THE TRAVELERS INSURANCE CO. VS. BLACKSTONE MINING COMPANY, INC.
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RENDERED: OCTOBER 17, 2008; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2007-CA-001610-MR
THE TRAVELERS INSURANCE
COMPANY
v.
APPELLANT
APPEAL FROM PIKE CIRCUIT COURT
HONORABLE EDDY COLEMAN, JUDGE
ACTION NO. 97-CI-00684
BLACKSTONE MINING
COMPANY, INC.
APPELLEE
OPINION
VACATING AND REMANDING
** ** ** ** **
BEFORE: FORMTEXT KELLER AND TAYLOR, JUDGES; GUIDUGLI,
SENIOR JUDGE.
TAYLOR, JUDGE: The Travelers Insurance Company brings this appeal from an
August 3, 2004, summary judgment, a May 24, 2007, judgment, and a July 9,
2007, amended judgment of the Pike Circuit Court awarding Blackstone Mining
Company, Inc. $117,861.25, plus interest, as overpayment of premiums on
workers’ compensation insurance policies issued by Travelers Insurance. We
vacate and remand.
Relevant to this appeal, Travelers Insurance issued two workers’
compensation insurance policies to Blackstone Mining covering the time periods
of August 29, 1992, through August 29, 1993, and of August 29, 1993, through
August 29, 1994. On March 2, 1997, Travelers Insurance filed a complaint against
Blackstone Mining alleging that Blackstone owed Travelers $474,870 in additional
premiums for the two workers’ compensation insurance policies. Therein,
Travelers Insurance contended that Blackstone Mining failed to pay workers’
compensation premiums for coverage on fourteen employees. Travelers Insurance
admitted that these fourteen employees executed and filed rejection notices of
workers’ compensation coverage with the Department of Workers’ Claims under
Kentucky Revised Statutes (KRS) 342.395. However, Travelers Insurance averred
that these rejection notices were invalid because the notices were not voluntarily
made by the employees as required by KRS 342.395(1). As Blackstone Mining
failed to pay premiums for these employees, Travelers Insurance alleged that
Blackstone owed Travelers the additional premiums for workers’ compensation
coverage provided for the employees.
In response, Blackstone Mining filed a counterclaim alleging that it
overpaid premiums on the same two workers’ compensation insurance policies.
Blackstone Mining alleged that twenty-three employees (not fourteen) filed valid
rejection notices of workers’ compensation coverage under KRS 342.395.
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Blackstone Mining pointed out that these twenty-three employees voluntarily
rejected workers’ compensation coverage in favor of insurance coverage provided
by Blackstone, which included disability coverage. The policy was issued by Mass
Mutual Insurance Company (Mass Mutual Policy) and the premiums were paid by
Blackstone Mining. Because these twenty-three employees rejected workers’
compensation coverage, Blackstone Mining alleged it overpaid premiums in the
amount of $120,861 for the workers’ compensation policies.
Both Travelers Insurance and Blackstone Mining filed motions for
summary judgment. Kentucky Rules of Civil Procedure (CR) 56. On August 3,
2004, the circuit court entered an order granting a partial summary judgment in
favor of Blackstone Mining. The court concluded that “no genuine issue of
material fact exists that 23 of . . . [Blackstone Mining’s] employees voluntarily
rejected workers’ compensation coverage.” However, the court denied summary
judgment upon the issue of damages. 1
In lieu of a trial, the parties agreed to submit proposed findings based
upon the record to the circuit court regarding the overpayment of premiums by
Blackstone Mining. By Findings of Fact, Conclusions of Law and Judgment
entered May 24, 2007, the circuit court decided the issue of damages. The circuit
court concluded that the Mass Mutual Policy provided coverage for
pneumoconiosis (black lung); thus, Blackstone Mining was not obligated to pay
premiums under the Federal Black Lung Benefits Act (30 U.S.C. § 901 et. seq.)
1
The August 3, 2004, order was interlocutory in nature as it only resolved alleged liability
regarding the claims asserted in the Complaint and Counterclaim.
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The court then determined that Travelers Insurance owed Blackstone Mining a
refund for workers’ compensation premium overpayments in the amount of
$120,861.25. Thereafter, by Amended Judgment entered July 9, 2007, the court
reduced the Judgment to $117,861.25 and awarded prejudgment interest on the
judgment at the legal rate of 8 percent for all premium refunds owed. The circuit
court further awarded Blackstone Mining its’ court costs. This appeal follows.
Travelers Insurance contends that the circuit court erroneously
rendered summary judgment by holding that twenty-three of Blackstone Mining’s
employees voluntarily rejected workers’ compensation coverage. For the reasons
hereinafter stated, we agree and vacate the summary judgment for Blackstone
Mining.
Under KRS 342.395(1), an employee may opt out of workers’
compensation coverage by filing a notice of rejection with the Department of
Workers’ Claims. However, the statute specifically provides that the “executive
director of that office shall not give effect to any rejection of this chapter not
voluntarily made by the employee.” KRS 342.395(1). To constitute a voluntary
rejection of workers’ compensation coverage, the employee must possess a
“substantial understanding of the nature of the action and its consequences.” Karst
Robbins Machine Shop, Inc. v. Caudill, 779 S.W.2d 207, 209 (Ky. 1989).
In the record, there is a deposition from only one of the twenty-three
workers, Harold Dean Thacker, who rejected workers’ compensation coverage.
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Also, the deposition of Blackstone Mining’s president, Raymond Strawser, was
included in the record.2
Both Strawser and Thacker testified that the rejections for workers’
compensation coverage were signed voluntarily and without coercion from
Blackstone. Strawser testified that he believed the Mass Mutual Policy provided
better protection to his employees for less premiums than workers’ compensation
coverage. He also stated that the employees were not threatened by Blackstone
Mining and were free to keep workers’ compensation coverage. Thacker testified
that he believed the Mass Mutual Policy provided him better coverage than
workers’ compensation coverage. He stated that he understood the policy
provisions and was not coerced to reject workers’ compensation coverage by
Blackstone Mining.
Under CR 56, summary judgment is proper where there exists no
material issue of fact and movant is entitled to judgment as a matter of law.
Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476 (Ky. 1991). To be
entitled to summary judgment as a matter of law upon a claim or counterclaim,
movant must produce sufficient evidence to sustain his burden of proof upon said
claim or counterclaim. CR 56.01. Stated differently, to prevail upon its
counterclaim and to be entitled to summary judgment, Blackstone Mining carried
the burden of producing evidence sufficient to sustain its counterclaim. CR 43.01.
In particular, it was incumbent upon Blackstone Mining to produce evidence
2
There was other evidence in the record, but it was irrelevant to the disposition of this appeal.
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proving that each of its twenty-three employees voluntarily rejected workers’
compensation coverage. And, to prove that such coverage was voluntarily
rejected, there must be evidence demonstrating that each of the twenty-three
employees possessed a substantial understanding of the nature of the action
(rejection of coverage) and its consequences. See Karst Robbins Machine Shop,
779 S.W.2d 207. Under CR 56.01, we do not believe it is proper to grant a
summary judgment where the movant fails to carry his burden to produce evidence
sufficient to sustain his claim or counterclaim on the merits. In such a
circumstance, the movant would not be entitled to judgment as a matter of law
under CR 56.3
In their depositions, Strawser merely testified concerning the general
practice of Blackstone Mining in offering employees coverage under the Mass
Mutual Policy, and Thacker primarily testified concerning the circumstances
surrounding his rejection of workers’ compensation coverage. However, there was
a complete lack of evidence demonstrating whether each of the remaining
individual employees who rejected coverage possessed a substantial understanding
of the nature of the action and its consequences. Most strikingly absent from the
record was an affidavit or deposition of any other employee who rejected coverage.
3
We note that our standard of review for the judgment entered on May 24, 2007, as amended
on July 9, 2007, would normally be based upon the clearly erroneous standard set forth in
Kentucky Rules of Civil Procedure 52.01. Any legal conclusions made thereon would be
reviewed under a de novo standard. However, since we believe summary judgment was
improperly granted by the circuit court in 2004 on the issue of liability, we do not reach the issue
of damages in this opinion.
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Upon the whole, we conclude that Blackstone Mining failed in its burden of
producing evidence that each of the twenty-three employees possessed a
substantial understanding of the nature of the action (rejection of coverage) and its
consequences and, thus, failed to prove that these employees voluntarily rejected
workers’ compensation coverage. Consequently, the circuit court erred by
rendering summary judgment as a matter of law that all twenty-three employees
voluntarily rejected workers’ compensation coverage.4
Thus, we vacate and remand this case to the circuit court for
additional proceedings consistent with this opinion. In so doing, the circuit court
shall consider each employee individually and determine whether each employee
voluntarily rejected workers’ compensation coverage based upon the unique facts
of each rejection, and what damages, if any, in the form of premium refund can be
allocated to each valid rejection. Simply put, the issue presented upon remand is
whether each of the individual employees voluntarily rejected workers’
compensation coverage and not whether the twenty-three employees as a group
voluntarily rejected workers’ compensation coverage. See Karst Robbins Machine
Shop, 779 S.W.2d 207. And, the evidence presented by Blackstone Mining must
prove same and be undisputed before summary disposition would be appropriate.
The circuit court may then address the issue of damages, if any.
4
We acknowledge that the record is sufficient to support employee Harold Dean Thacker’s
rejection of workers’ compensation coverage. However, we cannot determine what damages, if
any, can be allocated to this individual’s rejection of coverage.
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Considering our disposition of this appeal, we deem any remaining
contentions as moot at this time.
For the foregoing reasons, the summary judgment, judgment, and
amended judgment of the Pike Circuit Court are vacated and remanded for
proceedings not inconsistent with this opinion.
ALL CONCUR.
BRIEFS FOR APPELLANT:
Ronald G. Sheffer
William K. Burnham
Louisville, Kentucky
BRIEF AND ORAL ARGUMENT
FOR APPELLEE:
Frederick G. Irtz, II
Lexington, Kentucky
ORAL ARGUMENT FOR
APPELLANT:
Ronald G. Sheffer
Louisville, Kentucky
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