HON. ROBERT E. SPURLIN, DIRECTOR of the SPECIAL FUND V. GERALD PAYNE; W. R. GRACE & COMPANY; HON. DONNA H. TERRY, CHIEF ADMINISTRATIVE LAW JUDGE; and, WORKERS' COMPENSATION BOARD
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RENDERED:
November 26, 1997; 2:00 p.m.
TO BE PUBLISHED
NO.
96-CA-002908-WC
HON. ROBERT E. SPURLIN, DIRECTOR
of the SPECIAL FUND
APPELLANT
PETITION FOR REVIEW OF A DECISION
OF THE WORKERS' COMPENSATION BOARD
ACTION NO. WC-91-013017
v.
GERALD PAYNE; W. R. GRACE & COMPANY;
HON. DONNA H. TERRY, CHIEF ADMINISTRATIVE
LAW JUDGE; and, WORKERS' COMPENSATION
BOARD
APPELLEES
OPINION
AFFIRMING
* * * * * * *
BEFORE:
WILHOIT, CHIEF JUDGE;1 COMBS, and JOHNSON, JUDGES.
JOHNSON, JUDGE:
The Special Fund has petitioned this Court for
review of an opinion of the Workers' Compensation Board (Board)
rendered on September 27, 1996, which affirmed the order of the
Chief Administrative Law Judge (CALJ) which required the Special
Fund to advance the entire attorney's fee from its portion of the
1
Chief Judge Wilhoit concurred in this Opinion prior to his retirement effective November
15, 1997. Release of this Opinion was delayed by administrative handling.
award of disability benefits made to the appellee, Gerald Payne
(Payne).
Finding no error, we affirm.
The facts in this case are not in dispute.
On March
24, 1990, Payne, an employee in the maintenance department of W.
R. Grace & Company (Grace), sustained an injury to his back while
lifting a 100-pound motor.
December 1990.
He was not able to work after
Grace voluntarily paid temporary total disability
benefits (TTD) to Payne from December 1990, until the pre-hearing
conference in April 1993, for a total of nearly $41,000.
On July
31, 1995, the CALJ rendered her opinion and order in which she
found Payne to be occupationally disabled due to the back injury
of March 1990, and its arousal of a preexisting dormant disc
disease and osteoporosis into disabling reality.
She ordered
that responsibility for the occupational disability be
apportioned equally between Grace and the Special Fund.
She
further determined that Payne was entitled to TTD from December
1990, until December 3, 1991, the date Payne should have been
able to return to work but for a non-work related progressive
disease, osteopenia/osteoporosis.
Thus, Grace had voluntarily
paid Payne TTD for an approximate sixteen-month period for which
he was not entitled.
On January 30, 1996, Payne's counsel filed an affidavit
and motion in which he sought approval of an attorney's fee of
$7,564.77.
Attached to the motion was a Standard Form for
Attorney Fee Election (Form 109), executed by Payne, indicating
that he wanted his attorney to be paid in a "lump sum" and to
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have his "weekly benefits equally reduced until the defendants
have recouped the amount of my attorney's fee."
to the motion.
Grace objected
Although it did not dispute counsel's entitlement
to the fee, the employer contended that the Special Fund should
be responsible for the entire fee since due to the overpayment of
TTD it had already paid Payne $9,586.44 more than the total
amount for which it was determined to be liable under the terms
of the CALJ's award.
By an order dated March 14, 1996, the CALJ
approved the fee sought and ordered Grace and the Special Fund to
pay one-half of the amount to Payne's counsel.
Grace petitioned the CALJ for reconsideration and
reiterated that because it had overpaid Payne, it owed no weekly
benefits from which it could recoup the attorney's fee.
the Special Fund nor Payne responded to the motion.
1996, the CALJ entered the following order:
Neither
On May 8,
"In order to prevent
overpayment of the award, IT IS HEREBY ORDERED that the entire
attorney fee shall be deducted from the Special Fund's portion of
the award, as it appears that the defendant-employer's portion
has already been satisfied."
Both the Special Fund and Payne2 appealed to the Board.
The Special Fund argued, as it does in this Court, that a
defendant may be required to advance only so much of an
attorney's fee as is commensurate with that defendant's
percentage of liability for the disability award.
2
Payne has not pursued an appeal in this Court.
-3-
The Special
Fund relied on A & K Coal Company v. Blankenship, Ky., 708 S.W.2d
638 (1986), which stated as follows:
Since the sole purpose of the statute
[Kentucky Revised Statutes (KRS)
342.320] is to benefit the claimant in
allowing him to satisfy his present debt
to his attorney for representation in
the case, we find it anomalous to saddle
either the Special Fund or the employer
with the sole responsibility for payment
of that fee. We conclude therefore that
the attorney's fee is the joint
responsibility of the Special Fund and
the employer in such a case and that
they should pay a portion of the fee in
relation to their respective
responsibility for the employee's
disability.
Id. at 640 (emphasis original).
In affirming the CALJ, the Board
rejected the Special Fund's argument that Blankenship was
controlling and stated that "[o]ther policy considerations must
be utilized" in analyzing the issue vis-a-vis an overpayment by
the employer.
The Board stated as follows:
A policy wholly supported within our
workers' compensation system is that an
employer will make timely voluntary TTD
benefit[s] to a claimant who has been
injured and timely hassle-free medical
payments as a result of treatment
afforded to an injured employee. Here,
W. R. Grace paid voluntary payments
until the date of the pre-hearing
conference which amounted to a sum more
than $9,000.00 beyond what ultimately
was awarded against W. R. Grace by the
CALJ. The position taken by Payne and
the Special Fund is that W. R. Grace
should now make an additional payment of
$3,782.00 in order to satisfy its
proportionate obligation in the award of
attorney's fees.
. . . .
-4-
Under the circumstances presented in
this case, the CALJ concluded that,
based upon the overpayment by W. R.
Grace to Payne, that a fair resolution
within KRS 342.320 required the Special
Fund to pay the entirety of the attorney
fee. We believe that was within the
CALJ's discretionary authority based
upon the factual situation the CALJ then
confronted.
The sole issue in this appeal is whether the Special
Fund should be required to advance the entire attorney's fee when
the employer has totally satisfied its liability to a claimant by
its voluntary payment of TTD.
Prior to 1987, KRS 342.320(2)
provided that the attorney's fee would be paid in a lump sum
which was taken from the last payments due under the award.
In
1987, the Legislature made significant changes in our workers'
compensation laws, including an amendment to KRS 342.320(2),3
which gave claimants various options for paying their attorney as
follows:
(a) The entire attorney's fee in a
lump sum shall be paid directly to the
attorney of record and the
administrative law judge shall order the
payment of same, commuting sufficient
[amount] of the final payments of
compensation payable under the award to
a lump sum for that purpose; or
(b) The claimant may pay the
attorney's fee out of his personal
funds; or
(c) The administrative law judge
upon request of the claimant, may order
3
The Legislature made further changes to this statute in 1996, though none relevant to this
appeal. The options for payment of attorney's fees are now located at KRS 342.320(4). The
options contained in subsections (b) and (c) above are essentially unchanged, but the option in
KRS 342.320(2)(a) is no longer available.
-5-
the payment of the attorney's fee in a
lump sum directly to the attorney of
record and deduct the attorney's fee
from the weekly benefits payable to the
claimant in equal installments over the
duration of the award or until the
attorney's fee has been paid.
There have been no published cases that deal with the
proportionality rule mandated by Blankenship since KRS
342.320(2)(c), the amendment providing for the option chosen by
Payne, became available to claimants.
However, we are aware, as
was the Board, of some unpublished decisions of our Supreme Court
that hold, in the context of a settlement between the employer
and the claimant, that the 1987 changes to KRS 342.420(2), have
no impact on the viability of the proportionality rule in
Blankenship.
Those cases reason that the Legislature did not
intend, by providing options for payment of the attorney's fee,
to give a claimant the ability to alter the Special Fund's
obligation to advance more than its share of the attorney's fee.
We agree with the Board that these decisions, even if
published, are not controlling under the circumstances presented
in this case.
The reason that the Special Fund is required to
advance the entire fee is not attributable to the manipulation of
KRS 342.320(2) to the advantage or either Payne or Grace, but is
the result of the employer's voluntary payment of TTD in an
amount exceeding its liability to the claimant.
Clearly,
Blankenship does not contemplate the circumstances that exist in
this case.
-6-
The Special Fund argues that "by forcing the Special
Fund to pay the entire fee, the ALJ has made the Special Fund
bear responsibility for the employer's share of the attorney
fee."
This argument is misleading as neither defendant bears
responsibility for the attorney fee.
The fee is advanced and
then recouped from benefits which would otherwise be paid to the
claimant under the award.
KRS 342.320(2).
If the Special Fund
should prevail, Grace would be out-of-pocket $3,782, without the
means of recouping any of that sum.
The Special Fund, on the
other hand, can advance the entire attorney fee and recoup 100%
of it from the weekly benefits it owes Payne.
All the Special
Fund will lose is the interest on one-half the fee over the
duration of the award.
We believe the solution reached by the CALJ and
affirmed by the Board is the only one that comports with the
policy of encouraging employers to pay TTD payments to their
injured workers.
As this Court stated in Western Casualty &
Surety Company v. Adkins, Ky.App., 619 S.W.2d 502, 503-504
(1981), "the voluntary payment of compensation benefits during
the pendency of proceedings before the Board is a matter of great
importance to an injured worker and should not be discouraged."
See also Triangle Insulation and Sheet Metal Company v.
Stratemeyer, Ky., 782 S.W.2d 628 (1990).
Thus, we hold that an
employer who has made an overpayment of TTD should not be
required to advance its portion of an attorney's fee when another
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defendant is liable to the claimant and can recover the entire
attorney's fee from the weekly benefits it owes the claimant.
Finally, the Special Fund argues in the alternative
that the matter should be remanded to require Payne to pay
Grace's portion of the attorney's fee from amounts he has already
received from his employer.
However, the Special Fund did not
seek this remedy below, and accordingly, this question has not
been preserved for consideration in this review.
The opinion of the Workers' Compensation Board is
affirmed.
ALL CONCUR.
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BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE, W. R.
Grace & Company:
Hon. David R. Allen
Louisville, KY
Hon. William P. Swain
Hon. Walter E. Harding
Louisville, KY
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