Waiver-by-Mootness:
The Montana Supreme Court Clarifies Jurisdiction After Insurer’s Post-Payment “Reservation of Rights”
Commentary on Perea v. AmTrust Insurance Co., 2025 MT 130
Introduction
Perea v. AmTrust Insurance Co. presented the Supreme Court of Montana with a thorny procedural question and an important substantive dispute under the state’s Workers’ Compensation Act (WCA). The case involved Petitioner-employee Jordan Perea, who sustained a knee injury while employed by Truss Works, Inc. and later worked two other part-time jobs. The respondent, AmTrust, accepted the claim but disagreed with Perea over the correct calculation of Temporary Total Disability (TTD) and Temporary Partial Disability (TPD) benefits, which implicate average-weekly-wage (AWW) methodology and the statutory 40-hour cap under § 39-71-712, MCA.
Crucially, AmTrust eventually paid the full amount that Perea claimed but did so “under a reservation of rights,” asserting it could seek recoupment if the Workers’ Compensation Court (WCC) found an overpayment. When Perea nevertheless appealed to the Supreme Court, AmTrust argued the payment had mooted the controversy and stripped the Court of jurisdiction. The Supreme Court disagreed and in doing so articulated a new rule: if an insurer contends that its voluntary payment eliminates any live controversy, that contention operates as a waiver of its right to recoupment. This “waiver-by-mootness” principle preserves the constitutional case-or-controversy requirement while preventing insurers from simultaneously maintaining both a reservation of rights and a mootness defense.
Beyond the jurisdictional holding, the Court also addressed the WCC’s refusal to impose a 20 percent statutory penalty on AmTrust for late payment of benefits. Finding AmTrust’s post-injury AWW calculation for Period #3 unreasonable under Sturchio v. Wausau Underwriters, the Court reversed and remanded with instructions to impose the penalty.
Summary of the Judgment
- Issue 1 — Jurisdiction After Payment: The Court held that AmTrust’s assertion of mootness necessarily constituted a waiver of its reserved right to recoup the payment. With recoupment no longer in play, all benefit-calculation disputes except the penalty claim became moot because the employee had already received the full amounts claimed.
- Issue 2 — Statutory Penalty: The Court concluded that AmTrust’s method for calculating Perea’s TTD during Period #3 ignored § 39-71-123(3)(a), MCA, and the precedent in Sturchio. The miscalculation was therefore unreasonable, triggering the 20 percent penalty under § 39-71-2907, MCA. The case was remanded for the WCC to calculate and award that penalty.
Analysis
1. Precedents Cited
a. Jurisdiction / Mootness
- Mitchell v. Glacier County, 2017 MT 258 – reaffirmed the need for a live case or controversy.
- Wilkie v. Hartford Underwriters, 2021 MT 221 – discussed the “voluntary cessation” exception to mootness.
- Prior WCC appeals (Stewart, Newlon, Liberty Northwest) where insurers paid benefits under reservation of rights but did not assert mootness.
b. AWW Calculation / Benefit Entitlement
- Sturchio v. Wausau Underwriters Ins. Co., 2007 MT 311 – central precedent requiring the method “best suited” to each concurrent employment when calculating AWW.
- Barnhart v. Montana State Fund, 2022 MT 250 – distinguished; bars recovery of wages from jobs unaffected by the injury.
- Statutory framework: §§ 39-71-123, 701, 712, 2907, MCA.
2. Legal Reasoning
A. Waiver-by-Mootness Doctrine.
The insurer’s dual posture—(i) paying benefits “under reservation” and (ii) claiming the payment extinguished the controversy—was internally inconsistent. The Court reasoned that if the insurer truly intended to pursue recoupment, a live controversy would remain. Therefore, asserting mootness amounts to a representation to the Court that recoupment will never be sought. To harmonize Article III case-or-controversy principles with workers’ compensation practice, the Court formally construed the insurer’s position as a waiver of recoupment.
B. Penalty for Unreasonable Delay.
The WCC refused to award a penalty because the calculation appeared to involve “an issue of first impression.” The Supreme Court disagreed, holding that Sturchio had already resolved the question. Since Perea had held his Life in Bloom position for less than four pay periods, § 39-71-123(3)(a) required the “hired-to-work” formula, not a post-injury average. Because AmTrust used the wrong formula, its delay was unreasonable, satisfying the factual predicate for § 39-71-2907, MCA.
3. Impact of the Judgment
Procedural Impact – Insurers’ Strategic Calculus. The decision forces insurers to choose: either (1) maintain the right to recoup alleged overpayments and accept continued judicial review, or (2) waive recoupment and eliminate the controversy. They can no longer have both. This clarity is likely to accelerate claim resolutions, as insurers might now forego a mootness defense unless they fully abandon recoupment.
Substantive Impact – Enforcement of Sturchio. The Court’s reaffirmation of Sturchio solidifies that each concurrent job must be examined under the precise statutory method applicable to that employment scenario. Errors may now more readily be labeled “unreasonable,” exposing insurers to the 20 percent penalty.
Broader Jurisprudential Significance. “Waiver-by-mootness” could influence other areas where defendants try to moot a case by voluntary compliance while retaining rights antithetical to mootness (e.g., environmental enforcement, consumer class actions). Montana courts now have an analytic tool to prevent strategic manipulation of jurisdiction.
Complex Concepts Simplified
- Average Weekly Wage (AWW): The wage figure on which disability benefits are based. Montana uses different formulas depending on how long the worker has held the job and whether there is concurrent employment.
- Temporary Total Disability (TTD): Benefits paid when an injured worker cannot work in any capacity before reaching “maximum healing.”
- Temporary Partial Disability (TPD): Benefits paid when a worker can work but at reduced hours or capacity; capped by statute at 40 hours for AWW calculation.
- Reservation of Rights: An insurer’s statement that it is paying benefits now but may later demand repayment if a tribunal determines the payment was excessive.
- Recoupment: Retrieval of an overpayment from a claimant after the fact.
- Statutory Penalty (§ 39-71-2907, MCA): A 20 percent surcharge imposed on insurers who “unreasonably” delay or refuse payment.
- Voluntary Cessation Doctrine: A mootness exception allowing courts to hear cases where the defendant stops the contested behavior but could resume it.
Conclusion
Perea v. AmTrust delivers two pivotal lessons. Procedurally, it establishes that an insurer cannot wield post-payment mootness as both shield and sword; claiming mootness waives any recoupment right. Substantively, it underscores that incorrect AWW methodology—contrary to established precedent—constitutes an unreasonable delay, subjecting insurers to statutory penalties. As Montana’s workers’ compensation jurisprudence evolves, this decision provides clear guidance on jurisdiction, benefit calculation, and insurer conduct, with ripple effects likely to be felt in future compensation and civil cases alike.
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