The following summaries of recent noteworthy cases were written by Roland Legal PLLC.

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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.

When Awarding PPD Benefits Begin at the Beginning. The issue on appeal in Sweasy v. Wal-Mart, 2009-SC-000219-WC, ( Ky. 2009) was whether the language of KRS 342.730(1)(d) created a choice for when PPD benefits in a 425 week award commenced. In Sweasy, the ALJ awarded benefits to commence from the time Sweasy reached maximum medical improvement, not from the date of injury.

KRS 342.730(1)(d), the statutory provision at issue, states as follows:

For permanent partial disability, if an employee has a permanent disability rating of fifty percent (50%) or less as a result of a work-related injury, the Compensable permanent partial disability period shall be four hundred twenty-five (425) weeks, and if the permanent disability rating, is greater than fifty percent (50%), the compensable permanent partial disability period shall be five hundred twenty (520) weeks from the date the impairment or disability exceeding fifty percent (50%) arises.

The Workers’ Compensation Board reversed the ALJ’s determination, holding that the benefits should commence from the date of injury. The Court of Appeals reversed the Board and reinstated the ALJ’s determination, interpreting KRS 342.730(1) (d) to mean that an award based on a disability rating of fifty percent or less (a 425 week award) "may or may not begin" when the impairment or disability from an injury arises.

The Court of Appeals interpreted this language to mean that in the case of a 520 week award the benefits would commence as of the date of injury, but in the case of a 425 week award the language failed to specify when that period of disability commences, thus leaving it up to the ALJ to decide when the award would begin.

On appeal, Sweasy alleged her disability began at the time of her injury and argued there was no justification for the Court of Appeals’ interpretation of KRS 342.730(1)(d).

The Supreme Court agreed with Sweasy, reversing the Court of Appeals. The Court disagreed with the Court of Appeals’ interpreting KRS 342.730(1)(3) to allow for benefits to commence from the date of injury for an award of 520 weeks, but not an award of 425 weeks (as in the case of Sweasy).

After discussing precedent relative to statutory construction and examining the underlying policy of the workers’ compensation statute, the Supreme Court considered the Court of Appeals interpretation and held that the “legislature intended no such absurdity,” and that the compensable period for partial disability begins on the date that impairment and disability arise, without regard to the date of MMI, the worker's disability rating, or the compensable period's duration.”

All justices concurred.

Commentary:  The Supreme Court made the correct decision in this claim, although it may have been a bit harsh characterizing the Court of Appeals’ interpretation as an absurdity. This is the second decision of 2009 involving a reviewing Kentucky court’s micro-analysis of a statutory provision resulting in a rejection of plain meaning and the statute’s traditional application. In March of 2009, it was the Supreme Court, not the Court of Appeals, who in Chrysallis House v. Tackett, 2008-SC-000221-WC (Ky. 2009), rendered a rather controversial decision relative to the application of benefit enhancements under KRS 342.730 effectively creating an exception to the phrase “with or without cause” where none had previously existed. This case is discussed in further depth at Roland Legal’s blog OUCH!

At the completion of proof and following the first final hearing, the ALJ entered an interlocutory opinion placing the claim in abeyance based on her finding that Bowerman had not attained maximum medical improvement (per the treating physician’s testimony), but that he had achieved a level of improvement permitting his return to some work, justifying abeyance, payment of medical benefits but not payment of temporary total disability (TTD) benefits. Bowerman filed a petition for reconsideration on the ALJ’s failure to award TTD benefits, but the ALJ denied the petition. Bowerman appealed that denial to the Workers’ compensation Board, who dismissed the appeal since the opinion was not a final appealable order.

Approximately seven months after entry of the interlocutory order, Bowerman motioned to remove the claim from abeyance. Updated medical records were filed followed by a second hearing and the ALJ’s final opinion.

Although the ALJ incorporated her prior findings of fact from her interlocutory order into her final opinion, she then reversed her original factual findings and concluded that as of September 2005 Bowerman had reached MMI and could return to all former work activities, thus adopting the conclusions of the employer’s IME physician.

Bowman filed a petition for reconsideration asserting that the ALJ’s findings in her final opinion should have been consistent with her original interlocutory opinion. The ALJ denied the petition and Bowman appealed to the Workers’ Compensation Board, who affirmed the ALJ.

The Court of Appeals reversed with a scathing critique of what it deemed to be a misunderstanding of the law by both the ALJ and the Workers’ Compensation Board.

The Court of Appeals analyzed the ALJ’s decision and the Workers’ Compensation Board’s affirming based on two inquiries: (1) whether the ALJ’s fact-finding discretion extended “to rendering a final opinion in which she completely abandoned and reversed dispositive factual findings initially determined by her in the interlocutory opinion which favored Bowerman and were supported by substantial evidence, absent a showing of new evidence, fraud, or mistake” and (2) “whether the ALJ erred in denying additional TTD benefits when, as initially determined in the interlocutory opinion, Bowerman was found not to have reached MMI and his claim was abated pending completion of medical treatment recommended by his treating physician, reaching MMI, and assignment of an impairment rating.”

After reviewing the procedural history and facts and after a careful and thorough analysis of precedent and analogous opinions, the Court of Appeals held that the two inquires mandated reversal.

The Court determined that factual findings rendered in an interlocutory opinion, absent new evidence, fraud or mistake cannot be reversed. The Court noted the ALJ’s reversal of previously rendered findings was arbitrary, unreasonable, unfair and constituted a violation of statutory authority and sound legal principles. The Court additionally noted that even the Board misinterpreted “its own cited legal authority.”

The Court further held that while abatement in and of itself did not compel payment of TTD, the ALJ’s findings of fact in her interlocutory opinion did. The Court chided the ALJ deeming her denial of TTD demonstrated a lack of understanding of the prerequisites for an award of TTD as she initially denied TTD benefits because she found Bowerman could perform “some type of work.”

The Court held that in so opining the ALJ was applying the standard for permanent total disability (PTD) benefits not TTD benefits. Since Bowerman had not reached MMI and could not return to his previous work duties or customary work, he had satisfied the requirements for an award of TTD under KRS 342.0011(11)(a). The Court reversed and remanded, with Judge Keller dissenting in a separate opinion.

Commentary: In and of itself, the opinion serves as a seminal guide for the standard of review for appeals involving the de novo review of decisions challenged based on a fact-finder’s abuse of discretion. The opinion, some 42 pages, and certainly a longer than normal appellate decision reviewing a workers’ compensation determination, seemed largely geared towards highlighting what the Court considered to be both a clear abuse of judicial discretion and a clear misunderstanding and application of the law by both the fact-finder and the Workers’ Compensation Board. The substantive holding in and of itself seemed elementary, and perhaps that is what precipitated the tenor of the opinion.

Medical treatment for an injured workers’ back pain is compensable even if the original injury was a hip injury, as long as the back pain was a symptom or natural consequence of the original hip injury. Ranger Contracting v. Morley, 2009 Ky. App. LEXIS 151, No. 2008-CA-0010307-WC (Ky. App. 2009) (designated to be published). Claimant originally settled his claim stemming from a work-related hip injury. Subsequent to settlement, claimant moved to reopen the claim seeking compensation for medical treatment of low back pain which he attributed to the original injury. While medical testimony regarding the relationship of the low back pain to the original injury differed, the ALJ relied on claimant’s treating physician who opined the back pain was related to the original injury. The employer challenged the finding on various grounds arguing (1) that claimant was alleging a new injury not brought at the time of the original claim even though it was known to him deeming it barred under KRS 342.270; (2) that the claim was barred by the statute of limitations and (3) that the pain was not causally related to the original injury. In dismissing the employer’s arguments, the Court held that the back pain was compensable, noting that the pain did not constitute a new medical condition or injury and medical proof established it was causally related to the injury. In short, the Court deemed the back pain was a symptom or “natural consequence” of the hip injury even though the claimant did not injure his back in the original work accident.

Commentary: The court’s reasoning was sound, although some legal practitioners and physicians might take issue with the Court’s statement that pain in and of itself is not a medical condition but merely a symptom of a medical condition.

Statutory law controlling distribution of an injured worker’s benefits to his widow upon his death apply whether the benefits are paid by opinion and award or by settlement. Bell v. Consol of Kentucky, Inc., 2009 Ky. App. LEXIS 155, No. 2009-CA-000673-WC (Ky. App. 2009) (designated to be published). Claimant Bell entered into a settlement for benefits to be paid as a result of injuries he sustained in a work-related accident. Bell thereafter died in an un-related accident and his wife motioned to receive the full amounts of the remaining settlement benefits. The ALJ allowed for distribution of benefits to the widow, but only at 50% of the rate specified in the settlement agreement as required under KRS 342.730(3). Bell 's widow essentially argued on appeal that since the benefits were paid per a settlement and not an opinion and award, KRS 342.730(3) did not apply. The Court of Appeals, noting that the claim appeared to be one of first impression, held that KRS 342.730(3) applied with the same effect for a settlement as with an opinion and award.

Commentary: While this claim did appear to address an issue of first impression in Kentucky, the Court was correct in applying the same statutory provision to a settlement as would apply to an opinion and award since Kentucky law conveys the same weight to an approved settlement agreement as it does to an opinion and award. See Jude v. Cubbage, 251 S.W.2d 584 (Ky. 1952) (cited by the Bell court).

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