DONALD REYNOLDS v. KENTUCKY CARBON CORPORATION AND LIFE INSURANCE COMPANY OF NORTH AMERICA, A SUBSIDIARY OF CIGNA
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RENDERED: May 7, 1999; 10:00 a.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
1998-CA-000871-MR
DONALD REYNOLDS
v.
APPELLANT
APPEAL FROM PIKE CIRCUIT COURT
HONORABLE CHARLES E. LOWE, JR., JUDGE
ACTION NO. 97-CI-000208
KENTUCKY CARBON CORPORATION
AND LIFE INSURANCE COMPANY OF
NORTH AMERICA, A SUBSIDIARY
OF CIGNA
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: GUDGEL, CHIEF JUDGE; GUIDUGLI AND SCHRODER, JUDGES.
GUIDUGLI, JUDGE.
Donald Reynolds (Reynolds) appeals from a
judgment of the Pike Circuit Court entered April 3, 1998.
Reynolds had filed a petition to enforce a workers’ compensation
opinion and award entered by the Administrative Law Judge (ALJ)
on February 19, 1991, as amended by order on remand entered
March 26, 1992.
Appellant argued to the trial court and on
appeal that he was denied statutory interest on the principal due
under the workers’ compensation claim.
reviewed this matter, we affirm.
Having thoroughly
On February 19, 1991, Reynolds received an opinion and
award from the ALJ awarding him benefits for permanent and total
disability under the Kentucky Workers’ Compensation Act in the
amount of $294.86 per week based upon work-related injuries he
sustained while working for Kentucky Carbon Corporation (Kentucky
Carbon).
Prior to the award being entered, Kentucky Carbon had
paid temporary benefits of $61.92 and Life Insurance Company of
North America, a subsidiary of CIGNA (Cigna), Kentucky Carbon’s
disability carrier, paid Reynolds benefits under its disability
plan.
In the ALJ’s opinion and award, the ALJ indicated that
Kentucky Carbon would not be credited for disability payments
made by Cigna to Reynolds.
Specifically, paragraph five of the
award section provided:
The defendant-employer shall be afforded a
credit for all payments heretofore made
whether such payments are representative of a
voluntary payment of workers’ compensation,
salary continuation for disability, and/or a
disability pension plan. However, such
credit shall not be prospective and shall
affect no future payments to be made under
the compulsion of this Award.
After an appeal to the Workers’ Compensation Board
filed by Kentucky Carbon, the opinion and award was modified to
provide that Kentucky Carbon would receive credit for payments
made by Cigna prior to the award but retained the provision that
the employer would not receive credit for “future payments to be
made under the compulsion of this Award.”
In other words, the
ALJ’s order required Kentucky Carbon to pay the full amount of
$294.86 to Reynolds.
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However, from February 19, 1991 through December 4,
1996, both Kentucky Carbon and Cigna continued to make the same
payments to Reynolds.
Cigna paid $232.95.
Kentucky Carbon paid only $61.92 while
Once this situation was discovered Cigna
notified Reynolds of its overpayment and Kentucky Carbon began
making its full workers’ compensation payment to Reynolds on
November 20, 1996.
Thereafter, on February 6, 1997, Reynolds filed a
“petition to enforce workers’ compensation award” seeking full
payments of past due benefits allegedly owed him and claiming
statutory interest thereon pursuant to KRS 342.040.
Reynolds’
action was filed against Kentucky Carbon which then filed a
third-party complaint against Cigna.
After discovery was
completed and summary judgment motions considered, the trial
court entered its first “Findings of Fact, Conclusions of Law and
Judgment” on November 24, 1997.
That order granted judgment to
Reynolds against Kentucky Carbon in “the sum of $73,561.65 plus
interest at the rate of 12% per annum for and after December 4,
1996, until paid.”
The judgment further awarded Cigna a judgment
against Reynolds in the sum of $12.38 plus interest and awarded
Reynolds a $1,000 attorney fee.
Motions to reconsider and alter
or amend were timely filed and the trial court subsequently
entered a second judgment on December 19, 1997.
That judgment
awarded Reynolds the sum of $73,561.65 from Kentucky Carbon
($49,000.61 in additional workers’ compensation benefits and
$24,516.95 in interest), but also adjudged that Cigna recover
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from Reynolds the sum of $49,013.64, representing its overpayment
of disability insurance.
Kentucky Carbon’s motion to reconsider and alter or
amend that judgment was granted and the Pike Circuit Court
entered its final judgment in this matter on April 7, 1998.
After considering “the pleadings, affidavits, depositions and
memoranda of all parties, as well as hearings before the Court,”
the trial court ordered and adjudged the following:
1. Reynolds was granted judgment against
Kentucky Carbon in the sum of $49,000.61 for
additional workers’ compensation benefits.
2. Cigna was granted judgment against
Reynolds in the sum of $49,000.66 for
overpayment of long term disability benefits
paid.
3. Reynolds’ claim against Kentucky Carbon
for pre-judgment interest on the additional
workers’ compensation benefits was denied
because Reynolds “was not deprived of the use
of, or entered [sic] to interest on the
$49,000.66 underpayment of workers’
compensation.
4. The Judgment permitted Kentucky Carbon to
pay the judgment of $49,008.68 directly to
Cigna.
5. Awarded Reynolds attorneys’ fees in the
sum of $1,000 and costs herein expended.
From this final order Reynolds appealed.
On appeal the only issue presented by Reynolds is that
the trial court erred in not awarding him interest on the
workers’ compensation benefits Kentucky Carbon was originally
ordered to pay.
Reynolds claims that pursuant to KRS 342.040 he
is statutorily entitled to said interest.
pertinent part:
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KRS 342.040 states in
(1)Except as provided in KRS 342.020, no
income benefits shall be payable for the
first seven (7) days of disability unless
disability continues for a period of more
than two (2) weeks, in which case income
benefits shall be allowed from the first day
of disability. All income benefits shall be
payable on the regular payday of the
employer, commencing with the first regular
payday after seven (7) days after the injury
or disability resulting from an occupational
disease, with interest at the rate of twelve
percent (12%) per annum on each installment
from the time it is due until paid....
Relying on Stone v. Kentucky Ins. Guar. Ass’n. Ky., Ky. App., 908
S.W.2d 675, 677 (1995), appellant claims “that the obvious
purpose of an interest statute is to encourage a judgment debtor
to promptly comply with the terms of the Judgment and to
compensate the judgment creditor for the judgment debtor’s use of
his money.”
Reynolds contends that Kentucky Carbon had the use
of his money during that period of time and therefore would be
unjustly enriched if interest is not ordered.
Reynolds also
argues that not to follow KRS 342.040 and order interest will
undermine the beneficial purposes of the Workers’ Compensation
Act, including the timely payment of benefits.
We disagree.
Kentucky Carbon contends that, although they did
underpay benefits owed Reynolds, he did not suffer any lost since
Cigna overpaid under the disability plan the amount equal to the
underpaid workers’ compensation benefits.
not suffer an actual loss.
As such, Reynolds did
Kentucky Carbon admitted the
underpayment and filed a third-party complaint to join Cigna as
an indispensable party.
As seen by the final judgment entered
April 3, 1998, Reynolds owed Cigna the same amount Kentucky
Carbon owed Reynolds.
That issue has not been appealed.
-5-
Kentucky Carbon contends the clear purpose of KRS 342.040 “is to
penalize the paying party for depriving another party who has
obtained an award or judgment of the use and benefit of the money
awarded.”
Since Reynolds did in fact receive all he was entitled
to, although from the wrong source, Kentucky Carbon claims that
from a standpoint of equity and fairness, Reynolds should not
profit from this situation.
They claim that both the workers’
compensation benefits and the long term disability benefits are
funded by the same company and thus, in reality, Kentucky Carbon
was responsible for the total benefits Reynolds received.
Kentucky Carbon argues that Reynolds would be unjustly enriched
if he were awarded interest.
Its argument was succinctly stated
in a memorandum filed on September 17, 1997, which, in relevant
part, states:
If the Court does sustain plaintiff’s
motion to enforce this compensation award, it
should also allow Kentucky Carbon an off set
or credit for all over payments made by
Kentucky Carbon through CIGNA to Reynolds
under the long term disability plan (the
record actually shows $12.38 credit or over
payment by CIGNA when the off set is taken).
Whether Reynolds got the money due him out of
his employer’s right pocket or left pocket is
inconsequential as far as these proceedings.
No interest should be required to be paid
to Reynolds by Kentucky Carbon because
Reynolds got the amount of money to which he
was entitled to from his employer, Kentucky
Carbon, who, as mentioned above, is the same
payor under both plans. Interest is awarded
on money for which one does not have the
actual use of. This was certainly not the
case with Reynolds since Reynolds received
the same amount of money owed to him by his
employer, Kentucky Carbon, but only under a
different plan.
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Kentucky Carbon argues that in Stone, supra, cited by
Reynolds, the facts are distinguishable since in Stone there had
been significant delays in the case and in payment of benefits
caused by the employer.
judice.
This is not the case in the matter sub
In Stone, the Court set forth the general purpose for
statutory interest as follows:
In Kentucky, a prevailing party’s right to
recover post-judgment interest is granted by
statute. KRS 360.040 provides that “[a]
judgment shall bear twelve percent (12%)
interest compounded annually from its date.”
The language of the statute has been
interpreted as requiring the imposition of
interest on a judgment unless there are
factors which would make an award of interest
inequitable. Courtenay v. Wilhoit, Ky.App.,
655 S.W.2d 41, 42 (1983).
The statute’s
obvious purpose is to encourage a judgment
debtor to promptly comply with the terms of
the judgment and to compensate the judgment
creditor for the judgment debtor’s use of his
money.
...
Our position is strengthened by policy
reasons of concern in Kentucky and identified
in other jurisdictions that have addressed
the same question. Unless KIGA [Kentucky
Insurance Guaranty Association] is liable for
post-judgment interest, delaying tactics will
be encouraged and policyholders, such as
Stone, may be exposed to the risk of
significant financial loss. Ramage v.
Alabama Ins. Guar. Ass’n, 919 F.2d 1010, 1014
(5th Cir. 1990). KIGA should not be
“rewarded for excessive delay in payment, as
it would be if it could invest the limit [its
statutorily determined liability amount] in a
large claim yet not have to pay interest.”
[citations omitted].
Stone, 908 S.W.2d at 677-678.
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The issue of when and under what circumstances interest
should be awarded is within the sound discretion of the trial
court.
A number of other Kentucky cases explain
that the award of interest is within the
judicial discretion of the trial court. See,
for example, Curtis v. Campbell, Ky., 336
S.W.2d 355 (1960); Beckman v. Time Fin. Co.,
Ky., 334 S.W.2d 898 (1960); Avritt v.
O’Daniel, Ky.App., 689 S.W.2d 36 (1985). In
47 C.J.S., “Interest and Usury,” § 6 (1982),
the underlying principles are thus explained:
Interest is charged not
only because of the value
to the one who uses
money, but also as
compensation to the one
who has been deprived of
the use of money.
Interest is not recovered
according to a rigid
theory of compensation
for money withheld, but
is given in response to
considerations of
fairness; it is denied
when its exaction would
be inequitable....the
tendency of the courts is
to charge and allow
interest in accordance
with the principles of
equity, to accomplish
justice in each
particular case.
Nucor Corp. v. General Elec. Co., Ky., 812 S.W.2d 136, 143(1991).
Having reviewed this matter, we agree with the trial
court that Reynolds was not deprived of the use of, or entitled
to interest on the $49,000.66 underpayment of workers’
compensation benefits owed by Kentucky Carbon.
We believe the
factual situation is distinguishable from Stone and that “there
are factors which would make an award of interest inequitable.”
-8-
Stone, supra, at 677 citing Courtenay v. Wilhoit, Ky. App., 655
S.W.2d 41, 42 (1983).
Further, we do not believe the trial court
abused its discretion nor that the judgment was clearly
erroneous.
For the foregoing reasons, the judgment of the Pike
Circuit Court is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Robert J. Greene
Pikeville, KY
William J. Baird, III
Pikeville, KY
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