Opinion ID: 878870
Heading Depth: 1
Heading Rank: 2

Heading: The Application of the 20 Percent Penalty For Unreasonable Delay in Payment of Medical Benefits.

Text: In its finding of fact no. 6, the Workers' Compensation Court found that under § 39-71-2907, MCA, claimant Carlson was entitled to a 20 percent increase for unreasonable delay in the payment to her of compensation benefits due between June 8, 1983 and July 14, 1983. The Workers' Compensation Court, however, refused to assess a penalty on the delayed payment of the medical expenses, saying: The claimant further requests the penalty on the carrier's refusal to promptly and completely pay the claimant's medical expenses. While this Court specifically finds that Hartford's actions on this matter are unreasonable, the Court lacks jurisdiction to impose penalties on delayed medical reimbursements. Section 39-71-2907 above provides a penalty on delayed or refused `compensation benefits' only; these are separate and distinct from medical benefits (See § 39-71-704, MCA). In light of Hartford's continuous unreasonable actions, it is regrettable that additional penalties cannot be awarded. However, liability for actual payment of accrued and future compensation benefits was tolled until order of the Montana Supreme Court on June 8, 1983. Penalties on delay of medical benefits are warranted, but are not included in the Workers' Compensation Act and the provisions therein are exclusive. Some consolation may be found, little though it may be, in an award of reasonable attorney fees. Thus, the Workers' Compensation Court decided that it could consider medical expenses for the purpose of determining attorney fees allowable to the claimant, but that it could not assess a penalty for unreasonable delay in the payment of the medical expenses. Section 39-71-2907, MCA, provides in pertinent part: XX-XX-XXXX. Increase in award for unreasonable delay or refusal to pay. When payment of compensation has been unreasonably delayed or refused by the 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 percent. The claimant argues that the intent of § 39-71-2907, MCA, is to penalize the insurer who refuses to pay claims within a reasonable time and to encourage prompt payment of all Workers' Compensation claims. There is no reason to exclude medical benefits from the penalty statute. Medical expenses have not been specifically excluded; the generic term compensation is used in the same all-encompassing manner as it was used in Workers' Compensation Act and Workers' Compensation judge. Hartford argues that § 39-71-704, MCA, which defines medical expenses under the act makes it clear that weekly compensation and medical expenses are separate and distinct from medical payments. Section 39-71-704, MCA, provides: XX-XX-XXX. Payment of medical, hospital and related services. (1) In addition to the compensation provided by this chapter and as an additional benefit separate and apart from compensation, the following shall be furnished: (a) After the happening of the injury, the employer or insurer shall furnish, without limitation as to the length of time or dollar amount, reasonable services by a physician or surgeon, reasonable hospital services and medicines when needed and such other treatment as may be approved by the division for the injuries sustained ... (Emphasis added.) We hold that the Workers' Compensation Court erred on this point. Although several statutes in the Workers' Compensation Act use the words compensation and benefits interchangeably, the Workers' Compensation judge relied on one statute, § 39-71-704, MCA, to determine that medical payments are not included in the term compensation as it is used in § 39-71-2907, MCA. To begin with, the penalty statute itself, § 39-71-2907, MCA, provides that in the event of delay,  the full amount of the compensation benefits due a claimant ... may be increased by the Workers' Compensation judge by 20 percent. The legislature did not limit the penalty to just the word compensation; it used instead the term compensation benefits. There should be no argument that the compensation benefits which an injured worker receives under the Act includes compensation for time off the job, for disability and for medical payments. The Act itself makes the term compensation universally applicable to all of the sections of the Act. Section 39-71-103, MCA, provides: XX-XX-XXX. Compensation provisions. The compensation provisions of this chapter, whenever referred to, shall be held to include the provisions of compensation plan no. 1, 2 or 3, and all other sections of this chapter applicable to the same or any part thereof. The following statute requires the Workers' Compensation Court to give a liberal construction to the chapter: XX-XX-XXX. The court to give liberal construction to chapter. Whenever this chapter or any part or section hereof is interpreted by a court, it shall be liberally construed by such court. The holding of the Workers' Compensation judge that medical benefits are not subject to penalty conflicts with its holding that the claimant could recover attorney fees relating to the medical benefits. Section 39-71-611, MCA, provides for costs and attorney fees: XX-XX-XXX. In the event an insurer denies liability for a claim for compensation or terminates compensation benefits, and the claim is later adjudged compensable by the workers' compensation judge or on appeal, the insurer shall pay reasonable costs and attorney fees as established by the workers' compensation judge. It is evident that the statute relating to costs and attorney fees uses the term compensation benefits, and the Workers' Compensation Court construed that term to include medical benefits in determining attorney fees. Yet, the use of the same term, compensation benefits in the penalty clause is distinguished by the Workers' Compensation judge as not allowing a penalty to be assessed. As an example of the places in the Workers' Compensation Act where the word benefits is used interchangeably with compensation see § 39-71-709, MCA, relating to partial disability benefits and indemnity benefits. Subdivision (1) of that statute provides: XX-XX-XXX(1). In addition to temporary total disability benefits allowed in this chapter, a worker whose injury results in partial disability is entitled to receive compensation under XX-XX-XXX, or indemnity benefits under XX-XX-XXX through XX-XX-XXX. In the foregoing statute, the legislature used the word compensation and benefits interchangeably. This Court would not tolerate an argument that refusal of an insurer to pay indemnity benefits for partial permanent disability or for scheduled losses is not subject to the 20 percent penalty. The Workers' Compensation judge failed to take into consideration the legislative history of § 39-71-2907, MCA. The penalty provisions for delay of payment in compensation were first enacted in Ch. 227, Laws of Montana (1961). The enactment was codified as section 92-824.1, R.C.M. (1947). It provided: When payment of compensation has been unreasonably delayed or refused, either prior or subsequent to the issuance of an award, the full amount of the order, decision or award may be increased by ten percent (10) of the weekly award.  There is no question that this wording would relate the penalty to the weekly benefits that were paid to the injured employee. When the office of the Workers' Compensation judge was created, the same provision was carried forward as section 92-849, R.C.M. (1947), except that the new statute provided that the Workers' Compensation judge would make the determination. However, in 1979, in Ch. 63, § 5, Laws of Montana (1979), the penalty provision was amended as follows, with the underlined words showing the amendments: 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 claim on compensation benefits, the full amount of the compensation benefits due a claimant, between the time compensation benefits are delayed or refused and the date of the order granting a claimant compensation benefits, may be increased by the Workers' Compensation judge by 20 percent.  The amendment of Ch. 63, § 5, Laws of Montana (1979), became what is now § 39-71-2907, MCA, the section relied on by the Workers' Compensation judge. It is clear then from the legislative history of the Act that before 1979 the penalty did not apply to medical benefits since the penalty was limited to the weekly award. After the amendment in 1979, the penalty applied to the full amount of the compensation benefits. Hartford also contends in this appeal that because the payments were made to the medical providers and not to the claimant herself, that the penalty provision should not apply. This argument is specious. It was met by the Kansas Court in Farm Bureau Mutual Insurance Company v. Commercial Standard Insurance Company (1980), 5 Kan. App.2d 127, 612 P.2d 1265, where the insurer paid a death benefit of $1,000 to the funeral home, and sought to subrogate for the payment against a third-party insurer. The third-party insurer contended that because the payment was not made directly to the decedent, it was not compensation. The Kansas Court stated: Pursuant to this statute, plaintiff paid $1,000.00 to the funeral home. Unlike the $5,000.00 payment to the fund, this sum confers a benefit on the decedent's representatives and is compensation under the Act. By virtue of the plaintiff's paying for the services rendered by the funeral home, decedent's parents were compensated to the extent that they were relieved of assuming an unavoidable expense (citing authority). The funeral bill is analogous to medical expenses which have been held to be compensation. Owen v. Ready-Made Buildings, Inc. 180 Kan. 286, 303 P.2d 168 (1956). Finally the fact that the payment is made directly to the provider of services does not affect its status as compensation. KSA 1979 Supp. 44-504(b) permits subrogation for compensation paid by the employer regardless of who receives the actual payment. We hold therefore that the employer or his insurance carrier is entitled to be subrogated for the amount of the funeral bill and reverse the trial court on this point. 612 P.2d at 1268. In this case, Hartford claims subrogation against a third-party insurer, and by order of October 25, 1983, the Workers' Compensation Court determined that Hartford here could reduce its future obligations to the claimant by 50 percent until it has paid $74,327. Thus Hartford has been subrogated to the extent of $74,327 against recovery made against a responsible third party. That sum includes the approximate $35,000 that it paid in medical benefits. Its right to include medical payments in its subrogation claim is found in § 39-71-414, MCA, which provides: The insurer is entitled to subrogation for all compensation or benefits paid under the act. (Emphasis added.) Thus, medical payments under the act for the purposes of subrogation are treated as a compensation benefit; for the same reason, medical payments should be treated as a compensation benefit when a penalty is considered for wrongful refusal or delay in payment.