PETE GALOWNIA v. STARLINK SATELLITES; HON. RONALD W. MAY, ADMINISTRATIVE LAW JUDGE; AND WORKERS' COMPENSATION BOARD
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RENDERED:
AUGUST 2, 2002; 10:00 a.m.
TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
2001-CA-002686-WC
PETE GALOWNIA
APPELLANT
PETITION FOR REVIEW OF A DECISION
OF THE WORKERS' COMPENSATION BOARD
ACTION NO. WC-98-65232
v.
STARLINK SATELLITES;
HON. RONALD W. MAY, ADMINISTRATIVE
LAW JUDGE; AND WORKERS' COMPENSATION BOARD
APPELLEES
OPINION
REVERSING AND REMANDING
** ** ** ** **
BEFORE:
GUDGEL, JOHNSON AND TACKETT, JUDGES.
JOHNSON, JUDGE:
Pete Galownia has petitioned for review of an
opinion of the Workers’ Compensation Board entered on November
14, 2001, which affirmed an order by the Administrative Law Judge
which had dismissed his claim for benefits as barred by the twoyear statute of limitations contained in KRS1 342.185.
Having
concluded that the Board overlooked and misconstrued controlling
statutes or case precedent, we reverse and remand.
1
Kentucky Revised Statutes.
In September 1998, Galownia worked installing satellite
dishes for Starlink Satellites.
On September 13, 1998, Galownia
injured his knees when he tripped and fell while running cable
wire in an attic; that same day he orally notified his supervisor
of the accident and injury; and the next day he went to the
hospital where he received pain medication and was referred to an
orthopedist.
A subsequent examination resulted in a diagnosis of
left knee strain, chondromalacia patellae and intra-articular
derangement of the knee.
functional impairment.
Dr. Julie Ann Martin assigned him a 5%
Galownia did not resume working for
Starlink after the accident.
However, he did return to work in
January 1999, assisting in the installation of satellite dishes
for another company.
This new job involved less lifting and
carrying.
Starlink denied Galownia’s claim for workers’
compensation benefits on the grounds that he was an independent
contractor, rather than an employee.
Accordingly, it did not pay
Galownia’s medical expenses nor did it pay him any temporary
total disability benefits.
After Galownia hired an attorney in
1999, the parties attempted to resolve the issue of his
employment status and his entitlement to benefits.
Unable to
reach a settlement, Galownia filed an application for resolution
of injury claim with the Department of Workers’ Claims on March
30, 2001.
-2-
In May 2001, Starlink filed a motion to dismiss the
claim as barred by the two-year statute of limitations.2
The ALJ
issued a show cause order giving Galownia 15 days to show good
cause why his claim should not be dismissed as untimely.
In his
response, Galownia argued that the limitations period was tolled
because Starlink had failed to follow the required procedure
under KRS 342.040(1) by either paying temporary total disability
benefits or filing a notice advising the Department of Workers’
Claims of its refusal to make payments.
On June 25, 2001, the
ALJ entered an order granting Starlink’s motion and dismissing
Galownia’s claim based on the statute of limitations.
Galownia
filed a petition to reconsider challenging the ALJ’s rejection of
his tolling argument, requesting specific findings of fact, and
seeking a hearing on the reconsideration petition.
2001, the ALJ denied the petition to reconsider.
On July 16,
On November 14,
2001, the Board entered an opinion affirming the ALJ’s order.
This petition for review followed.
Under KRS 342.185(1), an application for adjustment of
claim for workers’ compensation benefits must be made within two
years after the date of the accident giving rise to the claim;
however, “[i]f payments of income benefits have been made, the
filing of an application for adjustment of claim with the
department within the period shall not be required, but shall
become requisite within two (2) years following the suspension of
payments or within two (2) years of the date of the accident,
whichever is later.”
2
The Board ruled that since it was
KRS 342.185.
-3-
undisputed that Starlink made no temporary total disability
payments and hence no cessation of payments occurred, the tolling
provision of KRS 342.185(1) was never triggered.
Galownina acknowledges that his situation does not
precisely fit within the parameters of KRS 342.185(1), but he
argues that the limitations period was tolled nonetheless because
Starlink failed to comply with the reporting requirements
contained in KRS 342.038(1) and KRS 342.040(1).
KRS 342.038(1) provides in relevant part:
(1) Every employer subject to this chapter
shall keep a record of all injuries, fatal or
otherwise, received by his employees in the
course of their employment. Within one (1)
week after the occurrence and knowledge, as
provided in KRS 342.185 to 342.200, of an
injury to an employee causing his absence
from work for more than one (1) day, a report
thereof shall be made to the department in
the manner directed by the commissioner
through administrative regulations . . . .
KRS 342.040(1) provides in relevant part:
(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, except
that if the arbitrator3 or administrative law
judge determines that a denial, delay, or
termination in the payment of income benefits
was without reasonable foundation, the rate
3
The arbitrator was eliminated by amendments enacted in
2000.
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of interest shall be eighteen percent (18%)
per annum. In no event shall income benefits
be instituted later than the fifteenth day
after the employer has knowledge of the
disability or death. Income benefits shall
be due and payable not less than semimonthly.
If the employer’s insurance carrier or other
party responsible for the payment of workers’
compensation benefits should terminate or
fail to make payments when due, that party
shall notify the commissioner of the
termination or failure to make payments and
the commissioner shall, in writing, advise
the employee or known dependent of right to
prosecute a claim under this chapter
[emphasis added].
The requirement in KRS 342.038(1) that an employer file a first
report of injury form (Form SF-1) if a worker misses one day of
work due to a work-related injury serves to prevent an employer
from manufacturing a limitations defense by denying knowledge of
an injury.4
The purpose of KRS 342.040(1) is to establish a
procedure for notification from a third-party, the commissioner,
to an injured employee, in writing, of his right to prosecute a
claim, the time-frame in which to do so, and to facilitate prompt
resolution of work-related injury claims.5
Several cases have dealt with an employee’s attempt to
estop an employer from asserting a statute of limitations defense
based on its failure to comply with the requirement in KRS
342.040(1) of notifying the commissioner of the termination of
payments or the failure to make payments when due.6
These cases
4
See J & V Coal Co. v. Hall, Ky., 62 S.W.3d 392, 395 (2001).
5
H.E. Neumann Co. v. Lee, Ky., 975 S.W.2d 917, 920 (1998).
6
See, e.g., City of Frankfort v. Rogers, Ky.App., 765 S.W.2d
579 (1988); Ingersoll-Rand Co. v. Whittaker, Ky.App., 883 S.W.2d
514 (1994); and Colt Management Co. v. Carter, Ky.App., 907
(continued...)
-5-
held that the notification procedures should be strictly applied
so that any failure in complying precluded an employer from
asserting a limitations defense regardless of fault or bad faith.
In Newberg v. Hudson,7 the Supreme Court dealt with a
claim of estoppel based on an employer’s failure to comply with
the notice statutes where no temporary total disability benefits
had been paid.
The Court indicated that although neither KRS
342.038, nor KRS 342.040 specifically addresses tolling,
application of the equitable principle of estoppel should be
applied on a case-by-case basis and the tribunal could take into
account the bad faith or fault of the employer for failing to
comply with the statutes.
In Hudson, the Court held that the
employer was not estopped from asserting a statute of limitations
defense because it had not been given sufficient information to
put it on notice that it was required to comply with the notice
provisions.8
In H.E. Neumann Co., the Supreme Court revisited the issue
of estoppel with respect to an employer’s failure to comply with
6
(...continued)
S.W.2d 169 (1995).
7
Ky., 838 S.W.2d 384 (1992).
8
See also J & V Coal Co., supra, where the Supreme Court
held estoppel would not apply despite an employer’s failure to
comply with KRS 342.038(1), where the employer’s duty to file
notice under KRS 342.040(1) was not triggered. We note the
confusing reference by the Court on page 395 to the fact “the
claimant did not miss work due to his injury for more than two
weeks at any time before the period of limitations expired”
[emphasis added]. We do not understand the relevance to “two
weeks.” Pursuant to KRS 342.040(1), TTD benefits are payable for
the eighth day of disability. If the disability continues for a
period of two weeks, then TTD benefits are also payable for the
first seven days.
-6-
the notice requirements.
The Court indicated that an employer’s
duty to file the notice documents under KRS 342.038(1) and KRS
342.040(1) existed whether voluntary temporary total disability
benefits were initially paid and then terminated or no voluntary
payments were made at all.
It rejected the argument that an
employer’s good faith could excuse its failure to comply with the
notice requirements where no payments were made:
Therefore, once the employer herein had
notice that claimant had missed more than one
day of work as the result of an alleged workrelated injury, it had the duty of filing a
first report of injury with the board within
one week. Moreover, when the employer failed
to make voluntary payments after claimant was
absent from work for seven days, it had the
duty of notifying the board that no benefits
would be paid so that the board could notify
claimant regarding the applicable statute of
limitations. The purpose of the abovereferenced statutes is to advise an injured
worker, in writing, of his right to prosecute
his claim, and the time frame in which to do
so, and to provide prompt resolution of
asserted work-related injury claims. Thus,
contrary to the employer’s assertion, the
intended purpose of the statute would not
imply a different standard based on whether
the employer initially paid voluntary
benefits and then terminated them, or never
paid voluntary benefits, as either way the
worker would be entitled to the intended
benefit of the statutorily mandated written
notice.9
It also rejected the argument that application of estoppel
depended on whether the employee was lulled into inaction by the
employer’s conduct:
Specifically, in the case at bar, unlike the
situation in Newberg v. Hudson, supra, the
record reflects that claimant missed more
than seven days of work immediately after the
9
H.E. Neumann, Co., supra at 920.
-7-
occurrence of the alleged injury, and that
claimant notified the employer of his injury
and his belief that it was work-related. At
that point, the employer was under a duty to
notify the board under KRS 342.038(1) and KRS
342.040(1). However, the employer failed to
advise claimant that it would deny the claim
until 2 ½ years after the date of injury,
well after the statute of limitations had
elapsed, depriving claimant of his
statutorily mandated right to written notice.
Hence, the failure of the employer herein, to
satisfy the statutory notification
requirements, acted to toll the statute of
limitations by estopping the employer from
prevailing on a statute of limitations
defense as claimant was never notified by the
board regarding his rights and the time frame
in which he must act. This is true
regardless of whether the employer was acting
in good faith in conducting its
investigation, or whether it was shown that
there was actual prejudice to claimant
[emphasis added].10
In the case sub judice, the Board relied upon Hudson,
but did not even discuss H.E. Neumann Co.
The Board concluded
that Galownia was not lulled into inaction by Starlink’s conduct,
and cited Hudson as recognition by the Supreme Court that an
employer should not be estopped from raising a limitations
defense for failing to satisfy the notice filing requirements
where there is a valid dispute as to applicability of the
Workers’ Compensation Act from the beginning of a claim.
The
Board noted that Galownia was aware of the dispute over his
entitlement to benefits because of uncertainty over his employee
status prior to the two-year anniversary date of his injury.
Board ruled that Galownia’s knowledge of the dispute was
The
sufficient to put him on notice that he needed to proceed in a
10
Id. at 921-22.
-8-
timely manner.
The Board concluded, “[i]f there is a known
dispute from the beginning as to the applicability of the
Kentucky Workers’ Compensation Act, whether it be workrelatedness, notice, employer/employee relationship, it is
incumbent upon the injured ‘employee’ to file his claim within
the two-year statute of limitations.”
The case sub judice is distinguishable from Hudson, and
the Board’s reliance on Hudson is misplaced.
The employer in
that case was not subject to estoppel because it did not have
sufficient information that its employee’s absence from work for
the requisite period was due to a work-related injury thus
triggering its duty to file the notices under KRS 342.038 and
342.040.
The employer in Hudson did not dispute the
applicability of the Act until after the claim was filed and its
unawareness of the existence of its duty to file the first report
of injury was reasonable because the employee did not miss more
than one day of work until six weeks after the injury, and the
employee failed to complete a form given to him by his employer
concerning whether he was alleging a work-related accident.11
Similarly, the Board’s focus on whether Galownia was
lulled into inaction is misplaced.
The Court in H.E. Neumann Co.
indicated that the focus should be on strict compliance with the
notice filing requirements, regardless of the employer’s good
faith or actual prejudice to the claimant.
Once an employer is
notified of a work-related injury and becomes aware of the fact
that an employee has missed more than one day of work because of
11
H.E. Neumann, Co., supra at 921.
-9-
the injury, the employer’s duty to file a first report of injury
arises under KRS 342.038(1).
Under KRS 342.040(1), the employer
must notify the commissioner of its failure to make temporary
total disability payments within 15 days after the employer has
knowledge that an employee has missed work for more than eight
days because of a work-related injury so that the commissioner
can advise the employee in writing of his right to prosecute a
claim.
If an employer fails to comply with its duty under both
of these statutes, the statutory limitations period is tolled and
the employer is estopped from utilizing a limitations defense to
bar an employee’s claim, regardless of whether the employee was
actually prejudiced such as being lulled into inaction or misled
by the employer’s noncompliance.12
Our standard of review is whether the Board overlooked
or misconstrued controlling statutes or precedent, or committed
an error in assessing the evidence so flagrant as to cause gross
injustice.13
There is no dispute that Galownia notified Starlink
of his injury the day it occurred; he was absent from work for
several months; Starlink was aware that his failure to return to
work was due to the injury; Starlink made no temporary total
disability payments; and it did not file a first report of injury
or notify the commissioner of its failure to make payments.
12
See J & V Coal Co., supra at 395 (“An employer who fails
to comply with KRS 342.040(1) is not permitted to raise a
limitations defense because its action effectively prevents the
commissioner from complying with its duty under KRS 342.040(1) to
notify the worker of his right to prosecute a claim and of the
applicable period of limitations.”).
13
See Western Baptist Hospital v. Kelly, Ky., 827 S.W.2d 685
(1992).
-10-
Thus, Starlink failed to comply with the notice requirements of
KRS 342.038(1) and KRS 342.040(1) even though it was aware of
Galownia’s work-related injury and his absence from work for more
than eight days because of the injury. Regardless of Starlink’s
good faith and any lack of prejudice to Galownia by Starlink’s
failure to comply with the statutes, the equitable principle of
estoppel applies to this case.
We hold that the Board erred in
ruling that Galownia’s claim was barred by the two-year statute
of limitations and that Starlink was not estopped from raising
the limitations defense.
For the forgoing reasons, the opinion of the Workers’
Compensation Board is reversed and this matter is remanded for
further proceedings consistent with this Opinion.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE, STARLINK
SATELLITES:
James D. Howes
Louisville, Kentucky
H. Brett Stonecipher
Lexington, Kentucky
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