No. 87-100 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1987 

FRANCIS J. BUTORI, JR., 

Claimant and Appellant, 

-vsBRUCE METCALF SPORTSMAN 66, 

Employer, 

and 

STATE COMPENSATION INSURANCE FUND, 

Defendant and Respondent. 

APPEAL FROM: The Workers' Compensation Court, The Honorable 

Timothy Reardon, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Leonard J. Haxby, Butte, Montana 

For Respondent : 

Hughes, Kellner, Sullivan & Alke; Stuart Kellner, 

Helena, Montana 

Submitted on Briefs: May 21, 1987 

Decided: August 11, 1987 

Filed: AUG 11 1987 

*,- I -7 

Clerk 
Mr. Justice William E. Hunt, Sr. delivered the Opinion of the 

Court. 

This is an appeal from the Workers' Compensation Court, 

State of Montana. Claimant alleges error by the court in 

holding that defendant State Compensation Insurance Fund 

(State Fund) is entitled to 50 percent subrogation against 

his entire third party recovery. 

We affirm this order of the Workers' Compensation Court. 

The issues presented on appeal are: 

1. Whether the Workers' Compensation Court erred in 

deciding that the State Fund is entitled to assert its 

subrogation right against the employee's entire third party 

settlement, including the economic and non-economic damages 

received. 

2. Whether the Workers' Compensation Court calculated 

the amount of the State Fund's subrogation correctly. 

The following facts were stipulated to by the parties 

and adopted by the Workers' Compensation Court: 

1. That the employer, Bruce Metcalf Sportsman 66, is 

enrolled under Compensation Plan No. 3 of the Workers' 

Compensation Act, and its insurer is the State Compensation 

Insurance Fund. 

2. That on June 22, 1981, claimant received an injury 

arising out of and in the course of his employment as a 

service station helper when his legs were pinned between two 

customers' automobiles. Claimant's actual weekly wage at the 

time of the injury was $107.20 per week. 

3. That the insurer accepted liability for the claim 

and has paid claimant the following disability benefits: 

a. On July 15, 1981, for the period from and 

including June 22, 1981 through July 14, 1981, temporary 
total disability benefits at the rate of $71.46 per week, 

totaling $235.37; 

b. On December 21, 1982, for the period from and 

including March 10, 1982 through April 13, 1982, temporary 

total disability benefits at the rate of $71.46 per week, 

totaling $357.30. 

c. On January 16, 1984, pursuant to Dr. Buehler's 

whole man impairment rating of 5 percent, claimant was paid 

$893.25, which represented 25 weeks permanent partial 

disability benefits at claimant's permanent partial rate of 

$71.46, reduced by 50 percent to partially satisfy 

defendant's subrogation interest in claimant's third party 

settlement. 

4. That from the time of the accident through December 

6, 1983, defendant paid claimant's medical expenses in the 

amount of $2,133.21. 

5. That on December 27, 1983, claimant settled his 

third party claim against the driver of the automobile that 

struck him. In settlement of that claim, Travelers Indemnity 

Company, the third party's automobile liability insurer paid 

claimant the sum of $26,000, from an automobile liability 

insurance policy with bodily in jury limits of liability for 

one person of $500,000. 

6. That on January 10, 1984, claimant's attorney 

reimbursed defendant in the sum of $1,362.94, which 

represented defendant's 50 percent subrogation interest in 

both the temporary total disability benefits of $592.67 paid 

claimant and the medical expenses of $2,133.21 paid for 

claimant. 

7. That since being reimbursed by claimant, defendant 

has paid medical expenses of $618.36, which is equal to the 

total medical expense of $1,236.72 incurred by claimant 

during that period of time, reduced by 50 percent to satisfy 
defendant's subrogation interest in claimant's third party 

settlement. 

8. That defendant elected not to participate in the 

cost of claimant's third party action and waived 50% of its 

subrogation rights in claimant's third party settlement. 

9. In settling his third party claim, claimant incurred 

attorney fees and costs totaling $6,500. 

10. With the exception of the $1,362.94 payable to the 

State Fund, the $26,000 was paid entirely for pain and 

suffering, non-economic loss. 

The subrogation rights of Workers' Compensation 

insurance carriers upon third party recovery has a 

straightforward history in Montana case law. 

The statutorily given right of subrogation has been 

recognized as constitutional and as being in furtherance of 

equity and justice. 

When as here, a worker, in the course of his 

employment is injured by the act or omission of one 

other than his employer or co-employee, his injury, 

because it was incurred in the course of his 

employment, gives rise to an obligation on the part 

of his employer or his employer's insurer, to 

provide the workers with benefits under the 

Workers' Compensation Act. The employer or insured 

in that case is called upon to make payments to the 

worker which really should be the burden and the 

responsibility of the third-party tortfeasor. It 

is a doctrine as old as equity that when a party is 

burdened by a debt or obligation that in natural 

justice, equity and good conscience should be paid 

by another, that party is subrogated to the rights 

of his payee to the extent of the payments made, as 

against the responsible party. 

Brandner v. Travelers Ins. Co. (1978), 179 Mont. 2081 587 

P. 2d 933, 936-937; See also Skauge v. Mountain States Tel. & 

Tel. Co. (1977), 172 Mont. 521, 565 ~.2d 628. 

When claimant elects to pursue a third party action, §§ 

39-71-412 and 39-71-414, MCA, govern. 
If the insurer elects to participate in the cost of the 

third party action the insurer is entitled to full 

subrogation for the amount which has been or will be paid to 

claimant. Section 39-71-414 (I), MCA. Tuttle v. 

Morrison-Knudson Co., Inc. (1978), 177 Mont. 166, 580 P.2d 

1379. 

If the insurer elects not to participate, the insurer is 

entitled to 50 percent of the amount paid or owed to claimant 

for up to two-thirds the amount of claimant's recovery. 

Section 39-71-414 (2) (c) , MCA. 

Occasions in which this right of subrogation has been 

limited by this Court are few. In Fisher v. Missoula White 

Pine Sash Co. (1974), 164 Mont. 41, 518 p.2d 795, this Court 

held that the statutory language did not differentiate 

between a survival action and a wrongful death action. In 

Swanson v. Champion International (1982) , 197 Mont. 509, 646 

P.2d 1166, the Fisher ruling was distinguished as no longer 

applicable after the 1977 amendment to the Workers' 

Compensation subrogation statute was enacted. 

[Ulnder the present statutory scheme,. . . and 

because of the intrinsic differences that exist now 

and have always existed in the source and effect of 

recoveries made in survival actions as 

distinguished from wrongful death actions, the 

subrogation rights of the employer or its insurer 

under the Workers' Compensation Act do not extend 

to recoveries made under wrongful death claims. 

The other distinguishable situation in which subrogation 

by the Workers' Compensation insurance carrier is limited is 

"in a case of reasonably clear liability, where a claimant is 

forced to settle for the limits of an insurance policy which, 

together with claimant's Workers' Compensation award, do not 

grant full legal redress to claimant . . . " Hall v. State 
Compensation Fund (Mont. 1985), 708 P.2d 234, 237, 42 St.Rep. 

1502, 1505. See also Skauge, 565 P.2d at 632. 

The case before this Court embraces none of the 

distinguishable facts which would negate or infringe upon the 

subrogation rights of the State Fund. Butori was not killed 

as a result of the industrial accident at issue. 

Consequently, there is no question concerning wrongful death 

versus survival actions. Nor is there an issue of Butori not 

having been "made whole." Butori settled his third party 

action for $26,000 on a policy with a $500,000 liability 

limit. The $1,362.94 portion of the settlement was 

designated as the subrogated amount payable to the State Fund 

for prior benefits paid. The remainder of the $26,000 was 

designated as non-economic loss damages, compensating Butori 

for pain and suffering. These designated amounts were agreed 

upon by the settling parties. However, "[wlhen subrogation 

is considered, neither the court nor the Workers' 

Compensation Court or Division should be bound by the 

allocations so made between private counsel." Swanson, 646 

P.2d at 1175. 

Further, as discussed above, the only occasions in which 

this Court has allowed an infringement on the rights of 

subrogation for a Workers' Compensation insurance carrier are 

when there is a wrongful death recovery or when claimant has 

not been made whole. More specifically, the only time this 

Court has differentiated between economic and non-economic 

losses is when the death was instantaneous, thereby barring a 

survival action. In such a situation, the Workers' 

Compensation Court can determine the value of the economic 

damages contained in the settlement or judgment and award 

such amount as subrogation to the insurance carrier. 

By "economic damages" we refer to those elements of 

damages in a wrongful death case that would have 
their source in the earnings of the decedent, and 

recompensed medical and burial expenses paid partly 

or wholly by the subrogating carrier. 

Swanson, 646 P.2d at 1174. 

Appellant has not demonstrated that he falls under any 

of these extenuating circumstances. Therefore, we affirm the 

order of the Workers' Compensation Court in holding that the 

State Fund is entitled to 50 percent subrogation of 

appellant's entire third party settlement. 

The second issue of whether the Workers' Compensation 

Court correctly calculated the amount of subrogation is 

resolved by a review of the applicable formula and its 

application by the Workers' Compensation Court. 

The record shows that the Workers' Compensation Court 

correctly utilized the statutorily designed formula as 

outlined in Brandner, 587 P.2d at 938, 939: 

(1) Amount of recovery $26,000 

(2) Attorney fees and costs 6,500 

(3) Net recovery after fees and costs 19,500 

(4) Claimant's minimum entitlement 

1/3 x $19,500 6,500 

(5) Insurers maximum recovery 

50% (% x $26,000) 13,000 

(6) Sum of (4) and (5) 19, [5] 00 

The net recovery of $19,500 is sufficient to provide 

claimant with his minimum statutory entitlement of $6,500. 

(7) Insurer maximum entitlement 13,000 

(8) Recapitulation 

Amount of Recovery $26,000 $ 6,500 

Cost and fees 6,500 

Claimant's entitlement 13,000 

(9) Benefits paid to date 

Temporary Total Disability 

$ 235.37 (agreed fact 3a) 

357.30 (agreed fact 3b) 
$ 592.67 

$2,133.21 (agreed fact 4) 

(impairment 5%) 1,786.50 (agreed fact 3c! 

$3,919.71 

10) Insurer share of payments 

to date (50% of $4,512.38) $ 2,256.19 

This calculation, taken directly from the judgment of 

the Workers1 Compensation Court, provides that Butori receive 

at least one-third of the net recovery, less claimant's 

proportionate share of fees and costs. This amount is 

required by S 39-71-414 (2) (d) , MCA, when the insured party 

initiates a third party action without insurer participation. 

The Workers' Compensation judge held further that: 

Claimant is entitled to any credit for amounts 

previously reimbursed to insurer for its 

subrogation claim. In addition, the insurer may 

reduce future benefits by 50 percent until $13,000 

is paid, at which time full benefits are restored. 

Butori cannot claim that he is being inadequately 

recompensed. He is being paid monthly benefits from the 

State Fund which cover his medical expenses and disability 

benefits. In addition, he will receive - at least $6,500 as 

damages recovered from his third party action. 

The court's calculations ensure that Butori will receive 

a minimum amount, but does not limit his recovery to only 

one-third of the entire amount received. The State Fund is 

entitled to 50 percent subrogation of amounts paid to 

claimant up to $13,000. If State Fund's obligations to 

Butori never total $26,000, he will receive the remainder of 

the recovery amount. The court correctly calculated the 

subrogated amount of appellant's third party recovery. 

We affirm the judgment of the Workers' Compensation 

Court. 
We Concur: 
Total $ 592.67 

Medical $2,133.21 (agreed fact 4) 

(impairment 5%) 1,786.50 (agreed fact 3c) 

Total $3,919.71 

(10) Insurer share of payments 

to date (50% of $4,512.38) 

This calculation, taken directly from the judgment of 

the Workers' Compensation Court, provides that Butori receive 

at least one-third of the net recovery, less claimant's 

proportionate share of fees and costs. This amount is 

required by 39-71-414 (2) (d) , MCA, when the insured party 

initiates a third party action without insurer participation. 

The Workers' Compensation judge held further that: 

Claimant is entitled to any credit for amounts 

previously reimbursed to insurer for its 

subrogation claim. In addition, the insurer may 

reduce future benefits by 50 percent until $13,000 

is paid, at which time full benefits are restored. 

Butori cannot claim that he is being inadequately 

recompensed. He is being paid monthly benefits from the 

State Fund which cover his medical expenses and disability 

benefits. In addition, he will receive - at least $6,500 as 

damages recovered from his third party action. 

The court's calculations ensure that Butori will receive 

a minimum amount, but does not limit his recovery to only 

one-third of the entire amount received. The State Fund is 

entitled to 50 percent subrogation of amounts paid to 

claimant up to $13,000. If State Fund's obligations to 

Butori never total $26,000, he will receive the remainder of 

the recovery amount. The court correctly calculated the 

subrogated amount of appellant's third party recovery. 

We affirm the judgment of the Workers' Compensation 

Court.