                                     No. 80-348
                       IN THE SUPREME COURT OF THE STATE OF MONTANA
                                          1981


ROBERT BENNETT,
                                  Claimant and Appellant,


HUGH BENNETT, Employer and
STATE COMPENSATION INSURANCE FUND,
                                  Defendant and Respondent.


Appeal from:           Workers' Compensation Court
                       Hon. William Hunt, Judge presiding.
Counsel of Record:
    For Appellant:
               Hoyt and Trieweiler, Great Falls, Montana
               John Hoyt argued, Great Falls, Montana
    For Respondent:
               Garrity, Keegan and Brown, Helena, Montana
               Thomas Keegan argued, Helena, Montana


                                        Submitted:   October 20, 1981

                                         Decided:    DEC - 7 1981
                                                     ,


       o&a;
Filed: -   -
                  v7   1481



                              -             Clerk
Mr. Justice John Conway Harrison delivered the Opinion of
the Court.
          This appeal is from a denial of benefits from the
decision of the Workers' Compensation Court.
          Five issues are raised in this appeal:
          1.   If the Division of Workers' Compensation has not
published rules governing the time and method of electing
coverage for members of an employer's family dwelling in the
employer's household, is the Division precluded from denying
benefits to Robert Bennett on the basis that no election was
made to cover him?
          2.   Is the State Fund equitably estopped from denying
cover age?
          3.   Does section 39-71-401, MCA, violate due process
because employers are not instructed on how to elect family
coverage?
          4.    Does   the     family member    exclusion deny   equal
protection?
          5.   Should appellant be awarded increased compensa-
tion for unreasonable delay or refusal to pay pursuant to
section 39-71-2907, MCA?
         We reverse.
         The facts are agreed upon by both sides. Hugh Bennett
established Bennett Well Service in Cut Bank, Montana, in
September 1975.        On September 28, 1975, an employee of the
State Fund ordered that compensation enrollment forms for
Bennett Well Service be sent to Bennett's attorney and also
to his accountant in Cut Bank.            These forms were sent with a
letter    explaining     the    special    endorsements   required    for
employees not required to be covered by workers' compensa-
tion     insurance.      The enrollment        forms, together       with
Bennett's    special   election      to   cover   himself   as     a   sole
employer, were received by         the State Fund on October 3,


        In June 1979 the appellant, Robert Bennett, a high
school student who still resided in his father's home, began
to work for his father at Bennett Well Service.              On June 26
he fractured his leg while working.           A first report of the
injury was filed on July 2, 1979.            On July 13, 1979, Hugh
Bennett elected coverage for Robert and on July 31, which
was the end of the first quarter of 1979 in which Robert had
been   employed, Bennett      Well    Service     sent   its quarterly
reports and premiums, including a premium for Robert to the
State Fund.     All premiums, including that for Robert, were
accepted.     The State Fund denied coverage at a later date
because the election had been made after the injury.
        In this case Bennett Well Service followed the proper
procedures by submitting a quarterly report to the Division
at the end of each quarter.           There was no showing to the
corporation or its agents that there was a different report-
ing method for a family member residing in the employer's
household.
       In refusing to grant appellant's request for coverage
the State Fund denied the claim on the basis of the fact
that Bennett Well Service had not elected compensation for
Robert under the provisions of section 39-71-401(2)(c), MCA,
which states:
       " -- ~ l o y m e n t sc o v e r e d a n d e m E -- y-----
         E m -- ....................                   lo ments
       exempted.      (1) Except as provided in subsec-
       tion (2) of this section, the Workers'
       Compensation Act applies to all employers as
       defined in 39-71-117 and to all employees as
       defined in 39-71-118.              An employer who has
       any employee in service under any appointment
       or contract of hire, expressed or implied,
son, Robert Bennett.                  The q u a r t e r l y r e p o r t was f i l e d a t t h e

end o f t h e q u a r t e r , J u l y 3 1 , 1 9 7 9 , a s u s u a l .

           The J u n e 26,        1979,      i n j u r y was r e p o r t e d t o t h e D i v i -

s i o n on J u l y 2 ,      1 9 7 9 , and a n e l e c t i o n of           coverage f o r t h e

employer's          family        members           dwelling         in     the    employer's

h o u s e h o l d was f i l e d on J u l y 1 0 , 1 9 7 9 .

           The     Division           argues       that     Robert         Bennett     was         not

c o v e r e d on J u n e 2 6 ,    1979, because             (1) t h e e m p l o y e r d i d n o t

e l e c t c o v e r a g e u n t i l J u l y 1 0 , 1 9 7 9 , and       ( 2 ) Robert Bennett

worked      the    summer        of    1978 w i t h o u t     coverage.           But,    Robert

Bennett       testified          that       he    would     not      have      gone      to    work

without workers'            compensation coverage.                        Large p l a c a r d s a t

h i s work p l a c e t o l d him a l l e m p l o y e e s w e r e c o v e r e d .

           Respondent         argues         that     the    claimant         should      not       be

a l l o w e d t o be i n s u r e d e x p o s t f a c t o ;      t h a t the Division did

prescribe         procedures          for    employees        t o e l e c t coverage;              and

t h a t t h e employer        received            f o r m s and a l e t t e r     c l e a r l y ex-

p l a i n i n g t h a t some e m p l o y e e s were n o t c o v e r e d u n l e s s s p e c i a l

endorse m e n t s forms were completed p r i o r t o an i n j u r y .

           The     employer           had        endorsed      the        same    form        to   be

covered,       s o h e was o b v i o u s l y f a m i l i a r      with        the procedure.

The p a y r o l l r e p o r t s s e n t t o t h e e m p l o y e r e v e r y t h r e e m o n t h s

a l s o contained t h i s reminder:

           "10.          OTHER ENDORSEMENTS:            Unless s p e c i f i c
           e n d o r s e m e n t s h a v e b e e n made, t h e f o l l o w i n g
           t y p e s o f employment a r e n o t c o v e r e d :

           "1 .   Members o f t h e e m p l o y e r ' s i m m e d i a t e
           family ( w i f e , husband, son or d a u g h t e r )
           dwelling i n t h e employer's household.

           "Include         family      members            or      household
           employees        where s p e c i f i c e n d o r s e m e n t s a r e on
           file.
          oral or written, shall elect to be bound by
          the provisions of compensation plan No. 1, 2,
          or 3. Every employee whose employer is bound
          by the Workers' Compensation Act is subject
          to and bound by the compensation plan that
          has been elected by the employer.
          "(2) Unless the employer elects coverage for
          these employments under this chapter and an
          insurer allows such an election, the Workers'
          Compensation Act does not apply to any of the
          following employments:


          "(c) employment of members of an employer's
          family dwelling in the employer's household;"
          The first and controlling     issue in this cause     is
whether    the   Division of Workers'    Compensation   failed to
publish    rules governing   the time and method     of electing
coverage for members of an employer's family dwelling in the
employer's household.     If rules were not published, can the
Division deny benefits on the basis that no election was
made to cover the claimant?
          The court found in its Finding of Fact No. 22, that,
"the Division of Workers' Compensation has published rules
concerning the way that the employer may elect to bring his
employees within the provisions of 39-71-401."
          It is important to consider     when   the Division   is
notified of an employer's new employees.         First, the Divi-
sion sends the employer a list of premiums for each job
classification.     Then, the employer prepares his quarterly
report to the Division, setting forth the names of the
employees, the amount paid to the employees, and the type of
work done by the employees.      A check for the premiums and
the quarterly report, are filed at the - of the quarter.
                                       end
          This is precisely what the employer, Hugh Bennett,
did in this case for all of his employees, including his
         "10.   OTHER COVERED ENDORSEMENTS:  Include
         family members or household employees where
         specific endorsement forms are on file."
                             -------------------
         (Emphasis added. )
         Respondent argues that since the employer personally
endorsed one of these forms and received notice every three
months, the employer received adequate notice.             Thus, the
Division's duty to publish rules notifying employers of the
election procedure pursuant to section 39-71-2303, MCA, was
complete.
         Section 39-71-203, MCA, gives the Division authority
to "perform any and all things          ...   which are necessary" to
administer the Workers' Compensation Act.              Section 39-71-
2303, MCA, orders the Division to "prescribe the procedure
by which the employers may elect to be bound by compensation
plan No. 3, including the effective time of such election
. . ."     The Division failed to prescribe the proper proce-
dure or rules other than reporting and paying procedures
above.     Therefore, Finding of Fact No. 22 by the Workers'
Compensation       Court   is   incorrect and    unsupported   by   the
evidence.         The court obviously was misled.        Hugh Bennett
did   exactly      as   instructed by   the Division    in following
precisely the reporting and premium payment procedures
outlined     by    the Division to provide coverage for his
employees.        The record shows that he notified the Division
of (1) the accident; (2) a week or ten days later he elected
to come under the plan; and (3) that he paid the necessary
premium to cover for that period.
         The Division does not have rules informing plan 3
members of the time and method of electing coverage for
members of an employer's family dwelling in the employer's
household.        Therefore, we reverse the Workers' Compensation
Court and order the claim approved.   The appellant's request

for increased compensation pursuant to section 39-71-2907,
MCA, is denied.




We concur:



    Chief Justice
                    J"




    Justices
Mr.    J u s t i c e Fred J . Weber d i s s e n t i n g :

         I respectfully dissent.                    The r e s u l t of t h e m a j o r i t y

o p i n i o n i s t h a t R o b e r t B e n n e t t , a t e e n a g e son o f Hugh B e n n e t t ,

o f B e n n e t t Well S e r v i c e , w i l l be awarded w o r k e r s ' compensation

f o r h i s fractured leg.               On i t s f a c e t h a t i s commendable.

U n f o r t u n a t e l y , t h e r e s u l t i s a t t a i n e d o n l y by d i s r e g a r d i n g

t h e s p e c i f i c s t a t u t o r y r e q u i r e m e n t s f o r o b t a i n i n g Workers'

Compensation c o v e r a g e i n Montana.

        Following a r e s i g n i f i c a n t f a c t s from t h e r e c o r d :

                 J u n e , 1979     -   R o b e r t B e n n e t t began work.

                 J u n e 26   -   R o b e r t f r a c t u r e d l e g w h i l e working.

                 J u l y 2 - B e n n e t t Well S e r v i c e s u b m i t t e d e m p l o y e r ' s
                 f i r s t r e p o r t of o c c u p a t i o n a l i n j u r y t o D i v i s i o n .

                J u l y 1 0 - Family member endorsement s e n t t o
                D i v i s i o n by B e n n e t t W e l l S e r v i c e c o n t a i n i n g
                t h e e l e c t i o n t o i n c l u d e R o b e r t B e n n e t t and
                S c o t t B e n n e t t , s o n s of Hugh B e n n e t t , members
                of t h e e m p l o y e r ' s immediate f a m i l y , under
                Workers' Compensation. Endorsement accompanied
                by l e t t e r from B e n n e t t W e l l S e r v i c e a t t o r n e y
                and a f f i d a v i t of a c c o u n t a n t .

                J u l y 18 - Division wrote Bennett W e l l S e r v i c e
                and i t s a t t o r n e y denying c o v e r a g e f o r R o b e r t ' s
                i n j u r y and s t a t i n g i n p a r t :

                "When t h i s f i r m e n r o l l e d w i t h t h e S t a t e Fund a
                l e t t e r was forwarded t o them c a r e f u l l y e x p l a i n -
                i n g t h a t members of a n e m p l o y e r ' s f a m i l y d w e l l -
                i n g i n t h e e m p l o y e r ' s household were n o t c o v e r e d
                under t h e Workers' Compensation A c t , u n l e s s
                endorsements were f i l e d w i t h t h e Fund i n d i c a t i n g
                t h a t t h e employer wished t o c o v e r and pay p r e -
                miums on household employees. A copy of t h i s
                l e t t e r d a t e d September 29, 1975 t h a t w a s forward-
                e d t o B e n n e t t Well S e r v i c e i n c a r e of John P.
                Moore, Box 997, C u t Bank, Montana, i s e n c l o s e d .
                These endorsements were n e v e r f i l e d t o c o v e r t h i s
                man's s o n s and t h e premium h a s n e v e r been p a i d
                t o u s f o r t h e i r employment.             The p a y r o l l r e p o r t s
                i n o u r f i l e i n d i c a t e t h a t t h e y have n e v e r been
                l i s t e d a s employees and p a y r o l l s have n o t been
                r e p o r t e d t o u s on t h e i r s a l a r i e s and premium h a s
                n o t been p a i d on them.

                "The endorsement you f u r n i s h e d u s w i l l be e f f e c -
                t i v e J u l y 1 3 , 1979, and R o b e r t and S c o t t B e n n e t t
                w i l l b e c o v e r e d e f f e c t i v e a s of t h a t d a t e . How-
                e v e r , t h e r e i s no way I c a n e f f e c t c o v e r a g e t o
                  Robert Bennett f o r h i s i n j u r y t o cover medical
                  and compensation b e n e f i t s f o r h i s i n j u r y of J u n e
                  26, 1979."

                 J u l y 31 - B e n n e t t W e l l S e r v i c e s u b m i t t e d q u a r t e r l y
                 r e p o r t , and w i t h i t p a i d premium f o r t h e two s o n s ,
                 R o b e r t and S c o t t .

B e f o r e d e n i a l of c o v e r a g e on J u l y 1 8 , t h e r e had been no

payment by B e n n e t t W e l l S e r v i c e of a premium f o r R o b e r t and

r e t e n t i o n by t h e D i v i s i o n of such premium payment.                    Therefore,

one c o u l d n o t c o n c l u d e t h a t i n s u r a n c e c o v e r a g e s h o u l d be

g r a n t e d b e c a u s e of t h e payment and r e t e n t i o n of premiums.

        The m a j o r i t y o p i n i o n s t a t e s t h a t t h e c o n t r o l l i n g i s s u e

i s whether t h e D i v i s i o n of Workers' Compensation f a i l e d t o

p u b l i s h r u l e s g o v e r n i n g t h e time and method of e l e c t i n g

c o v e r a g e f o r members of a n e m p l o y e r ' s f a m i l y d w e l l i n g i n t h e

e m p l o y e r ' s household.         The o p i n i o n r e f e r s t o s e c t i o n 39-71-

2303, MCA,         s u g g e s t i n g t h a t s e c t i o n 39-71-2303      requires the

D i v i s i o n t o p r e s c r i b e r u l e s which a r e a p p l i c a b l e h e r e .    We

r e s p e c t f u l l y p o i n t o u t t h a t s e c t i o n 39-71-2303      only r e f e r s

t o t h e p r o c e d u r e by which a n employer may e l e c t t o be bound

by compensation p l a n 3              --   t h a t b e i n g t h e p l a n under which a n

employer e l e c t s t o be covered by t h e S t a t e Fund.                       I n no way

i s t h a t applicable here.                That s e c t i o n does n o t r e q u i r e t h e

p r o m u l g a t i o n of r u l e s which a p p l y where t h e r e i s t o b e a n

e l e c t i o n f o r c o v e r a g e of a f a m i l y member.         I t is true that

t h e Workers1 Compensation C o u r t i n c o r r e c t l y found i n i t s

F i n d i n g of F a c t 2 2 t h a t t h e D i v i s i o n had p u b l i s h e d r u l e s

c o n c e r n i n g t h e way a n employer may e l e c t t o b r i n g h i s employees

w i t h i n t h e p r o v i s i o n s of t h e Act.        N s p e c i f i c r u l e was s e t
                                                            o

f o r t h by t h e D i v i s i o n , a l t h o u g h forms f o r e l e c t i o n a r e p r o v i d e d .

However, t h e m a j o r i t y o p i n i o n h a s n o t s u g g e s t e d why t h i s

s h o u l d be c l a s s e d a s r e v e r s i b l e e r r o r .
        B e n n e t t W e l l S e r v i c e s t a r t e d i n b u s i n e s s i n 1975.   At

t h a t t i m e , t h e s t a t u t o r y p r o v i s i o n s e x c l u d i n g c e r t a i n employments

from c o v e r a g e by t h e Workers' Compensation A c t were i n

e f f e c t i n t h e same manner a s today.               S e c t i o n 39-71-401,       MCA,

makes i t c l e a r t h a t t h e l e g i s l a t u r e d e c i d e d t h a t t h e Workers'

Compensation laws s h o u l d n o t a p p l y t o c e r t a i n t y p e s of

employment u n l e s s a n employer f i r s t t a k e s a n a f f i r m a t i v e

s t e p t o o b t a i n coverage:

               " ( 2 ) U n l e s s t h e employer e l e c t s c o v e r a g e f o r
               t h e s e employments under t h i s c h a p t e r and a n
               i n s u r e r a l l o w s such a n e l e c t i o n , - Workers'
                                                                    the
                                    ---
               Compensation Act does n o t a p p l y - any of -e
               f o l l o w i n g employments:
                                                                   to      - th

               " ( a ) household and d o m e s t i c employment;
               " ( b ) c a s u a l employment a s d e f i n e d i n 39-71-116
               (3);

               " ( c ) employment - members - - e m p l o y e r ' s
                                           of        of a n
               f a m i l y d w e l l i n g - - e m p l o y e r ' s household;
                                           i n the

               " ( d ) employment of s o l e p r o p r i e t o r s o r working
               members of a p a r t n e r s h i p ;

               " ( e ) employment f o r which a r u l e of l i a b i l i t y
               f o r i n j u r y , occupational disease, o r death i s
               p r o v i d e d under t h e l a w s of t h e U n i t e d S t a t e s ;

               " ( f ) any p e r s o n performing s e r v i c e s i n r e t u r n
               f o r a i d o r sustenance only;

               " ( g ) employment w i t h any r a i l r o a d engaged i n
               i n t e r s t a t e commerce, e x c e p t t h a t r a i l r o a d con-
               s t r u c t i o n work s h a l l be i n c l u d e d i n and s u b j e c t
               t o t h e p r o v i s i o n s of t h i s c h a p t e r . " S e c t i o n 39-
               71-401 ( 2 ) , MCA.          (Emphasis s u p p l i e d . )

       The r e s u l t of t h e m a j o r i t y o p i n i o n i s t o n e g a t e t h e

e s s e n t i a l p r o v i s i o n s of s e c t i o n 39-71-401(2),     MCA.      T h a t law

r e q u i r e s a n e l e c t i o n of c o v e r a g e by a n employer b e f o r e t h e

Workers' Compensation Act s h a l l a p p l y t o c e r t a i n d e s c r i b e d

employments.         The m a j o r i t y o p i n i o n w i l l a l l o w employers t o

a d o p t a " w a i t and s e e " approach t o e l e c t i o n s f o r c o v e r a g e .

The m a j o r i t y o p i n i o n s u g g e s t s t h a t an employer of household
and d o m e s t i c h e l p , c a s u a l employees, members of a n e m p l o y e r ' s

f a m i l y , s o l e p r o p r i e t o r s , working members of a p a r t n e r s h i p ,

and p e r s o n s p e r f o r m i n g s e r v i c e s f o r a i d o r s u s t e n a n c e o n l y

s h o u l d w a i t u n t i l someone i s i n j u r e d b e f o r e making a n e l e c t i o n

f o r coverage.         A t t h a t point,        t h e employer c a n a p p a r e n t l y

e l e c t c o v e r a g e and have t h e c o v e r a g e e x t e n d e d t o a n i n j u r y

which h a s a l r e a d y t a k e n p l a c e .      The s a v i n g s t o employers i n

premiums i s o b v i o u s .        This decision a c t u a l l y reverses the

r e q u i r e m e n t s of t h e law b e c a u s e i t f i n d s t h a t t h e A c t a p p l i e s

t o a n i n j u r y even though t h e r e h a s been no e l e c t i o n of

c o v e r a g e and even though t h e Act s t a t e s t h a t i t " d o e s n o t

apply    "
        W r e s p e c t f u l l y s u g g e s t t h a t i n t h e a b s e n c e of a n
         e

advance e l e c t i o n of c o v e r a g e f o r R o b e r t B e n n e t t , t h e r e was

no c o v e r a g e a t t h e t i m e of h i s i n j u r y and t h e d e c i s i o n of

t h e Workers' Compensation C o u r t s h o u l d be a f f i r m e d .




I concur i n t h e f o r e g o i n g d i s s e n t o f P4r.          J u s t i c e F r e d J . Weber.


               9,
Chief J u s I c e
                      Y@IrA        &
