ELWELL v AMERICAN SMELTING REFIN
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No. 85-22 IN THE SUPREME COURT O F THE STATE OF MONTANA 1985 ALFRED M. ELWELL , C l a i m a n t and A p p e l l a n t , AMERICAN SMELTING AND R E F I N I N G , I N C . , (ASARCO) , E m p l o y e r , D e f e n d a n t and Respondent. APPEAL FROM: T h e Workers' C o m p e n s a t i o n C o u r t , T h e H o n o r a b l e T i m o t h y R e a r d o n , Judge p r e s i d i n g . COUNSEL OF RECORD: For Appellant: Utick, G r o s f i e l d & Uda; Joan A. Uda, Helena, Montana For R e s p o n d e n t : Hughes, K e l l n e r , Helena, Montana S u l l i v a n & Alke; S t u a r t L. S u b m i t t e d on B r i e f s : Decided: Filed :lftj; 1 1985 ;j Clerk Oct. Kellner, 3, 1985 December 31, 1 9 8 5 Mr. Justice John C. Court. Sheehy delivered the 0pini.on of the Alfred Elwell appeals from a December 12, 1984, judgment of the Workers' Compensation Court that determined Elwell's employer, Elwell's ASARCO, was third party co-employee. entitled to subrogation settlement from Anthony against Strainer, a The judgment of the Workers' Compensation Court is remanded for further proceedings. The parties agree on the following facts: self-insured employer under Conpensation ASARCO is a Plan I. of the Workers ' Compensation Act (hereinafter the On October 17, 1979, Elwell suffered an industrial Act). injury while working at the ASARCO plant in East Helena, Montana. ASARCO supplied respirator masks for leakage. stannic oxychloride to test The chemical was to be blown around the outside of the mask while a worker was wearing a respirator; a leak would cause the worker to cough, showing a need to refit the mask. Anthony Strainer, a co-employee who was then the plant OSHA officer, unscrewed the respirator hoses from oxychloride, Elwell's a toxic oxygen gas, tank into and squirted claimant's stannic respirator. Neither Elwell nor Strainer were testing at the time the injury occurred. Strainer, acting without Elwell's knowledge, squirted the chemical into the respirator as a practical joke. Elwel.1 suffered serious, disabling injuries to his bronchial system as a result and has not been gainfully empl-oyed since October 17, 1979. ASARCO accepted liability for the claim and paid Workers' Compensation benefits of $41,269 temporary disability, $198 per week permanent disability and $4,639 medical. In October 1981, pursuant to S 39-71-413, MCA, Elwell sued Strainer alleging that Strainer's maLicious act caused Elwel-1's injury. intentional and Elwe11 also named ASARCO as a defendant, but that claim was dismissed because the provisions of the Act were determined to be Elwell's exclusi ve remedy from ASARCO. ASARCO elected not to participate in the cost of the action against Strainer, thus waiving 50% of the subrogation rights granted by statute. Section 39-71-414 (2)(c). Prompted by Elwell's suit, Straj-ner's homeowner's insurance company, Millers Mutual Insurance Company, sought a declaratory judgment that Strainer's act was intentional and therefore not covered under the homeowner's insurance policy. This Court held coverage. that the Millers' Mutual policy provided Miller Mutual Insurance Co. v. Strainer (Mont. 1983), 663 P.2d 338, 40 St,Rep. 743. Elwell then negotiated a settlement of his claim against Strainer for $50,000, the policy limits. Elwe11 incurred attorneys' fees of $16,500 and costs of $30 leaving a net The parties agreed that pursuant to S recovery of $33,470. 39-71-414 (2)(d), MCA, Elwell was entitled to one-third, or $11,157. ASARCO asserted a subrogation right to the $22,313 balance, but Elwe11 disagreed. disputed money in a The parties invested the tax-exempt money market. fund. The balance of that account, which continues to draw interest at a variable rate, was $24,139 as of July 16, 1984. The Workers' Compensation Court, citing S MCA, ruled that ASARCO was statutorily 39-71-414, entitled to subrogation for the $22,313 but gave Elwell the interest earned. Elwell appeals, raising two issues: Issue No. 1. Did ASAR.CO ha.ve a right of subrogation i n . Elwell's third party settlement? Are Elwell's attorneys entitled to fees Issue No. 2. and costs incurred incident to the resolution of issue no. l ? ASARCO raises one issue: Did the Workers' Compensation Court err in concluding that Elwell was entitled to the interest earned on the disputed amount? The Workers' Compensation Court, relying on the following statutory language, concluded ASARCO was entitled to subrogation: 37-71-414 (1). If an action is prosecuted as provided for in 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. ... Strainer's acts were intentional as that word is used in 39-17-413, MCA. Strainer's policy Elwe11 sued Strainer and limit of $50,000 which $16,530 attorneys' fees and costs. is settled for reduced by El-well contends that, although he is receiving the maximum benefits allowed under the Workers' Compensation Act, it is not sufficient to compensate him for his injury so ASAF.CO is not entitled to subrogation. Elwe11 concedes, and we agree, that tort concepts of negligence and full legal redress do not apply to benefits under the Workers' Compensation Act. There is a trade-off of ful.1 redress for not requiring proof of fault. El-well also concedes, and we agree, that ASAFCO's actions do not take them out of the exclusive remedy provisions of the Act. But, accident. Elwell argues this is an atypical industrial Elwell's injuries were caused by the intentional acts of his co-employee, Strainer. ASARCO1s acts did not remove it from the exclusive remedy provision of the Workers1 Compensation Act, but ASARCO' s officer , safety incredibly poor judgment, caused the accident. Strainer to be their showing ASARCO chose safety officer; ASARCO provided the noxious gas, and ASAFCO gave Strainer access to it. As the Workers' Compensation Court recognized, Elwell raises an equitable argument against subrogation. wrongful acts of ASARCO's safety officer injured Elwell. The The Act, however, provides that the insurer, or in this case the self-insured, is entitled to subrogation. Mr. Elwe11 is caught in the legal twilight zone where the Act precludes him from pursuing tort remedies from ASARCO, but a part of the tort recovery he received from Strainer may be returned to ASARCO. This issue is controll-ed by our decision in Hall v. State Compensation Compensation Insurance Fund, Division of Workers' (Mont. 1985) , - P.2d -, 42 St.Rep. 1502. That case treated the problem of a claimant who sustained injuries the value of which exceeded amounts he would receive under Workers1 Compensation benefits and from a responsible third party. does here, In that case the insurer claimed, as ASARCO that it was entitled under subrogation to a portion of the recovery the employee made from the responsible third party. We held in Hall that when a claimant is forced, in a case of clear liability, because of maximum limits of an insurance policy to a settlement with a third party tortfeasor, the amount of which settlement, together with claimant's Workers ' Compensati-on award, does not give the claimant full legal redress, the insurer or the employer is not entitled to subrogation rights under 5 39-71-414, MCA, until the claimant has attained full legal redress. ASARCO indicates that the claimant here will receive in Workers' Compensation benefits, over disability the total sum of $334,562. the course of his While that sum in the aggregate may seem large, it must nevertheless be considered in the light of our earlier discussion that the Workers' Compensation system is based upon a surrender by the worker of his right to ful.1 legal redress in return for the Workers' Compensation coverage provided by the employer. of fact exists, which must Compensatjon Court, as be resolved by to whether the A question the Workers' total prospective Workers' Compensation benefits plus the $50,000 recovery frnm the third party insurer, will give the claimant full legal redress. At the point where he does obtain full legal redress, if that is the case, ASARCO, in this case, under Hall, would then be entitled to subrogation for that portion of the $22,313 which exceeded full legal redress. We are returning this cause to the Workers' Compensation Court for a determination of that issue. Elwell also contends that he is entitled to attorneys' fees in this case, citing Wight v. Hughes Livestock Company (Mont. 1983), 664 P.2d 303, 40 St.Rep. 696, as authority for assessing fees to ASARCO rather than paying them out of the judgment. In this claim Elwell is incorrect. Attorneys' fees in Workers' Compensation cases are recoverable under S 39-71-611, MCA, b~here the insurer denies liability for a claim for compensation or terminates compensation benefits, and the Workers ' claimant is later adjudged Compensation judge or on compensable appeal-. The by the dispute between Elwe11 and ASARCO here does not come within the provisions of 5 39-71-611, MCA. Moreover, the amount of attorneys' fees incurred in the claim against the third party insurer has already been included in the computation which yields the $22,313 which is at issue here. Elwell has no right to attorneys' fees as to this disputed sum. ASARCO claims that the Workers' Compensation Court erred in determining that Elwell was entitled to all- interest earned on the $22,313 fund in escrow. Since we hold here that Elwell's right to the $22,313 is dependent on whether or not his benefits plus his recovery from the third party insurer constitute full legal redress, a determination of which of the parties is entitled to interest accumulating on the fund is dependent upon who has the right to the proceeds, or any portion thereof. In the event that the Workers' Compensation Court determines that ASARCO is entit-led to a portion or all of the $22,313, it will also be entitled to Otherwise, the interest earned claimant is in the entitled same proportion. to the interest accumulations. The judgment of the Workers' Compensation Court is reversed, and this cause is remanded for further proceedings before that Court in accordance with this opinion. Costs of appeal to Elwell. q k l.,%-fGY Justice W e Concur: Ckief J u s t i c e Mr. J u s t i c e F r e d J . Weber and M r . M. C h i e f J u s t i c e J . A . r While now is Z u s t i c e L. majority opinion. Gulbrandson Turnage c o n c u r r i n g : t h e undersigned. d i s s e n t e d controllinq. C. We therefore i n Hall, concur in t h a t opinion the present
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