INTHE SUPREME COURT OF THE STATE OF MONTANA

No. 84-323

TOM W. PUTNAM, Claimant andAppellant,

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 thepetitions 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. ITIS ORDERED: 1. That the full 

### paragraph set forth immediately 

### fol

### lowing the 

### statement of 

### issues on page 2 

### of 

### our opinion decided 

### June 13, 1985, 

### is hereby withdrawn, the withdrawn paragraphbeing

### as follows:"Initially there 

### were disputes as tothe identity of the insurer and the extentof coverage, all of which have been 

### resolved. The respondent in this proceeding 

### i-s State Compensation Insurance Fund (StateFund)

# ."
In place of such withdrawn paragraph, the following paragraph 

### ishereby inserted inouropinion: "There 

### is a dispute astothe identityof the employer of the claimant. The Work

### ers' Compensation Court found that claimant 'was an employee of eitherNielsen or the defendant Castle Mountain Corporation.' The respondent inthisproceeding 

### is State Compensation Insurance Fund (State Fund), which has agreed to accept liability fortheclaimant's claimwith a re'servation of rights against Castle Mountain Corporation and 

### its insurance carrier. We do not ruleupon which party was the employer of the claimant." 2. With the exception of the action taken in paragraph 

### 1, the petitions forrehearing aredenied. 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 thiscause. 

# 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, Judgepresiding.

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 Keefer, Billings,Montana

Submitted on Briefs: Jan. 24, 

### 1985 Decided: June 13, 1985 

### Filed: 

## SUN

## e

## :3

## 1985

ClerkMr. JusticeFred J. Weber delivered the Opinion of the Court. This 

### isan appeal from the order of theWorkers' Compensation Court granting partial summary judgment. The appeal challenges the court's refusal toapply the statutorypenalty to medical benefits and a portion of the weekly temporary total disabilitybenefits. Wemodify a portion of theorder and remand the cause for further proceedings. The issues are: 1. Does the penalty portion of 

### S 39-71-2907, MCA apply tomedica1benefits? 2. How should the penalty provisions of 

### S 39-71-2907, MCA be applied tothe 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 afterOctober 11, 1983. 3. Did the temporary total disability rate awarded the claimantproperly include allwages earned atthe

### timeof his injury? Initially there 

### were disputes astothe 1-dentityof the insurer and the extent of coverage, all. of which have been resolved. The respondent inthisproceeding 

### is StateCompensation Insurance Fund (StateFund)

# . 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 resultof thatunrelated accident, claimant received temporary total compensation benefits of $219 per week from January 16, 1981toon orabout 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, 1981accident. The undisputed findings of factby theWorkers' Compensation Court include the following: 1. In July 1981, the StateFund sentNiel-sen (employer)

a premium statement for April 

### 1 to June 30, 1981. That statement notified Nielsen thatpayment of the amount due was tobe 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 (2days afterclaimant's injury), Nielsen's payment was received by the StateFund. 

### 4. Through some type of a mix-up within the StateFund, 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 StateFund toallow an employer a ten day grace period from the date of cancellation. (Nielsen's payment on October 8was 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 theState Fund and claimant for approximately 17months. 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 

### itspriordetermination on thequestion of coverage. On July 25, 1983, the Bureau Chief of the StateFund was advised that Nielsen's coverage was in effect on October 6, 1981. The StateFund determined that 

### it should accept liabilityfor the claimant's claim. Various procedural steps followed, and the State Fund gave a number of assurances regarding acceptance of liabilityand 

### itswillingness topay both compensation and medical benefits. On October 11, 1983, the Workers' Compensation Court heard oral argument on the case and ordered the StateFund to make payments of both medical benefits and temporary total disability benefits. The court then concluded that the 1981 denial of liabilityforclaimant's claimwas not unreasonable within themeaning of thepenalty 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 delaywas 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 toascertain the truth of the improper cancellation allegation found in the Petition, but 

### its delay from July 25, 1983, tothe order of benefits (October 11, 1983) was unreasonable. Therefore a 20%penalty shallbe assessed to temporary total benefits due the claimant during thatperiod. "The court then adjudged that claimant was entitled to a 20% increase inhistemporary total disabilitybenefits 

### from July 25, 1983until October 11, 1983.

Does the penalty portion of 39-71-2907, MCA apply to medical benefits? The pertinentportion of § 39-71-2907, MCA 

### is: "When payment of compensation hasbeen 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 thecaseof 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 tothe foregoing statute.

How should the penalty provisions of 

### S 39-71-2907, MCA be applied tothe following: (a) Temporary total disability benefits from the date of injury on October 6, 1981

### toJuly 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 untilafterOctober 11, 1983. As to (a) weekly benefits from October 6, 1981 toJuly 25, 1983, the lower court found a reasonable explanation for the failuretopay. It therefore concluded thatthedelay in payment up toJuly 25, 1983was not a proper basis forpenalty. In 

### its order of partial summary judgment and in 

### its subsequent order denying the petition for rehearing, theWorkers' Compensation Court concluded that the penalty was warranted once the StateFund 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~r11, 1983. The stipulation of the parties established that as of October 11, 1983, the following amounts 

### were due 

### from the StateFund tothe claimant: Past due medical expenses $26,048.70 Past due temporary total disability 11,979.42 Lump sum advance 5,852.00 Tota1 $43,880.12 We disregard the lump sum advance of $5,852.00, asthat

was not a past due portion of the claim. It appears that substantially allof the medica1 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 alreadydue on July 25, 1983 could be subjecttothe statuto

### rypenalty. 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 tobe determined by the court at

### itsdiscretion under 

### 5 39-71-2907, MCA. The record 

### is not sufficient toallow us todetermine the extent of the penalty as to either medical benefits 

### or temporary total disability benefits found tobe due on July 25, 1983. In addition, 

### it would notbe appropriate forusto attempt tomake a decisionthat

### 5 39-71-2907, MCA, commits 

### to the discretion of theWorkers' Compensation judge.In regard toIssue 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 allwages earned atthe

### timeof 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 claimby thepresent claimant for additional temporary total disabilitybased on inju

### ries from the January 16, 1981accident, which he claimed had been aggravated by the October 6, 1981 accident. The Work

### ers' 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, atwhich 

### time the temporary total benefits 

### were terminated by the insurance carrier. The court noted, "The insurer has continued topay biweekly partial compensation benefits tothe claimant atthe maximum $109.50 rate." The court also specified that the evidencewas insufficient

### toallowthe court tomake 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 orabout March 3, 1983. The order does establishthatthere had been no award of permanent partial disabilitybenefits. 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 forEdson Express prior toJanuary 16, 1981. In the alterna

### tive, he argues thatthe amount of $109.50 perweek compensation benefits from Home Insurance Company should be added to theNeil-sen weekly wage of $240. Section 39-71-701 

### (I),MCA, in pertinent part provides: "(1) Weekly compensation benefits for injuryproducing total temporary disability shall be 66 2/3% of the wages 

### received atthe 

### 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 shallbe supported by a preponderance of medical evidence. "(20) 'Wages' means the average gross earnings received by the employee atthe 

### timeof the injury for theusual hours of employment in a week, and overtime 

### isnot tobe 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 factsdo not demonstrate a reason for concluding that the wages paid by a different employer nine months prior to the presentinjury can be considered asthe average grossearnings atthe 

### timeof in jury. We conclude there 

### is no basis for using the $340 per week paid prior toJanuary 16, 1981asthe permanent employment rate for claimant at the 

### time of the October 6, 1981 accident. Claimant argues in the alternative thathiswages asof 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 weeklywage incomputing thetemporary totaldisabilitybenefits towhich he 

### is entitled forthe October 6 accident. This type of stackingwould not be proper. It 

### isnot comparable to the stacking of wages from concurrent employrnent which has been approved in other cases. In this instance, 

### it would beunfair toinclude the $109.50 payments in the weekly wage and pay 2/3 of that $109.50 asa part of the temporary total disability benefits, while the claimant at the same 

### time received the $109.50 payments from Home Insurance inconnectionwith theother 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 totheWorkers' Compensation Court for furtheraction inaccordancewith thisopinion.

### We 

### concur:

t