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Mont. SC overturns $1.5M default judgment in Workers' Comp case

By Richard Jones | Mar 30, 2017

HELENA, Mont. (Legal Newsline) – On March 21, the Supreme Court of Montana released a memorandum opinion on a Workers' Compensation case filed against the state’s Workers' Compensation administrator Liberty Northwest Insurance.

Justice James Jeremiah Shea authored an opinion reversing a prior decision from the 3rd Judicial Court, ruling the lower court abused its discretion when it denied Liberty Northwest’s motion for default judgment. The case was remanded back to the lower court for further hearing. 

According to the memorandum opinion, plaintiff Susan Thomas filed a Workers’ Compensation claim after suffering a work-related injury on Sept. 16, 2010. Liberty Northwest, which administers Workers' Compensation claims for the state of Montana, handled Thomas’ claim.

After some dispute between Thomas and the insurer regarding medical benefits, Thomas filed suit. Thomas alleged, among other things, that the defendant failed to pay certain medical expenses and had violated the Unfair Trade Practices Act.

Thomas attempted filing service on Liberty Northwest using the Missoula County Sheriff to deliver a copy of the Summons and Complaint to the defendant’s local field office in Missoula.

According to the sheriff’s office, service was completed on Dec. 29, 2015. The general counsel for the Liberty Northwest then responded to Thomas’ attorney on Jan. 4, 2016, advising him that Liberty Northwest is a foreign corporation domiciled in Oregon and, therefore, must be served through the Montana Commissioner of Insurance.

According to the court, Thomas’ attorney considered the defendant served and on March 14, 2016, filed a motion for default judgment. The district court later granted the motion and ordered a judgment of $1,504,000 against the defendant. Liberty then filed an appeal based on improper service asserting the district court lacked jurisdiction. 

In the ruling, Shea cites Section 33-1-602 of the Montana civil code that states that service on a foreign insurer “may be made only by service of process upon the commissioner or a deputy or other person in charge.” Shea further stated that the court had addressed this issue in a prior ruling in LaFountaine v. State Farm Mut. Auto. Ins. Co. (1985).

In LaFountaine, State Farm, an Illinois corporation, was served at its Billings claims office instead of at the state commissioner’s office. The court held that the District Court never obtained proper jurisdiction over State Farm, as no valid service was ever achieved. Shea said he found “no meaningful distinction between LaFountaine and the present case.”

The default judgment against Liberty Northwest was reversed and remanded back to the District Court for further proceedings. 

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