No. 96-038 INTHESUPREMECOURTOFTHESTATEOFMONTANA 1996

HARRYA. NESS,

APPEAL FROM: Workers' Compensation Court

State of Montana The Honorable Mike McCarter, Judge presiding.

COUNSELOFRECORD:

For Appellant: R. Lewis Brown, Butte Legal Center, Butte, Montana For Respondent: Andrew J. Utick, Helena, Montana

Filed: Submitted onBriefs: 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 Nesswasentitled to total disability benefits only until September 11, 1989, the date

onwhich AnacondaMinerals Company(Anaconda) properly discharged its duties to investigate the extent of Ness's disability andto notify Nessof the results of that investigation. Anaconda cross appeals the Worker's Compensation Court's determination that Anaconda wasnot entitled to subrogate the benefits it hadpaid against Ness's settled third party claim, aswell asthe court's determination that Nesswasentitled toattorney's fees basedupon the awardof permanent partial disability benefits. Weaffirm. ISSUES 

### Nesspresents the following issue onappeal: 1. Did the Workers' Compensation Court err in concluding that the statutorily mandated notice of intent to reduce workers' compensation benefits validly maybegiven 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. DidtheWorkers' Compensation Court err inconcluding that Anacondawasnot entitled tosubrogate the benefits it hadpaid to Nessagainst 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. Onthe day in question, hewaswelding the belly pan of aD-8Caterpillar when it fell andcrushed 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 adefective part

onthe Caterpillar hehad been repairing. After paying total disability benefits for over a year, Anaconda terminated total disability payments and began paying partial disability benefits, relying on adoctor'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 hadbeen fulfilled in Ness I, this Court noted that Anaconda had not given Ness therequired notice of the doctor's report or a copy thereof. we

therefore held that [wlhen there is proof of the date onwhich the fourth element of the Coles test has been satisfied, there will besubstantial evidence for the termination of claimant's total disability benefits, and the commencement of partial disability benefits. Ness I, 849 P.2d at 1024. Onremand to the Workers' Compensation Court, Ness stipulated that hehadreceived notice of the doctor's report onSeptember 11, 1989. Accordingly, the Workers' Compensation Court determined that September 11, 1989, wasthe 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, bywhich 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. Hetherefore contended that Anaconda was precluded from reducing his benefits until it re-notified him of its intention to dosoafter complying with the Coles test. The Workers' Compensation Court disagreed, concluding that the plain language of this Court's opinion in Ness Iallowed Anaconda to reduce Ness's disability benefits from total to partial asof 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 Nessisentitled toattorney's fees basedonthe

awardof permanent partial disability benefits. DISCUSSION 

### 1. DidtheWorkers' Compensation Court err inconcluding that the statutorily mandated notice of intent to reduce workers' compensation benefits validly maybegiven 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 amandatory prerequisite for benefit reduction ortermination. TheColes test requires: (1) aphysician's determination that the claimant is as far restored asthe permanent character of his injuries will permit; (2) 

### a physician's determination of the claimant's physical restrictions resulting from an industrial accident; (3) aphysician's determination, basedonhis knowledge of the claimant's former employment duties, that hecan return towork, with orwithout restrictions, onthe job onwhich hewasinjured or another job for which heis fitted byage, education, work experience, andphysical condition; and (4) notice to the claimant of receipt of the report attached toacopyofthe report.' NessI, 849

### P.2d at 1024. Part of the confusion regarding this issue mayhave arisen because it involves twoseparate anddistinct notice requirements. Thefourth factor of the Coles test requires aninsurer to notify

aclaimant ofaphysician's report regarding the nature andextent of the claimant's injury andthephysician's opinion regarding the claimant's ability to return to work. Wehaveheld that, until suchaphysician's report is madeandthe claimant notified of it, 5aninsurer maynot reduce aclaimant'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), 248Mont. 26, 808p.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 madeunder 39-71-608 during atime of further investigation or, after a claim has been accepted, terminates all biweekly compensation benefits, it maydo soonly after 14days' written notice to the claimant, the claimant's authorized representative, if any, andthe 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 doso, and that, once it had the ability to doso, its former notice nolonger waseffective. Wefail to see why the passage of time should render the notice ineffective. Thecases Ness cites in support of this theory

are not onpoint. In Catteyson v. Falls Mobile HomeCenter (1979), 183Mont. 284, 599 P.2d 341, notice wasnot 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 begiven at least 14days before termination of

benefits. This Court hasalso held that if nostatutory notice was

w given, the insurer will not beallowed to reduce or terminate benefits unless and until the statutory notice properly is given. Chagnon v. Tillman Motor Co. (1993), 259Mont. 21, 855 P.2d 1002; Clark v. Hensel (1977), 127Mont. 8, 560 P.2d 515. Ness cites no

case in which this Court has held that the requisite statutory notice cannot begiven 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 anappellate court to ascertain what is actually contained in astatute, 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, wedecline to interpret §39-71- 609, MCA,as including anexpiration provision which, onits face, it does not in fact contain. Thestatutory notice given to Ness on November 22, 1982, wasboth proper andeffective. Anaconda had no duty to re-notify Ness of its intention to reduce his benefits once the Coles test was fulfilled, andthe Workers' Compensation Court properly refused to impose such aduty 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?

7Anaconda 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 madewhole asamatter of law because hesettled with the third party, Caterpillar, for less than policy limits. Anaconda contends that this Court's prior case law mandates such aresult. Inworkers' compensation cases, the law in effect at the time of aclaimant's injury establishes the claimant's substantive right to benefits. Williams v. Plum Creek Timber Co. (1995), 270 Mont. 209, 213, 891P.2d 502, 504 (citing Plooster v. Pierce Packing Co. (1993), 256Mont. 207, 291, 846 P.2d 976, 978; Buckman v. Montana Deaconess Hospital (1986), 224Mont. 318, 321, 730 P.2d 380, 382). Therefore, the governing statutes in this case are 539-71-412, MCA (1981) and 539-71-414, MCA(1981). Section 39-71-412, MCA (1981), which addressed aclaimant's right to pursue athird party claim, provided: The right to compensation and medical benefits as provided bythis chapter is not affected bythe fact that the injury, occupational disease, or death is caused by the negligence of athird 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 andsuch event is caused bythe 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 hemay 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:

8If anaction is prosecuted asprovided 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 afirst lien onthe 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 wasmadewhole. This Court determined that an insurer was not entitled to invade aclaimant'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 aclaimant who had settled athird 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 wasthe assumption that noclaimant would settle for asumof money which wasinsufficient to make him or her whole. In Brandner, this Court reasoned: [i]t cannot logically becontended, therefore, that [al claimant has not been made whole for his Workers' Compensation injury, when he, by his own voluntary action, hasfinally compromised his claim in full against the third-party tortfeasor. Brandner, 587 P.2d at 938

9The decision in m carved out anexception to this rule by

holding that it could not beassumed that aclaimant hadbeen made whole if heor she was forced to settle athird party claim for less than the policy limits. Consequently, the insurer's right to recoup its payments from the third party settlement under atheory of subrogation could only be exercised once the claimant was actually made whole. In Getten, this Court noted that the claimant's settlement hadbeenvoluntary, not forced. It therefore distinguished &a.lJ andembraced the holding in Brandner. 1narguing that it should beallowed 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 anddid sovoluntarily. Relying onthe 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. Weagree. While Anaconda attempts to distinguish these earlier cases from the later oneswhich vitiate the Brandner/Getten rule, there is noescaping the fact that both those cases have been substantively and unambiguously overruled. In Zacher v. American Insurance Co. (1990), 243Mont. 266, 794 P.2d 335, this Court stated:

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### Wehold that where aworkers' compensation claimant

recovers against a third party an insurer has no subrogation rights until aclaimant hasbeenmadewhole for his entire loss andanycosts of recovery, including attorney fees.

. . . To

### the extent that Hall andGetten contain requirements which mavbeinterpreted asaddinq to the foreqoina holdinq, Hall andGetten are expressly overruled. Zacher, 794P.2d at 338 (emphasis added). In Francetich v. State Compensation Mutual Insurance Fund(1992), 252Mont. 215, 827P.2d 1279, this Court held: [In Brandnerl TheCourt also distinguished thesituation in Brandner from the decision in Skauqe [v. Montana States Telephone andTelegraph Co. (1977), 172Mont. 521, 565P.2d6281. Thebasis 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 theworker hadbeenfully compensated for his injuries. There is language inBrandner which might beviewed asindicating that subrogation might havebeen appropriate evenif the injured worker hadnotbeenfully compensated for his injuries. To the extent that Brandner miqhtbe interpreted asallowins for subrooation prior tothe injured worker receivins full comwensation, it is overruled. Francetich, 827P.2d at 1284 (emphasis added). Despite the clear language tothe contrary, Anacondaattempts todistinguish both Zacher andFrancetich isanattempt topreserve 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, wasnot forced to settle for policy limits. Instead, hevoluntarily settled for asumfar below that dictated byCaterpillar's policy limits.

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

between voluntary and non-voluntary settlements. Indeed, while noting that such adistinction had been made in past cases, this Court specifically chose not to rely on that distinction when articulating the rule regarding aninsurer's right to subrogation. Wewill not narrow the impact of Zacher by inferring alimitation which the Court itself refused to place onits ownholding. Byits terms, the holding in Zacher refers to & cases where an insurer seeks to exercise aright to subrogation regarding aclaimant'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 onthe 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 hadbeen fully compensated for his injuries. Francetich, 827 P.2d at 1284. Anaconda attempts to construe this language asthe actual holding in Francetich, which it clearly is not. It is merely this Court again noting, as it did in Zacher, its ownformer reliance onthe Brandner/Getten rule. The holding is contained in the next sentence, which notes that Brandner might beconstrued to indicate that subrogation maybeallowed before the claimant hasbeen madewhole. Tothe extent Brandner might support

12such aresult, Francetich expressly overruled it. Francetich, 827

P.2d at 1284. Further, wenote the fundamental flaw in Anaconda's reliance

onarule which attempts to set forth whenaclaimant has been made whole as a matter of law. The question of whether an injured claimant has been madewhole is aquestion 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. Onthis 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 aclaimant has been madewhole is aquestion of law, they are expressly overruled. The issue of whether aclaimant has been made whole is aquestion of fact. Even Anaconda's own expert admits that Ness in fact has not been madewhole to date.

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

refusing to grant Anaconda the right to asubrogation 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 anattorney, who instituted suit after Anaconda stopped paying benefits to Ness. The issue faced bythe Workers' Compensation Court waswhat benefits, if any, Ness wasentitled to receive. The attorney's efforts in securing Ness's award are not diminished simply because Nessdid not specifically request agiven type of relief. Thedecision of the Workers' Compensation Court is affirmed.