Opinion ID: 1393495
Heading Depth: 1
Heading Rank: 9

Heading: issues i and ii penalty fee and attorneys' fees

Text: Issues I and II address whether the Workers' Compensation Court erred in failing to award a 20 percent penalty fee pursuant to § 39-71-2907, MCA, and attorneys' fees pursuant to § 39-71-611, MCA, for unreasonably terminating a claimant's benefits. Section 39-71-2907, MCA, provides in pertinent part: (1) 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%. The question of unreasonable delay or refusal shall be determined by the workers' compensation judge, and such a finding constitutes good cause to rescind, alter, or amend any order, decision, or award previously made in the cause for the purpose of making the increase provided herein. Section 39-71-611, MCA, provides in pertinent part: (1) The insurer shall pay reasonable costs and attorney fees as established by the workers' compensation court if: (a) the insurer denies liability for a claim for compensation or terminates compensation benefits; (b) the claim is later adjudged compensable by the workers' compensation court; and (c) in the case of attorneys' fees, the workers' compensation court determines that the insurer's actions in denying liability or terminating benefits were unreasonable. Issues I and II must be decided based upon a determination as to whether the insurer was unreasonable in terminating benefits; if it was unreasonable, a penalty fee and attorneys' fees may be awarded pursuant to §§ 39-71-2907, and 39-71-611, MCA, respectively. The Workers' Compensation Court concluded that the insurer had a reasonable basis for believing that Stevens was not injured on-the-job and was not, therefore, entitled to benefits. We must determine whether substantial evidence supports this conclusion. If the insurer was reasonable in its investigation of the claim, there is no basis upon which to award the penalty fee or attorneys' fees. If, however, there is not substantial evidence to support the Workers' Compensation Court's conclusion that the insurer's actions were reasonable, this Court must overturn the Workers' Compensation Court's decision and an award of a penalty fee and attorneys' fees will be warranted. Previous case law lends assistance in determining whether, in the instant case, the insurer provided a reasonable review and evaluation of the evidence prior to terminating Stevens' benefits. Our case law provides that an insurer has a duty to make at least a minimal investigation of a claim's validity in light of the relevant statutes. Absent such investigation, denial of a claim for benefits is unreasonable. Lovell, 860 P.2d at 101. See also; Gaumer v. Montana Dept. of Highways (1990), 243 Mont. 414, 421, 795 P.2d 77, 81. Lovell involved an action arising out of the State Fund's decision to terminate the benefits of Mr. Lovell when it learned that he was receiving Social Security benefits. The Workers' Compensation Court concluded, and this Court agreed, that even a cursory investigation would have revealed that Lovell received Social Security benefits due to his alcoholism, not because of the injury at issue. The Lovell Court further stated that in that case, the State Fund's failure to fulfill its duty to investigate served as a sufficient basis to conclude that State Fund's actions were unreasonable. Moreover, this Court stated that [p]ayment of unreasonably withheld benefits `on the courthouse steps' does not negate the insurer's potential liability for a penalty for unreasonable delay of benefits. To conclude otherwise would render the `unreasonable delay' provisions of the penalty statute moot. Lovell, 860 P.2d at 102. (Citation omitted.) With the Lovell principles in mind, we analyze whether the insurer was unreasonable in terminating benefits in the instant case. First, a basic timeline of the events of the case proves helpful. On October 28, 1992, an anonymous hotline tip call was placed to the State Fund, stating that the claimant was working. Approximately one month later, Greg Stone was hired to investigate the claim and about one month after Stone was assigned to the case, he delivered his report to the State Fund. Visser testified that he did not read Stone's report but that he was familiar with what was in the report. On February 24, 1993, Nancy Butler sent a letter to Robert Fairchild, Bureau Chief of the Montana Criminal Investigation Bureau (MCIB), asking for an investigation into Stevens' claim. Tom Woods was assigned to investigate the claim and on March 26, 1993, Fairchild wrote to Visser, stating that the investigation had been completed and a copy of Woods' report was enclosed. Visser did not read Woods' report before he sent a reply letter to the MCIB, relating the total amount paid by the State Fund to date for Stevens' claims and enclosing, for return, Woods' report. Visser stated that he did talk to Woods, but only once, and only about whether Woods had a witness who would testify against Stevens. Visser provided the following testimony: Q. And you didn't know what was in Mr. Woods' report because you read it  because you hadn't read it. The only way you knew what was in the report was from whatever conversation you had with Mr. Woods about what was in his report, right? A. Right. Q. Okay. And you talked, before you made this decision to terminate Mr. Stevens' benefits, you talked to Mr. Woods one time, and one time only, am I right? A. Regarding whether or not there was going to be a witness, yes. Q. Well, and that's all you talked to him about? A. Right. Q. You didn't talk to him about what was in his report other than are we going to have a witness or not, before you made the decision to terminate? A. We knew whether or not we had a case if we had a witness. And that was the only issue. Q. My point is, can you answer this yes or no, did you know, either from reading or talking to Mr. Woods, what it was that Mrs. Stevens was going to say? A. I had heard that she was going to testify that the claimant was injured prior to coverage being obtained. When Visser learned that Woods did have a witness who would testify about the falsity of the claim, he decided to terminate benefits; the date of the decision to terminate was April 21, 1993. On April 22, 1993, Stevens received notice via letter that his benefits were being terminated. Visser testified that he never spoke with Becker about her testimony to determine whether she was a credible witness despite the fact that he knew the witness was the claimant's ex-wife. Visser provided the following testimony: Q. So at the time you made the decision [to terminate Stevens' benefits], you didn't know whether you had or whether you didn't have a credible witness? A. When I made the decision, we knew we had a witness who was willing to testify that claimant's injury did not occur on that date. It's not my job to judge whether or not that testimony is credible. Q. And so at the time you made the decision you didn't know whether she was credible or not, did you? A. At the time I made the decision, I knew she was going to testify that the injury did not occur on the date that the claimant said it did. Q. Mr. Reporter, may I have my question read back. (Question read.) Q. Yes or no? MR. HERINGER: I think he responded to the question as posed. MR. EISELEIN: I don't think so. THE COURT: I will allow the question. You may answer the question. THE WITNESS: We knew we had somebody that was going to testify. That, combined with the fact that the claimant had the coverage on the 25th, claimed the injury on the 25th, that was enough reason to terminate benefits. Q. (By Mr. Eiselein:) I will try it one more time. Did you know on the 21st of April of '93 whether or not Carolyn Becker was credible or not?