UNINSURED EMPLOYERS' FUND v. DALE POWELL; TRANSPORT INVESTMENT GROUP, INC. d/b/a PROFESSIONAL TRUCK DRIVING SCHOOL; CLARENDON NATIONAL INSURANCE COMPANY; HON. RICHARD M. JOINER, ADMINISTRATIVE LAW JUDGE; and WORKERS' COMPENSATION BOARD
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RENDERED: June 17, 2005; 2:00 p.m.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2004-CA-002307-WC
UNINSURED EMPLOYERS’ FUND
v.
APPELLANT
PETITION FOR REVIEW OF A DECISION
OF THE WORKERS’ COMPENSATION BOARD
ACTION NO. WC-02-02032
DALE POWELL; TRANSPORT INVESTMENT
GROUP, INC. d/b/a PROFESSIONAL TRUCK DRIVING
SCHOOL; CLARENDON NATIONAL INSURANCE
COMPANY; HON. RICHARD M. JOINER,
ADMINISTRATIVE LAW JUDGE; and WORKERS’
COMPENSATION BOARD
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: HENRY AND SCHRODER, JUDGES; EMBERTON, SENIOR JUDGE.1
EMBERTON, SENIOR JUDGE:
The single question in this appeal is
whether the Workers’ Compensation Board erred in concluding that
an electronic submission to the Office of Workers’ Claims which
1
Senior Judge Thomas D. Emberton sitting as Special Judge by assignment of
the Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution
and KRS 21.580.
contained an inaccurate termination of coverage date constituted
sufficient compliance with the statutory requirements to relieve
appellee Clarendon National Insurance Company from liability for
payment of a compensation award to appellee Dale Powell.
The
Board rejected the contention of the Uninsured Employers’ Fund
that the error as to the termination date rendered the
submission a nullity, concluding that the actual termination
date was immaterial as the Commissioner was supplied with notice
that the employer was no longer insured by the carrier.
Finding
no error in the Board’s analysis, we affirm.
On September 20, 2002, appellant Dale Powell sustained
a work-related injury while in the employ of Transport
Investment Group, Inc., d/b/a Professional Truck Driving School.
No issue has been raised as to the award of benefits stemming
from that injury.
The issues advanced in this case center
solely upon the notice requirement set out in KRS 342.340(2) and
whether Clarendon, through its third party administrator
Midwestern Insurance Alliance, had sufficiently complied with
that statute to relieve Clarendon from liability for payment of
Powell’s award.
The facts, though somewhat complex, are not disputed.
On November 1, 2000, after Powell’s employer Transport had
notified its compensation carrier that its policy would not be
renewed due to a change in ownership, Midwestern sent notice to
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the insured and the agent, as well as to NCCI who at the time
was the only agent approved by regulation for electronic
transmission of data, that the policy would lapse as of January
14, 2001.
On February 21, 2001, Midwestern transmitted
information concerning the non-renewal of the policy to Workers
Comp Link, an intermediary who, due to a series of problems with
NCCI, had informally substituted for NCCI for transmission of
such data to the Department.
Although Midwestern properly
communicated to Workers Comp Link that the policy effective
January 14, 2000 was not being renewed, it appears that the
transmission date of February 21, 2001 was erroneously inserted
into the blank for policy termination date.
The transmission
concerning the coverage in this case was part of a group
transmission on February 21, 2001, all of which erroneously
inserted the transmission date instead of the termination date.
A department employee noticed that a large number of
notifications from Clarendon had the same termination date and
determined that there had been an error in the transmission.
The February 21, 2001 transmission which contained the errors
was rejected with directions to the carrier to re-file utilizing
the proper termination date.
On May 24, 2002, several months
after Powell’s injury, the Department finally accepted a
transmission which included accurate information about the non-
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renewal of the Transport Group policy which lapsed on January
14, 2001.
In rejecting the Fund’s contention that Midwestern’s
failure to timely transmit accurate information concerning the
non-renewal of the Transport’s policy rendered Clarendon liable
for payment of Powell’s compensation claim, the Administrative
Law Judge set out the following rationale:
Under the regulations in effect at the time,
the rejection of the transmission by the
Department of Workers’ Claims is of no
consequence. Notice was complete upon
transmission to the intermediary. In
addition, the agent that was approved at the
time, NCCI, was placed on notice of the nonrenewal of the policy back in November of
2000. Sufficient information got through to
the Department of Workers’ Claims to
constitute “receipt of the notification” of
the non-renewal as contemplated in KRS
342.340(2). The regulations in effect at
the time did not clearly require more.
Therefore, the coverage lapsed by nonrenewal.
The Fund’s appeal of that determination to the Board produced an
opinion and order which expanded upon the ALJ’s reasoning:
We reject the UEF’s contention that the
notification was insufficient under the
regulation because the termination date
contained in the notification was incorrect.
The carrier, via its third party
administrator, complied in good faith with
all applicable literal requirements of the
regulation. Moreover, the incorrect date of
termination supplied by the carrier, via its
third party administrator, was immaterial.
It did not cut short the carrier’s
contractual obligation to the employer and
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it provided the commissioner with notice
that the employer was no longer insured by
the carrier. The carrier and the third
party administrator complied with both the
letter and the spirit of the regulation.
We agree with the Board’s analysis.
KRS 342.340(2) contains the following language
pertinent to our decision:
Termination of any policy of insurance
issued under the provisions of this chapter
shall take effect no greater than ten (10)
days prior to the receipt of the
notification by the commissioner unless the
employer has obtained other insurance and
the commissioner is notified of that fact by
the insurer assuming the risk. Upon
determination that any employer under this
chapter has failed to comply with these
provisions, the commissioner shall promptly
notify interested government agencies of
this failure . . . .
As noted by the Board, the Supreme Court of Kentucky explained
in Travelers Insurance Company v. Duvall2
that the clear purpose
of the notification statute is to allow the Department to
monitor an employer’s compliance with mandatory workers’
compensation insurance provisions so that appropriate action may
be taken upon cessation of coverage.
With that view of the
statute in mind, application of the ten-day provision to these
facts confirms the propriety of the Board’s conclusion that the
error as to the actual termination date is immaterial in this
case.
2
Although contractual coverage terminated by non-renewal
884 S.W.2d 665 (Ky. 1994).
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on January 14, 2001, the earliest termination date for policies
included in the February 21, 2001 transmission would have been
February 11, 2001.
Thus, the error as to the actual termination
date caused no cutting short of contractual coverage or
prejudice to any party.
We also agree with the Board that the rejection of the
February 21, 2001 transmission actually had the effect of
frustrating the purpose of the statutory notification
requirement.
Although it was clear from the transmission that
Transport’s policy had been terminated, no enforcement action
was undertaken between the date of rejection and the date that
the re-filed transmission was finally accepted.
We simply find
no reasonable basis for total rejection of the transmission.
Direction to correct the Department’s records to supply the
actual date without rejecting the entire transmission would have
preserved the notification purpose of the statute without
offending the rights of the Department or any party.
The Fund’s technical arguments notwithstanding, we are
convinced that the carrier through its third-party administrator
substantially complied with the statutory notification
requirement by the transmission of February 21, 2001.
Accordingly the Board did not err in concluding that the carrier
was not liable for payment of this claim.
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The opinion and order of the Workers’ Compensation
Board is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Gregory D. Stumbo
Attorney General
R. Christian Hutson
Paducah, Kentucky
Dana C. Stinson
Assistant Attorney General
Frankfort, Kentucky
John T. Carneal
Paducah, Kentucky
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