KENTUCKY CONTAINER SERVICE, INC. V. KENNETH ASHBROOK, ET AL
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RENDERED : AUGUST 21, 2008
TO BE PUBLISHED
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2007-SC-000533-WC
KENTUCKY CONTAINER SERVICE, INC.
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APPELLANT
ON APPEAL FROM COURT OF APPEALS
2006-CA-002299-WC
WORKERS' COMPENSATION BOARD NO. 98-84520
KENNETH ASHBROOK,
HON . RICHARD M. JOINER,
ADMINISTRATIVE LAW JUDGE, AND
WORKERS' COMPENSATION BOARD
APPELLEES
OPINION OF THE COURT
AFFIRMING
An Administrative Law Judge (ALJ) found the claimant's application for benefits
to be timely because the electronic document that the employer's insurance carrier filed
to inform the Office of Workers' Claims that it had terminated temporary total disability
(TTD) benefits failed to comply strictly with KRS 342 .040(1) and 803 KAR 25:170, §
2(2). As a consequence, the Office failed to advise the claimant that he must file an
application within two years after the employer terminated TTD . A divided Workers'
Compensation Board affirmed and the Court of Appeals affirmed the Board .
Appealing, the employer argues that it did comply strictly with the notice
requirement and that the statute of limitations barred the claim. In the alternative, the
employer argues that the equities favored dismissing the claim despite the deficient
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notice that it terminated TTD. We affirm. The ALJ determined reasonably that the
employer failed to comply strictly with KRS 342 .040(1) and 803 KAR 25 :170, § 2(2).
The claimant did nothing to impede its ability to do so and, furthermore, the record
reveals no evidence of other extraordinary circumstances that would have required a
decision in the employer's favor.
The claimant sustained a work-related right shoulder injury on April 15, 1998.
He underwent surgery and received temporary total disability (TTD) benefits from April
16, 1998, through September 17, 1998. On November 3, 1998, he filed a Pro-se
medical fee dispute in which he sought payment for a cardiac evaluation that he
underwent prior to the surgery. An Arbitrator determined that he failed to prove a
relationship between the procedure and the shoulder injury and dismissed the dispute .
The claimant sustained a left shoulder injury and a left knee injury, in September
and November of 2002 respectively. He filed a claim for the injuries with the assistance
of counsel, on June 14, 2004. During the pendency of the claim, on March 9, 2005, he
filed an application for benefits for the 1998 right shoulder injury as well as for an injury
due to physical therapy performed for the 2002 left shoulder injury .
The employer raised a limitations defense regarding the 1998 injury, asserting
that more than two years had passed since it terminated TTD benefits and that it filed
the necessary electronic document with the Office of Workers' Claims (formerly the
Department of Workers' Claims) after terminating TTD benefits . The claimant testified
that he did not recall receiving a letter advising him of the need to file a claim within two
years after TTD was terminated . He stated that he first learned that he had only two
years to file a claim during a conversation with the attorney who represented him
concerning the 2002 injuries.
KRS 342 .038 requires workers' compensation carriers to submit various reports
to the Office. Debra Mng8tB, the Office7s Division Director for Information and
Research testified that one of the required reports is a Subsequent Report of Injury or
Form I/\-2 . which informs the Office that @ carrier has terminated voluntary TTD
benefits . Ifcorrectly submitted, the report causes the Office to generate and mail a
/
WC-3 letter, which advises the affected worker of the statute of limitations .
803 KAR 25 :170 .§ 2 has required carriers to use a data collection agent or value
added network designated by the Office 1o file Form I/\-2 reports electronically since
January 1, 1996. 1 Wingate explained that when implementing electronic filing, the
Office required those who wished to transmit electronic data to complete a profile and
participate in a training process to assure that they could successfully transmit
electronic information to the Office and receive it from the Office. The Office permitted
only those who completed the process successfully to submit electronic data .
Wingate testified that electronic data submission requires the use of specific
maintenance codes to convey information under standards set by the International
Association of Industrial Accident Boards and Commissions (IAIABC) . The codes are
contained in the Association's electronic data interchange manual, and an Event Table
found on the Office's VVebSite specMes the codes to be used in Kentucky. Wingate's
testimony did not make clear the extent to which the Office informed trading partners of
the Event Table . Attached [o her deposition was @ portion of the IAIABC manual, which
1803 KAR 25 :170,§ 1explains that a data collection agent is @ business that keys
information !D electronic format and transmits it to 8 value added network . A value
added network accepts electronic transmissions and sorts them for delivery to various
addresses .
defines the relevant maintenance codes as follows:
FN = Final : Closed claim, no further payments of any kind
anticipated .
Process : An IP or FS Subsequent report must have
previously been filed, and a previous periodic subsequent
report may or may not have been filed .
S1 = Suspension, returned to work, or medically
determined/qualified to return to work: All payments of
indemnity benefits have stopped because the employee has
returned to work or has been medically determined qualified
to return to work .
According to Wingate, the Event Table states that the S1 code will cause the Office to
generate and send the WC-3 letter but that the FN code will not do so . She explained
that the FN code was meaningless to the Office but that it was not an "improper" code
that the Office would question . She thought that some trading partners used it for
internal purposes . She acknowledged that the electronic filing system's use of codes
caused a number of problems initially for the Office, insurance carriers, and trading
partners .
Kathy New testified that she was manager of the claims department for
Midwestern Insurance Alliance, the claims service for the employer's insurance carrier .
She stated that the FN code referred to "notice of final TTD payment" and that
Midwestern did not receive an Event Table from the Office in 1998 or 1999. Shown a
letter that the Office sent in 1998 to inform carriers and their trading partners to use the
S1 code, she noted that the list of recipients did not include the employer's insurance
carrier, Midwestern, or the data collection agent/value added network that actually
submitted electronic data to the Office. She stated that a December 2, 1999, letter from
Ms. W)ng8te identified @number Ofclaims that lacked @return fOwork date or a Form
IA-2 but that the present claim was not among them . According
tD'N8VV'
MidVVe8terO's
data collection agent transmitted the IA-2 in the present claim on December 29, 1999 .
It contained an FN maintenance code . Although she stated that the Office first notified
Midwestern in 2000 or 2001 that only an S1 code would result in a WC-3 letter, no
evidence indicated that she re-submitted @ Form IA-2 that contained the S1 code.
The J\[jfOUnd the claim fOrfhB1998 injury ƒ o bBtimely under Billy Bak_r
,179 S .W.3d 860 (Ky. 2005) . The ALJ reasoned that Midwestern
submitted a defective Form IA-2 that failed to cause the Office to send @ WC-3 letter .
Thus, the failure to comply strictly tolled the statute of limitations, regardless of whether
it resulted from bad faith or misconduct.
KIRS 342 .040(l) and K[RS 342.185(l) operate in tandem . KIRS 342.185/1\
requires an application for benefits to be filed within two years after a work-related
accident or within two years after the employer terminates income benefits, whichever
occurs last KRS 342 .040(l) and the regulations place certain obligations on employers
and the Office of Workers' Claims. Their goal is to prevent individuals who receive
voluntary income benefits from developing
G
take sense of security and failing to file a
timely claim. KIRS 342 .040(l) requires an employer to notify the Office when it
terminates TT[JOrfails to pay TTD tO@worker vVhOh@s missed more than seven days
of mark due
10
@ work-related injury . )t requires the Office ` when so notified, to advise
the worker in writing of the right to file a claim and of the applicable period of limitations .
KIRS 342 .990 provides civil and criminal penalties for an employer's failure to
comply with KIRS 342.040/l\ ' bUtChapter 342provides no remedy for1he affected
worker. Thus, the courts have turned to equitable principles when the circumstances
warranted and estopped employers who failed to comply strictly with KRS 342.040(1)
from asserting a limitations defense, even in the absence of bad faith or misconduct .2
Contrary to the employer's assertion, Billy Baker Painting v. Barry, supra , stands
for the principle that an employer must bear the burden of its failure to comply strictly
with KRS 342 .040(1) and 803 KAR 25:170, § 2(2). Providing required information in an
incorrect format is no less a failure of compliance than failing to provide required
information . An exception to the principle of strict compliance is Newberg v. Hudson ,
838 S .W .2d 384 (Ky. 1992), in which the court found the circumstances not to warrant
an equitable remedy because the worker engaged in conduct that caused the employer
to fail to comply with KRS 342 .040(1). 3
KRS 342 .260(1) charges the Office's Executive Director with promulgating
regulations necessary to effectuate the purposes of Chapter 342 . 803 KAR 25:170, §
2(2) specifies the manner in which Midwestern was required to provide notice under
KRS 342 .040(1). It states in pertinent part as follows :
Beginning with work-related injuries and occupational
diseases reported to employers on or after January 1, 1996,
Billy Baker Painting v. Barry, supra , (employer failed to include TTD termination date
on Subsequent Report of Injury, so the Department failed to send WC-3 letter) ; Lizdo
v. Gentec Equipment , 74 S.W.3d 703 (Ky . 2002), (employer failed to prove that it
notified the Department or that the Department notified the worker) ; H .E . Neumann
Co. v. Lee, 975 S .W.2d 917 (Ky. 1998) (employer's failure to pay TTD or notify the
Department tolled the statute of limitations without regard to bad faith); Colt
Management Co . v. Carter, 907 S .W .2d 169 (Ky. App. 1995) (lack of misconduct is
immaterial where the employer failed to notify the Department that it terminated TTD) ;
and Ingersoll-Rand Co . v. Whittaker, 883 S .W .2d 514 (Ky. App . 1994) (failure to notify
the Department precluded a limitations defense regardless of who was responsible) ;
City of Frankfort v. Rockers , 765 S.W .2d 579 (Ky. App. 1988) (an employer may not
manufacture a limitations defense by failing to comply with KRS 342.040(1)) .
3 J & V Coal Co. v. Hall, 62 S .W.3d 392 (Ky. 2001), is inapplicable in the present
circumstances. It concerned a worker who was not entitled to TTD or to a WC-3 letter.
6
2
each insurance company . . . shall file the information
required on the Form IA-2 with a data collection agent or a
value added network designated by the Office of Workers'
Claims, in electronic format, every sixty (60) days for as long
as the disability of an employee continues and whenever
payments to an employee are commenced, terminated,
changed or resumed .
As the party raising a limitations defense, the employer had the burden of proof.
The evidence indicates that it did not comply strictly with KRS 342 .040(1) and 803 KAR
25:170, § 2(2). First, its carrier transmitted the Form IA-2 to the Office on December
29, 1999, which was more than a year after it terminated benefits . Second, the report
contained the incorrect FN maintenance code . And, third, the carrier failed to submit a
corrected report after being notified specifically in 2000 or 2001 that only the S1 code
signified the termination of TTD . As a consequence, the Office lacked the information
necessary for it to comply with its obligation under KRS 342 .040(1) to send a WC-3
letter . Unlike the situation in Newberg v. Hudson , supra, the claimant did nothing to
impede the employer's ability to comply with KRS 342.040(1) or the regulation .
The evidence revealed no other extraordinary circumstances that required a
decision in the employer's favor. Challenging a carrier's refusal to pay medical
expenses and knowing that a statute limits the period for filing a claim are different
matters . No evidence refuted the claimant's testimony that he learned of the statute of
limitations in a conversation with the attorney who represented him in the 2002 claims .
Nothing indicated precisely when he received that information or that he delayed
unreasonably to file a claim after receiving it .
The decision of the Court of Appeals is affirmed .
Minton, C.J., and Abramson, Cunningham, Noble, Schroder, and Scott, JJ .,
concur . Venters, J ., not sitting .
COUNSEL FOR APPELLANT,
KENTUCKY CONTAINER SERVICE, INC . :
DEREK PATRICK O'BRYAN
SHEFFER LAW FIRM LLC
1600 NATIONAL CITY TOWER
101 S .5 TH STREET
LOUISVILLE, KY 40202
COUNSEL FOR APPELLEE,
KENNETH ASHBROOK :
JAMES DELANO HOWES
HOWES & PAIGE, PLLC
1501 DURRETT LANE
SUITE 200
LOUISVILLE, KY 40213
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