*1 BUCKMAN, MON- Appellant, ROSE N. Claimant v. Employer HOSPITAL, TANA DEACONESS and State Respondent. Fund, Defendant Insurance No. 85-530. July 24, 1986.
Submitted
Dec.
Decided
MR. JUSTICE Opinion HUNT delivered the of the Court. appeals Rose judgment Compensa- the Workers’ denying tion Court bi-weekly her conversion of her Workers’ Com- pensation lump-sum payment. employer, benefits to a Buckman’s Hospital insurer, Compensa- Montana Deaconess its State appealed portion judgment Insurance Fund of the same wherein the trial court concluded that not discount insurers could injuries occurred to for which conversions awarded April 1985. part, reverse
We affirm the Workers’ opinion. proceedings part, pursuant to this and remand for challenges to the presented us concern constitutional issues first amendment Specifically, asked to presented S.B. 281. we are as decide: 39-71-741(2), MCA procedure
1. Whether outlined (1985), determining guide Compensation judge biweekly payments permanent for lump-sum conversion of whether injuries awarded, injury as to conversions total will be 15, 1985, constitutionally prohibited. occurring April before procedure outlined prospective Whether (1985), equal protection 39-71-741(2), violates the MCA guarantees of the United States Constitutions. Montana and 39-71-741(1), MCA in Section
3. Whether the directions contained all sums to discount value conversions occurring prior April injuries to conversions for prohibited. constitutionally denying Compensation Court erred 4. Whether the Workers’ *3 lump-sum biweekly of her benefits. Buckman conversion its September, Compensation Court entered In the Workers’ determining findings judgment of fact and conclusions of law totally Buckman, appellant permanently disabled and that the was denied her disability benefits. The Court that she was entitled to upon her failure to meet request lump-sum for conversion based 39-71-741(2), MCA. The court requirements set out Section 39-71-741(2), pro- MCA were the amendments found said applied in Buckman’s cedural in nature and could therefore be challenged had offense constitution. Buckman without to either constitutionality applied to her case as of Section of the predated on the effective date grounds injury that her Court, relying on its ear- Workers’ amendments. The Inc., Stelling Ranches, 8412- v. Rivercrest WCC No. opinion in lier discounting provision, in Sec- found concluded that MCA, retroactively Buckman’s 39-71-741(1), applied to tion award, United States clauses of both the would violate the contract it appeals judgment as Buckman and Montana Constitutions. 39-71-741(2), MCA, Hospital and State and the concerns Section 39-71-741(1), appeal judgment as Fund it concerns Section MCA. below, As first
For reasons stated we hold that: to the issue 39-71-741(2), prohib- application constitutionally of Section MCA is 15,1985. prior injuries April ited as to occurred to As that prospective pro- the second issue we hold that the equal protection guarantees cedure does not of Mon- violate issue, tana and United States As to the third we Constitutions. hold discounting lump-sums inju- that for value conversions prohib- April constitutionally ries that occurred 1985 is Finally, as lump-sum biweekly ited. conversion claimant’s benefits we remand for determination of whether claimant is enti- tled to a conversion of in light her benefits of our construction of MCA. issue,
As to the first challenges applica- the retroactive procedure 39-71-741(2), contained MCA. That by statute amended states it “must be used the division and compensation workers’ judge determining lump-sum whether a permanent conversion payments approved total will be any awarded . . .” discussing questions, Before it constitutional important that we consider the statutes which are to be an injured regard worker with conversions or to normal benefits. by benefits determined the statutes
in effect injury. Trusty Freight- v. Consolidated as of the date of (Mont. ways 1984), St.Rep. 973; Argonaut Iverson v. (Mont. Insurance Co. 1982), 198 Mont. P.2d 1366. Trusty, computations we held that the standards of benefits
for the claimant are fixed statutes effect as of the date of injury and concluded that enact could not a statute reducing the benefits to an worker reason of social secur- ity paid. benefits We further stated:
“The injury statute on effect the date of determines the benefits (Citations omitted). to . . received . That sets contractual parties. case, debts In the the 100% instant once unenforceable, offset constitutionally portion statute was found *4 of the statute became void. This Court cannot come back and change the statute to a 50% offset. con- Once we found the statute stitutionally unenforceable, then no offset remains in effect. appellant
We hold that benefits due to the his Workers’ under for Social Se- award shall be reduced offset curity benefits.”
681 P.2d at at 976. reasoning foregoing properly The controls in the of the cases application lump- for a where with an case we are involved biweekly specifically permanent payments. We sum conversion of lump-sum seeks conversion of hold that where an worker benefits, biweekly injury set the statutes in effect at the time of lump-sum refusal of a conversion. standards for either the award or We conclude the amendments made therefore that 39-71-741(2), MCA, considering Section cannot is lump-sum note this application for a conversion. We provision in there is no consistent with the 1985 amendments stating any portion retro those amendments that should be actively, provision. single exception the discount with a pro- of the prospective issue is second whether 39-71-741(2), equal pro- cedure set MCA violates the out guarantees of and States Constitutions. tection the Montana United We hold that it does not. procedure set language
After of the careful consideration of the 39-71-741(2) (3) legis reference to the out after merely codify, history those subsections lative we convinced that form, law allowed a conversion detailed which the claimant. benefits when it was in the best interests of hearings was During leading the enactment of S.B. there statutory language specific concern- of more considerable discussion February 14, 1985 ing lump sums. The of the the award record representative of the intent meeting of subcommittee is the senate considering specific language. Senator of the when administrator Divi- Haifey asked the of Workers’ language based on the talking sion “if he is about is whether what pay- couple which experience years, of the under last yes.” replied ments are called for . . . Mr. Blewett law, codify existing Our intent was estimate pro- law, altering than out examination rather borne 39-71-741(2) (3). cedure contained Compensation Court award Subsection 2 the Workers’ directs beneficiary “only if his demonstrates worker or conversions ability financially probable more with himself his to sustain biweekly payments partial than the whole or conversion lay goes on to then his resources.” statute other available *5 separate meant “sustain himself out criteria to indicate what 2(a), financially.” in that We note here that the criteria subsection and the difference between the discounted value a conversion only biweekly grounds future value of benefits cannot be the for a v. of Kent Sievert conversion, (1971), directly prior codifies the law 79, language 158 Mont. 489 104. contained in Subsection P.2d 2(b) position improvement states that of a financial claimant’s should be the basis of an it can award unless be awarded price annuity. an This would the insurer same it cost had purchased annuity option under the contained 39-71- 2207, MCA, Kent merely holdings states the same rule as our (Mont. 1986), in LaVe v. School Dist. #2 52,] Mont. 713 [220 546, St.Rep. P.2d 43 165.
Similarly, required plans case law has claimants to submit financial outstanding delinquent when debt basis for a conversion request. Kuehn v. Property National Farmers Cas. Union Co. (1974), 303, 164 Mont. 521 921. P.2d Furthermore where the court has outstanding found the significant debt was not so necessi- as to Ruple lump-sum conversion, tate v. Peter- a Bob it been denied. Logging son (Mont. Co. 1984), 1252, Mont. P.2d 41 prior directly 704. This language law is reflected 39-71-741(2)(c). 2(d) Subsection of that same statute likewise codifies case law requiring that a claimant show the worthiness of her business ven- plan adequacy ture and the of her business acumen. See Bundtrock v. Chevrolet (1982), 856; Krause v. 199 Mont. Duff Sears, Roebuck and Co. (1982), 197 Mont.
Finally,
39-71-741(3)
allows the division to order “finan-
cial, medical, vocational, rehabilitation,
educational or other evalua-
tive studies
lump-sum
to determine
a
is in
whether
conversion
best
interest
beneficiary.”
worker or his
These tests reflect
ways
the historical
in which a claimant could assert
conver-
a
sion was in
showing
her best interests other than
strict financial
necessity. Prior case law has
best in-
held
conversion to be
terests of a
required
claimant where medical considerations
family
move to a different climate. Polich v.
claimant and his
Whalen’s O.K. Tire Warehouse
(1983),
P.2d 38.
203 Mont.
Prior case law has held it to
the best interest
the claimant
diagnosed
instability
where
mental
made the award of a
anxiety. Legowik
necessary
v.
to relieve
the claimant’s abnormal
Montgomery Ward and Co.
Subsection 3 itself does However, 5, giving when combination with Subsection read jurisdiction make final deter mination, provides us that Subsection 3 combination convinces strictly qualify for when an alternative method to award interpre financial do not mandate a conversion. This considerations by May policy tation is statement buttressed from Compensation. Division of Workers’ represent summary, language we construe the of the statute *6 change prior re- existing April law and to
no from the requirements placed significant change from on no by no permanently partially case law. Therefore because disabled burdened, any claimants rights nor classification of have been equal protection in no of dissimilarly, treated we can find violation out in 39- prospective application procedure set Section 71-741, MCA. issue, challenged
As to third the amended Section 39-71-741(1), MCA, case, her applied to as a violation of her Constitutions, includ- “rights under the Montana and United States protection ing right equal her of the laws but not limited to process Compensation Court held due of law.” discounting provision and federal constitutional violated state impairments and sustained the prohibitions against of contracts impairment procedural against same of contract test. criteria process equal or Consequently reach the due the lower court did not protection issues. repeatedly recognized
In the state constitu Montana we have protection af provides protection separate from the 1986), (Mont. State v. Johnson forded the federal constitution. 1016-18; 1010, 1248, 1254-55, 503,] Mont. P.2d 43 719 [221 495, 500-1, (Mont. 42 1985), v. 713 P.2d State Mont. Pfost 60, 54, St.Rep. 1957, 1963-64; Mont. v. Yunker 180 Madison 126, 129. the floor and not Because the federal constitution establishes rights, may our Montana apex of state action violate constitutional guarantee. Constitution, any constitutional but not violate federal Therefore, we will not pursuant in the rule that to the wisdom case, necessary dispose any issue we search to reach not challenge and until the will reach a constitutional unless federal adequate independent state may on not be resolved grounds. challenge
We turn our attention to the contract clause before now interpreted past generally us. we have the contract clauses Const, II, 31, I, found in Art. Section Section and Art. 10(1), interchangeable guarantees United States Constitution as against legislation impairing obligation Neel v. of contracts. Savings (Mont. 1984), First Federal Assoc. P.2d Loan St.Rep. 18, initially our Consistent with intention to ex- grounds issue, amine state effort resolve we turn independent interpretation Montana contract clause case law for prohibition our own of contract. Federal cases cited analytical persuasiveness way on their relied man- but no date our decision. states,
The Montana post any Constitution ex nor “No facto law impairing obligation contracts, law making any or irrevocable grant special privileges, franchises, immunities, passed or shall be legislature.” II, Art. 1972 Mont. Const. We have interchangeably, construed two contract clauses cited have Supreme opinions United States validity to test the of Mon- legislation tana Neel, under both contract clauses.
The basis for Workers’ is a contract of hire either express implied. 39-71-117, MCA; MCA; 1C Larson Workmen’s Law Section 47.10 (1986). Court, This as well as courts of other have states held that *7 Compensation theory. is' based on contract Estate of (1977), 127, 431; Baker 222 Kan. 563 P.2d Harris v. National Truck (1975), 350, 690; Service Ala.App. Spengler 56 v. 321 So.2d Em- ployer’s (1974), Ga.App. Commercial Union and Insurance Co. 131 443, 693; (1970), 206 S.E.2d San Gaston v. Ore Co. 206 Construction 254, 956; Kan. Engineering Nadeau v. Power Plant Co. (1959), 12, 313; Morgan 216 Or. 337 v. P.2d Industrial Accident (1956), Board 272, 130 Mont. 300 954. P.2d This years Court has assumed for a number of that the Workers’ Compensation injury statutes in effect on the date of set the con- 1085, rights Trusty, tractual parties. P.2d 41 between the 681 at St.Rep. provisions at 973. This consistent with the of the Workers’ employee Act that the “each term or worker means
326
person employer . . in of . . . in this state . who is the service an hire, appointment express implied, under or contract of or oral or written.” Section MCA. in approve holding Supreme We of Court Estate the Kansas of (Kan. 1977),
Baker 563 at 436: P.2d liability employer employee “The or of an to an deceased them; the workmen’s arises out of contract between the terms of The statute embodied the contract. substantive rights parties by the are determined law effect on the between omitted.) (Citation However, injury. rights of under the date accrues, of ac- contract vest when the cause of action cause (Citations omitted.) injury on accrues the date death.” analysis clearly applicable case We conclude that his this where to a there is for conversion of benefits liability payment. Deacon We hold that Montana Buckman, Hospital, employer, employee, ess out of the arises them, stat contract between and that Workers’ injury part utes in effect on date of are a contract. in this con- question
The
whether the
at issue
becomes
statute
impairment
obligation
We first turn
stitutes an
of the
of contract.
analysis
Supreme
the three-tiered
set down
the United States
Light
Energy
Group,
Reserves
Inc. v. Kansas Power and
Court
569,
and followed
Co.
459 U.S.
103 S.Ct.
74 L.Ed.2d
Neel,
St.Rep.
41
at 18.
thresh-
675 P.2d at
this
fact,
has,
operated
a sub-
inquiry
old
is “whether the state law
Neel,
relationship.”
at
impairment
P.2d
stantial
of contractual
St.Rep.
Next,
we must look whether
state
at
justification,
legitimate public purpose
significant
regulations. Finally,
inquire
adjustment of the
we must
whether the
responsibilities
parties
on
contracting
are based
of the
public
appropriate
reasonable conditions
of a character
Reserves,
Energy
purpose
adoption
legislation.
justifying
Neel,
411-13,
704-5,
U.S.
We provision as substantially impairs of claimants which vested of injury altering remedy time to which the claimant is entitled. analysis
The second tier of the if the justification is state significant legitimate public purpose In regulation. behind the case, this party heightened because the state is a to this contract a scrutiny level of attaches:
“The Contract Clause is not an subsequent absolute bar to modifi- cation of obligations. a State’s own financial impairing As with laws obligations contracts, private may be constitu- tional if necessary important it reasonable public to serve an standard, purpose. applying however, complete this deference to legislative ap- necessity assessment of reasonableness is not propriate because the State’s self-interest at stake.” United States Jersey Trust Co. New York v. New 1, 25-6, U.S. 97 S.Ct. 111-12. 52 L.Ed.2d purpose defendants advance enactment increases, premium off to “head threatened hold employers’ business, doing promote down cost the Montana economy.” certainly We agree legitimacy purposes with these economy. and share the promoting concerns Montana’s However, those concerns and of themselves are not sufficient Clearly solve the issues before us in the case. the discount provisions may injuries occurring of the section after undoubtedly effective date of the Act. Such re- will However, type sult savings legislature. desired our April, concerns must be directed to who those were any sig- such as Rose Buckman. The record does not contain may bearing which nificant evidence the cost to state result on injured prior to provisions applied to workers the discount are not circumstances, state April, those we conclude that 1985. Under requires prove significant public interest which has failed *9 gen- application workers such as Buckman. The of the discount to justify the of in is sufficient eral statement the reason itself not severity as in this case. We therefore of the of contract 39-71-741, MCA, vi- retroactive of Section hold that the af- the clause the 1972 Montana Constitution. We olates contact of on this is- judgment firm the of the Workers’ a the is unconstitutional sue. Because we have decided statute clause, process of the contract we do reach the due violation protection equal issues.
Finally, denying in trial erred Buckman contends that the court 39-71-741, light a of Section her conversion. of our construction MCA, claimant is for determination of whether we remand the case lump sum. entitled to a of her benefits conversion proceedings part, part in Affirmed in and remanded for reversed pursuant opinion. to this HARRISON,
MR. WEBER and SHEEHY concur. JUSTICES MORRISON, concurring: specially MR. JUSTICE leg- although, my judgment, in majority opinion I concur in change test enactment islature intended the “best interest” Nevertheless, majority I in the MCA. concur legislation this are unconsti- holding features of that retroactive part are a covering workers’ tutional. The statutes injury at the time of employment The statutes effect contract. they vest Any attempt change rights after consti- control. these abridgment obligations unconstitutional tutes contract majority finds. 39-71-741, MCA, is prospective application affected of Section essence, statute, in- holding to its the Court’s reduced Compen- The Workers’ volves no more than the interest” test. “best assumption that proceeding sation Court has under been history indicates changed statute former test and the opin- majority legislature. As noted that was the intent of the off to “head purpose support of the statute was ion the advanced doing increases, costs of employers’ premium hold down threatened economy.” To this indicates business, promote me Montana change eligibility requirements that the intended to for a lump sum settlement. majority finally legis-
The effect holding will realize what the goal totally accomplish. lature its stated but failed to re- legislature enacting sult of the in- subject statute has been to delivering crease the cost of benefits to the worker and has contributed to facing the financial crisis the state insurance fund. Prior regula- to enactment of and the bureaucratic promulgated by division, tions simply the worker had to show injured it inwas the best interest worker to receive a lump payment sum rather than structured settlement. The petition, prepared worker’s lawyer, without assistance of a eas- could ily satisfy this burden. complicated The new statute so that an lawyer” worker “Philadelphia every has to hire a which the worker payment. desires to achieve a Further- more, the retained employ battery costly expert counsel must satisfy requirements witnesses to of the statute. The result has litigation, been greatly increased litigation expenses, increased delay payment increasingly expensive system benefits. This *10 premiums combined charged by pro- with low Fund State very duced a serious for financial crisis the State of Montana. monetary standpoint, From a it should make no difference to the Compensation State payments Insurance Fund whether are made in lump paid a sum or in Lump a structured settlement. sums are re- present duced to value at an interest factor that renders the means payment financially irrelevant fund itself. compensation The system workers’ simple must be returned to a compensation system injured compensated where workers can be litigation expenses. without Litigation never can be eliminated en- tirely legitimate disputes they and where legal need counsel should go presented Compensation forward and be to the Workers’ Court. However, “garden variety” workers’ case should subjected not complicated be in tortured scheme set forth MCA. my In opinion repealed simple this statute should be and a “best compen- interest” test reestablished so that workers can be necessity costly Perhaps sated without litigation. holding majority repeal unnecessary. neuters the statute and If that majority opinion step the result of giant forward has been preserve Compensa- taken to integrity the future fiscal of the State tion Insurance Fund. GULBRANDSON, dissenting.
MR. JUSTICE respectfully I dissent. ruling
I Court would affirm the Workers’ 39-71-741, MCA, procedural in in are amendments found in- though claimant’s this case even nature and could be jury pre-dated the amendments. Compensation Court holding
I reverse the of the Workers’ would provision in discounting that the award,
retroactively to violate contract clauses Buckman’s would of both the States and Montana Constitutions. United benefits
Those of us feel who majority opinion inadequate may find an insurmounta- are cli- legislature, better economic ble obstacle the event mate, previously injured attempt benefits for should to increase Corporation v. in K-Mart Supreme The workers. Nevada Court System (1985), State Industrial Insurance Nev.
562, upheld injured prior to stat- to workers increase of benefits was specifically ute that such an amendment amendments and ruled majority not an unconstitutional of a contract. possibility previ- for opinion effectively rules of future relief out ously injured workers Montana. presumed, Constitutionality prima Bill 281 “is facie Senate intendment its unconsti- every favor be made unless its will T Chevrolet v. & W
tutionality appears beyond a reasonable doubt.” 1386, 1370. Darvial Mont. 641 P.2d view, my relating conversions are unre- the laws promises parties bargained lated the enforcement of subject part as a contract and therefore should be construed scrutiny. to Contract Clause
However, scru- subjected even if to Contract Clause said laws MCA, tiny, 39-71-741(1), I is constitutional. would hold that Section (Mont. 1985), Burlington Raisler v. Northern This 1997, 2007, in its consider- scrutiny, ation Contract Clause stated: Federal Sav. in Neel v. First subject “This length was discussed at *11 96, and (Mont. 1984), Loan Assoc. Mont. Const, II, and Article 18. Both Article Const, impairment This prohibit of contracts. U.S. in Neel have been pointed Court two contract clauses out applied: interchangeably test be construed and set forth the Reserves, Energy that an examina- Supreme “The noted legislation validity of requires under the contract clause step analysis. inquiry a three The threshold is ‘whether the state law fact, operated impairment a substantial of the contractual relationship.’ If there is no substantial of the contrac- Second, relationship, inquiry legislation tual ended. sub- stantially impairs state, rights, in justification, contractual ‘[t]he a significant legitimate public purpose must have and behind regulation.’ adjustment rights responsibilities Third the of and of contracting parties ‘[u]pon must be based reasonable conditions’ appropriate public purpose a character justifying to the ‘[o]f ” legislation’s adoption.’ practices
Past before Court show that lump sum approximate biweekly “conversions” intended were injured worker, most, benefits. An injury, at the time of could anticipated have possibility receiving approximat- of sum ing benefits.
Statutes which alter generally contract remedies are not construed impair obligation expecta- a contract where the reasonable parties tions of the significantly are not reduced.
Even if Senate Bill substantially impaired deemed have contract, it is still “significant legit- constitutional if it has a public purpose” imate I and would so hold. prong third analysis Contract Clause involves a determina-
tion of
adjustment
whether the
rights
responsibilities
of “the
contracting
parties
upon
is based
reasonable
and is of
conditions
character appropriate
public purpose justifying
legisla-
adoption.” Energy
Group,
Reserves
Inc. v.
&
tion’s
Kansas Power
Light 459 U.S.
103 S.Ct.
MR. TURNAGE, CHIEF JUSTICE in the concurs dissent MR. JUSTICE GULBRANDSON.