UNINSURED EMPLOYERS' FUND, DIVISION OF KENTUCKY ATTORNEY GENERAL'S OFFICE v. HON. WALTER TURNER, OF WORKERS' CLAIMS); HON. DENIS S. KLINE, ADMINISTRATIVE LAW JUDGE; GAY HALL; PORTER INDUSTRIES, INC. OF ALLEN, KENTUCKY; and HON. ROBERT WHITTAKER, DIRECTOR OF SPECIAL FUND
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RENDERED:
October 30, 1998; 2:00 p.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
No.
1998-CA-000398-WC
UNINSURED EMPLOYERS' FUND,
DIVISION OF KENTUCKY
ATTORNEY GENERAL'S OFFICE
v.
APPELLANT
PETITION FOR REVIEW
OF A DECISION OF
THE WORKERS' COMPENSATION BOARD
WC-93-027848
HON. WALTER TURNER,
(COMMISSIONER, DEPARTMENT
OF WORKERS' CLAIMS);
HON. DENIS S. KLINE,
ADMINISTRATIVE LAW JUDGE;
GAY HALL; PORTER INDUSTRIES,
INC. OF ALLEN, KENTUCKY; and
HON. ROBERT WHITTAKER,
DIRECTOR OF SPECIAL FUND
APPELLEES
OPINION
AFFIRMING
* * * * *
BEFORE:
COMBS, EMBERTON and GUIDUGLI, Judges.
GUIDUGLI, JUDGE:
The Uninsured Employers’ Fund (UEF) petitions
for review of an opinion of the Workers’ Compensation Board
(Board) affirming an order of Hon. Denis s. Kline, Administrative
Law Judge (ALJ).
The question presented in this appeal relates to
payment of benefits by the UEF.
We believe the ALJ and the Board
have correctly interpreted recent legislative and administrative
changes relating to the payment of benefits and have not
overlooked or misconstrued the controlling statutes,
administrative regulations or precedent.
Nor do we believe that
the ALJ or the Board committed error in assessing the evidence so
flagrant as to cause gross injustice as required by Western
Baptist Hosp. v. Kelly, Ky., 827 S.W.2d 685 (1992).
therefore, affirm.
We,
Not believing we can improve upon the Board’s
opinion, we adopt it as our own:
The Uninsured Employers’ Fund (“UEF”) appeals
from an Order dated September 9, 1997 by Hon.
Denis S. Kline, Administrative Law Judge
(“ALJ”), and from the ALJ’s order of October
3, 1997 overruling its petition for
reconsideration.
Gay Hall (“Hall”) sustained a work-related
hernia injury on June 28, 1993 while lifting
a heavy piece of steel. At that time, Hall
was employed by Porter Industries, Inc.
(“Porter”). Hall filed a claim against
Porter and the Special Fund seeking workers’
compensation benefits since neither temporary
total disability (“TTD”) benefits, nor
medical benefits, were paid and surgery had
been recommended for repair of Hall’s hernia
condition. Subsequently, on September 7,
1994, the Commissioner, Department of
Workers’ Claims, certified that Porter did
not have workers’ compensation insurance
coverage on the date of Hall’s injury. The
UEF was thereafter joined as a party
defendant by ALJ order entered September 26,
1994.
Hall’s claim was adjudicated before ALJ
Kline who rendered an Opinion, Award, and
Order on May 22, 1995, awarding Hall TTD
benefits beginning July 7, 1993 until he
reaches maximum medical improvement following
the anticipated hernia surgery, along with
interest at the rate of 12% per annum on all
past due and unpaid installments of
compensation. Porter was additionally
ordered to authorize and pay for all medical,
surgical, and hospital expenses related to
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Hall’s hernia and hernia surgery. The issue
of whether Hall was entitled to permanent
occupational disability benefits was reserved
and placed in abeyance by the ALJ.
Porter appeals to the Workers’
Compensation Board (“WCB”) which affirmed the
ALJ’s award of benefits to Hall, but
dismissed Porter’s appeal as an appeal from
an order granting interlocutory relief.
Porter then appealed to the Court of Appeals
which rendered an opinion on August 30,1996
affirming the WCB and the ALJ. The claim was
remanded to the ALJ with directions for the
ALJ to finalize remaining considerations in
accord with the ALJ’s original Opinion dated
May 22, 1995.
On remand, the ALJ ordered that a prehearing conference be held on December 10,
1996. That conference was held and the ALJ
ordered Porter to pay TTD from July 7, 1993
through July 14, 1995, along with 12%
interest and all reasonable medical expenses
to be paid before December 17, 1996.
Further, the ALJ reopened proof time on the
issue of whether Hall sustained any permanent
occupational disability. The UEF
participated in this proceeding.
Subsequently, on December 20, 1996, Hall
filed a motion requesting an order from the
ALJ establishing the monetary liability for
the TTD awarded. Thereafter, the ALJ, in an
order of January 10, 1997, ordered that the
liability for TTD, as of December 16, 1996,
was $18,749.57. Moreover, the ALJ, noting
that the appeal time had run from the
finality of the Court of Appeals decision,
stated that his award of TTD “...is now final
and there is no just cause for delay in
entry.” Thereafter, based on a motion for
attorney’s fee, the ALJ, in an order dated
February 20, 1997, approved a fee for Hall’s
attorney in the amount of $3,750.00.
On July 30, 1997, Hall filed a motion to
commence payments on the award by the UEF
pursuant to KRS 342.760(4) and 803 KAR
25:010, § 27. Hall’s affidavit of July 24,
1997 was attached to the motion wherein he
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stated that 30 days had passed since the
ALJ’s order of January 10, 1997 directing
payment of TTD in the amount of $18,749.57;
that Porter had not paid any of the awarded
amount; and, that he requested an order of
the ALJ directing payment from the UEF. The
UEF responded to the motion that Hall must
first pursue an action in circuit court to
enforce payment of the award against Porter,
as an uninsured employer, and then assert a
default in payment of the judgment by Porter
before liability attaches to the UEF. This
was a requirement in 803 KAR 25:050, §24,
prior to the amendment to KRS 342.760(4),
§27, effective December 12, 1996, and prior
to the promulgation of 803 KAR 25:010, §27,
effective as an emergency regulation on
February 17, 1997 and formally adopted by
legislative review on July 27, 1997.
The ALJ, in an order of September 9, 1997,
concluded that the new regulation was
procedural in nature and applied to Hall’s
claim. Accordingly, he entered the following
order:
ORDER DIRECTING UNINSURED
EMPLOYERS’ FUND PAYMENT
Plaintiff has moved for payment
from the Uninsured Employers’ Fund
of the employer’s portion of the
Award dated May 22, 1995 and has
certified that the Award has been
final for more than 30 days and
that the employer is in default by
failing to timely commence payment
thereunder. The employer has
failed to secure payment of
compensation as provided in KRS
342.340.
Accordingly, IT IS ORDERED that the
Uninsured Employers’ Fund shall
immediately commence payment of the
employer’s portion of the Award
dated May 22, 1995.
The UEF filed a timely petition for
reconsideration asserting a patent error by
the ALJ in overlooking the established
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practice and procedure for collection of an
award from the UEF. The UEF argued that Hall
had alleged the award had not been paid
without any allegation of circuit court
attempt to collect the award and that the
order entered by the ALJ was based upon a new
regulation promulgated by the Commissioner of
the Department of Workers’ Claims. The UEF’s
position was that, notwithstanding the new
regulation, KRS 342.760(4) still requires a
showing of an actual default on behalf of the
defendant/employer before the UEF can be
ordered to pay benefits. The ALJ, in a
subsequent order dated October 3, 1997
overruled the UEF’s petition for
reconsideration. This appeal by the UEF to
the WCB then ensued.
KRS 342.760(4), amended by the Legislature on
December 12, 1996, states as follows:
(4) The uninsured employers’ fund
shall be responsible for the
payment of compensation when there
has been default in the payment of
compensation due to the failure of
an employer to secure payment of
compensation as provided by this
chapter. Such employer shall be
liable for payment into the fund of
all the amounts authorized to be
paid therefrom under the authority
of this subsection including
reimbursement of the special fund
of all liability apportioned to it
and for the purposes of enforcing
this liability the Labor Cabinet,
for the benefit of the fund, shall
be subrogated to all the rights of
the person receiving such
compensation from the fund. This
provision shall apply to all
pending claims upon which a final
order has not been entered.
(emphasis added).
In addition, the Legislature, enacted KRS
342.0015, effective December 12, 1996, which
provides:
-5-
Procedural provisions of 1996 (1st
Extra. Sess.) Ky. Acts ch. 1 shall
apply to all claims irrespective of
the date of injury or last
exposure, including, but not
exclusively, the mechanisms by
which claims are decided and
workers are referred for medical
evaluations.
Further, in KRS 342.0015, the Legislature
directed that the provisions contained in KRS
342.760(4) to be remedial.
Pursuant to the authority and directives
embodied in KRS 342.260, the Commissioner
promulgated regulations for the procedure for
adjustment of claims; and pursuant to KRS
342.760, promulgated §27 of 803 KAR 25:010 in
connection with “payment of compensation from
uninsured employers’ fund” which states as
follows:
(1)
Payment from the
Uninsured Employer’s Fund
of compensation shall be
made upon the
determination by an
arbitrator or
administrative law judge
that the responsible
employer failed to secure
payment of compensation
as provided by KRS
Chapter 342.340 and:
(a) Thirty (30) days have
expired since the
finality of an award and
a party in interest
certifies the responsible
employer has failed to
initiate payments in
accordance with that
award; or
(b) Upon showing that the
responsible employer has
filed a petition under
any section of the
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Federal Bankruptcy code;
or
(c) The plaintiff or any
other party in interest
has filed in the circuit
court of the county where
the injury occurred an
action pursuant to KRS
342.305 to enforce
payment of the award
against the uninsured
employer, and there has
been default in payment
of the judgment by the
employer.
(2)
The plaintiff may by
motion and affidavit
demonstrate compliance
with this section and
request an arbitrator or
administrative law judge
to order payment from the
Uninsured Employers’ Fund
in accordance with KRS
342.760.
(3) This section shall not be
construed to prohibit the voluntary
payment of compensation by an
employer, or any other person
liable for payment thereof, who has
failed to secure payment of
compensation as provided by KRS
Chapter 342, the compromise and
settlement of a claim, or the
payment of benefits by the Special
Fund.
(4) The sample form, Motion for
Payment from Uninsured Employers’
Fund, provided by the department
may be used by the employee.
Here, the UEF argues that contrary to 803 KAR
25:010, §27, there has been no finding that
the employer failed to secure payment of
compensation. In addition, the UEF contends
that this new regulation should be ruled
illegal since it alters the status of the UEF
-7-
from a “pay last” fund to a “pay first” fund.
In connection with the UEF’s first argument,
it appears that the UEF is asserting that the
ALJ simply failed to make a finding in
accordance with the regulation if 30 days has
elapsed since the finality of the award and
the claimant has not been paid. We believe,
however, that the language utilized by the
ALJ in his September 9, 1997 order
effectively makes such a finding.
The UEF, in connection with its second
argument on appeal, traces, in its brief, the
language utilized by the Legislature in KRS
342.760(4) since its enactment in 1972. The
UEF points out that the relevant language
regarding default has remained unchanged
throughout the period of time since 1972 and
is contained within the amended statute
effective December 12, 1996. Through its
citation to court precedent, beginning with
Davis v. Turner, Ky., 591 S.W.2d 820 (1975)
through Yocum [sic], et a. v. Campbell, et
al., Ky., 536 S.W.2d 470 (1976), Davis v.
Goodin, et al., Ky.App., 639 S.W.2d 381
(1982), and more recently in Wells v. Blair,
et al., Ky., 736 S.W.2d 346 (1987), the UEF
asserts that the established procedure in the
past has required a claimant to provide proof
that he has reduced an Administrative Law
Judge’s compensation award to a judgment in a
circuit court as required by KRS 342.305.
Then, and only then, reasons the UEF, where a
default in such payment is then shown, would
the UEF, as secondarily liable for the
claimant’s award, be required to, in fact,
make payment on the award as ordered
originally by the ALJ. Finally, the UEF
points out that where an administrative
regulation is contrary to a statute, the
statute will prevail. The UEF requests the
WCB to remand the claim to the ALJ for an
appropriate finding as to whether the
“responsible employer failed to secure
payment of compensation as provided by KRS
Chapter 342.340" and/or an opinion from the
WCB that the new regulation is illegal and
contrary to the established law and
legislative intent that the UEF be a “pay
last” fund.
-8-
While the UEF has argued that past
procedure and custom required a claimant to
file a proceeding before the circuit court in
order to obtain a judgment and then
demonstrate proof of default by a responsible
employer who had not secured insurance
coverage under the Act for injuries to its
employees, the statutory language in KRS
342.760, as previously enacted or as amended
effective December 12, 1996, has never
contained such a requirement. Moreover,
while it is true that the previous
regulation, 803 KAR 25:010, §24(1), required
the claimant “or any other party in interest”
to demonstrate that an action to enforce
payment of the award against the UEF had been
filed in the circuit court of the county
where the injury occurred and that there has
been a default in payment of the judgment by
the employer, the previous language of the
statute did not require this procedure. The
procedure was developed by the administrative
agency as a method of demonstrating that an
uninsured employer failed to make payment of
the award pursuant to the statutory mandate
enacted by the General Assembly.
The new regulation which was applied to
Hall’s claim against the UEF in this case,
continues to provide the procedure that a
claimant, or any other party in interest,
demonstrate that it has filed a circuit court
action to force payment of the award against
the uninsured employer and that there has
been a default in payment of the judgment by
the uninsured employer. However, the
regulation now provides additional methods
for a claimant to demonstrate that the
employer has defaulted in the payment of the
award without requirement that it proceed to
a circuit court judgment action.
Here, the Commissioner has certified that
Porter was uninsured on the date of Hall’s
injury. That certification meets the
requirement of subsection (1) of 803 KAR
25:010, §27, that Porter, as the responsible
employer, failed to secure payment of
compensation as provided by KRS 342.340. In
addition to that certification, present in
the record before us, Hall, as the claimant,
-9-
must additionally demonstrate or show that
“[t]hirty (30) days have expired since the
finality of an award and a party in interest
certifies the responsible employer has failed
to initiate payments in accordance with that
award....”
In Hall’s case, this was accomplished by
his motion and affidavit. The ALJ determined
that this complied with the alternative
method contained in the regulation to
demonstrate that liability should now be
afforded against the UEF in accordance with
KRS 342.760(4). We conclude the application
of the new regulation to the then pending
claim is supported by the amendment to KRS
342.760(4), effective December 12, 1996. We
further conclude that the procedures adopted
in the regulation by the Commissioner are
within the authority of the powers delegated
to the Commissioner and are not outside the
parameters of KRS 342.760(4).
Accordingly, the Order entered by Hon.
Denis S. Kline, Administrative Law Judge, is
hereby AFFIRMED and the appeal by the
Uninsured Employer’s Fund is hereby
DISMISSED.
The opinion of the Workers’ Compensation is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE, GAY HALL:
A.B. Chandler, III
Attorney General
J. Drew Anderson
Prestonsburg, KY
Robert W. Hensley
Assistant Attorney General
Uninsured Employers’ Fund
Frankfort, KY
BRIEF FOR APPELLEE, SPECIAL
FUND:
Joel D. Zakem
Labor Cabinet
Louisville, KY
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