where the exclusivity statute states 

that "an employer is not subject to any liability whatever for 

the death of or personal injury to an employee," Jacques clearly 

fits within the exclusion. (~mphasis added.) 

The law is very clear and Montana follows it with regards 

to Workers1 Compensation exclusivity and the exclusive jurisdiction of the Workers' Compensation Court to settle disputes of all 

kinds that arise in good faith and legitimately out of workers' 

claims. Yet, the respondents fail to follow the argument through 

the problems we face in the case at bar. What happens to an intentional or bad faith tort that arises, not out of the workers' 

employment, but after his employment has ceased? Although it is 

not new in the law, Montana has not reached that situation until 

now. Other jurisdictions have been confronted with the precise 

issue presented in this case, Gibson v. Nat. Ben ~ranklin Ins. Co. 

(1978) I Me. , 387 A.2d 220; Martin v. Travelers Insurance 

Company (1st Cir. 1974), 497 F.2d 329; Stafford v. Westchester 

Fire Ins. Co. of N.Y., Inc. (Alaska 1974), 526 P.2d 37; Unruh v. 

Truck Insurance Exchange (1972), 102 Cal.Rptr. 815, 498 P.2d 1063; 

Coleman v. American Universal Ins. Co. (1970), 86 Wis.2d 615, 273 

N.W.2d 220. See also Reed, supra. These cases have upheld the 

right of a claimant to bring an action in District Court against 

an insurer and its adjuster for independent intentional torts 

committed in the processing of a workers' compensation claim. 

The right has been upheld on several different grounds. 

First, and most frequently, the courts have upheld the right to 

bring an action for independent intentional torts because the 
tortious conduct, which gives rise to the action, does not arise 

out of the original employment relationship. It occurs after 

employment and arises out of the employee's relationship with the 

insurance carrier after the employment relationship has been terminated. It is preuicated on an act after the injury and during 

the settlement of the claim. The insurance carrier is no longer 

the "alter ego" of the employer, but rather is involved in an 

independent relationship to the employee when committing such tortious acts. Gibson, 387 A.2d at 222-223; Reed, 367 F.Supp. at 

Martin, Stafford, Unruh , 

498 P.2d at 1073; Coleman, 273 N.W.2d at 223. Perhaps the best 

statement of the concept is found in Coleman, which stated: 

"The injury for which remedy is sought in the 

instant case is the emotional distress and other 

harm caused by the defendants' intentional acts 

during the investigation and during the course of 

payment of the claim. This claimed injury was 

distinct in time and place from the original onthe-job physical injury which was subject to the 

Compensation Act. The injury for which recovery 

is sought in the present actions did not occur 

while the plaintiff was employed or while he was 

performing services growing out of and incidental 

to his employment. As the plaintiff repeatedly 

and correctly stresses in his brief, this action 

is based not on the original work-related injury 

but on a second and separate injury resulting from 

the intentional acts of the insurer and its agents 

while investigating and paying the claim. The Act 

does not cover the alleged injury, and the exclusivity provision does not bar the claim." 273 N.W.2d 

at 223. 

The second basis upon which courts have upheld the right 

to bring an action for independent intentional torts concerns the 

penalty provisions of the state workers' compensation acts. 

Many state acts like Montana's contain provisions which create 

penalties where employers fail to pay benefits or exercise unreasonable delay in paying such benefits. Several courts have determined that these provisions are not exclusive with respect to a 

claimant's remedies because legislatures did not contemplate them 

as being remedies for intentional wrongdoings. Where the wrong is 
intentional, malicious and calculated to cause intimidation, 

courts have held that a claimant is entitled to another remedy. 

Gibson, 387 A.2d at 223; Martin, 497 F.2d at 331; Stafford, 

526 P.2d at 43; Coleman, 273 N.W.2d at 224. 

One court has determined that the character of the penalty 

provisions within the workers' compensation schemes is such that 

they are especially applicable to kinds of conduct which are not 

intentional. Though they may be triggered by intentional wrongdoings or the presence of bad faith, they apply to conduct which 

falls short of bad faith, such as cases of mismanagement or deficient administrative practices. Where intentional wrongdoing 

is involved, one court has stated that the conduct cannot merely 

be expiated by penalty payments augmented in the amount of 10%. 

Coleman, supra, 273 N.W.2d at 224. 

Other bases have been offered by courts to substantiate 

the right as well. One court has relied upon a state constitutional provision, such as Article 11, section 16, 1972 Montana 

Constitution, which provides that every person shall have a remedy 

by due course of law for an injury done to him. Gibson, supra, 

387 A.2d at 223. 

The weight of authority has resolved this issue in favor 

of an independent action in the District Court for an intentional 

tort, as it does not arise out of an employment relationship. The 

penalty provisions of state schemes are not intended as remedies 

for intentional wrongdoings. The Compensation Act should not be 

a "shield" which will insulate those who would engage in intentional wrongdoing in the settlement and investigation of workers' claims. 

No one should be allowed intentionally and tortiously to cut off 

a claimant unilaterally for whatever purpose they choose and then 

hide behind workers' compensation exclusivity in assurance that the 

only retribution will come in the form of a compensation penalty 
paid for by society. 

Insofar as the plea made by the respondents in their 

limited defense of the carrier, we can only add that any 

party involved in the business of insurance knows its 

rights and responsibilities as well as its obligation 

to deal in good faith and with fairness toward those who 

are entitled to the protection of the Workers' Compensation Act. 

The order and judgment dismissing plaintiff's complaint is hereby vacated and set aside and the cause remanded to the District Court for further proceedings. 

We concur: 

%A Q0&4da& 

Chief Justice 

c16.IyLBJ2!dL/ Justices 
Mr. Justice John Conway Harrison specially concurring: 

In signing this opinion, I must express a real concern-- 

one perhaps that needs the attention of the legislature if 

our workers' compensation system is to properly care for the 

needs of our citizens. I recognize the right of a claimant 

to bring an action for the commission of an intentional tort 

in the settling of a workers' compensation claim. I am concerned, however, with the effect of these cases on the practical workings and operation of the workers' compensation 

system. Today we possibly open the door to abuse in the 

settling of workers' compensation claims. A claimant who 

disagrees with a settlement offer made to him by an insurance adjuster may escape the provisions of the Workers' 

Compensation Act by merely alleging the commission of an 

intentional tort. This may prove to be a tactic that places 

insurance adjusters at a severe disadvantage in settling 

claims. I have no special affinity for insurance adjusters. 

However, this is not the fashion in which the legislature 

envisioned the settlement process to operate. 

The safeguards against this type of abuse lie in the 

procedures established for dismissing actions that lack 

merit at the District Court level. The safeguards include 

motions for summary judgment and motions for directed verdicts. Prompt impositions of these safeguards will protect 

against abuse of the workers' compensation settlement process by lessening the possibility that an insurance adjuster will be forced to defend against a claim that lacks 

merit. The case here is before the Court on a motion to 

dismiss. At this stage of the proceedings, the allegations 

of the complaints must be taken as true and do state a 

cause of action for intentional tort. I, therefore, agree 
procedurely with the result reached in the case. I cannot 

say, however, that I would agree with the results if the case 

came to us after summary judgment. The claimant would have 

to produce much more evidence than the record now indicates 

exists before the facts would show intentional wrongdoing 

by the insurance adjuster in this case. This is especially 

true given the real practical problems of abuse of the 

workers' compensation system that may occur if this Court 

and the District Courts do not carefully enforce the safeguards provided by the judicial process. I therefore join 

in the opinion of the Court in this case, but with the 

above-noted reservations.