KENTUCKY ASSOCIATED GENERAL CONTRACTORS SELF-INSURANCE FUND; LADEGAST AND HEFFNER CLAIMS SERVICE, INC.; AND TRI STATE CRANE RENTAL, INC., AS INSURED BY KENTUCKY ASSOCIATED GENERAL CONTRACTORS SELF-INSURANCE FUND TRI STATE CRANE RENTAL, INC.; MARK R. FOSTER; HON. R. SCOTT BORDERS, ADMINISTRATIVE LAW JUDGE; AND WORKERS' COMPENSATION BOARD
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RENDERED: SEPTEMBER 7, 2007; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2006-CA-002564-WC
KENTUCKY ASSOCIATED GENERAL
CONTRACTORS SELF-INSURANCE FUND;
LADEGAST AND HEFFNER CLAIMS
SERVICE, INC.; AND TRI STATE CRANE
RENTAL, INC., AS INSURED BY
KENTUCKY ASSOCIATED GENERAL
CONTRACTORS SELF-INSURANCE FUND
v.
APPELLANTS
PETITION FOR REVIEW OF A DECISION
OF THE WORKERS' COMPENSATION BOARD
ACTION NO. WC-05-83313
TRI STATE CRANE RENTAL, INC.; MARK
R. FOSTER; HON. R. SCOTT BORDERS,
ADMINISTRATIVE LAW JUDGE; AND
WORKERS' COMPENSATION BOARD
AND:
NO. 2007-CA-000004-WC
TRI STATE CRANE RENTAL, INC.
v.
APPELLEES
CROSS-APPELLANT
CROSS-PETITION FOR REVIEW OF A DECISION
OF THE WORKERS' COMPENSATION BOARD
ACTION NO. WC-05-83313
KENTUCKY ASSOCIATED GENERAL
CONTRACTORS SELF-INSURANCE
FUND, AS ADMINISTERED BY
LADEGAST & HEFFNER; TRI STATE
CRANE RENTAL, INC., AS INSURED BY
KENTUCKY ASSOCIATED GENERAL
CONTRACTORS SELF-INSURANCE
FUND; HON. R. SCOTT BORDERS,
ADMINISTRATIVE LAW JUDGE; AND
THE WORKERS' COMPENSATION
BOARD
CROSS-APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: THOMPSON AND VANMETER, JUDGES; PAISLEY,1 SENIOR JUDGE.
VANMETER, JUDGE: Workers' compensation coverage is provided for injuries
suffered outside of Kentucky if the contract of hire was made in Kentucky under the
parameters of KRS 342.670. The primary issue we must resolve in this case is whether
the Administrative Law Judge (ALJ) and the Workers' Compensation Board correctly
held that coverage existed for an Ohio resident employee who was injured in Ohio on the
day he began work on the basis that such employment was a continuation of his previous
employment with a Kentucky-based employer which had ended six months earlier. We
1
Senior Judge Lewis G. Paisley sitting as Special Judge by assignment of the Chief Justice
pursuant to Section 110(5)(b) of the Kentucky Constitution and Kentucky Revised Statutes
(KRS) 21.580.
-2-
hold that the ALJ and the Board correctly applied KRS 342.670 to this case, and we
therefore affirm.
We recite the facts as summarized by the Workers' Compensation Board.
The facts relevant to disposition of this appeal are
undisputed and may be briefly summarized. Mark R. Foster
(“Foster”) was injured on May 20, 2005 in the course and
scope of his employment as a crane operator for Tri State.[2]
He was working in Ohio at the time. He is a resident of Ohio.
The date of injury in question was Foster's first day back at
work for Tri State after a six-month period during which he
had been laid off and, in the mean time, worked for another
company.
Foster had first gone to work for Tri State on June 24,
2004. He worked through the Local 18, Operating Engineers,
union hall, of which he has been a member for 30 years.
Members' insurance and pension benefits are administered
through the union, while their paychecks come directly from
the hiring contractor, in this case Tri State.
Upon his original hiring in June, Foster presented
himself to Tri State's office in Bellevue, Kentucky, where he
completed the necessary pre-employment paperwork and
received his job assignment. He was not required to fill out
an employment application, as he was hired by Tri State on
the basis of his experience and previous business relationship
with the owners of the company, Paul and Kathy Pitzer.
Foster did, however, interview with Mr. Pitzer before being
hired. Tri State contacted the union hall and requested Foster,
specifically, for the job.
Foster worked for Tri State from June 24, 2004, to
November 24, 2004 on various jobs located in Kentucky,
Ohio and Indiana. His first job was at East Bend Power Plant
in Kentucky, where he worked from June 24, 2004 through
July 28, 2004. He then worked for Tri State in Cincinnati,
from July 29, 2004 through August 2, 2004. His next
2
The proper name of the employer in this case is Tri State Crane Rental, Inc. We have therefore
corrected the Board's references to “Tri-State.”
-3-
assignment lasted just three days, August 3, 2004, through
August 6, 2004, in Ghent, Kentucky. He was then sent to
Oxford, Ohio, from August 19, 2004 through August 27,
2004, before returning to Cincinnati to work from September
3, 2004 through October 8, 2004. This five-week period of
employment in Cincinnati was on various jobs in the area.
Foster next worked in Florence, Kentucky, from October 9,
2004 through November 8, 2004, and then again in Bellevue,
Kentucky from November 8, 2004 through November 24,
2004. Foster apparently worked one day for Tri State in
Indiana, though the record does not disclose the exact date of
that job.
Foster was laid off by Tri State as of November 25,
2004 when the company experienced the usual holiday slowdown in work. Tri State advised Foster to sign back up at the
union hall for other work, if necessary, and further advised
that he would be contacted as soon as work picked up again.
Immediately after his layoff from Tri State, Foster took
a job with Sofco Erectors (“Sofco”), for whom he worked
from November 25, 2004 through April 15, 2005. He was
contacted on or around November 25, 2004 by Tri State and
offered another assignment, but it was to last only a few days.
Foster elected to take the job with Sofco, which was supposed
to be a six-month assignment.
Foster was without work from April 15, 2005 when the
Sofco job wrapped up, until May 20, 2005 when he was
contacted again by Tri State. Although the job to which
Foster was sent on May 20, 2005 was only a one-day
assignment, it was understood that Foster was being
“recalled” by Tri State to work on a regular basis. Ms. Pitzer
testified that it was usual for work to pick back up in the
spring and it was anticipated there would be sufficient work
to keep Foster employed for a while.
Tri State was not required to contact the union hall in
order to bring Foster back to work. The evidence is
somewhat conflicting as to the union's recall policy, however.
According to Foster, if a union member works for a
contractor for at least six months, then the contractor has the
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right to call the member back directly, without going through
the union, for up to two years. The member is not required to
go back to work for the contractor, however. It is a
discretionary matter for both the contractor and union
member. Ms. Pitzer testified that it is her understanding that
the contractor may contact the member directly, without
going through the union, if the member has worked for the
contractor within the last year. In any case, it is undisputed
that Tri State recalled Foster directly on May 20, 2005.
Foster reported to work that day at Tri State's
equipment holding yard on Spring Grove Avenue in
Cincinnati, Ohio. He met Mr. Pitzer and the two of them
traveled together to job sites in Wilmington and then South
Lebanon, Ohio. It was upon returning to the yard in
Cincinnati that Foster sustained the crush injury to his right
thumb that is the subject of the claim sub judice.
Foster's claim for workers' compensation benefits was
submitted to [Kentucky Associated General Contractors SelfInsurance Fund (KAGC)] through the fund's third-party
administrator, Ladegast & Heffner (“L&H”). Mary Margaret
Sutherland (“Sutherland”), the Vice-President of Claims
Services for L&H, testified that Foster's claim was denied due
to lack of coverage for the out-of-state injury. It is
undisputed that Tri State had a policy of coverage in effect
through KAGC on the date of injury in question for claims
arising in the state of Kentucky. Moreover, the policy also
provided for coverage in “such other states, except Illinois,
where the insured employs regularly employed Kentucky
employees.” Sutherland testified that “regularly employed
Kentucky employees” is very liberally defined to include
anyone who has worked in Kentucky at least eight hours
before sustaining an injury.
Sutherland further testified that, notwithstanding
KAGC's out-of-state policy, it would not be interpreted to
conflict with KRS 342.670. In other words, if the statute
would provide extraterritorial coverage for a given injury,
then the claim would be accepted. In Foster's case,
Sutherland explained, it was determined that KRS 342.670
did not apply to extend coverage. This determination was
-5-
premised on the assumption that Foster's employment with
Tri State was not continuous between 2004 and 2005. That
is, L&H deemed his employment on May 20, 2005 to be
pursuant to a new contract of hire, consummated over the
telephone when Foster accepted the job in Ohio from his
residence there. Sutherland elaborated, “Because Mr. Foster
is out of a union hall, and those periods of employment are
on, off, on, off as they're either short periods of time, long
periods of time, but when they end, they end, and then they
may begin again, they may not. So we look at that as each
time a new employment.”
When KAGC, through L&H, denied coverage for
Foster's claim, Tri State filed a Form 101, application for
resolution of injury claim, on September 13, 2005, requesting
that the issue of coverage be resolved by an administrative
law judge. The matter was subsequently assigned to ALJ
Borders, who bifurcated the claim for the taking of proof on
the question of coverage, which included the depositions of
Foster, Ms. Pitzer and Sutherland. The parties waived a final
hearing and agreed to submission of the matter following
briefing on the sole question of coverage. Although not
expressly preserved as an issue, Tri State nonetheless argued
in its brief before the ALJ that the cost of the proceedings
should be assessed against L&H, as the third-party
administrator for KAGC, based on its denial of coverage
without reasonable grounds, which had forced Tri State to file
a Form 101 and litigate the issue.
In his opinion rendered June 9, 2006, the ALJ
determined that, on the date of injury in question, Foster was
working under a contract of hire made in Kentucky and his
employment was not principally localized in any state. Thus,
pursuant to KRS 342.670(1)(b), Kentucky has extraterritorial
jurisdiction over Foster's claim, for which KAGC's policy of
workers' compensation would extend to cover Tri State's
liability.
-6-
On appeal, the Board upheld the ALJ's application of KRS 342.670 to the
facts, but reversed the ALJ's determination that KAGC, through L&H, had improperly
denied the claim. Both parties appeal.
Our standard of review of Workers' Compensation Board decisions is well
known in that our function “is to correct the Board only where the [ ] Court perceives the
Board has overlooked or misconstrued controlling statutes or precedent, or committed an
error in assessing the evidence so flagrant as to cause gross injustice.” AK Steel Corp. v.
Childers, 167 S.W.3d 672, 675 (Ky.App. 2005). This case involves the interpretation of
KRS 342.670, and its application to facts regarding Foster's employment. Specifically,
the issue in this case is whether Foster's employment which began in May 2004 was one,
continuous contract of employment, albeit interrupted by a six month lay off, or whether
his hire in May 2005 constituted a new contract of employment. In this case, the facts are
undisputed but the question of whether the employment falls within the parameters of the
statute is a conclusion of law, as to which we are not required to defer to either the ALJ or
the Board. AK Steel, 167 S.W.3d at 675 (holding that “[t]he interpretation to be given a
statute is a matter of law, and we are not required to give deference to the decision of the
Board”); see also Jecker v. Plumbers' Local 107, 2 S.W.3d 107, 110 (Ky.App. 1999)
(whether someone was an employee within meaning of KRS 342.640 was a legal
conclusion).
KRS 342.670(1) provides:
If an employee, while working outside the territorial
limits of this state, suffers an injury on account of which he
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. . . would have been entitled to the benefits provided by
this chapter had that injury occurred within this state, that
employee . . . shall be entitled to the benefits provided by
this chapter, if at the time of the injury:
(a) His employment is principally localized in this
state, or
(b) He is working under a contract of hire made in this
state in employment not principally localized in any state, or
(c) He is working under a contract of hire made in this
state in employment principally localized in another state
whose workers' compensation law is not applicable to his
employer, or
(d) He is working under a contract of hire made in this
state for employment outside the United States and Canada.
Both the ALJ and the Board analyzed the facts under subsection (b),
concluding that Foster's employment was not principally localized in any state, since Tri
State's business occurs in Indiana, Kentucky and Ohio, but that Foster was “working
under a contract of hire made in this state” since Foster had come to Tri State's office in
Bellevue, Kentucky in May 2004 to complete paperwork with respect to his initial hire.
KAGC argues, on the other hand, that Foster's original contract of hire ended in
November 2004, when he ceased working for Tri State and began working for Sofco, and
further that a new contract of hire was made in Ohio when Tri State called Foster at his
Ohio residence in May 2005. We disagree with KAGC's argument and adopt the Board's
analysis as our own:
Our review of Kentucky jurisprudence reveals no precedent
governing our disposition of this question. Likewise, we find
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no guidance in the statute or the legislative history
surrounding Kentucky's extraterritorial coverage provisions.
In this matter of first impression, we look initially to
Professor Larson's authoritative treatise, Workers'
Compensation Law, where we find the following discussion
and analysis:
§ 143.04 Place of Employment Relation
[1]—Employment Relation as Best Test
Of the three original theories on extraterritoriality—
tort, contract, and employment relation—the last is the
most relevant to compensation theory and the least
artificial. In this view, the existence of the employeremployee relation within the state gives the state an
interest in controlling the incidents of that relation, one
of which incidents is the right to receive and the
obligation to pay compensation.
[2]—Determining Situs of Employment Relation
[a]—Introduction
The big question under this theory is: What is meant
by existence or localization of the relation within the
state? The location of an injury is easy to identify; the
location of a contract less so, but still subject to wellknown legal rules; but the whereabouts of a relation
between two people has a somewhat more mystic
quality.
[b]—Making of Contract Within State as Creating
Employment Relation in State
The making of the contract within the state is usually
deemed to create the relation within the state. The
relation, having thus achieved a situs, retains that situs
until something happens that shows clearly a
transference of the relation to another state. This
transfer is usually held to occur when either a new
contract is made in the foreign state, or the employee
acquires in the foreign state a fixed and nontemporary
employment situs. The analogy to the law governing
-9-
residence is apparent, with the old residence persisting
until the new one becomes fixed.
[c]—Location of Transitory or Traveling Employments
In some kinds of employment, like trucking, flying,
selling, or construction work, the employee may be
constantly coming and going without spending any
longer sustained periods in the local state than
anywhere else; but a status rooted in the local state by
the original creation of the employment relation there,
is not lost merely on the strength of the relative
amount of time spent in the local state as against
foreign states. Generally, an employee loses this
status only when his or her regular employment
becomes centralized and fixed so clearly in another
state that any return to the original state would itself
be only casual, incidental and temporary by
comparison. This transference will never happen as
long as the employee's presence in any state, even
including the original state, is by the nature of the
employment brief and transitory.
[3]—Continuous Versus Successive Jobs
Questions sometimes arise, particularly in the
construction business, involving the difference
between successive jobs, each having its own
individual existence outside that state, and a
continuous employment relation in the course of which
extensive separate jobs are done in foreign states,
sometimes lasting many months each. If the
employment is intended to be continuous, the local
relation will probably be held to continue; this
conclusion may be reenforced by the local presence of
other factors such as the employee's residence or the
employer's principal business or headquarters,
indicating that as each job is completed the employee
may be expected to return to the local state, and that
the out-of-state activities are but an adjunct to the
employer's main business located within the state.
(Citations omitted.)(Emphasis added.)
- 10 -
We believe Professor Larson's analysis to be sound and
consistent with the basic principle underlying the
extraterritorial coverage provisions of KRS 342.670 and of
Kentucky's Workers' Compensation Act, generally. That is,
the statute is to be construed liberally to effectuate “the
munificent, beneficent and remedial purposes of the Workers'
Compensation Act.” Coal-Mac, Inc. v. Blankenship, 863
S.W.2d 333, 335 (Ky.App. 1993). See also Beale v.
Shepherd, 809 S.W.2d 845, 849 (Ky.1991)(“protecting the
interests of the injured worker is a basic tenet of workers'
compensation law”).
Thus, under the facts of the case sub judice, involving
a contract of hire made in one state followed by successive,
temporary jobs in one or more other states, we believe the
primary question to be answered is whether the employment
was intended to be continuous. This is a question of fact to be
answered by the ALJ with reference to those factors cited by
Professor Larson, as well as other relevant factors that may
arise in a particular case. If the ALJ determines that the
employment was intended to be continuous and that
determination is supported by substantial evidence, then the
situs of the original contract of hire and the state in which the
employment is principally localized at the time of injury are
controlling for purposes of KRS 342.670.
Applying the foregoing test to the case sub judice, we
conclude there is substantial evidence of record to support the
ALJ's finding that Foster's employment with Tri State was
continuous. The evidence on this issue was conflicting. The
ALJ could have accepted KAGC's argument that the
intervening six-month period, during which Foster worked for
an Ohio employer in the state of Ohio for five months, was
sufficient to break the relation between Foster and the state of
Kentucky. However, we are not prepared to say that the
evidence compelled such a conclusion.
The evidence established that the job with Sofco was
temporary. More importantly, both Foster and Ms. Pitzer
testified to their mutual understanding that Foster would be
recalled by Tri State as soon as work picked back up. Both
described Foster's status over the winter months as a
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temporary “lay off.” Foster advised Ms. Pitzer that he was
going to take the six-month assignment with Sofco and that
he would get in touch with her upon completion of that
assignment to ascertain whether more work was available
with Tri State. Foster did, in fact, contact Tri State on
subsequent occasions to ascertain the availability of additional
work. When additional work became available, the parties
picked up just where they had left off. Under these facts, we
do not believe Foster's acceptance of the job assignment on
May 20, 2005 constituted a new contract of hire.
Our conclusion finds support in the following
discussion found in Corpus Juris Secundum under the
heading “Circumstances not creating new contract”:
Where temporary layoffs are common in an industry,
and laid off employees are not considered to have been
dismissed, and parties behave as though there had been
no significant break in service when a claimant returns
to work after a layoff, the employee returns under the
existing employment contract. When an employee
returns to work after having been temporarily laid off
as a disciplinary measure, the contract of employment
temporarily suspended is continued, and no new
contract arises. A new contract does not arise when
there is a change in the work done, or in the
compensation paid to an employee. Whether payment
is by the day, week, or month, each day's employment
does not amount to a separate contract of hire.
99 C.J.S. Workers' Compensation § 139.
In light of the foregoing, we believe the ALJ's
determination that Foster's work at the time of his injury on
May 20, 2005 was a continuation of his earlier period of
employment beginning June 24, 2004 is based on substantial
evidence and a sound application of the law. As to this issue,
we affirm.
The only remaining issue is the cross-appeal filed by Tri State concerning
the Board's reversal of the ALJ's award of attorney fees and costs to Tri State for the
- 12 -
denial of the claim by KAGC, through its third party claims administrator, L&H.
Without unduly lengthening this opinion, we agree with the Board's determination that
L&H's denial of the claim was based on reasonable grounds, and that therefore the ALJ's
assessment of attorney fees and costs under KRS 342.310 was clearly erroneous based on
the evidence of record.
The Opinion and Order of the Workers' Compensation Board is affirmed in
all respects.
ALL CONCUR.
BRIEF FOR APPELLANTS/CROSSAPPELLEES:
Douglas A. U'Sellis
Louisville, Kentucky
BRIEF FOR APPELLEE/CROSSAPPELLANT TRI STATE CRANE
RENTAL, INC.:
Todd D. Willard
Lexington, Kentucky
- 13 -
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