The following summaries of recent noteworthy cases were written by Roland Legal PLLC.
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Schmidt v. South Central Bell: Back to the Future. Schmidt v. South Central Bell, No. 2010-CA-000986-WC (Ky. App. 2011).The statutory amendments removing the medical expenses cap in place under KRS 342.020 as enacted in 1962 were remedial, rendering the amendments retroactive.
In Schmidt, a to-be-published Kentucky Court of Appeals decision, Schmidt v. S. Cent. Bell, 2011 Ky. App. LEXIS 88 (Ky. Ct. App. May 13, 2011), claimant was injured at a time when KRS 342.020 imposed a $3,500 cap on the amount of medical expenses an employer was required to pay in a workers' compensation claim. The cap was later removed by subsequent legislative amendments.
Schmidt's employer later raised the cap as a defense in the context of a medical fee dispute, arguing the amendments were not retroactive and Schmidt's medical expenses remained subject to the cap in effect at the time of his injury. In a unanimous decision, the Court found against the employer, concluding the subsequent amendments to KRS 342.020 were retroactive in nature because they were remedial in that they expanded an existing remedy without affecting the substantive basis, prerequisites or circumstances precipitating the remedy and did not create new nor deny vested rights.
COMMENT: This was the proper result. The case, in and of itself, contains an instructive discussion of when a statute is considered retroactive. The Court relied heavily on its holding in the earlier decision of Kentucky Insurance Guaranty Association v. Conco, Inc., 882 S.W.2d 129 (Ky. App. 1994).
UPS v. West: Now That's a Bargain! UPS Airlines v. West, No. 2010-CA-001433-WC (Ky. App. 2011): A benefit plan as identified under KRS 342.730(6) is not "exclusively employer funded" if it is the product of collective bargaining.
In this to-be-published decision, UPS Airlines v. West, 2011 Ky. App. LEXIS 76 (Ky. Ct. App. Apr. 22, 2011), the Kentucky Court of Appeals addressed an issue of first impression in KRS 342.730(6) to determine if a benefit plan as defined under that statuary provision is considered "exclusively employer funded," entitling the employer to a credit against any workers' compensation benefits paid, if it is negotiated through the collective bargaining process.
Under KRS 342.730(6):
All income benefits otherwise payable pursuant to this chapter shall be offset by payments made under an exclusively employer-funded disability or sickness and accident plan which extends income benefits for the same disability covered by this chapter, except where the employer-funded plan contains an internal offset provision for workers' compensation benefits which is inconsistent with this provision.
Regarding the benefit plan before it, the Court concluded such was not an exclusively employer-funded plan, reasoning that the collective bargaining process was contractual in nature and different from non-negotiated employee benefit plans. In forming its holding the Court relied specifically upon GAF Corp. v. Barnes, 906 S.W.2d 353 (Ky. 1995), as well as various rulings from foreign jurisdictions.
COMMENTARY: This was an exceedingly thoughtful and carefully considered opinion by the Court of Appeals, hinging ultimately on the Court's determination (borrowed from a Utah court) that "The workers' compensation system . . . was not designed or intended to free an employer from performing its contractual promises to produce specific benefits to its employees."
The Going and Coming Rule and The Tragedy of Flight 5191 — Fortney v. AirTran Airways, Inc. Fortney v. AirTran Airways, Inc., 2009-SC-000429-WC (Ky. 2010). Whether an employer uses transportation or transportation expense as an inducement for an employee to accept or continue employment is material to supporting compensability, particularly when the journey is sizeable and when the employer pays all or substantially all of the expense.
On Sunday, August 27, 2006, 49 of the 50 people aboard Comair Flight 5191 died when the plane crashed after taking off from the wrong runway at Blue Grass Airport in Lexington, Kentucky. Clarence Fortney, an employee of AirTran Airways was on that flight. Fortney, who lived in Lexington, Kentucky but worked for AirTran in Atlanta, was flying to work via another carrier (Comair) under a reciprocal agreement (AirTran did not fly into nor out of Kentucky).
The ALJ deemed the injury non-compensable based on the going-and-coming rule, finding AirTran received no benefit of Fortney’s traveling from Lexington to Atlanta and thus the employer convenience/benefit doctrine did not operate as an exception.
The case eventually came before the Kentucky Supreme Court who, in a 5 to 2 decision, determined the facts fell under the service/benefit to the employer exception to the going-and-coming rule. The Court explained even if the travel inducement benefitted the worker but placed a financial burden on the employer, the inducement still benefitted the employer when its purpose was accomplished. As the Court observed, “An employer is unlikely to provide such an inducement unless it views the resulting benefit as outweighing the burden.”
COMMENT: The Supreme Court relied heavily on the body of law involving work injuries incurred as a result of an employee’s use of a company vehicle or in performance of duties in the course of employment yet off the employer’s premises. It also found Larson’s Workers’ Compensation Law, § 14.06 – 14.07 (2009) particularly instructive, and it was the concept of “transportation expense as inducement” which was key in the Court’s ruling.
Just Because Pneumoconiosis Affects A Coal Miner Doesn’t Make It Minor. Gardner v. Vision Mining, Inc., No. 2009-CA-000874-WC, (Ky. Ct. App. 2010). KRS 342.316 as applied to coal workers is unconstitutional.
In Gardner, the Kentucky Court of Appeals addressed a claimant’s argument that KRS 342.316, which governs the evidentiary standard and procedural requirements for coal workers’ pneumoconiosis (CWP) claims, was unconstitutional. In particular, KRS 342.316 provides for a consensus panel of “B” Readers to interpret x-rays submitted by both parties. If consensus is reached, the x-ray classification is presumed correct unless overcome by clear and convincing evidence. If consensus is not reached, the ALJ decides the claim on the evidence submitted.
The court found that because the statute requires the CWP claimant, and no other pneumoconiosis claimant, to prove his case by clear and convincing evidence and applies a different statutory scheme for the adjudication of such claims through use of a consensus panel violates a CWP claimant’s right to equal protection under the law.
COMMENT: The constitutionality of KRS 342.316 has been challenged in the past and CWP in general has been the subject of extensive legislative action.
Talk To The Hand ‘Cause My Hearing Loss Don’t Let Me Understand . . . Until I Have An 8% Impairment. Quebcor Book Company v. Mikletich, No. 2009-CA-001370-WC (Ky. Ct. App. 2010). A work-related hearing loss does not become occupationally disabling unless and until an eight-percent (8) whole person impairment becomes manifest and, therefore, until this threshold rating becomes manifest the two-year statute of limitations of KRS 342.185 does not begin to run.
In Mikletich, claimant’s employer conducted routine annual hearing tests. In 2008, Mikletich filed a claim for hearing loss. Evidence established that in 2006, Mikletich hearing loss warranted a six percent (6%) impairment and in 2008 warranted a 23% rating. Quebcor argued the 6% should be excluded from compensability because of the two year statute of limitations. The ALJ, Workers’ Compensation Board and Court of Appeals disagreed, arguing the limitation period of KRS 342.185 and construing case law did not begin to run until the condition became occupationally disabling, i.e. justifying a whole person impairment of 8%.
COMMENT: As the court observed, this case and others like it presented a unique circumstance. The decision seems sound given the unique threshold requirements of KRS 342.7305(2) which, unlike other repetitive trauma claims, relies on a percentage of impairment to determine when occupational disability related to the hearing loss has become manifest.
Safety Schmafety, Temporary Employee! Jones v. Aerotek Staffing, No. 2009-CA-001238-WC (Ky. Ct. App. 2010). A temporary staffing agency’s duty to provide a safe work place for its employees does not make it vicariously liable for enhanced benefits under KRS 342.165 resulting from a safety violation of a company where the employee is placed to work.
Jones was employed by Aerotek, a temporary staffing agency. Aerotek placed Jones with MISA, where he worked as a laser cutter operator on a machine, which the evidence established was unsafe as a result of MISA’s conduct. Jones was compensated for his injuries by Aerotek, but alleged his entitlement to an enhancement of benefits based on a safety violation which resulted in his injury. While the ALJ agreed with Jones and awarded the enhancement benefits allowed by KRS 342.165, the Workers’ Compensation Board and the Court of Appeals disagreed, holding that the safety violation was committed by MISA not Aerotek and, therefore, Jones could not avail himself of the 30% enhancement of KRS 342.165.
COMMENT: The result was certainly “harsh and unfair” as observed by both the Workers’ Compensation Board and the Court of Appeals, but the Court explained that in order for a temporary staffing agency can be found to have violated a safety statute or regulation, an employee must show the agency itself “’had knowledge of, approved of, directed, or acquiesced in’ its client’s actions.” Such a circumstance would rarely, if at all, materialize. The Court urged legislative review of the issue.
Don’t Worry UEF, You’ll Get it Back. Bradley v. Commonwealth of Kentucky, 2009-SC-000135-WC (
Kentucky Supreme Court 2009). The Uninsured Employers Fund (UEF) is responsible for interest on all past due income benefits and is permitted to recover liquidated damages including interest from the uninsured employer.
Claimant was an undocumented laborer from Mexico who died as a result of a work injury. His uninsured employer was found to have violated six different federal safety regulations. The parties stipulated to a safety violation and agreed that benefits would be enhanced by 30% per the workers’ compensation statute.
On appeal, the UEF challenged its responsibility for the payment of interest on the lump sum death benefit, as well as the ALJ’s failure to reduce benefits by 50% under KRS 342.130, which the UEF claimed required reduction because the claimant’s nonresident child was the estate’s sole beneficiary. Since the benefits were payable to the claimant’s estate, which did not exist in a foreign jurisdiction and was not an alien widow, widower, or child under KRS 342.130, the Court found KRS 342.130 inapplicable.
Regarding interest, the Court found the UEF responsible for the payment of interest, despite the UEF’s argument that as a state agency it was exempt from the payment of interest on public debts. The court viewed KRS 342.760 and KRS 342.790 as holding the UEF responsible for payment of death benefits as well as enhanced benefits with interest resulting from a safety violation.
COMMENT: The decision was a simple and correct one. Were the UEF’s argument to have been accepted, such a holding would be as the Court concluded in violation of the “substance” of the workers’ compensation statute. The UEF has the right of subrogation and can attach assets of the uninsured employer to recoup payments to the insured worker including interest.
No Misrepresentation Without Medical Causation. Baptist Hospital East v. Possanz, No. 2009-SC-000563-WC (
Kentucky Supreme Court 2009). Causation with regard to a misrepresentation under KRS 342.165(2) is a medical question.
In Possanz, the Court considered KRS 342.165 (2) regarding a claimant’s misrepresentation prior to hiring. KRS 342.165 (2) provides as follows:
No compensation shall be payable for work-related injuries if the employee at the time of entering the employment of the employer by whom compensation would otherwise be payable falsely represents, in writing, his physical condition or medical history, if all of the following factors are present:
(a) The employee has knowingly and willfully made a false representation as to his physical condition or medical history;
(b) The employer has relied upon the false representation, and this reliance was a substantial factor in the hiring; and
(c) There is a causal connection between the false representation and the injury for which compensation has been claimed.
The claimant suffered what would otherwise have been a compensable neck injury, but according to the employer he had misrepresented his physical condition to the employer upon application for the position by failing to disclose he had suffered a previous low back injury. The employer testified that had it been made aware of the previous injury the claimant would not have been placed in the job that resulted in his neck injury.
The Administrative Law Judge found in favor of the employer, concluding that the claimant would not have been hired if he had told the truth and, thus, would not have performed the work which exceeded his lifting restrictions and resulted in injury.
The Supreme Court disagreed and found that whether there is a causal connection between the misrepresentation and the injury is a medical question and the medical evidence before the ALJ required dismissal since it did not support a causal connection between plaintiff’s misrepresentation of a prior low back injury and the compensable neck injury.
COMMENT: The court’s interpretation of KRS 342.165 (2) is sound. However, it may have engaged in some fact-finding by concluding on its own that the medical evidence did not support a dismissal.
An employer is not required to file a motion to reopen for purposes of contesting a medical expense where services have not been rendered and where there is no bill. In Toyota Motor Manufacturing v. Lawson, No. 2008-002386-WC and 2009-CA-00064-WC (Kentucky Court of Appeals 2009), the Court of Appeals addressed a claim arising from claimant’s motion to reopen alleging her entitlement to temporary total disability and permanent disability benefits based upon the worsening of her condition, and Toyota’s failure to formally contest a proposed surgery by filing a medical fee dispute. The ALJ found
Toyota was not required to file a medical fee dispute to contest the proposed surgery and then found the surgery not to be reasonable or necessary. The Workers’ Compensation Board reversed, saying Toyota was required to file a formal fee dispute via a motion to reopen within 30 days of the utilization review.
The Court of Appeals disagreed, holding Toyota was under no obligation to contest the proposed surgery because there had been no services rendered and there was no bill to contest. The Court reasoned that the legislature did not incorporate the subject of preauthorization for medical treatment into the language of KRS 342.020, which sets forth the 30 day time period for contesting a statement for services.
Comment: While the Court’s holding seems simple enough, it may have been too simple. The Court interpreted KRS 342.020 based on precedent dealing with medical contests involving the rendering and billing of services. This line of cases came before enactment of Utilization Review (UR) procedures. Once UR procedures were enacted under 803 KAR 25: 190, employers were required to conduct
UR in certain situations where preauthorization was requested – the very situation present in Lawson. The Lawson court’s holding would seem to render that particular regulation toothless.
A workers’ compensation insurance carrier can file suit against an insured requesting reimbursement for a 30% increase in benefits which resulted from the insured's intentional safety violation under KRS 342.165 (1) if the insurance contract so provides. In Kentucky Associated General Contractors (KAGC) Self-Insurance Fund v. Music Construction, Inc. 2008-SC-000795-DG (Ky. 2008), Music’s employee was injured, and the injury was found to have occurred as a result of Music’s violation of specific safety regulations. Under KRS 342.165(1) the employee was entitled to a 30% increase in workers’ compensation benefits. Those benefits were awarded, and KAGC sought reimbursement from its insured for the additional benefits. KAGC asserted that Music bore liability for the additional benefits paid under KRS 342.165 (1) based on a specific exclusion from coverage in the parties’ contract for workers compensation insurance. Music attempted to rely on the case of AIG/AIU Insurance Co. v. South Akers Mining Co., LLC, 192 SW3d 687 (Ky. 2006) for its assertion that it was not responsible for reimbursement. The Court distinguished AIG/AIU by noting AIG/AIU was a workers’ compensation claim involving a statutory requirement that insurers promptly pay all benefits, where in Music the issue was a contract dispute between the carrier and its insured. Therefore, under the contract, Music was required to reimburse KAGC for the additional 30% in benefits.
Commentary: This was a sound decision. AIG/AIU was indeed inapplicable.
Workers compensation benefits constitute marital property. In Day v. Day, No. 2008-CA-000133-MR (Ky. App. 2008) the Court of Appeals addressed the issue of whether workers’ compensation benefits constitute marital property. The simple answer was in the affirmative. Exceptions do exist, but none were applicable to the facts of Day.
Commentary: The sting of this decision smarted all the more because appellant was injured only three months before separation and received his settlement only months prior to dissolution.
Journey Operating v.
Zurich : What’s an ALJ good for? Well, we’ll tell ya’. Journey Operating v. Zurich, No. 2009-CA-000279-WC (2009): An ALJ has the authority under KRS 342.125 to reopen a claim for the very purpose of finding the facts and formulating remedies to protect the verity of the proceeding.
Patrick Jeffers and William Bell were employees of Myers Completion, Inc. (Myers), a Tennessee corporation providing general maintenance for oil and gas wells, which was contracted by Journey Operating, LLC (Journey), a Kentucky corporation, to perform services on a well in Kentucky. Tragically, Jeffers and Bell died in a work-related accident while on the
Kentucky job. Myers’ insurer, Zurich American Insurance Company (Zurich), paid benefits to the decedents’ estates under Tennessee workers’ compensation law.
The decedents’ widows also sought benefits under Kentucky workers’ compensation law and filed their Kentucky claim against Myers and its insurer Zurich, as well as Journey and its workers’ compensation insurer, arguing potential liability against Journey as an up-the-ladder employer under KRS 342.610(2)(b).
The ALJ found Kentucky benefits payable and agreed that Zurich’s policy did not provide for benefits under Kentucky law. The ALJ, however, found Journey liable per KRS 342.610(2)(b), but granted it a credit for any benefits paid under the Tennessee (Zurich) policy.
Thereafter,
Zurich terminated payment of benefits in reliance upon an election of remedies doctrine. Journey moved to reopen the
Kentucky claim alleging fraud per KRS 342.125. The ALJ allowed the reopening, found Zurich’s actions amounted to constructive fraud, ordered it to reinstate benefits and reiterated Journey’s entitlement to a credit for any benefits
Zurich paid or would pay.
Zurich appealed to the Workers’ Compensation Board alleging the ALJ had neither the authority to reopen nor jurisdiction to decide the issues raised. The Board agreed with Zurich and reversed the ALJ, noting that the matter was a mere dispute between the two insurers and, therefore, jurisdiction lay with Circuit Court.
The Court of Appeals disagreed with the Board, noting that the fraud issue qualified the claim as much more than a mere dispute between two insurers. It effectively held that Zurich waived any right to contest its responsibility for continued payment of benefits under Tennessee law because it failed to object to the ALJ’s original ruling which “clearly considered and affirmed Zurich’s ongoing liability under
Tennessee law.” As for Zenith’s challenge of the ALJ’s jurisdiction and authority on reopening, the Court unanimously held the ALJ had the inherent power to utilize and appropriately did utilize statutory authority (KRS 342.125) to correct what she deemed was fraudulent conduct.
Commentary: Were this merely a claim involving a “settling up” between insurers as claimed by Zurich and the Worker’s Compensation Board, or had it even been a mundane reopening under KRS 342.125, the court might have ruled differently and the decision would not likely have been published. Instead, it was the differentiating aspect of a fraud allegation and the ALJ’s actions, as the court put it, “to protect the integrity of the proceeding” which compelled a contrary result and publication of the decision.
Chappell v. Kuhlman Electric: Now, who do we represent again? Chappell v. Kuhlman Electric Corp., 2006-SC-0000140-DG (Ky. 2009). This case holds twofold: (1) In a workers’ compensation claim, if an employer is a defense attorney’s client (vis-à-vis retention by an insurer), the employer does not cease being that attorney’s client just because the employer later elects to become self-insured; and (2) In order to prove that the actions of an attorney caused plaintiff harm, plaintiff must show that but for the attorney’s negligence plaintiff would have been more likely successful.
Chappell is not per se a workers’ compensation claim, but rather a malpractice claim (among other claims) arising from Chappell’s representation of Kuhlman Electric in a workers’ compensation action. The essential facts were that Chappell’s firm Landrum & Shouse (hereinafter “the law firm”) was retained by Kuhlman’s workers’ compensation insurer Amerisure to represent Kuhlman in a workers’ compensation claim filed by one of its employees. Following resolution of the original claim, Kuhlman became self-insured.
Some time thereafter, the employee successfully reopened his claim against Kuhlman alleging a worsening of his original injury. Again, Amerisure retained the law firm to represent Kuhlman Electric. Thereafter, the law firm filed a motion to join Kuhlman in its capacity as self-insurer as a party to the workers’ compensation action alleging that the employee’s original condition had not worsened but was the result of a new injury suffered while employed by Kuhlman in its self-insured capacity. The ALJ agreed and found Kuhlman liable in its self-insured capacity.
Kuhlman then filed a civil action against the law firm and Amerisure alleging, among other things, malpractice and bad faith, respectively. The Circuit Court granted both the law firm and Amerisure’s motions for summary judgment. Kuhlman appealed and the Court of Appeals affirmed. The matter then went before the Kentucky Supreme Court.
The Supreme Court acknowledged that there indeed was a potential conflict since a new legal entity was not created when Kuhlman elected to self-insure. Kuhlman was still the law firm’s client. However, it also determined, as did the Court of Appeals, that regardless of any breach of fiduciary duty, another law firm would have pursued the same course of action and Kuhlman would not therefore have been more likely successful.
Commentary: This is a type of conflict which can often arise in workers’ compensation claims and one which is often overlooked or ignored by attorneys. The Court’s decision was correct on both counts: (1) Kuhlman was the law firm’s client when insured by Amerisure and did not cease being a client when its interests became adverse to Amerisure’s; and (2) Since Kuhlman would have fared no better even in the absence of the conflict, no damages could be proven.
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