IN THE SUPREME COURT OF THE STATE OF MONTANA 

No. 84-323 

TOM W. PUTNAM, 

Claimant and Appellant, 

CASTLE MOUNTAIN CORPORATION, 

Employer, 

UNITED PACIFIC/RELIANCE INSURANCE 

COMPANY, 

Defendant and Respondent, 

and 

LEONARD NIELSEN, d/b/a NIELSEN LOGGING, 

Employer and Respondent, 

and 

STATE COMPENSATION INSURANCE FUND. 

and 

Y: =; DIVISION OF WORKERS' COMPENSATION, ,kc i-,i tz - .rL " %0' ".,e3 

Defendants and Respondents. 

ORDER 

We have now considered the petitions for rehearing filed 

on behalf of Tom W. Putnam and State Compensation Insurance 

Fund. We have concluded that a revision in our opinion is 

appropriate. 

IT IS ORDERED: 

1. That the full paragraph set forth immediately following the statement of issues on page 2 of our opinion 

decided June 13, 1985, is hereby withdrawn, the withdrawn 

paragraph being as follows: 
"Initially there were disputes as to the 

identity of the insurer and the extent of 

coverage, all of which have been resolved. The respondent in this proceeding i-s State Compensation Insurance Fund 

(State Fund) ." 

In place of such withdrawn paragraph, the following paragraph 

is hereby inserted in our opinion: 

"There is a dispute as to the identity of 

the employer of the claimant. The Workers' Compensation Court found that claimant 'was an employee of either Nielsen or 

the defendant Castle Mountain Corporation.' The respondent in this proceeding 

is State Compensation Insurance Fund 

(State Fund), which has agreed to accept 

liability for the claimant's claim with a 

re'servation of rights against Castle 

Mountain Corporation and its insurance 

carrier. We do not rule upon which party 

was the employer of the claimant." 

2. With the exception of the action taken in paragraph 

1, the petitions for rehearing are denied. 

3. The opinion in the above cause dated June 13, 1985, 

as modified by the above paragraph change, is approved and 

constitutes the final o inion in this cause. 4.J 

DATED this 7 %ay of July, 1985. 

We concur: . ,-' 

A'- ,q,TL,& 

ccr(cyief Justice 

Justice 0' '-- 
No. 84-323 

IN THE SUPREME COURT OF THE STATE OF MOlJTANA 

1985 

Claimant and Appellant, 

CASTLE b10UNTAIN CORPORATION , 

Employer, 

and 

UNITED PACIFIC/mLIANCE INSURANCE 

COMPANY, 

Defendant and Respondent, 

and 

LEONARD NIELSEN, d/b/a NIELSEN LOGGING, 

Employer and Respondent, 

and 

STATE COMPENSATION INSURANCE FUND, 

and 

DIVISION OF WORKERS' COMPENSATION, 

Defendants and Respondents. 

APPEAL FROM: Workers' compensation Court, The Honorable Timothy 

Reardon, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

William T. Kelly, P.C.; Halverson, Sheehy, Prindle h 

Finn; Patrick Prindle, Billings, Montana 

For Respondents: 

Hughes, Kellner, Sullivan & Alke; John Sullivan, 

Helena, Montana 

Keefer, Roybal, Hansen, Stacey & Jarussi; Neil 

Keef er, Billings, Montana 

Submitted on Briefs: Jan. 24, 1985 

Decided: June 13, 1985 

Filed: 

SUN e :3 1985 

Clerk 
Mr. Justice Fred J. Weber delivered the Opinion of the Court. 

This is an appeal from the order of the Workers' Compensation Court granting partial summary judgment. The appeal 

challenges the court's refusal to apply the statutory penalty 

to medical benefits and a portion of the weekly temporary 

total disability benefits. We modify a portion of the order 

and remand the cause for further proceedings. 

The issues are: 

1. Does the penalty portion of S 39-71-2907, MCA apply 

to medica 1 benefits? 

2. How should the penalty provisions of S 39-71-2907, 

MCA be applied to the following: 

(a) Temporary total disability benefits from the 

date of injury on October 6, 1981 to July 25, 1983, which 

were due on July 25, 1983 and not paid until after October 

11, 1983. 

(b) Medical benefits due on July 25, 1983 and not 

paid until after October 11, 1983. 

3. Did the temporary total disability rate awarded the 

claimant properly include all wages earned at the time of his 

injury? 

Initially there were disputes as to the 1-dentity of the 

insurer and the extent of coverage, all. of which have been 

resolved. The respondent in this proceeding is State Compensation Insurance Fund (State Fund) . 

Claimant suffered injuries in two different unrelated 

accidents. He was injured on January 16, 1981, while employed by a different employer as a truck driver, receiving 

weekly wages of $340 based upon a rate of $8.50 per hour. As 

a result of that unrelated accident, claimant received temporary total compensation benefits of $219 per week from January 16, 1981 to on or about November 10, 1981. On October 6, 
1981, while employed for a few days by Leonard Nielsen, 

claimant was severely injured when a dump truck ran over him. 

Initially, the State Fund denied the claim for the 

October 6, 1981 accident. The undisputed findings of fact by 

the Workers' Compensation Court include the following: 

1. In July 1981, the State Fund sent Niel-sen (employer) 

a premium statement for April 1 to June 30, 1981. That 

statement notified Nielsen that payment of the amount due was 

to be made within 30 days of the statement or coverage would 

be cancelled. 

2. On September 2, 1981, following non-payment by 

Nielsen, the State Fund sent Nielsen a "courtesy notice" 

statinq that his coverage was scheduled for cancellation on 

October 1, 1981. 

3. On October 8, 1381 (2 days after claimant's injury), 

Nielsen's payment was received by the State Fund. 

4. Through some type of a mix-up within the State Fund, 

the payment was not properly noted and Nielsen's coverage was 

cancelled. 

5. At the time of the claimant's accident, it was the 

policy of the State Fund to allow an employer a ten day grace 

period from the date of cancellation. (Nielsen's payment on 

October 8 was made within the ten day period from the cancellation date of October 1, 1981.) 

6. On October 26, 1981, claimant's attorney forwarded a 

claim for compensation in which Nielsen was listed as 

employer. 

7. By letter dated October 29, 1981, the Workers' 

Compensation Division advised claimant's attorney that 

Nielsen was uninsured. 

The Workers' Compensation Court also found that there 

was no further communication between the Division or the 
State Fund and claimant for approximately 17 months. Claimant's attorney called State Fund on March 18, 1983, and 

received a letter advising that Nielsen's policy was cancelled by State Fund on October 1, 1981 for failure to pay 

the premiums. Claimant filed a petition for emergency hearing. At that point, the State Fund started an inquiry into 

its prior determination on the question of coverage. On July 

25, 1983, the Bureau Chief of the State Fund was advised that 

Nielsen's coverage was in effect on October 6, 1981. The 

State Fund determined that it should accept liability for the 

claimant's claim. Various procedural steps followed, and the 

State Fund gave a number of assurances regarding acceptance 

of liability and its willingness to pay both compensation and 

medical benefits. 

On October 11, 1983, the Workers' Compensation Court 

heard oral argument on the case and ordered the State Fund to 

make payments of both medical benefits and temporary total 

disability benefits. The court then concluded that the 1981 

denial of liability for claimant's claim was not unreasonable 

within the meaning of the penalty statute, 5 39-71-2907, MCA. 

However, the court also reached the following conclusions: 

"Despite its continued agreement to do so, the 

State Fund had not paid compensation and medical 

benefits to the claimant as of the date of oral 

argument. This delay was unreasonable, and invites 

a penalty. The difficulty lies in determining at 

what point the State Fund should have reasonably 

realized its error and promptly tendered these 

benefits. . . . 

"The Fund acted promptly to ascertain the truth of 

the improper cancellation allegation found in the 

Petition, but its delay from July 25, 1983, to the 

order of benefits (October 11, 1983) was unreasonable. Therefore a 20% penalty shall be assessed to 

temporary total benefits due the claimant during 

that period. " 
The court then adjudged that claimant was entitled to a 20% 

increase in his temporary total disability benefits from July 

25, 1983 until October 11, 1983. 

Does the penalty portion of 39-71-2907, MCA apply to 

medical benefits? 

The pertinent portion of § 39-71-2907, MCA is: 

"When payment of compensation has been unreasonably 

delayed or refused by an insurer, either prior or 

subsequent to the issuance of an order by the 

workers' compensation judge granting a claimant 

compensation benefits, the full amount of the 

compensation benefits due a claimant, between the 

time compensation benefits were delayed or refused 

and the date of the order granting a claimant 

compensation benefits, may be increased by the 

workers' compensation judge by 20%." 

This issue has just been resolved by the case of Carlson 

v. Cain (Mont. 19851, P.2d , 42 St.Rep. 695. In 

that case, we concluded that an award for medical payments 

may be increased by the Workers' Compensation Court pursuant 

to the foregoing statute. 

How should the penalty provisions of S 39-71-2907, MCA 

be applied to the following: 

(a) Temporary total disability benefits from the date 

of injury on October 6, 1981 to July 25, 1983, which were due 

on July 25, 1983 and not paid until after October 11, 1983. 

(b) Medical benefits due on July 25, 1983 and not paid 

until after October 11, 1983. 

As to (a) weekly benefits from October 6, 1981 to July 

25, 1983, the lower court found a reasonable explanation for 

the failure to pay. It therefore concluded that the delay in 

payment up to July 25, 1983 was not a proper basis for penalty. In its order of partial summary judgment and in its 

subsequent order denying the petition for rehearing, the 
Workers' Compensation Court concluded that the penalty was 

warranted once the State Fund acknowledged it was liable for 

compensation benefits on July 25, 1983. The court further 

concluded that the penalty should be assessed on benefits 

which accrued between July 25, 1983 and Octob~r 11, 1983. 

The stipulation of the parties established that as of 

October 11, 1983, the following amounts were due from the 

State Fund to the claimant: 

Past due medical expenses $26,048.70 

Past due temporary total disability 11,979.42 

Lump sum advance 5,852.00 

Tota 1 $43,880.12 

We disregard the lump sum advance of $5,852.00, as that 

was not a past due portion of the claim. It appears that 

substantially all of the medica 1 expenses of $26,048.70 and 

the past due temporary total disability benefits of 

$11,979.42 were actually due to the claimant on July 25, 

1983. The lower court incorrectly assumed that no part of 

temporary total disability benefits or medical benefits 

already due on July 25, 1983 could be subject to the statutory penalty. 

To the extent that both medical benefits and temporary 

total disability benefits due on July 25, 1983 had not in 

fact been paid by October 11, 1983, such amounts may be 

subject to a penalty. The amount of such a penalty is to be 

determined by the court at its discretion under 5 39-71-2907, 

MCA. The record is not sufficient to allow us to determine 

the extent of the penalty as to either medical benefits or 

temporary total disability benefits found to be due on July 

25, 1983. In addition, it would not be appropriate for us to 

attempt to make a decision that 5 39-71-2907, MCA, commits to 

the discretion of the Workers' Compensation judge. 
In regard to Issue 2 (a) and (b), we remand the cause to 

the Workers' Compensation Court for determination as to the 

extent of the penalty, if any, to be charged upon those 

benefits which were due on July 25, 1983. 

I11 

Did the temporary total disability rate awarded the 

claimant properly include all wages earned at the time of his 

in jury? 

On March 3, 1983, the Workers' Compensation Court entered findings of fact, conclusions of law and judgment in 

Putnam v. Edson Express, Inc., and Home Insurance Company. 

The Edson Express case involved a claim by the present claimant for additional temporary total disability based on injuries from the January 16, 1981 accident, which he claimed had 

been aggravated by the October 6, 1981 accident. The Workers' Compensation Court concluded that claimant was not 

temporarily totally disabled as a result of the January 16, 

1981 accident and that the January accident was not the 

proximate cause of claimant's current condition. The court 

further pointed out that claimant had received temporary 

total disability benefits of $219 per week from January 16, 

1981 to on or about November 10, 1981, at which time the 

temporary total benefits were terminated by the insurance 

carrier. The court noted, "The insurer has continued to pay 

biweekly partial compensation benefits to the claimant at the 

maximum $109.50 rate." The court also specified that the 

evidence was insufficient to allow the court to make a determination of the permanent partial disability benefits to 

which the claimant may be entitled. There is no further 

explanation of the State Fund 's payment of partial compensation benefits of $109.50 from November 10, 1981 to on or 
about March 3, 1983. The order does establish that there had 

been no award of permanent partial disability benefits. 

Claimant was injured on October 6, 1981, while earning 

$6 per hour or $240 per week from Leonard Nielsen. Claimant 

states that this temporary job was to last only a few days, 

and that he began working for Neilsen in October 1981 in 

order to determine whether he was again capable of working. 

Claimant argues that the employment with Nielsen was 

only temporary employment and that his permanent employment 

rate was $340 per week, which he had received while working 

for Edson Express prior to January 16, 1981. In the alternative, he argues that the amount of $109.50 per week compensation benefits from Home Insurance Company should be added to 

the Neil-sen weekly wage of $240. 

Section 39-71-701 (I), MCA, in pertinent part provides: 

"(1) Weekly compensation benefits for 

injury producing total temporary disability shall be 66 2/3% of the wages received at the time of the injury. . . ." 

Section 39-71-116, MCA, defines "temporary total disabil-ity" 

and "wages" as follows: 

"(19) 'Temporary total disability' means 

a condition resulting from an injury as 

defined in this chapter that results in 

total loss of wages and exists until the 

injured worker is as far restored as the 

permanent character of the injuries will 

permit. Disability shall be supported by 

a preponderance of medical evidence. 

"(20) 'Wages' means the average gross 

earnings received by the employee at the 

time of the injury for the usual hours of 

employment in a week, and overtime is not 

to be considered. . . ." 

At the time of the October 6, 1981 accident, claimant 

was receiving a weekly wage of $240. That amount constitutes 

his "average gross earnings" under the statute. The facts do 

not demonstrate a reason for concluding that the wages paid 

by a different employer nine months prior to the present 
injury can be considered as the average gross earnings at the 

time of in jury. 

We conclude there is no basis for using the $340 per 

week paid prior to January 16, 1981 as the permanent employment rate for claimant at the time of the October 6, 1981 

accident. 

Claimant argues in the alternative that his wages as of 

October 6, 1981 should include the $109.50 being paid as 

partial compensation benefits by the insurance company for 

his former employer, Edson Express. The record is incomplete 

as to the nature of the $109.50 payments being made by Home 

Insurance. The amount of the $109.50 payment is 50% of the 

temporary total disability benefits of $219.00, which was 

awarded in connection with the January 16 Edson Express 

accident. This suggests that such payments may be in the 

nature of permanent partial disability benefit payments. 

Claimant argues that the $109.50 should be added to his 

$240.00 weekly wage in computing the temporary total disability benefits to which he is entitled for the October 6 accident. This type of stacking would not be proper. It is not 

comparable to the stacking of wages from concurrent employrnent which has been approved in other cases. In this instance, it would be unfair to include the $109.50 payments in 

the weekly wage and pay 2/3 of that $109.50 as a part of the 

temporary total disability benefits, while the claimant at 

the same time received the $109.50 payments from Home Insurance in connection with the other accident. 

We therefore affirm the award of temporary total disability by the Workers' Compensation Court based upon the 

average weekly wage of $240.00. 

We remand this cause to the Workers' Compensation Court 

for further action in accordance with this opinion. 
We concur: 

t