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                                                               No. 00-230


                          IN THE SUPREME COURT OF THE STATE OF MONTANA

                                                              2000 MT 310

                                                             302 Mont. 442

                                                              14 P.3d 1234

                                                         CARL WALLACE,


                                                       Plaintiff and Appellant,

                                                                      v.

                                            PROFESSIONAL FARM SYSTEMS,

                                            Employer, Defendant, and Respondent,

                                                                     and

                                    STATE COMPENSATION INSURANCE FUND,

                                              Insurer, Defendant, and Respondent.

                              APPEAL FROM: Montana Workers' Compensation Court,

                                     The Honorable Mike McCarter, Judge presiding.

                                                     COUNSEL OF RECORD:

                                                             For Appellant:

                         Randall O. Skorheim, Skorheim Law Office, Great Falls, Montana

                                                            For Respondent:


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                       Greg Overturf, State Compensation Insurance Fund, Helena, Montana

                                                Submitted on Briefs: July 20, 2000
                                                   Decided: December 7, 2000

                                                                    Filed:

                                    __________________________________________

                                                                     Clerk

Justice Terry N. Trieweiler delivered the opinion of the Court.

¶1 The Claimant, Carl Wallace, filed a petition in the Workers' Compensation Court
seeking retroactive reinstatement of total disability benefits from the Defendant, State
Compensation Insurance Fund. The Workers' Compensation Court denied Wallace's
petition and Wallace appeals from that decision. We affirm the judgment of the Workers'
Compensation Court.

¶2 The sole issue raised on appeal is:

¶3 Did the Workers' Compensation Court err when it held that the State Fund was not
required to comply with the steps set forth in Coles v. Seven Eleven Stores (1985), 217
Mont. 343, 704 P.2d 1048, or the 14-day notice requirement of § 39-71-609, MCA (1981)
prior to converting Wallace's temporary total disability benefits to permanent partial
disability benefits?

                                                FACTUAL BACKGROUND

¶4 At the time of his work-related injury, the Claimant, Carl Wallace was employed by
Professional Farm Systems, primarily "selling grain handling equipment and storage."

¶5 On May 21, 1982, he suffered a herniated inter-vertebral disc in his lower back while
delivering a grain bin to a farmer. Wallace filed a claim with the Respondent, State Fund.
The Fund accepted liability and began paying him temporary total disability benefits in
1983. Wallace continued to experience pain. He was evaluated at the Mayo Clinic in 1985
and 1993. The diagnosis was an early onset of arachnoiditis causing fixation of the lumbar
roots, leading to friction with spine movement and radicular pain.

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¶6 In May 1985, Wallace attempted to go back to work. The State Fund converted his
benefits to permanent partial disability benefits, but resumed paying him total temporary
disability benefits when he was forced to quit in November 1985 due to his back injury. In
1986, Wallace received training to be a real estate salesperson. His doctors determined
that real estate would provide a healthy working environment within his physical
limitations. Additionally, in November 1986, the State Fund requested that Dr. David
Friedrick examine Wallace to evaluate his medical impairment. Dr. Friedrick found that he
had reached maximum medical improvement and provided a 5 percent impairment rating.

¶7 Wallace obtained his realtor's license and began working at Bison Realty on April 2,
1987. After Wallace received his first commission from a real estate sale, the State Fund
reduced his payments to the partial disability rate. The State Fund admitted that Friedrick's
report affected this decision but that they had not notified Wallace of Friedrick's report. He
did not receive notice of Dr. Friedrick's diagnosis until 1997 when it was produced as part
of the discovery in this proceeding.

¶8 After petitioning the Workers' Compensation Court for retroactive payments of his
temporary total disability benefits, Wallace and the State Fund agreed to allow the
Workers' Compensation Court decide the issues presented as a matter of law. Wallace
filed a Motion for Summary Judgment to which the State Fund responded. The Court
denied Wallace's motion, and held that the State Fund properly reduced Wallace's benefit
rate.

                                                             DISCUSSION

¶9 Did the Workers' Compensation Court err when it held that the State Fund was not
required to comply with the steps set forth in Coles v. Seven Eleven Stores (1985), 217
Mont. 343, 704 P.2d 1048, or the 14-day notice requirement of § 39-71-609, MCA (1981),
prior to converting Wallace's temporary total disability benefits to permanent partial
disability benefits?

¶10 The issues in this case were submitted to the Workers' Compensation Court as issues
of law. We review the Workers' Compensation Court's conclusions of law to decide
whether they were correctly decided. Stordalend v. Ricci's Food Farm (1993), 261 Mont.
256, 258 862 P.2d 393, 394.

¶11 Wallace first contends that the State Fund failed to comply with the third and fourth

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requirements set out in Coles. In Wood v. Consolidated Freightways, Inc. (1991), 248
Mont. 26, 30, 808 P.2d 502, 505, this Court clarified the Coles criteria and held that before
an insurer can reduce benefits it must obtain:

        (1) a physician's determination that the claimant is as far restored as the permanent
        character of his injuries will permit, (2) a physician's determination of claimant's
        physical restrictions resulting from an industrial accident, (3) a physician's
        determination based on his knowledge of the claimant's former duties, that the
        claimant can return to work, with or without restrictions, on the job for which he is
        fitted by age, education, work experience, and physical condition and (4) notice to
        the claimant . . . .

¶12 Wallace contends that the State Fund violated the Coles requirements because it failed
to inform Dr. Friedrick of Wallace's job history. In addition, Wallace points out that he
was not notified of Dr. Friedrick's medical opinion that Wallace had reached maximum
medical recovery. Wallace now claims that these omissions by the State Fund require that
it continue to pay Wallace total disability benefits until the State Fund complies with the
Coles requirements.

¶13 In response, the State Fund contends that it is not required to comply with the Coles
criteria because Wallace returned to work as a real estate salesperson in 1987. In Larson v.
CIGNA Insurance Company (1996), 276 Mont. 283, 915 P.2d 863, we held that "the
insurer can rightfully terminate temporary total benefits without proceeding with an
investigation under § 39-71-609 . . . [s]ince the duty of investigation was statutorily
discharged, the Coles criteria do not apply." Larson, 276 Mont. at 294, 915 P.2d at 870.
Our decision in Larson applies when a claimant returns to work.

¶14 The record in this case establishes that Wallace did return to work. He began work as
a real estate agent in 1987. Since then, he worked an average of 30 hours per week. In
addition, he did spot jobs for the U.S.D.A. from 1987 to 1997. Therefore, we conclude that
the Workers' Compensation Court did not err when it held that the State Fund was not
required to comply with the Coles procedures before reducing Wallace's benefit rate.

¶15 Next, Wallace contends that the State Fund failed to comply with the statutory
requirements set out in § 39-71-609, MCA (1981) which requires that "an insurer must
give 14 days' written notice to the claimant before reducing benefits from total to partial."
Section 39-71-609, MCA (1981). However, Wallace overlooks the additional provision


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which states that "benefits may be terminated as of the time the claimant has returned to
work." Section 39-71-609(1), MCA (1981). Wallace returned to work as a real estate
agent in April 1987. His benefits were not reduced until he realized income from that
work. Therefore, we conclude that the 14-day notice requirement in § 39-71-609(1), MCA
(1981) does not apply to the reduction of his benefits. Contrary to Wallace's argument, we
conclude that the exception to the 14-day notice requirement upon which we base our
decision does not require that Wallace be "employed" or earn "wages" as defined in the
Act.

¶16 For these reasons, we affirm the judgment of the Workers' Compensation Court.

/S/ TERRY N. TRIEWEILER

                                                               We Concur:

                                                        /S/ J. A. TURNAGE

                                                    /S/ JAMES C. NELSON

                                               /S/ W. WILLIAM LEAPHART

                                                         /S/ JIM REGNIER




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