ROBERT L. WHITTAKER, DIRECTOR OF THE SPECIAL FUND v. PAULINE VANMETRE (NOW REYNOLDS); ANDERSON FOREST PRODUCTS; J. LANDON OVERFIELD, ADMINISTRATIVE LAW JUDGE; AND WORKERS' COMPENSATION BOARD
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RENDERED: SEPTEMBER 29, 2000; 10:00 a.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
2000-CA-000108-WC
ROBERT L. WHITTAKER,
DIRECTOR OF THE SPECIAL FUND
APPELLANT
PETITION FOR REVIEW OF A DECISION
OF THE WORKERS' COMPENSATION BOARD
ACTION NO. WC-88-27482
v.
PAULINE VANMETRE (NOW REYNOLDS);
ANDERSON FOREST PRODUCTS;
J. LANDON OVERFIELD,
ADMINISTRATIVE LAW JUDGE;
AND WORKERS' COMPENSATION BOARD
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
COMBS, JOHNSON, AND KNOPF, JUDGES.
KNOPF, JUDGE:
The Special Fund appeals from a December 13, 1999,
order of the Workers’ Compensation Board upholding a ruling by an
Administrative Law Judge (ALJ) that the Fund is liable to the
appellee Anderson Forest Products pursuant to a settlement
agreement.
The Fund maintains that the ALJ abused his discretion
by approving what had become a stale and unfair agreement and
that the Board erred by failing to correct the ALJ.
For reasons
somewhat different from those advanced by the Board, we agree
with it that the Fund was properly held liable.
Accordingly, we
affirm.
The pertinent facts are not in dispute.
Anderson’s
employee, Timothy VanMetre, suffered a work-related death in
1988.
The responsibility for the benefits awarded to his widow,
appellee Pauline VanMetre (now Reynolds), were apportioned
equally and sequentially between Anderson and the Fund.
The
award also provided that, in the event of Pauline’s remarriage,
periodic benefit payments would cease, but Pauline would be
entitled to a final lump sum indemnity of approximately
$17,000.00, half paid by Anderson and half by the Fund.
objected to this last provision.
The Fund
It maintained that liability
for the entire lump sum should reside with the party whose
liability for periodic payments was current at the time of the
remarriage.
Pauline remarried in 1995, at which time, the Fund
asserts, this issue became ripe for decision.
Anderson was then
the party liable for periodic payments, and the Fund sought to
reopen the award on the ground that Anderson should bear full
liability for the lump sum.
Aware that final resolution of this
question could take years, Anderson, in early September 1995,
offered to pay Pauline immediately the entire lump sum due her in
exchange for the Fund’s promise to reimburse Anderson half of
that amount should the dispute ultimately be decided in
Anderson’s favor.
This agreement was memorialized in a letter
and was executed by the Fund on September 11, 1995.
To reflect
its understanding that the agreement was governed by KRS 342.265
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(which provides for settlement agreements among the parties to a
claim for benefits), the Fund added to the agreement the phrase
“to the extent the ALJ will approve the same.”
Anderson promptly paid Pauline the full lump sum as
agreed, but neglected to submit the written agreement to an ALJ
for approval.
Meanwhile, the Fund’s quest to reopen Pauline’s
award failed, first before the ALJ and then at each level of
appeal, all the way to our Supreme Court, whose denial of the
Fund’s petition became final on March 21, 1998.
By that time the
Fund had forgotten its agreement with Anderson.
Consequently,
instead of repaying Anderson as it was obliged to do under the
agreement, the Fund paid directly to Pauline its share of her
lump-sum award.
Anderson’s demand a few months later for
reimbursement no doubt came as an unpleasant reminder.
Pauline
refused, apparently, to return the money mistakenly overpaid to
her, but rather than pursue the matter against Pauline, the Fund
denied Anderson’s demand for reimbursement on the ground that
Anderson’s failure to have the agreement approved rendered it
unenforceable.
Anderson thereupon petitioned an arbitrator for
an order “compelling” reimbursement, which the arbitrator
granted.
That order was adopted by an ALJ on de novo review, and
affirmed, as noted above, by the Board.
The Fund now appeals
from the Board’s order affirming the ALJ.
We may observe at the outset that our standard for
reviewing Board decisions
is to correct the Board only where [we]
perceive[] the Board has overlooked or
misconstrued controlling statutes or
precedent, or committed an error in assessing
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the evidence so flagrant as to cause gross
injustice.
Western Baptist Hospital v. Kelly, Ky., 827 S.W.2d 685, 687-88
(1992).
With this standard in mind, we turn to the substance of
the Fund’s appeal, which concerns the application of KRS 342.265.
That statute, which recognizes and regulates the
voluntary settlement of workers’ compensation claims, was first
enacted in 1952.
In 1998, at the time Anderson sought approval
of its agreement with the Fund, the statute provided in pertinent
part as follows:
If the employee and employer and special fund
or any of them reach an agreement conforming
to the provisions of this chapter in regard
to compensation, a memorandum of the
agreement signed by the parties or their
representatives shall be filed with the
commissioner, and, if approved by an
arbitrator or administrative law judge, shall
be enforceable pursuant to KRS 342.305.1
The parties do not dispute that their agreement--which
was one between an employer and the special fund in regard to
compensation--is governed by this statute, but they disagree as
to whether the statute was properly applied.
In arguing that it
was not, the Fund contends that Anderson’s delay in seeking
approval of the agreement has made the granting of that approval
inappropriate.
For the following reasons, we disagree.
1
Between 1995, when the parties entered their agreement, and 1998, when Anderson
sought approval for it, KRS 342.265 was amended to provide for approval by an arbitrator as
well as by an ALJ. In other respects the earlier version of the statute was the same as that quoted.
We agree with the Board (and the parties concede) that the amendment was purely procedural
and was therefore properly applied to the parties’ 1995 agreement. Miracle v. Riggs, Ky. App.,
918 S.W.2d 745 (1996).
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Not surprisingly given the unusual facts in this case,
precedent sheds little light on the question before us.
The
Board referred to Skaggs v. Wood Mosaic Corp., 428 S.W.2d 617
(1968), and Carter v. Taylor, Ky. App., 790 S.W.2d 448 (1990),
for the propositions that settlement agreements need not be
memorialized on official commission forms, but must nevertheless
be evidenced by a writing.
The Board concluded that the letter
from Anderson that was executed by the Fund satisfied this
requirement, and the parties do not dispute that their agreement
was thus evidenced.
On the question of the effect of Anderson’s
delay in seeking approval of the agreement, however, Kentucky
precedent seems to be silent.
Foreign precedent, too, is sparse.
At least one court has held, however, that, while a workers’
compensation claimant retains a right to withdraw from a
settlement agreement until the agreement has been approved, the
same right does not extend to employers or insurers.
See Oceanic
Butler, Inc. v. Nordahl, 842 F. 2d 773 (5th Cir. 1988)
(construing the Longshore and Harbor Workers’ Compensation Act,
33 U.S.C. § 908 (1984)).
apply to the Special Fund.
The same rule against withdrawal would
For these latter parties, at least, a
settlement agreement is binding when entered, but the obligation
to perform is conditioned upon administrative approval.
Id.
approval is denied, the duty to perform under the agreement is
discharged.
Restatement (Second) of Contracts § 225 (1981).
Thus, when the Fund received Anderson’s demand for
reimbursement in 1998, after it had mistakenly paid to Pauline
benefits she had already received from Anderson, the agreement
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If
had not yet been approved, and the Fund’s duty to perform
thereunder had not yet arisen.
to perform was not wrongful.
Fund.
At that point, the Fund’s refusal
To this extent we agree with the
The Fund’s refusal prompted Anderson’s motion to “compel,”
which was properly understood by the Board as a motion to approve
the agreement and thus to satisfy the condition precedent to the
Fund’s duty.2
The question raised by the Fund is whether, at
that point--three-plus years after the agreement had been entered
and months after the Fund’s liability to Pauline had become final
and had been satisfied--approval was still appropriate.
We agree
with the Board that it was.
First, as Anderson observes, KRS 342.265 does not limit
the time within which approval for a settlement agreement must be
sought.
Nor is there such a limit in the agreement itself,
notwithstanding the Fund’s addendum to the writing emphasizing
the necessity of administrative approval.
Furthermore, although
in certain circumstances a court (or administrative tribunal) may
supply a contract term omitted by the parties, see The
Restatement (Second) of Contracts § 204 (1981), we are not
persuaded that an “approval-must-be-sought-within-a-reasonable-
2
Anderson’s initial pleading sought enforcement of the as yet unapproved agreement, and
the Fund makes much of the fact that the administrative body lacks authority to grant such relief.
See KRS 342.305. The arbitrator further confused matters by asserting that he was approving the
agreement nunc pro tunc. There having been no prior approval or attempted approval that the
arbitrator could belatedly recognize, his approval of the agreement was not nunc pro tunc, but
was simply an exercise of his responsibility under KRS 342.265 to approve or disapprove the
agreement in the first instance. This error, however, was harmless. Harmless, too, was
Anderson’s characterization of its motion, inasmuch as the relief actually granted--approval of a
settlement agreement--was within the arbitrator’s authority, and the pleading, upon proper
objection, could have been amended accordingly.
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time” term could have been supplied here even if the Fund had so
argued because it is not clear that such a term is necessary to
the agreement nor is it clear what “a reasonable time” would have
been.
By the terms of the statute, therefore, and of the
agreement, Anderson’s motion for administrative approval was
timely.
The thrust of the Fund’s argument, however, is not that
approval of the agreement was strictly illegal, contrary to the
letter of the statute or of the contract, but that it was
inequitable.
Conceding that it had agreed to reimburse Anderson
as Anderson claims, the Fund nevertheless contends that, within
the larger picture of workers’ compensation administration,
Anderson’s failure promptly to submit the agreement for approval
was a more significant cause of its injury and a less excusable
departure from bureaucratic cooperation than was the Fund’s
forgetting that Anderson was to be paid rather than Pauline.
In
essence, the Fund seems to us to be urging an estoppel: it relied
to its detriment on Anderson’s silence or inaction with respect
to the agreement, with the result that Anderson’s assertion of
its agreement-based rights has now become inequitable.
In as
much as we agree with the Fund that Anderson’s failure to submit
the agreement promptly for approval was remiss, we find more
merit in this argument than the Board apparently did.
Nevertheless, we can not say that the Board abused its discretion
by affirming the decisions of the ALJ and the arbitrator.
It is
well established that one asserting an estoppel must have
reasonably relied on the action or inaction of the party to be
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estopped, Gailor v. Alsabi, Ky., 990 S.W.2d 597 (1999), but the
facts here do not compel a finding that the Fund’s alleged
reliance was reasonable.
On the contrary, the Board was well
within its discretion by affirming a finding that the Fund could
and should have remembered its agreement (despite Anderson’s
inaction) and made inquiry before paying Pauline.
An estoppel,
therefore, was not required to be found.
Finally, the Fund maintains that only matters
cognizable under KRS 342.125, the reopening statute, may be
litigated after an award has become final and that Anderson’s
claim for reimbursement does not justify a reopening.
We agree
with the Board, however, that settlement agreements, which are
subject to their own reopening provision, KRS 342.265(4), are
cognizable at any time during the course of an award, and that
where, as here, a post-finality agreement does not affect the
claimant and has not previously been filed and approved, it may
be addressed directly under KRS 342.265 without resort to a
reopening.
In sum, Anderson’s failure to seek prompt approval of
its agreement with the Fund was careless at best and uncooperative, contributing to rather than alleviating the
administrative burden of Kentucky’s Workers’ Compensation
system.3
It did not, however, violate KRS 342.265; breach the
3
Anderson, of course, discounts the role of its own fault in bringing about this mistake.
Insisting that a bargain is a bargain and that the Fund has unreasonably refused to honor its
bargain, Anderson has requested, without motion, sanctions against the Fund and an award of
interest on the Fund’s liability. For the reasons mentioned in the text, however, we are not
persuaded that the Fund’s position is unreasonable or indicative of bad faith. The Fund must
(continued...)
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parties’ agreement; or give rise, as a matter of law, to an
equitable default.
The Board did not err, therefore, or abuse
its discretion by upholding the ALJ’s order approving the
agreement and rendering it enforceable against the Fund.
Accordingly, we affirm the December 13, 1999, order of the
Workers’ Compensation Board.
ALL CONCUR.
BRIEFS AND ORAL ARGUMENT FOR
APPELLANT:
BRIEF AND ORAL ARGUMENT FOR
APPELLEE ANDERSON FOREST
PRODUCTS:
David R. Allen
Special Fund
Frankfort, Kentucky
James G. Fogle
Ferreri & Fogle
Louisville, Kentucky
3
(...continued)
closely observe the statutes and regulations governing the workers’ compensation system. Its
efficient operation requires that those with whom it deals do the same. For example, the
approval of settlement agreements by arbitrators and ALJs serves, among its other functions, to
create the records upon which the Fund depends. It is not unreasonable for the Fund to assert its
need for co-operation in such matters even if in this instance that need does not give rise to a
right to relief. Accordingly, Anderson’s request for sanctions is denied. Anderson’s request for
interest is also denied. Its right to interest was not raised before the Board and so is not properly
before this Court.
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