No. 96-038 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1996 

HARRY A. NESS, 

APPEAL FROM: Workers' Compensation Court 

State of Montana 

The Honorable Mike McCarter, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

R. Lewis Brown, Butte Legal Center, Butte, Montana 

For Respondent: 

Andrew J. Utick, Helena, Montana 

Filed: 

Submitted on Briefs: October 31, 1996 

Decided: November 25, 1996 
Justice William E. Hunt, Sr. delivered the Opinion of the Court. 

Appellant Harry A. Ness (Ness) appeals the decision of the 

Workers' Compensation Court concluding that Ness was entitled to 

total disability benefits only until September 11, 1989, the date 

on which Anaconda Minerals Company (Anaconda) properly discharged 

its duties to investigate the extent of Ness's disability and to 

notify Ness of the results of that investigation. Anaconda cross 

appeals the Worker's Compensation Court's determination that 

Anaconda was not entitled to subrogate the benefits it had paid 

against Ness's settled third party claim, as well as the court's 

determination that Ness was entitled to attorney's fees based upon 

the award of permanent partial disability benefits. We affirm. 

ISSUES 

Ness presents the following issue on appeal: 

1. Did the Workers' Compensation Court err in concluding 

that the statutorily mandated notice of intent to reduce workers' 

compensation benefits validly may be given before the insurer has 

discharged its duty to investigate the extent of the claimant's 

disability? 

In addition, Anaconda presents the following two issues on 

cross-appeal: 

2. Did the Workers' Compensation Court err in concluding that 

Anaconda was not entitled to subrogate the benefits it had paid to 

Ness against his settled third-party claim? 
3. Did the Workers' Compensation Court err in concluding that 

Ness was entitled to attorney's fees based upon the award of 

permanent partial disability benefits? 

FACTS 

Ness was injured in 1981 during the course of his employment 

for Anaconda. On the day in question, he was welding the belly pan 

of a D-8 Caterpillar when it fell and crushed him. Anaconda, which 

was self-insured, accepted liability and began paying temporary 

total disability benefits to Ness. Ness also instituted suit 

against the Caterpillar Tractor Company (Caterpillar), asserting 

that his injury was caused, at least in part, by a defective part 

on the Caterpillar he had been repairing. 

After paying total disability benefits for over a year, 

Anaconda terminated total disability payments and began paying 

partial disability benefits, relying on a doctor's opinion that 

Ness had reached maximum healing and could return to light work. 

Anaconda notified Ness on November 22, 1982, of its intention to 

reduce his benefits from total to partial disability. 

Ness petitioned the Workers' Compensation Court to reinstate 

total disability benefits, which that court refused to do. Ness 

then appealed the matter to this Court. In Ness v. Anaconda 

Minerals Co. (19931, 257 Mont. 335, 849 P.2d 1021 (Ness I), this 

Court determined that Anaconda's reduction of Ness's benefits was 

improper because Anaconda had not complied with the Coles test. 

While the first three elements of the coles test had been fulfilled 

in Ness I, this Court noted that Anaconda had not given Ness the 
required notice of the doctor's report or a copy thereof. we 

therefore held that 

[wlhen there is proof of the date on which the fourth 

element of the Coles test has been satisfied, there will 

be substantial evidence for the termination of claimant's 

total disability benefits, and the commencement of 

partial disability benefits. 

Ness I, 849 P.2d at 1024. 

On remand to the Workers' Compensation Court, Ness stipulated 

that he had received notice of the doctor's report on September 11, 

1989. Accordingly, the Workers' Compensation Court determined that 

September 11, 1989, was the proper date for the reduction of Ness's 

benefits from total to partial. 

Ness, however, argued that the letter he had received on 

November 22, 1982, by which Anaconda notified him of its intention 

to reduce his benefits, was insufficient notice because it was 

given before all of the Coles factors were fulfilled. He therefore 

contended that Anaconda was precluded from reducing his benefits 

until it re-notified him of its intention to do so after complying 

with the Coles test. The Workers' Compensation Court disagreed, 

concluding that the plain language of this Court's opinion in 

Ness I allowed Anaconda to reduce Ness's disability benefits from 

total to partial as of the date the fourth Coles factor was met. 

Ness appeals this conclusion. 

In addition, Anaconda appeals the Workers' Compensation 

Court's determination that it cannot subrogate the benefits it paid 

to Ness against his third party claim. It also appeals the court's 

4 
determination that Ness is entitled to attorney's fees based on the 

award of permanent partial disability benefits. 

DISCUSSION 

1. Did the Workers' Compensation Court err in concluding that 

the statutorily mandated notice of intent to reduce workers' 

compensation benefits validly may be given before the insurer has 

discharged its duty to investigate the extent of the claimant's 

disability? 

The Coles test ensures that the insurer has provided the 

claimant with the minimum information necessary to discharge its 

duty to investigate the extent of the claimant's disability. 

Compliance with the Coles test is a mandatory prerequisite for 

benefit reduction or termination. The Coles test requires: 

(1) a physician's determination that the claimant is as 

far restored as the permanent character of his injuries 

will permit; 

(2) a physician's determination of the claimant's 

physical restrictions resulting from an industrial 

accident; 

(3) a physician's determination, based on his knowledge 

of the claimant's former employment duties, that he can 

return to work, with or without restrictions, on the job 

on which he was injured or another job for which he is 

fitted by age, education, work experience, and physical 

condition; and 

(4) notice to the claimant of receipt of the report 

attached to a copy of the report.' 

Ness I, 849 P.2d at 1024. 

Part of the confusion regarding this issue may have arisen 

because it involves two separate and distinct notice requirements. 

The fourth factor of the Coles test requires an insurer to notify 

a claimant of a physician's report regarding the nature and extent 

of the claimant's injury and the physician's opinion regarding the 

claimant's ability to return to work. We have held that, until 

such a physician's report is made and the claimant notified of it, 

5 
an insurer may not reduce a claimant's benefits because it has not 

acquired sufficient information to discharge its duty to 

investigate the extent of the claimant's disability. Wood v. 

Consolidated Freightways, Inc. (1991), 248 Mont. 26, 808 p.2d 502. 

This is the Coles test, and notice to the claimant is the fourth 

factor of this test. Ness I, 849 P.2d at 1024. 

In addition, the insurer is statutorily required to provide 

the claimant with at least 14 days' notice of its intent to 

terminate benefits. Section 39-71-609, MCA, provides in part: 

if an insurer determines to deny a claim on which 

payments have been made under 39-71-608 during a time of 

further investigation or, after a claim has been 

accepted, terminates all biweekly compensation benefits, 

it may do so only after 14 days' written notice to the 

claimant, the claimant's authorized representative, if 

any, and the department. For iniuries occurrincr prior to 

Julv 1, 1987, an insurer must qive 14 davs' written 

notice to the claimant before reducinq benefits from 

total to uartial. 

Section 39-71-609(l), MCA (emphasis added). Ness does not argue 

that Anaconda's notice, when given, did not properly comply with 

the statute. Instead, he argues that Anaconda did not have the 

ability to reduce his benefits at the time it notified him of its 

intent to do so, and that, once it had the ability to do so, its 

former notice no longer was effective. 

We fail to see why the passage of time should render the 

notice ineffective. The cases Ness cites in support of this theory 

are not on point. In Catteyson v. Falls Mobile Home Center (1979), 

183 Mont. 284, 599 P.2d 341, notice was not given until nearly one 

month after benefits were terminated. This Court held that such 

notice was void because it did not follow the clear statutory 

6 
,mandate that notice be given at least 14 days before termination of 

benefits. This Court has also held that if no statutory notice was 

w given, the insurer will not be allowed to reduce or terminate 

benefits unless and until the statutory notice properly is given. 

Chagnon v. Tillman Motor Co. (1993), 259 Mont. 21, 855 P.2d 1002; 

Clark v. Hensel (1977), 127 Mont. 8, 560 P.2d 515. Ness cites no 

case in which this Court has held that the requisite statutory 

notice cannot be given until after the Coles test is completed or 

that, once properly given, the notice will somehow expire. 

As Ness rightly noted, when the language of a statute is 

plain, unambiguous, direct, and certain, the statute speaks for 

itself and leaves nothing for this Court to construe. Clark, 560 

P.2d at 516-17. Further, it is the function of an appellate court 

to ascertain what is actually contained in a statute, not to insert 

that which has been omitted. Russette v. Chippewa Cree Housing 

Authority (1994), 265 Mont. 90, 93-94, 874 P.2d 1217, 1219 

(citations omitted). Accordingly, we decline to interpret § 39-71- 

609, MCA, as including an expiration provision which, on its face, 

it does not in fact contain. The statutory notice given to Ness on 

November 22, 1982, was both proper and effective. Anaconda had no 

duty to re-notify Ness of its intention to reduce his benefits once 

the Coles test was fulfilled, and the Workers' Compensation Court 

properly refused to impose such a duty upon it. 

2. Did the Workers' Compensation Court err in concluding that 

Anaconda was not entitled to subrogate the benefits it had paid to 

Ness against his settled third-party claim? 

7 
Anaconda argues that the Workers' Compensation Court erred by 

refusing to allow it to subrogate the benefits it paid to Ness. It 

contends that Ness has been made whole as a matter of law because 

he settled with the third party, Caterpillar, for less than policy 

limits. Anaconda contends that this Court's prior case law 

mandates such a result. 

In workers' compensation cases, the law in effect at the time 

of a claimant's injury establishes the claimant's substantive right 

to benefits. Williams v. Plum Creek Timber Co. (1995), 270 Mont. 

209, 213, 891 P.2d 502, 504 (citing Plooster v. Pierce Packing Co. 

(1993), 256 Mont. 207, 291, 846 P.2d 976, 978; Buckman v. Montana 

Deaconess Hospital (1986), 224 Mont. 318, 321, 730 P.2d 380, 382). 

Therefore, the governing statutes in this case are 5 39-71-412, MCA 

(1981) and 5 39-71-414, MCA (1981). 

Section 39-71-412, MCA (1981), which addressed a claimant's 

right to pursue a third party claim, provided: 

The right to compensation and medical benefits as 

provided by this chapter is not affected by the fact that 

the injury, occupational disease, or death is caused by 

the negligence of a third party other than the employer 

or the servants or employees of the employer. Whenever 

such event occurs to an employee while performing the 

duties of his employment and such event is caused by the 

act or omission of some persons or corporations other 

than his employer or the servants or employees of his 

employer, the employee or in case of his death his heirs 

or personal representative shall, in addition to the 

right to receive compensation under this chapter, have a 

right to prosecute any cause of action he may have for 

damages against such person or corporations. 

Section 39-71-414, MCA (1981), which addressed an insurer's right 

to subrogation, provided in part: 

8 
If an action is prosecuted as provided for in 39-71-412 

or 39-71-413 and except as otherwise provided in this 

section, the insurer is entitled to subrogation for all 

compensation and benefits paid or to be paid under the 

Workers' Compensation Act. The insurer's right of 

subrogation is a first lien on the claim, judgment, or 

recovery. 

Section 39-71-414(l), MCA (1981). However, while this latter 

statute set forth an insurer's entitlement to subrogation, it did 

not set forth whether this right to subrogation began before or 

after the claimant was made whole. 

This Court determined that an insurer was not entitled to 

invade a claimant's paid third party claim via subrogation until 

the claimant had been made whole. See Brandner v. Traveler's 

Insurance Co. (1978), 179 Mont. 208, 587 P.2d 933; Hall v. State 

Compensation Insurance Fund (1985), 218 Mont. 180, 708 P.2d 234; 

Getten v. Liberty Mutual Insurance Co. (1989), 240 Mont. 90, 782 

P.2d 1267. However, the Court also held that a claimant who had 

settled a third party claim for less than the policy limits would 

be deemed to have been made whole. Brandner, 587 P.2d at 938; 

u, 708 P.2d at 236; Getten, 782 P.2d at 1270-71. The rationale 

behind this determination was the assumption that no claimant would 

settle for a sum of money which was insufficient to make him or her 

whole. In Brandner, this Court reasoned: 

[i]t cannot logically be contended, therefore, that [al 

claimant has not been made whole for his Workers' 

Compensation injury, when he, by his own voluntary 

action, has finally compromised his claim in full against 

the third-party tortfeasor. 

Brandner, 587 P.2d at 938 

9 
The decision in m carved out an exception to this rule by 

holding that it could not be assumed that a claimant had been made 

whole if he or she was forced to settle a third party claim for 

less than the policy limits. Consequently, the insurer's right to 

recoup its payments from the third party settlement under a theory 

of subrogation could only be exercised once the claimant was 

actually made whole. In Getten, this Court noted that the 

claimant's settlement had been voluntary, not forced. It therefore 

distinguished &a.lJ and embraced the holding in Brandner. 

1n arguing that it should be allowed to exercise its right of 

subrogation, Anaconda relies almost entirely on the decisions in 

Brandner and Getten. Under the law as articulated in those two 

cases, Anaconda contends that it is entitled to subrogate because 

Ness settled his third party claim for less than the policy limits 

and did so voluntarily. Relying on the decisions in Brandner and 

Getten, Anaconda contends that Ness "was 'made whole' by [his] 

voluntary settlement, or he would presumably not have made such 

settlement." 

In response, Ness contends that the rule relied upon by 

Anaconda and set forth in Brandner and Getten no longer is good 

law. We agree. While Anaconda attempts to distinguish these 

earlier cases from the later ones which vitiate the Brandner/Getten 

rule, there is no escaping the fact that both those cases have been 

substantively and unambiguously overruled. 

In Zacher v. American Insurance Co. (1990), 243 Mont. 266, 794 

P.2d 335, this Court stated: 

10 
We hold that where a workers' compensation claimant 

recovers against a third party an insurer has no 

subrogation rights until a claimant has been made whole 

for his entire loss and any costs of recovery, including 

attorney fees. . . . To the extent that Hall and Getten 

contain requirements which mav be interpreted as addinq 

to the foreqoina holdinq, Hall and Getten are expressly 

overruled. 

Zacher, 794 P.2d at 338 (emphasis added). In Francetich v. State 

Compensation Mutual Insurance Fund (1992), 252 Mont. 215, 827 P.2d 

1279, this Court held: 

[In Brandnerl The Court also distinguished the situation 

in Brandner from the decision in Skauqe [v. Montana 

States Telephone and Telegraph Co. (1977), 172 Mont. 521, 

565 P.2d 6281. The basis for this distinction apparently 

was the Court's belief that the injured worker's 

voluntary settlement with the third party for less than 

the upper limits of the third party's insurance policy 

indicated that the worker had been fully compensated for 

his injuries. There is language in Brandner which might 

be viewed as indicating that subrogation might have been 

appropriate even if the injured worker had not been fully 

compensated for his injuries. To the extent that 

Brandner miqhtbe interpreted as allowins for subrooation 

prior to the injured worker receivins full comwensation, 

it is overruled. 

Francetich, 827 P.2d at 1284 (emphasis added). 

Despite the clear language to the contrary, Anaconda attempts 

to distinguish both Zacher and Francetich is an attempt to preserve 

the applicability of the Brandner/Getten rule. It argues that 

Zacher does not necessarily conflict with Getten because, 

factually, both cases involve situations where the claimant was 

forced to settle for the third party's insurance policy limits. 

Ness, they remind us, was not forced to settle for policy limits. 

Instead, he voluntarily settled for a sum far below that dictated 

by Caterpillar's policy limits. 

11 
The holding in Zacher, set out above, does not distinguish 

between voluntary and non-voluntary settlements. Indeed, while 

noting that such a distinction had been made in past cases, this 

Court specifically chose not to rely on that distinction when 

articulating the rule regarding an insurer's right to subrogation. 

We will not narrow the impact of Zacher by inferring a limitation 

which the Court itself refused to place on its own holding. By its 

terms, the holding in Zacher refers to & cases where an insurer 

seeks to exercise a right to subrogation regarding a claimant's 

paid third party claim. And, by its terms, the holding 

specifically overrules Getten to the extent that it might add 

additional requirements to the holding in Zacher. 

Similarly, Anaconda relies on the cited language in Francetich 

which states that: 

[tlhe Court also distinguished the situation in Brandner 

from the decision in Skauqe. The basis for this 

distinction apparently was the Court's belief that the 

injured worker's voluntary settlement with the third 

party for less than the upper limits of the third party's 

insurance policy indicated that the worker had been fully 

compensated for his injuries. 

Francetich, 827 P.2d at 1284. Anaconda attempts to construe this 

language as the actual holding in Francetich, which it clearly is 

not. It is merely this Court again noting, as it did in Zacher, 

its own former reliance on the Brandner/Getten rule. The holding 

is contained in the next sentence, which notes that Brandner might 

be construed to indicate that subrogation may be allowed before the 

claimant has been made whole. To the extent Brandner might support 

12 
such a result, Francetich expressly overruled it. Francetich, 827 

P.2d at 1284. 

Further, we note the fundamental flaw in Anaconda's reliance 

on a rule which attempts to set forth when a claimant has been made 

whole as a matter of law. The question of whether an injured 

claimant has been made whole is a question of fact -I dependent on 

the level of his or her physical recovery and the extent of his or 

her compensation through benefits paid and/or damages recouped. 

In this case, Anaconda's own expert placed the amount of 

Ness's damages at $145,000, which was the lowest estimate 

presented. But Ness has not received benefits and settlement 

proceeds totalling $145,000, even if Anaconda's own estimate is 

presumed to be an accurate one and even if the entire $75,000 

settlement from Caterpillar is credited to Ness. On this basis, 

the Workers' Compensation Court concluded that "the settlement with 

Caterpillar did not in fact represent the amount necessary to make 

claimant whole. Therefore, it does not entitle respondent as a 

matter of law to a subrogation interest in the settlement 

proceeds." (Emphasis added.) 

The Brandner/Getten rule, which is the mainstay of Anaconda's 

subrogation argument, has been substantively overruled. To the 

extent that Brandner or Getten or their progeny indicate that the 

issue of whether a claimant has been made whole is a question of 

law, they are expressly overruled. The issue of whether a claimant 

has been made whole is a question of fact. Even Anaconda's own 

expert admits that Ness in fact has not been made whole to date. 

13 
Accordingly, the Workers' Compensation Court did not err in 

refusing to grant Anaconda the right to a subrogation interest in 

Ness's settlement with Caterpillar. 

3. Did the Workers' Compensation Court err in concluding that 

Ness was entitled to attorney's fees based upon the award of 

permanent partial disability benefits? 

Anaconda also contends that the Workers' Compensation Court 

erred by awarding Ness attorney's fees based on the award of 

permanent partial disability benefits. Anaconda argues that Ness's 

entitlement to permanent partial disability benefits was not the 

issue in this case. It further argues that Ness is not entitled to 

attorney's fees because Ness never specifically requested permanent 

partial disability benefits and, therefore, such benefits were not 

secured through the efforts of Ness's attorney. This argument is 

entirely without merit. 

Ness pursued his claim in the Workers' Compensation Court with 

the assistance of an attorney, who instituted suit after Anaconda 

stopped paying benefits to Ness. The issue faced by the Workers' 

Compensation Court was what benefits, if any, Ness was entitled to 

receive. The attorney's efforts in securing Ness's award are not 

diminished simply because Ness did not specifically request a given 

type of relief. 

The decision of the Workers' Compensation Court is affirmed.