KAGC v. Music Construction: AIG/AIU Doesn’t Negate the IOU

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.

Toyota Motor Manufacturing v. Lawson: Strengthening KRS 342.020 or Weakening 803 KAR 25:190?

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.

Day v. Day: Until Comp do us Part

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.

DWC Adopts New Open Records Request Procedure

Frankfort, Ky.  The Kentucky Department of Workers’ Claims has announced it will now be requiring prepayment  for all open records requests.  A new request form has been adopted by the DWC for this purpose.  Once the form is submitted, the DWC will mail a cost estimate.  Records will be mailed once payment is received.   While the request can be submitted via e-mail, the DWC reports it cannot fax or e-mail responses to records requests.

KLC Lends a Hand to KSBIT

The Lexington-Herald Leader reports that the Kentucky League of Cities (KLC) will take over administration and management of  the Kentucky School Board Association’s insurance pool known as Kentucky School Board Insurance Trust (KSBIT) that protects Kentucky school property and employees.  KLC Insurance Services will revive the insurance pool with $8 million , $5.5 million for the workers’ compensation fund and $2.5 million for the property/liability fund.  To read more, click here.

View OUCH!’s previous post on the anticipated merger here.

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.

Richmond ALJ Office to Close

The DWC has announced that the Richmond ALJ Office (formerly the office of ALJ Irene Steen, who was not reappointed to the position) will close.  Correspondence for that office should be sent to the Chief Administrative Law Judge’s Office, 657 Chamberlin Avenue, Frankfort, KY  40601.

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.

SEE ALSO:  http://www.kycases.com/2009/11/legal-negligence-conflicts-of-interest-insurance-representation-stephen-r-chappell-individually-and-.html

Doctor pleads guilty to drug charge in Eastern Kentucky pill-pipeline case

Doctor pleads guilty to drug charge in Eastern Kentucky pill-pipeline case – Latest News – Kentucky.com.

More ALJ Positions Open at KY DWC

Frankfort.  The Workers Compensation Nominating Commission is now accepting resumes for positions as Administrative Law Judge (ALJ) for the Kentucky Department of Workers’ Claims.  These are full-time positions and appointees shall not hold any other public office or maintain any private practice. 

Applicants for Administrative Law Judge positions must be licensed attorneys and must have five (5) years experience in the Commonwealth in the practice of workers’ compensation law or a related field and extensive knowledge of workers’ compensation law [KRS 342.230(3)].  The salary to be paid is that of a Circuit Court Judge. 

APPLICATIONS MUST BE RECEIVED ON OR BEFORE NOON (EST) THURSDAY, DECEMBER 10, 2009.  Interested parties are required to send one original resume and seven copies, along with a cover letter containing an e-mail address, to the attention of Brenda Majcher, Nominating Commission Clerk, Department of Workers’ Claims, Prevention Park, 657 Chamberlin Avenue, Frankfort, Kentucky  40601.  Questions may be directed to Mrs. Majcher at (502) 564-5550.