Opinion
No. 1999-CA-000061-MR.
Rendered June 23, 2000. Rehearing Denied August 25, 2000. Not For Publication June 7, 2001.
Appeal from Boone Circuit Court, Honorable JOSEPH BAMBERGER, JUDGE, Action No. 98-CI-00621.
Larry Hicks, Florence, Kentucky, brief for appellant.
R. David Clark, Licha H. Farah, Jr., Lexington, Kentucky, brief for appellee.
Before: BARBER, McANULTY AND COMBS, JUDGES.
OPINION
Reker appeals from an order granting Traveler's motion for summary judgment and dismissing her complaint with prejudice. We reverse.
On May 18, 1987, while traveling within the scope of her employment, Reker was beaten and sodomized with a broom handle by an assailant at a rest stop area. She sustained multiple injuries requiring ongoing medical treatment since that time.
On June 8, 1998, Reker filed a complaint in Boone Circuit Court against Traveler's, her employer's workers' compensation carrier, for alleged violations of KRS 342.267 and KRS 304.12-230(6), the Unfair Claim Settlement Practices Act (UCSPA), specifically: (1) failure to timely pay medical expenses where there was no basis for denial, and (2) failure to make a good faith attempt to settle the disability claim, although liability was clear. Reker alleged that she had a right to file a civil action by virtue of KRS 446.070.
After Reker retained counsel in her workers' compensation claim in May 1997, her medical bills were not denied, but Traveler's simply stopped paying them. Despite repeated efforts of counsel, some bills went unpaid and uncontested by Traveler's for over a year. At the time the complaint was filed in the trial court, the ALJ had already rendered a decision in the workers' compensation claim, awarding Reker 50 percent permanent partial disability benefits and past and future medical expenses due to the injury. Traveler's had appealed the ALJ's decision to the Board, but only over the interest due on the award. In March 1998, while the appeal concerning payment of the interest was pending, Reker filed a motion with the ALJ to compel payment of medical bills. On May 22, 1998, the Board affirmed the ALJ's decision. In July 1998, without explanation, Traveler's paid most of Reker's medical bills.
KRS 342.020(1) requires the employer or its insurer to make all payments for medical services rendered to an employee directly to the provider of the services within thirty (30) days of receipt of a statement for services. If utilization review is required, a notice of denial must be sent to the employee within thirty (30) days of completion, providing a statement of the medical reasons for the denial. 803 KAR 25:190(7). Requests to resolve a dispute regarding a medical bill must be filed within thirty (30) days of the receipt of the statement of services or within thirty (30) days of the completion of utilization review, if applicable. 803 KAR 25:012.
Traveler's moved for summary judgment in the trial court on August 31, 1998, contending that KRS 342.690 provides the exclusive remedy for work-related injuries, and that a dispute over unpaid and unreimbursed medical expenses must be resolved via the workers' compensation system. Traveler's noted that Reker did file a motion to reopen her workers' compensation claim, based upon nonpayment of medicals. Traveler's conceded that neither a written offer, nor an "official verbal offer of settlement" was made by its representatives. Traveler's explained that "[u]pon receipt of what counsel for Traveler's has deemed an unreasonable settlement demand," it did advise Reker's counsel that they were too far apart and that the ALJ may need to decide the claim. Traveler's contends that "its counsel attempted to obtain a more reasonable settlement demand and to include a settlement of all aspects of the Plaintiff's claim including her psychiatric claim." We think this means Traveler's would not settle unless Reker gave up her right to future medical (psychiatric) treatment, a fundamental protection under the Workers' Compensation Act. KRS 342.020(1). On November 13, 1998, the trial court granted Traveler's motion for summary judgment and dismissed the complaint with prejudice.
Reker did not seek to resolve a dispute over the reasonableness, necessity, work-relatedness or nonpayment of subject medical bills in circuit court. Reker only contended that Traveler's violated KRS 342.267 and KRS 304.12-230(6).
Reker correctly notes that the trial court's order was actually judgment on the pleadings, rather than a summary judgment. On appeal, the issue is whether the trial court acted properly in dismissing the action. CR12.03. Reker raises two issues on appeal: (1) whether Traveler's actions violated the UCSPA, as adopted in KRS 342.267; and (2) whether Reker is entitled to bring a civil action for damages, by virtue of KRS 446.070, because KRS 342.267 does not provide a remedy to an aggrieved party.
Workers' compensation is a creature of statute. "Thus, any analysis of a workers' compensation issue is necessarily an exercise in statutory interpretation." William v. Eastern Coal Corporation, Ky., 952 S.W.2d 696, 698 (1997). Effective December 12, 1996, the Workers' Compensation Act was amended to include KRS 342.267:
If an insurance carrier, self-insurance group, or self-insured employer providing workers' compensation coverage engages in claim settlement practices in violation of this chapter, or the provisions of KRS 304.12-230, the commissioner of the Department of Workers' Claims shall fine the insurance company, self-insurance group, or self-insured employer the sum of one thousand dollars ($1,000) to five thousand dollars ($5,000) for each violation and if they have a pattern of violations, the commissioner may revoke the certificate of self-insurance or request the commissioner of insurance to revoke the certificate of authority of the insurance carrier.
KRS 304.12-230 defines acts or omissions which constitute unfair claims settlement practices:
It is an unfair claims settlement practice for any person to commit or perform any of the following acts or omissions:
(1) Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue;
(2) Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies;
(3) Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;
(4) Refusing to pay claims without conducting a reasonable investigation based upon all available information;
(5) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed;
(6) Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear;
(7) Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds;
(8) Attempting to settle a claim for less than the amount to which a reasonable man would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application;
(9) Attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of the insured;
(10) Making claims payments to insureds or beneficiaries not accompanied by statement setting forth the coverage under which the payments are being made;
(11) Making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration;
(12) Delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information;
(13) Failing to promptly settle claims, where liability has become reasonably clear, under one (1) portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage; or
(14) Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.
Reker contends that she is entitled to pursue a civil action for unfair claims settlement practices violations by virtue of KRS 446.070. KRS 446.070 is entitled, "Penalty no bar to civil recovery," and provides: "A person injured by the violation of any statute may recover from the offender such damages as he sustained by reason of the violation, although a penalty or forfeiture is imposed for such violation."
Reker relies upon State Farm Mutual Automobile Ins. Co. v. Reeder, Ky., 763 S.W.2d 116 (1988). There, the insurance carrier had contended that KRS 304.12-230 only gave the Commissioner of Insurance the authority to perform a regulatory function, but that it did not create a private right of action. Our Supreme Court took a different view, noting that KRS 304.12-230 did not state that violation of its terms was enforceable only by the insurance commissioner, nor that a claim by an individual for damages for its breach was prohibited. Further, the Court "assumed that the General Assembly was aware of . . . [the] existence [of KRS 446.070] when it enacted KRS 304.12-320. [citation omitted]. It can easily be harmonized with the unfair claims act." Id. at 118. "The Kentucky law is similar to those adopted by thirty-eight other states . . . . [and] is intended to protect the public from unfair trade practices and fraud. It should be liberally construed so as to effectuate its purpose. KRS 446.080; [citation omitted]." Id. at 118. The Court held that the right of a private citizen to maintain an action for violation of the statute was "clearly supported" by KRS 446.070 so long as the plaintiff belongs to the class the statute was intended to protect.
The Workers' Compensation Act is social legislation which encompasses a number of public policy considerations. Foremost is the policy of compensating disabled workers for the decrease in their wage earning capacity, so they have a continuing source of income to meet basic needs for food, clothing, and shelter. Second, is the goal of promoting prompt disposition of claims and controlling the expense of pursuing a claim. To this end, both the legislature and the courts have adopted a policy encouraging settlement. Newberg v. Weaver, Ky., 866 S.W.2d 435, 436 (1993). Without doubt, an injured worker belongs to the class of persons KRS 342.267 was intended to protect.
Traveler's relies heavily upon KRS 342.690(1) and contends that the following language precludes Reker's claim:
(1) If an employer secures payment of compensation as required by this chapter, the liability of such employer under this chapter shall be exclusive and in place of all other liability of such employer to the employee, his legal representative, husband or wife, parents, dependents, next of kin, and anyone otherwise entitled to recover damages from such employer at law or in admiralty on account of such injury or death (emphasis added).
We disagree with Traveler's interpretation. The statute applies "[I]f an employer secures payment of compensation as required by this chapter, . . . ." KRS 342.340(1) requires every employer to insure (or provide security against) his liability for compensation. "Compensation" means "all payments made under the provisions of this chapter representing the sum of income benefits and medical and related benefits." KRS 342.0011(14).
Income benefits are payable for disability or death. KRS 342.730; 342.750. "Medical and related benefits" are defined at KRS 342.0011(13) as "payments made for medical, hospital, burial, and other services as provided in this chapter, other than income benefits.
Where an employer is liable for damages on account of an employee's work-related injury or death, the employer's liability is limited to the payment of income and medical and related expenses, if the employer has workers' compensation insurance. Damages on account of a violation of the USCPA are not damages on account of "injury or death." Simply put, KRS 342.690 is not a bar to Reker's claim. Traveler's reliance upon Zurich Insurance Co. v. Mitchell,_Ky., 712 S.W.2d 340 (1986), is misplaced. As noted above, workers' compensation is a creature of statute. Zurich was decided under a very different statutory scheme, long before the enactment of KRS 342.267 and prior to Reeder.
The string-cited cases Traveler's provides were also decided under a different statutory scheme and do not involve the issue on appeal. U.S. Fidelity Guar. Co. v. Technical Minerals, Inc.., Ky., 934 S.W.2d 266 (1996) and Fireman's Fund Ins. Co. v. Sherman Fletcher, Ky., 705 S.W.2d 459 (1986) dealt with whether a general contractor is liable in tort to the injured employee of a subcontractor. Zurich American Ins. Co. v. Haile, Ky., 882 S.W.2d 681 (1994) dealt with subrogation rights of a workers' compensation carrier in an action against a third- party tortfeasor. Traveler's also cites Union Underwear Co., Inc. v. Scearce, Ky., 896 S.W.2d 7 (1995), another old Act case, quoted entirely out of context, which dealt with whether or not the party filing a medical report in lieu of deposition must bear the cost of cross-examination.
Traveler's also contends that workers' compensation claims are "excluded from coverage" under KRS 446.070, in reliance upon Simmons v. Clark Const. Co., Ky., 426 S.W.2d 930 (1968). Reliance upon Simmons is mixing the proverbial apples and oranges. There, two employees of an insured subcontractor were injured, one fatally, when the scaffold upon which they were working dropped. Unsafe working conditions and a failure to furnish safety devices were alleged in violation of KRS 338.080 and KRS 338.160. The court held that the general contractor could not be liable in tort [for damages on account of the work-related injury or death], because of a specific statute — the former KRS 342.060 — which provided, in effect, that the general contractor was the employer of the employee of the subcontractor. Thus, the general contractor had the same liability and immunity as did the subcontractor. Simmons is clearly inapposite.
We have held that KRS 446.070 does apply to KRS Chapter 342. Pike v. Harold (Chubby) Baird Gate Co., Inc., Ky.App., 705 S.W.2d 947 (1986), involved a violation of KRS 342.197. The version in effect at the time provided that, "'[N]o employee shall be harassed, coerced, discharged, or discriminated against in any manner whatsoever for filing and pursuing a lawful claim under this chapter.'" Id. at 948. The employer had argued that the employee's remedy — where she was wrongfully discharged for having sought worker's compensation benefits for an ankle injury — was limited to the penalties prescribed in KRS 342.990. This Court disagreed:
The trial court did not address . . . [that argument], probably because of its total lack of merit. See KRS 446.070. It is only where the statute "both declares the unlawful act and specifies the civil remedy available to the aggrieved party, [that] the aggrieved party is limited to the remedy provided by the statute." (Emphasis added.) See Grzyb v. Evans, Ky., 700 S.W.2d 399 (1985), and cases cited therein. Of course, KRS 342.990 provides for no remedy to Ms. Pike.
Id. at 948.
KRS 342.267 does not provide a remedy to Ms. Reker. It only provides for a fine or revocation of the carrier's or self- insured's certificate for a pattern of violation. KRS 342.267 does not state that a violation of its terms is only enforceable by the Commissioner, nor does it prohibit a claim by an individual for damages for its breach. We can assume that the Legislature was aware of KRS 446.070 when it enacted KRS 342.267. Traveler's also relies upon General Acc. Ins. Co. v. Blank, Ky.App., 873 S.W.2d 580 (1993), which was decided three years before the General Assembly specifically amended KRS Chapter 342 to make the UCSPA applicable to workers' compensation claims. There, medical opinion regarding the need for surgery was in conflict. Blank went ahead and had the surgery. The carrier refused to pay. Blank filed a motion for interlocutory relief with the ALJ, requesting that the carrier pay for the surgery and resume payment of temporary total disability benefits. The ALJ denied the motion, because there was an issue of the appropriateness of the surgery.
Blank also proceeded to file a tort action in circuit court alleging, inter alia, violation of the UCSPA, KRS 304.12-230. The Court explained that the UCSPA was part of the Insurance Code and the Workers' Compensation Act was part of the Labor and Human Rights Statutes, and that it would be a "stretch" to make the UCSPA applicable to Blank's claim. The Court held that the UCSPA was not applicable to workers' compensation situations, stating that: "If such an application is ever to be established, it needs to come specifically from the General Assembly." Blank, id. at 582. It did, with the enactment of KRS 342.267 effective December 12, 1996.
We reject Traveler's contention that Blank and Zurich, hold that the exclusive remedy for violation of KRS 342.267 exists in KRS 342.310(1). Both cases were decided prior to the enactment of KRS 342.267; thus, the issue of remedies for violation of KRS 342.267, per se, was not decided. KRS 342.310(1) provides for the assessment of costs where a party brings, prosecutes, or defends proceedings without reasonable ground. KRS 342.310(1) contemplates that the litigation process has already begun, because it applies to "proceedings" — brought, prosecuted or defended. As we noted above, there is a legislative and judicial policy of encouraging settlements in workers' compensation claims. To that end, the standards for prompt and timely action and fairness in paying and in settling claims must apply, and must be enforceable, from the time the claim arises, not merely from the time "proceedings" are brought, if KRS 342.267 is to have any effect.
In FB Ins. Co. v. Jones, Ky.App., 864 S.W.2d 926 (1993), the carrier contended that the right of a private citizen to maintain an action for violation of the UCSPA, KRS 304.12-230, as established in Reeder was nullified by the passage of KRS 304.12-235. KRS 304.12-235 provides for interest on a final settlement where the insurer fails to make a timely good faith attempt to settle a claim, and for attorney's fees where the delay was "without reasonable foundation," — language similar to that used in KRS 342.310(1). This Court rejected the carrier's argument that the aggrieved party was limited to the statutory remedy of interest and attorney's fees:
The problem with this contention is that KRS 304.12-230 and KRS 304.12-235 are different statutes which address different kinds of culpable behavior . . . . KRS 304.12-235 appears to be intended as a prod to prevent laxity in the adjustment of claims. KRS 304.12-230, however, speaks out against more egregious behavior. The acts listed in the statute have the character of intentionally tortious acts. The Legislature might easily believe that one damaged by such action should receive damages as provided by KRS 446.070.
Id. at 929.
We believe that KRS 342.267 (which incorporates by reference KRS 304.12-230) and KRS 342.310(1) are also different statutes which address different kinds of culpable behavior. If not, there was no purpose in enacting KRS 342.267. KRS 342.310(1), providing authority for the assessment of costs for unreasonable proceedings, and KRS 342.990, providing the Commissioner authority to impose penalties, both existed long before the enactment of KRS 342.267. To interpret the statute as Traveler's urges, would reduce KRS 342.267 to an absurdity, because it would simply duplicate already existing rights. Courts must presume that the Legislature intended to effect a change in the law by amending a statute. Sanders v. Pierce, Ky., 979 S.W.2d 457, 460 (1998).
We, therefore, conclude that an individual injured by a violation of KRS 342.267 does have a civil cause of action in circuit court for damages, by virtue of KRS 446.070. In our opinion, Ms. Reker's complaint does state facts upon which relief may be granted. We reverse the order of the Boone Circuit Court and remand this matter for trial on the merits in light of our holding herein.
ALL CONCUR.