Opinion
NO. 2012-CA-001094-WC
03-15-2013
KENTUCKY EMPLOYERS' MUTUAL INSURANCE APPELLANT v. TAYLOR CONTRACTING/TAYLOR READY MIX, LLC; UNINSURED EMPLOYERS' FUND; CHRISTOPHER WATTS; HONORABLE EDWARD D. HAYS, ADMINISTRATIVE LAW JUDGE; AND WORKERS' COMPENSATION BOARD APPELLEES
BRIEF FOR APPELLANT: Mark W. Howard H. Douglas Jones Florence, Kentucky BRIEF FOR APPELLEE TAYLOR CONTRACTING/TAYLOR READY MIX, LLC: Jeffrey D. Hensley Flatwoods, Kentucky BRIEF FOR APPELLEE UNINSURED EMPLOYERS' FUND Jack Conway Attorney General of Kentucky Dennis Stutsman Assistant Attorney General Frankfort, Kentucky
NOT TO BE PUBLISHED
PETITION FOR REVIEW OF A DECISION
OF THE WORKERS' COMPENSATION BOARD
ACTION NO. WC-05-01707
OPINION
AFFIRMING
BEFORE: COMBS, KELLER, AND LAMBERT, JUDGES. LAMBERT, JUDGE: This is a worker's compensation claim bifurcated for determination as to whether Kentucky Employers' Mutual Insurance (KEMI) properly exercised its right to cancel coverage due to late premium payments. KEMI appeals, seeking review of the Workers' Compensation Board's (the Board) opinion re-entered May 21, 2012, in which the Board vacated the August 16, 2011, opinion of the Administrative Law Judge (ALJ) and remanded for additional findings of fact. After careful review, we affirm the Board's opinion vacating and remanding the case to the ALJ for additional fact finding.
This case has a lengthy appellate history, but for purposes of this opinion, we will summarize it as follows.
Appellee, Taylor Contracting (Taylor), secured through KEMI a policy of workers' compensation insurance for the term of November 1, 2004, to November 1, 2005, at an annual premium of $23,988.11. The application required the initial payment of 25% of the premium followed by nine more installment payments. KEMI sent monthly invoices for those nine installment payments, and it alleges that Taylor was consistently late in making payments pursuant to the date on the invoices. Eventually, on August 23, 2005, KEMI cancelled the policy for late payment. The cancellation date was prior to the September 19, 2005, work injury alleged by Christopher Watts in the underlying claim.
On June 8, 2006, ALJ Manno found that KEMI had given proper notice of the cancellation of the policy and therefore no coverage existed for the injury to Watts. On December 12, 2006, the Board affirmed, noting that the policy was not ambiguous and that the doctrine of reasonable expectations was not applicable.
On June 29, 2007, this Court remanded the case to the ALJ for additional findings of fact, noting that the policy was silent as to when the premium payments were due. We instructed the ALJ to look for extrinsic evidence beyond the four corners of the policy and make a factual determination of the parties' understanding of when payments were due. That decision was not appealed.
On October 17, 2007, on remand, ALJ Manno found that the parties understood that the invoices sent by KEMI controlled the due dates, and because Taylor's payments were late, KEMI had the right to and did properly cancel the policy.
On February 22, 2008, the Board reversed and remanded, this time making its own determination that the extrinsic evidence showed there was no meeting of the minds between KEMI and Taylor as to when the premium payments were due, and further stating that there were no facts to justify a finding that KEMI properly canceled the policy due to untimely payment.
This was a split decision with Chairman Gardner dissenting.
On November 13, 2009, this Court affirmed the Board's remand, holding that ALJ Manno had not properly followed its prior 2007 directive; i.e., that ALJ Manno had failed to make a factual determination as to the parties' understanding at the time the policy was entered into as to when payments were due. We noted, however, that the ALJ might not be able to make a determination that KEMI properly cancelled coverage based on the parties mutual understanding at the time the contract was made based upon the record. In October 2010, our Supreme Court affirmed this holding.
On August 16, 2011, again upon remand, after a thorough review of the evidence, ALJ Hays specifically made the factual determination that "the parties had a mutual understanding at the time the insurance policy was entered into that installment payments were to be made on specific dates as shown on the Quick App and as shown on the actual invoices . . . that in any event, Taylor knew or by reasonable inference should have known that the specific due dates would be shown on the invoices . . . ." It followed, therefore, that Taylor's payments were not timely and that KEMI was properly entitled to cancel the policy.
By opinion re-entered May 21, 2012, the Board concluded that ALJ Hays had not made sufficient findings of fact as to the parties' understanding of when premiums would be due at the time the insurance contract was entered into. In its remand, the Board instructed ALJ Hays that he could not consider the Quick App or the invoices mailed by KEMI. This appeal now follows.
On appeal, KEMI argues that the Board erred in vacating ALJ Hays' opinion on remand because the opinion contained sufficient findings of fact which were supported by substantial evidence and specifically authorized by the prior opinions of the Court of Appeals. In the alternative, should we determine that remand is appropriate, KEMI argues that the Board erred by directing the ALJ to ignore certain evidence.
Taylor argues that the Board did not err in vacating ALJ Hays' opinion because it was not supported by substantial evidence and clearly did not follow prior opinions of this Court. The Uninsured Employers' Fund has also filed a brief and supports Taylor's arguments. We agree with Taylor and the Uninsured Employers' Fund.
In the November 13, 2009, opinion of this Court we explicitly stated:
In our original opinion, we held the ALJ could determine, after making proper findings of fact, that KEMI had reason to, and did, properly cancel coverage. Therefore, in remanding this matter, we again instruct the ALJ that he or she may determine coverage was properly canceled; however, that determination must be based on what the parties understood at the time the contract was entered. We agree with the Board's implication, if not explicit statement, that the ALJ may be unable to make such a determination based upon the record. However, that determination is the ALJ's to make, Paramount Foods, Inc. v. Burkhardt, 695 S.W.2d 418, 419 (Ky. 1985), and any mandate by the Board to the contrary is inconsistent with our 2007 opinion which neither party appealed.Kentucky Employers' Mut. Ins. v. Taylor Contracting/Taylor Ready Mix, LLC, 2009 WL 3806146 (Ky. App. 2009). Simply put, ALJ Hays did not follow our instructions on remand and committed the same error as ALJ Manno in his second opinion by relying on the parties' subsequent course of dealing. There, ALJ Manno concluded that the payment stubs controlled the payment schedule and included a due date; and because Taylor did not remit payment until after the date of KEMI's cancellation notice, KEMI was entitled to cancel the policy. This Court and the Kentucky Supreme Court rejected that analysis, remanding with requirements that the parties' understanding at the time of the creation of the contract be evaluated.
Here, ALJ Hays found that the parties had a mutual understanding at the time the insurance policy was entered into that installment payments were to be made on certain specified dates as shown on the Quick App and as shown on the actual invoices received by the policyholder. These facts were previously rejected as a basis for determining the mutuality of understanding at the time of the contract. Further, the Quick App dates and the dates of subsequent billing notices are inconsistent with each other, defeating any notion of mutual understanding. Thus, only ALJ Hays' conclusion that Taylor "knew or by reasonable inference should have known" that the due dates would be shown on subsequent invoices and failure to pay would permit KEMI to lawfully cancel remains. However, ALJ Hays did not cite any evidence from the record which supports this conclusion.
Based on ALJ Hays' failure to support his findings with substantial evidence, the Board properly vacated and remanded his opinion for further findings.
Regarding KEMI's second argument, that the Board erred by directing ALJ Hays to ignore certain evidence on remand, we agree with Taylor and the Uninsured Employers' Fund that the Board was simply following prior directions of this Court as well as the Kentucky Supreme Court. It has already previously been determined that the Quick App dates were not consistent and were not agreed upon at the time the original contract was made. Accordingly, the Board did not err in instructing the ALJ not to consider these on remand.
Based on the foregoing, we affirm the Board's May 12, 2012, opinion and order vacating and remanding the decision to the ALJ.
ALL CONCUR. BRIEF FOR APPELLANT: Mark W. Howard
H. Douglas Jones
Florence, Kentucky
BRIEF FOR APPELLEE TAYLOR
CONTRACTING/TAYLOR READY
MIX, LLC:
Jeffrey D. Hensley
Flatwoods, Kentucky
BRIEF FOR APPELLEE
UNINSURED EMPLOYERS' FUND
Jack Conway
Attorney General of Kentucky
Dennis Stutsman
Assistant Attorney General
Frankfort, Kentucky