Opinion
NO. 2012-CA-000890-WC
04-05-2013
PEOPLEASE CORPORATION APPELLANT v. GRIMES ENTERPRISES, II, INC.; GENE R. TOMLIN TRUCKING AND BROKERAGE, INC.; MAVERICK TUBE CORPORATION; UNINSURED EMPLOYERS' FUND; LAWRENCE F. SMITH, Administrative Law Judge; and WORKERS' COMPENSATION BOARD APPELLEES
BRIEF FOR APPELLANT: J. Denis Ogburn Louisville, Kentucky BRIEF FOR APPELLEE TOMLIN TRUCKING AND BROKERAGE, INC.: Michael P. Neal Louisville, Kentucky BRIEF FOR APPELLEE UNINSURED EMPLOYERS' FUND Jack Conway Attorney General of Kentucky James R. Carpenter Assistant Attorney General Frankfort, Kentucky
NOT TO BE PUBLISHED
PETITION FOR REVIEW OF A DECISION
OF THE WORKERS' COMPENSATION BOARD
ACTION NO. WC-06-00207
OPINION
DISMISSING
BEFORE: CAPERTON, COMBS, AND DIXON, JUDGES. COMBS, JUDGE: PeopLease Corporation petitions for review of an opinion of the Workers' Compensation Board that affirmed in part, reversed in part, vacated in part, and remanded the decision of the Administrative Law Judge (the ALJ) awarding Stephen R. Collins (Collins) permanent partial disability benefits and medical benefits for a work-related injury.
This is a factually complicated case ultimately dealing with the issues of up-the-ladder liability and jurisdiction. PeopLease, an employee leasing firm duly registered in Kentucky, contends that the Board erred by concluding that its workers' compensation carrier was obligated to pay benefits either on its behalf or on behalf of its client, Gene R. Tomlin Trucking and Brokerage, Inc. (Tomlin Trucking). After our review, we conclude that the primary issue to be determined on appeal did not arise under our Workers' Compensation Act. Therefore, we must dismiss the appeal for lack of subject matter jurisdiction.
PeopLease is wholly engaged in the business of "employee leasing," a practice permitted in Kentucky and governed principally by the provisions of Kentucky Revised Statute[s] (KRS) 342.615. That statute has been construed by Labor Ready Inc. v. Johnston, 289 S.W.3d 200, 207 (Ky. 2009), as permitting "a leased employee to be viewed as being the lessee's employee rather than the employee leasing company's employee[.]"
Peoplease is a South Carolina company that specializes in the transportation industry. Tomlin Trucking, its client in this case, is a freight broker located in Missouri. PeopLease provides several services to its clients. When a client (Tomlin) leases an employee through PeopLease, PeopLease manages the payroll, taxes, and benefit packages of those employees. Tomlin Trucking leased all of its employees from PeopLease, and PeopLease provided workers' compensation insurance to the leased employees of Tomlin Trucking.
The injured employee at issue in this case is Stephen R. Collins, who is not a party to this appeal. Collins worked as an over-the-road truck driver for Grimes Enterprises, LLC, a heavy-haul trucking company based in West Virginia. Maverick Tube Corporation had contacted Tomlin Trucking to deliver a load of its merchandise from Arkansas to Pennsylvania. Tomlin Trucking then contacted Grimes Enterprises to undertake that delivery. Again, Collins had been hired by Grimes Enterprises. He was not an employee of Tomlin Trucking - leased or otherwise.
On February 16, 2004, Collins was driving into Kentucky from Arkansas with a load of steel products manufactured by Maverick Tube Corporation en route to the final destination in Pennsylvania. An accident occurred on the Western Kentucky Parkway in Grayson County, Kentucky. Collins sustained severe injuries.
After the accident, Collins filed a workers' compensation claim in West Virginia, the home state of Grimes Enterprises, his employer. Before July 1, 2008, West Virginia's legislature required workers' compensation benefits to be provided exclusively through a state-administered program (making West Virginia a "monopolistic" state for purposes of workers' compensation coverage) and not through a private insurer. In order to satisfy the claims of injured workers, West Virginia's Workers' Compensation Commission operated a workers' compensation fund. As a result of his claim filed with the West Virginia Workers' Compensation Commission, Collins received an award of temporary total disability benefits, permanent partial disability benefits, rehabilitation benefits, and medical benefits paid directly through the Workers' Compensation Commission of West Virginia.
On February 13, 2006, Collins filed an application for resolution of injury claim with the Kentucky Department of Workers' Claims. An investigation was conducted by the Division of Security and Compliance Enforcement Branch of the Department of Workers' Claims. In his investigative report, the compliance officer noted that Grimes Enterprises had advised that Collins's claim had been duly paid by the State of West Virginia pursuant to West Virginia's monopolistic insurance system. Nevertheless, Grimes Enterprises was certified as uninsured on the date of the injury. As a result, Kentucky's Uninsured Employers' Fund (UEF) was joined as a party defendant to the claim. However, the UEF denied the claim - as did Grimes Enterprises, Tomlin Trucking, Maverick Tube, and PeopLease.
During a benefit review conference conducted in October 2009, the parties agreed that the matter should be bifurcated so that a determination could be made with respect to which party or parties defendant, if any, were liable to Collins. On February 4, 2010, the ALJ rendered an opinion and order dealing with this issue.
After reviewing the evidence and the parties' briefs, the ALJ concluded, in part, as follows:
The UEF asserts that each of the other defendants is liable for the plaintiff's workers' compensation benefits as up-the-ladder contractors. Tomlin argues that as
merely a broker, it bears no responsibility. Maverick argues that as merely the maker of pipes it bears no responsibility. Peoplease argues that as the lessor of uninvolved employees to the broker, it bears no responsibility. None of the defendants have [sic]offices in Kentucky. Peoplease leases employees to uninvolved businesses in Kentucky. The connection to the Commonwealth is that the plaintiff was operating his truck for Grimes in Kentucky when he was injured.
At first look, the law of the case appears to be KRS 342.610(2), which reads,
A contractor who subcontracts all or any part of a contract and his carrier shall be liable for the payment of compensation to the employees of the subcontractor unless the subcontractor primarily liable for the payment of such compensation has secured the payment of compensation as provided for in this chapter.The UEF suggests that Tomlin, as staffed by Peoplease, is the contractor who has subcontracted the contract (Maverick) to Grimes, resulting in the injury to the employee (Plaintiff). . . . Peoplease had no involvement in the transaction at all. I am entirely persuaded that Peoplease was not mandated to insure employees other than those who worked for Tomlin.
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After much thought, study, and consideration, I believe the most relevant part of KRS 342.610(2) is the last clause quoted above:Opinion and Order on Bifurcated Issue at 7-10.
unless the subcontractor primarily liable for the payment of such compensation has secured the payment of compensation as provided for in this chapter.Chapter 342 allows for provision at KRS 342.670. In the present case, although the subcontractor (Grimes) did not
have Workers' Compensation insurance in Kentucky, it did have full coverage in West Virginia.
KRS 342.670(3) states,
(3) If any employee is entitled to the benefits of this chapter by reason of an injury sustained in this state in employment by an employer who is domiciled in another state and who has not secured the payment of compensation as required by this chapter, the employer or his carrier may file with the commissioner a certificate, issued by the commission or agency of the other state having jurisdiction over workers' compensation claims, certifying that the employer has secured the payment of compensation under the workers' compensation law of the other state and that with respect to the injury the employee is entitled to the benefits provided under that law, and that the benefits to which the employee or his or her dependents is entitled are at least as great as those to which he or she would be entitled if the injury occurred and was processed under Kentucky law, under Kentucky coverage. In this event:
(a) The filing of the certificate shall constitute an appointment by the employer or his carrier of the commissioner as his or her agent for acceptance of the service of process in any proceeding brought by the employee or his or her dependents to enforce his, her, or their rights under this chapter on account of the injury;
(b) The commissioner shall send to the employer or carrier, by certified mail to the address shown on the certificate, a true copy of any notice of claim or other process served on the commissioner by the employee or his or her dependents in any
proceeding brought to enforce his, her, or their rights under this chapter;
(c) 1. If the employer is a qualified self-insurer under the workers' compensation law of the other state, the employer shall, upon submission of evidence satisfactory to the commissioner, of its ability to meet its liability to the employee under this chapter, be deemed to be a qualified self-insurer under this chapter;
2. If the employer's liability under the workers' compensation law of the other state is insured, the employer's carrier, as to the employee or his or her dependents only, shall be deemed to be an insurer authorized to write insurance under and be subject to this chapter; however, unless its contract with the employer requires it to pay an amount equivalent to the compensation benefits provided by this chapter, its liability for income benefits or medical and related benefits shall not exceed the amounts of the benefits for which the insurer would have been liable under the workers' compensation law of the other state;
(d) If the total amount for which the employer's insurance is liable under (c) above is less than the total of the compensation benefits to which the employee is entitled under this chapter, the commissioner may, if he or she deems it necessary, require the employer to file security, satisfactory to the commissioner, to secure the payment of benefits due the employee or his or her dependents under this chapter; and
(e) Upon compliance with the preceding requirements of this subsection (3), the employer, as to the employee only, shall be
deemed to have secured the payment of compensation under this chapter.The purpose of KRS 342.670(2) and other subrogation elements of KRS 342 are [sic]to prevent duplication of benefits simply because an employer is liable for compensation in another state as well as Kentucky. Custard Insurance Adjuster, Inc. v. Aldridge, 57 S.W.3d 284, 288 (Ky. 2001). In Aldridge, the Supreme Court held that the Workers' Compensation Board did not have subject matter jurisdiction where the dispute concerned only which insurer was responsible for paying the plaintiff's claim. In that case, an Indiana insurer had erroneously paid a Kentucky claim, and the Supreme Court held that jurisdiction over a dispute between insurance companies rested in Circuit Court . In the course of that holding, the Court indicated the importance of not duplicating benefits. [Emphasis added.]
In the present case, there may yet be questions of disability, so this ALJ will not dismiss on the basis of jurisdiction. Based on an understanding of Aldridge and the subrogation statutes cited there, however, defendant Grimes' insurer, the State of West Virginia, will be credited by subrogation in every appropriate way.
The proof thus far indicates that the plaintiff has recovered more than $200,000 through the West Virginia Department of Workers' Claims, and through civil proceedings, and his medical expenses are fully covered for the indefinite future. Grimes may proceed as if insured and will not be liable to any extent greater than in West Virginia.
I find, therefore, that the controlling law is KRS 342.670(3); that Grimes' insurer, the State of West Virginia, is for purposes of this case "deemed an insurer;" and that Grimes is therefore "deemed insured." Therefore, no up-the-ladder liability pursuit is necessary.
Based on these conclusions of law, the ALJ ordered Grimes Enterprises to file the appropriate certificate under the provisions of KRS 342.670(3). He dismissed Tomlin Trucking, Maverick Tube, PeopLease, and the UEF as parties to the proceedings.
Collins filed a petition for reconsideration, contending that the ALJ misapplied the provisions of KRS 342.670 and erred by dismissing the UEF. In an order rendered on April 1, 2012, the ALJ concluded as follows:
The plaintiff asserts that the Commissioner of the Kentucky Department of Workers' Claims and the Chief Administrative Law Judge have determined that defendant Grimes was uninsured. However, this administrative judge notes that the findings at that level are prima facie and rebuttable in nature. This administrative law judge is arbiter of fact, however, and I have found that defendant Grimes is "deemed insured." I am persuaded upon further review, however, that the State of West Virginia is not liable to the plaintiff for benefits payable under Kentucky law. . . . It was therefore error to dismiss the UEF at this point.The ALJ amended his opinion and order and reinstated the UEF as a party to the proceedings.
The UEF further asserts that the plaintiff has failed to prove that he has in any way been "shorted" by the payment of West Virginia benefits, so there [is] no liability to be imposed. I find that because the claim was bifurcated for decision on the single preliminary issue, I cannot yet make a determination on this argument.
The UEF filed a petition for reconsideration contending that the ALJ erred by failing to conclude that the dismissed defendants did not have up-the-ladder liability. The ALJ remained unpersuaded by the arguments asserted by the UEF and denied the petition.
In its second petition for reconsideration, the UEF stated that the ALJ had "abandoned his reliance upon KRS 342.670(3), found Grimes Enterprises II to be uninsured," and erred by reinstating Collins's claim solely against the UEF. In an order rendered on August 10, 2010, the ALJ noted the reality that Kentucky could not compel the state of West Virginia to make payments. He explained as follows:
The finding on April 1, 2010 was that the State of West Virginia could not be required to pay additional benefits to the plaintiff. Under KRS 342.670(3), the defendant-employer is still deemed insured, but by an insurer who cannot be required to pay . The defendant-employer is therefore effectively uninsured, making the UEF a necessary party. (Emphasis added.)The ALJ did not alter his previous opinion and order.
When the UEF filed yet another petition for reconsideration of the opinion and order, the ALJ responded as follows:
KRS 342.281 permits an ALJ to correct patent errors appearing on the face of a final Opinion or Order. This ALJ has permitted several petitions for reconsideration of a non-final order in the interest of judicial economy and in an attempt to clear up a genuinely confusing issue. That statute does not, however, contemplate repetitive petitions for reconsideration of the same issue.
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The UEF's third petition for reconsideration is OVERRULED. (Emphasis added.)
On October 19, 2010, the UEF filed an appeal to the Workers' Compensation Board. The Board determined that the ALJ's opinion and order were interlocutory and dismissed the appeal.
Following a hearing conducted on September 19, 2011, the ALJ entered a final opinion and order determining the extent of Collins's occupational disability and awarding permanent partial disability benefits in accordance with the calculations submitted by Grimes Enterprises and the UEF. The UEF appealed again to the Workers' Compensation Board. Though it had been expressly dismissed as a party to the proceedings, Tomlin Trucking filed a protective cross-appeal.
In a sixty-three-page opinion, the Board affirmed in part, reversed in part, vacated in part, and remanded the decision to the ALJ. The Board determined that the record compelled a finding that Grimes Enterprises was an uninsured employer and that the ALJ erred by determining that the provisions of KRS 342.670(3) were applicable. It concluded that Tomlin Trucking and PeopLease had up-the-ladder liability pursuant to the provisions of KRS 342.610(2) and that the terms of PeopLease's workers' compensation insurance policy encompassed Collins. It also determined, sua sponte, that the ALJ's award was defective since it failed to include any explanation for the award calculations and to identify which defendant was liable. PeopLease filed this petition for review.
PeopLease contends that the Board erred by concluding that the evidence compelled a finding that it was a partner with Tomlin Trucking and that it was liable to Collins. However, as a threshold issue, the UEF contends that the appeal should be dismissed since PeopLease failed to name Collins as an appellee in its petition for review. The UEF asserts that this omission plainly violates the provisions of Kentucky Rule[s] of Civil Procedure(CR) 76.25(4)(a), which require the appellant to designate all adverse parties and the Board as appellees. It also argues that Collins as the claimant is an indispensable party to the proceeding and that his absence is fatal to the appeal. PeopLease contends that since the appeal pertains solely to which defendant is responsible for the payment of workers' compensation benefits, the claimant is not an adverse party and thus is not indispensable.
In arguing in support of their positions with respect to the motion to dismiss, the parties underscore the true nature of this conflict. The provisions of KRS 342.325 indicate that jurisdiction over "all questions arising under this chapter, if not settled by agreement of the parties interested therein" properly lies with the Administrative Law Judge of the Board of Workers' Claims. However, where the dispute is a contractual issue as to liability between the insurer and the employer not affecting the rights of a worker to receive workers' compensation benefits, jurisdiction lies in the circuit court. Custard Ins. Adjusters, Inc., v. Aldridge, 57 S.W.3d 284, 287 (Ky. 2001); see also Wolfe v. Fidelity & Casualty Insurance Company of New York, 979 S.W.2d 118 (Ky. App. 1998) ("Interpretation of insurance contracts and the enforcement of the right of the insured concern matters which are beyond the purview of the authority vested in the ALJ.").
The parties have not disputed that Collins is entitled to workers' compensation benefits in accordance with the provisions of Kentucky's act. There was no dispute before the ALJ concerning the validity of Collins's claims under our workers' compensation statutes, and the parties agreed to the sums to which he was entitled. That part of the award was not contested by any party. The dispute in these proceedings was the extent to which Collins's rights could be enforced against his employer's carrier - in this case, the fund administered by West Virginia's Workers' Compensation Commission. Consequently, the Board erred ab initio by assuming jurisdiction of the matter.
The ALJ undertook a thorough review of the facts and circumstances involved in this matter. There is no dispute that Grimes is the employer of Collins and that it is primarily liable for compensation owed to Collins. There also is no dispute that Grimes secured the payment of compensation through the state of West Virginia, a monopolistic state at the time of the injury. Collins was a West Virginia resident and Grimes a West Virginia employer. Grimes, through West Virginia's state fund, paid medicals; temporary total disability benefits; permanent, partial disability benefits; and vocational benefits. It continues to be liable for continuing medical benefits. Since Grimes properly secured payment for workers' compensation benefits, there can be no up-the-ladder liability pursuant to the provisions of KRS 342.610(2). The ALJ properly framed and characterized the only disputed issue: can Grimes's carrier be ordered by the Commonwealth of Kentucky to compensate Grimes for additional benefits to which he was entitled under our workers' compensation scheme? And, as the ALJ correctly expressed in his initial order and opinion, he lacked jurisdiction under those circumstances to decide any issue apart from the extent and duration of Collins's disability.
The Board erred by accepting the UEF's mischaracterization of the issue as one implicating an up-the-ladder analysis. We conclude that this is not a dispute governed by the provisions of KRS Chapter 342. Instead, jurisdiction lies in the circuit court.
Therefore, we dismiss this appeal.
ALL CONCUR. BRIEF FOR APPELLANT: J. Denis Ogburn
Louisville, Kentucky
BRIEF FOR APPELLEE TOMLIN
TRUCKING AND BROKERAGE,
INC.:
Michael P. Neal
Louisville, Kentucky
BRIEF FOR APPELLEE
UNINSURED EMPLOYERS' FUND
Jack Conway
Attorney General of Kentucky
James R. Carpenter
Assistant Attorney General
Frankfort, Kentucky