KENTUCKY EMPLOYERS' MUTUAL INSURANCE (KEMI) V. TAYLOR CONTRACTING/TAYLOR READY MIX, LLC, ET AL.
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IMPORTANT NOTICE
NOT TO BE PUBLISHED OPINION
THIS OPINION IS DESIGNATED "NOT TO BE PUBLISHED."
PURSUANT TO THE RULES OF CIVIL PROCEDURE
PROMULGATED BY THE SUPREME COURT, CR 76 .28(4)(C),
THIS OPINION IS NOT TO BE PUBLISHED AND SHALL NOT BE
CITED OR USED AS BINDING PRECEDENT IN ANY OTHER
CASE IN ANY COURT OF THIS STATE; HOWEVER,
UNPUBLISHED KENTUCKY APPELLATE DECISIONS,
RENDERED AFTER JANUARY 1, 2003, MAY BE CITED FOR
CONSIDERATION BY THE COURT IF THERE IS NO PUBLISHED
OPINION THAT WOULD ADEQUATELY ADDRESS THE ISSUE
BEFORE THE COURT. OPINIONS CITED FOR CONSIDERATION
BY THE COURT SHALL BE SET OUT AS AN UNPUBLISHED
DECISION IN THE FILED DOCUMENT AND A COPY OF THE
ENTIRE DECISION SHALL BE TENDERED ALONG WITH THE
DOCUMENT TO THE COURT AND ALL PARTIES TO THE
ACTION.
RENDERED : OCTOBER 21, 2010
NOT TO BE PUBLISHED
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2009-SC-000808-WC
KENTUCKY EMPLOYERS' MUTUAL
INSURANCE (KEMI)
V
APPELLANT
ON APPEAL FROM COURT OF APPEALS
CASE NOS . 2008-CA-000647-WC AND 2008-CA-000959-WC
WORKERS' COMPENSATION BOARD NO. OS-01707
TAYLOR CONTRACTING/TAYLOR READY MIX, LLC;
CHRISTOPHER WATTS;
UNINSURED EMPLOYERS FUND ;
HONORABLE ANDREW F. MANNO,
ADMINISTRATIVE LAW JUDGE; AND
WORKERS' COMPENSATION BOARD
APPELLEES
MEMORANDUM OPINION OF THE COURT
AFFIRMING
Affirming a decision by the Workers' Compensation Board, the Court of
Appeals determined that an Administrative Law Judge (ALJ) failed to make the
findings required by the court's previous order of remand' and remanded the
matter again . The court directed the ALJ to reconsider whether Kentucky
Employers' Mutual Insurance (KEMI) properly exercised its right to cancel
coverage for Taylor Contracting/ Taylor Ready Mix, LLC (Taylor) for late
' Taylor Contracting/Taylor Ready Mix, LLC v. Watts (2007-CA-000026-WC, rendered
June 29, 2007) .
payment of premiums and, as ordered previously, to base the decision on
additional findings concerning the parties' understanding when entering into
the contract. KEMI appeals the decision, asserting that the ALJ complied
adequately with the previous order of remand.
We affirm. The Court of Appeals did not err when it found that the ALJ
failed to comply with the June 29, 2007 order and remanded again with
instructions to do so. The ALJ failed to focus on the parties' mutual
understanding when entering into the contract, as ordered, and focused
instead on their subsequent course of dealing.
Taylor procured a workers' compensation insurance policy from KEMI for
the period from November 1, 2004 through November 1, 2005 at an annual
premium of $23,988.11 . The application required Taylor to pay the premium
in ten installments (one installment of 25% of the premium, followed by three
installments of 8 .34% and then six installments of 8.33%) . The payment plan
listed on the application was as follows:
11/02/2004
01/02/2005
02102/2005
03/02/2005
04/02/2005
05/02/2005
06/02/2005
07/02/2005
08/02/2005
09/02/2005
$5,997.03
$2,000.61
$2,000 .61
$2,000.61
$1,998.21
$1,998.21
$1,998.21
$1,998.21
$1,998 .21
$1,998 .20
Neither the policy nor any attachment set a schedule for premium payments.
Taylor paid the first installment on November 1, 2004 . KEMI began to
mail monthly invoices to Taylor on December 2, 2004 and typically required
payment within twenty-five days after the invoice date or considered an
installment to be past-due. The following chart summarizes the particulars
concerning the invoicing and payment of each installment, which differ in some
respects from the payment plan stated on the application for insurance :
Installment
Number
1
2
3
4
5
6
7
8
9
10--
Invoice
Date
---12/02/04
01/03/05
02/02/05
03/02/05
04/04/05
05/02/05
06/02/05
07/05/05
08/02/05
Installment
Amount
$5,997.03
$2,000.61
$2,000.61
$2,000.61
$1,998.21
$1,998 .21
$1,998 .21
$1,998 .21
$1,998 .21
$1,998.21
Due Date
per Invoice
---12/27/04
01/28/05
Upon Receipt
Upon Receipt
04/29/05
Upon Receipt
Upon Receipt
Upon Receipt
Upon Receipt
Date Received
11/01/04
12/28/04
02/04/0503/04/05
03/28/05
05/03/05
06/07/05 **
07/18/05***
08/25/05 ****
09/22/05
1
Notice sent 02/03/05 that policy would be canceled if payment not received by 02/21/05.
Notice sent 06/02/05 that policy would be canceled if payment not received by 06/20/05.
Notice sent 07/05/05 that policy would be canceled if payment not received by 07/23/05.
Notice sent 08/05/05 that policy would be canceled if payment not received by 08/23/05.
Although Taylor paid nine installments by August 25, 2005 and paid the
tenth on September 22, 2005, it paid most of the installments after the due
date stated on KEMI's invoice. , When that occurred, KEMI's subsequent invoice
generally listed the due date for the next invoice as being "upon receipt." On
three occasions, February 3, June 2, and July 5, 2005, KEMI notified Taylor
that the policy would be canceled for non-payment unless payment was
received by a stated date. KEMI withdrew the notices after receiving Taylor's
third, seventh, and eighth installment payments before the respective
cancellation dates .
At issue presently is KEMI's August 5, 2005 notice of its intent to cancel
the policy if Taylor did not pay $1,998 .21 by August 23, 2005, presumably for
the installment that was invoiced first on July 5, 2005 and then on August 2,
2005 as being past-due. KEMI received payment on August 25, 2005, after it
had canceled the policy.2 KEMI sent Taylor an invoice on September 2, 2005,
which indicated that the "Current Balance" was $1,998.20, presumably for the
tenth and final installment, which was invoiced first on August 2, 2005. An
October 2, 2005 invoice indicated that payment was received and listed no
outstanding balance .
The ALJ bifurcated the claim and determined ultimately that Taylor did
not have workers' compensation insurance coverage when Christopher Watts
was injured on September 19, 2005 ; that KEMI canceled its policy for late
payment of premiums; and that it gave proper notice of cancellation as
required by statute . The Board affirmed, after which Taylor appealed .
The Court of Appeals determined in an opinion rendered on June 27,
2007 that KEMI complied with the notice of cancellation requirement but also
determined that the ALJ erred by failing to address whether the contract
2
The record indicates that the employer notified the Office of Workers' Claims of the
lapse in coverage. See KRS 342 .340(2) .
entitled KEMI to cancel the insurance policy.3 Noting that the contract and its
attachments were silent concerning the due date for premium payments and
that Taylor paid all premiums within the coverage period, the court determined
that the ALJ must consider extrinsic evidence on remann4 and construe the
contract based on the parties' mutual understandings and reasonable
expectations 6 at the time they entered into it. More specifically, the court
directed the ALJ to determine "whether KEMI properly exercised its contractual
right to cancel the policy," including "the parties' reasonable understanding of
when premium payments were due."
The ALJ determined on remand that the payment stubs sent by KEMI
controlled the payment schedule and included the due date, noting that Taylor
knew the due dates but consistently made late payments and also failed to
make timely payment of past-due premiums . The ALJ noted more specifically
that Taylor owed both a past-due premium of $1,998 .21 as well as a new
installment of $1,998 .21 on August 2, 2005 . Yet, despite KEMI's August 5,
2005 notice indicating that the policy would be canceled for non-payment if
3
See Goodin v. General Accident Fire & Life Assurance Corp., 450 S.W .2d 252 (Ky.
1970) (policy may be canceled only upon strict compliance with contract provisions
authorizing cancellation) .
4 See Frear v. P. T. A. Industries, Inc., 103 S.W.3d 99, 106 (Ky. 2003) (court may
consider extrinsic evidence as to parties' intentions when entering contract to
resolve contractual ambiguity) .
s Nationwide Mutual Insurance Co. v. Nolan, 10 S.W. 3d 129, 131-32 (Ky. 1999)
(insurance policy should be interpreted according to parties' mutual understanding
when entering into the contract.
6 Woodson v. Manhattan Life Ins. Co. ofNew York, 743 S.W.2d 835, 839 (Ky. 1987)
(ambiguous terms in insurance contract are to be construed against drafter and in
favor ofinsured's reasonable expectations) .
$1,998.21 was not paid by August 23, 2005, Taylor failed to do so. Finding
that Taylor knew payments were due when it received KEMI's statements, the
ALJ concluded that the parties understood the statements to control the due
date for each payment; that Taylor failed to pay past-due premiums before the
cancellation date; and that KEMI properly canceled Taylor's policy .
The Court of Appeals did not err when it determined that the ALJ failed
to comply with its directions of June 29, 2007 . The AI,J's analysis focused not
on the parties' mutual understanding when entering into the contract, as
directed, but on their subsequent course of dealing. We conclude, therefore,
that the ALJ failed to comply with the previous order of remand and that this
matter must be remanded again for the ALJ to do so .
The decision of the Court of Appeals is affirmed .
All sitting. All concur.
COUNSEL FOR APPELLANT,
KENTUCKY EMPLOYERS' MUTUAL INSURANCE (KEMI):
H. Douglas Jones
Kenneth J . Dietz
Jones Dietz, PLLC
P.O. Box 0095
Florence, KY 41022-0095
COUNSEL FOR APPELLEE,
TAYLOR CONTRACTING /TAYLOR READY MIX, LLC :
Jeffrey Dale Hensley
1813 Argillite Road
P.O. Box 1004
Flatwoods, KY 41139
COUNSEL FOR APPELLEE,
CHRISTOPHER WATTS:
William Grover Arnett
P.O . Box 489
Salyersville, KY 41465
COUNSEL FOR APPELLEE,
UNINSURED EMPLOYERS FUND :
Pamela J. Murphy
Assistant Attorney General
Uninsured Employers' Fund
1024 Capital Center Drive
Suite 200
Frankfort, KY 40601
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